May 2014

FCC Chairman Wheeler Testifies Before House Communications and Technology

The House Commerce’s Committee’s Communications and Technology Subcommittee held a Federal Communications Commission oversight hearing on May 20. FCC Chairman Tom Wheeler was the only witness. House Republicans told Chairman Wheeler that they were troubled both by what the agency is doing, and what it is not. “Given some of the most recent actions out of the commission,” including the issuance of network neutrality rules and regulations governing coming auctions of airwaves for wireless broadband, “I fear that we may be headed into some rough waters,” Subcommittee Chairman Greg Walden (R-OR) said.

Actually, the criticism over net neutrality was fairly bipartisan, highlighting the controversy over Chairman Wheeler’s attempt to steer a middle path in the net neutrality debate. Republicans said Wheeler's plan goes too far, threatening to stifle the Internet's growth. Many Democrats think Wheeler's effort doesn't go far enough in asserting stronger regulatory powers to prevent broadband providers from charging companies more for higher-speed delivery of their content. Chairman Wheeler said his plan attempts to reinstate rules protecting Internet traffic that can stand up to legal review. "I understand that there is a great debate on this issue," Wheeler said. "I’ve consistently said that there is only one Internet. There’s not a fast Internet and a slow Internet ... and when the consumer buys access to the Internet, they are buying access to the full Internet and that’s what our rules attempt to protect," he said.

One key question is whether broadband providers should be subjected to tougher, utility-like regulation under the nation's telecommunications law. Republicans oppose any Net neutrality rules, arguing that the Internet has flourished in large part because it has been free from heavy government regulation. They are particularly upset about the idea of reclassifying Internet providers as so-called common carriers, similar to phone companies. Rep Anna Eshoo (D-CA), who represents Silicon Valley, also warned against the possibility that the proposed open Internet rules would allow broadband providers to offer faster access to their networks to companies willing and able to pay for that access. Lawmakers tried to pin down Wheeler on whether he opposed allowing paid prioritization. He said the agency recognizes that Internet providers would be disrupting a "virtuous cycle" between the demand for free-flowing information on one hand and new investment in network upgrades on the other if they started charging companies like Google for better access to consumers. What's more, he said, the FCC would have the legal authority to intervene. "If there is something that interferes with that virtuous cycle -- which I believe paid prioritization does [his emphasis] -- then we can move against it," Wheeler said. Wheeler cited network equipment manufacturers who've argued that you can't create a fast lane without worsening service for some Internet users. "That would be commercially unreasonable under our proposal," Chairman Wheeler said. Some Democrats said it should be banned. "If this concept moves forward, we could inadvertently block the next Google or Amazon from the market without even knowing it," said Rep. Doris Matsui (D-CA).

Chairman Walden also cited as troublesome the agency’s “selective inaction,” including its failure to complete its 2010 quadrennial review of broadcast ownership rules. Chairman Wheeler, who took office in late 2013, said earlier this year that the FCC would skip that long-delayed report in favor of a new, 2014 review of the rules.

Walden and full Commerce Committee Chairman Fred Upton (R-MI) also accused Wheeler of playing partisan politics -- citing reports that Wheeler sharing agenda items with Democratic commissioners a day before he shared them with the GOP commissioners.

Reining in the surveillance state

[Commentary] Sen Rand Paul’s (R-KY) strong libertarian principles have always differentiated him from many of his Republican colleagues. His outspokenness has many liberals and leftists asking a legitimate question: Why aren’t there more Democratic voices opposing the surveillance state?

Protecting civil liberties should be a critical piece of the progressive platform, but too many establishment Democrats and progressives have been silent on this issue simply because one of their own is in the White House.

