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The Department of Justice on "bid rigging"

Given the issue of whether or not the 700 Mhz auction is being run for the benefit of the American taxpayer, there is a very interesting quote from a Justice Department official today on their view of "bid rigging" in a competitive government auction, in this case concerning a defense contractor.

  • "The antitrust division is committed to protecting the competitive market for Americans," said Assistant Attorney General Thomas O. Barnett, who heads the department's antitrust division. "We will continue to bring to justice those who rig bids and thereby deprive the public of the benefits afforded by a competitive bidding process."

It is interesting to juxtapose this Justice Department quote of today with another quote from today in the Dow Jones article on the 700 MHz auction, which quoted the position of Gigi Sohn of Public Knowledge on "bid rigging":

  • She acknowledged that effectively Google and public interest groups were asking the FCC to "rig the auction" to facilitate a third national broadband competitor to the incumbents - AT&T Inc. (T), Verizon Communications Inc. (VZ) and the cable companies.

The ends don’t justify the means.

FCC pulling the rug out from under the Administration's broadband policy?

Kudos to the Wall Street Journal today for their twin great editorials on net neutrality and the 700 MHz auction: "Reed Hundt's Spectrum Play" by the Jounal editorial writers and "Telecom Time Warp" by Robert Crandall and Hal Singer.

  • The Journal editorial accurately hits on the Google/Hundt cabal to rig the auction rules so they can win the Nation's most valuable spectrum at a deep discount.
    • Google is laughing all the way to the bank that they could sucker a Republican Chairman of the FCC to carry their water and stand heavily on the competitive scales to pick them as winner before the bidding commences.
    • It will be interesting to see how Chairman Martin "squares this circle" and explains why market participants should ever trust what he says going forward on competition and regulation given that up to now he has discussed no market failure or consumer problem that requires regulation to solve up to now.
  • My favorite point of many in Robert and Hal's great editorial is reminding everyone the outrageousness of the FCC mandating "unbundling" (a drastic action reserved for entrenched monopolies) when the wireless industry is so obviously competitive that the price of a wireless minute has fallen by 84% over the last decade!
  • Amazing! Chairman Martin apparently finds market failure when prices are plummeting, consumer choice has exploded, subscribership and usage has skyrocketed and investment boomed. Huh?
    • What's wrong with this picture? 
      • The only apparent explanation is that Chairman Martin now believes more in the regulatory hand of Big Government than the "invisible hand" of market forces.
    • Wireless is the single biggest competitive success story in communications!
      • And Mr. Martin's reward for all those market players that invested billions of dollars of risk capital to buildout the world's most competitive facilities-based wireless marketplace -- is heavy handed and unnecessary "separations" and unbundling monopoly regulation!

Bottomline:  The Bush Adminstration's sole policy goal in telecommunications has been to promote broadband investment and deployment to all Americans.

FCC Martin proposes corporate welfare for Google in 700 MHz auction

According to DowJones, FCC Chairman Kevin Martin is proposing some of the net neutrality/open access regulation that Google requested for 22 of the 60 MHz of prime 700 MHz of spectrum to be auctioned off by the FCC in early 2008 for use in about 2010.

I have three points to make about Chairman Martin's reported net neutrality/open access proposal.

"Save The Internet" stoops to a new low of vacuousness

SaveTheInternet has a new video out that breathlessly claims that people only have until July 16th to tell the FCC to keep a "level playing field" in order to "save the Internet!"

  • This vacuous "eye-candy" video only says "the Internet is under attack in Washington" but says nothing about what "the attack" actually is, why anyone in their right mind would want to "attack the Internet," what the FCC is actually doing or deciding that needs their input by July 16th, or even why there is a July 16th deadline to act.
  • This video propoganda is a disturbingly accurate representation of the vacuousness of SaveTheInternet's whole net neutrality position and crusade.
    • It is all form and fear and precious little substance.
    • Its scary that they don't even try to inform or educate just incite.  
  • It also tells us a lot about what they think of the intelligence-level of average Americans and those on their mailing list -- they obviously just see them as lemings to scare and herd off a proverbial cliff.  
    • There is zero respect for people's intelligence in this video propaganda.
  • SaveTheInternet sees no need for facts, for information, for context, for balance, or hearing both sides -- just feed the masses the dumbest possible version of a scare message and shout that they have an urgent deadline to act!

This video is damning proof of how vacuous the net neutrality regulation movement has become. View it and weep.

