Category Archives: Telecom

The Flawed Focus of Universal Broadband

This month, the Federal Communications Commission begins drafting a national broadband plan as part of the 2009 stimulus package. This is not the first government attempt at broadband ubiquity, so the FCC can learn from past failures.

The commissioners have less than eight months to “ensure that all people of the United States have access to broadband capability,” as well as provide additional guidelines for using existing high-speed Internet infrastructure to support more than a dozen socioeconomic and political objectives.

Officials can sift through more than 1,700 suggestions from a gamut of activist groups, lobbyists and interested consumers. Many of them see the answer in some form of social and economic engineering by government bureaucrats, price controls, wealth redistribution, or other regulatory mandates. Nothing could be further from the truth. Now, as in the past, the FCC should reject proposals that are hostile to market forces.

A new public fund to subsidize Internet access for poor and rural residents is not likely to be effective. Consider the case of E-Rate, a US$2.25 billion FCC fund created in 1997 to connect all children to the Information Age by underwriting up to 90 percent of the costs of hard-wiring classrooms and libraries. Since its conception, however, E-Rate has been a bust. Public and private reports detail the regulatory loopholes, rubber-stamped “gold plated” networks, and criminal abuse.

After disbursing more than $20 billion in funds — collected, ironically, from fees that raise the cost of monthly phone bills — the FCC has still failed to establish basic accountability measures for E-Rate, and according to the Government Accountability Office (GAO) this March, excessive rules and paperwork keep thousands of schools from seeking reimbursements for legitimate costs. If the FCC is too inept to structure and manage our broadband funds properly today, what will make tomorrow any different?

Read more here.

Financial crisis not worrying Verizon

From the WSJ:

“Even with the credit crisis, the telecommunications industry is in better shape than it has ever been in. It is now competitive, relatively flush with subscribers and strategic options….“You’re not seeing the same liquidity issues and hue and cry coming out of the telecom industry that you’re seeing out of other industries,” Seidenberg said.”

FCC Comcast decision was political failure

Last week, the Federal Communications Commission (FCC) came under fire for making a ruling that many consider outside its authority. Without levying a fine, it charged that Comcast violated federal policy when it interfered with a file-sharing application used by consumers. This new plot twist in the Net neutrality story should remind everyone that when it comes to new technologies, government failure is a bigger menace than market failure.

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The FCC is a nonprofit entity, and, therefore, criteria such as power and politics — not money — shape its motives. In a world in which telecommunications has morphed into a simple Internet application, the FCC becomes irrelevant if it doesn’t govern the Net. This gives bureaucrats from both parties incentives to make new rules in order to stay in the game, as they did with their Net neutrality “principles” in 2005.

However, incentives to stay in power are not necessarily aligned with incentives to do what’s right for consumers. That should give everyone reason to consider carefully what is likely to happen if FCC Chairman Kevin Martin is successful in intervening to control the Internet’s future.

That would be a future in which lobbyists, interest groups, and power-hungry politicians controlled what consumers could access on the Net. It would be a future that looked a lot like the regulation-heavy telecommunications past.

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Read full article here.

How Net Neutrality Could Sabotage Healthcare Tech

At last week’s UCLA Technology & Aging Conference, representatives from Intel, Microsoft, Qualcomm, Toyota and other big-name firms discussed how technology is reshaping lifestyles for older individuals. However, important policy implications directly connected to these new tools went unspoken.

RFID (radio frequency identification) tags that can monitor the status of older individuals, face-recognition video systems that allow two-way video calls when someone simply enters the room, and robot-assisted remote telesurgery are just a few of the amazing systems described at the conference.

Eric Dishman, Intel’s director of product research and innovation, discussed his company’s goal of getting “rid of the nursing home” and putting “technologies in people’s homes.” Dishman is working from a distributed computing point of view, where caregiver expertise can arrive across time, and medical technology can be distributed from outdated institutions to an individual’s most frequented location.

Technology like RFID tags connected with wireless networks can help create an “always on” health monitoring system, thereby transitioning society away from a “mainframe” medical model and redirecting it toward a smaller, more personalized, PC-type model. This is a great idea, yet the unspoken truth is that this type of communication requires healthy, innovative networks. That raises a key question about Net neutrality, an issue spun and respun by many.

Essentially, it involves a fight over whether network operators, such as Verizon or Comcast, are allowed to continue to set the price for their services and prioritize information that rides on their pipes.

