Econoklastic

Part IIa — Who's Who in 700 MHz: the New Entrants

Let’s start with a profile of the new entrants to the 700 MHz auction. Part IIb will profile the potential bidders who were active in the two Lower 700 MHz auctions and the AWS-1 auction.

The Big Guys

I sound a little crazy calling AT&T Mobility Spectrum, LLC, a new entrant, but this AT&T subsidiary technically didn’t exist during previous auctions, although it is essentially Cingular beefed up with AT&T’s Aloha Partners acquisitions from the Lower 700 MHz auctions. It comes to the table holding the most spectrum of any 700 MHz bidder. More detail on possible ATT plans in Part III, but it could range from support of rural telcos with whom it has existing roaming agreements in the A and B Blocks to major challenges for the C Block REAGs or the D Block nationwide license.

Alltel Corporation, the major U.S. cellular company, did extremely well in the PCS auctions, but sat out the AWS-1 and Lower 700 MHz auctions. It’s also a little odd to call Alltel a new entrant, but it’s been a while since it has participated in an auction and it qualifies under the definition of not participating in the run-up auctions to 700 MHz. Look for Alltel to have interests at play in A, B, C, and E Blocks, and I would not rule out the possibility of a try for the D Block nationwide license, although I consider this unlikely.

Licenseco, LLC, is the name under which Frontline is bidding. This is a major D block competitor.

Backline is the name under which Fortress Investments Group is bidding. It brings substantial financial clout to the table and may be a significant C Block actor, although it is unlikely to be a D Block competitor because of an agreement with Frontline.

Chevron USA Inc., the major energy company, automatically becomes a serious competitor because of its financial resources, but I think it will concentrate on Gulf of Mexico CMAs and EAs or the Gulf REAG to support its fields there, much in the way PetroCom License Corporation did in the AWS-1 auction.

Google Airwaves Inc., Google’s bidding entity, singlehandedly changed the nature of the 700 MHz auction by pushing for wireless Carterfone and open, nondiscriminatory wholesale network access conditions. They got the wireless Carterfone condition from the FCC and they insist that they will use an open, nondiscriminatory wholesale network business plan to put together a third broadband pipe. They will definitely be going for the C Block REAGs and possibly some complementary A, B, and E Block spectrum with deep pockets.

More below…

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Econoklastic

700 MHz, Part I: How Do the Bidders Compare to AWS-1?

This is the first installment of a three-part essay on the upcoming 700 MHz auction which the FCC will be starting in January 2008. Part I looks at the aggregate data on potential bidders and compares them to bidders in the AWS-1 auction. Part II examines the new entrants and major actors in detail. Part III analyzes potential bidding strategy on the part of the most important actors in the auction.

It is difficult to understand why so much is being made of incomplete applications and the postponement of the final application and upfront payment deadline to January 4, 2008 for the FCC’s 700 MHz auction. This is FCC business as usual as far as auctions are concerned. Auction 44, the Lower 700 MHz auction, was postponed from June 2002 to January 2003, and of 153 original applicants only 125 qualified with upfront payments. The second Lower 700 MHz auction, Auction 49, was postponed to May 2003, and 56 of 60 applicants qualified. The AWS-1 auction, Auction 66, was postponed from June to August 2006 and had 171 incomplete applications (and 81 completed) as of July 2006; ultimately 168 bidders quaified and made upfront payments.

Looking at the applicant pool, the potential 700 MHz bidders differ somewhat from the AWS-1 bidders in the aggregate:

more below…

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Tales of the Sausage Factory

Why Teens Are Smarter Than Regulators — The Difference between Ubiquity and Substitutibility

Greetings gentle reader! Welcome to another chapter in my occasional series “What All Policy Wonks Need to Understand About Economics So They Can Spot The Industry Baloney” aka “The Econ 101 Gut Check.”

In today’s lesson, we look at two concepts often confused with one another. UBIQUITY, which means how widely available something is; and SUBSTITUTIBALITY, which means whether people regard one thing as a substitute for their first choice. Most arguments for deregulation of the media and the internet rest on confusing these related but very different concepts. For example, the argument that the availability of video clips on YouTube or other types of content creation confuses ubiquity and substitubality, as does the argument that cellphones compete with DSL and cable for broadband access.

