Verizon Strikes A Blow For Competition And Consumer Choice.

Probably not a headline anyone thought to see here at Tales of the Sausage Factory, but the fact is that Verizon’s decision to offer “skinny bundles,” and to (at least so far) defend that decision against the inevitable programmer lawsuits, confronts one of the biggest problems in pay TV. For many years now, I’ve talked about the interrelation between large cable operators exercising control over programmers and programmers responding by consolidating so they can exercise market power over cable operators. The result, as laid out in this 2013 paper by S.Derek Turner at Free Press, big cable and big content have become locked in a death spiral driven by ever-increasing prices to the point where even Americans in love with television increasingly look at “cutting the cord” and dropping their pay TV subscriptions altogether.

 

Now before anyone jumps on me, I am fully aware that Verizon is a profit maximizing firm that is doing this for the best of all possible reasons — to keep existing customers and hopefully attract new ones. I’m also aware of the limitations of the offer — they sell it with the lower speed FIOS package because they are going after the cost sensitive cord cutter not the higher end customer who either is not cost sensitive or has already cut the cord and now wants super broadband speed. So what? Public policy is not about getting companies (or anyone else) to do the right thing for the “right reason,” it is about getting companies to do the right thing for their own reason. Verizon sees that good policy (giving consumers more choices) is also potentially good business. Hoorah!

 

Mind you, as with all market dynamics, there is always an interplay between the invisible hand of the market and the very visible hand of government. It is, I would maintain, no coincidence that we are seeing a ferment in pay-tv and online video at a time when the DoJ antitrust division, the FCC and even folks in Congress signal that they will not take kindly to companies exercising market power to get in the way of innovation online. Also, as with the “false dawn” of online video in 2009-10, we can expect the dominant players (including Comcast, now no longer constrained to play nice to try to get its acquisition of Time Warner Cable approved) to fight back. We should by no means declare “mission accomplished” when it comes to breaking up the existing business model/incipient market failure/death spiral. We have a lot of work to do, and companies like Verizon might well settle in court the way DISH and Disney did on the Hopper.

 

Nevertheless, credit where credit is due. Likewise, huge applause to Cablevision for offering an even more revolutionary “cord cutting package” consisting of a digital antenna for free over-the-air-TV and the option to add HBO Go to the package (pay us a small fee and we’ll authenticate the ap for you). While Cablevision is more revolutionary, it does not require it to withstand lawsuits from ESPN and other disgruntled programmers, and maintains the dichotomy of the industry between all or nothing on cable channels which is why I give Verizon a bit more shout out cred here.

 

Now if I can only get Verizon to follow the suggestion I made back in 2008 that they sell high-speed FIOS broadband at dirt cheap prices to get people addicted to speed.

 

I unpack a bit what’s going on and why, and what additional policy steps need to happen to support pro-consumer changes in the industry, below . . .

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Comcast/TWC/Charter — OK, NOW It’s Time To Pop The Champagne, And Thank Staff For Doing Their Job.

Yesterday I wrote that it was too soon to start celebrating and that we could expect Comcast to muster its vast army of lobbyists and effectively bottomless treasury to keep trying to push its merger through. I even gently chided Tim Wu for declaring the Comcast deal “dead.”

 

Well, I am incredibly happy to eat crow on this one. To my surprise, Comcast decided to pack it in rather than push like Hell for the next few weeks. But on reflection, Comcast’s decision makes sense for several reasons. I will break these out in a separate post. But first, before the wonky stuff, I want to pause and reflect on the last 16 months.

 

At the start of 2014, things looked grim. First, the D.C. Circuit threw out the old Net Neutrality rules. Then Comcast announced it would buy Time Warner Cable. People believed that in corrupt Washington, no one could stop the well-connected Comcast whose CEO plays golf with Obama from getting what it wanted, and assumed the “former cable lobbyist” Tom “dingo” Wheeler would simply hand the Internet over to his cable buddies.

 

In February 2015, the FCC reclassified broadband as Title II. Today, Comcast will announce that it is abandoning its effort to acquire Time Warner Cable in response to resistance at every level of government. And Tom Wheeler appears on track to put a real pro-consumer, pro-competition agenda in place.

 

I know it is typical at this point for me to remind everyone that we have proven once again that Citizen’s movements are citizen driven!   And it is indeed the case that without the massive and coordinated efforts by the grassroots at every level — like my friend Hannah Jane Sassaman and the Media Mobilizing Project taking it to Comcast HQ in Phildelphia (and who continues to organize efforts to reform Comcast’s practices via the city’s refranchising process), the folks at TURN and Greenlining who opposed Comcast at the California Public Utility Commission, and everyone who wrote to the FCC or called their member of congress — we could not have won these battles and the battles yet to come.

