Mark A. Jamison

Stop the Cap! reader Joe sends along news of another one of those guest opinion hit pieces on Net Neutrality that pop up regularly in the media.  This one, The Internet is Never Neutral, printed in today’s Sun-Sentinel in south Florida, comes from Mark A. Jamison and Janice Hauge, a dynamic duo who have co-written several papers that always manage to turn up favorable conclusions for big telecommunications companies, including these page-turners:

• “Bureaucrats as Entrepreneurs: Do Municipal Telecom Providers Hinder Private Entrepreneurs?”
• “Subsidies and Distorted Markets: Do Telecom Subsidies Affect Competition?”
• “Dumbing Down the Net: A Further Look at the Net Neutrality Debate.”

The two are also working on other papers purporting to study regulatory policy and competition issues.  Let me illustrate my psychic powers by guessing they’ll find regulatory authorities to be obstacles to the well-oiled telecommunications machine and competition will be most hearty if there are no pesky regulations to hamper it.  We’ve seen how well that has worked so far for consumers in North America.

Remember Al Gore calling the Internet the information superhighway? The metaphor wasn’t and isn’t perfect, but it is instructive. Suppose we applied net neutrality to our transportation system — there would be no high-occupancy vehicle lanes during rush hour, no car-only lanes on interstates, and no toll road as an alternative to I-95 in South Florida. Transportation would be more costly and provide less value.

Forcing net neutrality would have similar results. Time-sensitive information, such as stock market transactions, would wait in line behind football game highlights.

Jamison, who is a former manager at Sprint Communications, and Hauge miss the entire point of the Internet’s biggest strength: its equal treatment of traffic from the smallest blog to Amazon.com.  Assuming providers, earning billions in profits even as their costs decline, invested appropriately in those networks, there would be no need for high-occupancy vehicle lanes and toll roads.  These kinds of “traffic management” techniques are proposed because provider dollars don’t keep up with consumer demand.  Social engineering tries to throttle traffic downwards by discouraging it with toll fees or manage it with special high cost lanes reserved only for those willing to pay or follow arbitrary rules governing their use.  More often than not, those premium lanes go underutilized while the rest of us remain stuck in the slow lane.

Net Neutrality would not impede network management that enhances the efficiency of traffic, except when it comes at the expense of someone else’s traffic. Net Neutrality also throws up a roadblock against providers who would plan to cash in with enhanced connectivity services that cannot exist unless  a market is created to sell them.  It’s similar to providers in Canada limiting your access to broadband, then throwing a penalty fee on your bill… unless you sign up and pay for their “insurance” plan to protect you from those charges.

Want to run a video streaming application on the Internet?  Pay for a broadband provider’s deluxe delivery insurance, and customers will be able to watch that video without buffering.  The alternative is to be stuck waiting because your video is being delivered on an artificial “slow lane.”

If you are thinking that it sounds like net neutrality restricts innovation and hurts customers, you’re right. Our research has shown that net neutrality limits innovation, contrary to the claims of the net neutrality proponents. How can this be? Imagine a one dimensional network — one that does nothing but carry information from point to point, which is how the old Internet has worked. What kinds of content providers flourish in that context? Those big enough to distribute their software across the net and those whose software takes advantage of the great bandwidth that they don’t have to pay for.

Their research makes numerous assumptions that might prove accurate in a laboratory environment, but simply discounts provider mischief in their efforts to maximize profits and minimize costs.  Providers have earned countless billions providing this “one dimensional network” to consumers.  It’s the one bright spot in a lackluster telecommunications sector.  Those who innovate new broadband applications have flourished.  Some providers who have not want to innovate in a different way – by inventing new Internet Overcharging schemes to profit from the service without actually improving it.  When their interests are at stake in owning and managing their own content services, bandwidth suddenly becomes plentiful.  The TV Everywhere project will potentially provide a value-added service to cable and telco TV providers, all made possible in marked contrast to their argument that other producers’ video content is clogging their networks.

