Tag Archives: monopoly

FCC makes flabby broadband victory claims in a thin press release

by Steve Blum • , ,

Sumo suits

In a press release heavy on spin and very light on data, the Federal Communications Commission claimed broadband “is being deployed on a reasonable and timely basis” because the number of people without access to service at a minimum of 25 Mbps download and 3 Mbps upload speeds decreased by 25% in 2017. The reason for this stunning achievement? “FCC reforms”.

But a closer look at the cherrypicked data in the release shows that this feat isn’t so amazing after all.

The “more than 25% drop in Americans lacking access to fixed broadband” claim doesn’t mean that the percentage of unserved dropped from, say, 50% to 25%. The way the press release states it kinda makes you think that’s the case, but when you crunch the numbers you realise that the 6.5 million people who gained access represents about 2% of the population – overall, the number of unserved people dropped from 8% of the U.S. population to 6%.

That’s if you take the FCC’s numbers at face value. Which isn’t a smart thing to do. Yet. The full report, with supporting data, hasn’t been released. Commissioner Jessica Rosenworcel, a democrat, has seen it, though. Her tweeted response is “I beg to differ”.

One key question is where did the data come from?

If, as is likely, it comes directly from the availability reports filed by providers, it might represent increased reporting, rather than increased availability. The number of existing providers filing FCC availability reports – particularly fixed wireless operators of dubious performance – has increased over the past few years, and incumbent wireline operators have become more creative in their claims.

Another bit of manifest nonsense is that policies adopted by the republican majority on the FCC have much to do with actual improvements. The FCC’s claims are based on data that is current as of December 2017, less than a year after the Trump administration was sworn in, and the same month that the republican majority approved its first major policy change, the repeal of network neutrality regulations. For nearly all of 2017, the broadband industry played by Obama era rules.

A 2% increase in the number of people with access to moderately fast broadband would be a notable achievement. We won’t know if that number is legitimate until the FCC publishes all the data its claim is based on. According to the press release, that’s expected “in the coming weeks”.

T-Mobile’s merger with Sprint could get even closer scrutiny in California

by Steve Blum • , , , ,

Californian opponents of T-Mobile’s proposed takeover of Sprint want more hearings and another round of written evidence and rebuttals, before the California Public Utilities Commission moves ahead with approving or rejecting it. Prior to last week’s hearings, the CPUC in-house consumer advocacy unit – the public advocates office (PAO) – asked the administrative law judge hearing the case to, in effect, slow the proceeding down to give them time to review four thousand pages of testimony and evidence that T-Mobile and Sprint dropped on them. The PAO is recommending that the CPUC not allow the merger to take place.

After the hearings, other opponents – two private consumer advocacy groups, TURN and the Greenlining Institute, and the Communications Workers of America (CWA), a telecoms labor union – endorsed the request for more testimony and hearings. As CWA put it

Justifying an application for the first time with 4,000 pages of “rebuttal testimony” is entirely improper and violates intervenors’ due process rights. The Commission has held that “[p]roviding the basic justification in rebuttal is unfair, since parties are not generally given the opportunity to respond to rebuttal with testimony of their own.”

Sprint and T-Mobile naturally don’t agree. They submitted more than 250 pages of additional material that argues that there was nothing in the 4,000 pages that was particularly new or didn’t directly respond to points previously made by opponents to the deal. The companies particularly object to adding more hearings and filings because doing so “would substantially disrupt the schedule adopted by the Commission – adding at least six weeks of unjustified delay”.

The Federal Communications Commission is also reviewing the proposed merger. Assuming there isn’t another federal government shutdown, it’s scheduled to reach a decision by the end of May. Even if the CPUC’s review remains on its original track, it could run even longer than that.

Collected documents from the CPUC’s review of the proposed merger of Sprint and T-Mobile.

T-Mobile tries to make California merger case with soft engineering and hard hype

by Steve Blum • , , , ,

Ebbc mobile broadband availability 2012

T-Mobile and Sprint claim that if they are allowed to merge, then California will see “enormous public-interest benefits”. That’s what the companies told the California Public Utilities Commission in testimony submitted as part of the regulatory review of their proposed deal. That claim is founded in large part on T-Mobile’s description of a glorious 5G future that includes download speeds of up to half a gigabit and coverage that reaches deep into the most rural areas of California.