History shows that government regulatory and price controls have a negative effect on innovation, and applying them to the Internet — as Net neutrality advocates want to do — would be disastrous for rolling out newer, faster and more efficient network services. This makes one wonder if Intel’s research and innovation department ever talks with its lobbying arm, because in 2006 the company foolishly jumped on the Net neutrality bandwagon.

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Read more here.

Wide-Open Wireless

Many telecom observers were stunned this week when Verizon announced it would open up its network to “wireless devices, software and applications not offered by the company.” This change in policy is good for consumers and worth closer examination, especially on the business side.

Verizon’s “walled garden” required consumers to use a Verizon-chosen phone in order to get Verizon’s service. Consumers disliked that restriction, and the company took notice. Indeed, the company’s press release makes the point that Verizon has often parted with the “big telecom” mentality in order to serve consumer-driven demand.

For instance, “the company parted with the industry last year when it introduced prorated early termination fees and in 2004 when it refused to participate in a wireless directory when customers said they didn’t want one. Verizon Wireless also broke with ‘wireless tradition’ when it supported local number portability, because customers wanted the freedom to take their number if they switched service providers.” Now Verizon is breaking with tradition to offer consumers greater device choice.

Verizon also clearly sees large revenue opportunities in an open system. The success of the iPhone made it obvious that consumers are willing to buy their own phones at high prices instead of simply going with subsidized versions that the phone company offers. Right now, the iPhone can only be used on AT&T’s system, but if it could be used on any system, Verizon would certainly be better off. Of course, there is another business reason for Verizon to open up as fast as possible.

If it can get developers to start working on new devices for its system, it will be in a better position when Google’s Android open source mobile software project starts to take off. The market forces pushing open the wireless industry appear almost unstoppable, making one marvel that state utility commissions still hold hearings to question whether there is enough competition in the sector. That brings up the issue of politics, and wherever there is telecom, there are lobbyists.

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Read more here.

Wi-Fi Policy Win for PRI

For years, PRI has been warning San Francisco officials that their so-called “free Wi-Fi” idea was guaranteed to be a failure. Finally, they realize it. In late August, Earthlink pulled out of a misguided plan to supply the city with free Wi-Fi, saying it was no longer economically viable for the company. This is a big policy win for freedom and reflects the reality that my colleagues and I presented in a study published last February: that municipal Wi-Fi systems, otherwise known as government controlled Internet systems, always end in failure.

The study, titled “Wi-Fi Waste: The Disaster of Municipal Communications Networks,” reviewed 52 city-run telecom networks that compete in the cable, broadband, and telephone markets. The amount of deception and anti-competitive activity that we found in our sample was appalling and a solid reason why proposed Muni Wi-Fi systems across the country should be opposed. It’s nice to see that politicians, the media, and companies are finally taking notice.

So does this mean an end to the idea of cities blanketed in Wi-Fi? Of course not – it means the opposite. Now that government is not distorting the market with subsidies, both corporate and open source networks can flourish. One company that seems to be doing a good job of expanding Wi-Fi access in San Francisco is Meraki, but there are others as well.

Cable TV and Phone Calls Are Taxed at Twice the Rate of Other Goods, Study Finds

Those who care about free speech should consider why government taxes are higher on communications than on other goods and services. This new study by The Heartland Institute and the Beacon Hill Institute is eye opening.

Here’s a paragraph from the study:

According to the Tax Foundation, the national average retail sales tax rate (combining local, county, and state sales taxes, weighted by personal income) is 6.61 percent. Taxes and fees on cable TV and telephone subscribers average 13.52 percent, twice as high. In other words, telephone calls and cable services are taxed at two times the rate as clothing, sporting goods, and other household products.

Finally, Muni WiFi done right

Anaheim Mayor Curt Pringle today announced a citywide wireless service coverage initiative to ensure all major cellular phone companies are able to provide full coverage through Anaheim’s 50 square miles. This is in contrast to other cities like San Francisco and Philadelphia that prefer to stifle competoition by only granting city-wide access to a small number of providers like Earthlink or Google.

“It’s only fitting that the United States’ largest municipal Wi-Fi city would have complete and total coverage for all wireless devices, including cellular telephones,” said Mayor Pringle. “For 150 years in Anaheim, we have championed creativity, innovation and imagination – the same ideals that technology companies embody.”

Good for them. It’s time for leaders in other cities to do the same.

