Walden

When lawmakers talk about “unleashing” anything for “innovation,” it’s a safe bet we’re about to be treated to an anti-regulatory rant about how government rules are ruining everything for big business.  Rep. Greg Walden (R-Ore.) does not disappoint.

Walden is chairman of the Communications and Technology Subcommittee of the House Energy and Commerce Committee, an important place to be if you want to influence telecommunications policy in the United States.  Walden slammed the Federal Communications Commission this morning in an editorial piece in Politico, accusing the agency of regulating communications companies before they have a chance to engage in bad behavior:

Sometimes the FCC acts before thoroughly examining whether regulation is needed. It’s now time to stop putting the regulatory cart before the horse. That’s why this bill requires the FCC to survey the marketplace, identify a failure and conduct a cost-benefit analysis before imposing rules.

[…] When the FCC reviews a merger, it now often imposes unrelated conditions. These extraneous agreements may not correspond to any harm presented by the transaction, may not be justified industry-wide and, in some cases, are outside the commission’s jurisdiction.

Such bootstrapping is unfair to the singled-out parties. It also results in poor policy. Imposing extraneous conditions on a transaction that is not otherwise harmful is inappropriate. And if a transaction is harmful, imposing extraneous conditions cannot cure it. Merger conditions should be directly related to transaction-specific harms, and within the FCC’s general authority.

Walden’s concerns coincide with the corporate agendas of some of the nation’s largest telecommunications companies he oversees as chairman.  That may not be surprising, considering seven of the top 10 corporate contributors to his campaign fund are all telecommunications companies.

Walden's top campaign contributors (Source: Opensecrets.org)

Walden’s record on “innovation” is open to interpretation.  He is on record opposing Net Neutrality, has sought to “streamline” the FCC by hamstringing its authority, and has favored a variety of mergers and acquisitions that have effectively reduced competition for American consumers.

The FCC’s zeal for increased competition appears occasionally in its rulemakings, although the agency under Chairman Julius Genachowski can hardly be considered aggressive and out of control when it comes to some of the most contentious telecom issues that have arisen during the Obama Administration.  It only followed the Justice Department’s lead opposing the AT&T/T-Mobile USA merger.  It punted on Net Neutrality enforcement, doesn’t oppose Internet Overcharging, and has granted more mergers and acquisitions than it has sought to block.

FCC Chairman Julius Genachowski has not always successfully stared down industry efforts to consolidate and deregulate.

Some examples of “unrelated conditions” the FCC has imposed on mergers include no price hikes for consumers for a limited time (Sirius-XM), a discounted Internet service for poor families (Comcast-NBC Universal), and spinoffs of acquired cellular network assets in barely competitive markets (Verizon Wireless-Alltel).

Sirius-XM mostly kept to their agreement, but promptly raised prices when it expired, Comcast followed the FCC’s agreement to the letter but found ways to limit the number of qualified families, and Verizon Wireless sold some of their acquired Alltel assets to AT&T, which at least provided improved AT&T reception in certain markets they largely ignored earlier.

Consumer advocates would argue the FCC should never have approved these transactions in the first place, and the conditions the FCC imposed were so mild, they faced little opposition from the companies involved. But apparently even that is too much for Walden, who we have a hard time seeing opposing any of these mergers.  Besides, some of the largest companies donating to Walden’s campaign fund are already adept at working around the FCC, suing their way past the regulations they oppose.

Walden advocates the FCC only perform its oversight functions after the industry is proven to have imposed unfair, anti-competitive, and discriminatory policies against consumers, not to act to prevent those abuses in the first place.  In short, he wants the FCC to regulate only after the damage has been done. That would be akin to calling the fire department after your house burned to the ground. Companies would be free to walk away with their ill-gotten gains with little threat the FCC would punish bad behavior and fine the bad actors.

If you are Comcast, that is innovation.  If you are a consumer, it’s something else.

Obama

In his State of the Union address last night to Congress, President Barack Obama complained that America’s digital infrastructure is inadequate to allow entrepreneurs and small businesses to successfully market their goods and services over the Internet.

