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Robert Hahn, Peter Passell — Wed, 21 Mar 2012 02:49:44 +0000

It's official: The era of salad bar style mobile data plans is almost over. AT&T has joined Verizon and T-Mobile in slowing download speeds for its remaining customers with unlimited data plans, once they reach set (albeit generous) limits. Among the national mobile carriers, only Sprint, which is struggling to compete with its larger rivals, is still playing the salad bar game—and Sprint, too, may yet think better of it. A rip-off, you say? A conspiracy to squeeze bigger bucks out of the nice folks who regularly watch Hulu and stream Pandora on their smartphones? The policy change may, indeed, cost a relatively small number of data guzzlers some inconvenience (when they are "throttled") or some cash (if they step up to metered plans designed for heavy users). But the change was inevitable: With demand for bandwidth growing at an astounding pace, the carriers simply don't have enough capacity to satisfy everybody inclined to watch Modern Family or NFL highlights on their iPhones during their lunch breaks. Meanwhile, next-generation tablets like the brand new iPad 3 with 4G LTE are bound to make mobile video a reality for millions more. What's more—and this is the part you're not going to like—it's a good thing. Pricing based on usage is vital, if mobile wireless is to deliver on its remarkable promise. Not very long ago, wireless was mostly used for phone calls, text messaging, and an occasional peek at Yelp.com to find the closest pizza parlor. But wireless broadband opened the door to streaming video anywhere anytime, and everybody under age 35 seemed to get the message at the same time. The mobile carriers are now racing to keep up with demand for 4G service that can deliver gorgeous HD. And while they will likely get some help from Congress's initiative to auction off a big swath of spectrum now controlled by over-the-air TV broadcasters, it's going to cost a large fortune and take years to have an impact. Over the next few years, there's just no way the carriers will stay ahead of demand without raising revenues and pricing by the byte-to-ration capacity. Limits on download speeds for heavy users in the remaining unlimited data plans—the equivalent of those long lines for almost-free bread in the long-since-collapsed Soviet Union—will probably be gone in a few years because unlimited data plans will be gone. But as long as the government cooperates by selling spectrum to the highest bidders, the variety and quality of mobile wireless services will keep on expanding. The impact on mobile wireless bills will depend on both demand and supply. On the demand side, mobile video will likely put significant upward pressure on prices. On the supply side, the FCC could alleviate supply constraints by getting spectrum out there more quickly and allowing secondary markets in spectrum to operate with a minimum of regulatory oversight. Average mobile wireless bills may well go up, but only because the growth in use of ever-more indispensable mobile services will more than offset the decline in the price of a gigabyte. Would you really prefer to go back to the good old days, when the most valuable use of a cell phone was to tell your spouse you were stuck in traffic and would be late for dinner? (This post was also published in U.S. News & World Report.)

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Robert Hahn, Peter Passell — Tue, 14 Feb 2012 12:00:43 +0000