Some Democrats in Congress have taken bold stands. Longtime civil-liberties champion (and former House Judiciary Committee chair) John Conyers has worked to limit the National Security Agency’s collection of bulk telephone data. Reps Keith Ellison of (D-MN) and Adam Schiff (D-CA) have probed the administration’s drone and surveillance programs. Rep Zoe Lofgren (D-CA) is pushing to prevent the NSA from weakening online encryption. In the Senate, Judiciary Committee chair Patrick Leahy (D-VT) has held oversight hearings questioning excessive surveillance. Even Dianne Feinstein (D-CA), chair of the Senate Select Committee on Intelligence and normally a committed defender of the intelligence community, finally spoke out after discovering that the CIA spied on Senate staffers. And recently, Sens Mark Udall (D-NM) and Ron Wyden (D-OR) sent a letter to Solicitor General Donald B. Verrilli Jr., strongly criticizing a “culture of misinformation” that has resulted in “misleading statements . . . about domestic surveillance.” And Sen Bernie Sanders (I-VT) has proposed a bill limiting FBI and NSA spying.

Still, too many Democrats and even progressives are reluctant to challenge the Obama Administration, either because they don’t want to criticize a besieged president or because they’re focused on other priorities. As they stay silent, a host of troubling policies, including the assassination of US citizens without due process, the prosecution of record numbers of journalists and whistleblowers, the unaccountable growth of the surveillance state and the vast expansion of the drone program, are proliferating unchecked.

Round 2 in Rep Amash's offensive on NSA

Rep Justin Amash (R-MI) wants to stop the government’s snooping on people’s phone calls any way he can.

The libertarian stalwart filed two amendments to the annual defense spending bill that would effectively prevent the National Security Agency (NSA) from collecting and storing bulk records about domestic phone calls. The strategy is reminiscent of a nearly successful move that came within seven votes of passage shortly after revelations about the NSA emerged from documents leaked by Edward Snowden.

The new measures are meant as a “backstop” in case a more comprehensive NSA reform bill does not get to the House floor, according to Amash's chief of staff, Will Adams. The legislation could be slated for a floor vote, but so far no session has been scheduled.

Accelerated Lobbying: Bipartisan House Appeal to Reject Title II

Two new reports demonstrate the accelerating scale of Washington lobbying in connection with the Comcast/Time Warner Cable merger and with the Federal Communications Commission's network neutrality proceeding.

Comcast is currently registered with 40 firms, and it spent $5 million lobbying Congress during the first quarter of 2014, according to Senate reports as quoted in Politico, which calls Comcast's campaign "a K Street stimulus package." Among Comcast's recent lobbying recruits is Joseph Gibson, who once served as chief minority counsel for the House Judiciary Committee and also as chief of staff for Rep. Lamar Smith (R-Texas), a former chairman of that committee.

For its part, Time Warner Cable has spent $33 million so far in 2014, according to official records.

Separately, Maplight, a Berkeley (CA) organization that compiles data about campaign contributions, has identified 28 House of Representatives members -- including Speaker John Boehner (R-OH), Majority Leader Eric Cantor (R-VA) and Communications Subcommittee Chairman Greg Walden (R-OR) -- who have urged the FCC not to adopt a Title II reclassification of the Internet and who also have received well-above-average campaign contributions from the cable industry.

The 28 House members (eight Republicans and 20 Democrats) who signed one of three recent letters to FCC chairman Tom Wheeler have received an average of $26,832 in contributions from the cable industry, says Maplight. That sum is 2.3 times more money than the average for all members of the House of Representatives, $11,651, according to Maplight's research.

Overall, Republicans signing the letters to the FCC have received, on average, $59,812 from the cable industry, five times more than average contributions to House members; Democrats signing the letters received an average of $13,640 from the cable industry, 1.2 times more than the average, according to the Maplight analysis.

Maplight tallies 29 members of Congress who own stock in Comcast, making Comcast the 25th most held stock among members of Congress. Minority Leader Rep. Nancy Pelosi (D-CA) owns more Comcast stock than any other member.

