Earlier this year, Gov. Sam Brownback (R-Kansas) signed legislation into law that allows AT&T to deregulate itself, and its rates, at will.  Kansas ratepayers are about to pay the price for that law as basic phone rates are expected to increase as much as $84 a year for residents that have few alternatives.

AT&T wants to eliminate price caps on landline service, which currently limit pre-tax prices to $15.70 in rural areas, $16.70 in larger Kansan cities with enhanced local calling areas.  After AT&T won similar deregulation in Oklahoma, Texas, Missouri and Arkansas, AT&T has been regularly raising basic phone rates, which are now $5 to $7 more a month for basic service than before deregulation.

AT&T intends to divert much of the additional revenue away from upkeep of its landline network, which in several states it has won the right to abandon in rural areas, and use the money to enhance its cell phone network instead.

AT&T spokesman Aaron Catlin told The Wichita Eagle AT&T intends to supply communities currently bypassed by AT&T DSL with heavily usage capped, and much more expensive, 3G wireless broadband instead.

AT&T currently sells that service for $60 a month with a 5GB usage limit and an overlimit fee of $50 per gigabyte.

Catlin told the Eagle AT&T was excited with the possibilities, although rural Kansans facing those prices might not be.

“A lot of bad things are going to happen long-term,” Steve Rarrick, an attorney for the Citizens’ Utility Ratepayer Board told the newspaper. “Over time, they (customers) are going to see their phone bills go up. That’s been the experience of other states.”

Phillip Dampier: "Where is the actual innovation in The Spectrum Innovation Act?"

Republican members of the Subcommittee on Communications and Technology on spectrum issues have circulated a draft bill — The Spectrum Innovation Act — which is breathtaking when you finish reading it.  For the first time I can recall, the United States Congress is proposing a way for business to bypass telecommunications laws by buying their way out.  The proposed bill would allow big spectrum holders like wireless phone companies, broadcasters, and others warehousing unused spectrum to win a “get out of regulation free”-card just by buying and selling the public airwaves.

A hearing on spectrum issues is scheduled for this Friday, and it promises to be fascinating if only to hear the reasoning behind Congress proposing to throw their own authority to the wind.

The bill’s contents are appalling for a variety of reasons:

• Public airwaves remain a private commodity that companies can buy, sell, or trade, with the not-so-fringe benefit of winning deregulation or being granted a legal free pass to ignore laws still in effect for others;
• The purchase of spectrum under this bill could allow wireless carriers to avoid even the pretense of today’s watered-down Net Neutrality policies;
• Unlicensed white space/spectrum which could be used for innovative new wireless applications could instead become warehoused by private companies for their own use (or more likely to keep others from using it.)

Harold Feld, legal director of Public Knowledge, says the impact of the House measure should not be underestimated.

Feld

“Until now, communications law has never been publicly put up for sale,” Feld said.  “This draft bill would do that by allowing broadcasters to choose which rules they will follow and which rules they won’t if they sell their broadcast spectrum at auction.”

That is distressing enough, but the implications for wireless innovation are in peril if this bill ever becomes law, according to Feld.

“The innovation and experimentation we have seen through the use of unlicensed spectrum would screech to a grinding halt,” Feld believes. “Rather than have the FCC decide how much spectrum would be used for unlicensed uses, the draft bill would require a collective bid for unlicensed spectrum higher than bids for licensed uses.  Given that unlicensed uses like Wi-Fi come from small and new companies, the future of new uses would be very bleak.”

Feld points to several provisions in the bill to prove his points:

• Pages 18-19, line 19 (regulatory relief). If you are broadcast licensee, instead of taking money from an incentive auction for repacking or moving to a different spectrum band, you can ask FCC for a waiver of any commission rule or any provision of law.

• Pages 28-29, line 8 (administration of auctions).  If someone buys a license at auction, the spectrum is exempt from even the weak Net Neutrality rules that have been approved to guard against basic anticompetitive activity in wireless service such as barring competitive services.

• Page 29, line 3.  Prohibits spectrum cap, and also eliminates the ability of  the Commission to favor small business and minority, women-owned businesses in auctions.

• Page 26, line 10. Unlicensed spectrum is subject to auction.  A block of spectrum would be put up for auction, with bidders specifying whether use would be for licensed or unlicensed use.  Unlicensed has to be higher for bid to be accepted.

• Page 30 (section begins).  Gives public safety spectrum to the states, without an auction, with a nebulous plan and some unspecified grant money to coordinate the public safety network.

He’s more than proved the point.

