Tales of the Sausage Factory

My Insanely Long Field Guide To Understanding FCC Chairman Tom Wheeler Statement On Peering.

At the press conference following the Federal Communication Commission (FCC) March 31 Open Meeting, Chairman Tom Wheeler made the following observation:

 

“Interconnection is part of the Network Compact.” Peering “is just a $3.50 word for interconnection.”

 

Wheeler followed up this statement by explaining that there was a difference between “network neutrality” and the “open internet” on one hand and “interconnection” as the ‘path to the Internet’ on the other hand. While government has a critical role in monitoring peering/interconnection to protect the values of the Network Compact, it isn’t a network neutrality issue. You can see Wheeler’s full statement here (Start at 144:45 – 147:23 has unrelated stuff in middle) (transcript here).

 

After the meeting, the FCC released a separate statement that they really mean it when they say that they aren’t going to do peering as part of the Net Neutrality rules. While Brendan Sasso at National Journal gets points for noticing that “the FCC could decide to enact separate regulations on the issue or force Comcast to accept new rules in order to receive permission to buy Time Warner Cable,” most folks I’ve read in the press have broadly interpreted this as indicating the FCC will not look into the Comcast/Netflix dispute or complaints by Cogent and Level 3 about large edge-providers squeezing them for higher interconnection fees.

 

Personally, I think most people are totally misreading this. Wheeler’s statements make it look more likely to me that the FCC will start looking closely at the Internet peering market, not less likely, especially as part of the Comcast/TWC deal. Indeed, Comcast’s Chief Lobbyist David Cohen, who ranks in my book as one of the absolutely smartest and most effective telecom lobbyists ever, has already started backing away from earlier statements that regulators would ignore peering issues and that he expects them to look at the Comcast/Netflix deal. (Unsurprisingly, Cohen also said he expects regulators to find no problems with the deal and called Netflix CEO Reed Hasting’s arguments that this eviscerated net neutrality “hogwash.”)

 

Below, I will rant at considerable length that (a) Wheeler is right, this is not a “network neutrality” issue, but the same goddam interconnection issue that we have struggled with for more than a hundred years in every networked industry from railroads to electricity to broadband; (b) The FCC needs to actually look at this and study it and understand how the market works before it makes any decisions on what to do; and, (c) While Wheeler is not saying in any way, shape or form he actually plans to do anything before he has real information on which to base a decision, he is signaling — for anyone actually paying attention — that he is, in fact, going to actually look at this as part of his overall transition of the agency around his “Fourth Network Revolution” and “Network Compact” ideas.

 

 

While this last would seem pretty basic and obvious, it represents a significant change in policy from the previous insistence that IP magic pixie dust obscures all things Internet and makes them invisible to the FCC. Whether I agree with what Wheeler ultimately does or not — and I have no idea what he might ultimately do here, he could decide the market is competitive and working just fine — I don’t believe Wheeler is going to go around with his eyes and ears covered blathering about the magic nature of the Internet. I think Wheeler is actually going to check under the hood and see what actually makes the damn thing tick — and Comcast is just the company to help him do it.

 

Much ranting below . . .

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Tales of the Sausage Factory

Comcast/TWC Merger Explained By Taiwanese News Animation

I will, eventually, have more to say about the Comcast’s proposed acquisition of Time Warner Cable (TWC). My first reaction, I will admit, was pretty visceral. “My God! Aren’t you already freakin’ BIG ENOUGH Comcast?” But then, I realized that I needed to actually calm myself, and recall that bigness is not necessarily —

OH MY GOD!! YOU COMCAST PEOPLE HAVE NO LIMITS! YOU’RE LIKE SOME GIANT, COAX-TENTACLED CTHULHU-BEAST THAT KEEPS PROMISING TO DEVOUR US ALL BETWEEN 8 A.M. AND NOON BUT DOESN’T ACTUALLY GET AROUND TO DEVOURING US UNTIL AFTER 3 P.M. BECAUSE YOU GOT ‘STUCK IN TRAFFIC’ AND A PREVIOUS DEVOURING RAN LONGER THAN EXPECTED . . . .

