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October 16, 2006

Two Good News Stories

The FCC made one good decision and one good non-decision last week.  The decision means that we all may have better over-the-air Internet access available in a few years.  This is a big deal.  The non-decision means that at&t MAY not get the same carte blanche from the FCC that it got from the Justice Department as it seeks approval to swallow up BellSouth.

A story in the Los Angeles Times says:

“The Federal Communications Commission on Thursday struck a compromise that would give technology companies some access to the white space between television channels while addressing broadcasters' fears that new gadgets could interfere with their signals.

“Under pressure from Congress, the FCC took the first step toward allowing fixed wireless devices, such as broadband receivers in homes, to use most of the vacant channels in any given market after the digital TV transition in February 2009.”

It used to be that an over-the-air TV channel needed a broad swatch of spectrum (radio frequencies) over which to broadcast its signal.  Old analog equipment is sloppy in its use of spectrum so “guard frequencies” had to be left unoccupied between channels to avoid interference.  The TV stations have been ordered to switch to digital format only by 2009, which makes it possible to broadcast the same amount or more content in much less spectrum, and to give back the extra spectrum they will no longer need.  There is a catch that some people (probably very few but certainly some) will still be using old TV receivers which don’t have digital capability.  Since they won’t be able to receive the new digital signal, there is a chance that political pressure will force Congress or the FCC to extend the deadline.  But probably not.

So the big question is who gets the newly freed up spectrum.  If you have been reading Fractals of Change lately, you know that I’m convinced that almost all spectrum ought to “free” – that is available for anyone to use like a highway so long as certain rules of the road are followed.  My theory is that when this nirvana arrives, the same data will always be available over the air that’s available over a wire and vice versa and that the airwaves will essentially become another Internet or at least an almost ubiquitous Internet access mechanism. It’s unquestionable that the recent innovation is radio use has disproportionately occurred in the shards of undesirable spectrum that are free today – WiFi is the poster child for how spectrum can be free and very useful.

It’s good that the FCC has decided to make this spectrum available for Internet access rather than auction it off for some dedicated content use.  However, this DOES NOT mean that they will make it free.  They could very easily decide to auction it off to cellular carriers or other players.  Again according to the LA Times:

“…And commissioners must decide whether to auction off the vacant spectrum for licensed use, as it does with cellphone bands, or allow free, unlicensed use, as is done with Wi-Fi and existing low-range devices such as baby monitors and garage door openers.”

“Free” has my vote.

In its non-decision, the FCC decided at least to take its time before rubber-stamping at&t’s application to buy BellSouth and almost complete the rebuilding of the old monopoly AT&T with mobile phone and Internet access new to the mix.  According to The Wall Street Journal (subscription required):

“The FCC concluded a meeting Friday without reaching a decision when the two Democrats on the commission asked for more time to study new concessions proposed by AT&T. The timing of any decision was thrown into doubt by the development.

“Two of the FCC's Republicans support the merger as proposed by the companies. But the FCC's two Democratic commissioners want to, among other demands, impose conditions on the newly-formed company's broadband Internet operations aimed at ensuring it treats all Internet traffic equally. The FCC's fifth member, Republican Robert McDowell, is expected to recuse himself from the vote due to his past telecommunications lobbying work.

“The Justice Department's antitrust division approved the merger on Wednesday after concluding the deal won't substantially harm competition across a broad swath of telecommunications services. The DOJ announcement prompted howls of protest from some consumer groups and members of Congress. Both want the FCC to more closely scrutinize the merger and require the companies to do more to ensure the deal doesn't have an anticompetitive impact.”

This merger needs lots of scrutiny and plenty of conditions if permitted.  We have plenty of indications of how at&t uses monopoly (or at least duopoly) power including CEO’s Ed Whitacre’s stated intent to charge Google, Vonage et al twice for using “his pipes” – actually the pipes we and Google and Vonage already pay for.  The new at&t has continued the old AT&T’s policy of overcharging American soldiers in Iraq for calls home.  And Bell South distinguished itself by trying to get the State of Louisiana to shut down the New Orleans municipal WiFi network which has been an enormous help in reconstruction and one of too few success stories besides the Saints from that still beleaguered city.

Jeff Pulver who knows both telecom and the FCC well is skeptical.  He is quoted in Business Week saying: “…whatever sound bites come out of this meeting, I don't believe that anything substantial will happen.”

Actually, the FCC decision and non-decision are related.  If spectrum is actually opened up and if it is not then auctioned off to at&t or the cable companies to extend their duopoly, if that spectrum is actually freed, my optimistic view is that entrepreneurs will use it to create so many  innovative alternatives to both cable and telco access that it won’t matter which remnant legacy telco swallows up which other obsolete remnant.

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