CommLawBlog : Broadcast & Communications Lawyers & Attorneys : Fletcher Heald & Hildreth Law Firm : Telecommunications, FCC Regulation, Communications Act

Sure enough, that fin de siècle panacea is going to be the go-to device again in the 21st Century.  As described by the Chairman, the NBP will propose a “Mobile Future Auction” – unclear whether the “mobile” there modifies “future” or “auction” – which will “permit[ ] existing spectrum licensees, such as television broadcasters in spectrum-starved markets, to voluntarily relinquish spectrum in exchange for a share of auction proceeds”. 

Precisely how such an auction would work has yet to be disclosed – indeed, it may not even have been determined yet.  But it is apparent that the Commission has thoroughly embraced the notion that television spectrum is a resource that can and should be re-purposed for mobile broadband use.  While Genachowski’s speech shed no light on the anticipated auction mechanism, it did offer something in the nature of a rationale as to why TV spectrum is being singled out.

For openers, there is a “massive amount of unlocked value” in TV spectrum – maybe even $50 billion, according to “one study” – and from this, the Commission has ineluctably concluded that there are “inefficiencies in the current allocation”.  Who says there’s $50B, give or take, in “unlocked value” there?  Why, “a broad range of analysts, companies and trade associations participating” in the FCC’s nearly infinite range of broadband-related inquiries.  Which analysts, companies and associations?  Well, the Chairman didn’t say.  How might the inherent “value” get “unlocked” (and how did it get “locked” in the first place)?  That’s another explanation which is left for a later day.

Another reason for grabbing TV spectrum: according to the Chairman, TV “spectrum is not being used efficiently – indeed, much is not being used at all”.  In support of this claim Genachowski cited some vague and general claims along the lines of “Even in our very largest cities, at most only about 150 megahertz out of 300 megahertz [of TV spectrum] are used.”

While a speech is probably not the forum in which to lay all one’s cards out on the table, the Chairman might still have offered just a tad more support for the decision to go after TV spectrum.  After all, estimates of “unlocked value” are not really something you can take to the bank, particularly if those estimates were propounded by folks who might be in a position to rake in some of that “unlocked value” if things go the right way.  And it’s difficult to credit claims of efficiency of spectrum use when the TV industry, and the viewing public, are less than nine months into the DTV era.  Certainly there may be substantial spectrum potential yet to be tapped, but why must we assume that the best (maybe even the only) way to tap it is through mobile broadband services to be provided by somebody other than broadcasters? (In fact, FHH has a client who has a technology that will allow TV stations to use any digital bits they don’t need for television programming to provide broadband – something they can do today under present rules and so can do a lot faster than navigating through the political reallocation and auction thickets.)

Perhaps recognizing that his rationale was not all that compelling, Genachowski shifted gears into huckster mode:  “the Mobile Future Auction is a win-win proposal: for broadcasters, who win more flexibility to pursue business models to serve their local communities; and for the public, which wins more innovation in mobile broadband services, continued free, over-the-air television, and the benefits of the proceeds of new and substantial auction revenues.”  Often when you hear the term “win-win”, it’s a safe bet that somebody’s trying to sell you something that you might neither want nor need. In this case, for example, we don’t know what “flexibility” broadcasters might gain that they don’t have now.

The Chairman did emphasize that the “Mobile Future Auction” is currently envisioned as a voluntary program. Voluntary?  Perhaps, but maybe only in the same way that a businessman “voluntarily” decides to buy insurance from the guy who says “nice little business you got here – it’d be a shame if something happened to it.”

In any event, while we may not know all the details, we at least know the direction in which the Commission’s heading.  Ideally more details will be available on March 16, the day on which the NBP is currently set to be revealed.  But even that will mark, at most, the starting point of what is likely to be a difficult struggle.

Interestingly, it’s not at all clear what difference (if any) the FCC’s views will make.   The statute requiring the NBP doesn’t say who is in charge of adopting it, or whether it even needs to be adopted by the Commissioners as the formal recommendation of the agency to Congress. The law simply directs the FCC to do its due diligence to come up with a plan, then tell Congress about it.  Other than that, the FCC appears to have no independent authority to jumpstart or otherwise implement the NBP; the only entity explicitly granted authority by Congress to adopt regulations related to the broadband initiative is the Assistant Secretary of Commerce in charge of NTIA, not the FCC.  Moreover, the FCC’s statutory auction authority doesn’t say anything about turning over any proceeds to incumbent licensees or anyone else but the U.S. Treasury.

Given the uncertainty about the follow-through, we are cautiously advising broadcasters to view the NBP as the FCC’s recommendation to Congress, and not a final decree.  It is also appropriate to bear in mind that the folks in Congress may be reluctant to turn their backs on broadcasters, particularly if broadcasters increase the intensity of use of their spectrum by introducing more multi-channel broadcast or non-broadcast services.  Notwithstanding social media and Internet advertising campaigns, etc., candidates continue to flock to broadcasters at election time to reach for voters.  And broadcasters’ ability to deliver voters’ eyes and ears may constitute an “unlocked value” of its own.

