Comcast-Clearwire’s 4G WiMax rollout starting in Portland today, as part of broader national launch this year, is powerful evidence of the vibrancy and dynamism of the facilities-based broadband competition trajectory in the U.S.

  • This latest announcement provides an excellent opportunity to take stock of both the current state of broadband competition in the U.S. and the competitive trajectory of how the U.S. broadband market is getting increasingly more competitive.

Contrary to the parade of imperfection horribles claimed by anti-competition groups to try and justify a wide variety of new net neutrality-related regulations, the U.S. has more real and growing facilities-based broadband competition than any nation in the world.

The Comcast announcement provides powerful proof points of all the good aspects of vibrant facilities-based competition.

  • Proves that the marketplace can and will fund the building, launching and operating of the equivalent of a seventh national broadband offering (in addition to: cable modem, telco DSL/fiber, Verizon Wireless, AT&T Mobility, Sprint, and T-Mobile/Deutsche-Telecom facilities).
  • Proves that a new competitive entrant must offer a compelling value proposition to succeed; i.e. Comcast is offering a faster speed at a lower price than the current market in Portland.
  • Proves that there is facilities-based innovation competition; Comcast-Clearwire has adopted WiMax which is a fundamentally different technology than current wireless 3G or 4G LTE technology provided or planned to be provided by the four national wireless broadband competitors, and its substantially different from WiFi technology, a wireless technology that has been deployed more broadly in the U.S. than in any other nation.
  • Proves that people increasingly demand “broadband to the person” mobility, not just broadband to the home or building.
  • Proves that this market is dynamic and ever-changing — requiring an up-to-date and forward-looking view in order to get an accurate assessment of the market. To the extent that one is open-minded and interested in the competitive facts, the benefits to consumers, and the real competitive trajectory of the communications marketplace, the evidence is powerful that American-style facilities-based broadband competition is both working today for consumers, and increasingly will be going forward.
    • Competition works!

     

 

 

 

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A new coalition of some struggling broadband competitors, NoChokePoints.org, is making claims that the “special access” market is being “choked” by lack of competition and is urging the FCC to reverse course and regulate lower prices for these competitors.

  • “Special access” is basically the business-to-business leasing market of the copper wire connections that link many buildings and cell towers to the Internet backbone at DS1 (1.5 Mbs) and DS3 (44.7 Mbs) speeds.

To solve this controversy and determine who is actually “choking,” or holding up whom, I thought it would be instructive and interesting to consider how the beloved TV detective Columbo would apply his common sense questioning to get to the bottom of this whodunit.

 

Now let me try and understand the venue here… We are talking about the old CLEC and colocation hotel business, the business segment which attracted tens of billions of dollars in investment capital during the late 1990’s after passage of the 1996 Telecom Act. And most all of these CLECs went bankrupt when the tech bubble burst because too many CLECs and ISP companies overbuilt much of the special access market. And while the CLECs went bankrupt, many of these special access facilities were recycled for pennies on the dollar and are now being used by successful competitors that are not part of the NoChokePoints coalition… right? And those more facilities-based CLECs saw a competitive advantage in acquiring or building their own microwave or fiber facilities to offer a better and faster service to differentiate their competitive offering and win customers… am I getting it?

Now let me see if I understand the technology at issue here in the “special” access market… It’s 1990’s dial-up-era copper wire technology… right? It’s used for transport of multiple users data and the DS1 (1.5 Mbs) and DS3 (44.7 Mbs) speeds are pretty pedestrian by todays standards… are they not? And since Clearwire has committed to use microwave backhaul for its national 4G WiMax network and not special access copper wire, it must be feasible and a better mousetrap… right? And if I understand this microwave backhaul technology, its basically the same technology that MCI used to compete with AT&T 37 years ago when MCI was known as Microwave Communications Inc. So the technology to bypass special access copper wire has been around for a long long time… has it not?

  • And isn’t the fiber (FIOS) or coax (DOCSIS 3.0) technology that last mile broadband providers often provide to a single residential customer actually faster than the DS1 or DS3 copper wire special access technology the NoChokePoint competitors want to use for multiple users?
  • And if my memory serves me right, wasn’t Internet technology designed to survive a nuclear war so it inherently re-routes traffic if it ever encounters what used to be a network “chokepoint?”
  • So am I missing anything on the technology at issue here?