 

But we also need to actually appreciate the hardworking folks at the Department of Justice and the Federal Communications Commission who actually did their jobs and looked at the facts and recommended the right thing — despite all the pressure some of the most powerful corporations in America could bring to bear. The staff who took the time to pick apart all the carefully prepared expert statements and the professionally prepared and packaged “evidence” submitted by Comcast and sift through the millions of pages of documents submitted into the record, patiently building the legal and factual case against the merger that could survive not only judicial scrutiny, but the anticipated counter-attack by the army of coin-operated think tanks and shills.

 

Yeah, those guys. The despised “bureaucrats” and the FCC and DoJ bosses who had their backs and gave them room to do the right thing. Them. They did their jobs. They worked hard at it. They came to the right result.

 

Next time you want to score cheap points or enjoy the pleasures of easy cynicism, remember that. I’m not saying they’re perfect, or all good and pure and noble. Heck, I spend a good deal of my time trying to swim upstream and push staff in directions they may not want to go, and am not afraid to call out the bad calls, the politically based decisions, and the stuff that’s just plain wrong — often in rather snarky and unflattering terms. I’ve got a job to do as well, and that means making sure that those in charge don’t get a free pass when they side with special interest against the public interest.

 

But I am saying that there are a lot of people at the FCC — and in federal service generally — trying to do their job and get it right. Sometimes they even succeed, if the process lets them. When that happens, it would not kill you to say “thanks.”

 

Stay tuned . . . .

 

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Comcast/TWC/Charter — Looking Good But Too Early To Pop The Champagne.

We’ve seen a bunch of news reports recently that the Department of Justice Anti-Trust Division (DOJ) staff and the staff at the Federal Communications Commission (FCC) appear ready to recommend that the proposed Comcast acquisition of Time Warner Cable does not pass statutory muster and their respective agencies should take appropriate action. You can review what that means in these two lengthier blog posts I wrote about how DoJ merger review works and how FCC merger review works.

 

Critically, however, as this CNN piece notes, we only have rumors and speculation. Obviously, as an opponent of the deal, I would not be surprised of staff at DoJ and the FCC, after reviewing the record, concluded that this deal caused serious anti-competitive harm and offered no offsetting benefits. But, as someone who has played regulatory poker with Comcast for 15 years now, I can say from personal experience that no one counts Comcast out until the game is well and truly over. Even if the rumors are true (and I have no way of knowing), these would only be staff recommendations. Comcast still has plenty of opportunities to plead, cajole and bully DoJ and FCC into submission.

 

Which is why it’s important to remember my advice from last February with regard to Title II reclassification: DON’T BE THE SEA HAWKS! We need to continue to keep the pressure on to get this over the goal line. You can start at my employer, Public Knowledge, which has this action page up over here.

 

At the same time, while not getting ahead of ourselves, it is important to understand how this deal went from “sure thing, no antitrust issues, these aren’t the drioids you’re looking for, move along, move along” to “on the ropes and sinking fast.” While I’m not going to fall into the trap of thinking we have already won, we have a lot of good reasons to believe that this fight is winnable. I elaborate a bit below . . . .

 

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First Round of Lawsuits Filed In Net Neutrality Case. Now What?

Yesterday, the U.S. Telecom Association (USTA), the trade association for incumbent telecoms like Verizon and AT&T, and a Texas WISP called Alamo Broadband, filed separate appeals from the FCC’s Order reclassifying broadband as Title II and applying net neutrality rules. (This Ars piece links to both Petitions). USTA filed in the D.C. Circuit, while Alamo filed in the 5th Circuit (which is generally considered one of the more hostile to the FCC).

 

I dig into this a bit, and try to explain what happens next, below . . .

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Today is FCC Net Neutrality Order Day! What Happens Now?

Word is today the FCC will release its network neutrality order reclassifying broadband as Title II. I’ll update with a link when that happens.

UPDATE: Here is the Order in all it’s yummy geeky goodness.

UPDATE #2: I goofed on the length of time parties have to file petitions for review with the federal appeals courts. I cited 47 U.S.C. 402(c). But as a kind reader emailed me, the mandatory time limit in 402(c) only applies in the limited number of instances listed in 47 U.S.C. 402(b) — cases with exclusive jurisdiction in the D.C. Circuit. In most cases, including here, petitions are filed under 402(a), which directs the filer to the procedural rules under the time allowed under 28 U.S.C. 2344. That gives parties 60 days to file a Petition for Review, not the 30 days specified in 47 U.S.C. 402(c). This error is now corrected below.

My only excuse is I was dashing this off quickly in the morning and forgot about this distinction between 402(a) and 402(b). It was annoyingly sloppy on my part. My thanks to the reader who chose to correct me very gently by email rather than mocking me disdainfully on Twitter or in the comments section.

Below is a (relatively) short FAQ on what happens now.

