Recently in Regulation Category

The good people at the NYT have given me more reason to get excited about next month's NCTA Cable Show in New Orleans: Watching the speculation, rumour and intrigue behind who might try and take over Time Warner's cable systems, which are about to become sort of "up for grabs" as they get spun off.

Jeffrey L. Bewkes, the chief executive of Time Warner Inc., continued to trim what has for years been the world's largest media company by announcing Wednesday that it would completely spin off its cable company.

The news -- which was not unexpected and follows an earlier transaction in which a portion of the cable unit was spun off into a separate public company -- came as Time Warner reported quarterly earnings that were largely in line with Wall Street's expectations.

This is going to be fun to watch for a number of reasons. Last time there was a major group of systems up for sale was when AT&T sold off their Cable systems, leading to a "friendly" competition between Cox Communications, and the eventual winner Comcast. That victory gave Comcast a huge market advantage in the number of subscribers, but Comcast, which has a reputation for fighting like Rocky, the unofficial mascot of its' home city of Philadelpha, may not be able to benefit from going after TIme Warner without helping Cox, their old Atlanta-based foes. 

No, I wasn't there, but the FCC sent me a copy to read because they're such fantastic people. I routinely go back and forth on Martin. One minute I'm incensed at his hair-trigger indecency standards, the next minute impressed by how stubbornly he wants a la carte pricing, which might not be a bad idea, no matter what the industry says. Then, I'm totally floored by his insistence on open access for the 700mhz auction, possibly the smartest decision he's made in his tenure (and I suspect having to due with the influence of his old boss, ex-Commissioner Harold Furchtgott-Roth, whose book A Tough Act to Follow? should be required reading for anyone who wants to know about the FCC).

So, whenever I read or hear one of Martin's speeches, I never know how I'll feel afterwards. His CTIA remarks (delivered yesterday) are no different.

Here's an excerpt with an ending that you won't believe:

 

Although initially opposed by the industry, the Commission also worked to create a more open platform on a portion of the 700 MHz spectrum.  The Commission was determined to ensure that the fruits of wireless innovation swiftly pass into the hand of consumers.  A network that is more open to devices and applications can help foster innovation on the edges of the network.  As important, it will give consumers greater freedom to use the wireless devices and applications of their choice when they purchase service. 

 

I believe that putting these choices into the hands of consumers, rather than network operators, will spur the next phase of wireless broadband innovation - innovation that can make us more productive, keep us entertained, and improve our quality of life.

 

Ok, so you've got the big picture. Good. 

When adopting the open platform requirement in the 700 MHz band, we saw it as a rare chance to promote innovation and consumer choice while writing on a clean slate.  We targeted only one block of the spectrum.  And since I have been Chairman, I have opposed applying network neutrality obligations with mandatory unbundling or wholesale requirements to networks that would undermine investment incentives.  This careful balancing of spurring innovation and consumer choice while encouraging infrastructure investment is critical to the wireless industry's continued impressive growth.

 

 

So, what you're saying is if they already own it, they can use however they please, competition be damned. With wireline, you're right. Wholesale was a disaster. Wireless? We don't know yet...but wait, there's more...

 

And what we have observed since the adoption of our 700 MHz rules is quite outstanding.  The requirement for open access in the 700 MHz auction is leading carriers to recognize the benefits of a more open platform. 

 

In fact, in less than a year, many of you have evolved from vocal opponents to vocal proponents, embracing the open platform concept for your entire networks. 

 

Translation: Good job for seeing the writing on the wall before we had to smack you.

 

Verizon Wireless has committed to open its entire network to devices and applications of consumers' own choosing.  More and more wireless providers, including T-Mobile and Sprint through their participation in the Open Handset Alliance, and AT&T, are also embracing more openness in terms of devices and applications.  Indeed, in looking at the program for this conference, I was excited to see a number of educational sessions and panels focusing on the issue of openness.  This interest now appears to be shared across the industry.

 

So, Verizon is trying to catch up to GSM's convenience. They're...competing! But watch...after that eloquent pean to the glories of competition and the free market, Kevin is about to drop an anticompetitive, protectionist bombshell:

 

In light of the industry's embrace of a more open wireless platform, it would be premature to adopt any other requirements across the industry.  Thus, today I will circulate to my fellow commissioners an order dismissing a petition for declaratory ruling filed by Skype that would apply Carterfone requirements to existing wireless networks. 

