The FCC’s latest proposal to regulate the Internet just got a little more interesting. The agency announced its “third way” approach to classifying broadband services.

First, a little background: Back in 2002, the FCC decided to classify internet access as an “information service” under Title I, rather than as a “telecommunications service” under Title II of the Communications Act.  

This meant that the FCC would not have specific and direct authority to regulate Internet Service Providers (ISPs), but would reply upon its “ancillary authority.” This essentially says that the agency is allowed to do anything reasonable to accomplish the goals that Congress prescribes, but will not regulate the ISPs with the broad sweeping powers that it exercises under Title II.

Fast forward to the recent decision by the US Court of Appeals for the District of Columbia in April in the case of Comcast v. FCC. The court ruled that the FCC’s “ancillary authority” wasn’t strong enough to impose restrictions on ISPs. Both the FCC and proponents of net neutrality viewed this decision as a huge blow to the cause.

Conventional wisdom saw two possible results:

1)       The FCC would withdraw and ISPs would prevail as beneficiaries of Title I “ancillary authority”, or,

2)       The FCC would move to reclassify broadband access as a Title II “telecommunications service.” If successful, ISPs would suddenly find themselves subject to the regulatory scrutiny of the FCC.

Although that would insure that the FCC would win the battle against Comcast to preserve net neutrality, almost everybody agrees that Title II classification would be far too heavy-handed. Even FCC chairman Genachowski said “prescriptive regulation can chill investment and innovation, and a do-nothing approach can leave consumers unprotected and competition unpromoted, which itself would ultimately lead to reduced investment and innovation.”

So what has the FCC proposed? “The Third Way.” It’s what might be called a hybrid approach: the FCC will say that broadband transmissions — the flow of data — are subject to Title II regulations, while broadband “computing functionality” — the data itself — remains under Title I oversight.

Furthermore, the FCC says it will excuse broadband transmissions from many Title II regulations and only impose a few specific provisions of Title II. Together, these provisions generally include the following:

1)       A collection of provisions to “forbid unreasonable denials of service and other unjust or unreasonable practices.” It is important to comment that AT&T, Comcast, Sprint and Verizon have all voiced support of these provisions in the past.

2)       The Universal Service provision that provide “access to advanced telecommunications and information services in all regions of the Nation.” The FCC would promote universal broadband access under this provision. Again, both AT&T and the cable industry have argued in favor of this provision in just the past few months.

3)       A provision that requires service providers to protect confidential information they receive while providing service. Who would argue against this provision?

4)       A provision that requires that service providers must make their services and equipment accessible to people with disabilities, unless it’s not “reasonably achievable.” Seems like a good idea to me.

It seems clear that the FCC is pursuing its mandate from Congress and remaining true to its goal: Impose as little regulation as possible while still trying to achieve the basics of net neutrality.

There was quite a bit of discussion during last week’s eComm show about net neutrality and the National Broadband Plan. You can find my summary here. The discussion couldn’t have been timelier, as FCC commissioner Michael J. Copps also addressed the topic on this week’s Bill Moyers Journal, a show which is quickly becoming part of my weekend morning routine. I can’t embed the video, but I highly recommend watching the interview here. I won’t summarize the whole segment, but Copps made it pretty clear that he thinks the FCC should define the Internet as a type of communication service, and should thus regulate it in a similar way to the rest of the telecommunications industry.

Day 2 of eComm promises to be quite engaging, with a focus on voice and mobile. Perhaps one of the most interesting turn of events has been  how people have dealt with the travel problems that the Icelandic volcano has presented. Quite a few presentations have been cancelled because the speakers were not able to make it to the show. However, a couple have gone forward by presenting remotely via Skype. Martin Geddes is currently discussing cloud communications from his living room in London. The calls have been dropped a couple times, but overall the presentations have been very effective, and provided a good argument for video conferencing in lieu of in person meetings, as well as the value video can bring to a call. Martin’s video dropped out about 5 minutes into his presentation, and it became much less engaging and more difficult to follow the talk with only the audio. But I find it interesting that it took an act of god to get a conference about emerging communication technology to embrace video conferencing as a presentation vehicle.