Proof that Municipal Telecom Networks Are Financial Disasters

The Pacific Research Institute just published a paper I coauthored on Municipal networks. The study, titled “Wi-Fi Waste: The Disaster of Municipal Communications Networks” reviewed 52 city-run telecom networks that compete in the cable, broadband, and telephone markets. The amount of deception and anti-competitive activity that we found in our sample was appalling and a solid reason why proposed new Muni WiFi systems should be opposed.

We’re blowing it on technology

That’s the word from Dr. John Rutledge, one of the nation’s most accomplished economists who has advised several presidents (including the current administration). He’s been spending a lot of time in China recently and has first hand knowledge of how America is doing compared to the rest of the world. His recent blog post is here. Here’s an excerpt:

After huffing and puffing for more than 2 years, Congress failed to pass the telecom reform legislation that we need to support the massive sustained investments in the new, high-speed communication networks that we need to compete with China, India, and other countries who are getting it right.

Net Neutrality Shopping Is Bad for the Economy

Shopping is normally good for the economy, but not when the shoppers are net neutrality advocates looking for friendly deals on a regulatory forum. Policy makers in Michigan, their current target, should tell pro-regulatory activists to go home, with good reason.Those who support net neutrality legislation frame themselves as proponents of the Net, but in reality their recommendations would have an anti-Internet effect. The worry is that network providers like AT&T or Comcast will start charging some Web sites more than others. It is true that network providers would like to charge high-traffic Web sites for their larger usage of the network, but it remains unclear why that would be wrong or unfair.

Voip.com, an Internet phone provider, is one of the corporations calling for government intervention. Without government oversight, it argues, “consumer-friendly applications like VoIP, online gaming, and streaming homegrown video would likely be squeezed out by the larger corporations that can afford to pay for unfettered service.”

It’s obvious that Voip.com is simply trying to avoid the risk of paying more for their network use, but the thing Voip.com’s executives have missed is that the Net is getting crowded. If network operators can’t recoup their costs for the higher bandwidth use, then the network will slow down for everyone and services like VoIP, online gaming, and streaming video won’t work so well anymore.

Read more here.

Arnold Appoints California’s Broadband Task force

Today, Governor Arnold Schwarzenegger announced the appointment of Ellis Berns, Rachelle Chong, William Geppert, Charles Giancarlo, Paul Hernandez, William Huber, Christine Kehoe, Wendy Lazarus, Lloyd Levine, Michael Liang, Bryan Martin, Timothy McCallion, Sunne Wright McPeak, Milo Medin, Peter Pardee, Peter Pennekamp, Debra Richardson, Rollin Richmond, Larry Smarr, Jonathan Taplin and Emy Tseng to the Broadband Task Force. The purpose of the Task Force, according to the press release, is to identify opportunities for increased broadband adoption and enable the creation and deployment of new advanced communication technologies.” There are 5 Republicans on the 21 member Task Force, but that doesn’t necessarily mean it will be pro-government. Levine, a Democratic Assemblyman, has been very good on broadband issues.

Nixing Net Neutrality

This week, a key federal official cautioned against calls for net neutrality, the effort to expand government reach in the Internet marketplace. It’s a wise move to keep the Internet free of red tape. So why are lobbyists pushing for new rules?

Net neutrality holds that Internet network providers such as AT&T and Verizon should remain neutral with respect to their online content. Although the issue appears to be how best to ensure an open Internet, it’s obscuring the hidden agenda. Web sites and online content providers seek to use federal regulation to tie the hands of their broadband providers and prohibit them from charging businesses more for future services.

Some Internet giants like Google and Amazon.com would like elected officials and the public to believe that network providers will block consumer access to their Web pages if they refuse to pay for future premium services, projecting scary scenarios of an “Internet ghetto” or a “two-tiered” network. Other rhetoric invokes science fiction doomsday visions.

Read more here.

Here Comes the Technology Tax Man

Last month, the U.S. Treasury Department announced the end of the ancient federal excise tax (FET) on long-distance telephone bills. Consumers should be wary of this seemingly positive development, as cash-strapped bureaucrats now press forward with plans for new technology taxes, threatening innovation.

One of the most ambitious schemes is the Streamlined Sales Tax Project (SSTP), a national effort by state legislators and local tax officials to cash in on the billion-dollar Internet economy. SSTP seeks to bypass a 1992 U.S. Supreme Court decision that ruled that states cannot require out-of-state companies to collect taxes without an in-state “nexus” or physical presence. By promoting uniform tax standards across states, SSTP officials are hoping Congress will step in and disband the nexus requirement for tax collection, a move that would be disastrous for both businesses and consumers.

