Wireless Cowboys

I love what Vistabeam is doing and flattered to be mentioned in their blog.   Here's the link to the article - it's a post I put up on cybertelecom today on Why Broadband is Important.  These guys are the real deal; they are doing a hard job & I'm honored to be mentioned by them.

Meanwhile super busy, thus the dearth of posting here.  Will catch up on that as soon as I can.

Meanwhile, be well.

Erik

Escape from Net Neutrality

To really grok how important it is to get regulation right, you'll have to actually look at Lee Selwyn's economic analysis of the present state of telecommunications markets.  [I had trouble with the deep link, so just in case, click here scroll down to "Telecom Deregulation: All a Matter of Degree" Lee Selwyn" or try the second link first.] 

What the slides demonstrate is incredible concentration of market control and power in the hands of AT&T and Verizon. They also provide economic proof that the deregulatory policies of the past eight years have all but handed the Internet to Ma Bell.

In several recent proceedings  ("Net Neutrality NPRM" ), the FCC has begun to ask the question of whether there is a problem with how the Internet works and what it should do. These are good questions to ask. Unfortunately, in the vast majority of proceedings the FCC is starting from the wrong premise. They are assuming that they can remedy a market where the two largest players combined are nearly twice as big than the rest of the entire market using only minimal regulation. In other words, they seek to remedy what is clearly monopoly control with deregulatory tools.

The good news is that may be changing. (Doc Searls picks up on that here: Liberating the Net From Telephony), but before we get to the end of the story, let's pick up on how we got here:

A. How We Got Here:

• The Shrinking Natural Monopoly (slides 11-15): Lee Selwyn, whom I personally regard as one of the smartest telecommunications economists around traces, in un-economist-like concrete network detail shows precisely where money is and why.  

• Full Monopoly:  At slides 18-20, Dr. Selwyn shows how rapidly wealth concentrates when a retail provider is deregulated while every other competitor is forced to subsidize the dominant provider's retail services in the absence of meaningful wholesale regulation and antitrust control.

• Telecommunications Enterprise Markets are Monopolized as Well: as Dr. Selwyn points out and as GAO has told us for years,there is zero competition for network access plant.  Access is a business term that refers to dedicated capacity between points.  It is used primarily in the context of large businesses, Internet Service Providers, data centers, and other heavy duty users purchasing large amounts of capacity.  (Compare slide 17 AT&T before SBC acquired them and AT&T after the merger: slides 18 and 19).

• Everyone pays the loop owner even if the loop owner is supposedly deregulated in a "competitive" market.  Slide 20 shows the loop facilities (i.e. this refers to the actual physical line from your home or business to the first major point of network aggregation), for all intents and purposes are totally deregulated, even where they are supposedly "regulated". (From a financial perspective, there's no duopoly; there's pure monopoly.)

• No one can deploy any form of competitive network that exchanges voice traffic with any incumbent landline network without paying subsidies to the deregulated telephone company, which itself uses very low cost advanced gear, based upon cost assumptions that date back to the 1940s.  

Subsidies, therefore, continue to flow from the Internet to the since-deregulated Bell landline services and facilities.  These same deregulated Bell landline facilities, however, support Bell Long Distance, Bell mobile wireless services, Bell "Internet" services, and so on.  


We're paying regulated subsidies to deregulated massive monopoly machines and allowing them to compete in deregulated markets.  We created The Perfect Storm.

B. Net Neutrality: Gives Ma Bell Her Cake While She Eats Competition Too:

First, it cannot even begin to fix the problems it pretends to be able to solve. The reason is simple. Anything that's transmitted in Internet Protocol is deregulated. The irony is that rather than encourage the deployment of new, better, faster, cheaper, more technologically advanced loop facilities, deregulation resulted in everyone funding only one form of loop plant (copper) providing only one form of functionality (time division multiplex analog voice over 64kbps circuits).

• Worse yet, Bells now want more funding for services that have been subject to minimal or no regulation.
  
