Telecom

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Flaws Remain in OTI’s “Cost of Connectivity”

The Open Technology Institute recently released the latest version of its “Cost of Connectivity” report. We at ITIF have repeatedly criticized past “Cost of Connectivity” reports for their flawed methodology (criticisms, by the way, shared with many others). The most recent OTI report continues this tradition, relying only on advertised broadband plans in a handful of cities. In keeping with this tradition, we offer the following constructive criticism in hopes that OTI will continue to improve their methodology going forward. One big improvement in this year’s report is the decision to drop the comparison of “Triple Play” bundles, with the recognition that the variation in cost and quality of programming bundles from country to country is too great to offer a meaningful comparison. Hopefully next year’s report will recognize the U.S. broadband market for the success it is and leave us with even less ammo for criticism.

It is not clear that we can draw any real conclusions from this year’s collection of data, given the tiny sample size and the disparity between advertised and actual speeds in Europe, not to mention the remarkable differences in history, culture, and … Read the rest

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Harry Reid, Title II, and The Rashomon Effect

Rashomon, for those readers who aren’t big film buffs, is a 1950’s Japanese masterpiece about a rape and murder mystery told through four different points of view. The film’s brilliant technique, now commonplace in modern narratives, presents different witnesses’ contradictory, self-serving accounts of the crimes with the audience left to sort out the truth. All the spin in policy debates these days can make interpreting current events feel like a similar exercise, with some advocates being all too eager to seize on and promote a particular interpretation, no matter how strained it may be. Case in point: Harry Reid’s recent letter to David Segal of Demand Progress on net neutrality.

Appreciating the subtleties of Reid’s letter requires some context. The most recent iteration of the now decade-long debate over net neutrality has actually seen widespread agreement over the general principles of the open Internet. All the major carriers insist they have no interest blocking or degrading traffic or splitting up websites into tiers or packages. The real controversy is over the appropriate jurisdictional framework for the FCC to build its rules on. There are two possible starting points: either … Read the rest

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Interconnection: Towards a New Regime

Internet interconnection usually doesn’t make for big news. The term refers to the agreements that connect up the Internet’s component networks and since they usually “just work” they rarely attract the media’s spotlight. We don’t particularly care how our House of Cards gets to our screen or whether our video bits travel long distance though a transit provider or cached closer to home on a content delivery network (CDN), so long as it works.  So long as it works. Now old news, it was around October when some Netflix users first began seeing their streams slow.

This touched off a rather public spat, with a back and forth of blog posts from Netflix and Verizon. Tensions rose after Netflix began placing notices on customer’s screens accusing Verizon’s network for the slow streams. Verizon responded with a cease and desist with which Netflix appears to have complied. On top of all this, FCC Chairman Tom Wheeler recently released a statement announcing a relatively informal investigation into recent interconnection deals.

On Wednesday, at an event hosted by the Congressional Internet Caucus Advisory Committee, David Clark, noted Internet engineer and MIT researcher, … Read the rest

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Net Neutrality Misunderstandings

The Wall Street Journal reported Wednesday that FCC Chairman Tom Wheeler was set to circulate a draft of rules to be proposed to codify net neutrality. This initial story prompted a sudden outpouring of inaccurate reporting and misplaced vitriol. There are a number of unfortunate misunderstandings ITIF would like to help clear up in the hopes that Chairman Wheeler is not deterred from what is a very reasonable approach to a difficult policy problem. The Chairman took to the FCC blog on Thursday to try to “set the record straight,” unfortunately, with today’s powerful echo-chambers and viral proliferation of over-reactions, setting the record straight is a very difficult task.

Chairman Wheeler explained that he intends to propose rules that will allow for a case-by-case analysis of traffic management, allowing practices that are “commercially reasonable” to all on reasonable terms. Any type of practice that harms competition or consumers as a result of abuse of market power would be prohibited. ITIF has long been an advocate for these types of restrictions on broadband providers.

We believe the general direction of Wheeler’s proposals to be a good balance between protecting consumers and … Read the rest

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Cable, A Monopoly… If You Ignore Competitors

In arguing that “American regulators should block Comcast’s proposed deal with Time Warner Cable,” a recent article in The Economist displays a surprising number of misunderstandings about how our broadband and television markets work. The magazine argues that the combined firm, by having 30% of pay TV subscribers, will be just too big, a “fearsome” “Goliath” that will force only its own content upon its subscribers and only at a trickle. Strange words from a publication with a column named after Schumpeter.

