Tales of the Sausage Factory

It's Nice WhenThe FCC Listens — Sorta. Why I like The Proposed Resolution Of Comcast's Complaint Against Verizon But Why Some Of It Makes Me Uneasy.

Back in February, I blogged about Comcast’s complaint against Verizon for its “retention marketing” practices. That’s Verizon’s practice that, when they get a request from another carrier to terminate voice service and transfer the phone number of a customer who is switching from Verizon (a practice called “porting” the number), they make one last run at trying to persuade the customer to stay. At the time, I observed (as I have for well over a year now, since I first made this argument at the at the Federal Trade Commission’s 2007 workshop), that if we are going to rely on competition, then we cannot have rules that privilege one side over another. To cancel video service, you have to call the cable operator, who then gets a last chance to pitch you hard to stay and makes it as difficult as possible to terminate service. But to change telephone provider, the cable company can ask the telco provider and the telco provider isn’t allowed to try to keep the customer — but must wait to pitch the customer until after the customer has already switched. That’s crazy. It needs to be consistent, or it puts the telcos at a serious disadvantage against the cable cos.

Well, back in April, the Enforcement Bureau issued a recommended decision that adopts this same argument. (I’ve been a shade busy, or would have blogged on this earlier.) It strongly recommends that the Commission commence a notice of proposed rulemaking designed to harmonize the rules for switching video and voice. No surprise, as this also tracks a Verizon Petition for Declaratory Ruling — as noted by the Bureau in a footnote.

Needless to say, I wholeheartedly approve of such harmonization, having supported this approach for well over a year. So why does the recommendation make me uneasy?

Because of the legal reasoning around the facts of the instant complaint. The Bureau recommends a finding of no violation because number porting is not a Title II telecom service and cable providers offering voice over IP (VOIP) are not providing Title II services. Which means that the FCC can flit back and forth between Title I and Title II at will, depending on its policy needs of the moment. It also means that Title II telecommunications service has now been reduced to only the voice component of plain old telephone service. And even critical elements of POTS, like managing the phone number systems, no longer count as telecommunication services under Title II.

I’m even more queasy about this because it is probably right under the enormous deference shown to FCC definitional hair splitting thanks to the combination of the Brand X decision and the D.C. Circuit’s decision on CALEA in ACE v. FCC. Well, Scalia warned the Brand X majority, but they didn’t listen. And Michael Powell, by trying to put broadband services beyond the reach of FCC regulation, ended up enormously expanding the power of the FCC to regulate services on a whim.

More on what I’m talking about and what this means for the future (if adopted by the Commission) below . . .

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Tales of the Sausage Factory

Independent Musicians Launch “Rock The Net” Network Neurtality Campaign

My good friends at Future of Music Coalition (FMC) launched a major campaign today for net neutrality. Called “Rock the Net” (a name whose lameness caused some modest embarsement at the begining of the call, but sometimes you gotta grab that cliche by the horns so you can trample the wolves while swimming from the sharks), the campaign brings together major music groups to raise awareness of the net neutrality issue and press for network neutrality legislation (such as the Dorgan-Snowe bill pending in the Senate).

Why do musicians care about network neutrality? And who are Future of Music anyway? See below….

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Tales of the Sausage Factory

Appears that Rose and Lloyd (and me) were right . . .

A month or so back, I reported that Greg Rose and Mark Lloyd had written a study for the Center for American Progress concluding that incumbent wireless providers used spectrum auctions to block the mergence of new competitors. Then came the AWS auction, with its legion of bidders. “A ha!” Declared the Wall St. Journal and others in the anti-net neutrality, anti-regulatory, pro-spectrum property camp. “Look at how the market-based policies create competition! No need for regulation here!”

Turns out, not so much . . . . Either for new spectrum entrants or for broadband competition.

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Tales of the Sausage Factory

An Examination of the Economics of Whitacre Tiering

Today’s lecture in my occassional “Economics of Market Power” series comes from the hot policy debate over whether we should let dsl (and cable) providers charge third parties for “premium” speeds to reach their customers. I call this behavior “Whitacre Tiering” (as distinguished from other sorts of tiering traffic or bandwidth) in honor of AT&T CEO Ed Whitacre, a chief proponent of the concept.

Last time, I explained why permitting Whitacre tiering would be a disaster for democracy. This time, I’ll explain why Whitacre tiering produces really, really awful results from an economic perspective. It gives actors all the wrong incentives, adds new layers of uncertainty and inefficiency to the market generally, and discourages investment in bandwidth capacity at every stage of the network (thus aggravating the broadband incentives problem you may have read about recently, rather than solving it, as some defenders of Whitacre tiering maintain).

But hey, don’t blame me, I’m just the messenger! Go do the math yourselves. All you need is a basic knowledge of Econ 101. OTOH, if you have a religious belief, possibly supported by self-interest or fueled by PAC money, that all deregulation is good and all regulation is bad, mmmkay (not that Senator Enisgn is likely to ever read this), I expect you will remain unpersuaded. Rather like passionate believers in Ptolemy’s geocentric model of the cosmos, I expect the true believer neo-cons, the companies whose self-interests are implicated, and their wholly owned subsidiaries in state and Federal legislatures, to devise theoretical models and epicycles to explain away all the nasty empirical problems and assure me I live in the delightful world of competition and frictionless switching to competitors.

It moves, it moves . . . .

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Tales of the Sausage Factory

Telecom Act Rewrite — I've Always Depended on the Kindness of Monopolies

I’ve just read through the “Broadband Investment and Consumer Choice Act” (72-page pdf available here) introduced by Senator Ensign (R-NV) (and co-sponsored by Senator McCain, to my intense disappointment). In the name of deployment of broadband, consumer choice, free markets, yaddah yaddah yaddah, the bill strips the states and local governments of any consumer protection function and frees your local monopoly providers to serve you! Oh, and without the danger that your local government might decide to supply a pesky competitor. After all, we wouldn’t want you, the local citizen, to decide to foolishly waste your own tax dollars! We, the federal government, know best! Ain’t federalism grand? Except, of course, when it isn’t . . .

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Posted in General, Tales of the Sausage Factory | Also tagged , | 5 Comments (Comments closed)
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