Long Term Communications Goals

2010 Sept

FCC policies should aim towards some long term goals. I presume that the FCC currently seeks to advance two goals:

Commodity pricing on computer to computer (C2C) communications,
Prompt roll-out of wide-spread broad-band service.

These two goals are in conflict when we consider who is to pay the substantial costs of the infrastructure to provide last mile data transport. Other portions of the data transport may play a role too. The temptation is to let the promise of monopoly pricing pay this high cost. To this end the FCC would allow owners of the last mile infrastructure some sort of de facto monopoly or duopoly and thus set prices freely. This would presumably enable business plans that include provision of the last mile infrastructure, but also discriminatory pricing of data transmission. I think it plausible that that this would indeed result in early availability of wide-spread broad-band, but at what ultimate cost?

I see three roads ahead and perhaps some intermediates:

Allow, even encourage some form of monopoly pricing, perhaps with build-out requirements.
Mandate commodity pricing perhaps modeled after early 20th century POTS tariffs along with:
- Government subsidized provision of last mile infrastructure,
- No subsidy and slow rollout by private industry, incented by small profits.
Some sort of dual service where some regulated fraction of the capacity of the last mile infrastructure is under tariff control, and the remainder may be priced at will by the owner of the infrastructure. Presumably anyone is free to transmit data over the ‘public lanes’ but congestion there might be troublesome for some users.

I avoid proposals to ‘spread the costs’ schemes which led to the separations mess that still plague POTS service incentives.

I recall that Boston had (or has) a cable regulation regime where cable system owners are required to lease 1/2 of the cable capacity at market prices.

I propose that it is important, long term, to avoid monopoly pricing on computer to computer (C2C) communications. Crudely the alternative is commodity pricing. C2C requires several tiers of infrastructure, from ‘last mile’ to international, intercontinental facilities and a few tiers between. There is currently good competition on the larger scales of data transmission. The nature of the business of providing the last mile is currently under contention.

Admission: this note implicitly assumes that competition suffices to solve the problems that I address here and that those problems are more important than even those of quick provision of wide-spread availability of broad band service.

Few (none?) current end users of Internet pay according to distance. Current crude pricing schemes to pay long haul providers may not survive.

The FCC promulgates these principles regarding Internet:

To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to access the lawful Internet content of their choice.
To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to run applications and use services of their choice, subject to the needs of law enforcement.
To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to connect their choice of legal devices that do not harm the network.
To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to competition among network providers, application and service providers, and content providers.

Items 2 and 3 are alike in saying there are to be no limitations by government or corporations on the nature of uses of the Internet except for law enforcement, but made concrete in two ways:

2 insures freedom for all applications
3 insures freedom for all Internet attached hardware

Items 1 and 4 alike encourage rapid deployment while providing freedom of usage from restrictions government or network operators. I take it that being ‘entitled to competition’ stands in for being entitled to the low prices and variety normally provide by competition. I think that competition is the best means to that end but others may differ.

Each of the four items are contravened in some current or recent communication context:

Item 1: AOL provided a ‘walled garden’ presumably in hopes of attracting both information providers and information users and charging for the utility of connecting them. This business plan failed but perhaps only because Internet provided an effective and ‘free’ alternative. Internet was free of only the monopolist’s pricing, not free of the real cost of moving the bits. Some interests would love to have a monopoly on connecting information providers with information users and imagine ways to steer Internet in such a direction. It might then not be possible for another network to enter the market. The monopolist’s ability to price discriminate would mean, for instance, that the main surplus value added by a search engine could be seized by the monopolist by charging, in proportion to the new value, the engine operator for access to his consumers. This would tend to greatly limit business plans based on innovation resulting in highly efficient technologies that produce great value since the bulk of that value is at risk of being seized by the monopolist who had not part in its creation.
Item 2: Like Item 1 ensures that end users may likewise innovate and use applications of their choice. This is currently not possible in cell phones where the service provider limits the programs that run in ‘my’ cell phone.
Item 3: Would, in the cell phone context, ensure that I could purchase or even build my cell phone and use it with any cellular service provider, more or less as is possible today in many countries. This item is a worthy holdover from the Carter Phone decision.
Item 4: is perhaps to avoid the sclerosis of Bell Telephone in the middle of the last century. While they pushed technology and applied it magnificently to POTS, they still had blind spot that were exploited famously by MCI and later by such Tymnet and ARPA net. These later competitors were arguably illegal but the cost of exclusion became so obvious that the legal system had to adapt to reality. It did. Lets avoid that mistake this time.