  
  
  "The infrastructure necessary to provide and optimize the delivery of such services, however, is extraordinarily costly, reflecting hundreds of billions of dollars of private carrier investment. It is these carrier investments that create the stable platforms that support new features and higher speeds, that successfully balance competing bandwidth demands, and that enable the astonishing array of innovative devices and applications that develop at the network “edges.” It is impossible to predict all of the benefits that next generation networks may provide. But one thing is certain: the Commission must maximize the incentives for carriers to make these foundational investments, because without them, none of the other, more visible innovations would be possible. (AT&T Comments in GN Dockets 09-157, 09-51 available here: http://fjallfoss.fcc.gov/prod/ecfs/retrieve.cgi?native_or_pdf=pdf&id_document=7020039959)
  
  
  

As you peruse FCC comments filed by AT&T Mobility, Verizon Wireless, AT&T, Verizon, Inc. consider their market data.  There is none.  Rather they come up with numbers on things like:

A. Handset "competition", which is nothing more than the tiny tail of vendors wagging off of the backside of the two largest landline, IXC, Internet peers, and mobile wireless carriers in the world. 

B. Size and health matter, so don't be fooled by "number of competitors" per market; that's an old landline trick as well, but counting up the players on the field is not the same thing as determining whether they are breathing or have a pulse. Wireless competition is not "vibrant" in a world where the third largest wireless competitor posted a net loss of $2.8 billion for 2008 and another $978 million for the first six months of 2009, while its credit was downgraded to junk status, and millions of its wireless subscribers are switching to "rival carriers."

Second, it is legal vaporware. Net neutrality is not law, it is not even rule. Over the long term, the FCC cannot sustain the fiction that a vast majority of the economic and technical activity associated with any wire or radio communication in the United States continues to exist in a statutory no-man's land called "ancillary jurisdiction". That was created to allow for a little regulatory flexibility, not to exclude from the ambit of the 1934 Communications Act the most ubiquitous, revolutionary, and pervasive network technology ever known to humankind.

It leaves completely in the dark and out of reach the very instruments of massive and near complete market control:

• enormously high special access costs (as noted above, these costs are critical input to every other carriers' costs because carriers use them to connect major network facilities as well as wireless towers or to reach fiber optic backbones from data centers or large enterprise locations);
• extremely high per minute subsidies paid by all carriers who exchange voice calls with incumbent landline network.

Third, the appearance of a rule may be worse than no rule at all. Net Neutrality, however, has deeper, more subtle potential harms, including but not limited to the possibility that courts, once again, refuse to apply antitrust because "it's regulated".  This was effectively the holding in Verizon Communications, Inc. v. Law Offices of Curtis Trinko, LLP.   


While facially the idea that a regulated entity should not be subject to antitrust regulation makes sense, the holding in Trinko overlooks legal, market, and network realities in ways that accelerated the monopolization of telecommunications markets.   This is primarily due to the fact that the market opening regulations embodied in the federal Telecommunications Act of 1996 were extremely difficult to enforce.  They were highly technical and split enforcement between the FCC and 52 separate public utility commission jurisdictions (50 states + Washington, D.C. + Puerto Rico).  


Unfortunately, therefore, if the FCC enacts some quasi-rulings about "Net Neutrality" imposing upon loop owners (wireline or radio or both) some common-carrier like "obligations" that aren't overturned by the DC Circuit, antitrust enforcement will suffer. Antitrust will suffer because the courts, once again, will be confronted with the question of whether antitrust remedies should apply to services that are regulated. As a result we may have stacks of Net Neutrality "rules", but no actual means of enforcing them.

Fourth, Net Neutrality pretends that the Internet can be compartmentalized. This is extraordinarily dangerous in several respects. At a high level, the FCC is going to parse out a bunch of deeply interrelated problems into several different regulatory silos, then examine the "issues" in terms dictated by the old silos pretending all the while these evaluations are actually relevant to anything that's going on in the market. For example:

• The FCC in one proceeding they might find competition in mobile wireless markets without fully addressing the fact that AT&T and Verizon own a vast majority of the wireline networks that every mobile wireless carrier relies upon to compete.

• In another proceeding on landline voice, they might find sufficient voice competition without considering consolidation in mobile wireless or cable television. In yet another they might choose to leave "broadband" unregulated despite the fact that any broadband provider will have to buy connectivity from AT&T and/or Verizon in order to supply the services they use to compete with both. Moreover, that "broadband" competitor might also be forced to pay additional fixed and recurring costs to AT&T and/or Verizon by state (or federal) regulators as a condition of using those services.

