Wednesday, August 30, 2017

FSF Files Reply Comments to Restore Internet Freedom

Today, the Free State Foundation submitted its reply comments for the Restoring Internet Freedom proceeding, debunking many claims made by pro-regulatory organizations in the initial round of comments. In our reply comments, we make the following arguments: the Title II Order had a negative impact on broadband investment, broadband services are functionally integrated Title I “information services,” the broadband market is comprised of dynamic and intermodal competition, broadband privacy jurisdiction should return to the FTC, and the FCC should implement a cost-benefit analysis.
John Eggerton posted a nice summary of our reply comments on Multichannel News. Please share!

Monday, August 28, 2017

"The Next Google"

In advance of the filing of reply comments in the FCC’s Restoring Internet Freedom proceeding (a.k.a. the “net neutrality proceeding”), I’ve been thinking about the “next Google.”

You know the one to which I’m referring. I’ve been in countless debates regarding net neutrality regulation over the past decade when a Google representative – arguing in favor of stringent net neutrality regulation – has said: “We’re not concerned about Google because we’re big enough to protect ourself. We’re concerned about the next Google.”

Other pro-net neutrality advocates, mimicking Google, often invoke the “next Google” as justification for their pro-regulatory position. For example, in a blog published on April 29, 2014, then-FCC Chairman Tom Wheeler said he would impose Title II public utility regulation to protect the “next Google.”

Even President Obama adopted the meme in August 2014, declaring: “[T]he position of my administration, as well as a lot of the companies here, is that you don’t want to start getting a differentiation in how accessible the Internet is to different users. You want to leave it open so the next Google and the next Facebook can succeed.”

Worrying about the next Google or the next Facebook got me thinking about an article published in the Wall Street Journal on August 9, 2017, titled, “The New Copycats: How Facebook Squashes Competition from Startups.” Read it yourself if you want a real basis for worrying about the “next Google” or “next Facebook.”

Here are just a couple of excerpts:

“Silicon Valley is dominated by a few titans, a development that’s fundamentally altering the nature of America’s startup culture. While it’s as easy as ever to start a company, it is getting harder to grow fast enough and big enough to avoid getting either acquired or squashed by one of the behemoths.”

“The deep pockets of giants such as Facebook, Alphabet Inc.’s’ Google, Apple Inc. and Amazon make it increasingly difficult for startups to compete and stay independent. The four firms have a combined market capitalization of almost $2.5 trillion, a rough equivalent to the annual gross domestic product of France.”

The article details the strategies and tactics employed by Facebook, Google, and the other Silicon Valley behemoths (to stick with the WSJ’s terminology) to either squash any emerging rivals, or to buy them out. Hence, if you are truly concerned about the “next Google” or the “next Facebook,” what you should worry about – much more than net neutrality – is how Google and Facebook use their undisputed market dominance, along with their “squash or acquire” tactics, to block emerging competitive threats from gaining a real foothold.

Scott Cleland, who closely tracks the financial results and market activities of the Silicon Valley titans, reported in a recent blog that public data show that Google, Amazon, and Facebook have acquired approximately 350 potential competitors to “ensure no innovative ‘garage startup’ has a plausible competitive opportunity to seriously threaten the Internet cartel’s dominance.” And he concluded:

The most recent data from second quarter 2017 earnings show that Google and Facebook have a digital advertising cartel that commands 96% of all digital advertising growth. The analysis shows that it isn’t broadband providers that content providers must fear will engage in anti-competitive or discriminatory behavior, it is the Google-Facebook ad cartel.”

Not surprisingly, there are increasing calls for antitrust or other government authorities to investigate and sanction – or even regulate as public utilities – Google and Facebook, and perhaps other Internet behemoths (to stick with the WSJ’s terminology.) I’m not advocating such action here. In my view, in a dynamic market environment such as that presented by the present Internet ecosystem, caution is warranted before either antitrust or regulatory remedies are imposed. The costs to innovation and investment to “de-FANG-ing” the Internet giants may well outweigh the benefits.

