I have a new post up at TechPolicyDaily.com, excerpted below, in which I discuss the growing body of (surprising uncontroversial) work showing that broadband in the US compares favorably to that in the rest of the world. My conclusion, which is frankly more cynical than I like, is that concern about the US “falling behind” is manufactured debate. It’s a compelling story that the media likes and that plays well for (some) academics.

Before the excerpt, I’d also like to quote one of today’s headlines from Slashdot:

“Google launched the citywide Wi-Fi network with much fanfare in 2006 as a way for Mountain View residents and businesses to connect to the Internet at no cost. It covers most of the Silicon Valley city and worked well until last year, as Slashdot readers may recall, when connectivity got rapidly worse. As a result, Mountain View is installing new Wi-Fi hotspots in parts of the city to supplement the poorly performing network operated by Google. Both the city and Google have blamed the problems on the design of the network. Google, which is involved in several projects to provide Internet access in various parts of the world, said in a statement that it is ‘actively in discussions with the Mountain View city staff to review several options for the future of the network.’”

The added emphasis is mine. It is added to draw attention to the simple point that designing and building networks is hard. Like, really really hard. Folks think that it’s easy, because they have small networks in their homes or offices — so surely they can scale to a nationwide network without much trouble. But all sorts of crazy stuff starts to happen when we substantially increase the scale of IP networks. This is just one of the very many things that should give us pause about calls for the buildout of a government run or sponsored Internet infrastructure.

Another of those things is whether there’s any need for that. Which brings us to my TechPolicyDaily.com post:

In the week or so since TPRC, I’ve found myself dwelling on an observation I made during the conference: how much agreement there was, especially on issues usually thought of as controversial. I want to take a few paragraphs to consider what was probably the most surprisingly non-controversial panel of the conference, the final Internet Policy panel, in which two papers – one by ITIF’s Rob Atkinson and the other by James McConnaughey from NTIA – were presented that showed that broadband Internet service in US (and Canada, though I will focus on the US) compares quite well to that offered in the rest of the world. […]

But the real question that this panel raised for me was: given how well the US actually compares to other countries, why does concern about the US falling behind dominate so much discourse in this area? When you get technical, economic, legal, and policy experts together in a room – which is what TPRC does – the near consensus seems to be that the “kids are all right”; but when you read the press, or much of the high-profile academic literature, “the sky is falling.”

The gap between these assessments could not be larger. I think that we need to think about why this is. I hate to be cynical or disparaging – especially since I know strong advocates on both sides and believe that their concerns are sincere and efforts earnest. But after this year’s conference, I’m having trouble shaking the feeling that ongoing concern about how US broadband stacks up to the rest of the world is a manufactured debate. It’s a compelling, media- and public-friendly, narrative that supports a powerful political agenda. And the clear incentives, for academics and media alike, are to find problems and raise concerns. […]

Compare this to the Chicken Little narrative. As I was writing this, I received a message from a friend asking my views on an Economist blog post that shares data from the ITU’s just-released Measuring the Information Society 2013 report. This data shows that the US has some of the highest prices for pre-paid handset-based mobile data around the world. That is, it reports the standard narrative – and it does so without looking at the report’s methodology. […]

Even more problematic than what the Economist blog reports, however, is what it doesn’t report. [The report contains data showing the US has some of the lowest cost fixed broadband and mobile broadband prices in the world. See the full post at TechPolicyDaily.com for the numbers.]

Now, there are possible methodological problems with these rankings, too. My point here isn’t to debate over the relative position of the United States. It’s to ask why the “story” about this report cherry-picks the alarming data, doesn’t consider its methodology, and ignores the data that contradicts its story.

Of course, I answered that question above: It’s a compelling, media- and public-friendly, narrative that supports a powerful political agenda. And the clear incentives, for academics and media alike, are to find problems and raise concerns. Manufacturing debate sells copy and ads, and advances careers.

Filed under: federal communications commission, net neutrality, regulation, technology, telecommunications, truth on the market, wireless Tagged: Broadband, FCC, Internet Access, Network neutrality, rankings, TPRC

Excerpt

You may not know much about the most important agency in Washington when it comes to regulating new technologies. Founded 99 years ago today, the Federal Trade Commission has become, for better or worse, the Federal Technology Commission.

