Tales of the Sausage Factory

Open Access Gains Another Convert, AT&T Denies Poisition Change

A brief update on my recent post that AT&T recently conceded it might consider bidding on an open access license. Unsurprisingly, Frontline Wireless — the party pushing for the “E Block” public safety/open access network — filed a copy with the Commission stating that this proves that an E Block auction would attract bidders and that the business model is workable. In response, according to today’s (6/29) Communications Daily an AT&T spokesperson said: “Our position has not changed. As we’ve stated on the record at the FCC, mandated ‘open access’ conditions on licenses in the 700 MHz band should be rejected. We need to see the specific rules the FCC adopts for auction before determining our level of participation.”

The carefull reader will note that these statements are not inconsistent. Of course AT&T would prefer not to have open access, and — at the drop of a hat — will explain why open access is an unworkable awful idea and you should ignore all the evidence from Europe or from the U.S. until we abolished open access in 2005. But there is a huge difference between “we hate open access and think it’s a bad idea” and “we absolutely refuse to bid on a license with an open access condition and nobody else with any money would bid either.” Given that the most potent argument against open access from a political perspective is “don’t mess with the revenue” (as evidenced by the recent Op Ed in the Washington Post by two CTIA lobbyists wearing their “think tank” hats), proof that folks other than Frontline will even show up to bid (and folks with deep pockets at that) on an open access license is rather significant.

Meanwhile, open access for the 700 MHz auction continues to attract new supporters from different sectors of the industry. Northop Grumman, rather a heavy-weight in the equipment manufacture and public saftey/defense contracting world, filed this document supporting open access and explaining that yes, you really can construct a secure public safety network that shares spectrum with an open access commercial network. So much for “it will never work, it’s too hard, lets stick to what we’ve always done.”

In addition, the Frontline cover letter on the submission that introduced the “Well Connected” post with the AT&T interview stated that Citibank had made a presentation to the Commission “last week” explaining that open access is a workable business model. Annoyingly, I can find no record of this presentation in the record for Docket 06-150, but I may just be missing it (it is a pretty big docket). (UPDATE: My thanks to Susan Crawford for pointing me to the appropriate ex parte filing.)

But assuming that Frontline accurately describes a presentation that took place, we now have:

1) A statement by a major financial investor that open access is an attractive and workable model from a business perspective;

2) A statement by a major equipment manufacturer and network operator that commercial open access — even in the more complicated universe of a dual use public safety network — is technologically feasible;

3) A statement by a major incumbent that it would at least “look at” bidding on an open access license if the Commission adopts such a rule;

4) Statements by wireless equipment and wireless application providers that there is a desperate need for open access in the wireless world and in the provision of broadband services generally;

5) Over 250,000 individuals saying the status quo sucks and we want open networks and new providers.

On the other side, we have the entire incumbent industry and its usual cheer leading section chanting that everything is vibrantly competitive, we live in the best of all possible worlds, everything works perfectly and competitively, and even thinking “open access” too loudly will scare away bidders and reduce revenue to a fraction of the expected $10-15 billion. And besides, open access can’t possibly work either on the business side or the technical side.

And all the while, the clock ticks away, as everyone scrambles to get this done before the end of the summer.

Stay tuned . . . .

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Tales of the Sausage Factory

I rarely post “me too” postings . . .

But I feel it is important to circulate this well written piece from Alpie.net. Of course, regular readers will recognize it as one of my favorite tropes, although I usually phrase it differently. Being a citizen rather than a “consumer” means making the jump from bitching about reality to trying to change it. Yes, God knows we’re all busy, trying to make ends meet, raise families, etc. etc. But, like getting enough exercise, making sure the kids do their homework, eating a balanced diet, etc., it’s something that you either make time for because you think it’s important or suffer the consequences.

Stay tuned . . .

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My Thoughts Exactly

Fourthbranch and the Sally Ann Quinn parlor game

By the grace of God I don’t get TV in my house, and, modulo the occasional exception of a cable intermezzo of a few months’ duration here and there, haven’t for nearly twenty years. But I’m not a Puritan, and so, when I’m on a business trip as I am now, I sometimes put on the tube, and if there’s no baseball to be found I check out what’s up with hoi polloi. So it was that tonight I saw for the first time, on TV, the legendary salonista Sally Ann Quinn.

She was pretty hot, I’ll admit; younger and better looking than I had imagined. After all, she was already a doyenne at the time of Bill Clinton’s first inaugural– a priestess in the cult of High Broderism. It was she who famously pronounced Slick Willy too plebeian, too common, to inhabit the place which we rubes across the land had thought belonged to us, viz, the White House, until Sally Ann Quinn set us straight. So you can forgive my imagining her an old hag.

