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Objecting to Obsolete Obligations

The Washington Post's lead story today, "Landline Rules Frustrate Telecoms," puts a needed spotlight on obsolete communications law that: falsely assumes the telecom marketplace is still a monopoly with no consumer choice; and still mandates telecom companies subsidize below-cost, copper-line telephone service to households as if it were still a government-sanctioned monopoly.

A bit of history is warranted here. This century-old political arrangement -- the 1913 Kingsbury Commitment between the Federal Government and AT&T -- effectively established a government-sanctioned monopoly in return for universal telephone service to all Americans and utility rate of return regulation. In 1996, Congress reformed Federal communications policy by ending monopoly and promoting competition. Today, despite copper telephone networks losing half of their customer base to cable, wireless, VoIP, broadband and other Internet competitors (and losing most of their most profitable landline customers) many legacy telecom legal requirements, like subsidized below-cost telephone service, live on despite being obsolete. This means that in today's fiercely competitive voice service marketplace, mandating that only one provider must provide subsidized below-cost, copper-line service to potentially millions of households, is a classic un-funded mandate and a hidden, unfair, investment-distorting business tax on only one competitor.

T-Mobile to FCC: Give us a Do-Over and Verizon's Cable Spectrum Too

T-Mobile demanded last week that the FCC deny the Verizon-Cable spectrum license transfer, apparently so Deutsche Telecom/T-Mobile could get it at a deep FCC managed-market discount.

The FCC is not Deutsche Telecom/T-Mobile's personal do-over button that they can push and magically reset the marketplace to an earlier time more to their liking. All other players have made market-driven decisions and have to live with them, and so should Deutsche Telecom/T-Mobile. That's the essence of free-market competition, companies move forward or backward based on their own market-driven choices. It's not competition or a market, if those who don't like the outcome of their own market decisions, run to government for a do over and quasi-international bail-out.

Let's review how T-Mobile got to this point.

For years T-Mobile has been a seller of its spectrum; because its parent Deutsche Telecom has long wanted to exit the U.S. market because it requires more capital investment than they are willing or financially able to expend.

Verizon-Cable Hearing Exposes Weakness of Opposition

 

The Senate Judiciary Subcommittee hearing on the proposed Verizon-Cable spectrum sale flushed out the opposition's best arguments and evidence and they proved surprisingly weak and sparse.

Behind the façade of FreePress' trademark bumper-sticker bluster of "a competition crisis," "a creeping duopoly," and "spectrum warehousing," there was very little substance to back up their pejorative assertions.

FreePress' bogus duopoly deception is the core weakness of the opposition to this commercial agreement. To believe there is a Verizon-AT&T wireless duopoly, one has to:

Verizon-Cable Senate Hearing - Competitive Reality vs. FreePress Fiction

 

Hopefully, the March 21st Senate Judiciary Subcommittee oversight hearing on the Verizon-Cable spectrum transaction will be a fair hearing based on the competitive facts and the law, and is not allowed to be hijacked politically by FreePress' signature gamesmanship.

I. FreePress Fiction

It is disturbing that two of the three hearing witnesses opposing the Verizon-Cable agreement are from FreePress: Joel Kelsey, FreePress' Policy Advisor and Tim Wu, who was FreePress' Chairman just thirteen months ago and has been a longtime FreePress board member.

It is curious and troubling that the Senate Subcommittee specializing in "competition policy" would seek testimony from two anti-profit, anti-property-rights adherents who don't believe competition policy can work.

 

Verizon-Cable: Opponents Need FCC to Overreach its Authority

The March 21st Senate Judiciary Subcommittee hearing reviewing the Verizon-cable agreements provides Congress with an opportunity to learn:

  • How the metamorphosis of communications competition is increasing competition;
  • How the Government has created artificial and temporary spectrum scarcity in failing to free up more spectrum for broadband use in a timely fashion; and
  • How unfair, arbitrary and capricious the FCC review process has become in reviewing market transactions.

Given that the DOJ has such weak grounds and facts under antitrust law to challenge the Verizon-cable commercial agreements, and given that the spectrum transfer is in the public interest in multiple dimensions, opponents appear to be pushing the FCC to do whatever necessary to try and block Verizon-cable under the FCC's make-it-up-as-they-go-along public interest standard.

Is Netflix the AOL of Web Streaming?

 

Netflix' erratic and panicky behavior this past year is telling us that Netflix' leadership fears they may becoming the AOL of web streaming.

Remember AOL was the company that led the dial-up narrowband market, but fell way short in transitioning to broadband success. (Investors remember AOL-Time Warner, dubbed the worst merger of the century.) Meanwhile, Netflix is the fallen star company that led the mail-DVD business, but now is struggling to repeat its offline success online with web streaming.

If one looks at Netflix' panicky behavior over the last year or so, a clear pattern emerges that Netflix' own management is very concerned about how it will successfully transition from DVD mail-order leader to successful web streaming provider.

Consider the cumulative evidence.

 

Debunking the Carping over Broadband Usage-Pricing

Activist carping about the commercial Internet being commercial is revving up again, this time with the carping focused on framing new broadband usage-pricing innovations by Time Warner Cable and AT&T, as somehow a violation of the "open web."

To cut to the quick and translate what is really going on politically here, this activist carping is the latest attempt to revive and re-fight the manufactured net neutrality debate between:

Why the Verizon-Cable Agreement is in the Public Interest

 

The evidence below shows the Verizon-Cable agreement is clearly in the public interest, if the FCC fairly reviews the agreement and all of the relevant facts, in the full context of the highly competitive wireless ecosystem.

Top Reasons Why Verizon-Cable Agreement is in the Public Interest

Increases competition: The agreement increases competition because it enables:

 

Why the Verizon-Cable Agreement Increases Competition

 

Reports that the Senate Antitrust Subcommittee will hold a hearing on the Verizon Wireless-Cable agreement spotlights an old truism: What one looks for, one sees. What the Government ultimately sees here largely will depend on whether the Government looks backward through an analog competitive lens or looks forward through an Internet competitive convergence lens. In a nutshell, if they look backwards with 1996 cable-telco Silo-Vision lenses, they will see an agreement not predicted in 1996; however if they look forward with 2012 Internet-Vision lenses that see 4G LTE wireless, iPhones/Android, VoIP, DBS, video streaming, Netflix, cable modems, DSL, FIOS, Skype voice/video file-sharing, cloud-computing etc. – they will see an agreement that is not at all surprising or problematic given the competitive context of today and the future.

Obsolete Television Law Needs Modernization

Important free market communications legislation introduced in mid-December warrants flagging because it brings needed attention to a real and growing problem, how obsolete communications law stifles innovation, growth and consumer benefit.

See my Forbes Tech Capitalist post on the DeMint-Scalise bill, “The Next Generation Television Marketplace Act.

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Q&A One Pager Debunking Net Neutrality Myths