Yesterday morning at 10 AM, the long expected and very much debated video franchise reform bill made its official debut before the House Energy and Commerce Committee’s Subcommittee on Telecommunications and the Internet.
As Subcommittee Chair Fred Upton (R-Mich) observed, the Committee likes to have telecom bills be bi-partisan in nature, and the Barton-Rush bill is no different. The bill is named after sponsors Energy and Commerce Chair Joe Barton (R-Tex) and Rep. Bobby Rush (D-Ill).
Previous incarnations of the bill also featured minority leadership on the Committee as sponsors, including Reps. Ed Markey (D-Mass) and John Dingell (D-Mich), which notable attribute subsequent versions lacked, leading Rep. Dingell to preface his comments about this, even later version with the remark that “(a) funny thing happened on the way to the forum.”
In point of fact, the Barton-Rush bill contains some of the more controversial telecom issues to come before the Energy and Commerce House since 2001, when the Tauzin-Dingell legislation was marked up, and yesterday’s hearing captured some of that momentous, highly contested event.
The differences between the Tauzin-Dingell markup and yesterday’s hearing, however, lay in the lack of “edge of your seats” vote counts that characterized the markup, with people slumped on the floor in the back of the room, even sleeping right where they stood – but all that fun might yet come, sooner rather than later.
With some raw feelings obviously present in the room, there were notable attempts by members assuage differences so that they might come together over amendments and arrive at a bi-partisan solution. With any luck, and lots of work, differences may be ironed out before markup, which is set for April 4.
As it happens, previous versions of the House telecom reform bill were more sweeping in their scope, while the current bill contains some of the key drivers sought by various segments of industry – the telcos’ goal of national video franchise authority, interconnection rights and access for VoIP and E911, community broadband, and net neutrality.
Significant differences remained on some of these key issues, though. Chairman Barton went down the line on the first panel, asking each panelist for a concise definition of net neutrality. He got seven different definitions, or to be more precise, six definitions and one anti-definition.
These seven different answers on net neutrality came from a panel of industry experts, representing companies or heads of associations, experts on which the Committee must rely in drafting legislation, which conundrum Chairman Barton noted: if the experts cannot reach agreement, where does that leave the Committee?
As it stands now, the bill’s language gives the FCC express authority to enforce its net neutrality Connectivity Principles – adopted last August – on a case-by-case basis, but without granting rulemaking authority.
Chairman Barton highlighted the lack of agreement among experts, and another salient fact: that the bill gives the FCC authority to punish wrongdoers, and his comments posed a strong response to Rep. Ed Markey’s (D-Mass.) masterful handling of the case for going further than the bill currently does to protect net neutrality, which is his belief.
Panelist Tim Reagan, testifying for Corning, Inc., and the Telecommunications Industry Association, briefly articulated the origins of net neutrality in filings by vendors at the FCC several years ago during the Title I and Triennial Review Order debates. These “principles” were later embraced by FCC Chairman Powell and form the core of today's FCC Policy Statement.
As the net neutrality debate has ricocheted about the policy arena, some have argued that the FCC’s push for deregulation of broadband over the past several years has eliminated the anti-discrimination provisions provided under the Title II (common carrier) regime. In response, this bill seeks to restore the FCC’s authority to enforce these anti-discrimination principles in a Title I broadband world.
Whether this delegation of authority to enforce anti-discrimination principles, as opposed to specific rules, goes far enough to ensure net neutrality forms one pillar of the debate, but only one pillar. Net neutrality has all the elements of a “nobody gets out of the van” admonition to a group of passengers that produces one result: everyone's out of the van.
Whether by coincidence or design, a front page story in Thursday's Wall Street Journal described security efforts by some companies to limit their employees’ access to Instant Messaging, personal e-mail services, even VoIP services such as Skype. It’s network management for security, but it also involves blocking of peer-to-peer applications.
