Seton Motley is the president of Less Government, a DC-based non-profit organization dedicated to reducing the power of government and protecting the First Amendment from governmental assault.
One of America’s leading authorities on technology and telecom policy, Motley is a writer, television and radio commentator, political and policy strategist, lecturer, debater, activist, and policy advisor to The Heartland Institute.
FCC Chairman Ajit Pai gets it that 5G wireless is a gamechanger3 for the rationale underlying the Wheeler-FCC’s Title II Open Internet order and net neutrality policy. Fast-changing markets and new competitive realities are a huge threat to the viability of the previous-FCC’s Title II Open InternetOrder4 and net neutrality policy because they are based on the unsupported and unproven assumption that competitive ISPs command monopoly market power. FCC Chairman Pai enjoys a plethora of new competitive evidence that enables this FCC to reverse the previous FCC’s Open Internet order, based on recent tectonic market changes, new competitive realities, and Chairman Pai’s return to FCC policymaking based on real world evidence, reason and the law.
Two years is an eternity in Internet time.
In a nutshell, multiple 5G mobile broadband developments cumulatively change everything in creating dramatically more mobile broadband capacity and speed, and much more fixed vs. mobile broadband competition.
Bottom-line: Broadband communications competition is well on the way to catapulting to another level of competitive intensity.
These new competitive realities seriously imperil the FCC’s rationale supporting the Title II Open Internet order, the case for strong net neutrality authority, and the justification for preemptive regulations.
Meanwhile back at the Mobile World Congress last week in Barcelona, former FCC Chairman Wheeler told5 Bloomberg, he doubted that the new FCC “can come back a couple of years later and say, oh things have changed so dramatically, that you need to reverse all these decisions…“
This apparent glacial view of time and blindness to the effects that the Internet marketplace’s fast-moving changes have on FCC regulation and its authority, is emblematic of the fatal flaw of the previous FCC’s Open Internet Order. The previous FCC imagined that it permanently could take central control of the competitive broadband sector; set some prices at a de facto price of zero; determine unilaterally without Congress which companies are maximally regulated or not; dictate what business models are disallowed after the fact; and omnisciently anticipate and germinate where and how investment and innovation should occur – all without worrying about how the marketplace may change or how new competitive facts in the real world could affect the sustainability of FCC policies and authority. Before we consider what’s changed in the competitive marketplace in the last three years, some brief context is useful.
We need to consider the last three years, because the FCC’s 2015 Open Internet Order was prepared throughout 2014, and thus the Title II decision was initially predicated, largely on the FCC’s 2013 competition assessments. It is also important to note that for several years, previous FCCs did not come to any conclusion about whether the wireless, video or broadband markets were competitive or not, despite the purpose of the 1996 Telecom Act being “to promote competition and reduce regulation,” and despite multiple statutory requirements to report to Congress about the evolving state of competition. There was purposeful, self-serving, FCC neglect for many years to not reach any conclusions that these markets were competitive, because any recent record of FCC’s conclusions on the state of competition in broadband-related markets would kneecap the FCC’s Open Internet order rationale and circular logic, that competition was insufficient and/or unable to ensure net neutrality in the absence of strong FCC regulatory authority based on insufficient market competition.
As the Title II DC Circuit dissent6 exposed, the FCC’s “unreasoned” refusal to “inquire into competitive conditions” when the purpose of the underlying statute is promoting competition, makes the open Internet order “arbitrary and capricious.”
What’s changed “dramatically” in the marketplace warranting an FCC competition baseline reset?
Last summer, the FCC “dramatically” changed U.S. spectrum supply in effectively flooding7 the wireless market last summer with ~11 GHz of new 5G, gigabit-speed, millimeter-wave spectrum capacity, that can be useful in soon providing gigabit wireless broadband speeds to consumers and businesses nationally. Of that ~11 GHz of spectrum, ~4GHz is for licensed spectrum still to be auctioned, and the other 7 GHz for unlicensed spectrum, which is largely available for use now. Recently, FCC Chairman Pai set an important, pro-competition precedent in authorizing8 LTE-U, which like LAA, is a licensed use protocol that can appropriately coexist with unlicensed use and users.
This sets a new pro-investment trajectory of optimizing spectrum use of all kinds, which “dramatically” facilitates the deployment of 5G small cells necessary for achieving gigabit wireless broadband speeds. What is the market evidence that this “dramatically” changes the marketplace? One “dramatic “development is that Alphabet’s Google Fiberreversed9 their broadband access competitive plans after the FCC Spectrum Frontiers Order, in effectively shutting down its seven-year-old effort to deploy gigabit fiber broadband service while signaling it is in process of replacing it with gigabit fixed-wirelessbroadband service.
