Tag Archives: broadband

Hidden in Plain Sight: FCC Chairman Pai’s Strategy to Consolidate the U.S. Wireless Marketplace

While couched in noble terms of promoting competition, innovation and freedom, the FCC soon will combine two initiatives that will enhance the likelihood that Sprint and T-Mobile will stop operating as separate companies within 18 months. In the same manner at the regulatory approval of airline mergers, the FCC will make all sorts of conclusions sorely lacking empirical evidence and common sense.

FCC Chairman Pai’s game plan starts with a report to Congress that the wireless marketplace is robustly competitive. The Commission can then leverage its marketplace assessment to conclude that even a further concentration in an already massively concentrated industry will not matter. Virtually overnight, the remaining firms will have far less incentives to enhance the value proposition for subscribers as T-Mobile and Sprint have done much to the chagrin of their larger, innovation-free competitors AT&T and Verizon who control over 67% of the market and serve about 275 million of the nation’s 405 million subscribers.

Like so many predecessors of both political parties, Chairman Pai will overplay his hand and distort markets by reducing competition and innovation much to the detriment of consumers. He can get away with this strategy if reviewing courts fail to apply the rule of law and reject results-driven decision making that lacks unimpeachable evidence supporting the harm free consolidation of the wireless marketplace. Adding to the likely of successful overreach, is the possibility of a muted response in the court of public opinion.

So how will the Pai strategy play out? First, the FCC soon will invite interested parties to provide evidence supporting or opposing a stated intent to deem the wireless marketplace sufficiently accessible and affordable throughout the nation. The FCC has lots of evidence to support its conclusion, but plenty of countervailing and inconvenient facts warrant a conditional conclusion, particularly in light of future market consolidation. Wireless carriers have invested billions in network infrastructure and spectrum. Rates have significantly declined as the industry has acquired scale and near full market penetration. Bear in mind that all of this success has occurred despite, or possibly because of a federal law requiring the FCC to treat wireless carriers as public utility telephone companies. Congress opted to treat wireless telephone service as common carriage, not because of market dominance, but because it wanted to maintain regulatory parity with wireline telephone service as well as apply essential consumer safeguards.

How ironic — perhaps hypocritical — of Chairman Pai and others who surely know better to characterize this responsibility as the product of overzealous FCC regulation that has severely disrupted and harmed ventures providing wireless services. Just how has common carrier regulation created investment disincentives for wireless carriers when operating as telephone companies? Put another way, how would removal of the consumer safeguards built into congressionally-mandated regulatory safeguards unleash more capital investment, innovation and competitive juices?

U.S. wireless carriers regularly report robust earning and average revenue per user that rival any carrier worldwide. Of course industry consolidation would further improve margins while relaxation of network neutrality and privacy protection safeguards would create new profit centers. T-Mobile shareholders get a big payout, while the remaining carriers breath a sigh of relief that their exhaustively competitive days are over.

Will the court of public opinion detect and reject the FCC’s bogus conclusion that common carrier regulation has thwarted wireless investment and innovation? That requires a lot of vigilance and memories of the bad old days when no carrier opted to play the role of maverick innovator and marketplace disrupter. With T-Mobile or Sprint merged or acquired, the remaining ventures have ever more incentives not to spend sleepless afternoons competing and devising new ways to stimulate customer interest in changing carriers. T-Mobile and Sprint have offered just about every value enhancement in recent years such as carry forward minutes, reduced roaming charges, unlimited service, new bundles and use your own device at much lower monthly rates. Would these options exist if only three carriers served 95% of the market?

If you think the recent spate of airline mergers has enhanced competition and the air travel experience, then a wireless marketplace with 3 national carriers will work out just peachy.

Written by Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law

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Hidden in Plain Sight: FCC Chairman Pai’s Strategy to Consolidate the U.S. Wireless Marketplace

While couched in noble terms of promoting competition, innovation and freedom, the FCC soon will combine two initiatives that will enhance the likelihood that Sprint and T-Mobile will stop operating as separate companies within 18 months. In the same manner at the regulatory approval of airline mergers, the FCC will make all sorts of conclusions sorely lacking empirical evidence and common sense.

FCC Chairman Pai’s game plan starts with a report to Congress that the wireless marketplace is robustly competitive. The Commission can then leverage its marketplace assessment to conclude that even a further concentration in an already massively concentrated industry will not matter. Virtually overnight, the remaining firms will have far less incentives to enhance the value proposition for subscribers as T-Mobile and Sprint have done much to the chagrin of their larger, innovation-free competitors AT&T and Verizon who control over 67% of the market and serve about 275 million of the nation’s 405 million subscribers.