 

 

Wait a minute! Whoa there! Because you've allowed open access on a network that hasn't been built yet, you're denying open access on the networks that already exist? What this means, is that Skype can't deploy an iPhone or BlackBerry application that lets you access your Skype account from your mobile device. It also means that someone like me, who only has wireless internet access (via a Sprint AirCard) could very well be denied the use of Skype (or Vonage, or any other VOIP service) through the connection that I pay for.

How is that premature? How is Carterfone (meaning that anything I can connect to the POTS network without breaking it is legal to connect) inapplicable to wireless networks? You're telling me that if I have an application that runs on my BlackBerry and uses the device's TCP/IP stack (an open industry standard since the 1970's, by the way) to provide me with a gateway to my VOIP-based phone number, it would be premature to tell my Wireless carrier that they have to let me use it even if it doesn't cause any harm to the network?

Oh, Kevin. You had me flipped. I was ready to start singing your praises to all who would listen...and now this? What are you doing to me? I hoped this was an April Fool's joke, but alas, my hopes were dashed. Even when you say things like this:

In conclusion, let me say that, at the Commission, our job is to provide ample spectrum for a range of wireless services and a regulatory framework that allows you - the entrepreneurs, engineers, and network operators of the world to provide lower prices, better and more innovative services, and more choice to wireless consumers. 

 

How, in the name of Guglielmo Marconi can you talk about the glories of competition and lower prices after you've slammed the door in the face of a service that lowers prices?

Please, Mr. Chairman. Quit playing games with my heart (and my phone). Pick a side.

...not really, but the headline pulled you in, didn't it?

 

The House Committee on Energy and Commerce Subcommittee on Telecommunications and the Internet (Rep. Edward Markey (D-MA), Chairman) does however, have a hearing scheduled for next Tuesday, April 1 (I am not making this up) entitled "Online Virtual Worlds:  Applications and Avatars in a User-Generated Medium".

We're still waiting on that report from Dan Miller, Senior Economist for the Joint Economic Committee's Republican Staff (and avid gamer) on taxation of virtual worlds. Miller has previously said that existing tax code could in theory enable the IRS to levy taxes on virtual earnings, although an October 2006 press release from the JEC says that this is extremely unlikely.

The hearing is scheduled to be in 2123 Rayburn HOB, which means it will be webcast (and possibly live-blogged). No word yet on whether or not simultaneous hearings will take place in other realms, or if the witness list includes avatars, bots, or unicorns.

 

XM-Sirius is APPROVED.

The merger was approved without conditions despite opposition from consumer groups and an intense lobbying campaign by the land-based radio industry.

The combination still requires approval from the Federal Communications Commission, which prohibited a merger when it granted satellite radio operating licenses in 1997.

The Justice Department, in a lengthy statement explaining its decision, said the two companies compete not just with each other but also with other forms of radio and entertainment. Customers must buy equipment that is exclusive to either XM or Sirius, and subscribers rarely switch providers.

"People just don't do that," an assistant attorney general, Thomas O. Barnett, said in a conference call with reporters.

The government also appeared to endorse the argument of the companies that they compete with other forms of audio entertainment, including "high-definition" radio, Internet-based radio stations and even devices like Apple's iPod

Good for USDOJ for rejecting the idiotic arguments of the National Association of Broadcasters. If anyone remembers, they claimed that Satellite Radio was a totally different animal from the nationally-syndicated, homogenized terrestrial radio behemoths and that XM and Sirius competed with each other, but not against AM and FM. 

I'm sure everyone has heard that R.E.M. is letting people get to the premiere of their new album, Accelerate via the iLike Facebook Application. 

...digital opened up many new ways the record companies can take their music to fans and this is one example. this is through a service called iLike and music is a social thing, people define themselves by it and it is one of the things you talk about with your friends and sharing it is a great way to do it. this is a way of sharing music legally with other friends and you can post it on your blog or Facebook and do other things with it... 