Breathe, Harold, breathe. Think policy. [pause for calm] Several folks have posted excellent policy analysis, starting with my Public Knowledge colleague Jodie Griffin in this blog post here to this excellent piece by David Karr to this more general expression of antitrust concern by Paul Krugman

COMCAST IS ALREADY BUYING A POWER COMPANY! A FREAKING POWER COMPANY!!! YOU ALREADY ARE DOMINATING VIDEO, DATA AND VOICE AND YOU ARE BUYING A POWER COMPANY AND RUN ALARM SYSTEMS AND ARE PROBABLY GOING TO IMPLANT CHIPS IN OUR BRAINS SO WE CAN STREAM XFINITY DIRECT TO OUR EYEBALLS AND —

As you can see, I’m still having a bit of trouble getting over my visceral reaction to the shear size and scope of this deal. So while I am calming down and getting ready to write my Insanely Long Field Guide To the Comcast/TWC Merger, I will simply let the good people at Taiwan’s fine Tomo News capture the moment. Because nothing really says “Comcast/TWC” better than giant robots and tasers.

Stay tuned . . . .

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Tales of the Sausage Factory

Shutting Down the Phone System: Comcast’s Very Scary Filing

I’ve been sorting through the various filings at the FCC in the Phone Network to IP transition docket. I single out the 7-page filing by Comcast as the filing that scares the absolute bejeebers out of me.

 

Why? Because everyone else – no matter what their financial interest or political alignment – at least paid lip service to the idea that we ought to have some kind of regulation. Whether it’s a general nod to a “minimal and light touch regulatory regime” or a specific shopping list, the vast majority of commenters recognized then when you have something as big, complicated and utterly essential to people’s lives as the phone system, you need some kind of basic backstop for people to feel comfortable and to address problems that will invariably come up. Even AT&T has made it utterly clear that it does not see the future of phone service as a regulation-free zone.” Even staunch free market conservatives such as TechFreedom and Free State Foundation acknowledge that, as a practical matter, there is going to need to be some set of rules – even if they hope to keep these rules to what they regard as the barest minimum necessary.

 

Comcast, and Comcast alone, suggests otherwise. Comcast alone thinks we can manage the phone system as the Libertarian Nirvana. This smacks either of unbelievable hubris (“we’re so big everyone will have to deal with us – what could go wrong?”) or an incredible sense of market power (“we’re so big everyone will have to deal with us – heh heh heh”). Either way, this sends chills down my spine, because the filing signals loud and clear that Comcast – one of the largest providers of residential phone service in the United States, the largest residential broadband provider, and the single most powerful entity in U.S. telecom policy – simply doesn’t get it when it comes to the future of the phone system.

 

As I explain below, Comcast needs to understand that “With Great Market Share Comes Great Responsibility.” Because when you are this big, even what you don’t say can have huge consequences. Comcast is beyond “too big to fail.” It is now officially in its own regulatory category called “too big to be allowed to screw up.” Because Comcast is now so big, and so central to communications in the United States, that it could single-handedly crash the phone system by stupidly trying to manage it as if it were the cable world. Unless Comcast gets with the program and acknowledges the need for some kind of ongoing oversight of the phone system, this transition is guaranteed to become an utter disaster.

 

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Tales of the Sausage Factory

What the DoJ Documents Tell Us About the Comcast/NBCU Merger

In all the hoo ha about the Comcast/NBCU Merger, few folks troubled to read the Department of Justice Competitive Impact StatementComplaint, andConsent Decree. That’s rather unfortunate, as these documents sets forth a straightforward case under the antitrust laws for program access conditions for online competitors and for network neutrality. Here’s the short version:  Comcast pre-merger makes almost 30 times more money from providing cable service than from programming revenues. Even adding all of NBCU’s revenue, Comcast will still make more than twice as much from selling cable service ($34 billion) as from programming ($16.9 billion). Anyone who can do basic arithmetic would therefore conclude that yes, Comcast’s incentive to protect its cable business from erosion by online distributors (or even from traditional rivals) outweighs the potential gain from increasing programming distribution. As an added bonus, for those ideologically committed to believing otherwise, turns out Comcast’s own documents agree with the simple arithmetic and not the fun theoretical models their experts submitted. Which is why (among other reasons) DoJ continued oversight is not merely something extra. It really matters.

Lets break this out some below …

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Tales of the Sausage Factory

Genachowski Hits The Legal Reset Button — “Title II Lite”

Genachowski has announced his proposed response to the Comcast case. This is precisely the result Comcast and the other carriers feared since the DC Circuit panel signaled at oral argument they would slam the FCC.  In my latest “5 Minutes With Harold Feld,” I give a short (at least, as short as I can) explanation of what this “Third Way” (also referred to as “Title II Lite”) means and what happens next from a process perspective. Some additional analysis, laughing at Wall St. analysts, and reference to a Dilbert from 1992 below . . .

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Tales of the Sausage Factory

The Comedy of Comcast v. FCC Part I — What Did The Court Actually Do?