While such legislation would no doubt be celebrated by incumbent providers to reinforce the status quo — their status quo — it is a nightmare for everyone else — another piece of irony from some Republican lawmakers who name their bills the diametric opposite of their end effect.  We can’t think of a better way to crush innovation and destroy the potential of competition by granting today’s players deregulation and easy access to unlicensed spectrum.  It’s as oxymoronic as a level playing field in the Rocky Mountains.  That’s why we need some actual innovation in The Spectrum Innovation Act.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Engadget Broadband in Europe.flv[/flv]

Rick Karr at Engadget delivers a sweeping indictment of America’s broadband duopoly in a special video presentation that explores Europe’s leapfrog advancements in broadband penetration, speed, and pricing.  It’s all made possible by technology policy.  In Europe, open access is guaranteed.  In the United States, telecommunications companies won the right to keep competitors off their networks.  The result is a staggering decline in America’s broadband ranking, now below Portugal and Italy.  So what happened to let Europe spring ahead of the United States?  Government regulation.

The game-changer in the United Kingdom and the Netherlands has been government regulators who have forced more competition in the market for broadband.

The market in the UK used to be much like ours here in the U.S.: British homes had two options for broadband service: the incumbent telephone company British Telecom (BT), or a cable provider. Prices were high, service was slow, and, as I mentioned above, Britain was falling behind its European neighbors in international rankings of broadband service.

The solution, the British government decided, was more competition: If consumers had more options when it came to broadband service, regulators reasoned, prices would fall and speeds would increase. A duopoly of telephone and cable service wasn’t enough. “You need to find the third lever,” says Peter Black, who was the UK government’s top broadband regulator from 2004 to 2008.

Starting around 2000, the government required BT to allow other broadband providers to use its lines to deliver service. That’s known as “local loop unbundling” — other providers could lease the loops of copper that runs from the telephone company office to homes and back and set up their own servers and routers in BT facilities.

Today, the UK’s broadband marketplace resembles America during dial-up Internet days, when customers could choose from a dozen or more providers and get substantial discounts or service tailored towards specific needs.  Today, that choice isn’t available from cable and phone companies.  There’s typically just one of each, and your practical choices usually end there. Thanks to Stop the Cap! reader Corey for sharing the story with us.

The video lasts 16 minutes.

Courtesy Kelvin Luffs

Several weeks ago, the Netherlands’ former state-owned telephone company — Koninklijke KPN N.V. — thought it would be a fine idea to charge their mobile customers extra subscription fees for accessing popular online services like Skype, YouTube, and Facebook.  KPN’s proposal would have added €3 a month for the privilege of using Skype.  Want to update friends on Facebook?  That will run €0.02 per megabyte.  YouTube?  €0.50 per hour.  Not a single Euro would be passed along to any of these companies, however.  KPN itself would bank the entire amount.

The Dutch Parliament reacted to news of this, and other recent controversy involving the country’s mobile providers, by introducing strong Net Neutrality regulation in Parliament — the second country after Chile to do so:

1. Providers of public electronic communication networks which deliver internet access services and providers of internet access services do not hinder or slow down applications and services on the internet, unless and to the extent that the measure in question with which applications or services are being hindered or slowed down is necessary:

a. to minimise the effects of congestion, whereby equal types of traffic should be treated equally;
b. to preserve the integrity and security of the network and service of the provider in question or the terminal of the enduser;
c. to restrict the transmission to an enduser of unsolicited communication as referred to in Article 11.7, first paragraph, provided that the enduser has given its prior consent;
d. to give effect to a legislative provision or court order.

2. If an infraction on the integrity or security of the network or the service or the terminal of an enduser, referred to in the first paragraph sub b, is being caused by traffic coming from the terminal of an enduser, the provider, prior to the taking of the measure which hinders or slows down the traffic, notifies the enduser in question, in order to allow the enduser to terminate the infraction. Where this, as a result of the required urgency, is not possible prior to the taking of the measure, the provider provides a notification of the measure as soon as possible. Where this concerns an enduser of a different provider, the first sentence does not apply.

3. Providers of internet access services do not make the price of the rates for internet access services dependent on the services and applications which are offered or used via these services.

4. Further regulations with regard to the provisions in the first to the third paragraph may be provided by way of an administrative order. A draft order provided under this paragraph will not be adopted before it is submitted to both chambers of the Parliament.

5. In order to prevent the degradation of service and the hindering or slowing down of traffic over public electronic communication networks, minimum requirements regarding the quality of service of public electronic communication services may be imposed on undertakings providing public communications ­networks.

The new bill, expected to pass the Dutch Senate as early as this week, would ban mobile providers from nickle-and-diming customers for the applications they run on their mobiles.  It’s a far different approach than Net Neutrality policies in the United States, which exempt cell phone companies.

van Dam

KPN’s original announcement that it was introducing extra charges for certain popular mobile applications raised privacy concerns in Parliament over exactly how KPN knew what their customers were doing with their phones.  That’s a question the Netherlands Consumer Authority wanted answers to as well.