What I am actually advocating is this: The next time you hear the “next Google” invoked as a justification for imposing stringent, inflexible net neutrality regulation (whether by “Title II” or any other name), please take such ritual incantation with a big grain of salt.
Here is what I think that Google, Facebook, Amazon, and the other Silicon Valley giants really may be worried about. That absent rigid net neutrality anti-discrimination mandates, emerging competitors might have an opportunity to strike deals with Internet service providers that give them the opportunity to differentiate themselves with innovative market offerings that appeal to new consumer demands. Or that absent an absolute ban on paid prioritization, new entrants might have an opportunity to strike deals with Internet service providers that allow them more readily to offer innovative new applications. An absolute ban on paid prioritization may prohibit start-ups from giving assurances regarding the speed and reliability of proposed offerings that are necessary to attract investors and consumers.
If you really believe that Google is worried about the “next Google” not emerging, I’ve got a bridge I’d like to sell you at a bargain price. Don’t get me wrong: I’m not saying that Google should be worried about protecting the next Google – only that it’s fanciful to think that it is. When Google claims to be, that’s reason enough to question the validity of whatever proposition it’s peddling.

One final thought: Google – back when it truly was the “next Google” – emerged and grew to achieve market dominance at a time when no heavy-handed net neutrality regulations, much less Title II public utility regulations, were in place governing Internet service providers’ practices.

Wednesday, August 23, 2017

Verizon Gives Consumers More Options for Unlimited Data

Earlier this week, Verizon unveiled three new options for unlimited data plans: Go Unlimited, Beyond Unlimited, and Business Unlimited. Go Unlimited starts at $75 per month and video is “DVD-quality” – standard-definition on phones (480p) and high-definition (HD) on tablets (720p). Beyond Unlimited starts at $85 per month and supports HD for phones and tablets (720p for phones and 1080p for tablets). Go Unlimited and Beyond Unlimited both provide monthly discounts for each additional line, but the Business Unlimited plan gives customers flat monthly rates. Verizon is also introducing an unlimited option for customers on prepaid plans. (See the chart below.)
Some people are criticizing Verizon for limiting the video quality in some of the new plans, but Verizon is upfront and transparent about the details of each offering. In response to pro-regulatory advocates who state that Verizon’s new plans violate net neutrality principles, Free State Foundation President Randolph May stated:
"Whether the new plans violate 'net neutrality' depends of course on who defines how strictly and in what context the plans are offered. Aside from definitional constructs, I'd say that this type of differentiation is good for consumers, considered overall, and what is expected in a competitive marketplace. This is also a good example of why the FTC should handle these issues that really relate to how plans are marketed to consumers."
Many pro-regulatory advocates also have criticized mobile providers for offering free data services instead of offering unlimited data plans. But as I stated in a February 2017 blog, it was not until FCC Chairman Ajit Pai ended the investigation of free data services and established an environment of permissionless innovation that mobile providers were willing to offer unlimited data plans. Of course, with permissionless innovation in a dynamically competitive marketplace, Verizon has tripled its consumer-friendly options for unlimited data plans.
In general, more options for unlimited data plans, as well as free data services, give consumers the freedom to choose the option which best fits their preferences and cost allocations. This type of marketplace freedom spurs consumer demand for online content and encourages additional innovation and investment in broadband networks.

Friday, August 18, 2017

Maryland Could Be Future Hub of Data Economy

The Center for Data Innovation recently published a report entitled “The Best States for Data Innovation,” ranking the U.S. states on their ability to foster data innovation. The report also discusses how technological advancements, like faster computing, better algorithms, and more robust communication networks, have made it easier to collect, store, analyze, use, and disseminate data. These advancements have led to the emergence of the data economy: an economy in which success depends on how effectively firms can leverage data to generate insights and unlock value.
Maryland ranks third overall among the fifty states and leads in several categories. Given Maryland’s high ranking, if Governor Larry Hogan – with the General Assembly’s help –continues his efforts to improve Maryland’s business climate and fiscal situation, Maryland could become the national hub of the data economy.
Here are some notable categories where Maryland ranks in the top 10:
  • Enabling technology platforms: Maryland ranks 1st.
  • Broadband access: Maryland ranks 3rd.
  • The availability of machine-readable data on public-transit systems: Maryland ranks 3rd.
  • Using data to develop human and business capital: Maryland ranks 6th.
  • Maryland has one of the highest percentages of science, technology, engineering, and math (STEM) degrees, ranking 7th overall.
  • Maryland has the highest number of jobs in the country related to statistics and the second highest number of jobs related to data-science.
  • Maryland also was one of the first states to enact an open-data policy, allowing residents and businesses to have access to government datasets.