It’s been rather busy the last few weeks. Between my unfairly holding Sprint responsible for its own screw ups, shamelessly cheering on the documentation of our national broadband drought by Our Great Google Overlords, and generally crushing all who dare oppose me, it’s been hard to find time to blog about stuff. So naturally, while I was away for the last day of Passover, the DC Circuit issued its long awaited decision in the Comcast/BitTorrent case, Comcast v. FCC.

Needless to say, the opinion was greeted with the total hysteria that has become the hallmark of the network neutrality debate — with terms like “Nuclear Option,” “World War III,” and “spanking.” Opponents of FCC jurisdiction rejoiced, supporters of network neutrality lamented, and a few shrewd observers noted that the actual outcomes could prove far worse for Comcast and the incumbents than if Comcast had lost (as I noted after oral argument last January).

My co-counsel, Marvin Ammori, has written up his retrospective here. Understandably, he’s rather bummed. Despite this whole thing being my idea in the first place, however, I’m actually rather pleased and amused with how this whole thing is turning out. Sure, I would much rather have won. But as the history of the last 2+ years of this unfolds, the tale of how Comcast managed to bluff, badger, and bungle itself into a position where it has not only guaranteed harsher condition on its merger with NBC-Universal, but revived the possibility of classifying broadband access as a Title II telecom service for the first time in 10 years, is the stuff of high farce. And while I wish I could claim credit for this outcome, the real “heroes” here are Brian Roberts (head of Comcast) followed closely by AT&T, NCTA and the Republican party.

To try to keep this manageable, I’ll divide this into two posts. Below, I will try to set forth what the court actually said and the immediate legal implications, without worrying too much about the overall policy. While I can hardly claim to be an impartial observer, I’ll do my best to identify my editorial comments as such and note where reasonable minds can differ. In Part II, I shall shamelessly indulge myself with my own eyewitness to history and why I think the Comedy of Comcast v. FCC deserves its special place in the realm of farce — although we have by no means reached a certain conclusion.

More below . . .

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My Thoughts Exactly

Last day to get your comments to the FCC about Net Neutrality

OK, get off your duff & file your comment with the FCC. Here’s why and how.

My comment:

The Internet is a fundamental engine of our democracy. It’s the equivalent in our day of what “the press” was in the earliest days of our republic. Yielding control of the Internet to large corporations is a betrayal of the bedrock values upon which our nation was founded and still rests.

In the words of MIT professor Daniel Weitzner, in testimony given before the FCC at Harvard, “What’s at stake is everyone’s ability to communicate with everyone else.”

In effect, the FCC must decide whether the Internet is to be optimized as a vital tool for promoting and protecting citizen engagement with each other and with their government, or as a tool for maximizing shareholder value of large corporations. It’s a simple fact that you cannot optimize for both. If the FCC optimizes for democracy and “everyone’s ability to communicate with everyone else”, there will still be ample room for lots of people and lots of corporations to make money.

But if the FCC decides to void the principles of Net Neutrality in the interests of corporations, our democracy will be decisively and perhaps irremediably harmed.

The FCC must now act decisively in the public interest by enacting strong rules that keep the Internet free from blocking, censorship and discrimination.

Don’t give in to pressure from AT&T, Comcast, Verizon and their lobbyists. Stand with us in support of a strong Net Neutrality rule.

Do it now. It will take two minutes. It’s important. Do it. (Weitzner citation from this brilliant eye-witness report ).

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Tales of the Sausage Factory

Does Comcast Fear To Win Too Much?

I grant I wasn’t there, but pretty much everyone who was seems to think the D.C. Circuit oral argument in the Comcast/BitTorrent case was an utter disaster for the FCC/pro-NN forces and a total triumph for Comcast. Given my previously voiced opinion about the judicial activists on the D.C. Circuit, I can’t say this surprises me even in light of the previous precedent. Indeed, from what I have heard, the D.C. Circuit appeared breathtakingly eager to rush past the procedural issues and declare that the FCC has absolutely no jurisdiction to regulate anything an ISP ever does, ever.

So why has Comcast, which (along with its trade association) has argued that it would violate its First Amendment rights for the FCC to regulate its conduct as an ISP, posted this blog entry to explain that of course they totally support FCC regulation of broadband ISPs, under the right circumstances, etc.?