According to Maplight's tally of campaign contributions "from cable interests" since 2012, the top recipients who signed the recent letters to Chairman Wheeler are Reps Walden (who received $109,250), Cantor ($80,800), Boehner ($75,450), Upton ($65,000) and Barrow ($60,500).

Why Comcast, AT&T Are Splurging: Leverage

Comcast and AT&T have already pledged $112 billion for two acquisitions in the past few months, and this is only the beginning of a feverish few years of dealmaking, according to a new report by Ernst & Young.

This is the second report in as many weeks projecting billions of dollars will change hands as media conglomerates try to outflank competitors and new rivals by getting bigger.

With the rise of YouTube, Netflix and Hulu, traditional media and cable companies are consolidating to dictate terms as best they can. Comcast and AT&T want to provide video and Internet services -- without paying an arm and a leg for those videos.

“Size matters,” Tom Connolly, Global Leader of Media & Entertainment, Transaction Advisory Services at Ernst & Young, told TheWrap. “These companies want to do what they can to maximize geographic reach and customer reach for when they are negotiating.”

Time Warner, Disney and Comcast want to own as many different producers of content as they can, so that the people who own the pipes must deal with them if they want high-quality product.

Executives remain optimistic about the future, according to the report, but these deals could cost people their jobs. Companies will reduce the size of their work force, eliminating redundancies as they acquire companies that perform some of the same functions.

Is Netflix’s place in the slow lane?

[Commentary] The recent interest in network neutrality has been spurred on by Netflix’s fight with Comcast for a fast lane. Should Netflix itself have a fast lane?

Why does Netflix exist only as a streaming format instead of with a local storage option? And why is it shelling out money for what seems to be an inefficient solution? If I had to guess it is because (a) consumers don’t have the alternative option and (b) storage rights cannot be easily negotiated with video copyright holders because they fear that storage leads to piracy while streaming is somehow safer. That last one has worked out so well since users don’t know how to share passwords!

But I think that streaming video is a puzzle. And Net Neutrality advocates should be concerned about this. If network congestion is a real thing -- and I suspect it is -- then streaming video (in all its forms) is currently the culprit.

The concern is that congestion is itself causing a barrier to start-ups who may have a legitimate reason for real-time bandwidth. We need to think creatively about empowering consumers to put Netflix and others in their right place in the queue. At the moment, that market force does not seem to be present.

Want a level playing field for telcos and OTTs? Try deregulating

[Commentary] There is currently a sweeping debate in the EU about the need for a level playing field between telecommunications operators and Over-the-Top service providers (OTTs).

OTTs are agents that offer telecommunication services (such as telephony, texting, or TV) over basic data or Internet connectivity. Examples of widely known OTTs are WhatsApp, Skype, and Netflix.

At first sight, there are two basic ways to achieve a level playing field: 1) remove regulation on the telco sector, so that both OTTs and telco operators are unregulated, or 2) regulate OTTs in the same way as telco services. So, what kind of level playing field would most benefit consumers? In short, the lack of a level playing field has two basic effects: Transfer of wealth from regulated to unregulated activities, i.e. from telco operators to OTT providers.

Possible unsustainability of the regulated activities and, in consequence, of the whole value chain. This insight should be considered when deciding how to achieve the level playing field between telco operators and OTTs. Recall there are two basic options: 1) de-regulate the telco market or 2) apply the same regulation to OTTs and telcos. Both options will eliminate the transfer of wealth across the activities in the value chain, but only the first option is able to stop the second effect -- value chain unsustainability. In fact, a level playing field achieved through regulation of OTTs would encourage the transfer of wealth from the Internet value chain to other economic sectors.

In other words, telco operators would still lose value, not to other agents in the Internet sector, but rather to other completely different and possibly unconnected sectors. And OTTs would of course lose value. In sum, it seems that, from an economic theory perspective, the only level playing field compatible with telco, OTTs, and consumer interest in general is the unregulated level playing field.

