Sleeping Beauty or Lost?

Posted by: Carl Povelites on May 27, 2010 at 2:13 pm

I have now been in the wireless industry for more than 20 years.  With the release of the FCC’s 14th Annual Wireless Competition Report, I’ve begun to wonder whether I have been sleeping the last couple of years or whether I am on the show Lost (maybe living in an alternative universe?).   For those who know me, I am no beauty and I certainly don’t get enough sleep (although I do enjoy my naps), I have come to conclude that it is the latter and the smoke monster is very disconcerting.

Having been around awhile, I lived through the early days when the states and the FCC were grappling with how they were going to regulate this thing called wireless (actually, we called it cellular then – yes, I’m that old).  Remember, the wireless sector was conceived as competitive with two licenses being awarded in each market.  In these early days, we were busy running from state to state, filing Certificates of Public Convenience and Necessity (CPCNs) in order to get approval to build facilities and start offering services to customers.  In many states, we filed tariffs and even had to file tariff changes 30 days in advance for any promotion that we wanted to offer (this made it so much simpler to find out what your competitor was up to ahead of time –  now all we have are rumors in the blogosphere).   Eventually, the industry was deregulated in many states.

With the passage of the Omnibus Budget Reconciliation Act in 1993, Congress authorized spectrum auctions and set forth a National Framework for the regulation of wireless, preempting states on entry and rate regulation.  It also set forth the requirement for the FCC to produce its annual competition report.   With the PCS spectrum auctions, competition and the competitive nature of wireless were cemented. 

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Adventures in Cryonics

Posted by: Hank Hultquist on May 26, 2010 at 1:06 pm

When a Red Sox fan hears the words “separation” and “freeze” in close proximity, he or she might think of Ted Williams. Unless, of course, that Red Sox fan also happens to be a telecom policy wonk (like your humble blogger).  In which case, he or she might also think of “Part 36”  and the regulatory alchemy by which “costs” are “separated” between the “interstate jurisdiction” and “intrastate jurisdiction.” I put these words in quotes because their peculiar usage in this arcane context should always be kept “separated” (at least mentally) from their normal meanings. In this context, we’re not talking about costs but expenses; they’re not separated like an egg, but divided like the Solomonic child; and the distinct jurisdictions arise only as a consequence of the formalities associated with the process.  At its heart, “separations” is an artifice created to enable bi-jurisdictional regulation.

The rate-making process for regulated utilities always involved somewhat complicated formulas for translating capital expenditures, overhead and administrative costs (SG&A), and other expenses into prices. But only in America did regulators further “refine” this process by subdividing these things into their “interstate” and “intrastate” subparts. (I like to think of them as telecom equivalents to Leibniz’s monads, but that’s not quite right since I have complete confidence in the ability of ingenious regulators to divide them even further.)

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Dewey Defeats Truman

Posted by: Joan Marsh on May 20, 2010 at 12:34 pm

Occasionally, a conclusion is reached that is so unhinged from the facts that it defies explanation.  So it is with the 14th Edition of the Mobile Wireless Competition Report released today by the FCC.

Actually, it was not a conclusion in this case that baffles, but the lack of one.  After reviewing an extensive record that demonstrates robust and even cut-throat competition in almost every facet of the US wireless industry, the FCC decided that it would not, as it has in the past, draw any conclusion about whether the U.S. wireless industry was effectively competitive.

Why should things have changed so suddenly?

It’s not the industry.  On almost every measurable indicator, the U.S. leads the world in wireless investment, deployment, penetration and innovation.  What is driving the investment and innovation?  Robust competition in the U.S. wireless market.  And despite uncertain economic times, carriers continue to invest billions of dollars in upgrading their networks – more than $20 billion in both 2008 and 2009.

It’s not a lack of choice.  The U.S. continues to have four national carriers – a level of competition most European countries envy – three large regional providers, and dozens of smaller providers.  Most U.S. consumers continue to have at least five different providers from which to choose.  The Organization for Economic Cooperation and Development (OECD) states that the U.S. wireless market is the least concentrated among 26 industrialized nations. 

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A Teachable Moment

Posted by: Michael Balmoris on May 19, 2010 at 2:39 pm

We hope everyone enjoyed our little contest and took it in the spirit it was offered – a playful reminder that the internet is more than an app or service or bits of content.  After years of debate over and discussion of the issue of “net neutrality,” we would hope that all sides recognize that it takes a village of app, service, content and network providers to keep the internet humming along.  Here at AT&T we are working and investing and innovating to provide seamless connectivity so that our customers can access whatever legal content, app or service they want, when and where they want it.

Ok, now onto the good stuff.  First, we want to give a shout out to all those who took the time to enter the contest. Following are five entries, which were in the running for best embracing the essence of our contest, and are deserving of honorable mentions: 

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Fantasy Baseball Prediction League

Posted by: Hank Hultquist on May 18, 2010 at 11:45 am

Harold Feld has an interesting response to Bob Quinn’s recent Pickett’s Charge blog post. While Harold makes a number of points, I want to focus on one in particular. Under the heading of “Argument #2,” he raises questions about what other services might be pulled into the kind of classification analysis that his Fantasy Baseball version of the FCC is engaged in.

For purposes of fantasy competition only, let’s assume that Harold is right and just “Because all Information Services are Delivered Via Telecommunications, Classifying Broadband Access as a Telecommunications Service Would [Not] Require Classifying Facebook and Akamai as Telecommunications Services.” Perhaps Harold is right that the FCC’s channeling of Justice Scalia will not result in reclassification of all information services as mixed information and telecommunications services. Under Scalia’s reasoning, there might be services where the “telecommunications component” does not seem like a separately identifiable part of the offer (to a discerning regulator).

At the same time, the FCC probably cannot fire a magic bullet that affects the classification only of Internet access services. There are three kinds of services that I’m particularly interested in here. The first is the category that we at AT&T think of as “emerging devices.” Things like e-readers, navigation devices, wireless picture frames (the list could go on and on). Users of these services and devices do not purchase wireless data services from traditional wireless providers. Instead, their service provider bundles end-to-end wholesale data transport services (including the user’s “last mile”) with their own server infrastructure to provide each particular service.

Under the FCC’s prior understanding, where information and telecommunications services were mutually exclusive categories, most people would have assumed that such services fell in the information bucket. Now we will all have to consider whether they contain distinct information telecommunications components. Do consumers view these services as including a “transmission component?” Should such services expect to be collateral damage under the proposed approach?

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