Answer: Comcast fears to win too much. For Comcast (and other broadband providers), the ideal world consists of an FCC with jurisdiction but no authority. That is to say, they want an FCC that appears to have authority to do something, but when push comes to shove is prevented from actually doing anything Comcast doesn’t like. Which is why Comcast wanted to win on procedure and, perhaps, get the court to threaten the FCC that it had no authority. In that universe (which could still come to pass), Comcast could keep Congress from giving the FCC explicit authority by saying it has jurisdiction but keep the FCC from doing anything by claiming that it lacked authority for any specific action.

But there is every indication that the D.C. Circuit will go much further, and find that the FCC has no jurisdiction to even consider regulation of ISP behavior no matter what the circumstances, because it doesn’t believe that ancillary authority exists. While that sounds like exactly what Comcast would want, it scares them silly. Because even the fear of this sort of huge loss creates a panic that could lead Congress explicitly delegating the FCC extremely clear and unambiguous authority.

More, including a shout out to all my fellow Buffy the Vampire Slayer fans, below . . . .

UPDATE: According to this blog post by Washpo Reporter Cecilia Kang, I’m not the only one thinking this way. A few more choice remarks from NCTA’s Kyle McSlarrow about how the FCC’s role is to be a big ATM for his members may get even this Congress off it’s rear end.

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Tales of the Sausage Factory

Will Comcast/NBC Need FCC Approval? And How Would That Play Out?

The industry news is abuzz with the upcoming Comcast/NC Universal Deal. According to recent reports, Comcast would buy 51% of NBC Universal (assuming Vivendi, which owns 20% at the moment, agreed with the terms). But beyond this general framework, it’s unclear whether all the assets held by NBC Universal would be included in the deal. Whether or not the FCC has jurisdiction hinges on this question.

The FCC does not have general jurisdiction over deals pertaining to content. NBC Universal owns lots of radio and television stations. Transfer of the licenses to the new Comcast-controlled entity would require FCC approval. But if the deal does not include the licenses, the FCC would probably lack a jurisdictional hook. Review of the deal would lie strictly in antitrust — at either the DoJ or Federal Trade Commission (FTC). From an antitrust perspective, the deal raises some concerns given the concentration of content and Comcast’s position vis-a-vis other existing subscription television providers (e.g., FIOS, DIRECTV) and potential new competitors (e.g., Netflix and other “over the top” video providers)). It may also concern broadcasters, both NBC affiliates worried about the change in management and other broadcasters worried how this would impact Comcast’s retrans negotiations. Much of this will also depend on whether the deal includes the movie production studios, prior existing content, and a host of other details that impact the universe of content distribution these days.

Assuming the TV and/or radio stations are included, it’s not entirely clear what happens. The D.C. Circuit eliminated the FCC’s existing ban on cable/television cross ownership (which applied only to broadcast licenses in a cable system’s franchise area) in 2002 on the basis that the D.C. Circuit didn’t like it (Fox Television Stations, Inc. v. FCC, 280 F.3d 1027 (D.C. Cir. 2002). That decision does not directly impact the FCC’s general obligation under Section 310(d) to ensure that any transfer of a license serves the public interest. Comcast and NBC will certain push the Fox Television decision for all its worth, arguing that the DC Circuit decision to vacate the rule means that there are no circumstances under which the FCC could prevent a broadcast/cable cross-ownership rules. Opponents will argue that while the D.C. Circuit vacated a per se rule that any cable/broadcast combination was contrary to the public interest, that has zero impact on the Commission’s responsibility to resolve the question of whether transfer of these licenses to this cable company serves the public interest. I expect much confusion and argument on this point. Assuming the FCC has jurisdiction in the first place.

Stay tuned . . . .

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Tales of the Sausage Factory

McDowell Forgets He Already Voted That FCC Has Authority To Enforce NN Rules.

I recently complained that no one else ever seems to follow the record on the network neutrality stuff. But Commissioner McDowell took the prize for failure to remember what he had previously voted for in this very proceeding back in March 2007 when the Commission voted out the Notice of Inquiry that started this whole thing. Mind you, McDowell should not feel too bad, given that nobody else at the FCC seems to remember this stuff either. Not when they wrote the Comcast/BitTorrent Order, nor even when they wrote the Notice of Proposed Rulemaking last week. Despite the fact that both items are actually in the same blasted docket. Because good God almighty, how hard is it for the staff at the FCC to actually know the friggin’ docket? It’s just the basis for this entire proceeding. And the entire collective agency cannot remember that it voted as settled law by 5-0 that it has authority to regulate and enforce network neutrality rules. And that McDowell not only voted in favor, he explicitly concurred!

I swear, it’s enough to make a poor obsessed policy wonk tear out what’s left of his hair and beard.

More below . . . .

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