And you thought it was just a job -- but one where you check your net neutrality rights at the door. I suppose a counterargument would be that, given the number of hours people spend on the job, any restriction on one's abiltiy to roam about the Internet makes the freedom to surf freely at home that much more precious... but it's still not the real issue.
This may explain, in part, the Washington Post’s position on net neutrality, wherein in an editorial that appeared March 13, 2006 (“The Eden Illusion”), it was asserted that proponents of net neutrality “exaggerate the purity of cyberspace” – or it may perhaps be related to their cable system ownership.
There could also be a privacy element to net neutrality, where locational devices or software embedded in mobile devices is used to communicate point-of-sale or "almost-point-of-sale" or "why-don'tcha-come-on-over-to-our-point-of-sale-sale" information by merchants to consumers -- in effect, mobile pop-up ads that pop up whenever you're around. Should this be something that only network operators can control, perhaps for a fee?
Testifying for Amazon.com, Paul Misner admitted that, while there have been very few instances of companies violating the FCC's connectivity rules, given the fairly recent migration into the Title I world and contemporaneous adoption of the FCC's Policy Statement, and inclusion of connectivity principles in the SBC/AT&T and Verizon/MCI merger agreements, he argued that the lack of specific cases does not mean there won't be a problem down the road.
Which may be another way of saying that this debate probably isn't over.
The House Energy and Commerce Committee will hold a hearing tomorrow morning on the “Communications,
This morning, the Technology, Innovation and Competitiveness Subcommittee of the Senate Commerce Committee held a hearing on the Importance of Basic Research to US Competitiveness, over which Subcommittee chair Sen. John Ensign (R-Nevada) presided. Senator Ensign has sponsored a number of bills germane to innovation and competitiveness, including the Broadband Investment and Consumer Choice Act with Senator John McCain (R-Arizona), and the National Innovation Act (S. 2390 on Thomas, Library of Commerce) with Senator Joseph Lieberman (D-Connecticut) and 14 co-sponsors.
I'll follow with a summary of the high points in the Innovation and Competitiveness hearing when I come up for air.
The Chairman of the House Energy and Commerce Committee, Rep. Joe Barton (R-Tex), and Reps. Chip Pickering (R-Miss.), Fred Upton (R-Mich.), and Bobby Rush (D-Ill), have introduced legislation that creates an alternative method by which telco companies may obtain permission to compete with incumbent cable operators to provide video services to consumers.
The bill is called the "Communications, Opportunity, Promotion and Enhancement Act of 2006," or COPE 2006.
Currently, both cable and other operators must go apply to local franchise authorities, or LFAs, to provide programming to citizens. LFAs number in the tens of thousands, and the telcos have complained about their sheer number as an obstacle to their goal of delivering video services to consumers ASAP.
While the major telcos, and the small carriers as well, have chosen a variety of differing architectures to handle the massive capacities required to deliver video on networks originally designed to do something completely different, there is one constant among the various approaches: the sooner telcos can begin to produce revenue from the upgrades, the better. This Next Generation of Broadband buildout will be very costly, with no time for delay or indecision.
Virtually all segments of the telecom industry are under assault right now from technological development and market developments that leave no business model safe from competition, no core market protected. Service set substitution, such as Voice over Internet Procotol (VoIP) for circuit switched voice, or reliance upon nationwide wireless services instead of traditional wireline long distance service, to cite two examples, has essentially ignited what amounts to an arms race among all combatants – requiring massive, bet-the-farm investments launched to shore up declining revenues through “bundling,” of voice, data, video and wireless.
To give an idea of the conceptual difficulties involved in policy, the telcos fought amongst themselves for years over “unbundling” rules in order to fight the cable companies with “bundling,” itself an unproven theory, and with no turning back.
COPE 2006 addresses some of this service set shifting by making it easier for telcos to apply for a national franchise in lieu of obtaining local approval: a safety valve, if you will. Many aspects of the current cable application process are maintained in the bill, such as franchise fees, PEG channels and I-nets (“institutional networks”), and the bill also addresses another hotly contested broadband issue, allowing local municipalities to provide broadband services their citizens on the same conditions as other providers.