But according to this USA Today article (reporting on this study by the PEW Internet and American life project), teenagers who actually use this stuff on a regular basis understand the differences perfectly. And if regulators, policy types, or even just folks who care about getting it right for its own sake want to get our national media and broadband polices right, then we better learn from these teenagers and get the difference between ubiquity and substitutibility straight.

Class begins below . . . .

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Tales of the Sausage Factory

Defending Peter Nickles

This won’t matter to most of you, but a former colleague of mine from Covington and Burling got attacked on the front page of the Washington Post today and I feel an urge to respond.

More below . . . .

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Tales of the Sausage Factory

A Plug For My Friends At WIMN

The awe-inspiring thing about the progressive reform movement is how many small organizations of dedicated people are making a major difference in the word.

Below, I reproduce a recent end of year letter from WIMN — Women In Media And News. These women run a small and incredibly effective shop. If you want to support organizations that are making a difference, these are good people who can really use the money.

Stay tuned . . . .

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Tales of the Sausage Factory

Reform Week At the FCC — And Why Letting In The Public Is Better

(Sadly, the original version of this got lost in the disk failure we had Tuesday. So this is a somewhat shorter reconstruction.)

With both Republicans and Democrats interested in reforming the FCC for their own reasons, it seems a perfect time to crank out a new white paper on reforming the FCC. As you can see from the press release, Common Cause and my employer Media Access Project have released a new white paper called Puting the Public Back In Public Interest: Painless Reforms to Improve the FCC, authored by yr hmbl obdn’t, fellow Wetmachiner Gregory Rose, and Common Cause’s Jon Bartholomew. Astute readers with good memories will recognize many of the recommendations from previous posts and writings of mine, including this from this speech I gave back in 2003. Most of these issues have festered for years, for all that they have gained recent notoriety.

In the same vein, I draw attention to Matthew Lasar’s piece, 5 Ways to Improve FCC.GOV, on his generally excellent FCC Blog Lasar’s FCC Letter. Lasar’s suggestions are good, and many of them are echoed in our white paper (although derived independently, great minds think alike and all that).

Coincidentally, a different piece by Matt, “Faux Celebrity Comments At the FCC,” triggered a serious question by Adam Thierer at the Progress and Freedom Foundation blog. Given that we have situations in which a single organization such as Parent’s Television Council is able to generate thousands of identical comments from its members, and that others are using fake names, and that there are even allegations that NAB submitted false comments fake brief text comments opposing the Xm-Sirius merger, or used deceptive means to get people to send in such comments, is there any real value in making it easier for the public to file brief comments? Doesn’t that just create opportunities for confusion and abuse, warping the regulatory process and shifting power away from the real public to the manipulators and unscrupulous?

Matt gave his answer here, in which he makes reference to what I call the “Alice’s Restaurant” rule of public comments: If one commentor says ‘my media sucks because of consolidation,’ that’s an outlier and you ignore it. If two people file, ‘my media sucks because of consolidation,’ then it’s just tree huggin’ liberals and you ignore it. But if two million people file such comments, that’s data—because we’ve demonstrated enough people care to at least make a minimal effort to express their feelings.

To amplify a bit, I would certainly like to see anyone who submits fake comments designed to persuade the FCC that people support a particular position when they don’t, either by forging their names and email addresses or obtaining these through deceptive means, should be subject to criminal penalties under 18 USC 1001. But I do not dismiss the ability of an organization to get its members to file a boatload of identical comments or complaints through a comment engine. This is the modern equivalent of the petition drive. In a previous generation, the determined citizen might spend a day in a mall parking lot or knocking door to door to get signatures on a petition in support of some candidate or in opposition to some law. Signing something in a parking lot to “send a message about global warming” or “show Washington you hate big government” takes about as much time and understanding as filling out the info in a standard “comment engine,” and tells us the same thing — a broad base of citizens cares at least enough to take a minute to send a message rather than just ignore it.