Practical application of yet another problem not remedied by Net Neutrality:

• Because the "Internet" and "IP-enabled services" are deregulated, landline incumbents, particularly Bell telephone companies (AT&T, Verizon, etc.) will refuse to permit competitive broadband networks to connect with their networks. Without such connections, however, no competitor can exist. They are refusing to interconnect networks with mobile wireless carriers unless the mobile wireless carrier agrees to pay 10x or more than they currently pay for wireless calls if those calls happen to use next generation WiFi to provide greater coverage in homes and other places. These requirements would kick in despite the fact that neither the regular wireless call nor it's WiFi equivalent touch the Bell landline network unless and until a wireless caller calls a landline number. The network architectures, call flows, and costs are the same. Yet, many of the old line telephone companies are preparing, again, to hold their networks hostage and extract more money from anyone who happens to call. Net Neutrality does not address this.

Net Neutrality may be a beginning, but it only addresses the very surface of entrenched market harms resulting from nearly a decade of bad deregulation. As such, it has the potential to create as much harm as it attempts to remedy. Without transparent, consistent and readily enforceable regulation, we're in for Groundhog Day version of the past 8 years of rampant mercantilism.

Or so it seems from where I sit.

Effandineffablernets

Urbi et Orbi:

In the places I go there are things that I see
That I never could spell if I stopped with the Z.
I'm telling you this 'cause you're one of my friends.
My alphabet starts where your alphabet ends!
Dr. Seuss

Open your soul, hearts and minds; leave your walls behind and come out here with me.  Come on. Just come outside.  The house of thought won't collapse if you leave it behind for a bit.  

21st Century Paradigm: Read anything that Doc Searls or John Hagel, JP Rangaswami, Bob Frankston or other "visionaries" (why some see that as a put-down is beyond me) others write.  For some it's visionary.  For others it's vibrant reality.  For some a blessing.  For others a warning.  

21st Century Paradigm: whole brain thinking  -> using both hemispheres of your brain rather than hopping around on one hemisphere cursing how horrible reality is while simultaneously cursing the right hemisphere.  

• Intuitively logical

• Logically intuitive

• Neither intuitive nor logical but still, it's here.

• Behavioral economics

• Commons; Open spaces; anima.

• Collaborative.  Cloud.  Infrastructure. 

• Ambient connectivity.  Open. Yin.  Fluid.

21st Century Paradigm: Effandineffablernets

The naming of networks is a difficult matter.  It isn't just one of your holiday games.  

...

But above and beyond there's still one name left over,
And that is the name that you never will guess;
The name that no human research can discover--
But THE NETWORK ITSELF KNOWS, and will never confess.
When you notice a net in profound meditation,
The reason, I tell you, is always the same:
His minds are engaged in a rapt contemplation
Of the thought, of the thought, of the thought of his name:
His ineffable effable
Effanineffable
Deep and inscrutable singular Name.

Humans call it the "Internet."  The things they miss.

20th Century Paradigm: Telecommunications.  Mine.  Not yours.  Bright lines.  Hard boundaries. Opposition is competition.  Zero sum legal contests render high truths. 

20th Century Paradigm:  We hire politicians to run our proprioceptors and pay lawyers to fight reality in cramped artificial contests obscured from stakeholders and judged by politicians beholden to those who hire the lawyers.  

20th Century Paradigm: "We murder to dissect" (quoting Tennyson b/c 20th century paradigm is simply 19th century paradigm gone nuclear and digital without producing sustainable energy or sustainable communications systems). 

20th Century Paradigm:  Thinking top-down command and control corporations, militaries, or governments are efficient, evolved, adaptive, or anything other than pathologically self-destructive. 

20th Century Paradigm: pills solve potency.  (Love is potency.)

20th Century Paradigm: Any assumption that order can be imposed or mandated.  Rather than see the futility of the systems of orders it invented, it simply re-organizes the same system in order to impose the same form of order that caused the catastrophe necessitating the reorder again.  

Corporations, of course, do this much better than government.  They're paid more, and therefore, smarter.  Observe the abundant manifestations of corporate wisdom during the 20th century.  Neither corporations nor governments create wisdom.  They are dangers to themselves and others.  Were that not true, we'd have a vibrant ecosystem at every layer both inside and outside the glass not to mention the planet that sustains it all.    

20th Century Paradigm: History controls the present and fears the future.  