Another naked fallacy in the authors’ argument is that content providers don’t pay for the bandwidth to host and distribute their content.  They do — to the companies that host their content and provide connectivity to the Internet.  That’s the job of web hosting companies.  Internet service providers simply want to be paid extra for doing their job – providing connectivity to consumers who pay $4o or more a month Free Press found costs about $8 to provide, and then also charging content creators a second time to facilitate delivery of that content.  That’s akin to charging a phone customer for placing a long distance call and also demanding to bill the person who answers.

Now, suppose that the network can offer enhancements that improve customers’ experiences. Content providers whose sites would not benefit from such enhancements could ignore the offering. But there will be some content providers who could improve their services by buying the enhancements, such as priority packet delivery. These sites become better without net neutrality and offer customers more service. In other words, there is more innovation and greater customer welfare without net neutrality than with it.

Promises, promises.  Just getting these providers to upgrade broadband speeds to consumers has been a never-ending quest.  Many consumers are willing to pay for “improved service” in the form of faster connections to the Internet.  Consumers are not willing to pay more for artificially limited service, be it through throttled speeds or usage caps.

At the conclusion of their study, which assumes providers will not leverage their duopoly in most American markets to increase pricing/revenue and reduce costs by limiting demand on their networks, they readily admit they did not take into account several possible scenarios:

One issue is how the offering of premium transmission might affect the network provider’s incentive to change the standard transmission speed. At least AT&T has committed to not degrade service for any network user, but it is unclear how such a commitment would be enforced.

Secondly, we do not analyze the effects of peer-to-peer communication, which is growing in importance on the Internet.

Thirdly, we do not consider the effects of vertical integration by the network provider and whether this would provide an incentive for foreclosure.

The PURC is part of the University of Florida, but also receives private corporate funding

Because the broadband industry fights any attempt to regulate their service, it is unlikely any such promise from AT&T would be enforced.  What AT&T defines as “degraded” service is open to interpretation as well.  As broadband demand is dynamic and growing, should AT&T leave standard transmission speeds exactly as they are today, that non-premium service would be degraded through inattention to broadband growth.  Peer to peer communication is largely a story from the first round of the Net Neutrality debate in 2006-7.  A more significant amount of traffic is now attributed to online video.  Finally, not considering vertical integration in the cable and telephone industry is a fatal flaw.  The history of telecommunications regulation has largely been written during periods when the cable and telephone industry abused their market position to overcharge consumers for service, lock up content distribution channels, and forestall competition wherever and whenever possible.

Frankly, Jamison and Hauge’s world view only innovates new, even fatter profits for providers like AT&T.  Perhaps some of those profits can go towards even greater funding for the Public Utility Research Center, where Jamison serves as director and Hauge as a Senior Research Associate.  The PURC, part of the University of Florida, just happens to have, among others, AT&T and Embarq Florida as sponsors, and both companies have seats on the PURC Executive Committee.

Sun-Sentinel readers don’t have that information because it’s not included in the disclosure at the bottom of the piece.  Following the money would shed a lot more sun on this important debate.

Luke Wilson's blizzard of postcards

Luke Wilson is back for three more AT&T ads hitting back Verizon Wireless for its 3G map ads, and Apple has come running to AT&T’s defense with two new ads of its own.

The theme?  AT&T’s GSM network lets subscribers talk and browse the web at the same time.  Verizon Wireless’ CDMA network does not.  For that matter, neither does Sprint, which also uses CDMA, but as a non-combatant gets a pass for this round.

Mobile phone networks in the United States primarily use GSM (AT&T, T-Mobile) or CDMA (Verizon Wireless, Sprint, MetroPCS, U.S. Cellular, Cricket) technology.  Because of the way the two standards developed, GSM can permit a customer to talk while also concurrently using mobile data services.  CDMA users must choose one or the other.

The new round of ads exploit that difference.  How important that distinction is depends on how you use your phone.  If you frequently use your AT&T phone to web browse while also speaking to someone on that phone, you would likely find Verizon Wireless’ limitation irritating.  If you don’t, you won’t care.

More importantly, it’s a moot point if you find yourself in one of AT&T’s older EDGE network areas, which predominate outside of major cities.  The EDGE standard doesn’t let you talk and browse at the same time either.