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The FCC Is Gonna Give Me An Open Internet For My Birthday!! Tell Congress Not To Be Party Poopers.

Today is my birthday. Happy birthday to me. Tomorrow, the FCC will vote on whether or not to classify broadband as a Title II service and adopt strong rules for network neutrality. Or, in other words, the FCC is getting me an open Internet for my birthday, which is the best . . . birthday . . . present . . . EVAR!!

 

But before we get to celebrate, we need to blow past the last symbolic push by Republicans in Congress to take a hyperpartisan swipe at “Obamacare for the Internet.” So tune in to the hearing at the House Energy and Commerce Committee at 10:30 a.m. and please BE SURE TO CALL YOUR CONGRESSCRITTER and tell him or her that (a) we need an open Internet protected by Title II; and, (b) Harold wants an open Internet protected by Title II for his birthday and they are mean party poopers who hate America. You can click on this link to get to a page with an integrated calling tool.

 

Alternatively, if your Congresscritter is one of the enlightened ones that supports Title II, thank your representative and tell him or her to keep up the fight. Because right now, we have one goal in life: don’t be the Seahawks. We are running down the clock here, and this is not the time to try for a fancy play. We want to run the damn ball over the goal line and score our touchdown. That means we all huddle together and drive for that last few inches in the final seconds.

 

A year ago, when things looked bleak, I urged those who loved an open Internet not to give up in despair but — to borrow a phrase from one of my favorite poems — rage against the dying of the light. “Politics is the ‘art of the possible.’ Advocacy is about making the impossible, possible,” I urged.  “We have not “lost” network neutrality nor has the FCC gutted it — yet. Rather, we now have the opportunity to correct the mistake the FCC made four years ago when it failed to classify broadband as a Title II service and adopt an absolute ban on ‘paid prioritization’ and other unjust and unreasonable practices. True, the current proposal reaches the wrong tentative conclusion. But it frames the right questions and gives us our chance if we step up and make our case.”

 

And that’s what we did. In an unrelenting wave, for almost a year, millions of Americans pushed the FCCmelted down the Capitol Hill switchboard, and demonstrated. And, from all appearances, it looks like the FCC will correct the mistake it made and will reclassify broadband as Title II.

 

This is, overwhelmingly, the biggest defeat for vested interests I can recall in my 15 years working in this sector. It was against the conventional wisdom, over the united objections of every major industry constituency, without significant support from major industry players such as Google and Facebook or Microsoft. This is bigger than stopping SOPA/PIPA in 2012, because we actually pushed the FCC to do something affirmative, rather than just stopping Congress from making a giveaway to the industry.

 

Reclassification was a thing that should not be possible, and which therefore nobody but a handful of us believed could happen. It did not happen because some powerful person or special interest wanted it. It did not happen because John Oliver made a funny video. It happened because hundreds of lawyers, grassroots organizers, and policy advocates persuaded over 4 million people to stand up for their rights and demand that the government act to protect them from the unrestrained corporate power of broadband access providers. It shows — to everyone’s surprise — that government of the people, by the people and for the people has not perished from this Earth.

 

Democracy working — best damn birthday present EVAR.

 

Stay tuned . . . .

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Title II, Robert McDowell, And The Boy Who Cried ‘Black Helicopter.’

I noted with some considerable interest the February 17 Wall St. Journal Op Ed by Former FCC Commissioner Robert McDowell and Gordon M. Goldstein describing how reclassifying broadband as a Title II telecommunications service will invariably lead to “the International Telecommunications Union (ITU), a regulatory arm of the United Nations” asserting jurisdiction over the Internet. As a consequence, McDowell warns us, the ITU will allow freedom-hating dictatorships such as Russia and China to take control of “Internet governance,” extend censorship to the Internet, and generally crush freedom-as-we-know-it.

What I noted, however, was the remarkable similarity between this column and McDowell’s 2010 Wall St. Journal Op Ed on the same theme. “The U.N. Black Helicopters will swoop down and carry off our Internet if we try to reign in carriers from abusing consumers and adopt real net neutrality” has become a perennial favorite for McDowell and some others. We heard the same cries in 2012 as we geared up for the ITU’s World Conference on International Telecommunications (WCIT). In the lead up to the WCIT, the refusal of then-FCC Chairman Julius Genachowski to close the inquiry into whether to reclassify broadband as Title II prompted more than a few anti-net neutrality advocates to claim that supporting Title II, or even just plain ‘ol net neutrality, gave aid and comfort to Russia, China, Iran, etc. in their efforts to use the ITU to take over the Internet.

So no surprise, as we move closer to actually reclassifying broadband and getting strong network neutrality rules in place, it is time once again for the annual reunion tour of Robert McDowell and the Black Helicopter Band. Despite making the same wrong prediction about the ITU for the last 5 years, we will once again see Robert McDowell and the usual suspects singing backup that reclassifying broadband will serve the nefarious agenda of Russia, China and anyone else we don’t like by allowing the U.N. to swoop in with their black helicopters and carry off our Internet and crush our freedoms.