Like so many predecessors of both political parties, Chairman Pai will overplay his hand and distort markets by reducing competition and innovation much to the detriment of consumers. He can get away with this strategy if reviewing courts fail to apply the rule of law and reject results-driven decision making that lacks unimpeachable evidence supporting the harm free consolidation of the wireless marketplace. Adding to the likely of successful overreach, is the possibility of a muted response in the court of public opinion.

So how will the Pai strategy play out? First, the FCC soon will invite interested parties to provide evidence supporting or opposing a stated intent to deem the wireless marketplace sufficiently accessible and affordable throughout the nation. The FCC has lots of evidence to support its conclusion, but plenty of countervailing and inconvenient facts warrant a conditional conclusion, particularly in light of future market consolidation. Wireless carriers have invested billions in network infrastructure and spectrum. Rates have significantly declined as the industry has acquired scale and near full market penetration. Bear in mind that all of this success has occurred despite, or possibly because of a federal law requiring the FCC to treat wireless carriers as public utility telephone companies. Congress opted to treat wireless telephone service as common carriage, not because of market dominance, but because it wanted to maintain regulatory parity with wireline telephone service as well as apply essential consumer safeguards.

How ironic — perhaps hypocritical — of Chairman Pai and others who surely know better to characterize this responsibility as the product of overzealous FCC regulation that has severely disrupted and harmed ventures providing wireless services. Just how has common carrier regulation created investment disincentives for wireless carriers when operating as telephone companies? Put another way, how would removal of the consumer safeguards built into congressionally-mandated regulatory safeguards unleash more capital investment, innovation and competitive juices?

U.S. wireless carriers regularly report robust earning and average revenue per user that rival any carrier worldwide. Of course industry consolidation would further improve margins while relaxation of network neutrality and privacy protection safeguards would create new profit centers. T-Mobile shareholders get a big payout, while the remaining carriers breath a sigh of relief that their exhaustively competitive days are over.

Will the court of public opinion detect and reject the FCC’s bogus conclusion that common carrier regulation has thwarted wireless investment and innovation? That requires a lot of vigilance and memories of the bad old days when no carrier opted to play the role of maverick innovator and marketplace disrupter. With T-Mobile or Sprint merged or acquired, the remaining ventures have ever more incentives not to spend sleepless afternoons competing and devising new ways to stimulate customer interest in changing carriers. T-Mobile and Sprint have offered just about every value enhancement in recent years such as carry forward minutes, reduced roaming charges, unlimited service, new bundles and use your own device at much lower monthly rates. Would these options exist if only three carriers served 95% of the market?

If you think the recent spate of airline mergers has enhanced competition and the air travel experience, then a wireless marketplace with 3 national carriers will work out just peachy.

Written by Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law

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More under: Access Providers, Broadband, Law, Policy & Regulation, Telecom, Wireless

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Net Neutrality Is a Smashing Success by FCC’s Preferred Metric, Reports Free Press Researcher

“If investment is the FCC’s preferred metric, then there’s only one possible conclusion: Net Neutrality and Title II are smashing successes,” says Free Press Research Director S. Derek Turner, author of a new report released by the consumer advocacy group. The report titled, “It’s Working: How the Internet Access and Online Video Markets Are Thriving in the Title II Era,” examines internet-industry developments in the two years since the Federal Communications Commission’s February 2015 Open Internet Order which resulted in the adoption of strong Net Neutrality rules and reclassification of broadband-internet access as a Title II telecommunications service.

“The restoration of Title II for broadband-internet access was designed to preserve what the FCC rightly calls the internet’s virtuous cycle of investment and innovation,” says Turner. “All available data indicate that the 2015 decision to adopt strong rules on a sound legal footing is working as intended, benefiting internet users, broadband-access providers and the myriad businesses that distribute services over the open internet.”

The centerpiece of President Trump’s FCC chairman, Ajit Pai, “is his demonstrably false claim that the mere existence of Title II authority has caused a reduction in broadband investment. … This claim is both false on its face — aggregate investment by publicly traded ISPs is up since the FCC’s vote — and completely illogical. –Turner

Other findings from the report:

“Aggregate capital investments at publicly traded ISPs were 5 percent higher during the two-year period following the FCC’s Open Internet vote when compared to the two years prior to the vote. Claims of a decline are based on manipulated data, and in any event, do not support a causal impact from Title II.”

“Capital investments were higher at 16 of the 24 publicly traded ISP firms (or units) following the FCC’s vote. These increases are due primarily to continued core network expansion.”