The catch is that this wonderfulness is “projected” and not promised. Even if the infrastructure is built, T-Mobile’s president, Michael Sievert, is careful to add a footnote in small print that reminds us…

Average data rate is not equivalent to the actual user experience. The user experience will be affected by a number of variable factors, including received signal strength, location of the mobile device and base station, and whether the device is in motion, among others.

His testimony is supplemented with an impressive collection of county by county maps offered by his chief technology officer, Neville Ray, that show how much better 5G service will be if T-Mobile can scoop up Sprint. It appears that Ray is assuming that Sprint won’t grow much – his projections for Sprint’s 5G coverage area look a lot like its current 4G and below footprint.

The real problem is that this sort of modelling produces coverage predictions that far outstrip actual results. An example is shown above. It’s two mobile broadband coverage maps for the east San Francisco Bay Area posted by the CPUC in 2012. The one on the left is an aggregate of the availability reports generated by the four major mobile carriers using predictive modelling, the one on the right is based on actual mobile download tests conducted by the CPUC, and then run through the same process. The carriers claimed nearly everything was green, the color of good and great. The CPUC’s measurements showed that service in most of the region is brown to yellow, the color of, well, you get the picture.

Oral testimony in the case begins today in a CPUC courtroom in San Francisco. We can only hope that it won’t be as larded with marketing hype as T-Mobile’s and Sprint’s written statements.

Collected documents from the CPUC’s review of the proposed merger of Sprint and T-Mobile.

T-Mobile-Sprint merger gets a hard look in California this week

by Steve Blum • , , , ,

California’s review of the proposed merger of T-Mobile and Sprint goes into high gear on Wednesday. The California Public Utilities Commission will hold a hearing to allow lawyers for the two companies and the organisations that oppose the deal to cross examine experts, and others, who submitted written testimony about it. Three days have been blocked out, although it might not go that long.

The best supported and most coherent opposition to the merger comes from the CPUC’s in-house watchdog unit, the public advocates office (formerly known as the office of ratepayer advocates). It submitted lengthy arguments and a tall stack of data that shows why tipping the mobile broadband market into oligopoly status is a very bad idea

The Commission should deny the proposed transaction because of the irreparable damage to competition in the wireless market and the low-income customer markets as well as the absence of specific, measurable, and verifiable benefits to the merger. The loss of a competitive player in these markets would create significant risk of parallel conduct and higher pricing for consumers. This pricing risk is demonstrated by the two largest players in the wireless market today, AT&T and Verizon, which generally offer higher-priced plans than T-Mobile and Sprint. New T-Mobile would rival or exceed these companies in market share, creating a strong incentive for oligopolist behavior. New T-Mobile would also comprise nearly 60 percent of the wireless prepaid market that predominantly serves low-income customers, pacing excessive market power under the control of a single company and creating a virtual monopoly over these services. Because [T-Mobile and Sprint] are not under [traditional wireline telephone rate] regulation, protections cannot be implemented that are adequately enforceable and verifiable to address these risks.

Just so. The CPUC has little authority over mobile carriers, and none where mainstream consumer pricing is concerned. It can impose conditions on any approval of the merger – the public advocates office suggests some as a fall back position – but those would provide only temporary and limited protection to Californian consumers.

The best way – the only way in this case – to fix a problem is to not cause it in the first place.

Other groups with a stake in the outcome have also jumped in. The California Emerging Technology Fund (CETF) and the Greenlining Institute expressed concern about the proposed merger’s impact on low income and minority communities, but didn’t particularly object to it so long as money and other benefits were required as mitigation. It’s worth noting that CETF’s primary source of funding is money extracted from companies that have had mergers or similar consolidations under review at the CPUC, and Greenlining relies on so called intervenor compensation from the CPUC, and companies appearing before it, as a reward for raising such issues.

The Communications Workers of America also has a dog in the fight. At this point, the union wants the merger blocked, claiming it would “would result in the loss of 3,432 jobs in California”, but it also left the door open to a settlement. In the past, CWA has opposed telecoms mergers, but then flipped and supported them once its needs were met.

T-Mobile and Sprint naturally objected to all these statements, filing detailed rebuttals, and scheduling time for cross examination at this week’s hearing. I intend to write a future post about those rebuttals, but if you want to read them yourself, you can find it all here:

Collected documents from the CPUC’s review of the proposed merger of Sprint and T-Mobile.