The world is an amazing place. You can sit in a Starbucks in Malibu while I'm sipping tomato soup at a Pret a Manger in London, and we chat for free using Skype or Viber or Rebtel. Or how ‘bout this one: You can pull a smartphone out of your parka on the slopes of a mountain in Colorado and use it to remind your DVR back home in Miami to record a rerun of Homeland. But the fact that we astonish ourselves everyday with the latest jaw-dropper in wireless telecommunication doesn't mean it will always be thus. Nobody has a crystal ball when it comes to predicting how wireless media will be used down the road. But we do know that legislators and regulators in Washington will have a big impact on the pace and direction of wireless innovation through their management of electromagnetic spectrum—what was called the "airwaves" long before Apple or Google or Verizon were on the scene. Spectrum is scarce—that is, the amount of information that can be pushed through those metaphoric airwaves is limited by economics and the state of technology. So most economists support auctioning spectrum to the highest bidder in order to make sure it ends up in the hands of those who value it most. Indeed, many have favored it ever since Nobel laureate economist Ronald Coase came up with the idea a half-century ago. But the market for wireless networks, while competitive, has two clear industry leaders—Verizon and AT&T. And some telecom analysts argue that consumers would be better off if the auctions were set up to favor smaller companies, perhaps keeping the two industry leaders out of the game entirely. We think the potential costs of such discrimination against the giants outweigh any plausible benefits. In fact, it's hard to think of a market in which the old saw—don't fix it if it ain't broke—fits better. Usage on wireless networks has been exploding—including usage by low-income groups and minorities. At the same time, charges for both voice and data use have been falling even as reliability and geographic coverage have been improving. The risk here is that freezing the industry leaders in place while giving competitors indirect subsidies (in the form of less-than-competitive prices for spectrum) would slow innovation. Indeed, both of the industry leaders are racing to acquire the spectrum to broaden access to "4G" service—the sort needed to watch video without hiccups and to seamlessly manage a host of other sophisticated smartphone and tablet functions. But the Federal Communications Commission, which has the last word on most mobile regulation (unless Congress pulls rank), has other priorities. It is apparently inclined to throw sand in the gears of Verizon and AT&T in the name of increasing competition. In response, the House Republicans have introduced a bill that would limit the FCC's discretion on spectrum auctions, giving everybody equal opportunity to participate in any auction. That strikes us as a reasonable place to start, since it makes sense to place the burden of proof on those who think discrimination against large firms in spectrum auctions would do more good than harm. Moreover, the "proof" in question should be practical, not theoretical—actual experience in which discrimination in auctions of government resources has served the interests of consumers. Spectrum allocation—like so many issues that falls under the rubric of economic regulation in Washington—is excruciatingly boring for almost everybody except the policy wonks who toil in the blogosphere and the lawyers/lobbyists/consultants who build country homes on the proceedings. But ignorance here is not bliss. We've all had a great ride on wireless technology over the past few decades. Some bad decisions now, though, could take much of the wind out of its sails. (This post was first published on U.S. News & World Report.)

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Robert Hahn, Peter Passell — Thu, 22 Dec 2011 01:52:08 +0000

