The unprecedented release of a FCC draft staff analysis opposing the proposed AT&T / T-Mobile transaction could backfire legally, undermining its intent to backstop the DOJ’s pending lawsuit against the merger.

See my Forbes Tech Capitalist post on the “Top Ten Flaws in the FCC’s AT&T / T-Mobile Competition Analysis.”
 
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 FOR IMMEDIATE RELEASE

December 2, 2011

Contact: Scott Cleland

703-217-2407

Verizon/SpectrumCo Deal Reflects Metamorphosis of Communications Competition

Broadband, Internet, & Cloud Computing Technologies Creating Omni-Modal Competition

WASHINGTON D.C. – Verizon Wireless’ purchase of 20 MHz of currently unused, near-nationwide AWS spectrum from Comcast, Time Warner Cable, and Bright House Networks for $3.6b and reselling rights spotlights the extraordinary metamorphosis of communications competition being driven by broadband, Internet and cloud computing technologies.

The following quotes may be attributed to Scott Cleland, Chairman of NetCompetition.org:

This transformative deal spotlights the extraordinary metamorphosis of the communications market to the ‘omni-modal competition’ occurring everyday in the marketplace, where broadband, Internet, and cloud computing technologies scramble old market boundaries and create new markets all the time. Specifically, this deal’s cross-reselling arrangement — cable bundling Verizon’s wireless service and Verizon reselling cable services via its stores — is very similar to the evolving competitor-partner layered relationships that broadband communications providers have morphed into over the last few years with manufacturers, software providers, retailers, content companies, financial companies, and platform players like: Apple, Google, Microsoft, Facebook and Amazon, to name the most prominent.

(To better understand this transformation of the competitive landscape to ‘omni-modal competition,’ please see this seven- page graphic presentation here entitled: “The Metamorphosis of Communications Competition Driven by Broadband, Internet, and Cloud Computing Technologies.” The link: http://netcompetition.org/images/uploads/The_Metamorphosis_of_Communications_Competition.pdf)

Spectrum is the property foundation of wireless private enterprise. Given that commercially-available spectrum is a finite resource and re-purposed spectrum comes to market at a glacial pace, available, unused and useful spectrum for leading wireless providers is exceedingly scarce.

Spectrum need is directly proportional to the number and usage rates of a provider’s subscriber base, especially the number of bandwidth intensive smart-phone and tablet customers. The larger the provider, the greater the need for spectrum to maintain capacity, quality of service, and growth headroom for next generation services.”

NETCompetition.org is a pro-competition e-forum representing broadband interests. See www.netcompetition.org.

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See my Forbes Tech Capitalist post “The Next Leg of Wireless Growth? here.

Please see my Forbes Tech Capitalist blogOpposing “The Verge” of Socialismhere, which rebuts Joshua Topolsky’s Washington Post column: “Want better wireless service in America? Socialize it.”

 

FreePress’ latest trumped up net neutrality charge alleges in a complaint to the FCC that Verizon violated net neutrality in limiting access to third-party tethering applications on Google’s Android platform, (like other carriers have) — applications that effectively would enable Android users to bypass standard Verizon data usage plans and improperly consolidate usage of multiple devices onto one device data usage plan.

  • Specifically, FreePress is singling out Verizon by alleging that Verizon has violated its unique net neutrality obligation, because Verizon is using the spectrum of a special 700 Mhz “C” Block license that came with some special obligations (see para 223) concerning offering reasonable open standards to devices and applications.
  • Simply why FreePress’ charge is bogus here is FreePress is essentially claiming that when one person pays for an all-you-can eat buffet, that one person should be entitled to feed others off of the their refillable plate; anyone with an ounce of propriety knows that is cheating.

This analysis will:

  • Spotlight FreePress’ political and strategic motives for trumping up net neutrality charges at this particular time; and
  • Why the facts indicate the FCC eventually will reject FreePress’ bogus complaint.

I.  Important Context:

First, this FreePress complaint is blatant political payback for Verizon exercising its constitutional right to challenge the FCC’s Open Internet Order and Data Roaming Order, because both suits likely will expose that the FCC does not have the direct statutory authority to regulate broadband information services like a Title II common carrier.

Second, this is a bald attempt to trigger a new Verizon-specific proceeding at the FCC, in addition to the already pending AT&T-T-Mobile acquisition review, so FreePress and its allies can demonize both of the alleged wireless “duopolists” at the FCC at the same time.

Third, this is a transparent maneuver to try and reopen the Open Internet Order to extend wireline net neutrality regulation to wireless.

Fourth, this complaint provides FreePress another high-profile issue (if the FCC or the media fall for it) to re-argue their rejected radical “dumb pipe” interpretation of net neutrality where FreePress essentially argues that network owners and investors have no freedom to earn a profit or offer competitively differentiated offerings to consumers.

Finally, the minutia focus of this complaint is yet another attempt by FreePress to draw the FCC into trying to micromanage most all market outcomes via a Title II-ish common carrier regulatory mindset.

II.  Why FreePress’ Charge is Bogus:

At core, FreePress misrepresents Verizon’s 700 MHz license obligations by selectively quoting the FCC and also ignoring the direct language in the FCC’s Second Report and Order on the 700 MHz Band.

  • That FCC language shows Verizon has the business latitude and freedom to prevent users from gaming data plans by improperly consolidating the usage of multiple devices on a data plan designed and offered for one device. 

Specifically, the FCC envisions compliance with the 700 MHz license rules involving the offer of reasonable open standards for devices and applications — which Verizon does.

From the FCC’s order:

  • Para 206: “We anticipate that wireless service providers will address this requirement by developing reasonable standards, including through participation in standards setting organizations…
  • Para 223: “We emphasize that we are not requiring wireless service providers to allow unrestricted use of any devices or applications on their networks.
    • …In particular, we believe it is reasonable for wireless service providers to maintain network control features that permit dynamic management of network operations including the management of devices operating on the network, and to restrict use of the the network to devices compatible with these network control features. Standards to ensure that network performance will not be significantly degraded would also be appropriate.”
  • Para 230: “… where the licensee bases it network restrictions on industry-wide consensus standards, we would afford the restrictions a presumption of reasonableness.”

In sum, the plain language of the FCC’s 700 MHz Order above permits Verizon to enforce their terms of service.

  • It is not a net neutrality violation or a violation of the 700 MHz order to prevent users from economically gaming the terms of service with a third party application by improperly consolidating the data usage of multiple devices onto the data usage plan designed and based on the usage of one device.

Given the big picture that: 

  • The House passed a Resolution of Disapproval of the FCC’s Open Internet Order;
  • The Senate is likely to do the same as soon as the FCC gets around to officially posting the Order in the Federal Register; and
  • The House Appropriations Committee’s pending appropriations bill would bar the FCC from implementing net neutrality regulations…
    • The FCC should reject FreePress’ latest net neutrality overreach.