Finally, the bill addresses another contentious point, allowing the FCC to enforce its consumer-oriented Connectivity Principles, without further expansion of “Net Neutrality” principles through a rulemaking process. VoIP and e911 VoIP access are also addressed.
There will be a hearing on the bill before the Energy and Commerce Committee this Thursday, March 30, at 10 AM.
This is my third and final attempt at this story, which started out two days ago as a comment on a French parliament vote requiring iPod interoperability at Apple’s expense.
This in turn led me to wonder about the far reaching changes that every nation faces dealing with digital and media convergence, and its enormous impact on society, also illustrated by reports from China restricting a popular “American Idol” style TV show, and imposing hourly limits on young video gamers, when two additional things intervened: one, my posting vanished (user error) and two, global telecom consolidation emerged in the form of merger talks between Alcatel and Lucent, so yesterday’s news is yesterday’s news.
In other words, it’s been a busy week for telecom and media interests. Next week should be busy too.
Certain aspects of the “unbundling” rules on broadband facilities began their creep in similar fashion, when the FCC invited states to go beyond then-unfinished federal rules on Line Sharing. Result: patchwork. One state might decide that something another state did was “A-OK,” and bingo, rule adopted, so that the rules were all over the map until the FCC's federalized approach brought uniformity to the process.
While it may well be true that states can be “laboratories” for tweaking the rules, it also stands to reason that these tweaks are not without their own attendant costs when it comes to the real world, bottom line impact on innovation. On another, related front, electronics vendors have to deal with a slew of environmental rules imported to the states straight from Europe.
While Apple might be running new Intel chips on its iMacs and MacBooks, this week Dell bought Alienware, a privately held, aptly named maker of high end gaming computers that happen to run on chips from... AMD. Seems that Dell wanted to bring some spice to its lineup in both substance and form…
Absent some real showing of harm, then, do we really want legislators dictating how technology may be adopted and used by citizens? Or meddling in the complex business arrangements of a company like Apple, which developed hardware and software and entered into licensing agreements to make content available to consumers, and created mechanisms to protect that content?
In fairness, though, the Apple story was more widely reported than a related issue on Digital Rights Management from
The moral of the story is that it’s hard to draw conclusions about what’s going on when so many of the pieces are moving at once, and not just here, in Washington, DC, but world-wide.
The FCC declined to act by Sunday on a petition for forbearance that Verizon had filed with the agency, seeking deregulatory treatment for broadband services that serve
At any rate, Verizon’s petition made it through, and today AT&T’s CEO announced that it plans to seek similar treatment from the agency. FCC Chairman Kevin Martin and new Commissioner Deborah Taylor Tate issued a joint statement that the agency is taking “another step in establishing a regulatory environment that encourages such investments and innovation by granting Verizon’s petition for regulatory relief of its broadband infrastructure and fiber capabilities.”
FCC Chairman Martin has a long history of acting in the interests of broadband investment, going back to the FCC’s decision to deregulate fiber to the home loops and hybrid-fiber copper loops in the Triennial Review Order (TRO), decided by the agency on February 20, 2003. The decision and other similar deregulatory actions by the agency have resulted in a shockwave of investment in broadband facilities by telcos seeking to compete with cable.
While the win at the FCC was good for Verizon, there is another news report about the company today that also bears mentioning: an agreement reached between Verizon and CBS whereby the telco will carry the broadcast company’s content for a fee. While the broadcasters and the cable companies have traditionally been at each other’s throats, the entry into video programming by telcos has the potentially to shake up that, er, chummy relationship. As the saying goes, with friends like those, who needs enemies?
While terms of the deal were not disclosed, Verizon is expected to pay the broadcaster a fee per subscriber (reportedly on the order of .50 cents per sub) to air content. This “pay to play” arrangement is slightly different from the relationship that cable operators have with broadcasters; cable ops normally don't pay broadcasters for content since their signal is carried over the air, while they will pay for delivery of some cable content. The deal could pave the way for other deals between telcos and broadcasters and provide broadcasters with an additional source of revenue other than advertising.