Verizon, America’s largest wireless network, pulled a rabbit out of its corporate hat last month, announcing a multi-billion dollar deal to buy spectrum from cable-TV giants Comcast and Time Warner and the smaller, Syracuse, NY-based Bright House Networks. Sound familiar? AT&T, number two in wireless, made a similarly surprising move in March declaring its ill-starred intention to buy T-Mobile. The AT&T deal drew the wrath of both the Justice Department and the FCC, which ultimately proved fatal. Does a similar fate await Verizon? Ah, you say – there’s no real comparison. Unlike the proposed AT&T/T-Mobile merger, Verizon’s acquisition doesn’t involve the acquisition of millions of subscribers from a competitor, increasing market concentration in the wireless market. But the deals do have one big thing in common: In both, the primary objective was to cope with the looming scarcity of spectrum. For without more bandwidth, neither carrier will be able to deliver on the promise of whiz-bang wireless broadband services such as high definition movies anytime, anywhere. To be sure, the problem here is not precisely a shortage of spectrum per se, but a shortage created by the wasteful allocation of spectrum today. If Washington were so inclined, it could free up a ton of spectrum for more valuable uses. That includes spectrum now warehoused by government for low-value tasks and spectrum assigned to commercial interests – notably local TV stations – that no longer make much use of it. The process would be pretty simple: auction the spectrum to the highest bidders (perhaps with a share of the proceeds going to legacy holders), and then allow it to be traded like any other valued resource. This is an old, but important, idea, one first suggested by Nobel economics laureate Ronald Coase back in 1959. And it’s one that has taken on greater urgency in recent years, both because the technology of spectrum-hungry broadband mobile has arrived in the form of tablets and smartphones, and because Washington desperately needs revenue. (We’re talking tens of billions here.) But the politics of spectrum allocation remain gridlocked, as competing interests push and shove for advantage. So AT&T and Verizon, the number one and two players in the American wireless market, resorted to end-runs around the problem – that is, to buying spectrum from other carriers or merging to make more efficient use of the partners’ combined holdings. If the AT&T/T-Mobile combination had survived the legal gauntlet, it could have become the largest U.S. wireless provider, with as much as one-third of the market. But the emphasis here is on the word “theory.” The merger might or might not have reversed T-Mobile’s sinking fortunes – which is why its parent company, Deutsche Telekom, has signaled its intent to leave the U.S. market, with or without a merger deal. The upshot is that it’s far from self-evident that AT&T would have remained first in subscribers for long in a post-merger market. Verizon’s rollout of 4G, the holy grail of mobile excellence, is expected to cover more than 200 million Americans by the end of this year -- compared with roughly 70 million for AT&T. Moreover, the proposed Verizon deal includes cross-marketing with the cable companies’ retail stores, yet another advantage in this most visible of consumer markets. But the merger succumbed to implacable opposition from the trustbusters at Justice and the micromanagers at the FCC. Both agencies argued that the merger would give AT&T more latitude to raise prices. And neither apparently put much weight on AT&T’s need for additional spectrum if it is to offer viable competition for Verizon in a 4G world. If this were 1951 instead of 2011, a time when self-satisfied American mega-companies like GM set the pace for global industrial innovation, we’d have more sympathy for the government’s tilt against market concentration. But as the Verizon gambit makes clear, this is anything but a static contest. AT&T and Verizon are living in uncertain times in which they must run to stay in place. That doesn’t mean the risk of monopoly power is as dead as the Oldsmobile. But it does mean that discretion in managing markets really has become the better part of valor. As we see it, Washing has three options. The first is to drastically limit what firms like Verizon and AT&T can do to improve their service offerings, with obvious short-term consequences in terms of slowing the roll out of 4G. The second is to break through interest-group gridlock and leaven competition in the wireless market with a lot more spectrum – the best option, surely, but probably a political non-starter at the moment. The third option, and the probably the best under the circs, is to look favorably upon telecom deals that promise more efficient use of currently available spectrum on the premise that the vitality of innovation means more to consumers than the potential downside of greater market concentration. Does that mean giving free passes to the telecom giants? Hardly. But it would mean a change in priorities at Justice and the FCC in which the agencies used their legal leverage to minimize concentration in regional wireless market without undermining the potential for more efficient use of spectrum.

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Robert Hahn, Peter Passell — Sat, 09 Apr 2011 16:55:15 +0000

Yesterday, the FCC decided to regulate the rates that big telecoms can charge the smaller ones for using their mobile networks for data services ranging from streaming video to Web mail. The “little” guys, including not-so-little Sprint, are happy. The big guys – AT&T and Verizon – are not. The FCC Chairman explained that the ruling would “spur investment in mobile broadband and promote competition.” We’re unconvinced. There is always a significant price to pay for this sort of detailed regulation: Rate-setting is a messy business that is guaranteed to keep an army of lawyers, lobbyists and economists fully employed. And that may be only the beginning. Consumers might enjoy lower rates in the short run, if they’re lucky – but face a real major risk of lesser service in the long run. If the tariffs prescribed are below the levels needed to cover the fully allocated costs of maintaining the networks, the smaller carriers would have an incentive to free-ride on the majors’ existing investments rather than making their own. What’s more, the obligation to share the wealth in the future would reduce the larger carriers’ incentives to add capacity – in the end, actually undermining competition. True, there’s always the chance that, left on their own, the big guys will abuse their dominant position. But as The Economist recently pointed out (and as we recently echoed), such hypotheticals are better addressed by the antitrust laws if and when they arise.

