M2Z Networks recently filed a study I prepared for them in the AWS-3 service rules proceeding (07-195) before the FCC.

In this study I identified how a coordinated effort between T-Mobile and the Rural Telecommunications Group threatened to wreck the AWS-3 auction by writing rules excluding technology proposed by key potential new entrants, including M2Z Networks, and adopting disastrous combinatorial bidding rules like those which provided a nearly half-billion dollar windfall for Verizon in the 700 MHz Band auction.

In brief, T-Mobile has proposed a “bandwidth maximization plan,” first mooted in this filing and elaborated here. The T-Mobile plan would split the J Block in half, giving 5 MHz for uplink and joining the other 5 MHz of J Block with 20 MHz of AWS-3 spectrum for downlink. This would force abandonment of the Time Division Duplex (TDD) technology envisioned by the FNPRM in favor of Frequency Division Duplex (FDD) technology favored by T-Mobile.

That might seem innocuous enough at first glance, but it eliminates consideration of a technology which is both more efficient and more robust than T-Mobile's FDD alternative, and it is never a good idea to throttle new technologies at the bidding of vested incumbents. However, it is more pernicious still in that it aims at excluding the TDD technology on which Sprint, Intel, Arraycom, and M2Z proposed to build a nationwide network, effectively erecting entry barriers to major competitors to T-Mobile.

The irony is that T-Mobile proposes to kill TDD technology in AWS-3 on the pretext of preventing interference between AWS-3 and AWS-1 spectrum (T-Mobile was a major acquirer of AWS-1 spectrum). However, the FCC's Office of Engineering and Technology conducted extensive testing and found that such interference presented no significant problem. T-Mobile's justification for the technologically-discriminatory erection of this entry barrier is, thus, a lie.

But it gets worse.

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I have watched with a combination of amazement and horror at the way the Democratic leadership has caved in to demands that Congress enact the Paulson Plan. There are many reasons for opposing this ill-conceived plan, including the facts that it aims only at rescuing the shareholders and unsecured creditors of financial institutions and it was crafted by a former chairman of Goldman Sachs to bail his banker buddies out while leaving the rest of us with a bill for as much as $700 billion. But the worst of it is that it will do very little to address the fundamental credit contraction arising from deflation of a massive housing bubble which underlies the current crisis, as evidenced by the continued worsening of money markets even after the Senate's adoption of the revised plan.

I have nearly laughed myself silly at Republican claims that the Paulson Plan amounts to socialism (in fact, it's far closer to the Mefo Bill scheme that Hjalmar Schacht designed than anything the left would come up with). So I offer a plan designed by a left social democrat that would actually address the economic basis of the current credit crisis (and, thus, a socialist way to really pull capitalism's chestnuts out of the fire). The plan is heavily influenced by Nouriel Roubini's excellent analysis — I heartily recommend his blog for extremely insightful discussion of the credit crisis — but goes much further in remedying the underlying flaws in the financial system.

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Maybe I'm just a grumpy old economist, but I was struck just how misleading a recent commercial from the Esurance auto insurance company is.

It suggests that there are real savings, economically and ecologically, associated with the fact that Esurance provides only online proof of insurance cards. Since states still require you to have a paper proof of insurance in your car, all this amounts to is transfer of the transaction costs associated with printing a paper proof of insurance from Esurance to the customer. That's hardly a savings to the customer.

What's worse is that the claimed ecological savings is complete bunkum. If Esurance provided the paper proof of insurance, it could ensure ecological benefits by a corporate policy of printing them only on recycled stock. By forcing the customer to print it, Esurance virtually guarantees that only customers who assume the transaction costs of obtaining recycled stock to use with their own printers provide the promised ecological savings. Esurance's policy virtually guarantees that the vast majority of its paper proofs of insurance will benefit the environment not a whit.

Just for the misleading economic and ecological claims I'd be inclined to give Esurance a thumbs down, but the assumption that people are too stupid to think this nonsense through really seals the deal.

Some critics of the 700 MHz Band Auction (Auction 73) attribute the failure of C Block — which consisted of large Regional Economic Grouping (REAG) licenses — to clear at the kinds of premium over the licenses in the AWS-1 auction that the Economic Area (EA) and Cellular Marketing Area (CMA) in the A, B, and E Blocks did to the fact that C Block had wireless Carterfone service rules attached.

