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Powerful evidence US wireless market is world's most competitive

Kudos to Steve Pociask of the American Consumer Institute for another outstanding piece of analysis that debunks the notion that the US wireless market is not competitive and requires net neutrality/open access regulation.

The powerfully straightforward conclusions are:

  • The US has more choice and less concentration in wireless than Europe;
  • Americans use their wireless almost four times as much as Europe;
  • US wireless prices are the lowest in the world save for Hong Kong.

What's wrong with that picture?

Debunking more net neutrality revisionist history

Liberal blogger Matt Stoller of OpenLeft has a post at Save the Internet that lamely tries to rewrite "the history of net neutrality" in his commentary about his interview with FCC Commisioner Michael Copps.

FCC Chairman's welcome reiteration of opposition to net neutrality regulations

I wanted to commend and spotlight a critically important and completely under-reported/under-appreciated part of the FCC Chairman's statement on the 700 MHz auction released yesterday:

  • "We must continue to encourage the critical investment needed to build the next generation wireless network.  Since I have been Chairman, I have advocated strongly that applying network neutrality obligations, unbundling, or mandatory wholesale requirements to networks can undermine investment incentives.  I do not support such regulations.  The Order we adopt today does not apply these regulations to this block or any other block." [bold added for emphasis]

This is very important, welcome, commendable, and strong affirmation of the FCC's broad deregulation policy -- that was completely lost in the gaggle of press coverage.

New broadband uncertainty -- is 700 MHz info? or telecom service?

There are so many problems with the FCC's new 700 MHz auction rules that create a more regulated open access/net neutrality license -- its hard to know where to start.

  • Be confident that I will get to them all over time.

Yesterday I highlighted the dirty little secret that there is very substantial risk that this will become known as the "do over auction" because it may not raise enough money to satisfy the rules and because the FCC likely overstepped its legal authority and will be overturned  in court.

Let's raise another dirty little secret behind the new rules that will increase regulatory uncertainty for broadband deployment.

The FCC's "Do Over" Auction?

A much under-reported part of the high drama behind the FCC's current 700 MHz auction rules is that there is a very substantial risk that this becomes known as the "do over" FCC auction.

First, to any outside observer, the FCC's highly-tailored auction rules appear to have a pretty obvious "set aside" for the Google camp and its proposed net neutrality/open access business model for a third of the 700 MHz spectrum.

  • The FCC reportedly is "hedging its bets" on the Google set aside license -- worried that its policy experiment may fail to raise the revenue for the US Treasury that is estimated in the US Budget -- so it is imposing a "reserve price" -- in English, a price floor for this new set aside spectrum open license -- to supposedly guarantee the taxpayer 70% of what an "open" auction would deliver.
    • Some could characterize this FCC-signaled minimum acceptable price for the "Google-set-aside license" as a fixed 30% discount from the price paid at the AWS auction price. However, the real discount is much larger than 30% because the AWS spectrum is no where near as robust or valuable than the 700 MHz spectrum.
  • There are a lot of reasons that Google or others will not bid billions for open access spectrum.
    • First, it is likely not worth it.
      • It's an untested and unproven business model that offers little opportunity to earn a return on the roughly $10b it would take to build and operate such a national network.
      • Most professional and independent investors will ask the blunt and pointed question: how does the 700 MHz set-aside-licensee expect to make money building a highly-capital-intensive wireless-facility model that has dramatically less business and operating flexibility than the other seven existing broadband competitors that have many years head start, and when the cost of acquiring just one new customer could easily be in the $200-400 range on average?
      • What's wrong with that investment and business pitch?
        • It's a money pit.
        • It's dotcom bubble pixie dust.
        • It's a loser.
      • Net neutrality/open access, while cloaked in consumer terms, is basically an old-style industrial policy and corporate wealth transfer scheme from the risk-taking capital-intensive builders of wireless facilities to high-profit tech applications companies like Google, eBay and Amazon, companies who seek for consumers to pay for the bandwidth that they would profit the most from.
    • Second Google is not getting the wholesale resale and unbundling mandates they requested, so their highly-publicized offer to bid $4.6b is moot.
    • Third and most important, why would Google want to become a facilities-based, capital intensive wireless provider?
      • Such a move would change their business model and virtually none of Google's existing growth shareholders would want the dilution and huge capital and operating cost spikes required for Google to become a wireless carrier.
        • It's not going to happen.
        • Google's promise to bid will probably go down in FCC history as one of the best "head fakes" of all time.
    • In short, the FCC has chosen a new policy path that has substantial risk of not generating the revenue expected -- requiring a "do over" of the auction.