As an habitual, nay, addicted reader of political blogs I had of course read about her shot across “Fourthbranch” Dick Cheney’s bow in today’s WAPO, in which she said that “some Republicans” were looking for an excuse, presumably medical, to ditch Cheney and replace him with the sweet-smelling dreamboat Fred Thompson. So when I got back to the hotel room tonight after a hard day in the Silicon Valley salt mines and began my futile search for non-Giants baseball and saw her name under the crylon “The Plot against Cheney,” I had to stop and look, as at the proverbial car wreck– this one with a decapitation.

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Tales of the Sausage Factory

Possible AT&T Shift on Open Access May Signal Seismic Shift In 700 MHz Auction

Until now, the existing incumbents of all shapes and sizes have presented a solid, immovable wall of resistance against any kind of “open access”/wholesale obligation attached to a license. In the context of the Frontline proposal in particular, carriers have railed against it as a “poison pill” that would scare away potential bidders and reduce the projected $15 Billion auction revenue to spare change and half a wooden pencil.

Which makes this tepid expression of possible interest in a Frontline “E Block” license despite an open access condition by AT&T Senior Vice President Robert Quinn Jr. epic news and potentially another major win (on par with support from Senator John Kerry and Presidential candidate John Edwards) for the forces of open access. According to the article — reporting on an interview Mr. Quinn gave to the Center for Public Integrity’s Drew Clark:

“It’s a different business model for us, but one that we’d be looking at,” Quinn said in an interview with the Center for Public Integrity’s “Well Connected” Project. “If, in the end, that spectrum is attached to public safety, and for example there’s a wholesale requirement, we’ll take a look at it.”

AT&T is waiting for final FCC rules before deciding whether or not to place a bid. “Our position is that we need to see the specific rules the FCC adopts for the auction before determining our level of participation,” AT&T spokesman Michael Balmoris said on Monday. The FCC rules are expected by July.

That looks pretty tame, until one considers the speaker and the context. In spectrum lobbying terms, this is roughly the equivalent of Iranian President Mahmoud Ahmadinejad saying that, under the right circumstances, he would accept an invitation to visit Israel and meet with Israeli Prime Minister Ehud Olmert.

More importantly, AT&T’s statement that it would consider bidding on an E Block license with an open access condition has significant implications for the debate about the auction itself. Statements churned out by incumbents and their think tank cheerleaders — such as this Washpo Op Ed from two CTIA consultants/think tank dudes — portray open access as so onerous that it will kill the auction revenue. AT&T’s statement that it would consider bidding on open access licenses demonstrates that such arguments are utterly bogus. Because if AT&T would consider bidding, you can bet your last cell tower that every other major incumbent would conisder it as well. What, sit it out and let all that spectrum go to a rival?

So why would AT&T even hint at a change in position, given how deeply this undermines the “absolutely no, never, you must be mad” rhetoric of the anti-open access opposition? For wild speculations, see below . . . .

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Tales of the Sausage Factory

Why You Need to Call Your Member of Congress to Save Internet Radio

As internet radio subscribers today may have discovered, a number of internet radio sites are participating in a “Day of Silence” to draw attention to the upcoming increase in internet royalty rates that will drive many of the smaller sites out of business (and probably drive up rates for others). On July 15, the rates paid by internet broadcasters will increase dramatically (retroactive to 2006), thanks to a decision last spring by the Copyright Royalty Board.

Supporters of internet radio are pushing members of Congress to support the Internet Radio Equality Act (H.R. 2060 and companion bill S. 1353 in the Senate). The Bill would fix the rates for internet broadcasts to match the rates paid by satellite radio providers (terrestrial radio providers pay no royalties, heck they are able to extort payola from the music industry). You can find much useful information and how to take action from this Free Press Action page.

UPDATE: Members of Congress Beg Industry Not To Force Them to Actually, Y’Know, Do Stuff.

And I want to stress that action to pass this bill is desperately needed. Why? Because conventional wisdom (CW) in DC is that this bill is unnecessary since everyone expects Soundexchange (which reps the music industry on royalty collections for online play) and the “internet radio industry” to cut a deal. As the CW goes, everyone has too much to lose if the rates really do go into effect — what with public radio stations and other smaller radio broadcasters stopping their streaming, popular streaming sites like Live365.com potentially going under and independent musicians losing their exposure and so forth — that the relevant parties must inevitably cut a deal. And, if all else fails, the DC Circuit may solve the problem by reversing the Copyright Board. So why pass a bill when the problem will take care of itself?