[Herrera-González is Regulatory Economic Manager at Telefónica]

Nearly 1.2 Million Add Broadband In The First Quarter Of 2014

Leichtman Research Group found that the seventeen largest cable and telephone providers in the US -- representing about 93% of the market -- acquired nearly 1.2 million net additional high-speed Internet subscribers in the first quarter of 2014.

These top broadband providers now account for over 85.5 million subscribers -- with top cable companies having 50.3 million broadband subscribers, and top telephone companies having over 35.2 million subscribers. Other broadband findings for the quarter include:

Overall, broadband additions in 1Q 2014 amounted to 105% of those in 1Q 2013
The top cable companies accounted for 83% of the net broadband additions for the quarter versus the top telephone companies
The top cable companies added about 970,000 subscribers, representing 121% of the net additions for the top cable companies in 1Q 2013
The top telephone companies added about 200,000 subscribers, 64% of the total net additions for the top telephone companies in 1Q 2013
AT&T and Verizon added 732,000 subscribers via U-verse and FiOS in 1Q 2014, while having a net loss of 638,000 DSL subscribers. U-verse and FiOS broadband subscribers now account for 49% of Telco broadband subscribers -- compared to 40% in 2013
The top cable broadband providers have a 59% share of the market versus Telcos, with about 15.1 million more subscribers than the top telephone companies -- compared to 13.1 million more a year ago

Chattanooga's super-fast publicly owned Internet

Chattanooga (TN) may not be the first place that springs to mind when it comes to cutting-edge technology. But thanks to its ultra-high-speed Internet, the city has established itself as a center for innovation -- and an encouraging example for those frustrated with slow speeds and high costs from private broadband providers.

Chattanooga rolled out a fiber-optic network a few years ago that now offers speeds of up to 1000 Megabits per second, or 1 gigabit, for just $70 a month. A cheaper 100 Megabit plan costs $58 per month. Even the slower plan is still light-years ahead of the average US connection speed, which stood at 9.8 megabits per second as of late 2013, according to Akamai Technologies.

As federal officials find themselves at the center of controversy over net neutrality and the regulation of private Internet service providers like Comcast and Time Warner Cable, Chattanooga offers an alternative model for keeping people connected. A city-owned agency, the Electric Power Board, runs its own network, offering higher-speed service than any of its private-sector competitors can manage.

The Federal Communications Commission recognizes the potential of municipality-run broadband, saying in early 2014 that it will push for the repeal of state and local laws supported by the cable industry that make it harder for cities to set up their own networks.

Chattanooga officials say the network has helped spark a burgeoning local tech scene and the relocation of a number of businesses, drawn by both the fast Internet and the reliability offered by the smart grid.

How Older Americans Can Stay Safe, Stay Healthy and Stay Connected

Why are many older Americans still hesitant to buy mobile phones, tablets or other devices, access the Internet or become broadband adopters?

According to recent studies, many seniors say they shy away from using new devices because they are not sure how to use them or have trouble seeing the display, using the touch screens, hearing the prompts or learning the appropriate commands. Some are afraid to ask for help or simply don’t know where to get the help they need.

A recent Pew study shows 77 percent of seniors are willing to learn how to use tablets and smartphones, but indicated they would need some assistance. To raise awareness of the benefits of broadband-enabled communications technology and to help facilitate its use, the FCC’s Consumer and Governmental Affairs Bureau is hosting a special event May 22, 2014, in recognition of Older Americans Month. Presentations and demonstrations will show older Americans, their families and caregivers how they can Stay Safe, Stay Healthy and Stay Connected.

The FCC event will highlight new programs, phone apps, government websites, and discuss how to harness these new resources to maximize access and facilitate healthy, connected living from home. The program will feature consumer information about: staying safe online, text alerts, communicating during emergencies, technologies for people with disabilities, aging in place, telemedicine, digital literacy, and remote access to loved ones and health care providers.

[Coho is in the FCC’s Consumer Affairs and Outreach Division]

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