“So much of America needs to be rebuilt. We’ve got crumbling roads and bridges, a power grid that wastes too much energy, an incomplete high-speed broadband network that prevents a small-business owner in rural America from selling her products all over the world.

During the Great Depression, America built the Hoover Dam and the Golden Gate Bridge. After World War II, we connected our states with a system of highways. Democratic and Republican administrations invested in great projects that benefited everybody, from the workers who built them to the businesses that still use them today.

In the next few weeks, I will sign an executive order clearing away the red tape that slows down too many construction projects. But you need to fund these projects. Take the money we’re no longer spending at war, use half of it to pay down our debt, and use the rest to do some nation-building right here at home.”

President Obama also touched on the problem of online piracy and imported counterfeit goods.  Last week, controversy over online piracy legislation including the Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA), brought consumer opposition to both, temporarily shelving the measures.  But the president acknowledged the problem was not going away.

“It’s not right when another country lets our movies, music, and software be pirated,” he said. “Tonight, I’m announcing the creation of a Trade Enforcement Unit (TEU) that will be charged with investigating unfair trading practices in countries like China. There will be more inspections to prevent counterfeit or unsafe goods from crossing our borders.”

Upton

Republicans fired back at the president over his rural broadband remarks, accusing the administration and the Federal Communications Commission of supporting pre-conditions on forthcoming spectrum auctions.  One House committee chairman tasked with broadband issues said the FCC was supporting policies that could reduce auction proceeds by reserving certain frequencies for up-and-coming wireless competitors or restrict how much spectrum a current market leader like AT&T or Verizon Wireless could acquire.

“The President said we have an incomplete high-speed broadband network, but his Federal Communications Commission is protecting its turf instead of joining us to free up airwaves to build the next generation communications networks,” said House Energy & Commerce Committee chairman Rep. Fred Upton (R-Mich.).

FCC chairman Julius Genachowski has had little regard for the House Republican-backed proposal that could potentially tie the FCC’s hands to set rules for spectrum auctions.  House Republicans also oppose setting aside certain spectrum for free, unlicensed high-power Wi-Fi use, preferring to auction as much spectrum as possible.

Earlier this month, Upton blasted the FCC chairman for opposing a “winner take all” auction approach:

“Bluster aside, it sounds like we have a federal agency more concerned about preserving its own power than offering serious improvements as we prepare to finalize this legislation. We worked with the FCC’s auction experts to give the agency the legitimate flexibility it needs to design the mechanics of the auction. It’s time to stop the FCC from engaging in political mischief that will hurt competition and steal money from the taxpayer’s coffers. Don’t take our word for it – look at the 2008 auction. The FCC imposed conditions on the C and D blocks that ultimately prevented the D-block from selling and pushed smaller carriers out of the auction. Taxpayers lost somewhere in the neighborhood of $5 billion, and spectrum remains sidelined. And speaking of protecting taxpayers, it’s time for the FCC and others to be honest about how taxpayers would be affected by their plans to give away valuable spectrum to favored constituencies. Our goal is to strike the right balance by keeping plenty of opportunity for unlicensed use without forcing taxpayers to forfeit any return on a resource that everyone agrees is worth billions.”

We have received several inquiries about where Stop the Cap! stands on the “Stop Online Piracy Act” — legislation currently in Congress designed to combat online piracy.  We’ve remained silent on this legislation for only one reason: we just haven’t have the time to cover it.  But I wanted to take a moment to answer the ongoing inquiries from readers about where we stand on this legislation.

In short, we oppose it.

As with virtually all legislation bought and paid for by large corporate interests, this attempt to thwart online piracy is yet another example of special interest overreach with a bountiful basket of unintentional consequences corporate lobbyists are not paid to consider when pushing the agenda of giant media and entertainment conglomerates.

As of yesterday, the Obama Administration seems to have recognized the growing opposition to the legislation from just about everyone apart from the corporate interests spending millions to promote and lobby it.  Some media reports seem to indicate SOPA is on the verge of being shelved, at least temporarily.  But you can be certain that like all monied legislation, it will be back.