Now let me see if I understand the economics at issue… The apparent accusation by NoChokePoints is that 1990’s dial-up copper wire technology is too expensive to provide today’s broadband services. Am I missing something here or wouldn’t it make more sense to build more efficient and competitive broadband facilities to provide faster broadband than to distort the market by artificially lowering the price of dial-up era copper-wire technology below the market price of competitive microwave/fiber broadband technology? Wouldn’t artificially driving down the price of old facilities discourage investment in the faster broadband facilities needed to meet the nation’s ever-increasing bandwidth demands of the future?

  • Excuse me, I must not be that bright, because I can’t get my head around the NoChokePoints notion that the economics of facilities-based competition can’t work for the special access, so-called “middle mile,” part of the network that aggregates traffic of many customers, but the much more challenging economics of facilities-based broadband competition in the last mile can support 6-7 competitors in most of the country (cable modem, DSL, four wireless broadband providers: Verizon, AT&T, Sprint, T-Mobile/Deutsche-Telecom — and increasingly ClearWire.)
  • There must be something I am missing if it is somehow more economical and a better return on investment to have only one customer pay for more fragmented last mile facilities than many customers paying for more efficient, concentrated and larger scale special access facilities. Frankly that one makes my brain kinda hurt.

Now let me see if I fully understand the relevant circumstances… There have been no formal complaints to the FCC that special access pricing was anti-competitive. And the NoChokePoints members have not availed themselves of the FCC’s expedited enforcement process called the “rocket docket” where issues like this could be resolved in roughly five months. And NoChokePoints is not alleging that there is a rights of way problem or a barriers to entry problem, only that the prices are too high. But what is really puzzling here is that NoChokePoints is discouraging the FCC from collecting more data on this market. If the data and evidence supported the allegation that there is no special access competition, why doesn’t NoChokePoints lead with that evidence? Strange, doesn’t make sense to me, but then I must not be that bright.

Just one more thing…. In any investigation of this sort I have to explore potential motives. Well NoChokePoints is basically charging that their competitors have the motive of making money… and that seems accurate to me. But what about NoChokePoints’ motives? The evidence suggests that these struggling competitors would like to lower their costs and offload to their competitors their capital expenditure budget for investing in and deploying broadband facilities for the future. I guess that would be a great gig if one could pull it off…

So what have we learned from this common sense investigation? Well it seems to me that there is nothing special about this market, nor the technology or economics. Seems more like special pleading for special treatment in a competitive marketplace. At no point have they made the case that they have been “choked.” It seems to me that the real offense here would be if the FCC didn’t promote competition and went down the slippery slope of price regulating competitive broadband markets, which would surely “choke” broadband investment.

 

 

 

Kudos to Bret Swanson’s excellent new research: “Bandwidth Boom: Measuring U.S. Communications Capacity from 2000-2008.

  • For the first time, it measures and puts into perspective the incredibly explosive growth in American bandwidth capacity since the U.S. began strongly promoting facilities-based broadband competition and Internet infrastructure investment.
    • This research is new and interesting because it focuses on measuring supply-side bandwidth capacity, i.e. the fruit of tens of billions of dollars in infrastructure investment, rather than just the traditional demand-side measure of data traffic or usage.

This research also helps refute the constant whining and pessimism by the tech elites’ that the U.S. is in the “digital dark ages,” is falling behind the world in broadband, and in need of massive U.S. Government intervention in the Internet infrastructure market in order to make any progress.

  • The one page report summary is here.
  • The full report is here.

In summary, Bret Swanson’s Entropy Economics report found:

 

 

“Over the eight-year period:

• Total residential bandwidth grew 54x.

• Total wireless bandwidth grew 542x.

• Total consumer bandwidth grew 91x.

• Residential bandwidth per capita grew 50x.

• Wireless bandwidth per capita grew 499x.

• Total consumer bandwidth per capita grew 84x,

for a compound annual growth rate of 74%.”

 

Impressive by any measure.

Today I testified before a Joint House Subcommittee hearing of the Energy & Commerce Committee on “The Potential Privacy Implications of Behavioral Advertising.”

  • A one-page summary is below and the full testimony is here.