The report says: “The widespread adoption of data analytics and artificial intelligence is expected to contribute hundreds of billions of dollars to U.S. GDP in the coming years in sectors such as finance, transportation, and manufacturing, while unlocking new opportunities to improve outcomes in fields such as education and health care.” For Maryland, fostering data innovation will continue to attract more economic activity and job creation into the state, establishing Maryland as a hub of the data economy and providing innovations in medicine, education, and transportation for its residents.
As I stated in a July 2017 blog, Maryland has struggled with achieving fiscal responsibility in the past. But new leadership under Governor Hogan has started to reform Maryland’s business climate. If successful, efforts to eliminate unnecessary regulations and lower burdensome taxes and fees will attract jobs and economic activity into the state, increase Maryland’s tax base, and reduce its long-term debt. Alleviating the burden of long-term debt for residents and businesses will spur additional economic activity within Maryland and attract more data-intensive businesses that value Maryland’s emerging data economy.
As the report states:
While data-driven innovation is a global phenomenon, some regions are better poised to enjoy the resulting benefits because they have invested in and supported the conditions necessary to succeed in the data economy. This is also true within the United States, where some states are actively building the necessary foundation for a thriving data economy and others are lagging. Decisions made today that affect the extent to which a state participates in the data economy will have long-term implications for its future growth, as data plays an increasingly larger role in many different sectors across the economy. Early adopters will benefit more quickly from using data to address a multitude of challenges, and by positioning themselves at the forefront of data-driven innovation; they also will be able to grow and attract data-driven companies in a wide range of sectors that will make them the future hubs of the data economy.
The Center for Data Innovation’s report says that some of Maryland’s high-level statisticians and data-scientists may reside in the state for federal government employment. Nevertheless, with this valuable resident workforce, Maryland’s data economy already has an advantage over other states. Governor Hogan and the Maryland General Assembly should continue to reduce regulatory and tax barriers that could inhibit data-intensive businesses from locating in the state.
Governor Hogan and other state leaders should be commended for their efforts to foster data innovation within the state. State leaders should be proud, but not content, with Maryland’s 3rd overall ranking. There is no reason why Maryland cannot become the United States’ future hub of the data economy.

Thursday, August 17, 2017

Antitrust Provides a More Reasonable Framework for Net Neutrality Regulation

Yesterday, the Free State Foundation published a new Perspectives from FSF Scholars entitled “Antitrust Provides a More Reasonable Framework for Net Neutrality Regulation” by Joshua Wright, a member of FSF’s Board of Academic Advisors and a former Commissioner at the Federal Trade Commission. Professor Wright discusses why using antitrust, instead of Title II regulation, would provide sufficient regulatory oversight of broadband providers by examining vertical agreements on a case-by-case basis while also encouraging investment and fostering competition.

Tuesday, August 15, 2017

Comcast's Internet Essentials Program's Milestones and Enhancements

Congratulations to Comcast on the new milestones reached in its Internet Essentials program, the nation’s largest and most comprehensive high-speed Internet adoption program. Today Comcast announced that it has now connected more than four million low-income Americans, in one million households, to high-speed Internet service at home. This is a significant contribution by Comcast to efforts by it and other private sector companies, to contribute resources and expertise to help close whatever digital divide remains.

