Failing to Pass the Straight-Face Test

Posted by: Hank Hultquist on September 13, 2016 at 1:56 pm

Yesterday, AT&T filed comments with the Office of Management and Budget on the FCC’s woefully deficient analysis of the burdens associated with the so-called enhanced transparency requirements adopted in the 2015 Open Internet Order (OIO). The Commission’s analysis evinces a complete disregard for its responsibilities under the Paperwork Reduction Act. The FCC has not specifically identified the things Internet service providers (ISPs) must do to comply with the new transparency requirements; it has not separately estimated the burden of each requirement; it has not explained the benefits that would justify these requirements; and its lowball estimate of the overall costs is absurd on its face.

By way of background, the PRA requires agencies like the FCC to minimize the burden of required data collections. The FCC must obtain approval from OMB before any such collection can take effect. In this case, the FCC has had ample time to undertake a thorough analysis of the paperwork burdens of the OIO, yet has submitted a superficial, conclusory and slipshod analysis that OMB should reject. The treatment of just one of the new requirements, disclosure of packet loss, demonstrates the inadequacy of the FCC’s analysis.

To comply with the new transparency requirements, wireless providers will have to measure something they have not been required to measure or report previously (packet loss), in geographic areas where they do not currently take any similar performance measurements and may not have previously measured, and during undefined “peak hour” time periods. For AT&T, compliance with this requirement would cost far more than the FCC is estimating. Indeed, it could very well cost AT&T alone more than what the FCC has estimated for the entire industry to comply with all of the FCC’s transparency requirements because it could require extensive additional drive testing at a cost of many millions of dollars each year. Yet the FCC has estimated that the burden to the entire industry of all its transparency requirements, included those adopted in 2010, is only $640,000.

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Lies, Damn Lies, and Statistics

Posted by: AT&T Blog Team on September 12, 2016 at 11:35 am

By Caroline Van Wie, AT&T Assistant Vice President of Federal Regulatory

As former British Prime Minister Benjamin Disraeli famously said, “There are three kinds of lies: lies, damned lies, and statistics.” Statistics are particularly concerning when they’re taken out of context or used to prop up policies which the body of the larger economic analysis would not support. When it comes to the Commission’s analysis of the Business Data Services market, basing policies on a handful of outlier statistical results while ignoring the weight of the evidence and the data’s deep-seated flaws would result in a disastrous outcome for broadband investment.

Over the past several months, the FCC – first through its hired economist, and later through Staff – has released over 100 regressions that purport to analyze the data the Commission has collected about the Business Data Services market. Each time, the FCC announced that the regressions show that ILECs retain market power for legacy DS1 and DS3 services. Each time, economists, including those the FCC asked to conduct peer reviews of the FCC regressions, observed that the regressions suffer from significant flaws that render them unreliable, including the severe correlation/causation problem that economists refer to as “endogeneity,” incomplete and incorrect data on pricing and the number of competitors, mismatches in the pricing and competitor data, and incorrect methods for computing the statistical significance of the results. And each time, we noted that some of the most significant of these flaws are not fixable because of the limitations of the data available to the FCC’s economists.

Undeterred, FCC Staff released yet another set of regressions in late August. These regressions address one of the problems with the earlier regressions – the flawed method for determining statistical significance. As a result of that correction, many of the prior results purportedly demonstrating the presence of market power in legacy DS1s and DS3s fell by the wayside. Those results now show nothing of the sort. But, no less important, as explained in a white paper filed last week by Drs. Israel, Rubinfeld, and Woroch, the revised regressions do not address the core, foundational flaws that continue to plague the entire exercise. Because of these deep-seated flaws, the regressions continue to produce wildly inconsistent and often anomalous results that in many cases conflict with basic economics. These erratic results confirm that the endogeneity and other data-related flaws are dominating the regressions, and thus they cannot be used to support any conclusions about ILEC market power for DS1s and DS3s.    

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FCC’s Set-Top Box Proposal Still Plagued by Copyright and Privacy Concerns

Posted by: Bob Quinn on September 8, 2016 at 5:04 pm

The FCC’s latest set-top box proposal has recognized what we have been saying all along – apps are the future and, in fact, the here and now. Apps are how consumers watch television today and how Hulu, Amazon and Netflix have created their businesses. Apps allow innovation to flourish, while protecting privacy, security and copyright. Yet, while outwardly embracing apps, the Chairman’s latest proposal undermines those fundamental protections that an app environment provides by requiring disclosure of entitlement data, by creating a new licensing body that the FCC will oversee, and by extending their rules beyond set-top box replacements to mobile apps. Because the new and improved proposal raises many of the same copyright and privacy concerns as the original Google Fiber-backed proposal pitched last January, it should be discarded.

First, let’s unpack the privacy implications. While the new proposal states that existing privacy protections will be preserved, it also requires pay-TV providers to disclose “entitlement” or subscription data to third-party box (or app) providers. In other words, the FCC would require video companies like ours to tell third parties like Google Fiber exactly what channels each customer is “entitled” to receive – despite the fact that video companies are statutorily prohibited from making those disclosures without customer consent.

To get around the statutory privacy protections, the proposal says that a customer can “opt in” to such disclosure. This, however, raises more questions than it answers. To whom do they opt in? What disclosures must we provide to get consent? Can Google Fiber share that data with its affiliates? What happens to a consumer’s private right of action that is statutorily guaranteed? Who enforces this regime? What if the consumer buys the box or app and then opts out?