U.S. broadband is expensive, even more so where bundles aren’t available

by Steve Blum • , , , ,

Us ave broadband price 2feb2018

The U.S. is in the bottom half of the broadband price league table, according to a report by the Federal Communications Commission. It was published last February, but I just unearthed it and had a chance to take a hard look at the numbers. When you take both standalone and bundled Internet service packages into account, and weight it by the FCC’s market share figures of 25% standalone and 75% bundled subscriptions, the average monthly price ranges from $38 per month to $74 per month, depending on speed.

As you can see from the table above, bundled prices are noticeably cheaper than standalone rates. That implies that broadband service is significantly more expensive in rural areas, where bundle-happy cable operators do not go and expensive Internet-only wireless providers are common.

The FCC used three methods to compare broadband prices in the U.S. to other developed countries. Two were relatively straightforward comparisons, that show that broadband costs more in the U.S. than in most of the other countries studied…

For fixed broadband prices, under the first method comparing unweighted average prices, the United States ranks 18th out of 23 countries that offer fixed standalone broadband plans with download speeds of at least 25 Mbps and less than 100 Mbps, and 26th out of 28 countries that have fixed standalone plans with download speeds of 100 Mbps or greater. When taking into account fixed broadband bundled with video service, the United States ranks 10th out of 20 countries with download speeds of at least 25 Mbps and less than 100 Mbps. For the highest speed bundle plans with download speeds of 100 Mbps or greater, fixed broadband in the United States ranks 23rd out of 25 countries that offer such plans. Using the second approach, the fixed broadband price index analysis, the United States ranks 21st out of 29 countries aggregating both standalone and bundled broadband products.

The third method – a more complicated regression analysis – bumped the U.S. up the charts to number 7. It tries to account for cost differences between countries, and reckons that because customers have so much more online content available in the U.S., broadband is really cheaper because it’s worth so much. Or something like that. On a cash out of pocket basis, it’s still expensive, though.

New year but old questions for technology and telecoms policymakers

by Steve Blum • , , , ,

Five major broadband issues will top the public policy charts in California and at the federal level in 2019. In no particular order…

  • Net neutrality – The ball is in a federal appeals court in Washington, D.C., where arguments will be heard in February over whether the Federal Communications Commission acted properly in 2017 when it declared broadband is not a telecommunications service. California’s net neutrality law is on hold until that case plays out, which could take years. Congress is unlikely to act. In 2018, house democrats couldn’t even agree amongst themselves whether to overturn the FCC decision.
  • Privacy and data ownership – Big corporations with big political budgets will be urging congress, on the one hand, to preempt state privacy legislation with friendlier federal rules, and on the other hand they’ll be trying to water down California’s new privacy law. A bill that’s already been introduced in Sacramento could do that. The larger debate – who owns customer data, consumers themselves or the companies they share it with? – is just beginning. Congress, courts, regulators and administrators will be involved, but tech companies can get in front of the issue. 2019 is their opportunity to offer answers. If they don’t, governments will decide for them.
  • Monopoly vs. competition – Courts and regulatory agencies will decide whether competition continues to shrink as monopoly model ISPs grow. T-Mobile’s takeover of Sprint is under review by the FCC and the CPUC. The federal justice department gets a look too, and it continues to challenge AT&T’s purchase of Time Warner in court. Cable and telco lobbyists are whispering wishes into compliant republican ears at the FCC, this time with the aim of killing municipal broadband competitors. The CPUC looks at broadband affordability and the future of PG&E, one of the few remaining sources of independent dark fiber. It also has to decide if it’s serious about the conditions it puts on mergers and acquisitions, as it did with Charter’s purchase of Time Warner cable systems.
  • Local ownership and authority – Another federal court fight heats up, as an FCC order regarding wireless facilities is otherwise set to take effect on 14 January 2018. It limits what local government can do with property they own in the public right of way, restricts their authority to review permit applications, and sets shorter shot clocks for decisions. Lobbyists and lawyers for mobile carriers are already using the order to try to force cities to do their bidding, and they’ll be handing out cash to legislators in Sacramento, while asking them to bake FCC rules into California law.
  • Broadband infrastructure subsidies – Applications for grants from the rebooted California Advanced Services Fund (CASF) are due in April, and in a couple of weeks incumbent Internet service providers have a chance to exercise the right of the first night first refusal that California lawmakers gave them in 2017. Cash payments from AT&T, Comcast, Charter and other monopoly model ISPs tilted the playing field. The California Public Utilities Commission tried to level it a bit; we’ll see in the next few months whether CASF will improve broadband access in rural California, or simply be a $300 million slush fund for telcos and cable companies. The federal agriculture department is rolling out a $600 million rural broadband grant and loan program, with billions more on the way, and it’s better designed to benefit rural communities.