Read more here.

Telecommunications Bill Promises Bevy of Customer Benefits

This week, the U.S. Senate Commerce Committee approved the Communications, Consumer Choice and Broadband Deployment Act of 2006, sponsored by Ted Stevens (R-Alaska) and Daniel Inouye (D-Hawaii). If passed by the full Congress, this massive telecom bill will bring consumers significant benefits, especially long overdue cable franchise reform.

New technologies have made it possible for broadband providers to compete with cable’s video services by offering television over the Internet, also known as “IPTV.” Unfortunately, the current system of cable franchising allows local government bureaucrats to make it difficult for cable competitors to enter the market. Stevens’ and Inouye’s bill would change that and open up the marketplace.

More competitors mean more choice, better quality and lower prices. In states where local lawmakers have already passed reforms, the results have been stunning. This has led to a movement in state legislatures across the country to approve cable franchise reforms. Even California’s leftist Democrats, such as Assembly speaker Fabian Nunez, understand that less government control would increase choice and deployment. It would also increase tax revenues.

Brookings Institute scholars Robert Crandall and Robert Litan recently calculated that local government revenues from cable franchise fees would actually increase more than US$400 million due to competition. The reason is that although consumers would be paying 13.5 percent less for cable than they are now, subscriptions would increase between 29.7 and 39.1 percent. However, cable reform isn’t the only key item in the Stevens and Inouye bill. It also takes a rational approach to the issue of net neutrality.

Read more here.

Broadband Starting to Bloom

Broadband adoption in American homes grew by 40 percent in the last year, twice the growth rate of the year before, according to the Pew Internet and American Life Project. That’s good news that should be followed by more good news if technology is allowed to move forward, unfettered by heavy government regulations.

Broadband adoption among African Americans increased by 121 percent between 2005 and 2006 and English-speaking Latino households reported a strong 46 percent increase, bringing those groups’ overall household broadband adoption rate to near parity with white households, according to the report. That quells worries that some populations would be left out of the Internet revolution. Even access in tough-to-reach rural areas is expanding at a brisk 39 percent. While not everyone always finds it easy to get online, the revolution is touching virtually every group in a significant way.

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Read more here.

Will Congress Serve up ‘Hillary Net?’

At least six bills before Congress deal with an issue that leaves many confused and involves a lot of money, constant spin doctoring, and now Hillary Clinton. No, we’re not talking about HillaryCare redux or Whitewater, but “Net neutrality,” a concept being used to trick Americans into accepting regulation of the Internet.

Supporters say Net neutrality would protect consumers’ rights to surf wherever they want on the Net. That is pure spin and conceals the real purpose of Net neutrality legislation: to lock broadband providers into a single business model that will make companies like Google and Yahoo richer. That’s a sweet deal for those firms, but a bad deal for consumers and the rest of America.

Recipe for Disaster

Net neutrality regulations mean price controls because the concept would disallow broadband providers like AT&T and Verizon from charging more to those who use more bandwidth. That’s a recipe for disaster because such regulations will translate into shortages of bandwidth, harming American competitiveness.

In supporting Net neutrality legislation backed by Internet giants Google and Amazon.com, Hillary Clinton said, “We must embrace an open and non-discriminatory framework for the Internet of the 21st century. Any effort to fundamentally alter the inherently democratic structure of the Internet must be rejected.”

Openness is indeed an important concept and free speech is key to democracy, which has led some to question why Google has banned at least three news sources in the last few weeks that are conservative or focus on Islamic extremists.

It is ironic that at a time when Google is presumably fighting to keep the Internet “open and free,” it is censoring data — not only in China and other countries, but also in America. The New Media Journal e-zine was one of the publications that was censored by Google’s staff because employees thought the site contained hate speech.

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Read more here.

Choice in TV but not education?

PRI’s Lloyd Billingsley writes an excellent piece on video choice and education. The key question he asks is why California’s left-leaning democrats think competition is good in cable, but not for education. Here’s an excerpt:

Speaker Nunez is right that we need more choice, quality and lower prices in television service. If he follows that logic, he would push to empower California’s parents and students by giving them choice in education. That, of course, would require defiance of public employee unions.