KPN was accused of using “deep packet inspection” to monitor the activity of their customers.  In April, KPN discovered many of them were using an alternative messaging service called WhatsApp to bypass paying SMS text message charges.

Labour MP Martijn van Dam was unimpressed with KPN’s defense of its monitoring customer activity.  Although the company said the monitoring practice is widespread, it denied it was violating the privacy of its customers in the process.  van Dam suggested that would be akin to “a postal worker who delivers a letter, looks to see what’s in it, and then claims he hasn’t read it.”

van Dam is a co-author of the Net Neutrality bill that soon followed and is expected to pass over the objections of mobile companies, who claim they will be forced to raise prices in response.

Unless Canada deregulates the media industry further, a “technological storm” by “audiovisual Wal-Marts” will harm or destroy Canada’s media companies.  No doubt looking directly at Netflix, those were the views of Quebecor CEO Pierre Karl Peladeau at the outset of hearings held this week by the Canadian Radio-television and Telecommunications Commission on media ownership and vertical integration issues.

Canada’s media landscape is rapidly consolidating at a rate that will allow even ordinary Canadians with a passing interest in the issue to recognize the handful of remaining media moguls and identify them by name.  Phone companies that own major Canadian television networks, cable operators that own cell phone companies, and mergers among the dwindling pack have left consumers soaking in Shaw, Rogers, Bell, and Quebecor — whether they flip on their televisions, make a cell phone call, read a newspaper, or download something from the Internet.  Talk about vertical integration!  Now the supersized are back for more deregulation so they can trade programming rights between themselves, fend off the devil — Netflix, and of course continue to buy each other out.

There is one exception, of course.  Allowing party crashers.  While all of the incumbent players want the rules loosened up on their respective media and telecommunications operations, they are hellbent on keeping foreign competition out of Canada — the only real deep pockets sufficient to break up a convenient cartel of phone and cable companies.  Rogers and Shaw stay on their respective sides of a line dividing eastern Canada’s turf for Rogers and western Canada’s territory for Shaw.  Bell and Telus do much the same.  Quebecor provides cable for Quebec, and a handful of much smaller players fight for any remaining crumbs.

For Americans, it would be the equivalent of turning over your telephone, broadband, cable, television, newspapers, magazines, and radio stations to Rupert Murdoch or ex-media baron Ted Turner.

For Canadians, these hearings come just a tad too late.  Shaw Communications is absorbing their latest buyout — Canwest Media’s TV assets, which are hardly meager.  Shaw will run more than two dozen local broadcast TV outlets, 30 cable and satellite networks, and Global — a major broadcast network.  Bell is still popping Rolaids over its digestion of the enormous CTV and smaller upstart A-Channel network.  When it’s finished, “A” will become “CTV Two.”

The Globe and Mail notes between them, Bell, Shaw, Rogers and Quebecor control:

• 86 per cent of cable and satellite distribution;
• 70 per cent of wireless revenues;
• 63 per cent of the wired telephone market;
• 49 per cent of Internet Service Provider revenues;
• 42 per cent of radio;
• 40 per cent of the television universe;
• 19 per cent of the newspaper and magazine markets;
• 60 per cent of total revenues from all of the above media sectors combined.

As far as growth goes, as Alan Keyes used to proclaim, “that’s geometric!”

But it’s still not enough now that Netflix has arrived in Canada.  Despite the fact the operation has been challenged by punitive usage caps restricting viewing (or lowering its video quality), Netflix and new technology companies like it are the 21st century boogeymen for these multi-billion dollar media corporations.  The only way to defend against it?  Deregulate to allow them to trade viewing rights, grow larger, and charge whatever they like.  Somehow that seems to miss the point: Netflix is popular because it costs less, allows people to stream the shows they actually want to watch at a time of their choosing, and let’s families drop some overpriced premium channels and video rental fees along the way.

Bell’s dollar-a-holler researcher expanded on why large media conglomerates miss the point, even if he did so unintentionally.

According to University of Alberta economics professor, Jeffrey Church, “vertical integration is beneficial for consumers.” Sit down as you read why:

• it reflects efficiencies, spurs competitive innovation and is a global trend;
• telecom, media and Internet markets in Canada are “highly competitive;”
• our ‘small media economy’ needs a few deep-pocketed national champions to compete globally and invest heavily in innovation at home;
• instances of harm are mostly imaginary and few and far between;
• it helps keep “consumers . . . within the regulated system” (Shaw’s submission, p. 4).

Like cattle.