Broadband Reports notes “it seems like AT&T might just be better served by not talking anymore, and just focusing on getting tower sites and backhaul links upgraded. How many upgraded cell sites would Luke Wilson’s salary have paid for? How many backhaul links could have been upgraded with the money spent suing Verizon? Fixing the capacity and coverage issues that have been plaguing AT&T would do more than any ad campaign.”

Apple’s “me too” ads promote the same concurrent use of phone and data applications on the iPhone, but also ignore the pesky fact that those stuck in AT&T’s vast EDGE network will discover it’s a distinction without a difference.

Watch all five ads below.

… Continue Reading

When dealing with an increasingly deregulated telecommunications industry, legislative relief from bad company practices is usually unavailable.  Some customers turn to the courts, through class action lawsuits brought against companies that can’t or won’t do the right thing.  Unfortunately, all too often such actions never bring more than bottom dollar refunds or coupons that can only be redeemed with the provider that treated you badly in the first place.  The real spoils are reserved for the lawyers bringing the case.

In Illinois, that has been proven true yet again as a Madison County judge orders refunds of $21.20 for nearly 700,000 formerly-Illinois Bell business customers who deserved refunds dating back to 2001, but never got them.

Judge Daniel Stack ruled that AT&T, current owner of the impacted area, should pay $21,671,857 total.

But more than $7,000,000 of that will never reach wrongfully charged customers.  Instead, that money will be diverted to pay the lawyers who brought the class action case.

The Madison-St. Clair Record did the math:

[Judge Stack] awarded a third of the judgment, more than $7 million, to class action lawyers Terrence O’Leary of Granite City, Glenn Bradford of Edwardsville, Thomas Londrigan and Timothy Londrigan of Springfield, and Mary Leahy of Springfield.

Stack wrote that they expended more than 3,000 hours on the case.

That would mean they made about $2,400 an hour.

Subtracting their fee leaves less than $15 million for customers, and Stack conceded that complete payment “may be impossible and/or impracticable.”

He ruled that Land of Lincoln Legal Assistance Foundation should receive all funds that remain after AT&T has issued credits to current customers.

Legal firms that bring class action lawsuits should be paid for taking the risk of bringing the case, but far too often they, along with one or two original class members, profit handsomely while those actually harmed are left with little once the spoils are divided.  Lawyers and key class members are paid in full (or well beyond) while those victimized are handed lunch money or coupons for a free month of phone features or some other limited value giveaway.  Doesn’t this call into question why any customer would want to participate in such suits in the first place?

A federal judge Wednesday ruled that Verizon Wireless can continue to run its 3G network ads, suggesting they might be “sneaky,” but are not misleading.  U.S. District Court Judge Timothy Batten Sr. told AT&T’s attorneys that their request for a temporary restraining order was denied, but the judge indicated he will hear new arguments in a second hearing on December 16.

AT&T claimed that Verizon’s “There’s a Map for That” ad campaign mislead consumers into believing AT&T provided no service in vast areas of the country because Verizon’s ads depicted non 3G service areas in white, a color that traditionally represents “no service” on many cell phone coverage maps.

Judge Batten said people casually viewing the ads might misunderstand the commercials, but a viewer’s misinterpretation “doesn’t mean they’re misleading.”

“Most people who are watching TV are semi-catatonic,” he said, prompting laughter from the courtroom. “They’re not fully alive.”

AT&T’s apparent backup plan is a new ad of its own, attacking Verizon Wireless with… Luke Wilson.

[flv width=”640″ height=”450″]http://www.phillipdampier.com/video/ATT Ad Luke Wilson.flv[/flv]

Actor Luke Wilson helps AT&T Mobility fire back at Verizon Wireless as the holiday season approaches. (30 seconds)

The effectiveness of Wilson’s spirited defense of AT&T is debatable, judging from early ad reviews.  We spotted one continuity error straight away.  At the 0:15 second mark, notice the “Access to over 100,000 apps” box is already filled with an “x” before Wilson turns to the board to fill it.  The “x” is there before it’s gone and back again.  Perhaps it’s an unintentional homage to the frustration experienced by AT&T-exclusive iPhone application developers not getting approval for applications previously approved.