“During the two years following the adoption of the Open Internet Order, cable-industry physical network investments increased 48 percent compared to the amount invested during the two prior years. Cable ISPs’ core network investments accelerated dramatically during 2016, representing the highest single-year jump since 1999.”

“Telecom-company spending on fiber-to-the-home network terminals and terminal ports rose nearly 50 percent during 2016.”

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The Role of FttH in the Development of 5G

As the roll out of FttH remains a slow process, it is no wonder that more and more people are looking towards mobile as a potential alternative.

Obviously, mobile communication has improved over recent years in providing excellent access to broadband; and it has also become more affordable. At the same time, there is the fabulous hype about 5G, and the PR and media machines of the vendors involved make you believe that this will become a real competitor to the slow moving FttH developments.

First of all, anybody who has started to use video-based media over mobile networks seriously — beyond Facebook, YouTube, etc. — will have noticed that you will very quickly run out of the download capacity that is included in your mobile phone package, and any serious video use over mobile networks will quickly run into hundreds of dollars per month.

Secondly, 5G as a viable commercial mass market alternative might be 10 and possibly even 15 years away.

For starters, there is still not a 5G standard, and this is essential for vendors to provide devices for mass markets in order to deliver an affordable device. Totally new handsets are needed to facilitate the multiple tiny antennas that are required in order for the device to operate over the high frequency necessary for 5G. No mass market will be achievable without a standard for such devices.

Secondly, 5G will require access to a fibre optic backbone in order to provide the affordable high-speed services that are talked about by the vendors and the mobile operators alike. Currently, in most western economies, not much more than 50% of mobile towers are currently linked to fibre optic networks — 5G could require a hundred-fold increase in mobile base stations and most of them need to be linked to a fibre optic network.

For the service to deliver the promised quality to the end-users, a fibre optic connection to the 5G base station is needed within 100 meters of where the actual 5G users are. Furthermore, as soon as one starts talking about offices, public buildings, cafes, etc. the reality is that the fibre network will need to be brought into these buildings in order to provide a reliable service. 5G has significant problems penetrating walls, foliage, water, even people (which from a spectrum perspective are seen as big bubbles of water). So in order to provide 5G services in these places multiple 5G antennas are needed within rooms to enable access to the mobile services.

When comparing wireless to fibre it is also important to note that, while wireless has a very limited capacity to carry lots of data over any distance (e.g., 100 metres for 5G), fibre can carry enormous amounts of data over tens of kilometres. So, from a network efficiency point of view fibre-based infrastructure will always win over wireless.

As we have said in many of our articles over the last decade, mobile infrastructure and fibre infrastructure are both essential. It is not a case of either/or. But in the end, mobile services will just provide local access linked to a fibre optic infrastructure. In other words, the majority of infrastructure needed to deliver 5G will be based on an FttH — or at least FttC (Fibre to the Curb) — infrastructure.

It is obvious that for these reasons it is impossible for the industry to deliver mass market 5G services within the short and even the medium term; so a 10-year horizon for such a level of 5G penetration is far more realistic.

Surely, in relation to mobile broadband being an alternative to FttH — as is the case at the moment — mobile broadband will increase its position at the bottom end of the market, for those people with very basic broadband access requirements. At the most, this might be sufficient for around 15% of the market.

However, at the same time, the overall content requirements for ‘bandwidth-sucking’ applications will continue in areas like entertainment, as well as in education, healthcare, business, smart cities, smart grids, smart buildings and so on.

FttH/FttC will potentially also benefit the development of 5G, depending on mobile operators being able to get affordable wholesale access to that network. It would be rather silly if the various mobile operators were also forced to bring their fibres to the curb in parallel with the fixed telcos in order to deliver 5G services.

So don’t expect a rapid development of 5G services for the mass market. 5G will most likely be installed in pockets where there is a clear business case (for a premium service) and where there is plenty of fibre available to provide a fast and reliable service.

On the other hand, 5G could also be a catalyst for the development of wholesale based FttH/FttC networks. But chances are that regulations to enable national wholesale based fibre optic networks will not be swiftly forthcoming; some of the mobile operators will not wait for that and will extend their own fibre backbones; if the latter is the case, the economic viability of fixed telco based FttH networks will even further diminish.

Written by Paul Budde, Managing Director of Paul Budde Communication

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Why Don’t We Have Peak and Off-Peak Pricing for Broadband?

I saw the following poster on the London Underground yesterday, and as is often the case it got me thinking about the parallels with telecoms.

The poster explains the peak and off-peak fare structure for tube travel. The purpose of this pricing syste… Continue reading

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