Comcast also announced three key program enhancements:
  • For the fourth time in six years, Comcast will increase the program’s Internet service speeds, this time from 10/1 Mbps to up to 15/2 Mbps. More speed was the number one requested enhancement from Internet Essentials customers, and this latest increase will improve streaming quality in the home (15 Mbps is three times the speed necessary to view a high-definition video), especially when multiple devices are connected to the Internet at the same time.
  • To help family members connect to the Internet on the go and save money on their wireless bills, Internet Essentials customers will now enjoy 40 hours of free out-of-home WiFi access per month to the company’s growing network of 18 million Xfinity WiFi hotspots. This WiFi access is being offered in addition to the free in-home WiFi Internet Essentials customers currently enjoy.
  • Comcast is also expanding its pilot program for low-income senior citizens from five cities and metropolitan areas to 12, including today in Miami-Dade County.

The milestones announced by Comcast today, along with the Internet Essentials program enhancements, are certainly worthy of note.

Thursday, August 10, 2017

Priority Communications Services for Governments: Lessons for Private Prioritization

The Federal Communication Commission’s 2015 Open Internet Order contains a ban on “paid prioritization,” or agreements that allow a content provider to pay an Internet service provider for priority treatment in a “fast lane” to jump around congestion on the Internet. I described in a May 2017 FSF Perspectives how paid prioritization arrangements are very common in many markets and usually lead to pro-consumer benefits.

While the Open Internet Order prohibits Internet Service Providers (ISPs) from charging for prioritization, other FCC policies encourage prioritization arrangements, so long as other government agencies are the ones given access to the fast lane. There is a lesson here for the government that it ought to recognize with regard to private sector prioritization arrangements on the Internet.

Prioritization arrangements can have benefits for consumers and the general public, and it is entirely appropriate for the FCC to provide for favorable access for government emergency and disaster responders. But the same logic applies to at least some private services on the Internet, which are likely to be delayed or deterred so long as the rigid prohibition against paid prioritization remains in place.

The FCC majority in the 2015 Open Internet Order argued that having a fast lane for those willing to pay for it would place their competitors in the “slow” lane at a disadvantage. Moreover, they asserted that without this ban, ISPs would have the incentive to make the slow lane even less attractive by avoiding investing in it, so that firms in the slow lane would eventually be forced to pay to move to the fast lane. Thus, the 2015 FCC adopted the following prohibition:

No Paid Prioritization. Paid prioritization occurs when a broadband provider accepts payment (monetary or otherwise) to manage its network in a way that benefits particular content, applications, services, or devices. To protect against “fast lanes,” this Order adopts a rule that establishes that:

A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not engage in paid prioritization. “Paid prioritization” refers to the management of a broadband provider’s network to directly or indirectly favor some traffic over other traffic, including through use of techniques such as traffic shaping, prioritization, resource reservation, or other forms of preferential traffic management, either (a) in exchange for consideration (monetary or otherwise) from a third party, or (b) to benefit an affiliated entity.

As then-Commissioner Ajit Pai pointed out  at the time, the FCC adopted this blanket ban on paid prioritization even though ISPs had not adopted paid prioritization in any meaningful way. The effect on capital investment of the 2015 order, which included the paid prioritization ban, has been the opposite of what the 2015 FCC majority predicted, because broadband investment is down significantly since the Open Internet Order was implemented. Indeed, Free State Foundation Research Associate Michael Horney has estimated that in 2015 and 2016 investment declined by $5.6 billion.

On a page titled “Priority Telecommunications Services,” the FCC website explains how it views the importance of certain prioritization programs:

Often times, it is necessary to either prioritize the provisioning of new communications services or prioritize the restoration of services that have been damaged or otherwise are not functioning. This is especially true in disaster situations when numerous outages may occur at once or systems become overloaded by demand. This topic introduces three major priority service programs that have been established by the Federal government in order to provide prioritized system access for designated users or to allow for prioritized installation/restoration of services. The Federal government administers these priority communications services that are provided by the wireline and wireless telecommunications carriers and are necessary to promote the nation's security and emergency preparedness (NS/EP) functions.