Frontline's proposal is so disingenuous: Let me count the ways

Frontline's Reed Hundt is mounting a furious eleventh hour effort to finagle a backroom sweetheart deal for his company from the FCC, in the 700 MHz auction. He attacked the outstanding op ed in the Washington Post by Robert Hahn and Hal Singer in both the Post and in RCR.  Our former Big Government FCC Chairman, Mr. Hundt also apparently has lost his cool and perpsective in railing against the rollout of the new, innovative and already successful iPhone as somehow a market failure that only his company can cure.

My response to SaveTheInternet views on broadband

A core purpose of NetCompetition.org is to promote a debate of Net neutrality regulation on the merits. SaveTheInternet.com had a recent blog post "Painting over broadband failures with pretty pictures" that prompted me to comment on their blog -- which I have included below:

"If SaveTheInternet followers are truly "open" to diverse points of view that may be different from theirs, I recommend that you consider the mounting evidence that the US is in fact not falling behind but is actually a unique success in promoting facilities-based broadband competition in the world. Please see this link for the four best alternative views on this question:
http://www.precursorblog.com/node/451 .

No due diligence for Frontline Wireless? Special favors for special interests?

Congrats to Jeff Eisenach of Criterion Economics for his outstanding and incisive analysis "Due Diligence: Risk Factors in the Frontline Proposal."

  • Jeff Eisenach wonderfully brings clear thinking and common sense to a topic that sorely needs it.

The analysis exposes the Google-supported Frontline Wireless proposal for what it is... a "trust us" investment of effectively billions of dollars in forgone receipts due to the American taxpayer in a free market auction.

A concise summary of the excellent FTC report on Net Neutrality

I strongly recommend the FTC staff report on "Broadband Connectivity Competition Policy" to anyone wanting an objective, well-reasoned, fair, and comprehensive review of the facts and evidence of the net neutrality regulation debate.

I believe the most important sentence in the whole 170 page staff report, which covered an enormous and comprehensive public record on the subject, was on page 11 and again on page 160:

  •  "To date we are unaware of any siginificant market failure or demonstrated consumer harm from conduct by broadband providers." [Bold emphasis added]
  • I believe that's the best bottomline summary conclusion of the report.

The FTC report can be further well summarized by the following four sentences found on pages 10, 11, 155 and 11 respectively:

  • "We recommend policymakers proceed with caution in evaluating proposals to enact regulations in the area of broadband Internet access."
  • "Policymakers also should carefully consider the potentially adverse and unintended effects of regulation in the area of broadband Internet accesss before enacting any such regulation."
  • "Over time, competition produces the best results for consumers, providing them the lowest prices, the highest quality products and services, and the most choice."
  • "The FTC will continue to devote substantial resources to maintaining competition and protecting consumers in the area of broadband Internet access, using a variety of tools."

In closing, I was very impressed with the FTC staff's knowledge, sophistication, and fair representation of both sides' views.

"Earmarked Airwaves" -- a 700 MHz auction "UNE-P" deja vu?

Kudos to Robert Hahn and Hal Singer for their outstanding op ed in the Washington Post "Earmarked Airwaves."

  • The editorial cogently presents the fork in the road that faces any major FCC decision: to follow law, which promotes competition and market-driven outcomes, or to freelance and try and "manage" competition and pick winners and losers in advance through "spectrum earmarking."
  • FCC history is littered with freelance "managed competition" failures, but two are particularly ignominious and highly relevant to this 700 MHz auction:
    • the illegal UNE-P scheme to rig telecom competitive outcomes following the 1996 Telecom Act; and
    • the Nextwave auction scandal that kept 30 MHz of prime spectrum fallow and tied up in court for almost a decade.

At its core a spectrum auction is the quintessential type of competition. The auction law's purpose in 1993 was to use market forces, competition, to allocate the public's asset most appropriately, largely because previous FCC spectrum allocation processes were so ineffective, unfair and prone to serious abuse and graft.

  • While no process is perfect, a clean competitive auction process has proven highly effective in rewarding US taxpayers and fostering a growing and highly competitive wireless marketplace that greatly benefits consumers.

This 700 MHz auction may be shaping up to be FCC Chairman Kevin Martin's legacy moment: will it be marked by promoting competition and market-based outcomes or will it be marked by standing on the auction scales to ensure the spectrum is "earmarked" to the predetermined, chosen "winner" -- in this case former Clinton-Gore FCC Chairman Reed Hundt's Frontline Wireless company.  

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