Unfortunately, experience tells me that it is precisely in situations like this, when everyone thinks a deal is inevitable, that there is the highest risk of things spiraling out of control and falling apart. Each party thinks that because “failure is not an option” it can hang tough and the other side must blink. Usually, this collapses into a last minute scramble to reach an 11th-hour agreement. But given the diversity of players and complexity of issues, I don’t think you can patch this up with a Marathon session that ends at 11:59 p.m. on July 14.

Consider, there is a huge disparity among the terrestrial radio broadcasters on what would be the acceptable dimensions of a deal. Industry giants like Clear Channel and Viacom will be willing to settle for a much higher rate than either small commercial operators or NPR. NPR, in turn, will settle at a much higher rate than the small non-commercial stations such as those represented by the National Federation of Community Broadcasters. The “internet broadcasters” have even more exagerated divisions by size and business model, with many of the smallest players absent from the negotiations. An industry with participants from Yahoo! to the archtypal individual in the basement is not going to come together on a “unified position.”

Worse, there are other elements of the structure besides the rate itself. Other issues include the reporting requirments and DRM management systems demanded by the music labels. While these are not addressed by the legislation (which only addresses rates), the negotiations among the industry participants will likely include extraneous issues in an effort to get a critical mass of industry players on board. Again, this favors the largest participants with the most diverse interests.

Finally, the largest players — particularly the big radio chains — have incentive to cut a deal that reduces the existing rate but still jacks up the price (either in terms of rates or interms of additional monitoring and reporting costs) for smaller players (both terrestrial broadcasters and internet broadcasters).

On the music side, there is considerable diversity of opinion among musicians about what to do here. On the one hand, independent musicians love internet radio as an outlet where they actually get play time and do not want to see the internet broadcasters strangled. On the other hand, it is very difficult for people to aggressively advocate to cut their own pay. A good analogy is where a union negotiates with management for pay and benefit cuts to stave off a business collapse. On the one hand, workers want to keep having jobs. OTOH, it is tough to swallow — particularly when the fat cats (here, the major labels and the large terrestrial radio chains) are still making out like bandits. There is a natural inclination of independent musicians to ask “why the Hell should people ask us to save internet radio at our expense when we already get shafted by the system? Aren’t we entitled to get a pay raise?”

So, in my opinion, I think getting a “comprehensive settlement” that eliminates the need for legislation is a lot harder than people think. And, even if there is a settlement, it is almost certain to tilt toward the interests of the largest industry players with some crumbs thrown to the little guys. Everyone will pose for the photo op looking exhausted and saying that it was a tough negotiation but something everyone can live with. Meanwhile, the cutting-edge tiny independents — who don’t even register on the DC policy meter but who most need protection of a set, fair rate to survive — will die a silent death offstage.

And, even if there is a settlement and it is livable, this decision will hang over internet radio providers like a damn Sword of Damocles, shaping the industry and forcing them to play by the rules set by the big music labels and the biggest radio operators because they live in fear of when the agreement expires and they have to go through all this again. A world where internet radio broadcasters have a right to music at a set rate is a very different world from one where they must go begging on bended knee to the copyright lords for the privilege of access to music that competes with other powerful interests.

So if you love vibrant and truly independent internet radio, and if you want to keep the door open so that the next generation of internet radio innovators can come into being, please, please, PLEASE call your Sentors and Representative and tell them to support the Internet Radio Equality Act. Tell Congress to resolve this issue for good, in a way that both makes sure performers get paid and still allows internet radio and community-based terrestrial radio broadcasters to defy both the major labels and the big broadcasting chains.

Stay tuned . . . .

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My Thoughts Exactly

What Digby said

All hail Digby.

If you’re not familiar with Digby, by all means, do yourself and the cause of democracy a favor and get familiar.

Those of you who are among Digby’s regular readers know that until recently very few people knew whether Digby was a man or a woman, and still today, even after Digby’s speech, only her close friends know her name or what she “does for a living.” All I know about her are (as of a few days ago), (a) what she looks and sounds like, and (b) that she is and for some while has been the best writer writing about current events in the USA. She is passionate, informed, funny, angry, brilliant, and a magnificent prose stylist.

This is the first, but it will certainly not be the last of time that John of Wetmachine joins the exponentially growing phenomenon of bloggers putting up posts entitled “What Digby said.” (Meaning, of course, “I hereby emphatically endorse what Digby said.”) Digby, the Tom Paine of our era.

That is all.

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My Thoughts Exactly

Pay no attention

In an attempt to get all social networky, here is a link to my Technorati Profile.