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Verizon, which is preparing for a surge in wireless Internet use as it starts shipping iPhones, is taking the unusual (but hardly unprecedented) step of reserving the right to slow data service for its heaviest users. Should you care about such “throttling” (the industry’s term, not ours)? Yes and no. Yes, because consumers who are thinking about switching to Verizon are being put on notice that they may run into trouble using their smartphones’ most demanding capacities – notably, streaming video – at peak hours. If you don’t want to risk slowdowns, buy service from another carrier. On second thought, better just to trim your expectations: none of the other carriers can guarantee blinding speed 100 percent of the time. No, in the sense it is in the interest of everybody on Verizon’s network for the company to manage traffic so that nobody is denied service when it runs out of bandwidth. What else would you have Verizon do? Drop calls? Randomly block key data services like email for those at the back of the queue? Some supporters of “net neutrality” will no doubt complain since Verizon is practicing what might be called discrimination in an effort to ration scarce bandwidth. But they’re unlikely to get a sympathetic hearing from the FCC, which would permit throttling under its proposed Internet rules. All we can ask for is transparency: If the telcos want to manage their wireless networks this way, they need to make their policies clear upfront. The government, for its part, should work to make throttling less likely by auctioning more bandwidth to the highest bidders.

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No good reason, but maybe some bad ones. In particular, the government could easily be drawn into interest group battles masquerading as high-minded debates over the principles of telecommunications policy.

Should content providers be allowed to charge Internet service providers, the way they now charge cable TV and satellite companies. Order Prandin online no prescription, Or look at the carrier-content relationship from the other direction: Should service providers be allowed to charge content providers for premium video quality. Then, there are the questions raised by the fact that the lines between carriers and content providers are blurred. For example, should a wireless carrier that sells a lot of voice services be allowed to block (or charge) Internet phone companies that piggyback on their systems. Finally, should there be rules on how Internet service providers and wireless providers can charge you, the consumer, to recoup their huge investments.

No doubt, consultants in search of second homes will discover a zillion reasons for believing that, without intervention, the new, video-dominated Internet will generate windfalls for somebody. But we think the proper test is different: Are regulators likely to do a better job in promoting efficiency and growth in an industry characterized by rapidly changing technology and a need for tens of billions of dollars in capital to stoke the engine of progress.

The answer may turn on how markets evolve – in particular, whether any of the players manage to find ways to build durable barriers to competition. What does seem clear, though, is that the burden of proof should be on those who want regulation now, because the Internet TV revolution has finally arrived at your doorstep and could soon be in the palm of your hand.

(This post was also published on Forbes.com.).

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Robert Hahn, Peter Passell — Mon, 01 Nov 2010 16:35:59 +0000

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But we don’t need price controls or blunt non-discrimination rules to guard against such abuses, order Reglan online no prescription. Congress could give the FCC the job of addressing the grievances of alleged victims of discrimination on a case-by-case basis – the method the FCC and other enforcement agencies have successfully used to protect consumers in other markets while leaving room for innovation and growth, comprar en línea Reglan, comprar Reglan baratos. Order Reglan no prescription, Indeed, congressional middle-roaders – notably Olympia Snowe – appear to be headed in this direction, purchase Reglan. Reglan gel, ointment, cream, pill, spray, continuous-release, extended-release, With net neutrality decisions on hold until the November elections, policymakers have some breathing room to ponder a sensible compromise. Somebody needs to guard the store against felons. But it’s clear that giving the FCC the task of deciding what the store sells, to whom, and at what price would be an expensive mistake.

(This post was also published on Forbes.com.).

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Verizon's admission immediately brought forth criticism from the blogosphere. And the FCC wasn't far behind: it is already preparing new regulations Order Yagara (Herbal Viagra) online no prescription, to prevent "bill shock"--you know, when dad finds out that little Jennifer has downloaded every episode of "True Blood" and "The Vampire Diaries," and stuck him with a $400 cell phone bill.

The irony, of course, is that Comcast ran afoul of the FCC, in part, for failing to use tiered pricing to ration bandwidth. Now, apparently, Verizon has caught the FCC's attention by deciding to charge according to usage.

The FCC may do no more than require carriers to notify customers when they've exceed their allotted megabytes--something AT&T is apparently planning to do, even without a nudge from Washington. Still, we'd much prefer that the FCC stay out of data-service-pricing decisions altogether, letting the carriers adjust to changing technology and market conditions.

Telecommunications markets don't always get it right. But we doubt that the regulators could do better.

(This blog post was published earlier on CNET.).

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