For Verizon, the deal is a no-brainer way of acquiring video programming content for its nascent FIOS FTTH video network. Without content, at least at the outset, until sites like youtube.com or Google video take over the planet, or until other uses for FTTH are developed (they’re coming), the selling points for having a super volume broadband spigot into the home are probably not realized by your average suburban customer, unless one of the occupants happens to be a gamer in which case all of the chairs in the house shake.
Verizon will offer the programming over its FIOS service in seven states:
The Senate Commerce Committee held a hearing Wednesday afternoon on US Innovation and Competitiveness, the issue having been placed on center stage by President Bush in his State of the Union address on January 31, 2006.
The hearing was chaired by Senator John Ensign (R-NV), who has co-sponsored legislation with Senator Joseph Lieberman (D-CT) to preserve US leadership in innovation, research and development (“The National Innovation Act,” released December 15, 2005).
A major theme involved the difficulty of shifting of resources from one entity or group to another, which witnesses Ms. Deborah Wince-Smith (President, Council on Competitiveness), and Mr. Norman Augustine (Chairman of the Board and CEO (Retired), Lockheed Martin Corporation) addressed in response to questions from Senator Ensign.
Senator Ensign – who also has sponsored deregulatory telecom reform legislation – connected further broadband deployment as a means to a competitive end for the country, which sentiment was echoed by Senator George Allen (R-VA).
Sen. Allen also has sponsored legislation (“The Wireless Innovation Act” or “WIN Act”) to tackle broadband deployment through preservation of so-called “white spaces,” currently within the analog TV band, for use in deploying unlicensed wireless broadband, particularly in rural and underserved areas
Senator Lieberman noted an earlier wake-up call, citing numbers released by the OECD which listed
He continued that, while there are lot of important hearings going on on Capitol Hill every day, this was one of the most important, in putting money where our hopes are, to sustain environment of entrepreneurship and invention that has benefited the public and private sectors.
This has been an interesting “year” for telecom reform. The legislative year isn’t really a calendar year or a fiscal year and instead is subject to its own rules which may best be described, to the untrained eye, as “incomprehensible,” which in turn determine periods of “recess,” and which I find to be a wonderful throwback to another time, but that’s a completely different issue and I am already way off topic.
At any rate, this being an “election year,” the “normal” rules are suspended, and the subject turns to the remaining legislative days for handling such mundane issues as running the country, and tinkering around with expectations that are not only enshrined, approaching the epitome of birthright, as well as chiseled in stone, by which I refer to the business of how telecommunications are beamed and received across the land.
By the way, am I the only one dreading when people can use cell phones on planes?
This year began with the telcos complaining mightily about the age old system whereby local authorities deign to award video franchises to multi-channel providers wishing to deliver programming to their citizens. Apart from the completely reasonable fear of approaching yet another government entity (federal, state, local...), hat again in hand, seeking permission to do something with the wires and antennas that already festoon the local landscape (that festooning done at some considerable cost, given that cellphone towers don’t grow on trees, until, by Golly, the citizens of a particular community demand that it be so), the telcos rightly concluded that the sheer number of Local Franchise Authorities (LFAs) populating the hinterlands was enough to make their heads spin.
Not that the telcos weren’t familiar with big numbers, or doing some head spinning of their own, capable of counting billions and billions of dollars in savings from their already consummated or planned or yet unannounced mergers, but the fact is the whole process was going to take too darned long, and that was not a good thing. Reason is, and while we’re on the subject of billions and billions, of dollars that is, that are flying out the proverbial telco front door to upgrade their networks to deliver video, the LONGER THE PROCESS TAKES, the MORE UNCERTAIN WALL STREET BECOMES ABOUT SPENDING, and there goes the infrastructure. This is where cable enters the picture; hit “pause.”