AT&T Mobility wanted Verizon Wireless to stop showing ads that call out the differences between the two wireless competitors’ national 3G networks.  When Verizon didn’t, AT&T sued.  This week Verizon Wireless doubles down with three new holiday season ads that are guaranteed to enrage AT&T even further.

Anyone who has seen a Rankin/Bass holiday special will instantly recognize at least one of the ads is a play on the Island of Misfit Toys, seen in the 1964 holiday classic Rudolph, the Red-Nosed Reindeer.

[flv width=”620″ height=”380″]http://www.phillipdampier.com/video/Verizon Wireless Verizon Misfit Toys Ad.flv[/flv]

Verizon Wireless – “The Island of Misfit Toys” (30 seconds)

AT&T accuses Verizon Wireless of misrepresenting its national data coverage by showing non-3G areas in white, a color AT&T says traditionally represents no service at all.  AT&T says its wireless data network, in its entirety, is more expansive than Verizon’s.  Verizon counters its ads only compare 3G coverage, and clearly label the maps as such, including a fine print disclaimer indicating “voice and data services available outside 3G coverage area.”

AT&T further argues watching frustrated consumers shaking their phones or sitting alone because they were unable to meet up with their friends would suggest to a casual viewer they weren’t able to access any service.

[flv width=”620″ height=”380″]http://www.phillipdampier.com/video/Verizon Wireless Blue Christmas Ad.flv[/flv]

Verizon Wireless – “Blue Christmas” is sure to draw the ire of AT&T as a frustrated father visibly shakes his iPhone and never seems to be able to use it. (30 seconds)

Verizon Wireless’ attorneys officially responded to the AT&T request for a temporary restraining order to pull the ads off the air with a direct opening: “AT&T did not file this lawsuit because Verizon’s ‘There’s A Map For That’ advertisements are untrue; AT&T sued because Verizon’s ads are true and the truth hurts.”

The attorneys argue, “Remarkably, AT&T admits that the 3G coverage maps — the one thing that is common to all five ads — are accurate and that the ads’ express statement that Verizon has ‘5X More 3G Coverage’ than AT&T is true.”

AT&T has been one of the loudest voices in this advertising battle, spending many millions of dollars to market its 3G network as the “Nation’s Fastest 3G Network” and, with its exclusive partner Apple, naming the latest iPhone (only available on AT&T’s network) the “iPhone 3GS.”

The stark truth, as revealed by the concededly accurate coverage maps in Verizon’s advertising, is that the geographic reach of AT&T’s 3G network is far less extensive than AT&T would have the public believe — and far less extensive than Verizon’s 3G network. Consumers who are interested in smartphones have a strong interest in knowing the comparative 3G coverage offered by Verizon and AT&T.  Cutting off the free flow of information about Verizon’s more extensive 3G coverage would harm consumers in a way that could not be redressed.  And because injury to First Amendment rights is by definition irreparable, suppressing Verizon’s speech on an “emergency” basis before a definitive and fair adjudication would irreparably injure Verizon and its goodwill in addition to costing Verizon customers. Any harm to AT&T, in contrast, is merely speculative.

In the final analysis, AT&T seeks emergency relief because Verizon’s side-by-side, apples-to-apples comparison of its own 3G coverage with AT&T’s confirms what the marketplace has been saying for months: AT&T failed to invest adequately in the necessary infrastructure to expand its 3G coverage to support its growth in smartphone business, and the usefulness of its service to smartphone users has suffered accordingly. AT&T may not like the message that the ads send, but this Court should reject its efforts to silence the messenger.

[flv width=”620″ height=”380″]http://www.phillipdampier.com/video/Verizon Wireless Elves Ad.flv[/flv]

Verizon Wireless – “Elves” includes the line “good luck browsing the web with that one.” (30 seconds)

AT&T has gone all out to find confused consumers to back up their request for a temporary restraining order, running a survey asking ordinary cell phone users what they thought Verizon Wireless’ ads meant.  But Verizon Wireless answers the survey wasn’t limited to smartphone customers, who are already well aware of the differences between 3G and older, slower speed data networks, and for that reason the results are invalid.

Verizon Wireless says it will continue the aggressive campaign beyond the all-important holiday season, when cell phone handset sales are at some of their highest traditional levels.