Presumably, like the old proposal, the data stream itself (which doesn’t exist today) will have to utilize a technology that must be created using a standard yet to be determined and issued by a standards body yet to be identified. The only thing certain is that consumers have to have it in two years. Sound complicated? You honestly need a flow chart to follow this. The lack of answers to these same fundamental questions at this stage of the proceeding is disturbing, to say the least.

Second, rather than allowing the MVPDs to enter into license agreements with third parties’ competitive navigation device providers, as they do today, the FCC is concocting a separate licensing body that would create (dictate) a single, one size fits all license to cover all apps and all MVPDs. This licensing body would create the terms of the license (and be the sole enforcer of the license), but the FCC would state up front what terms need to be included and would review the licensing terms, striking out what terms they do not like. While the new proposal states that the FCC will only serve as a backstop, the reality is that the FCC reserves the right to dictate and approve the terms of the license. Exactly the flaw that led the Copyright Office to declare the original Google Fiber proposal a non-starter, stating that it did not “respect the authority of creators to manage the exploitation of their copyrighted works through private licensing arrangements.” By usurping the free marketplace and the rights of the content creators in this regard, the FCC has in effect (as the programmers, NAB and NCTA have also stated) created a “compulsory copyright license,” clearly outside of the FCC’s jurisdiction.

The licensing body is not even necessary. Under the proposal submitted by pay-TV distributors and leading independent programmers, an equipment manufacturer would need to go to only eight different MVPDs to enter into essentially a form agreement for an HTML-5 app (or choose to do a B2B deal with those MVPDs).   Contrast that to the 3,400 apps that Roku has on its system and the at least hundreds, if not thousands, of apps other devices have. Accepting licenses from eight additional parties can hardly be a burden. This single license would also have to account for technology and business differences among competitive MVPDs and varying app models, differences in the hundreds of underlying agreements between the programmers and the MVPDs, and be able to evolve quickly to account for security and technology developments in a rapid manner. It simply cannot be done.

Finally, despite statutory language which says that the mandate here is a market for competitive navigation devices, i.e. set-top box replacements, the new proposal reaches beyond devices located within the home (and beyond the FCC’s statutory authority) by requiring licenses and data sharing with makers of mobile apps without any finding that the market for mobile apps is somehow failing. All this despite evidence in this record that there are more than 460 million retail devices supporting MVPD apps today.

The industry offered the FCC an approach that would have provided an open platform, protected privacy and copyright, and still allowed business-to-business deals for those platforms that did not want to use HTML-5 technology. To its credit, the FCC accepted an app framework, which seems like a no-brainer since consumers are easily accessing and enjoying apps to view their news and entertainment. However, in its desire to go well beyond the mandate of the statute, it has created a revised proposal that still violates consumer privacy rights and copyright laws. The FCC should focus on the proposal put forth in June without undermining it with these overbroad, highly complicated and unnecessary add-ons.

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Broadband Investment:
Not for the Faint of Heart

Posted by: Joan Marsh on August 30, 2016 at 11:01 am

July 2007: In exchange for FCC action on its demand for four specific “open access” conditions on the 700 MHz Upper C Block, Google commits to bidding $4.6B in the 700 MHz auction.

January 2008: When the auction closes, it becomes clear that wireless companies – not Google – shouldered the multi-billion dollar cost of the auction. As soon as the reserve was hit for the Upper C Block, Google took its billions and went back to Mountain View. Those same wireless companies spent billions more deploying those licenses to build the most advanced LTE networks in the world and give the U.S. leadership on LTE technologies.

April 2008: Google touts a new proposal for “Wi-Fi on Steroids.” Using newly-authorized 600 MHz white spaces, Google announces plans to have American consumers from Manhattan to North Dakota surfing the Web at gigabits-per-second speeds on new devices that will be available by the 2009 Holiday Season.

Today: There are less than 1,000 white space devices in the white space database and no real measure of broadband white space service. Google’s plans to blanket the country with broadband white spaces devices appear to be on hold.

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Facts not Fiat

Posted by: Joan Marsh on August 26, 2016 at 8:52 am

Today, AT&T filed its response to a July 27 Notice of Apparent Liability (NAL) issued by the FCC for alleged violations of the lowest corresponding price (LCP) requirements of the E-rate program.  These rules say that in order to participate in the E-rate program, a carrier must charge a participating school, library or consortium no higher than the lowest price that it charges to any similarly situated non-residential customer for similar services.  To be clear, we wholeheartedly support the E-rate goals of providing schools and libraries with affordable broadband and telecommunications services. The Bureau’s arguments, however, that we applied the LCP rule incorrectly are factually wrong, they deviate from the FCC’s own rules and existing precedent, and they continue the Enforcement Bureau’s troubling pattern of “rulemaking through enforcement.”

The facts of the case aptly demonstrate that no actual FCC rules were violated.  First, the Bureau alleges that AT&T should have provided two school districts rates based on one-year contracts despite the fact that the schools were buying services on a month-to-month basis.  Contract term is a regular and routine distinction in rates, and the Commission has previously expressed the view that length of contract is a valid basis to price services differently among customers.   In this case the school districts at issue never asked for annual contracts, never signed annual contracts and did not behave as though they had annual contracts.

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