One of the three programs described above by the FCC is the Telecommunications Service Priority (TSP) program, which is authorized by the FCC and administered by the Department of Homeland Security (DHS) Office of Emergency Communications. The TSP program is a paid prioritization arrangement. According to DHS:

TSP is a fee-based program and organizations pay their telecommunications vendor for the services. TSP set-up and recurring costs vary depending on 1) the type of service requested (provisioning or restoration), 2) the telecommunications vendor providing the service (e.g. AT&T, CenturyLink, Sprint, Verizon, etc.), and 3) the geographic location requested for the provisioning or restoration service.

Prioritization arrangements can have benefits for consumers and the general public, and nothing herein is intended to be criticism of the current FCC policies giving favorable access to government emergency and disaster responders. As emergency services and public safety evolve, government agencies may want to have even greater access to paid prioritization available to them for government functions such as Amber alerts, severe weather alerts, and Homeland Security warnings.

But the same logic applies to at least some other services on the Internet, which are less likely to be widely available so long as the rigid prohibition against paid prioritization remains in place.

For example, telemedicine is an emerging private application that may require prioritization in order to become widely available and accepted as reliable. Telesurgery now allows specialized surgeons in one location to operate on patients in completely different locations. The emerging market for telesurgery can give patients in small hospitals or remote areas access to highly-skilled specialists who otherwise would not serve those areas. According to a recent medical journal article:

The ultimate goal of telerobotic surgery is to replicate the normal process of surgery from a distance. The success of telesurgery (or any aspect of telemedicine for that matter) depends largely on how faithfully and without incident remote activities duplicate their on-site equivalents. Because of its direct impact on surgeon performance, a frequent metric in real-time telesurgery research is that of system delay (citations omitted).

Autonomous vehicles and interactive e-learning are other examples of applications in their early stages of development that require a high level of end-to-end reliability. Investors may be unwilling to take the risk of investing in these applications if they cannot be assured of reliable prioritized broadband connections. The FCC’s prohibition against charging for paid prioritization may well prevent these services from developing, as well as other new applications that no one is yet anticipating.

As FCC Commissioner Michael O’Rielly recently stated, “Even ardent supporters of net neutrality recognize, as I've said before, that some amount of traffic differentiation or ‘prioritization’ must be allowed or even encouraged.” Moreover, to the extent the Open Internet Order is suppressing capital investment broadband infrastructure, that is infrastructure that is not available for government first responder needs. 

Whatever policy the FCC adopts as part of its present proceeding, it should not be a rigid ban against paid priority arrangements for private Internet uses, which precludes arrangements that offer tremendous potential health, safety, and economic benefits. The government actually authorizes priority arrangements, and recognizes their value, in various emergency, public safety and related contexts. It should not adopt a blanket ban on such arrangements that would prevent their development in other contexts that would prove valuable to consumers.

Tuesday, August 08, 2017

Compensation for Pre-1972 Recordings

Good piece by Rep. Darrell Issa in Variety on bringing pre-1972 recordings out of the Dark Ages.

Here's the problem that would be remedied by passage of a proposed law called the CLASSICS Act as described by Rep Issa:

"When a musician records a song today, federal law grants a copyright in the “sound recording” itself — the captured version of the performance, separate and apart from the notes and lyrics. But thanks to an inexplicable gap in federal copyright law, the recordings by musical greats like John Coltrane, Aretha Franklin, Frank Sinatra and others before February 15, 1972 aren’t given the same copyright protections as their modern peers. In recent years, disputes have arisen as to what these rights should consist of — creating significant uncertainty for artists, record labels, and music distributors alike."

Congressman Issa's piece is worth a look.

Friday, August 04, 2017

Senate Passes MOBILE NOW Act

Yesterday, the Senate passed the MOBILE NOW Act, which is a vital step towards relinquishing spectrum to meet the increasing demand for mobile services and 5G technology. As it is discussed in an April 2017 Perspectives from FSF Scholars, the MOBILE NOW Act would require the National Telecommunications and Information Administration (NTIA) and the Federal Communications Commission (FCC) to relinquish necessary licensed spectrum. The legislation also would require the FCC to increase access to unlicensed spectrum and to streamline mobile deployment processes. 

Thank you to Chairman John Thune and Ranking Member Bill Nelson of the Senate Committee on Communications, Science and Transportation for their leadership on this bipartisan issue!