The players are changing, too. New CPUC and FCC commissioners will take their seats, and a new administration takes office in Sacramento. Not much has changed at the California legislature, though. Democrats have a super majority in both houses, with familiar faces leading key telecoms committees. Charter, Comcast, AT&T and Frontier know where to send the checks.

FCC’s economic illiteracy on display in muni property preemption fight

by Steve Blum • , , , ,

Sometimes the real story is in the footnotes. That’s the case with a Federal Communications Commission denial of a request to delay enforcement of its September order that would, if upheld by federal courts, take away property rights from local governments. In the denial, the FCC tries to make its case with economic nonsense: that the market value of an asset is only determined only by its “actual and direct costs”.

The market value of anything is determined by the balance between its perceived worth to the buyer and the seller. In a competitive market, the perceived worth to the seller is based primarily on two factors: the cost to make one more of the item and the profit the seller needs to stay in business. The seller’s opinion of the value the buyer places on the item also plays a role.

The FCC’s argument focuses on a single sell-side factor, ignores everything else – including buy-side valuation – and conflates practical competition with a perfectly competitive market (a mythical beast much beloved by theoretical economists).

It’s the buy-side valuation, which is based on the buyer’s expectation of generating a return from ownership of the asset, that allows a seller to legitimately maximise profit in a normally competitive market.

In the September wireless order, the FCC said that any city or county-owned assets (e.g. light poles) that are located in the public right of way and useful to mobile broadband companies, don’t actually belong to local agencies. Instead, those assets are supposed to be made available on an open access basis, under the same cost-based terms that apply to, say, installation of a utility pole.

Over the past couple of years, Californian cities and the mobile industry – carriers and infrastructure companies – have been negotiating deals for bulk leases of street lights and other municipal assets. Some cities can command a higher price than others. In and around Silicon Valley, $1,500 per pole per year is a rate that’s often mutually agreeable. In other parts of the state, the figure can be more or, usually, less than that. The amount of revenue that a carrier expects to generate from the pole leases is a major factor.

Artificially lowering the price to $270 per year, as the FCC is attempting to do, amounts to a subsidy, extracted from a city and given to a private company that would otherwise be willing to pay more, based on its profitability expectations.

Contrary to what the FCC states, there is a competitive market for pole access. Mobile carriers can install utility poles in the public right of way, lease space on private property or share facilities with their competitors. Using existing light poles is not a requirement, it’s a cost saving measure. By negotiating a price with a city – which would not want to see more poles cluttering up the right of way or to lose out on revenue – the benefits are fairly split between the buyer and the seller.

Profit is dirty word in the public sector and euphemisms such as “surplus” or “deferred spending” are usually employed. But whatever you call it, it’s a completely legitimate – and sometimes legally required – goal for a city.

Partisan shift in Congress could influence anti-trust reviews of T-Mobile’s takeover of Sprint

by Steve Blum • , , , ,

The flip from a republican majority to a democratic one in the federal house of representatives has opened a window of opportunity for, among others, those opposed to T-Mobile’s planned takeover of Sprint. A coalition of fourteen labor organisations and a wide range of advocacy are urging the presumed incoming chairmen of the house judiciary, and energy and commerce committees to investigate the “likely effects” of the deal.