More after the morning break.

Afternoon Update

The main theme of the late morning/ early afternoon talks was telecom policy, culminating in a panel on the National Broadband Plan. There seemed to be a consensus that it was a good move for the plan to focus on allocating more spectrum (500 MHz worth), as the future of the Internet will be mobile. However, there was quite a bit of disagreement, and spirited discussion, on how to ensure equal access to content, and how that might be regulated. Panelists seemed to be split on if there are adequate tools to measure service, with Richard Bennet from ITIF indicating that websites like Speedtest.net were adequate, while Susan Estrada from FirstMile maintained that there is a lack of standards for service measurement, and that it is difficult to ascertain where in the series of networks which comprise the Internet possible bottlenecks and disruptions of service may occur.

 Perhaps the most contentious issue (no surprise) was net neutrality. There were a lot of great points made, some of which I had never considered. Tracy Rosenberg from Media Alliance was a strong advocate for structural separation and protection for independent voices. Susan countered that the topic of net neutrality is premature and confuses the discussion, which should really focus on internet access, and not content. Richard agreed, pointing out that a third of Americans do not have access to the Internet, and furthermore many Americans do not want to pay for a high speed connection. My first reaction was to also agree with Susan and Richard. It made sense that we should try to get everyone Internet before we worry about regulating it. However, the more I thought about it, the more I wondered why the issues had to be tackled sequentially. If we wait too long to figure out net neutrality, won’t it be harder to enact some sort of reform once we establish an acceptable level of broadband penetration? And aren’t the issues somewhat related anyway? Paul Brigner from Verizon asserted, to no one’s surprise, that Verizon has no interest in blocking service to its subscribers. But, as the panel began to discuss right before they were cut off, access in rural areas is one of the biggest issues in the Broadband Plan. So while Verizon may claim they have no interest in limiting service, they may not have an incentive to provide service to some consumers if the cost of doing so is too high. At that point  there needs to be either regulation to mandate coverage, or a way to subsidize network expansion. Basically, there need to be rules for how service gets provided, and who is responsible for management, which evokes net neutrality in my mind.

There was also a good open discussion around many issues, including the video conferencing ecosystem. From the attendees, it seems like there are still some concerns about quality. But the main issue remains interoperability. I claimed that consumer networks will probably continue to be separate, but enterprises will have to be able to connect. H.264 SVC should hopefully accelerate that. 

 My favorite talk was again something that was a little off the beaten path. Marc Smith evoked my inner social science nerd by introducing us to NodeXL’s analytic abilities for social networks. Really cool stuff.

Time for some coffee.

Late Afternoon Update

The afternoon sessions seem like they are leading up to tomorrow’s sessions pretty nicely. Tomorrow is all about augmented reality, and we have been getting a taste of what is possible with that. For instance, Jason Kolb from Cisco discussed how Google Wave and XMPP can enable social communication apps that help people interact with other folks in their immediate environment, in a very elegant, user-friendly way.

Now, before yesterday, I had no idea what augmented reality was. But over the last 24 hours I have been able to get a bit of a handle on it. Similar to virtual reality, augmented reality uses information from outside one’s current physical environment to enhance their experience. When I first heard this, I thought of people running around with clunky helmets in a lame sci-fi version of the future. But the more I learn about it, the more I can see a practical purpose for AR apps.                                                                                     

One of the most promising areas is mobile communications. If you are already using GPS or navigation services on your phone, wouldn’t you also like to hold the phone up to get even more information in real time about your surroundings, such as when landmarks were founded, or sales at stores in the neighborhood? AR apps give you that by overlaying additional information on top of a more traditional cell phone or camera view.

I am sure I am just scratching the surface, but John G. should be able to dive a little deeper tomorrow.

The Net Neutrality debate continued this week with a ruling by the United States Court of Appeals for the District of Columbia Circuit that favors large network operators, and arguably could limit consumer’s access to the internet applications and services they crave. In the ruling, the Court decided the FCC does not have the authority to explicitly regulate the flow of internet traffic. Hence, the FCC’s landmark directive limiting Comcast’s ability to block BitTorrent traffic is unwarranted. The ruling could give network operators the precedent to selectively prioritize or block specific classes or types of internet traffic. Thereby, potentially having a profound effect on the further adoption of voice and video over IP services.