However, careful analysis of the dynamics of the auction suggest that interaction of the auction's combinatorial bidding, eligibility and activity rules, and the way in which minimum acceptable bids were calculated created a “perfect storm” in which Verizon was able to scoop up the two most populous REAGs for nearly half a billion dollars less than bidders were willing to pay earlier in the auction. This had a seriously depressing effect on the price at which C Block cleared and had nothing to do with the wireless Carterfone service rules.

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It's amusing to see Hilary Clinton and John McCain blasting Barack Obama for his remarks explaining why despair and bitterness over the way economic elites have marginalised them economically and politically have motivated large portions of the working class to vote for politicians and issues which are utterly contrary to their economic self-interest: “It's not surprising that they get bitter, they cling to guns or religion or antipathy to people who aren't like them or anti-immigrant sentiment or anti-trade sentiment.”

It's less amusing to see Obama backtracking now with his claim that “I didn’t say it as well as I should have.”

While Obama got it wrong on free trade — Chicago School free trade fanaticism has been a potent weapon for extracting surplus value from working people internationally by breaking unions and depressing wages, and people are justifiably angered about it — he got it right about the basis on which large elements of the American working class embrace right-wing causes and politicians who serve the interests of the economic elite rather than working people. There are two fundamental explanatory principles here.

First, as an insightful nineteenth-century political economist put it, religion is the opiate of the masses. There is a direct correlation internationally and in the U.S. between the degree of economic pain which globalisation and other forms of primitive accumulation against labour have imposed and the rise in the prevalence of fundamentalist religiosity since the late 1970s. The rise of the Religious Right and their issues in American politics, and their attraction to elements of the working class, are directly tied to this. When it looks like nothing can be done because the system is owned lock, stock, and barrel by an economic elite who profit from gutting your union, shipping your job to a Chinese slave-labour factory, plundering your pension fund, and dropping your health care, people get religion. And right-wing politicians play on this to keep working people from effectively opposing the underlying economic causes by focusing on gay marriage, abortion, and other social issues. It's called creating false consciousness.

Second, it is a well-known phenomenon that in the absence of a class-conscious, well-organised, effective democratic left the exacerbation of economic oppression will produce support for the Right among working people. It happened in Weimar Germany when German social democracy dithered while working-class voters divided themselves between the Nazis and the KPD. It's not surprising that the Bush administration's penchant for corporatist-fascist ideology and the nativist Right's racialist agenda have confused working people into supporting positions which help the economic elite keep power. We haven't had a serious democratic left in this country since the Great Depression (some people might argue that we've never had a serious democratic left in the way European countries have).

I see nothing in Obama's original remarks — the reference to ”anti-trade sentiment" aside — which isn't entirely defensible.

In fact, it would have been refreshing as hell to have heard Obama respond to Clinton that eight years of her and her husband selling out the Democratic Party working-class base, trying to abolish the New Deal, blocking a single-payer national health care system on behalf of their buddies in the insurance industry, and triangulating on making the Gingrich agenda on everything but abortion the DLC agenda, while stuffing corporate cash into their pockets as fast as they could raise it (confirmed by their joint tax returns since leaving office), have led a lot of working people to despair about politics and embrace right-wing social and religious issues.

But that isn't going to happen, largely because the principal difference between Obama and Clinton is that he hasn't been around long enough to get his snout into the corporate trough as deeply as the Clintons, but he has hopes with his millionaire fundraisers. So he backtracks.

I apologise for the hiatus between this and my last 700 MHz Auction update, but with 36,419 bids over 261 rounds, analysing the data set is taking a bit of time.

Among the several controversies arising the from now-completed auction has been ATT's claim that bidders were deterred from bidding on C Block because of the open access rules imposed on the block. I can say with confidence that this is a bald-faced lie.