The FTC oversees nearly every company in America. It polices competition by enforcing the antitrust laws. It tries to protect consumers by punishing deception and practices it deems “unfair.” It’s the general enforcer of corporate promises. It’s the de facto regulator of the media, from traditional advertising to Internet search and social networks. It handles novel problems of privacy, data security, online child protection, and patent claims, among others. Even Net neutrality may soon wind up in the FTC’s jurisdiction if the Federal Communications Commission’s rules are struck down in court.

But how should the FTC regulate technology? What’s the right mix of the certainty businesses need and the flexibility technological progress demands?

There are essentially three models: regulatory, discretionary and evolutionary.

The epitome of traditional regulatory model is the FTC’s chief rival: the FCC. The 1996 Telecom Act runs nearly 47,000 words — 65 times longer than the Sherman Act of 1890, the primary antitrust law enforced by the FTC. The FCC writes tech-specific before technology has even developed. Virginia Postrel described the mentality best in The Future and Its Enemies:

Technocrats are “for the future,” but only if someone is in charge of making it turn out according to plan. They greet every new idea with a “yes, but,” followed by legislation, regulation, and litigation…. By design, technocrats pick winners, establish standards, and impose a single set of values on the future. 

The less technocratic alternative is the evolutionary model: build flexible law that evolves alongside technology. Learn from, and adapt to, the ever-changing technological and business environments.

On antitrust, that’s essentially what the FTC (along with the Department of Justice) does today. Judicial decisions are firmly grounded in economics, and this feeds back into the agencies’ enforcement actions. Antitrust law has become nearly synonymous with antitrust economics: both courts and agencies weigh the perils of both under- and over-enforcement in the face of unavoidable uncertainty about the future.

But much of what the FTC does falls into the discretionary model, unmoored from both sound economics and judicial oversight. The discretionary and evolutionary models share a similar legal basis and so are often confused, but they’re profoundly different: The discretionary model harms technological progress and undermines the rule of law, while the evolutionary model promotes both.

Continue reading on Tech Dirt

I have a new post up at TechPolicyDaily that takes a historical perspective on Network Neutrality. The abstract is below. I had to cut a bunch out of the piece — I hope to add a bunch of the cut parts back in and post an extended version here later this week.

Read the full piece here.

Susan Crawford recently received the OneCommunity Broadband Hero Award for being a “tireless advocate for 21st century high capacity network access.” In her recent debate with Geoffrey Manne and Berin Szoka, she emphasized that there is little competition in broadband or between cable broadband and wireless, asserting that the main players have effectively divided the markets. As a result, she argues (as she did here at 17:29) that broadband and wireless providers “are deciding not to invest in the very expensive infrastructure because they are very happy with the profits they are getting now.” In the debate, Manne countered by pointing to substantial investment and innovation in both the wired and wireless broadband marketplaces, and arguing that this is not something monopolists insulated from competition do. So, who’s right?

Read the full piece here. 

Today’s oral argument in the D.C Circuit over the FCC’s Net Neutrality rules suggests that the case — Verizon v. FCC — is likely to turn on whether the Order impermissibly imposes common carrier regulation on broadband ISPs. If so, the FCC will lose, no matter what the court thinks of the Commission’s sharply contested claims of authority under the Telecommunications Act.

Read the full piece here.

We’ll be delving into today’s oral arguments at our live-streamed TechFreedom/ICLE event at 12:30 EDT — and tweeting on the #NetNeutrality hashtag.

But here are a few thoughts to help guide the frantic tea-leaf reading everyone will doubtless be engaged in after (and probably even during) the arguments

Read the full piece here.

On Monday the DC Circuit hears oral argument in Verizon v. FCC – the case challenging the FCC’s Open Internet Order.

Following the oral argument I’ll be participating in two events discussing the case.

Read the full piece here. 

My new FSF Perspectives piece, Let Them Eat Cake and Watch Netflix, was published today. This piece explores a tension in Susan Crawford’s recent Wired commentary on Pew’s 2013 Broadband Report.

I excerpt from the piece below. You can (and, I daresay, should!) read the whole thing here.