Second, there is substantial legal risk that the FCC does not have the authority to condition these licenses in a way that limits an "open" auction and substantially reduces the revenue for the US Treasury.

Jim Harper of Cato has a great piece on the 700MHz auction

Please read Jim Harper's (of Cato) cogent and on-point critique of the FCC's 700 MHz auction.

Well said Jim!

"Open" is clearly in the eye of the beholder.

And "open access" is just as impossible to define as its philosophical twin: "net neutrality."  

A "Third" national broadband pipe? Try an eighth!

I keep shaking my head in disbelief when the Google camp breathlessly claims that the 700 MHz is the last opportunity to create a true "third broadband pipe?"

  • This is a common trick in politics -- to completely ignore reality and facts, and create ones own "alternate reality," which suits one's political and corporate agenda.

The much ballyhooed proposal in the 700 MHz auction for an "open access license" (whatever that endlessly evolving term means) claims to be all about Government creating a "third broadband pipe?"

Hello???!!!

  • The marketplace is already delivering many more competitive broadband pipes now! FIVE of them -- way ahead of when this Google-camp experiment may deliver in several years time.

Let's come down to earth folks.

FCC McDowell's Great WSJ op-ed -- debunks need for new national broadband policy

Please read FCC Commissioner Robert McDowell's outstanding op-ed in the Wall Street Journal today. It eviscerates the sloppy thinking and weak evidence of net neutrality/open access proponents that are trying to manufacture a national broadband problem/crisis to justify their  new Big Government "National Broadband Policy."

This op-ed is particularly timely given the current  and tightly coordinated attempts by liberal House and Senate Democrats to establish the groundwork for an abandonment of competition and free market policies in communications and replace it with a new "National Broadband Policy" which is the liberal codeword for a Big Government-managed broadband sector.

This is a spectrum auction Google not a policy auction! No to "OPEN Sesame!

Anyone who hasn't read Google's letter to the FCC today  on the 700 MHz auction -- you have to -- its an absolute hoot! 

  • I am amazed that a company so rich and successful in business could be so arrogant, impolitic, and ham-handed in Washington!  

First Google, despite what you may think, the US Government and FCC policy is not "for sale."  (And even if you think it is, at least try to be less obvious about your cynicism in public.)

  • Does Google actually think "committing" to a minimum bid of $4.6B in the 700 MHz auction in return for its demands for a change in the 1993 auction law is somehow acceptable behavior for a publicly-traded company?
    • Google is crassly and ham-handedly saying that their opening bid to effectively "buy" FCC policy starts at $4.6B!
    • Hello Google! You "bid" at the spectrum auction not at the FCC for policy favors. One type of "bidding" is perfectly legal the other is not.
  • As only dotcom billionaires can do, Google is disrespecting the FCC as just another type of "hired help" where it just needs to negotiate their "price."
    • Any supporters of Google should be mortified at Google's disrespect for, and cheapening of the FCC policy process. Google should be ashamed and embarassed by this crass letter and tactic.  
      • (It seems that Google is so used to buying off content providers that sue them for IP theft with "revenue sharing arrangements" that they seem to think they can buy-off whomever they want.)   

Second, the demand in their letter oozes with arrogance. Let's parse the final and operative sentence of Google's letter to see just how arrogant.

Markey broadband legislation: Let no good deed go unpunished

What's wrong with this picture?

What's wrong with this picture? Nothing! 

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Q&A One Pager Debunking Net Neutrality Myths