July 2008

How CBS Lost the Super Bowl Case

[Commentary] While the outcome of CBS v. FCC seems like a win for free speech, it is really the opposite. In last week's decision, the court never tells the FCC that it may not regulate broadcast programming content. Indeed, it said that FCC regulation of broadcast speech is permissible, only the process was flawed. Essentially, CBS won on a procedural technicality, not on the broader issue of whether the government may regulate speech. And while broadcasters are mistaken that this case is a major victory, let's hope investors are more aware. Federal indecency rules are but one example of regulations unique to broadcasting. They have been rationalized by the courts as part of a larger system of regulation artificially premised on spectrum scarcity (everything of value is scarce but not everything is subject to content regulation) and the protection of children. But many parents want their children to have full access to books and the Internet, neither of which is federally regulated. Federal policy is to bring the Internet to every classroom and every farm and village in America at a cost of billions of dollars annually. The Internet has no shortage of indecent material. Broadcasting, by contrast, is intellectually orphaned by the government. No federal program insists on, much less subsidizes, broadcast access to every classroom. Nonetheless, much of government content regulation is rationalized on protecting children. Investors and all Americans will cheer when the Supreme Court ultimately stops broadcast content regulation. Broadcasting will not turn into a cesspool of indecent material any more than book publishing or newspapers are today. Instead, unshackled from excessive regulation, broadcasters will be able to compete more effectively, to the benefit of all consumers. (Furchtgott-Roth is a former FCC commissioner.)

Stevens Relinquishes Vice Chairmanship of Commerce

Embattled Sen Ted Stevens (R-Alaska), former chairman of the Senate Commerce Committee, relinquished that vice chairman's post for now in accordance with Senate Republican Conference rules. The Senate Commerce Committee has postponed hearings on its agenda this week.

Congress may revamp phone fees that subsidize rural service

Congress is building toward major reform of a program that subsidizes rural phone service with billions of dollars in fees charged to all land-line and wireless customers. Reform of the Universal Service Fund - which also subsidizes phone and Internet service for schools, libraries and rural health care providers - is one of the biggest issues facing telecommunications companies. Although there is widespread agreement that some reform is necessary, big changes would be likely to trigger a lobbying battle involving rural legislators - who largely favor the current system - and may hinge on the outcome of the presidential election. The issue has gotten an added push from Sen Barack Obama, the presumed Democratic nominee for president, who argues that universal service fees should support broadband in underserved areas because rural customers already have quality voice service.

What DPI can do to you

(7/25) Despite the very public black eye given to deep packet inspection (DPI) technology following its use to block peer-to-peer traffic and to target ads to unsuspecting Web surfers based on their browsing habits, a growing number of technology companies are incorporating DPI or similar technology into their products. While this may seem like contrary behavior to those outside the telecom industry, the truth is that DPI is simply too valuable a technology to be set aside. Instead, telecom companies are pursuing ways to make it more palatable. "This is another situation where the technology is advancing faster than the understanding of how to apply it," said Mike Coward, chief technology officer of Continuous Computing, which provides components to DPI vendors. "All the things we can do with the technology would scare the average consumer. The dance at this point is to figure out exactly the right set of controls and constraints to put on the network that consumers will accept."

The consumer-friendly version of DPI

Deep packet inspection has come under fire from consumer groups, Net Neutrality proponents and even members of the U.S. Congress. But one UK ISP is using DPI in a way intended to improve customer service - with its customers' permission. PlusNet is a BT-owned ISP with about 120,000 that began using Ellacoya's IP Service Control System - now part of Arbor Networks since its acquisition of Ellacoya - in 2006 to launch a Subscriber Service Portal that allows its customers to monitor their own usage, among other things. After first using DPI as a way to inspect and prioritize traffic to protect services such as VoIP and gaming from latency caused by network congestion, PlusNet took things to a new level. The company decided to offer four different classes of service for residential and business customers - or eight classes total - and to further allow customers to customize their particular service when they signed up.