The first stunner comes with the assertion that Comcast has 55% of TV and broadband subscribers, so long as you ignore . . . subscribers of competing TV and broadband providers. Confused? You aren’t alone. Satellite TV programming, telco operations like AT&T’s U-verse, broadcast, and over-the-top are all substitutable to cable TV. Sure, cable is well-positioned today, but explicitly ignoring competitors in the analysis is too far. The ability for different platforms to compete, now and in the future, is a key premise of our current competition policy. As we continue the convergence on the IP platform, different underlying technologies can compete in the provision of broadband and … Read the rest

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Netflix Grows Up

Last month something evil happened in Las Vegas: Netflix was invited into the inner cloister of the Last Mile Cabal, where a blood sacrifice sealed a dark pact with Comcast. What was in that pact, what were the terms on which the sacrifice was made? I’ll tell you: a commercial transaction that will reduce congestion at points of interconnection, improving Netflix performance across Comcast’s network, bringing joy and good cheer to video streamers across the country. Wait, what – you may ask – what’s evil about that? I’m not quite sure either, although reading the coverage of this deal, you’d think it was.

To be clear, this is an interconnection issue, not a net neutrality issue.  Let me repeat that: this is not a net neutrality issue.  It is unfortunate timing for the parties – with the recent opinion from the D.C. Circuit vacating the Commission’s non-discrimination and no-blocking rules some industry watchers are on hair-trigger to find a would-be violation. Accusations that Comcast was “throttling” Netflix, or that Netflix is “paying off” Comcast for a “premium” connection are simply wrong. Netflix is not getting priority treatment of its traffic, … Read the rest

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Comcast, Time Warner Cable Deal Deserves Accurate Analysis

Big news yesterday – Comcast is planning to buy Time Warner Cable in a stock deal worth $45.2 billion. This is no doubt a big transaction: Comcast and Time Warner are the two largest U.S. cable operators, and the deal will give the combined company roughly a third of the pay TV market. Such a largemerger deserves a careful look from the FCC and the DoJ, but knee-jerk reactions against any consolidation, all too common in the media, cloud the discussion. We should consider the benefits to consumers and the overall economy, as well as the potential drawbacks instead of assuming big cable companies are necessarily bad. With a little analysis, the deal appears a win for consumers and the economy overall.

The most important point, frequently overlooked or downplayed by opponents, is that Comcast and Time Warner have no overlapping service areas. The two simply do not compete. There will be no change at all to consumer facing competition in the pay TV or broadband market after the deal goes through. Furthermore, what we should really be concerned with is intermodal competition, not how a merged entity would stack … Read the rest

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18 Years – Time for an Update

Today marks the 18th Anniversary of the signing of the 1996 Telecom Act. In these 18 years the communications market has changed dramatically – change that warrants an update to our laws. We are all familiar with the recent explosion of services riding over our networks, but a simple thought experiment illustrates just how dramatic the changes of the last twenty years have been. Imagine if Congress had enacted the Telecommunications Act of 1999 instead of the Telecommunications Act of 1996. Would encouraging facilities-based competition in an attempt to build a duplicative phone network have seemed wise when by then it was clear broadband networks were key? Would the rise of the Web and early IP voice communications have given us pause? The changes we have witnessed since the ’96 Act represent a break in our ability to easily understand and predict this complex sector. It is time to update the Act, but not in a way that assumes to know what direction or velocity our communications and media markets are heading or what would be best for them.

In 1996 voice, video, and data were totally separate services … Read the rest

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New America Foundation Report Finds Municipal Broadband Providers Gouging Consumers

In its second annual report assessing broadband speeds and prices in various nations, the New America Foundation reports some disturbing findings. Broadband provided by U.S. municipal governments costs much more than broadband provided by private sector providers in other nations. The local government of Bristol, Virginia ranks 31st; Lafayette Louisiana’s service 44th, and Chattanooga Tennessee’s, a recipient of federal stimulus funds for broadband, ranks a dismal 57th in the price of broadband. All of them charge their unsuspecting citizens prices around four times higher than their private sector competitors in other nations.

As they write, “Many American consumers take high prices and slow speeds to be a given, but our data demonstrates that it is possible to have faster, more affordable connectivity in cities of comparable density and size.” New America writes that it will be releasing a report shortly calling for policy solutions to address this terrible situation. Based on their analysis, I am sure they will be calling for Congressional legislation prohibiting socialist local governments from getting into the broadband business.

Of course my reason for pointing this out is to show the absurdity of the New America … Read the rest

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US Broadband’s Latest Report Card

On October 16, Akami released its quarterly state of the Internet rankings comparing nations around the world on broadband speeds. The United States continued its upward trajectory, improving in both average connection speed and average peak connection speed. This new data further illustrates that the claims of some broadband Casandras, such as Susan Crawford, regarding the weakness of U.S. broadband networks are highly misleading.

As ITIF has noted, over the last five years  America has made great strides in improving average connection speeds and enhancing broadband infrastructure. According to the latest Akami study, the U.S. now ranks eighth in the world in average connection speed, up from ninth last quarter, and 11th in average peak connection speed, which grew 34 percent year over year. It should also be mentioned that the nations ranking above us in both categories either have small, densely populated geographic areas where deployment costs are lower, or enjoy significant government subsidies for broadband deployment and adoption.

The data exemplifies the success of America’s competition-based broadband model in incentivizing innovation and promoting the continued deployment of high speed networks. This is particularly clear when we … Read the rest