For those new to this performance, I debunk it (once again) below . . .

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Title II Doesn’t Give FCC New Rate Regulation Powers — For One Thing, Section 706 Already Did That.

As we get closer to the Federal Communication Commission (FCC) historic vote on reclassifying broadband as Title II, we descend further into a phenomena I refer to as #broadbandghazi. Crazy conspiracy theories and wild allegations abound, with the faithful ever insisting that the latest revelation proves, PROVES I SAY, the nefariousness of the evil dictator and tyrant Obama. The very fact that there is no actual evidence only proves how NEFARIOUS and EVIL are his ObamaPlans ™, etc.

 

Case in point, the oft repeated meme by opponents of Title II that Section 201 — by its very nature — imposes “utility style rate regulation” on broadband. Commissioner Pai, who has come to exceed even his usual histrionics on this particular subject, dramatically and repeatedly pushed this meme at his recent press conference. “The American people are being misled by about President Obama’s plan to regulate the Internet,” dramatically declaimed Pai, not sounding in the least like a crazed-conspiracy theorist. (And no, I’m not exaggerating, that actually was his opening line. See his statement here.) “the claim that President Obama’s Plan to regulate the Internet does not include rate regulation is flat out false.” (emphasis in original, *sigh*) When pressed to explain whether he accused Chairman Wheeler of being a liar, Pai demurred slightly, explaining that while everything Wheeler said about forbearing from the explicit price regulation statutes, Section 201(b) (47 U.S.C. 201(b)), by prohibiting all rates and practices that are “unjust and unreasonable,” by its very nature imposes “utility style price regulation” on broadband since it would allow people to bring complaints that the price charged is unjust and unreasonable. Q.E.D. Accordingly, no matter what the FCC Order actually forbears from or says, PRICE REGULATION IS COMING!! BE AFRAID AMERICA!! UTILITY! UTILITY! Pai in particular points out that the proposed Order will — *gasp* — allow consumers to file complaints and even use the courts if broadband providers rip them off with unjust or unreasonable rates and practices. “The plan repeatedly invites complaints from end users and edge providers alike,” warns Pai, apparently unaware that most people like the idea of a consumer protection agency like the FCC being authorized to take complaints when companies screw them over with unjust and unreasonable rates (as demonstrated by this delightful “Ode to Comcast (while waiting for the cable guy)”).

 

A few problems with this argument. First and foremost, Section 706 (47 U.S.C. 1302(a)) explicitly directs the FCC to use “price caps” to promote broadband deployment. In fact, if you go read the statute, price caps are the first explicit authority the FCC is already directed to use under Section 706. Keep in mind that Section 706 applies to broadband already under Title I. So to the extent the argument is based on the idea that language in 201 adds new authority, this argument fails. The explicit directive in Section 706 for the FCC to use price caps as direct rate regulation far exceeds any secret plan to regulate prices by implication from the language in Section 201 despite lots of forbearance to the contrary.

 

Indeed, given the explicit price cap language in Section 706, the FCC forbearance from future price regulation tied to reclassification actually reduces the likelihood of “utility style rate regulation” from the existing Section 706 authority (because, as I discussed back in this blog post on forbearance, the FCC can actually forbear from future obligations that don’t exist yet).

 

There are lots of other problems with this argument as well, as Politifact found when Ted Cruz first raised it back in November. So I elaborate on all the reasons the “Section 201 means utility style price regulation” is bogus #broadbandghazi conspiracy mongering below. . . .

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Net Neutrality, Munibroadband and the SOTU Shout Out.

For all us telecom geeks out there, the big deal was the President’s rather brief shout out on network neutrality and munibroadband. You can see the full text of the speech here. The key paragraph was almost literally a blink and you miss it:

“I intend to protect a free and open internet, extend its reach to every classroom, and every community, and help folks build the fastest networks, so that the next generation of digital innovators and entrepreneurs have the platform to keep reshaping our world.”

Still, as we sometimes say, less is more. That little paragraph actually packs some good punch in Washington speak, as I explain below.

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Welcome To The 2015 Spectrum Season!

Happy New Year faithful readers! Following in the footsteps of Congress, The Daily Show, and just about everyone else here in D.C., I’ve been on hiatus for the last month or so getting rested and rejuvenated for the exciting new year of 2015. In particular, I am extremely excited about this year’s roll out of the “Spectrum Wars” series.  To make life easier for everyone (and more entertaining for myself), I will provide some summaries of the major regulatory issues currently on the table — including what TV series they resemble. As this is primarily intended for people trying to catch up on existing proceedings, I’m not going to speculate on new things that might happen.

Enjoy below . . . .

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