Instead of a lengthy explanation about SOPA, we’d prefer to point you to some excellent pieces explaining why the proposed bill is a really, really bad idea.  Free Press has an organized campaign to stop the legislation in its current form, one that you should consider supporting, even if the bill is now languishing in Washington.  Also check out the Electronic Freedom Foundation’s web form to contact your legislators to oppose SOPA.

Stop the Cap! will participate in the Stop SOPA censorship campaign scheduled for tomorrow.  Visitors will first land on an information page explaining why this site “has been blocked.”  But that page includes a link to continue your journey back here, where regular coverage will continue.

Be sure to watch these two videos:

[flv width=”596″ height=”356″]http://www.phillipdampier.com/video/MSNBC Chris Hayes SOPA and Antipiracy Debated 1-15-12.flv[/flv]

Chris Hayes’ courageous in-depth debate about SOPA appeared on MSNBC, a network owned by Comcast-NBC, which ardently supports the legislation to the point of distributing pro-SOPA coffee mugs to employees. (18 minutes)

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/SOPA Marvin Ammori.flv[/flv]

Marvin Ammori’s assessment of the legislation appeared on Al-Jazeera English, one of the few news networks willing to discuss the proposed legislation on-air.  (4 minutes)

Static isn't just for the UHF dial, it's for powerhouse lobbying groups, too.

While surface reporting on “white space” broadband and “super Wi-Fi” seem to suggest the United States is on the cusp of opening up much of the UHF television dial to wireless broadband, behind the scenes broadband advocates are fretting about being outmaneuvered by the powerful broadcast lobby.  The theory behind “white space” broadband seems simple enough.  Anyone who has flipped channels up and down the UHF dial sees a lot of unused real estate.  While most cities receive 5-10 UHF TV channels, there are dozens of apparently empty channels filled with what seems to be nothing at all. Can’t we make more efficient use of the UHF dial and open the excess to other uses?

The FCC has been studying just that, with the proposition that broadcasters could be relocated closer together or agree to sell their broadcast license and sign off the air for good.  Theoretically, the UHF dial would be reduced to channels 14-30.  Stations on channels 31-51 would have to relocate down the dial to make way for broadband.

That was the plan anyway

Naturally, the National Association of Broadcasters (NAB), the broadcast industry lobbying group, was not happy to learn of this plan, which is still heavily promoted by wireless telecommunications companies.  They quickly argued there were not enough UHF channels left to accommodate every TV station on the air today, and some cities bordering Canada faced losing major stations if the plan was adopted.

In the clash of the lobbying titans, it appears broadcasters have at least temporarily won the upper hand.  Legislation authored by the powerful House Communications Subcommittee Chairman Greg Walden (R-Ore.), would grant the FCC authority to conduct spectrum horse-trading and auctions, but only if the sales take “all reasonable efforts to preserve” the coverage area of impacted broadcast stations.

In the minds of several wireless broadband advocates, “reasonable efforts” kills it. That key passage is open to wide interpretation, which in Beltway language means a full employment program for Washington law firms who will end up letting a judge decide what “reasonable” really means.

Blair Levin

Blair Levin, an attorney who served as chief of staff to FCC Chairman Reed Hundt from 1993 to 1997, where he oversaw the implementation of the disastrous 1996 Telecom Act, is all sour grapes about the latest developments in Congress.  That is to be expected — he was once considered the Obama Administration’s chief “broadband czar.”

“The legislation ties the FCC’s hands in a variety of ways,” Levin tells TVNewsCheck. “It opens it up to litigation risk, which then, in conjunction with the other handcuffs, makes it difficult to pull off a successful auction. The nature of the bill dramatically increases the probability that there will be less spectrum recovered and less money for the [U.S.] Treasury.”

Broadcasters have been legitimately worried about where they might fit within the new, slimmed-down UHF dial.  The more broadcasters packed closer together, the greater the chance of interference and reduced signal coverage for those who happen to live between two cities sharing the same channel number.  The NAB has consistently opposed forcing station-owners’ hands and wants stations compensated for their costs and inconvenience.

