In her latest column, Media Post media market guru Diane Mermigas wonders how long it will be before we see a traditional over-the-air (OTA) broadcast TV network (like ABC, NBC, CBS, or Fox) dump their old broadcast business altogether and just move all their properties to cable and satellite TV. And, in response to Mermigas, Cory Bergman of Lost Remote argues, as I did last week, "the real future of TV is not linear cable, but non-linear video delivered seamlessly via IP to multiple devices, including your TV set. But mass adoption of this approach is still several years away."

Bergman is right. It would be foolish to think any traditional network is going to rely exclusively on IP-based distribution any time soon; they see it as more of a compliment (or another product window). But Mermigas may be on to something in predicting that broadcast networks may soon be looking to get out of the OTA television business altogether and essentially become "a glorified general entertainment cable network."

The strain on their dysfunctional paradigm is emanating from a devastating recession and the ongoing digital revolution. Both are permanently altering the rules of play for the networks. A case can be made for at least one of the Big 4 broadcast networks emerging as a glorified general entertainment cable network within the next several years. The economic advantages: more steady ad revenues and consistent subscriber fees as content is distributed cross-platform.

It would be a bold move that a free-spirited company such as News Corp. might already be contemplating for its Fox Broadcast TV Network, or NBC Universal for its peacock network. Industry analysts increasingly wonder how an independent CBS can prattle on under the crumbling old rules. In a world of exploding access and choices, the prime-time ratings (even with Live plus 3 configurations) spell diminishing returns. For Disney, ABC's general entertainment status is on par with ESPN in sports; the new multi-platform model is in place except for formally moving the ABC TV Network to the cable side of the ledger.

My once and present boss Ken Ferree recently remarked of the FCC:

Although it is true that a foolish consistency is the hobgoblin of simple minds, a foolish inconsistency is worse. The FCC is guilty of the latter.

The subjects Ferree addressed were twofold. First, the inconsistency between the FCC's recent decision to intervene on the side of the programmer, NFL Network, in its program carriage dispute with cable operator Comcast Corporation and the agency's calls for the industry to adopt an "a la carte" pricing model to ensure that consumers only receive programming channels they affirmatively choose to receive from their multi-channel video programming distributor. And second, the FCC's purchase of labeling rights - ostensibly a form of "embedded advertising" - on a NASCAR racing car at the same time it is contemplating imposing limits on the ability of commercial advertisers to do likewise.

In my nearly 17 years of public policy work, I have never felt so vindicated about something as I did this weekend when I read Dan P. Lee's Philadelphia magazine feature on "Whiffing on Wi-Fi." It is a spectacularly well-written piece about the spectacular failure of Philadelphia's short-lived experiment with municipally-subsidized wi-fi, which was called Wireless Philadelphia. You see, back in April 2005, I wrote a white paper entitled "Risky Business: Philadelphia's Plan for Providing Wi-Fi Service," and it began with the following question: "Should taxpayers finance government entry into an increasingly competitive , but technologically volatile, business market?" In the report, I highlighted the significant risks involved here in light of how rapidly broadband technology and the marketplace was evolving. Moreover, I pointed to the dismal track record of previous municipal experiments in this field, which almost without exception ended in failure. I went on to argue:

Keeping these facts in mind, it hardly makes sense for municipal governments to assume the significant risks involved in becoming a player in the broadband marketplace. Even an investment in wi-fi along the lines of what Philadelphia is proposing, is a risky roll of the dice. [... ] the nagging "problem" of technological change is especially acute for municipal entities operating in a dynamic marketplace like broadband. Their unwillingness or inability to adapt to technological change could leave their communities with rapidly outmoded networks, and leave taxpayers footing the bill.

I got a stunning amount of hate mail and cranky calls from people after I released this paper. Everyone accused me of being a sock puppet for incumbent broadband providers or just not understanding the importance of the endevour. But as I told everyone at the time, I wasn't out to block Philadelphia from conducting this experiment, I just didn't think it had any chance of being successful. And, again, I tried to point out what a shame it would be if taxpayers were somehow stuck picking up the tab, or if other providers decided not to invest in the market because they were "crowded-out" by government investment in the field. But even I could have never imagined how quickly the whole house of cards would come crumbling down in Philadelphia. It really was an astonishing meltdown. Dan Lee's article makes that abundantly clear:

