So, the GAO recently released a report on the wireless industry and found that:

The biggest changes in the wireless industry since 2000 have been consolidation among wireless carriers and increased use of wireless services by consumers. Industry consolidation has made it more difficult for small and regional carriers to be competitive. Difficulties for these carriers include securing subscribers, making network investments, and offering the latest wireless phones necessary to compete in this dynamic industry. Nevertheless, consumers have also seen benefits, such as generally lower prices, which are approximately 50 percent less than 1999 prices, and better coverage.

Now, if you are a self-described "consumer advocate," I would hope the bottom line here is pretty straightforward and refreshing: Prices fell by 50% in 10 years. That alone is an amazing success story. But that's not the end of the story. The more important fact is that prices fell by that much while innovation in this sector was also flourishing. Do you remember the phone you carried in your pocket -- if you could fit it in your pocket at all -- ten years ago? It was a pretty rudimentary device. It made calls and... well... it made calls. Now, think about the mini-computer that sits in your pocket right now. Stunning little piece of kit. It can text. It can do email. It can get Internet access. You can Twitter on it. Oh, and you can still make calls on it (but who wants to do that anymore!)

The point is, this is a great American capitalist success story that everyone -- especially "consumer advocates" -- should be celebrating. So, what does Public Knowledge president Gigi Sohn have to say?

"These trends do not bode well for consumers, despite any benefits of the moment," she told Ars Technica.

Wait, what?

Julius Genachowski claims his "Third Way" approach to taking over the Internet looks a lot like the benign "wireless model" of regulation.

If it were true, that would be a good thing.

According to Genachowski:

In its approach to wireless communications, Congress mandated that the FCC subject wireless communications to the same Title II provisions generally applicable to telecommunications services while also directing that the FCC consider forbearing from the application of many of these provisions to the wireless marketplace. The Commission did significantly forbear, and the telecommunications industry has repeatedly and resoundingly lauded this approach as well-suited to an emerging technology and welcoming to investment and innovation. In short, the proposed approach is already tried and true.

Presumably, the "wireless model," if applied to the Internet, would spur growth and innovation. But I have a question. In the FCC's NOI, how does the wireless model of "light regulation" apply to, er, the wireless model?

I haven't quite figured out the circularity of that one yet.

Oh, well. Maybe I shouldn't waste my time trying. It seems more apparent than ever that for wireless and wireline broadband service it's not really about regulating "downward" - i.e., deregulating, as is the hallmark of the "wireless model" - but instead, regulating "upward," thus adding regulation.

Just the other day, leaders from the House and Senate said they planned on updating the Communications Act. Maybe they've finally started listening to us - we proposed doing this back in 2005, with PFF's Digital Age Communications Act (DACA). Or, perhaps the FCC's so-called "Third Way" doesn't look like the "no-brainer" that the agency spun in its press releases. Well, whatever their intentions may be, it certainly couldn't arrive at a better time.

The framing is all important, of course. Art Brodsky of Public Knowledge (ostensibly one of the groups "writing" the next Act) says Americans shouldn't worry about the FCC's "Third Way." In his view - "The government is not taking over the Internet. What the government is doing is engaging in traditional consumer protection, traditional regulation of a telecommunications service that will get people to the Internet." PK seems happy with this model - whether done at the FCC, or at Congress' hands.

Hmmm...Getting people to the Internet? Traditional, simple stuff. Sort of like strolling to the store, or peddling to the park. Or, like in childhood, making a call from tin cans and string - which is what'll result if PK and their ilk have their way.

As I peruse the FCC's just released Wireless Report, I wanted to jot down some initial thoughts before wading knee-deep in the regulatory morass.

First off - far from press reports which state the FCC clearly determined the market is not "effectively competitive," well, that's wrong. In fact, the FCC fails to make any such determination whatsoever. It says:

...[R]ather than reaching an overarching, industry-wide determination with respect to whether there is "effective competition," the Report complies with the statutory requirement by providing a detailed analysis of the state of competition that seeks to identify areas where market conditions appear to be producing substantial consumer benefits and provides data that can form the basis for inquiries into whether policy levers could produce superior outcomes...

OK, time for a quick rant. What is all this confusion and consternation over early termination fees (ETFs) for high-end smartphones? I mean, seriously, how hard is this process to understand? The FCC has worked itself into a lather over this and is bombarding wireless operators and Google with hate mail letters of inquiry harassing asking them about their ETF policies. I just don't get it. Let's review some simple realities:

• Smartphones -- especially high-end devices like the iPhone, the Droid, and the Nexus One -- are basically mobile mini computers.


