Who Should Pay for Netflix?

Posted by: Jim Cicconi on March 21, 2014 at 4:08 pm

I saw Reed Hastings’ blog yesterday from Netflix asserting in rather dramatic fashion (with diagrams) that ISPs should build facilities (he said provide, but those facilities have to be built) to accept all of Netflix’s content – indeed all of the content on the Internet – without charge.  Failure to do so, according to Mr. Hastings, was a violation of “strong net neutrality rules” and bad public policy.  I thought it might be helpful to unpack those assertions so we could get right down to the core of Netflix’s rather radical proposition — that people who don’t subscribe to Netflix should nonetheless pay for Netflix. Here are some undisputed facts upon which everyone should agree.

First, let’s all accept the fact that the advent of streaming video is driving bandwidth consumption by consumers to record levels.  Increased bandwidth consumption and faster broadband networks like our Gigapower service in Austin, Texas (and soon Dallas) are requiring all service providers to drive more fiber into their networks to create the capacity necessary to deliver those services to consumers, whether the service providers are delivering a wireless or a wireline product.  This phenomenon was at the heart of our Project VIP investment announcement in November 2012 and it is true of companies like Cogent, Level 3 and CDNs like Netflix as well.

Second, we should accept that companies must build additional capacity to handle this traffic.  If Netflix was delivering, for example, 10 Terabytes of data in 2012 and increased demand causes them to deliver 20 Terabytes of data in 2013, they will have to build, or hire someone to build, the capacity necessary to handle that increased volume of traffic.  That increase in traffic from Netflix is, by the way, not only the result of a likely increase in online viewing by existing subscribers, but also due to an increase in Netflix’s customer base (it announced a 33% increase in subscribers from 2012 to 2013 – good for Netflix).

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Right on in AWS-3

Posted by: Joan Marsh on March 17, 2014 at 3:59 pm

A draft order for the AWS-3 auction is circulating for a vote at the FCC, and while I have not seen the item, early reports of its recommendations suggest to me that the Commission staff has got this one exactly right.


The item proposes a band plan that includes two 10 x 2 MHz EA blocks and one 5 x 2 MHz CMA block.  Incorporation of the large block and license sizes will not only ensure that the FCC drives the greatest efficiencies out of this spectrum, but also that it attracts the most revenue at auction.  A quick study of the AWS-1 auction is instructive on these points.

Take yourself back to 2006 – the iPhone has not yet been introduced and most of us were sporting Blackberries and pushing maybe 70 MBs of data a month, mostly doing email but little else.  No Facebook postings, no Twitter feeds, no app stores chock full of data-hungry apps.  Carriers generally entered Auction 66 with very little awareness of the data tsunami headed their way.

Yet the bidding activity even back then clearly favored the larger license sizes and the larger blocks — both from an activity ratio perspective and from revenue received.

Let’s look first at the bidding activity ratios — a figure that attempts to capture first round bidding (or demand) against MHz offered (or supply).   For example, if you are selling 100 units and have opening demand for only 100 units your activity ratio is flat at 1 and bidding competition is virtually non-existent.  On the other hand, if opening bids are for 700 units against your same 100 units available, your activity ratio is 7 – which demonstrates high interest in the units and corresponding high bidding competition.

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The Continuing Evolution
Of the Global Internet

Posted by: AT&T Blog Team on March 14, 2014 at 8:43 pm

By Len Cali, AT&T Senior Vice President of Global Public Policy

Twenty-five… global… and surpassing expectations!  That’s the Internet, driving economic growth, job creation, education, and production efficiencies; and enriching our lives and our communities, all around the world.

The Internet works so well, and has expanded so quickly, that we tend to take for granted what made it possible.  All of this has been brought to citizens of the world by a private-sector-led, multistakeholder governance model that is flat, decentralized, and consensus-based.  Governments have a role, but so too do other interested and competent stakeholders including, perhaps most significantly, the experts and independent bodies that make crucial contributions to the technical operation of the Internet.

Early on, the U.S. government recognized the important role the private sector and Internet users play in managing the Internet’s core functions.  It supported efforts of the Internet community to form a private, dedicated, and nonprofit corporation to handle certain essential technical functions including responsibility for allocation of domain names and IP addresses, for protocols, and for root servers that together authoritatively map website names to IP addresses.  These functions comprise the Domain Name System (DNS) that is operated by the Internet Assigned Numbers Authority (IANA).

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Establishing Effective Spectrum
Policy – Part III

Posted by: Joan Marsh on March 14, 2014 at 2:16 pm

When the Commission’s mobile spectrum holdings proceeding was initiated over a year ago, AT&T argued that the Commission’s basic spectrum aggregation test – as originally conceived – remained a sound approach. The test seeks to strike a balance between regulatory certainty, by assuring licensees that spectrum accumulations within a safe harbor will be approved, and regulatory flexibility, by giving the Commission a focused tool to assess whether proposals that exceed the safe harbor screen will foreclose competition.

The benefits of this balanced, consumer-focused approach have been extraordinary. Competition has enabled the U.S. to become the world leader in deploying the next generation 4G LTE technologies and mobile innovation and investment continues to create U.S. jobs, spur U.S. investment and power U.S. growth.

To be sure, modest steps are still needed to update the screen and restore its validity. For one thing, the screen continues to exclude a substantial amount of spectrum that the Commission’s own reports to Congress recognize as usable for mobile wireless service and that, in fact, is being used today. Most prominently, the Commission should correct a current glaring omission by including in the screen the entire 194 MHz of BRS and EBS spectrum held almost entirely by Sprint/Clearwire, rather than the mere 55.5 MHz the Commission has included to date.

Moreover, some recent decisions have departed from longstanding precedent by no longer treating the safe harbor as “safe,” requiring divestitures even where the screen has not been exceeded. These ad hoc departures from the Commission’s framework undermine the predictability that is critical to business planning. While ad hoc review of spectrum holdings in excess of the screen is both expected and appropriate, extending that process to transactions that do not trip the screen unnecessarily adds uncertainty to business planning. The Commission should make clear that its case-by-case analysis will be reserved for proposals to exceed the threshold level in any local market and that this review will be properly focused on the potential for actual foreclosure.

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AT&T Statement on Michele Ellison’s Appointment to Chair the New FCC Connect2Health Task Force

Posted by: AT&T Blog Team on March 4, 2014 at 5:30 pm

The following may be attributed to Bob Quinn, AT&T Senior Vice President —Federal Regulatory:

“No matter her responsibility at the Commission, we can always count on Michele to convey a sense of fairness and thoughtfully listen to all sides before coming to a conclusion. As the Chief of Staff for then Chairwoman Clyburn, Michele was instrumental in helping the Chairwoman achieve a great deal in a very short amount of time. We are certain that the interoperability issue would not have been solved without her leadership.

“Michele’s steadiness and balance has served her well and will continue to do so in her new role. We wish her all the best and look forward to working with her to remove the obstacles that stand in the way of innovation in the area of telehealth and telemedicine.”

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