Before the first “white space” broadband signal takes to the airwaves, the government will have to set aside at least $3 billion to defray expenses incurred by television stations moving down the dial.  With language that guarantees broadcasters won’t have to suffer from an interference nightmare, FCC engineers will have a much harder time finding enough channels for the number of stations that need to move.  That could mean fewer channel positions up for auction.

Blair believes stations can extract even more by playing the litigation threat card.

“Nobody wants to go to an auction when there is the threat of a judge anywhere having the ability of holding it up,” Blair said. “I believe a good lawyer could find a way to get the question of  whether the FCC took all reasonable efforts in front of a judge. If you are designing the auction and a big law firm shows up and says, ‘If you don’t take care of my single broadcaster, we are going to find a way to get to court.’ That’s a real threat.’’

The Lady Gaga problem

Lady Gaga's wireless microphone malfunction.

Assuming Washington can fling enough cash to soothe the nerves of worried broadcasters, impediments to white space broadband don’t stop with the local Fox station.  The next complication is the wireless microphone issue.  When you see Lady Gaga in her latest outrageous outfit, you probably are not noticing her wireless microphone.  Performers of all kinds use these low power devices that often work over unused UHF spectrum.  Only it may not be unused for long.

Spectrum Bridge, a “white space” database administrator charged with coordinating who is using what frequency for what purpose, understands the challenges of trying to keep track of TV reporters, bands on tour, and other wireless microphone users, who all expect an interference-free experience.  Electric companies and municipalities also plan to utilize white space spectrum to manage smart city and smart grid communications.  A year later, Super Wi-Fi applications that deliver longer distance Wi-Fi service are expected to arrive.

It’s becoming a crowded neighborhood.

Congress’ NAB-friendly, Republican-sponsored bill may be modified substantially in a Democratic-controlled Senate, and there is still plenty of time for lobbyists to work their magic.  But it’s safe to say that those who have waited at least seven years for white space broadband to become a reality will have to wait a little longer.

One of the things we have tried to teach readers over the last few years is how important it is to follow the money trail when encountering a group, politician, or researcher counter-intuitively arguing “up is down” or “right is left.”  So when a business columnist in the Press of Atlantic City slammed rural broadband as a service provided “to a group of people who mostly don’t want it,” we started digging:

The FCC claims this effort will give 7 million rural people reliable access to high-speed Internet connections. So the hundreds of millions of urban and suburban Americans who wish their Internet was faster and more reliable will pay for 2 percent of us to get just that.

Or maybe we’ll be paying for redundant, overpriced telecom work by companies that donate to rural politicians.

Federal stimulus spending in response to the recession already included $7.2 billion for this same purpose. An analysis by Navigant Economics of three big projects under that Broadband Initiatives Program found:

Even “areas in which very high proportions of households were already served by multiple existing broadband providers” were eligible for subsidized broadband work.

The author’s suspicion that money was involved in all this was correct, but he completely missed who was boarding the money train.

Navigant Economics, the “research group” that produced the inflammatory report slamming rural broadband funding, happens to count AT&T as one of its important clients.

The group, a subsidiary of Navigant Consulting, provides economic and financial analysis of legal and business issues to law firms, corporations and government agencies.

In fact, Navigant pitches its services to a range of corporate clients:

Navigant Economics provides economic analysis in litigation and regulatory proceedings involving competition issues. Our experts have provided testimony in proceedings before District Courts, the Department of Justice, the Federal Trade Commission, the Federal Communications Commission, the Federal Energy Regulatory Commission, and numerous state Public Utilities Commissions.

We provide economic analysis and testimony in connection with mergers and acquisitions and antitrust claims of:

• Anticompetitive horizontal agreements (price fixing, bid rigging, potential anticompetitive effects of joint ventures)
• Unilateral conduct (predatory pricing, refusals to deal, monopolization via patent fraud)
• Vertical restraints (exclusive dealing, requirement contracting, tying and bundling)

We also offer economic analysis and testimony on issues of price and rate of return regulation, mandatory access, quality of service, and benefit-cost analysis, with especial expertise in regulatory proceedings involving communications and the Internet (software and hardware sectors, network unbundling and “net neutrality” issues affecting telecom and cable firms, retransmission consent and other content-related issues, and the range of wireless spectrum issues) and all types of energy markets.