The communication space, particularly real-time video, continues to evolve and the options for consumers expand everyday:

-          Earlier this year at CES, several television manufacturers, such as Panasonic, introduced products to enable video conferencing from the comfort of one’s living room.

-          Mobile video is no longer a futuristic concept and networks and smartphone processors are reaching speeds capable of delivering and processing high-quality real-time video transmission.

-          Today, GIPS expanded our product portfolio by introducing VideoEngine-Mobile for the Android platform.

-          One can easily imagine a future generation iPad with a front-facing camera enabling high quality two-way video.

The promise of receiving voice and video from any device, at anytime, anywhere in the world, is becoming a reality.

As video becomes commonplace, the question at hand is—how will consumers receive the flood of packets laden with video frames and—will network operators have a say in determining which packet is most deserving of an unencumbered path through the internet. The debate surely will continue with more still to come from the Courts, FCC and Congress.

The F.C.C. has finally handed in its homework. It submitted The National Broadband Plan to Congress yesterday.

 Weighing in at 376 pages, The Plan is a treatise asserting that the broadband Internet is becoming the common communications medium of the United States, eventually displacing the telephone and broadcast television.

The Chairman of the F.C.C. called The Plan “a 21st-century roadmap to spur economic growth and investment, create jobs, educate our children, protect our citizens and engage in our democracy.”

He went on to comment that The Plan would be largely paid for by the auctioning of unused or under-utilized wireless spectrum. The Plan calls for reallocation of 120 MHz of broadcast TV spectrum. In other words, The Plan would auction off the equivalent of about 20 television channels of wireless spectrum that are currently occupied by broadcast television companies.

These companies are represented by the National Association of Broadcasters. Here is what NAB Executive Vice President Dennis Wharton had to say about The Plan.

“We were pleased by initial indications from the F.C.C. that any spectrum reallocation would be voluntary, and were therefore prepared to move forward in a constructive fashion on that basis. However, we are concerned by reports today that suggest many aspects of the plan may in fact not be as voluntary as originally promised.”

 Back in February I addressed this subject and concluded that the F.C.C. will either have to negotiate with the incumbent broadcasters or seize the spectrum under eminent domain.  Apparently the F.C.C. isn’t interested in making a deal, but is instead proposing to seize it. Maybe it’s a tactic to get the broadcasters to negotiate.  Time will tell.

The Plan also proposes that broadcasters face the prospect of paying a new government fee for use of spectrum that they currently occupy. This is new:  television station owners currently don’t pay an annual fee to the F.C.C.

Understandably, the NAB isn’t happy. “As the nation’s only communications service that is free, local and ubiquitous, we would oppose any attempt to impose onerous new spectrum fees on broadcasters.”

The NAB concluded its comments about The Plan with this:

 “We strongly support congressional efforts to conduct an inventory of all available spectrum, and believe that no reallocation plan should move forward without a complete accounting of how the airwaves are allocated, licensed and used.”

In February I commented that spectrum reallocation is going to take a long time and make a lot of lawyers wealthy.

Let the Games Begin.

In an article released yesterday in BusinessWeek, it was disclosed that the Federal Communications Commission is considering paying broadcasters to vacate wireless spectrum, which the agency would use to alleviate network congestion caused by the growing popularity of devices like smartphones.

It was a slow day for news. This isn’t exactly an earth-shattering revelation. The reallocation of under-utilized spectrum has been considered a logical step for use by rapidly growing wireless networks for a long time. With the steady rise of smartphones and their demand for data services, it is clear that wireless service providers will need more than 4G equipment upgrades to deal with the swarm of new subscribers.

The problem is the plan. You see the U.S. government would buy back spectrum from broadcasters, and then turn around and auction the newly acquired spectrum to companies that desperately need more to augment their networks. Networks that are already straining to support the growth of data-intensive devices like the iPhone. Companies like AT&T and Verizon, who will pay dearly for access to more wireless spectrum.