In a letter sent yesterday (h/t to a story by Harper Neidig in the Hill for the pointer), the groups reminded representatives Jerry Nadler (D – New York) and Frank Pallone (D – New Jersey) that they spoke out against the merger when democrats were the minority party, that they should follow through now that they’re in the majority…

Representative Pallone, on April 30th you and Representative Doyle wrote to Chairman Walden and Chairman Blackburn requesting a hearing on the proposed Sprint/T-Mobile merger. You correctly pointed out that due to its “primary jurisdiction over the wireless industry, [the Energy and Commerce Committee has] a responsibility to understand the potential effect of this merger on consumers, workers, and the communications market.” You added that “the merger would create a new wireless behemoth by shrinking the number of nationwide wireless providers from four to three.” You went on to say that the Committee should explore the merged entity’s foreign ownership; whether 5G deployment is helped by the proposed merger, despite the fact that both T-Mobile and Sprint have invested in 5G already; and the state of wireless competition.

We agree. We hope you will now announce your intent to schedule exactly this kind of hearing.

The groups include the Greenlining Institute and the Communications Workers of America, which are also opposing the merger at the California Public Utilities Commission.

Congress has no direct role when it comes to reviewing mergers. At the federal level, that job falls to the justice department and the Federal Communications Commission. But they do have to answer to congress, at one level or another.

Investor-owned electric utilities won’t be California’s competitive broadband hope

by Steve Blum • , , , ,

The door has officially closed on expansions of Pacific Gas and Electric’s and Southern California Edison’s telecommunications businesses. It’s a small issue compared to the wildfire disasters that both companies are grappling with, but it could have a significant and ongoing effect on California’s uncompetitive broadband services market.

At its last meeting, the California Public Utilities Commission voted to allow PG&E to withdraw its application to become a certified telecommunications company. It applied last year, hoping to make better use of the 2,600 miles of fiber optic routes it owns in northern California. It ran into the same knee-jerk reaction from so called consumer advocates, who don’t seem to realise that electric customers and broadband subscribers are the same people, as SCE did when it unsuccessfully asked for permission to streamline telecoms business requirements placed on it by the CPUC.

The CPUC’s decision rewards the efforts of the consumer groups and industry lobbyists who intervened in its review of PG&E request. The decision specifically allows them to apply for “intervenor compensation”, which has to be paid by PG&E, even though no decision was reached on the merits of the case. The decision calls their efforts a “substantial contribution” that expanded “the scope of this proceeding from the usual scope of applications for [telecom company certification]”.

They certainly did that. By making a grab for any likely profits PG&E (and SCE) might make from putting valuable dark fiber on the market and from offering other telecoms services that would offer competition to monopoly model telephone and cable companies, the intervenors and the commissioners who accepted their arguments killed the business case. It’s a victory for the lawyers and lobbyists who can now send their bills to PG&E, and for companies like AT&T, Comcast, Charter and Frontier, who would prefer to keep California’s telecoms market under their control.

It’s a defeat for everyone else.

FCC’s broadband market share data shows urban/rural technology divide and decline of DSL

by Steve Blum • , , , ,

There’s a lot to chew over in the Federal Communications Commission’s latest report on broadband subscribers in the U.S. Just one of the many charts (pictured above) tells an interesting story about how people in the U.S. get fixed broadband service in their homes. Two conclusions jump out immediately: cable companies are winning the fight for broadband market share, but the availability of cable modem, fiber to the premise or other wireline service depends population density.

In other words, high density urban areas, and medium to high density suburbs are likelier to have high speed service via direct fiber or coaxial cable service, while people in rural areas are likelier to have to depend on fixed wireless or satellite providers.

DSL service, of whatever generation of technology, is fading into irrelevance. It is significantly less popular than cable modem service. Nationally, 62% of all fixed residential broadband service (defined as better than 200 Kbps in at least one direction) is delivered via cable modem, while telco style DSL accounts for 24%, and FTTP for 12%. But when usable service levels are examined, telco DSL craters, accounting for 13% of connections at 10 Mbps download and 1 Mbps upload speeds or better, and only 4% at speeds of at least 25 Mbps down and 3 Mbps up. The former is the FCC’s minimum for its $3 billion broadband subsidy program – the Connect America Fund – while the latter is the FCC’s and federal agriculture department’s minimum benchmark for what they call “advanced services” and what everyone else considers to be run of the mill Internet use in 2018.

The overall trend in California is the same, according to the study, which is based on reports filed by service providers as of 30 June 2017. It doesn’t break out residential and business connections, but market share figures for total connections tell a similar story: cable accounts for 64% of all broadband connections, telco DSL is at 28%, FTTP is at 8% and fixed wireless has about 1%.