Phillip "Making Sense, Not Dollars" Dampier

The result is what critics refer to as “dollar a holler research” — bought-and-paid-for-results that coincidentally fit the framework of a client’s public policy agenda.  In this case, AT&T (among other phone companies) has fretted about broadband stimulus funding ever since the Obama Administration made it clear the industry would not collectively control the program or reward themselves at taxpayer expense.  In addition to criticizing the decision-making process, phone and cable companies have objected to numerous applicants who applied for grants to build networks serving communities those companies have ignored or under-served for years.

To say AT&T has no vested interest in the outcome of rural broadband would be the first major understatement of 2012.

Martyn Roetter with MFR Consulting said Navigant was giving a bad name to researchers.

“Navigant Economics as well as other economists in academia and the consulting profession seem increasingly prepared to support arguments in favor of their clients’ desires and goals regardless of whether they are reasonable or preposterous,” Roetter wrote. “Unfortunately this behavior tends to blur the distinction between (a) respectable advocacy with findings based on evidence and rational arguments and (b) indefensible nonsense, discrediting both academics and consultants.”

Navigant spent much of 2011 trying to convince regulators and the public that T-Mobile actually doesn’t compete with AT&T, so there should be no problem letting the two companies merge.  Readers win no prizes guessing who paid for that stunner of a conclusion.  Thankfully, the Department of Justice quickly dismissed that notion as a whole lot of hooey.

Navigant’s second ludicrous conclusion is that there is no rural broadband availability problem.  Navigant has a love affair with slow speed, spotty DSL (sold by AT&T) and heavily-capped 3G wireless (also sold by AT&T) as the Frankincense and Myrrh of rural Internet life.  With those, you don’t need any broadband expansion (particularly from a third party interloper).

“The notion that a nominal maximum speed in a shared radio access network is comparable to a nominal maximum speed of a fixed broadband line to a location is a striking example of ignorance, wilful or otherwise, of the very different operating characteristics and capabilities of these two transmission media,” Roetter soberly observed.

But he knows better.

Roetter

Kevin Post, columnist for the Press of Atlantic City, bought Navigant’s conclusions hook, line, and sinker and repeated them in the press.  In fact, he upped the ante parroting the time-honored provider argument that rural America doesn’t need 21st century broadband because, well, they just don’t want it:

This costly effort is aimed at bringing broadband to a group of people who mostly don’t want it, according to a 2010 Pew Internet survey.

Half of Americans who don’t use the Internet told Pew that the main reason is they don’t find it relevant to their lives.

Only one in 10 nonusers said they would be interested in starting to use the Internet sometime in the future.

Actually, the Pew Internet survey came well before Navigant’s outlandish conclusions, and didn’t directly address the rural broadband availability problem.  Instead, Pew was looking at broadband adoption rates, primarily in places that already have one or more broadband providers.  Pew found what providers have already realized themselves: broadband growth and adoption is slowing; everyone who wants the service in urban America already has it or wants it.  Those that don’t are typically older and lack computers or are too poor to afford the asking price.

Post’s suggestion that a Pew Study concluded rural America does not want broadband service is an exercise in fixing the facts.

That’s the magic of the Dollar-a-Holler Echo Machine.  Big telecom companies hire public policy consultants and researchers to find their way to “scientific” evidence proving their corporate agenda, and then feeds the “facts” and “research” to receptive reporters, astroturf “consumer groups,” and politicians to bolster their case.  It’s not AT&T suggesting there is no rural broadband problem — it’s Navigant Economics.

As Roetter writes, “A basic knowledge of wireless markets exposes the […] indefensible nature of the positions outlined above. A policy based on ‘tell me what you want to hear, pay me, and I will reproduce it all regardless of its merits’ is a disservice to professionals who try to remain objective and independent, i.e. professional.”