This is also where Net Neutrality comes into play. A flat out, common carrier requirement that the telcos and the cable companies have to: 1) build big dumb broadband pipes; so that: 2) Google video may become the preferred video provider delivered over the big dumb broadband pipes has the rare effect of uniting the telcos and cable companies over a matter of public policy – rare, these days, indeed. Google and other Application Service Providers (ASPs) which are “unaffiliated” with the carriers view Net Neutrality as a means to survival in tomorrow’s digital broadband world, whereas the carriers see the ASPs playing them for SAPs, “S-A-P” as in “Good Sport.”
Actually, the telcos and cable companies may not be that far apart on another matter of public policy, this being the proposal to reform the Universal Service Fund (USF) to assist with the broadband buildout to rural as well as unserved or underserved areas. Assuring the viability and sustainability of USF is a primary concern for members of the Senate Commerce Committee, as well as the Congressional Rural Caucus in the House, and some members view preserving USF as a step in promoting further broadband deployment. Suffice to say that there may be some areas where the big telcos, cable companies, and small telcos disagree on matters involving Universal Service.
This again is the summary version of a year’s worth of agreements, disagreements, tendered positions, and issues gone largely to ground (such as the big telcos’ opposition to municipal broadband buildout), that in turn brings us full circle back to our title. It would seem that we have strange triangles wherein two parties may agree on two points out of three, but disagree on the third, only to find agreement with a third party on the third issue, and agreement perhaps one other issue, but you get the point. Two’s company, three’s a crowd, but only on the issues; the third party being most welcome to forge a coalition with another affected group that in turn is opposed to the interests of the other two, and so on.
What this strange, hydr-oxy like structure means is anyone’s guess, but when you take into account the remaining “legislative calendar” and “election year” and consider that you have one very complicated string of related issues completely up for grabs, and not necessarily subject to consensus when all issues are counted – or when all parties are polled, you may as well just throw up, or throw out, your hands: rock crushes scissors, scissors cut paper, and paper covers rock.
The “quadruple play” is the only reasonable response to competitors that want to eat your lunch and more, that incidentally also are providing the same services you provide to consumers. These services will also enable delivery of new technological surprises, such as VoIP over broadband or wireless, which will over time will likely threaten your future growth services, if you happen to be a network provider, but that’s the nature of the business.
In other industries it may be enough to have your current cash cow under assault from competitors, but the telecom industry likes to do the arms race one better and include their very customers in the competitive mix. Consumer demand has driven the adoption of new technologies at a rate so rapid that the uptick casts some doubt on projected revenues from tomorrow’s business models as well as those from today. Think consumers can game a system that has the rapid sharing of information at its very core?
Several years ago the FCC reviewed the sharing obligations that incumbent carriers had to meet with respect to competitors within the same technological platform, or wireline sector. After some deliberation, the FCC declined to extend these sharing obligations to new broadband investments, lock stock and barrel, which is what the intra-sector competition demanded the agency do. After all, they looked like competitors on paper.
Instead, the FCC correctly reasoned that these sharing obligations might add some additional cost to the risky new investments incumbents wanted to make in wireline broadband infrastructure, where cable was the dominant provider platform. The agency made a tough call, and for sticking to its guns, the FCC came in for tremendous criticism about the litany of consumer ills that would surely follow, such as higher prices, reduced competition and technological choice, and so on.
None of the dire predictions came true. Some observers have suggested that a combined AT&T/BellSouth operation could deliver even lower broadband prices to consumers in the BellSouth states, given that AT&T has been extremely aggressive about pursuing both increased deployment with price cuts on its own turf, the better to bring about a war of bundled services with cable.
Critics of the proposed deal will no doubt rush the ramparts in the name of “Divestiture!” (with a wireless flavor this time), or invoke the ideals of Net Neutrality (their version, that is), or perhaps insist that any video franchise reform legislation is now moot, all of which agitating is within their rights to do. Remember though, that somebody has to build these networks, and sending the wrong messages on (regulated) pricing or other (extracted) concessions is probably not the best way to encourage the buildout.