In addition, the initial spectrum price-per-pop results from the FCC’s current incentive auction also signal that the FCC’s Spectrum Frontiers’ order — that is flooding the market with ~11GHz of 5G millimeter-wave spectrum — may also have had a “dramatic” effect on the spectrum/wireless marketplace. In part, that’s because the price-per-pop for this prime TV spectrum was “dramatically” less than expected, with a startling ~80% lower spectrum per-pop prices than the previous AWS auction, per Moffett-Nathanson estimates, despite the TV spectrum being more powerful, longer-range spectrum than AWS. This recent market investment evidence about the demand and price for different types of spectrum, also spotlights a “dramatic” shift in the improving the economics of broadband deployment, by pushing more fiber closer to home, but not all the way to the home, because small-cell, short-range, fixed-wireless now has gigabit speed potential at a “dramatically” less last-mile, deployment cost.
Another recent “dramatic” game-changer was Chairman Pai’s rejection10 of the previous FCC’s enforcement policy document that asserted wireless “zero-rating” was likely a violation of net neutrality. In stark contrast, Chairman Pai wisely and quickly rejected11 the net neutrality notion that free data for consumers was somehow bad for consumers, and in doing so, has unleashed new pro-competitive forces that in turn, very quickly led to all four of the national wireless broadband providers offering practically unlimited data usage at varying speeds. And kudos to FCC Commissioner Mike O’Rielly who is signaling12that the now-Republican-led agency will make it a priority to ensure that state and local laws don’t block expeditious deployment of 5G gigabit wireless broadband to all Americans.
This is also a “dramatic” pro-competitive change in the marketplace, because rather than having the previous FCC anti-competitively, strongly encouraging and supporting municipalities to enter the broadband business unfairly and destructively, as a Franken-competitors/regulators, this FCC is focused on encouraging and supporting municipalities to provide more deployment-friendly conditions to encourage multiple private-sector competitors to serve their locales. All this comes together to create a “dramatically” different competitive reality than the FCC’s implicit assumption that fixed broadband and wireless broadband were not competitive substitutes or competitors to each other. According to a 2016 US Census Bureau study13 for the Commerce Department, one in five households are now mobile only for broadband access, up from one in ten just two years earlier.
The trend is increasingly clear; a new study14 from Parks Associates estimates another 10% of broadband households are likely to cancel their fixed-line service in the next year. Thus, in the not-too-distant future, this dramatic change over the last three years will mean that there increasingly is just broadband, not a fixed or wireless broadband dichotomy. That’s because; most all broadband providers will have some mixture of fiber/coax/DSL-wire and fixed/mobile/WiFi-wireless offerings; and most all will have broadband offerings that offer practically unlimited usage without effective caps; and most all will offer high-quality-video capable speeds.
According to the FCC’s most recent data, ~95% of Americans now have at least five choices of broadband providers, so if a consumer has any problem or concern that their provider is not providing good services at a competitive price, or may not be allowing access to something for some reason, they have four alternatives to which they can switch their service.
In sum, what all this means is that the current FCC can reconsider and overturn the FCC open Internet order based on the fact, that the actual competitive conditions that undergird most of the FCC Open Internet order’s assumptions and conclusions, have in fact, changed “dramatically” — warranting reconsideration by the FCC. Those who think that not enough has changed to warrant this FCC reconsidering the Title II net neutrality work of the previous FCC appear to be ignoring all the pro-competitive developments that have occurred over the last two years, are occurring now, and will be occurring while the reconsideration proceeds. Watch 5G become a gamechanger for the viability of the FCC’s Open Internet order.
was last modified: March 9th, 2017 by Seton Motley
- ^ Seton Motley (www.stopnetregulation.org)
- ^ see all (blog.heartland.org)
- ^ gamechanger (m1e.net)
- ^ Order (m1e.net)
- ^ told (m1e.net)
- ^ dissent (m1e.net)
- ^ flooding (m1e.net)
- ^ authorizing (m1e.net)
- ^ reversed (m1e.net)
- ^ rejection (m1e.net)
- ^ rejected (m1e.net)
- ^ signaling (m1e.net)
- ^ study (m1e.net)
- ^ study (m1e.net)
- ^ Precursor.Blog (precursorblog.com)