• Mini mobile computers do not grow on trees; someone has to make them and sell them at a profit or else no one would offer them to begin with.


• But the people who make and sell these devices (and wireless service for these devices) want to ensure rapid, widespread distribution to win over customers and recoup their costs.


• So, they offer a classic business inducement -- an upfront subsidy for the product in exchange for monthly payments to amortize the upfront "loan" they have given the customer;


• AND THEN THEY FORM A CONTRACT WITH THE BUYER TO MAKE THE DEAL WORK. And that contract obligates both sides to live up to their end of the deal.


• Hey... did I mention they need to form a contract to make the deal worth it? OK, good, wanted to make sure I got that point across.


• Then they give you a nice shiny new mobile mini-computer that for some reason we Americans still insist on calling a cell phone.


• Then you start paying off the "loan" they've given you for that device over the span of the service contract. This is called "prorating."


• But, if you default on that loan by breaking your contract, you'll be hit with a penalty -- an early termination fee -- since it would leave the carrier without a way to recoup the cost of that shiny new mobile mini-computer that they handed you on the cheap when you just absolutely had to have the hot new toy in town.

Is this process really all that complicated? And why is it so controversial? It certainly shouldn't be. Prorating happens every day in countless ways in a capitalist economy. And yet in the apparent techno-entitlement society we live in these days, some people seem to think there's something scandalous about this process when it happens with our beloved mobile devices. In reality, the smartphone subsidy and prorated contract system is really one of the great pro-consumer accomplishments of our time.

FCC Commissioners Michael Copps and Meredith Attwell Baker kicked off the 2010 Congressional Internet Caucus "State of the Net" conference this afternoon with two brief keynote addresses. Below I've summarized the highlights here from my live Tweeting at the event (@AdamThierer):

Commissioner Copps

• "every great challenge this country faces... has a broadband component at its core if it's going to be successfully dealt with"
• Broadband is the great enabler; Private sector will lead, but national objectives and visionary public policy also have to be at core
• "sins of recent public policy past" got in way of us doing things that needed to get done
• Worries about wider new "divides between us"; have opportunity to close them
• Praises Hillary Clinton's Internet freedom speech from last week
• Hard to conceptualize the changes that next 5-10 years hold in light of the developments of past 5-10
• Worried about open Internet; "unreasonable discrimination"... doesn't want to allow "too much latitude" to private operators... says it is threat to "openness" (he never really defines the term, however)
• Passionate views on both sides of Net neutrality debate
• Need big pipes and more spectrum to grow capacity (I certainly agree on that one! But Net neutrality isn't going to help us much in that regard)
• He fears consolidation
• Says minority and women voices are not getting heard online (he says we should measure it by audience measurements & ad $$ but doesn't bothering mentioning how much wider the gap was in the old mass media era when none of those voices could get heard at all)
• How do we assure what we're doing "actually works for democracy" and the "public interest" (but never defines what that means)
• Says media is failing us today; victims are public; investigative journalism is dying (but never discusses how current FCC regulation affects the equation)
• cites Founders (Jefferson, Madison) re importance of media ... and then favorably cites McChesney & Nichols new book (ugh, someone needs to tell Commissioner Copps that McChesney is a neo-Marxist who wants to destroy all private media providers!)

As I mentioned, I'm out in Vegas attending the Tech Policy Summit at CES today and tomorrow and trying to blog about some of what's going on. Here's my summary of panel#1 on broadband policy and the pending national broadband plan.

The second panel was entitled "The Spectrum Grab and Innovation" and was moderated by Rob Pegoraro of The Washington Post. The panelists were:

• Dean Brenner, VP of Government Affairs, Qualcomm


• Michael Calabrese, VP, Wireless Future Program, New America Foundation


• David Donovan, President, Association for Maximum Service Television (MSTV)


• Joan Marsh, VP, Federal Regulatory Affairs, AT&T


• Craig Moffett, VP and Senior Analyst, Sanford C. Bernstein & Co.


• Janice Obuchowski, Founder and President, Freedom Technologies

I have summarized some of what the panelists had to say down below.