...this is a new model for record companies to take music out there. can they make money out of it? this is a licenceed legal service and what the music business is trying to do against a backdrop of most music being available for free illegally, the record companies are trying to licence as many new services as possible to give music fans an option, because that's what we want. we want more ways for music fans to get their music. that's what the record companies would like. that's the message they would like to send out. nobody really knows. once it is available, it is available and you are trying to convince people to pay for it...a lot of artists realise you don't need a record label, you can say ""i can make it available myself."" 

very few artists can do this. rem have done this through their record company. record companies and artists can do these things and use the new digital services. what does it mean for music? do you think it is good for a band that doesn't have a label, can go out and get people listening to their music?

I see some sad double-talk here. On one hand, the labels wants to allow streaming over the 'net when they see fit, but when 'Net Radio took off, they rushed to extract every dollar out of it because they saw it compromising their existing distribution networks. Not illegally, but in the sense that in that world, they lack their traditional influence in what gets pushed to the top of the DJ's "record stack." So, with the help of the Library of Congress and the Copyright Office, they want to replace 'net radio, especially independent stations and services like Last.Fm and Pandora (which actually drive record sales by pushing new music to consumers based on their tastes) out of business, because it imperils their vertical model of middle-manning that has been in place for the past fifty years. 

For the first time in 30 years, the Supremes are making a comeback...to broadcast indecency cases. The Associated Press reports that the SCOTUS (as we inside-the-Beltway like to call them) has granted cert (another legal buzzword for "ok, let's hear it")  to FCC v. Fox Television Stations, 07-582.

First off, I'll note that the FCC has a dismal record before the Federal courts. I don't have time to run the numbers, but they lose many more than they win. Normally the Government comes in with a huge advantage, but this agency is simply the Washington Senators of litigation. To bring as many appeals as they do, I guess "they gotta have heart..." On the other hand, Paul Clement, while a great advocate, is still no match for his predecesor, that master Long Ball Hitter Ted Olsen, or even Shoeless Joe from Hannibal Mo'. (Seriously. Go rent Damn Yankees before I post another YouTube clip).

Technically, this case only concerns the Billboard Music Awards show in which expletives uttered by Cher and Nicole Richie were broadcast over the public airwaves in 2002 and 2003. More well known is the seperate case that NBC has brought challenging the FCC's fine against them for broadcasting Bono's use of the "F-word" during the 2003 Golden Globes.

Note that the FCC is the appellant in this case. They are asking the highest Court in the land to overturn a decision by the 2nd Circuit Court of Appeals in New York which struck down the Commission's rules on "fleeting expletives." In that 2-1 ruling, the Circuit Court rapped the FCC on the knuckles for changing its' policy and failing to explain the rationale for doing so. The Appeals Court decision nullified the policy until the FCC came up with a better explanation, and also skeptically noted that any such explanation would still be unconstitutional.

Note that the 2nd Circuit hit the FCC with the equivilant of a legal 1-2 combination. The left hand, the procedural grounds rejection is a swift jab, but the constitutional argument is a knockout uppercut with the right glove. 

The government's position is interesting, to say the least. Quoth the AP:

Solicitor General Paul Clement, representing the FCC and the Bush administration, argued that the decision "places the commission in an untenable position," powerless to stop the airing of expletives even when children are watching.

The FCC has pending before it "hundreds of thousands of complaints" regarding the broadcast of expletives, Clement said. He argued that the appeals court decision has left the agency "accountable for the coarsening of the airwaves while simultaneously denying it effective tools to address the problem."

 

One explanation for the Supreme Court revisiting the 30 year old FCC v. Pacifica decision is that the 3rd Circuit Court of Appeals in Philadelphia is pondering the weighty question of whether or not Janet Jackson's brief flash of jewlery-covered nipple during the 2004 Super Bowl halftime show was indecent and deserves a fine. The Supremes generally intervene to resolve such "split circuit" decisions.

To give some background, I'll return to the AP article:

The new policy was put in place after a January 2003 broadcast of the Golden Globes awards show by NBC when U2 lead singer Bono uttered the phrase "f------ brilliant." The FCC said the "F-word" in any context "inherently has a sexual connotation" and can trigger enforcement.