Summary Testimony of Scott Cleland, President, Precursor LLC

“Why A Consumer-Driven, Technology/Competition-Neutral, Privacy Framework Is Superior to a Default ‘Finders Keepers Losers Weepers’ Privacy Framework”

Before the Joint House Energy & Commerce Hearing on Behavioral Advertising, June 18, 2009

Precursor LLC is an industry research and consulting firm specializing in the future of the converging techcom industry. For the last three years, I have also been Chairman of NetCompetition.org, a pro-competition e-forum funded by broadband companies. In addition, beginning in 2009, I have done consulting for Microsoft. My testimony today reflects my own personal views and not the views of any of my clients.

 

The Privacy Problem:

 

First, technology has turned privacy reality upside down. Before the Internet most people enjoyed substantial privacy because it was inefficient, difficult and expensive to collect and disseminate private information. However, Internet technology has flipped that reality on its head by making it hyper-efficient, easy and near free incrementally to collect and disseminate private information. As a result, we now have a technologically/competitively-skewed, “finders keepers losers weepers” privacy framework by default.

 

 Second, the essence of the behavioral advertising or Internet privacy problem is captured well by the Consumer Reports 9-25-08 poll which spotlighted that the average American consumer believes they are in much more control of their private information online than in fact they are.

Third, all of the technology megatrends (social media, cloud computing, Internet mobility, and the Internet of Things) are all converging to increase the risks to consumers who wish to safeguard their privacy online.

Fourth, there is a growing collection of “publicacy” interests among the technology elite that view privacy online very differently than most Americans view privacy offline. Increasingly, Congress will be forced to weigh these increasingly competing and conflicting online/offline privacy interests and trade-offs.

Fifth, increasingly the “underground currency” of the Internet is private data. Private information is valuable, because in the absence of a system where consumers can assert ownership of and control over their privacy, privacy can be taken from them for free and profited from with little to no obligation to, or compensation due, to the affected consumer. The increasing commercialization of privacy by publicacy businesses increasingly creates new risks for consumers in return for little to no protection or reward.

 

 Finally, the current technology-driven, “Swiss cheese” privacy framework may be the worst of all possible worlds. In the absence of a consumer-driven, technology/competition neutral, privacy framework, consumers have neither a meaningful role in protecting their privacy nor the freedom to exploit some of the value of their private information — if that is their choice. Simply, the current haphazard privacy framework affords an individual no meaningful-informed choice to either protect or benefit themselves in the marketplace arena of their private information. The technology used should be irrelevant to privacy policy.

 

A Privacy Solution: A Consumer-Driven, Technology & Competition-Neutral Privacy Framework:

 

Since it is consumers’ private information that is being taken and exploited without much meaningful consent by the consumer, and since it is consumers which are most at risk from having their most private information stolen or used inappropriately, wouldn’t it be more logical for a privacy framework to be more oriented around a consumer’ perspective rather than a technology perspective? Clearly businesses should be free to fairly represent and engage consumers in a fair market transaction over the disposition of their private information — a fair market transaction where consumers are able to effectively understand and negotiate the risk/reward value of sharing their private information. Since a consumer is the only one who knows what information about their personal situation, interests, views and intentions, they are comfortable in sharing for what purposes, wouldn’t it be logical to have a privacy framework that empowered consumers with real input and influence over either protecting or exploiting their own interests, whatever they may be?

 

Conclusion:

 

 If Congress decides to legislate on Internet privacy, a consumer-driven, technology/competition-neutral privacy framework would be superior to a technology-driven privacy framework, because it would:

  • Emphasize protecting people not technologies.
  • Empower consumers with the control/freedom to choose to either protect or exploit their own privacy;
  • Prevent competitive arbitrage of asymmetric technology-driven privacy policies with a level playing field;
  • Stay current with ever-evolving technological innovation; and
  • Accomodate both privacy and publicacy interests by empowering real consumer choice.

Full testimony also can be found here.  

 

 

 

 

 

 

 

 

Kudos to Verizon’s Link Hoewing for an excellent post highlighting the recently released Pew Research Report, which shows the U.S. continues to make steady, broad, and impressive progress in broadband adoption.

This Pew research is another independent evidence point that undermines the manufactured dogma that the U.S. is failing in broadband — dogma artificially designed to provide a cover story for abandoning successful bipartisan facilities-based competition policies in favor of a “retro” common carrier broadband/Internet regulation regime.