The Chairman of the FCC appears poised to attempt yet another appropriation of private property from cable operators. This time the vehicle is a regulation that would require cable operators to carry hundreds of low-power television stations. The practical effect would be to force cable operators to devote already limited channel capacity to stations that have programming of such small appeal that there exists no market demand for it. Now, one can criticize this latest proposal on many levels - it almost certainly is unconstitutional, it is inconsistent with the Communications Act, it is inequitable, unfair, bad policy, and bad economics. But, taking the proposal seriously, what it really suggests is that the time has come to take back the broadcast spectrum allocated to these stations and devote it to services that people actually want. The stations demanding new carriage rights can't, after all, apparently survive based on their over-the-air viewing audience, and their programming schedule is so weak that no cable operator would carry it voluntarily without a federal mandate. At some point, the federal government has to stop trying to prop up failed enterprises. In this case, the costs of doing so are measured in terms of inefficient spectrum usage and burdensome regulations on an industry that is providing a service that consumers demand in large numbers.

Boynton Beach, Florida's experiment with municipal wi-fi has ended. [Add it to the list of recent failures]. According to the South Florida Sun-Sentinel:

There's a roadblock in Boynton Beach's information superhighway. The city's Community Redevelopment Agency decided this month it has no more money for free wireless Internet service in its district. Boynton Beach was the first city in Palm Beach County to offer Wi-Fi three years ago. It operated 11 "hot spots," or access points, paying $44,000 annually for vendors to keep the system running. But the CRA dropped vendors who failed to meet their contracts. Other companies wanted to sell the Community Redevelopment Agency new equipment, but in a tough budget year, offering free wireless was no longer viable, said the agency's executive director, Lisa Bright. [...] "There is clearly no way for it to be a revenue generator at this time," Bright said. "It's premature for us to go to the next level."

Whenever I read one of these articles about the small town or mid-sized town wi-fi experiments failing so miserably I have to admit that I am a bit surprised. After all, many muni wi-fi supporters have argued that it is precisely in those communities where government support is most necessary and will be most likely to fill in gaps left by sporadic / delayed private broadband deployment. Frankly, I always thought this was the best argument for muni wi-fi and it's why I made sure to never go on record as opposing all government efforts, even though I am obviously a skeptic and don't like the idea of wagering taxpayer money on such risky ventures. (By contrast, I could just never see the reason for government subsidies of wi-fi ventures in major metro areas with existing private broadband operators. Like Philly and Chicago.) But the fact that many small town or mid-sized town wi-fi experiments are failing is really interesting because it must tell us something about either (a) the viability of the technology or (b) demand for such service. Now, many municipalization believers will just say that clearly (a) is the case and argue that we just need to wait for Wi-Max solutions to come online and then all will be fine. It certainly may be the case that Wi-Max will help boost coverage in low density areas, but is that really the end of the story? What about demand? What really makes me mad when I read most of these stories about current failed experiments is that they rarely give us any solid numbers about how many people utilized the services. To the extent any journalists or analysts are out there contemplating a story or study on this issue, I beg you to dig into the demand side of the equation and try to find out how much of the currently muni-wifi failure is due to technology and how much is due to demand, or lack thereof. Of course, government mismanagement could also be a culprit. But I suspect there is a far less demand for these services than supporters have estimated.

Several of us over on the TLF have outlined our reservations about the proposal to allocate a block of the Advanced Wireless Services (AWS) spectrum for a free, nationwide wireless service. (Here's a filing I signed on to that critiques the portion of the plan that requires censorship of the entire band once allocated).

But, strictly from an economic perspective, this is the best overview and critique of the plan I have seen so far: "The Static and Dynamic Inefficiency of Abandoning Unrestricted Auctions for Spectrum," by Bob Hahn, Allan Ingraham, Greg Sidak, and Hal Singer. It's a response to a paper favoring the M2Z plan that was penned by Simon Wilkie of USC, who also formerly served as the Chief Economist of the FCC. (Wilkie's work on behalf of M2Z can be found on the M2Z site here). It's a good debate and I encourage you to look at both papers if you are interested in this issue.

Thursday morning's "OPEC 2.0" Op Ed in the New York Times by Columbia Law professor Tim Wu exhorts Americans to "face" their bandwidth addiction and explore alternative supplies of bandwidth "before it is too late." One may ask, too late for what? Are we really in imminent danger? As if characterizing the everyday use of broadband communications networks an "addiction" was not worrisome enough, Wu then analogizes bandwidth - what he defines as "the capacity to move information" - with oil and other finite energy sources - and paints a dark picture of today's largest bandwidth providers as greedy monopolists (or duopolists) controlling supply and "maintain[ing] price levels and extract[ing] maximum profit from their investments" similar to the OPEC oil ministers setting "production quotas to guarantee high prices." The problems with Wu's flawed analogies are explored in greater detail by my colleague Bret Swanson.