Twenty-six companies bid on C Block spectrum: Alltel Corporation, AST Telecom, LLC, AT&T Mobility Spectrum, LLC, Bluewater Wireless, L.P., Cellco Partnership d/b/a Verizon Wireless, Cellular South Licenses, Inc., CHEVRON USA INC., Choice Phone LLC, Club 42 CM Limited Partnership, Copper Valley Wireless, Inc., Cox Wireless, Inc., Cricket Licensee 2007, LLC, Google Airwaves Inc., King Street Wireless, L.P., Thomas K. Kurian, MetroPCS 700 MHz, LLC, NatTel, LLC, PTI Pacifica, Inc., Pulse Mobile LLC, QUALCOMM Incorporated, SAL Spectrum, LLC, SeaBytes, L.L.C., Small Ventures USA, L.P., Triad 700, LLC, Vulcan Spectrum LLC, and Xanadoo 700 MHz DE, LLC.

Note that the lying buggers at ATT bid on REAGs 2 and 4. They were deterred, but only by Verizon's deeper pockets.

The interesting dynamic in C Block is the effect of combinatorial bidding on the outcome. Under the combinatorial bidding rules three packages of REAGs were available (the 50 state package, the Atlantic package, and the Pacific package) as well as the individual REAGs. The rules provided that so long as the bid on a package exceeded the total amount of the bids on all the individual REAGs in that package, the package bidder would win (assuming that the package bid reached the reserve price). If the total amount bid on the individual REAGs exceeded the package bid in a round, then the package was “broken” and the package bidder wouldn't be required to take any REAGs if it couldn't have the whole package (this was to prevent a bidder who wanted a national footprint from getting stuck with less if another bidder outbid on one or two crucial components of the package).

Echostar was a strong proponent of combinatorial bidding, insisting that they wouldn't show up and bid if the C Block did have a combinatorial bidding rule. Oddly enough, they got the rule and then their bidding entity, Frontier Wireless, didn't even show in C Block bidding (they bid mainly in E Block without combinatorial bidding). But what they inadvertently did was screw at least one major bidder with the combinatorial bidding rules they insisted on.

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For the first time since the Federal Reserve began tracking home equity data in 1945 the amount of equity homeowners hold in their homes fell below 50% in the fourth quarter of 2007 according to the Federal Reserve. More interesting still is the finding by Moody's Economy.com that approximately 10% of homeowners now have zero or negative equity in their homes. This resulted from a 8.9% drop in U.S. home prices in the fourth quarter of 2007.

And analysts are predicting roughly an equal decline in home prices in the first quarter of 2008. That will put nearly 20% of homeowners at zero or negative equity.

What happens if homeowners are genuinely the rational actors of neoclassical economics? They default on their mortgages the moment they reach zero equity and wait for the up to two years it would take for their lender to force them out by foreclosure. That means large-scale bank failures even with a massive federal bailout. Can we say the magic words “conjunctural crisis of capital”?

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It's apparent to anyone who has been following the 700 MHz auction that the plan to allocate spectrum for a nationwide public safety network which would allow a private company to deploy the infrastructure and sell access to the network to private users, who could be preempted by public safety users in an emergency, isn't going to happen. D Block has miserably failed to reach its reserve price for a number of reasons, not the least of which was the apparent bullying of Frontline by the Public Safety Spectrum Trust's agent Morgan O'Brien which led to Frontline's withdrawal from the auction.

Fellow Wetmachiner Harold Feld's trenchant analysis lays out the options for D Block. I have a few things to say on the matter as well.

A national public safety broadband system is a vital national security interest of the United States. The notion of handing vital national security infrastructure over to private enterprise is one of the worst ideas the Bush administration has ever had. It hasn't worked well in Iraq and it's a non-starter for D Block. Let's drive a stake through the heart of the idea that private providers can more efficiently deliver a vital public good than government can. The FCC should simply shelve the D Block proposal until the new Congress is elected.

The new Congress should definitively decide whether a national public safety network is, as the 911 Commission opined, a vital national security need. If so, it should appropriate the funds for the federal government to build and deploy the necessary infrastructure. It's what Dwight Eisenhower did with the interstate highway system. The 700 MHz auction has already raised nearly twice the projected revenue. Either a national public safety is needed or it isn't.

Such a federally-built public safety network offers an additional benefit. There is little additional marginal cost to building a network which allows capacity to be used by others while allowing public safety to preempt them during emergencies. Such capacity could be offered at cost to municipalities for community wireless broadband networks. The presence of such a government-owned network would force the major wireless broadband providers to cease redlining rural and inner-city America, closing the digital divide, as well as provide partial reimbursal to the Treasury for the costs of building the network. We would have our third broadband pipe, and it would be a joint federal-state-local asset.