Only the present affects the present.  The future is the fears of the past projected on a wall.  Future and past exist only in fleeting and transitory thoughts.  Thought is malleable.  It is illusion.  What you think is not what is.  What is is what is.  Thinking is the screen of illusion that separates awareness from reality.  

Flow the spaciousness brothers and sisters.

Oh the things you can find
If you don't stay behind!

Good luck.

Erik

Ode to Individual Achievement: Service of Others

The constitution exhorts us mortals to reach high. Without forgiveness of ourselves and others, only depths, not heights are reached.

Our job is transcendence of present challenges.of governance. America is not a fixed location. It is an aspiration.

We have, therefore, the power and the duty to re-create ourselves again. We can repurpose and realign regulation and agencies.

Bob Cannon's service to all of us in maintaining the Cybertelecom list, which is sacred space for off-the-record discussions for industry insiders, and the Cybertelecom site for all these years is an incredible democratizing
gift and shining example of the power of a single individual to change government.

This is how you do transparency and the Administration should thank and bless this man for all that he has done, not to mention follow his example.

Empowering the Internet one American at a Time pt 2 (Show Up)

So if you follow some of my writing you know I've blown up the illusion that Net Neutrality will do a thing for any innovative company or individual out there. It's a long story but boils down to the fact that Net Neutrality attempts to weave a regulatory silk purse from the sow's ear of decades of de-regulation.

That's the bad news.

Here's the good news. The FCC just might get this. They may have an inkling that their Net Neutrality rules will come undone on appeal. So they've done two things:

First, they launched an inquiry into whether or not they should consider transitioning from a "circuit switched" to an IP-enabled world. (Hint: we're there; this is about helping them transition).

Second, they've announced a technical workshop. Techies, show up, OK? People from small companies, innovators, broadband, wireless, whatever is your gig - pay attention and get involved.

http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-294965A1.pdf

Empowering the Internet one American at a Time

From this lawyer's perspective, regulation mostly puts the legal power in the hands of carriers and regulators. The Internet puts technology in the hands of everyday people. There's a mismatch. I've offered here and in other places simple ways to fix that near term, but as you may see from discussions in policy, legal, technical, and economic circles, we get into all sorts of interesting chats about history and this and that, but few actually take on the political realities and industry issues head-on. Connectivity sucks in every state because we subsidize to the tune of billions of dollars per year ancient technologies, force new ones into those shoehorns, and drive costs through the roof. Industry, particularly competitive industry is hemmed in on one side by what by any monetary measure is monopoly and on the other by regulators. Since industry is terrified of getting under the skin of the regulators (with good reason in many respects - they can be vindictive at times; happy to take anyone through any dozen briefs, recommended decisions and commission decisions), there's a lot of dancing around the issue, but few, IMHO, really run it to ground.

Very simply: federalize regulation BUT put the rights in the hands of individuals rather than the always hyper-political state PUCs, which, as you note and as has been discussed on this list and other lists for years, tend to be self-serving in how they cut up their data. Unless and until we flatten regulation, it will continue to flatten us. The little guys cannot afford the legal and political horsepower it takes to compete. Trust me; I've run some of the biggest ones around (at least from the competitive side) and I still deal with this on a daily basis.

This does not mean that there is not a role for state regulation. It means that state regulation must be realigned. They have to quit regulating industry and start empowering consumers. But, for now, we have to take away Bell's tools of control and dominance, which are primarily exercised at the state level.

As you examine this, keep your eye on the ball, follow the money. This is a money game; money runs the system and money runs DC, just as surely as it runs any state. That's just the facts; it is not personal to any regulator or individual, myself included, who spends a lot of time (and gets paid quite a bit of money) to make legal, regulatory, and political calculations relative to the business plans I find innovating, empowering and interesting. It simply observes how the system works. The system is not going to change soon, which is fine. And we are wise to focus on the money. We'd be ill advised to waste it.

The secret to success is that when individuals change themselves in relation to the system, the system must change. Look, I'm a deep inside the industry attorney and litigator. I get paid a lot of money to work this system. Yet I'm giving away the kind of advice any industry lawyer sells to its clients for quite a bit of money. I'm teaching you and anyone who cares to read this how to re-define the terms of engagement. Accordingly, I'm not giving transparency; I'm teaching it.