The Fox programs at issue are a Dec. 9, 2002, broadcast of the Billboard Music Awards in which singer Cher used the phrase "F--- 'em" and a Dec. 10, 2003, Billboard awards show in which reality show star Nicole Richie said, "Have you ever tried to get cow s--- out of a Prada purse? It's not so f------ simple."

Two questions come to mind. 1) are the "thousands" of complaints that Solicitor General Clement refers to actual complaints, or "click to complain" form letters, and 2) did anyone actually watch the Billboard Music Awards?

If a "celebrity" utters an expletive and noone is tuned in, should we even care?

(apologies for the rhyming. I couldn't resist).

 

Reuters' DealZone Blog reports that Sirius CEO and Howard Stern's chief benefactor Mel Karmazin has voiced hopes that the FCC would rule on the merger by the end of this month.

At the Bear Stearns 21st Annual Media Conference, Karmazin is quoted as saying that he "took heart" about FCC Chairman Martin's desire to make a final ruling by...the end of March.

On the other hand, as Reuters notes, Karmazin has been wrong before on this.

Karmazin's predictions on timing, however, may prove false since the companies have been wrong before. The satellite radio companies previously predicted that regulators would sign off on their their proposed $4.2 billion merger by the end of 2007.

XM Satellite Radio Holdings Inc Chairman Gary Parsons was less specific than Karmazin when he spoke at the Bear Stearns conference. He merely said he was confident the regulatory review was moving forward "in a timely manner."

Smart interpretation of a cryptic comment from Martin, or just another prediction? XM Chairman Gary Parsons was more circumspect, saying that he was "confident the regulatory review was moving forward in a timely manner."

Of course, it's been more than a year (February 20, 2007) that they announced the proposed merger, which would allow the combined company to offer more programming on their combined spectrum and eliminate the duplicate channels that each of them carry.

Considering the glut of radio station ownership consolidation since the 1996 Telecommunications Act and the FCC's new print-broadcast cross-ownership rules, I'd think that anything which strengthens the Satellite Radio option for consumers to avoid the commercial-laden, boring FM radio dial is a good thing. Already, both XM and Sirius have more diverse content than most of the stations in major markets, simply because they have the ability to offer it. Most radio stations, on the other hand, play the same playlists, and often don't even have a real DJ in-house. They're computer controlled.

Sadly, XM also plays more local DC music than any of DC's terrestrial stations.

I'm generally not a fan of monopolies, but this one wouldn't be a bad thing. When you're competing with free, you need all the help you can get.

Judiciary Committee Chairman John Conyers (D-MI) is about to jump into the net neutrality fray.  Although ISPs limiting users' access to certain content, like BitTorrent video transfers, under the guise of "reasonable network management" has gotten more press lately, there's another issue to look at.

 

Here's a very brief excerpt from the article at Reuters

 

By Peter Kaplan

WASHINGTON (Reuters) - Congress may have to stop broadband Internet providers from charging content providers higher fees for priority access to the Internet, a senior House of Representatives Democrat said on Tuesday.

"I am concerned that if Congress stands by and does nothing, we will soon find ourselves living in a world where those who pay, can play (on the Internet), but those who don't are simply out of luck," Judiciary Committee Chairman John Conyers said.

 

 

 

 

This is almost the reverse of the issue that we've covered so heavily.  As opposed to limiting a customer's ability to access someone's content they're limiting a company's ability to distribute the content by way of higher service fees.  Does it make sense that ISPs would want to charge a higher rate to businesses because they're more likely to use a lot of bandwidth?  Sure.  But unless it is made very clear how that pricing is determined we could run into trouble.  If it's settled on as a pay-by-usage syste, like your water or electric bill, then they'd get the (implied) desired effect of limiting the ability of competing companies (like companies who provide competing video on demand content, for instance) from distributing their content.  If a suit was filed the ISP could very easily say "Hey, we make it very clear that businesses pay $xxx for xxxMB of access each month.  We couldn't care less what they're using the bandwidth for." and be reasonably safe.

 

Either way, we're still in potentially dangerous territory.  We're still trying to regulate how public companies provide access to public space.  If there's anything that walks the tightrope between what is and isn't within the Government's jurisdiction, I think this is it.