Having induced a degree of fear in the reader, Wu then introduces a note of hope for a better and alternative world in which one "future possibility is to buy your own fiber, the way you might buy a solar panel for your home." Perhaps. But what would this really mean? How many Americans really want to become their own "network managers," bear the responsibility for buying their own fiber, or install and maintain their network? And this is one of the least objectionable suggestions in his piece.

This week I was pleased to join a diverse collection of think tanks and public interest groups in submitting joint comments to the FCC opposing the proposed content filtering mandate that would be part of a future AWS-3 auction. That's the proposed auction that would create a "free" nationwide wireless broadband service. As part of the deal, the company would need to need to take steps to provide a "clean" Internet connection by filtering content. This joint filing points out why that is a bad idea:

* the reach of the filtering mandate is extraordinarily broad, and would attempt to censor content far beyond any content regulation regime that has been previously upheld in the face of constitutional challenge.
* even if the scope of the filtering mandate were more narrowly focused, it would conflict with the First Amendment analysis that the Supreme Court applied to Internet access in the seminal Reno v. ACLU decision.
* even if the Commission were to require filtering on an "opt out" or "opt in" basis, the Constitutional problems would not be avoided. Opt-out filtering would impose an unconstitutional burden on listeners and recipients of Internet communications, and both opt-out and opt-in filtering would violate the First Amendment rights of speakers and other content providers on the Internet. Simply put, the First Amendment does not allow a government mandated "blacklist" of websites to be blocked.
* would also violate the terms and intent of two federal statutes - 47 U.S.C. § 326 (which prohibits the Commission from "interfer[ing] with the right of free speech") and 47 U.S.C. § 230 (which promotes user control over content and limits burdens on service providers).
* would also limit what people could do online using the free AWS-3 service so dramatically that the usefulness of the service would be radically reduced.
* would also certainly lead to legal challenges that would delay the implementation of the proposed access service.

Berin Szoka and I just released a short article on the FCC’s proposed follow-up to the failed 700 mhz D Block auction: a free, nationwide wireless service that would serve public safety users as well as consumers. It's attached down below or the PDF can be found here.
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What's Worse Than Rigged Auctions & Internet Censorship?
How About Both in One Package!

a PFF Progress Snapshot
Release 4.12 June 2008

by Adam Thierer and Berin Szoka

The big spectrum policy debate in town these days continues to be the fight about how to redo the botched D block auction. As we all know, FCC Chairman Kevin Martin's previous effort to micro-manage that auction failed miserably. Sadly, the follow-up plan isn't much better, as the Wall Street Journal notes in an editorial today:

You'd think Chairman Martin would have learned from this experience. It's not the role of regulators to pick winners and losers to achieve their preferred social outcomes. Private competition and the price mechanism can most fairly and efficiently find the best use for scarce spectrum. The FCC's clumsy attempt at social engineering resulted in a failed auction that has prevented otherwise desirable spectrum from being put to commercial use.

Alas, Mr. Martin has now proposed another wireless auction for a separate piece of spectrum. And this time he wants to require the winner to offer free Internet access that filters out pornography--conditions that obviously would decrease the value of the license and turn off potential bidders. It just so happens that Mr. Martin's proposed auction seems tailor-made for the business plan put forward by M2Z, another politically connected Silicon Valley start-up looking to enter the wireless broadband telecom market.

Auction participants are now talking about their plans for the spectrum acquired during the 700 MHz auction.

AT&T plans to expand a G4 architecture network to cover 87 percent of the US. The "B Block" spectrum gained by AT&T is unencumbered by open access restrictions.

Verizon, the other big winner in the auction, also plans to roll out "a fourth-generation network using long-term evolution (LTE) technology."

Qualcomm Inc. plans to expand its MediaFLO USA mobile television service.

Google didn't pick up any of spectrum but is apparently pleased with the results.

As was widely publicized, the reserve bid for the "D Block," which was organized as a public/private network to be used for public safety communications, was not met. Want to learn more about what the aftermath of the failed "D Block" auction means for public safety? PFF is hosting a CEO Luncheon with Declan Ganley April 29th, where Ganley and a panel of experts will discuss this very subject. More information can be found here.