In a recent study submitted to the FCC by The Brattle Group, one likely scenario suggested that the government could acquire wireless spectrum from incumbent broadcasters for $6 billion and auction that spectrum for $48 billion. That’s a tidy $42 billion profit.

Why would broadcasters agree to sell their spectrum assets to the government, only to have the government turn around and auction those assets to the highest bidder?

Considering these sums of money, the FCC will need to sharpen its pencil or prepare for a lengthy legal battle. It will either have to sweeten the deal for the incumbent broadcasters, or claim eminent domain and seize the spectrum.

Either way it will take a lot of time and a lot of lawyers to sort this one out.

I spent a good 4 hours yesterday watching my favorite football team, the Minnesota Vikings, self destruct as only they can. During the frequent commercial breaks, I noticed the over abundance of ads for mobile carriers. There were the usual pudgy Owen Wilson AT&T ads dueling with the Verizon map commercials, along with a few Sprint and Metro PCS spots mixed in. This flurry of activity sparked me to wonder aloud, “How competitive is this market?”

The perception given by all the commercials is that the market is very competitive. Each firm is making its case for why it is the best choice- largest 3G network, fastest downloads, widest selection of phones, least restrictive calling plans, etc- and furiously trying to attract as many customers away from the other providers. Yet, I couldn’t help but think that, while they have offered more services, each successive cell phone plan I have purchased over the last 8 years has only been more expensive than the previous. If this market is that competitive, shouldn’t prices be falling?

If you believe the commercials, it appears as if they are. Verizon and AT&T announced reduced rates for their voice plans. Interestingly enough, they both settled at $69.99 a month, behavior which seems remarkably coordinated. However, as Marguerite Reardon pointed out for CNET, these new plans may actually be more expensive for many users, as they impose higher fees for web and data usage for owners of mid-range phones. 

This is an incredibly complex topic, which we have touched on in the past, but it seems like, at least until now, most carriers have tried to use subsidized phones as their main differentiator. By signing exclusive deals with manufacturers, and then offering phones for reduced upfront fees, operators are able to lure customers based on those phones’ features.  What many consumers may not realize, however, is that they are probably paying more in the long run than users of the same phones in other countries. Telecommunications tends to be a naturally oligopolistic market, and the U.S. mobile market is no exception. The high barrier to entry associated with owning large networks leads to only a small number of firms owning virtually the whole market. But what is most important (and what the FCC will probably be looking into) is if this arrangement is beneficial to consumers. I don’t have an answer to this question, but I do have a nagging feeling that I should be getting more for less.

I believe that this week’s news about Google’s threat to pull out of the Chinese market has far reaching implications for the ultimate opportunity to provide more openness.  David Drummond, Google’s Chief Legal Officer was interviewed earlier this week on CNBC (my apologies in advance for the really lame graphics, sound effects and screaming reporter):

Although Gmail was not yet a service available on google.cn, it was a service that many Chinese used on gmail.com.  And email is only one of the beneficial services available on Gmail.  Gmail (and its tightly associated Gtalk) is one of the leading providers of HD Voice.  Local Chinese Internet service providers Baidu and TenCent also offer HD Voice, but their ability to interconnect Chinese with international callers may not ultimately be as powerful as Google’s capability to do so.

During graduate school at UC Berkeley’s Haas School of Business, I participated in a two week seminar in China on the ins and outs of doing business there.  Besides being very impressed with what I saw and the companies that I visited, it was very clear that there were a multitude of challenges to succeeding and that the effort was not for the faint of heart.  In many of the articles that I have read in the last week, I was surprised to read the speculation that Google’s true motivation for its actions was the second place ranking of its search engine.  Considering the challenges involved, I think that Google has accomplished a lot in the short time that it has been engaged in China.

Ultimately, voice and video over IP has the power to connect people in ways that aren’t fully possible via email or other more static information technologies.  This ability to connect and exchange ideas is an opportunity that all nations benefit from.  Hopefully, the Chinese government and Google can come to a mutually beneficial arrangement to provide the Chinese with the ability to reach out and connect with the rest of the world.  They have a lot to learn from us, and we have a lot to learn from them.