Policymakers have long experience with petitions and petition drives. They understand the difference between a petition with 10,000 names, 100 individual letters that talk about real life experiences, and the 5 people who take the trouble to actually call or make a visit to discuss their case. Each of these forms of contact provides a type of information, and decisionmakers weight it accordingly — or should.

In addition, as I went on at length after the media ownership vote, the entire regulatory process gains validity when the public perceives it has a meaningful way of communicating with regulators and can monitor the process. Taking brief text public comments in a a simple and straightforward fashion, and allowing the public to follow who files and how many people file, is an important aspect of this.

Finally, it reconfirms for those that have filed that they are not alone (or, perhaps, that they are), helping interested members of the public to organize and engage in discussion with each other. It provides a focal point for concerned citizens to act as citizens and make themselves heard in a way that goes beyond the mere ritual of voting. Even if public comments had no other value, it would be worth it for this benefit alone.

Which is why, I suppose, I’ve been such a fan of FCC reform for so many years. It’s not just about getting better data and creating a process that everyone perceives as more open and fair. These are important. But it is also about something more vital. Ensuring that in our modern administrative state, when so much of our government in a democratic society seems beyond our control, any means by which we maintain the vital link between the government and the governed is to be cherished and nurtured. It reminds us that we are free people in the land of the free, with both the right ad the responsibility to participate in the government decisions that matter to us. We are not spectators in our own lives, nor helplessly awaiting the decisions of others. We are citizens, from whose consent all sovereignty arises, and without whose consent sovereignty is tyranny. When we speak, the FCC (and the rest of the federal government) owes it to us to listen.

Stay tuned . . . . .

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Tales of the Sausage Factory

700 MHz Auction Pre-Game: Just A Bit More Unseemly (and perhaps untimely) Gloating . . . .

So last summer, as we debated the rules for the upcoming 700 MHz Auction, one of the big questions we at PISC repeatedly kept getting asked was “so who is really going to show up to bid?” Especially on controversial issues like open access (and even its wussier cousin, device open access), block size (have big blocks and combinatorial bidding, or maximize smaller blocks), and anonymous bidding, the incumbents all kept repeating over and over again how any deviation from previous rules would keep people from bidding and the auction would be a failure and everyone would hate us forever. Commissioner McDowell reiterated these criticisms (at least with regard to the open device conditions on C Block) in his dissenting statement:

Curiously, however, in an effort to favor a specific business plan, the majority has fashioned a highly-tailored garment that may fit no one. It’s not what Silicon Valley wants; it’s not what smaller players have told me they want; and it’s not what rural companies want. To date, the Commission has received no assurances that any company is actually interested in bidding on the encumbered spectrum. Not one.

Because, of course, everyone knew Google wasn’t going to bid, the DBS companies weren’t going to be real players, and if anyone new was planning to show up, there was no sign of it. Even those most eager to see new competitors emerge (and who ultimately supported the PISC proposals) had their doubts and looked for as much reassurance as possible before taking a leap of faith that we were right.

Well, the FCC just released the list of applicants to bid in the upcoming 700 MHz auction. A total of 266 potential bidders filed (the bulk of the forms are “incomplete” due to procedural defects that will be corrected, but this is pretty standard). That’s more than the 252 potential applicants that showed up at this stage for the “wildly competitive” and “highly successful” AWS auction in August ’06. The list includes Google, Frontline, Echostar, and — as I kept insisting — a number of companies that could not possibly be predicted as bidders until bidding rules were actually determined and potential bidders got to assess whether they had a chance or not.

Towerstream is an excellent example of this last type of bidder. No one could possibly predict that they would show up, and many folks still can’t believe it. But Towerstream CEO Jeff Thompson cites the FCC “embracing the open access model supported by Google” as making the spectrum a “natural fit” for his entreprenurial wireless broadband company, and credits the FCC for making the auction amenable to new bidders. Nor is Thompson alone. A host of newcommers apears to have found the rules attractive enough to make it worthwhile to ante up for a chance to play.