If a national public safety broadband network is needed, we should do it right and the government should build it, or the Democrats and Republicans in Congress should publicly admit that there is no compelling national security need. And if it is built, it should be built with the benefit of all Americans in mind, not just the profits of the corporate greed machine.

Probably won't happen, for all the reasons Harold cited. But it makes me nostalgic for a visionary like Dwight Eisenhower (and those are words I don't often utter).

John Sundman wants sexy details on John McCain, Vicky Iseman, and Paxson Communications. I'll tell all I know.

Cornerstone TeleVision had sought to obtain the noncommercial license for WQEX, owned by Pittsburgh public broadcaster WQED, and then to transfer the license to Paxson Communications with Cornerstone and WQED splitting the $35 million Paxson was putting up for the sale. The proposal was virtually unprecedented since it involved transfer of noncommercial license held by a public broadcaster to a commercial enterprise. The complicated plan was an attempt to end-run a 1996 FCC ruling that WQEX could not be “dereserved,” i.e., commercialised, by a direct sale to a commercial broadcaster.

The Republican minority on the FCC supported the plan, the Democrats opposed... until John McCain weighed in via his December 10, 1999 letter to the FCC, demanding that the FCC Commissioners ”advise me, in writing, no later than close of business on Tuesday, Dec. 14, 1999, whether you have already acted upon these applications.... If your answer to the latter question is no, please state further whether you will, or will not, be prepared to act on these applications at the open meeting on Dec. 15. If your answer to both of the preceding questions is no, please explain why“ (the full text of McCain's letter to FCC Chairman William Kennard may be found here).

McCain had held up confirmation of Democrat Susan Ness' reappointment to the FCC since the previous July. Apprised of McCain's adamant support for Paxson on this issue, Ness voted against her fellow Democrats to approve the deal. As far as I know, the only ones getting screwed in all this were the Democrats by Ness (who caved to pressure from McCain — and despite repeated gutlessness in dealing with the Republican Congress Ness is frequently mooted as the next FCC Chairman if Clinton is elected).

And even then the well-laid plan of Paxson fell apart over a condition placed by the FCC on the deal, prohibiting Cornerstone from ”proselytising," an important issue, since the transfer involved a religious broadcaster taking over an educational TV station.

Commenting on a piece by The Financial Times columnist Clive Crook on Barak Obama's likely economy policies if elected, The Economist manages to interject a point desperately depressing, but spot on: “His voting record suggests that, if elected, Mr Obama would be the most economically left-wing American president since ... well, it's hard to say. Richard Nixon?”

The Economist has had Nixon in their sights ever since he briefly introduced wage and price controls in August 1971, violating a core tenet of Chicago School orthodoxy, but on reflection they have a point. Nixon was the last president who was willing to seriously entertain the use of government to fundamentally regulate the economy not solely at the behest of Wall Street and corporate interests. The Friedmanite orthodoxy which was religiously embraced by so many around Reagan and which has subsequently stripped government of the will to regulate the unchecked greed machine of the market was viewed as a sectarian movement, very nearly a cult, by Nixon and his principal economic advisors.

But it says a great deal about how much the progressive movement in the Democratic Party has surrendered that the principal organ of neoliberalism, The Economist, finds that the worst thing it can say about Barak Obama is that he might pursue Nixonian economic policies. Lyndon Johnson and the Great Society are beyond the realm of possibility, much less Roosevelt and the policies which underlay the New Deal. And they are almost certainly right. Obama is as much a captive of the corporate-worshipping wing of the Democratic Party as Billary (the principal reason that Hillary Clinton won't release her joint income tax returns is that they would reveal that husband Bill has been openly a wholly-owned subsidiary of major U.S. and foreign corporate interests since leaving the White House, just as he was more clandestinely since his first days in Arkansas politics).

With Edwards and Kucinch out of the race there's very little to enthuse me about a contest between a product of the Daley machine in Chicago and the Democratic Leadership Council's anointed one. I suspect strongly that Obama will be just another case of “run to the left, govern to the right.” I only wish The Who's lyrics were right: We won't get fooled again. But I wouldn't make book on it.