Merger and acquisition talk surrounds Embarq

Embarq, the former Sprint unit that sells local phone service and high-speed Internet connections in parts of 18 states, is cutting costs and focusing on rapidly growing niches while confronting continued deterioration in its home phone business. Wall Street analysts such as Jonathan Levine at Jefferies & Co. think the Kansas company isn't getting all the credit it deserves for executing a strategy that's likely to continue boosting adjusted earnings in the near term. That being said, Levine wrote in a new investor report Friday that he would be on the watch soon for possible merger and acquisition deals involving companies such as Embarq and Windstream, a local phone company out of Little Rock (AR) that spun off Alltel.

OECD Broadband Ranking System Needs Restructuring, Says Think Tank

Basing telecommunications policy around the faulty ranking system of the Organization for Economic Cooperation and Development would lead to an "ill-defined national broadband strategy," officials from the Phoenix Center think tank said. Decrying the widespread assumption that America has fallen behind the rest of the world in broadband penetration, George Ford and Lawrence Spiwak criticized the OECD's ranking system at a luncheon in the Rayburn House Office Building. The current OECD system ranks measures broadband penetration on a per capita, and not a per household basis, which has led to countries with smaller household sizes moving up in the chart since 2001. People do not buy broadband connections, Ford said; rather, households and businesses buy broadband connections. Moreover, said Ford and Spiwak, countries that have risen in recent rankings - Denmark, Sweden, Switzerland, and the Netherlands - are small and do not have large rural areas where broadband deployment remains a challenge. Additionally, many countries that were near the top in broadband rankings in 2001 have since fallen, said Ford. "Miracle" Japan has dropped in the OECD ratings, for example. In spite of having 100 Megabit per second-capable broadband networks, Japan ranked behind the U.S. in the December 2007 OECD ratings.

Public interest groups roast FCC smutless broadband plan

Nearly half a dozen advocacy groups from liberal to libertarian concur: they hate Federal Communications Commission Chairman Kevin Martin's proposal for a national broadband service with the porn filtered out. "Unconstitutional and unwise," their Friday filing calls the plan, which they charge amounts to a "government mandated 'blacklist' of websites." The filtering component would limit the system "so dramatically that the usefulness of the service would be radically reduced." Plus, if the agency actually approved the scheme, it would face a tsunami of lawsuits. So contend the Center for Democracy and Technology (CDT), People for the American Way, Adam Thierer of the Progress and Freedom Foundation, the Public Interest Spectrum Coalition, the American Booksellers Association, the Von Coalition, the Electronic Frontier Foundation, and fifteen other groups. It was inevitable that this shoe would drop on a scheme that is already taking heavy incoming fire from the wireless industry for its alleged technical shortcomings.

Dingell to NTIA: As Many Coupons as Necessary

House Commerce Committee Chairman John Dingell (D-MI) says the National Telecommunications and Information Administration's "recent decision to allow additional households to apply for 6 million expired and unredeemed coupons may not be enough to meet demand." He is concerned that the NTIA will not have enough administrative funds to reprocess all of the coupons that go unredeemed. The current redemption rate is under 50%, which means that either a lot of people applied who don't need them, or there will be a bunch of people who will have to pay for the boxes themselves. The NTIA recently said it will send out as many coupons as possible. "As many coupons as possible" will need to be "as many coupons as necessary," Chairman Dingell suggested. "I expect the NTIA to fully comply with the requirements set forth by Congress and to recycle as many coupons as are needed to meet consumers' needs. The committee will exercise vigorous oversight to ensure that the NTIA performs its task efficiently, effectively and, most of all, in a manner that does not leave consumers behind."

More People Watching Primetime "TV" Online

According to a new study by Integrated Media Measurement, the appetite for primetime network TV online is growing, with 20% of respondents saying they watch some primetime TV programming online. Of those 20%, about one-half watch shows they missed or have already seen, while the other half are watching shows as they become available and "appear to be beginning to use the computer as a substitute for the television set."

Benton

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