In anticipation of the FCC unveiling a national broadband plan at its February 17 meeting, both the U.S. Department of Justice and the Obama administration have recently made public recommendations that could signal a meaningful change in the wireless broadband market.

First, in a report filed on January 4 that analyzed the state of competition for broadband Internet access, the Antitrust Division of the U.S. Department of Justice said that the best way to promote wireless broadband competition was to free up more radio spectrum.

 “The scarcity of spectrum is a fundamental obstacle that the commission should address,” the Justice Department said. “Reallocating spectrum that is being underutilized would encourage the deployment of wireless services and could help to make such services more competitive with wireline offerings.”

The potential increase in wireless spectrum is significant. The FCC could feasibly auction a sizable slice of the available spectrum; increasing the current 500 MHz to 1300 MHz over the next few years.

The DoJ went on to recommend that the FCC should organize any spectrum auctions so big wireless providers in any given geographical area cannot easily win these auctions. In other words, the FCC should foster a competitive wireless broadband market.

The Obama administration then released its recommendations the following day (January 5).  In a letter to the Chairman of the FCC, NTIA chief Lawrence Strickling said the administration also felt that additional measures were needed to ensure competition in markets where customers have little to no choice of broadband providers.

Let’s see: Both the Justice Department and the Department of Commerce are tasking the FCC with a national broadband plan that will dramatically expand the available wireless spectrum and insure that a competitive market is preserved.  Excellent.

As a consumer of both wireless and wireline broadband services, I am anxious to see what the FCC delivers on February 17.

As a frequent consumer of pop culture criticism, I am well aware that it is almost 2010 thanks to all the “Best of 2009” (or now “Best of Decade”) lists. While sometimes predictable and cliché, I look forward to reading about the albums, books, movies and band names  that unite or divide critics. It’s a good way to discover music or movies that I had previously overlooked (this year’s winner: the Dirty Projectors) and it’s nice to take a look back at the year that was.

So, in that spirit, here are some of the most relevant stories in the telecom/VoIP/tech industry in 2009:

Net Neutrality Picks up Steam

With the new administration in Washington, the regulatory climate was noticeably different than the previous 8 years. The FCC began to look into possible monopolistic behavior in the mobile telecom market and the exclusive agreements between handset manufacturers and carriers. In addition, Congress offered proposals which would set actual rules around the regulation of the Internet. Major companies like Google, Apple and AT&T were all in the mix, and should be for the foreseeable future.

Android Offers iPhone Alternative

For all of us who were searching for a smartphone with iPhone-like functionality, but with a physical keyboard, a better network and an open platform, the Droid was the answer to our prayers. Perhaps that’s why Time Magazine named the Droid the “Device of the Year”. Subsequent news of a Google branded phone only fanned the competitive flames between Google and Apple.

Mobile VoIP Makes Waves

For years, pundits have been speculating about the arrival of mobile VoIP (I am sure at least blog or article in the next 14 days will proclaim that 2010 is the year). While I wouldn’t argue that mobile VoIP is here, or that it will soon be, it was a major component of the previous 2 storylines. One of the motivating factors behind the FCC looking into mobile operator behavior is carriers’ ability to block certain types of traffic (e.g. VoIP). In addition, Google Voice, while not technically a VoIP service, drew the ire of the FCC under allegations that it was blocking calls to rural areas. Also, the recent rumors surrounding the Google Phone indicate it may be an unlocked phone that will be sold without carrier subsidy, and configured to offer free VoIP calls. While mobile VoIP may not be mainstream, it sure is having an impact on the industry.

HD Voice Goes Mainstream

GIPS has been trumpeting the cause of wideband speech since the company’s inception. While the technology saw a great deal of adoption with the launch of PC-based calling services, it wasn’t until the marketing-friendly name “HD Voice” came along that it really took off. The number of companies announcing HD voice solutions, combined with industry organizations pushing for adoption of the technology, point to a potential for mass acceptance of a new standard of voice quality.