 

Hopefully, the Government and the ISPs can keep the best interest of the public in mind while they work it out.

 

 

We've had a string of posts on Comcast's repeated anti-consumer actions regarding "reasonable network management" and their throttling of BitTorrent downloads.  We also covered the fact that they hired people to take up space at an open FCC hearing on the subject to keep out people who might not have been there to cheer for Comcast.  Now their shenanigans have brought Net Neutrality into the spotlight and FCC Chairman Kevin Martin may be ready to make his move.

The scoop from Broadcasting & Cable

By John Eggerton -- Broadcasting & Cable, 3/3/2008

The issue of network neutrality was back with a vengeance last week, with Comcast in the hot seat and FCC Chairman Kevin Martin leading the interrogation.

Network neutrality is an umbrella term for the debate over whether the FCC or Congress needs to spell out what broadband networks--essentially, an entity like Comcast.net that provides an Internet connection to customers--can and can't do in managing Internet traffic to their customers.

Martin said last week he thought the FCC had the authority to fine or otherwise penalize Comcast if allegations of blocking peer-to-peer file-sharing services are true. Comcast says the allegations aren't true, but according to Martin, the FCC is taking the matter very seriously.

It certainly seemed that way. At a day-long open meeting on network management practices last week, Martin repeatedly grilled pro-network-neutrality advocates about the allegations against Comcast, which was represented at the meeting by Executive VP David Cohen.

More fuel was added to the fire after activists accused Comcast of packing the meeting with its own executives. Comcast denied that but admitted to hiring line-sitters, not to keep out the public, but rather to accommodate its interested employees.

...

And while trying to define "network neutrality" was the seemingly impossible quest when the issue dominated the telecom agenda in the last Congress, "What is 'reasonable network management?'" appears to be the $64,000 question this time around.

The issue is more than an academic question for content companies. Much of the bandwidth-heavy content in question is the sort of high-resolution video that studios and networks are increasingly putting on the Web.

Indeed, the other company complaining about Comcast, online content distributor VUSE, pointed out during the hearing that the content it is distributing using the peer-to-peer application includes programming from CBS, Showtime, A&E and others.

Mike McCurry, co-chair of Hands Off the Internet Coalition, the anti-regulation net-neutrality group, contends that legislation, rather than FCC enforcement of its own guidelines, could be a big problem. "[Content providers] really need to watch this debate because regulated network neutrality is a killer for them," McCurry says. "It basically makes it impossible for network providers to manage data flow that would give the consumer a satisfactory experience."

McCurry says that Rep. Ed Markey (D-Mass), House Telecommunications and Internet Subcommittee chairman, is clearly signaling that this will be the year for the debate because the U.S. will have a new president, a new commission and a new Congress in 2009. "It is a good time right now for people concerned, particularly the content providers, to think about what kind of universe they want to live in," he says.

So Comcast's actions have brought it to the forefront, but now what?  The content providers are sure to argue (probably on their own, sadly) that there should be true neutrality and that the ISPs should just provide the gateway to the content and call it a day.  I'm sorry, but that won't happen.  Do you really think that multi-billion dollar companies are going to accept legislation that effectively says that they have no control over their own network?  I'm sorry, but no.

If the various content providers would band together, maybe with VUZE, the so-far largest and most vocal, at the helm they'd have a better chance of reaching a compromise that doesn't favor the "big boys"; the ISPs.  This definitely plays into one of Andrew's big things, which is that a lot of tech companies seem to ignore Washington.  If the content providers were represented by one single entity they might have the weight, not to push around, but to bargain on an equal lever with Comcast, AOL Time/Warner and Cox.

Time/Warner mentioned possibly going to a pay-per-use system where, like your electric bill, you would get charged accordingly with your usage.  That way, instead of limiting high-bandwidth users who pay the same flat rate as casual users they would just pay more.  Unfortunately, Comcast's actions have forced the FCC to jump in and probably in a big way.

With all the changes in Washington in the next year everyone will be looking to make their mark - can you really make a bigger mark than the one you'd make by putting a giant like Comcast in their place?