We must still see what happens, of course. I can recall all the pre-game prediction for the AWS auction, where the most valuable licenses ended up in the hands of the usual suspects. In many ways, this is working out like my waiting to see if the Patriots complete a perfect season or if the Red Sox would win the World Series. There is lots of room still for things to go badly. But I can’t help but feel a happy, warm contented glow (and breathe a quiet sigh of relief) that I don’t have to answer the age old question “what if we throw a party and no one shows up?”

Stay tuned . . . .

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Tales of the Sausage Factory

Responding to Kevin Martin and Other Reflections On Yesterday's FCC Broadcast Ownership Vote

(As you may have seen from John’s post, we lost several days worth of material yesterday and couldn’t get this posted promptly. So forgive me for posting what is literally yesterday’s news. And hopefully I will be able to get back or reconstruct the other posts.)

So the day has come. Martin has crossed the ownership Rubicon, and we now move on to the campaign to force Congress to over-rule the FCC vote while simultaneously fighting in the courts. (And if you want to see us stay in the fight and have a chance of winning, I highly recommend making a tax deductible contribution to my employer (and lead counsel for the case) Media Access Project).

First, a hearty congratulations to the Commissioners, and Kevin Martin in particular, for starting only an hour late from the announced time! This is quite the improvement from the last meeting. Who says FCC reform doesn’t work? Second, if it is going to take 2 hours for everyone to read their statements, please let us know so we can use the bathroom first. Third, if the FCC is going to make a habit of this, I recommend putting in a concession stand so we can buy snacks during the intermission.

That out of the way, a few more serious reflections below….

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My Thoughts Exactly

Second Law Makes Itself Known to Wetmachine

We had a disk failure, & had to restore from backup. Astute readers may notice that we’ve lost a few days’ worth of posts.

Not sure if we’ll be able to do anything about that (I’m on the road for the next few days. . .). In the meantime, wetmechanics are welcome to repost from their own personal archives, if they care to do so. . .

We apologize for the horrible discontinuity.

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Tales of the Sausage Factory

The Consistency of Kevin Martin and the Faith Based FCC

So many people are mad at Kevin Martin these days, but for so many different things. He is either a “tool of industry” or “interfering with the market,” depending on whom you ask. And no one seems more confused about this than the ranking member of the House Commerce Committee, Joe Barton (R-Tx).
Mr. Barton understands all bout de-regulating. That’s what good Republicans do, after all. But he cannot understand why Mr. Martin is making such trouble for the “highly competitive” cable industry. As reported in this article:

“It’s been said that consistency is the hobgoblin of little minds,” said Rep. Joe Barton, R-Texas, the committee’s senior Republican. “If that’s the case, we could use a few hobgoblins at the FCC.”

Barton complained that Martin plans to ease the cross-ownership ban while doing little on other media ownership restrictions and is attempting to limit the number of subscribers one cable system can reach.

“It baffles me how the same FCC can appropriately eliminate regulations for some segments of industry because of increased competition, and at the very same time refuse to deregulate or even impose more regulation on segments of industry that are creating that very competition,” he said.

Democrats, of course, accept that Mr. Martin as a Republican should be a tool of industry. To the extent they wonder about any apparent inconsistencies, they attribute it to Martin being a shill for the telcos. This, of course, does not explain why Martin denied Verizon’s request for deregulation in six major cities or why Martin told Verizon to bugger off on modifying C Block. But if he isn’t an industry tool, why did he ram through the sale of Tribune and waive FCC regs so that Tribune could appeal in the DC Circuit and try to get the entire newspaper/broadcast cross-ownership ban repealed?

While armchair psychology and analysis based on shreds of available information is always a perilous past-time, I will argue below that Kevin Martin is actually extremely consistent in his decisions and his management style. I say this neither as a criticism or as praise. But pivotal to understanding the actions of the FCC and therefore to exercising my stock in trade of effective advocacy is trying to make some guess on what actually drives the current FCC Chairman in making decisions. Feld’s Second Law of Public Policy states: “Public policy is made by human beings.” (OK, I know Clausewitz said it first about war, but the principle still holds.) So understanding the human beings making policy is a critical step in influencing policy — even if we understand them poorly.

Besides, it’s fun.

Guesses below . . .

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