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Tales of the Sausage Factory

AT&T's $10 DSL and the Renomination of Commissioner Tate: What The Senate Confirmation Hearing Should Ask

The Consumerist runs this good but inaccurate report on AT&T’s offering its mandated $10 DSL intro rate for those who have not subscribed to DSL previously. AT&T accepted this as a merger condition when it acquired BellSouth last year. What Consumerist gets wrong is that this condition comes not from the FTC, which did not review the merger (regular readers will recall that it was the Department of Justice Anti-Trust Division that gave the merger a thumbs up with no conditions). The price control aspect came from the FCC, as part of the bucket ‘o concessions AT&T made after it failed to get McDowell unrecused and suddenly had to respond to Democrats rather than blowing them off with bogus concessions.

This matters for two reasons. First, it means that complaining to the Federal Trade Commission, as suggested by Consumerist, is not exactly effective. FTC had nothing to do with the condition and won’t enforce it under their merger authority. If AT&T makes it damn hard for people to order the cheap rate, then there might be a claim as an unfair or deceptive trade practice, but I think that is kind of a stretch.

No, the place to complain is at the Federal Communications Commission. While it doesn’t hurt to file a complaint with the FCC’s Enforcement Bureau, you will also want to make sure that you copy it to the FCC’s record in the AT&T/BellSouth merger via its Electronic Comment Filing System (ECFS). The relevant docket number is 06-74.

But, more importantly, this raises some serious questions that Congress needs to ask not merely about AT&T’s commitment to honoring the merger conditions, but also about the FCC’s willingness to enforce them — especially in light of statements made by Chairman Martin and Commissioner Tate at the time of the merger. Fortunately, President Bush’s decision to nominate Tate for a second term provides an excellent opprtunity for members of the Senate Commerce Committee to put these questions to Commissioner Tate directly.

Because while $10 DSL is important, this is also important to other AT&T merger conditions, such as network neutrality condition. And while, unlike many of my colleagues, I don’t think Martin or Tate are mindless Bellheads or wholly owned subsidiaries of AT&T, I do think it’s important to get them pinned down on the record that they will vigorously enforce the merger conditions and not allow AT&T to weasel out by “complying” in a way that deprives these conditions of meaning.

More below . . . .

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Tales of the Sausage Factory

Adelstein Publicly Calls for Open Access

Two important updates from my most recent post. First, Commissioner Adelstein publicly supported some kind of open access requirement for the 700 MHz auction licenses. Wooo Hoooo! For us policy geeks, it’s kind of like the moment when the Millenium Falcon comes out of nowhere and blasts the Imperial tie fighters targeting Luke as he barrels down toward the access port. Not that I had any doubt where Adelstein’s heart was, but it’s always reassuring to see him commit himself.

The second update is that DIRECTV and Echostar got out bid by some Brits for Intelsat. This makes it more likely that they will want to bid aggressively in the auction, assuming they think they can win.

Stay tuned . . . .

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Tales of the Sausage Factory

Adelstein to Tech Sector & Frontline: Can You Hear Me Now?

FCC Commissioner Jonathon Adelstein’s recent speech at the Wireles Communications Association (WCA) conference — and subsequent remarks to the press on the 700 MHz auction have caused quite a stir among those in the blogosphere following this issue. My fellow advocates of open access, such as Matt Stoller at Mydd.com, voiced considerable concern that Commissioner Adelstein (a long-time friend of the public interest) would come down against open-access proponent Frontline and against the position staked out by the Public Interest Spectrum Coalition, the 4G/Tech industry and others in support of larger license blocks. (Go take a look at my Impossibly Long Field Guide if you are lost on who these players are). OTOH, Publius over at Obsidian Wings has posted a defense of Adelstein, in which he also falls into the classic trap (as he does in his (much shorter than mine) auction guide for dummies) in believing that the telcos are the antichrist when, at least in my opinion, it’s a Hell of a lot more complicated. Yo, Netheads! You can hate other incumbents besides the Telcos! Really!

Anyway, to get back to the issue of the day: Adelstein’s speech and subsequent reactions. Matt and Publius raise good points, but neither sees the full picture here. But heck, that’s why folks need TotSF (or so I like to think), to fill in the blanks and provide the needed backstory for those not familiar with how life in the public policy sausage factory works (and its why the average TotSF post is about 4 single-spaced pages — yeah, I talk too much, I know).

Short version: Adelstein was not committing to a position or dissing a proposal. He was sending a signal to the tech guys and Frontline that if they want to get what they are asking for, they need to answer some very real and legitimate questions. Because Adelstein and McDowell are widely considered “swing votes” on critical questions (with Tate and Copps believed focused primarily on public safety), their public speeches (along with Chairman Martin’s of course) get particular scrutiny. Adelstein has not sold out (as feared by Stoller). Nor is Martin a “a wholly owned subsidiary of Verizon”, nor are 4G Coalition (or yr hmbl obdnt) “useful idiots,” as argued by Publius.

So what is going on (at least in my long-winded opinion)? See below….

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