Use it: run the money and market equations first, then the political equations, and then the legal equations. Do not get lost in thinking it's the other way around b/c 99% of what's discussed is the legal, technical or economic equations. They are code for talking about the other two. That's how DC handles these issues (and I've spent decades inside DC as well, so I speak from experience) in ways that aren't uncomfortable for them (which again, is not to judge it as bad b/c it is not bad; it is just how humans handle emotionally difficult issues particularly when, as here, they feel helpless to change this - often regulators - even the many state regulators I know well and sincerely and deeply respect to a person - feel trapped & unable to do anything about it. Well, time to fix that.).

You may consider starting here: The FCC yesterday invited comment on how we "transition" from aCircuit Switched to IP-enabled world, which is ironic b/c the world is already there. The real question is how *they* transition. That's a good question and I think folks deploying WiFi, WiMax, FTTx, and other innovating and empowering network technologies an help. This is a political problem; you are the people.

There's nothing to lose but the *illusion* that the system as presently construed serves everyday Americans. It is time to empower Main St. b/c like bank and securities regulation, power and transparency were taken away from real people. We lost our way. The good news is that in empowering individual Americans we re-invigorate industry by shifting its focus to lowering cost and deploying the very best technology has to offer from harvesting profits based upon ancient and now irrelevant technological assumptions and regulations.

And tipping my cards, my clients are thrilled with a world where individuals are empowered. They are the open-source types looking way over the horizon at some very exciting technologies & would celebrate your involvement.

There is nothing but opportunity here.

Keep up the good work America.

Kind regards,

Erik

A Conversation with Bob Frankston, Inventor of VisiCalc, Internet Legend ...

Bob & I have been discussing the Internet, law, technology, economics and policy on closed email lists for years. Bob's a good friend and someone I greatly respect. He's also someone who has influenced my thinking greatly. Recently, in response to controversies over Net Neutrality, Bob and I got to conversing about how to fix things.

Here's my response to a recent post from Bob's blog: Conversation with Erik Cecil on Net Neutrality

Bob,

I couldn't agree more with you. We've been funding the network of 1945 for years now while Verizon and AT&T build their own network of the future, locked down, walled off and dribbling out innovation on their terms, not ours. It is the greatest irony of regulation for the public that the public has no idea how regulation works, no idea that they are paying to rebuild monopolies that turn around and suck them dry of every possible cent in the name of preserving services even the networks admit are done and gone.

Between the present walled gardens where law and regulation is used to disable human achievement and innovation and a world where glass is simply what it is - a utility input - lies the question of how best to enable individual human beings. Because the Internet turns the telephone network inside and out, so too must we turn regulation inside out and give to individuals all of the rights of common carriers because, in all honesty, "common carriage" as a business, as a middle, is irrelevant to the value of networks. Rather, what is needed are massive, neutral network operators wise enough to spend their time, effort and money empowering individuals rather than inventing new ways to restrict innovation that they may dribble it out a bit at a time to a public and a technological world capable of innovation on scales that these entities are actually terrified to consider.

Voice and channel vendors are, as a business and value proposition, dead. One knows this from reading their 10Ks, 10Qs and comments on file with the FCC. But going to bit vendor, which is precisely where Net Neutrality is going to put us, is not the answer either. As an interim step, however, we can at least declare all IP to be common carriage (we already do in many realms - CMRS providers, for example, can provide "non-telecommunications", including IP, but it is treated as "common carriage" and thus "telecommunications" nonetheless. (Were this not the case, then no CMRS network - AT&T, Verizon, TMO, Sprint, etc. could interconnect with another at cost-based rates per Sections 251/2 of the Telecom Act as they are deploying 4G / LTE / WiMax, and other technologies that are entirely not telecommunications in ancient legal views under which we must still live).

Unless and until we free the FCC from the moorings of serving "industry" so that it may serve individuals; unless and until we free ourselves from ancient conceptualizations of how to fund and deploy computer networks that also happen to provide voice functionality, we're going to continue to pour billions of dollars down the greedy gullets of giant networks whose main objective is value extraction. In 2008-2009 the largest incumbent telephone carriers saw ROIs of 100%, which, in this day and age is nothing short of the obscenity we've seen with the worst of Wall Street excesses. Yet it continues unabated.

Let's hope the world wakes up.

***for more on Bob's thinking, check Debi Jone's blog, Mobile Jones: "It's Infrastructure, Stupid"