PFF has just released the transcript of an excellent panel discussion I moderated last week entitled, "Let's Make a Deal: Broadcasters, Mobile Broadband, and a Market in Spectrum." As I've mentioned here before, one of the hottest issues in DC right now is the question of broadcast TV spectrum reallocation. Blair Levin, who serves as the Executive Director of the Omnibus Broadband Initiative at the Federal Communications Commission, recently raised the possibility of reallocating a portion of broadcast television spectrum for alternative purposes, namely, mobile broadband. Such a "cash-for-spectrum" swap would give mobile broadband providers to spectrum they need to roll out next generation wireless broadband networks while making sure broadcaster receive compensation for any spectrum they hand over. The FCC just recently released a public notice on "Data Sought on Users of Spectrum," (NBP Public Notice # 26) that looks into the matter. "This inquiry," the agency says," takes into account the value that the United States puts on free, over-the-air television, while also exploring market-based mechanisms for television broadcasters to contribute to the broadband effort any spectrum in excess of that which they need to meet their public interest obligations and remain financially viable." Meanwhile, the House Energy and Commerce Communications Subcommittee is set to hold a hearing on the issue next Tuesday.

PFF's panel discussion on this issue featured an all-star cast of characters, including opening remarks by Blair Levin, and a terrific discussion ensued. [You can hear the full audio from the event here.] Down below I have highlighted some of the major points each speaker made during the discussion and also embedded the complete transcript in a Scribd reader. Also, just a reminder that my PFF colleague Barbara Esbin and I authored a short paper on this issue recently: "An Offer They Can't Refuse: Spectrum Reallocation That Can Benefit Consumers, Broadcasters & the Mobile Broadband Sector."

Wall Street Journal columnist Holman Jenkins has a new column up this morning about the ongoing battle over broadcast television spectrum reallocation. ["The Rabbit-Ear Wars."] It discusses the plan being floated by FCC "broadband czar" Blair Levin, who serves as the Executive Director of the Omnibus Broadband Initiative at the Federal Communications Commission. Levin has raised the possibility of reallocating a portion of broadcast television spectrum for alternative purposes, namely, mobile broadband. Such a "cash-for-spectrum" swap would give mobile broadband providers to spectrum they need to roll out next generation wireless broadband networks while making sure broadcaster receive compensation for any spectrum they hand over. The FCC just recently released a public notice on "Data Sought on Users of Spectrum," (NBP Public Notice # 26) that looks into the matter. "This inquiry," the agency says," takes into account the value that the United States puts on free, over-the-air television, while also exploring market-based mechanisms for television broadcasters to contribute to the broadband effort any spectrum in excess of that which they need to meet their public interest obligations and remain financially viable."

Holman Jenkins argues that the issue is incredibly contentious and likely to engender a great deal of political wrangling. "The spectrum puzzle won't be solved by the clean and simple deal the agency envisioned," he says. That's true, but I think the FCC still deserve some credit for at least starting the discussion. As my PFF colleague Barbara Esbin and I noted in our recent paper, "An Offer They Can't Refuse: Spectrum Reallocation That Can Benefit Consumers, Broadcasters & the Mobile Broadband Sector," [PDF], it's hard to see what is wrong with letting broadcasters hear offers of cash for their spectrum! That being said, they should have their hands forced (to give up the spectrum, that is). I think Jenkins generally gets it right when he says:

PFF hosted a very animated discussion yesterday on the proposal to have broadcasters return some of their spectrum for auction in order to clear more spectrum for wireless broadband services. The event featured Blair Levin, Executive Director of the FCC's Omnibus Broadband Initiative, who has been at the center of recent reports that the agency has been talking to broadcasters and the wireless industry about such a proposal.

The tension between stakeholders was palpable as illustrated by heated exchanges between the panelists. Specific topics ranged from the true economic and social value of the spectrum held by broadcasters, to what specific bands would be viable to use for broadband services, to if there really is an upcoming spectrum crisis that needs to be proactively addressed. Panelists even touched upon how regulation of the broadcast industry could hinder any proposed deal. Excellent coverage of the event which describes the highlights better than I can be found at TVNewsCheck.com, WSJ Online, Communications Daily (subscription) and TR Daily (subscription).

Audio of the event is available here and a recent paper on the issue authored by Adam Thierer and Barbara Esbin is available here. A transcript of the event will be available shortly and Adam, who moderated the event, will share his thoughts on the event upon its release.