In her piece, after noting the persistence of the digital divide, Crawford turns to her critique of both Pew’s and the FCC’s definition of “high-speed internet” – 4 Mbps down/1 Mbps up – and the inclusion of mobile Internet access in these measurements. She argues that this definition … is too slow. What if you wanted to watch two HD quality videos at once over a single connection? […]

But the digital divide isn’t about people today not being able to watch movies on Netflix. And it’s definitely not about people today not being able to use future service that may or may not require the sort of infrastructure Crawford wants the government to build. […] It’s about the (very real) concern that, as civic and democratic institutions increasingly migrate online, those without basic Internet access or knowledge will be locked out of a vital civic and democratic forum. […]

None of [applications central to concerns about the digital divide] require bandwidth sufficient to stream high-quality video. Indeed, none of them should require such capacity. Another very real concern related to the digital divide is that various groups with disabilities – the deaf and blind, for instance – are already unable to avail themselves of these online forums because they rely too much on sophisticated multimedia formats to provide basic information. […]

I would suggest that a better target for Crawford’s efforts – if she is really concerned about lessening the digital divide (and I do fully believe that her convictions are well meaning and sincere) – would be to advocate for government institutions and other civic and democratic forums to develop online applications that do not require high-speed broadband connections. […]

In a world where consumers perceive a non-zero marginal cost for incremental bandwidth consumption – perhaps, as an example, a world with consumer bandwidth caps – there would be consumer demand for lower-bandwidth versions of websites and other Internet services. Rather than ratcheting bandwidth requirements consistently up – increasing the size of the digital divide – the self-interested decisions of consumers on the fortunate side of that divide could actually help shrink that divide. […]

The tragic thing (though, to economists, not surprising) about demands that the Internet economy disobey laws of supply and demand, that Internet providers offer consumers a service unconstrained by scarcity, is that such demands create the Internet-equivalent of bread lines. They are, in fact, the wedge that widens the digital divide.

Filed under: federal communications commission, law and economics, markets, net neutrality, regulation, telecommunications Tagged: bandwidth caps, Crawford, digital divide, FCC, net neutrality

Summary

This article assesses the FCC’s current policies and rules regarding transaction reviews, concluding that the Commission’s current spectrum transfer review process harms consumer welfare. In particular, the FCC’s spectrum screen as currently structured, its standard of review for spectrum transfers, its use of conditions, as well as the scope of its transaction reviews exceed legal limits, impede efficient markets for spectrum, and deter welfare-increasing transactions and investment.

First we explain the FCC’s current policies and decisions regarding transaction reviews and assess their appropriateness with respect to the Commission’s authorizing legislation, regulations and case law. With respect to the scope of its transaction reviews and its use of conditions in particular, we find that the FCC’s practices exceed their permissible limits.

Next we address the economics of the FCC’s policies and decisions, explaining and assessing the animating economic logic behind the FCC’s actions. We demonstrate that the FCC’s current spectrum screen and transaction review standards rest on the premise that spectrum concentration in markets inherently leads to anticompetitive behavior. Further, we explain the flaws in this premise.

In demonstrating and assessing the basis of the FCC’s transaction reviews, we discuss the particulars of the FCC’s spectrum screen in detail, focusing on its use of concentration metrics and claims that its full analysis (beyond the initial screen) investigates competitive conditions more broadly. As we discuss, the Commission uses HHIs and spectrum concentration measures improperly as de facto triggers for per se illegality, rather than triggers for further investigation. Further, none of the full analyses described by the Commission investigates an aspect of competition other than market or spectrum concentration; instead, they simply restate in more detail the structural analysis implied by the HHI test and spectrum screen.

Addressing the economics underlying the FCC’s actions, we demonstrate that both economic theory and evidence indicate that the presence of more competitors in telecommunications markets does not necessarily result in lower prices and better service for consumers. Particularly in industries (like wireless) that are characterized by rapid technological change, non-horizontal competitive constraints and shifting consumer demand, the threat of entry and the need for repeated contracts with input providers with market power operate to constrain strategic behavior, even in heavily concentrated markets.

The welfare effects of spectrum concentration are at worst ambiguous, and, as we demonstrate, as the market has grown more concentrated, investment, coverage and product diversity have increased while prices for consumers have decreased. These results are consistent with a more robust model of firm behavior in the industry that takes account of entry threats and technological change.

Next we undertake a detailed critique of the FCC staff’s analysis of the AT&T/T-Mobile merger, demonstrating that it exhibits the same flaws as the agency’s more cursory transaction reviews.

We conclude with a discussion of the policy implications and suggestions for reform.