We will, of course, have to wait and see.

As far as nitty-gritty factual information goes, the Commission is interested in the current availability and implementation of broadband services within schools and school districts. Where broadband services have been implemented, how are they being used for online learning systems, backroom data reporting systems and the like? Have various communications systems (instant messaging, online video conferencing and such) assisted in the introduction of new learning opportunities that were not otherwise available?

On a more conceptual level, the Commission is asking about the role of government in supporting the introduction and development of broadband use in schools and school districts, and what specific steps the Commission could or should be taking along those lines (including the setting of technology standards and the support of technology literacy programs).

The E-Rate program is yet another focus of the FCC’s interest: what modifications to that program might “stimulate the adoption of broadband throughout communities”?   How do current participants use the program, and should the program be expanded (through Congressional action, of course) to include additional educational programs such as Head Start? Also, how about maybe modifying the distribution of E-Rate funds – would that assist broadband deployment? And might changes to the E-Rate program affect the expansion of broadband deployment, and what might the impact of such expansion be on the level of E-Rate Funding? (The Commission is particularly concerned that the current limit on funding – $2.25 billion – may prevent further expansion of broadband deployment. But if that limit were to be upped, what types of services could be provided?)

It’s not exactly clear how such a vast amount of information covering a vast number of subjects might be compiled and usefully presented in a mere 16 days – let alone thoughtfully digested and analyzed by the Commission in the next three months. Why the FCC waited until this late date to initiate a soup-to-nuts review of the use of “broadband for educational purposes” is unclear, but it reminds us of a frantic midnight call to a fellow student for their notes to prepare for the big calculus test the next day. While the goals of the Commission are obviously worthwhile and could lead to the development of important policies, the rushed nature of the agency’s efforts does nothing to dampen skepticism as to whether a tsunami of information submitted in the next 16 days can or will be put to good use. Only time will tell.

(At the risk of getting too technical: Deep Packet Inspection is the process by which Internet service providers can probe around in the contents of data packets passing through their systems.  When a file – whether it’s a web page, or an email, or a video, or whatever – is sent from Point A to Point B on the Internet, it first gets organized into “packets” which are then sent on their way to their common destination.  Those packets don’t necessarily all travel the same path through the myriad interlinked computer systems which comprise the Internet.  For purposes of getting them all to the same place, the intervening systems need to know only the intended destination and a few other factoids relating to routing.  The particular contents of the packets ordinarily do not come into play in the transmission.  Deep Packet Inspection, however, permits detailed analysis of those contents, thus affording inquiring minds access to information which would ordinarily be thought to be private.)

There is concern that this technology is too much of a temptation for those who gather and utilize consumer data. But the bills being written don’t restrict themselves to dealing only with this “extreme” type of tracking. They apply to most companies that store and use data. Here is how the legislation breaks down:

Two online privacy bills are now in different stages of development in the House. The first is being written by Rep. Rick Boucher (D-VA-9^th), Chairman of the Energy and Commerce Subcommittee on Communications, Technology and the Internet, one of two House subcommittees with jurisdiction over the issue.  Boucher reportedly is working with his Republican counterpart, Cliff Stearns (R-FL-6^th), on language that would: (a) allow Internet sites routinely to collect benign information from consumers unless the consumers affirmatively “opt-out” of such collection; but (b) prohibit the collection of sensitive personal information unless the consumer expressly agreed to such collection by affirmatively “opting-in”. The objective of this approach seems to be to force people to jump through hoops before releasing tracking rights to their sensitive information, because it takes more effort to opt-in than out. In theory, people will therefore make informed choices about who collects the sensitive details of their lives and how they use that information. (But how do we define sensitive, you ask? We’ll have to wait until the bill is introduced to see.)

The second bill has been introduced by Rep. Bobby Rush (D-IL-1^st), Chairman of Energy and Commerce’s Subcommittee on Commerce, Trade and Consumer Protection – the other House subcommittee of jurisdiction. Rush’s bill, H.R. 2221, would require the Federal Trade Commission (FTC) to promulgate regulations to secure computerized data containing personal information.   (See the subcommittee hearing on the bill here.) It would be no surprise if the two subcommittees’ bills were to be merged into one piece of legislation regulating online privacy.

If an online privacy bill passes the House, the torch will be passed to the Senate, where Senate Commerce Committee Chairman Rockefeller has made no secret of his consumer-oriented focus. On the one hand, Senator Rockefeller acknowledges the reliance of the news industry on new technology. On the other hand, his Committee position makes him responsible for drafting a law restricting how media profit from the same advertising that supports their news-gathering operations. It is unclear how Senator Rockefeller and others of like mind will resolve this tension. 

While the bills will determine the principles of privacy policy, Congress will likely rely on the executive branch to determine important detail. The FCC is already shaping the online landscape as it writes its National Broadband Plan and takes its public stand on “network neutrality.” The Federal Trade Commission is deeply involved in behavioral advertising and is beginning to share its thoughts with the FCC as well.  Whether involved in writing online privacy law or executing and enforcing online privacy regulations, all government entities involved are now deciding how they will allow much-needed innovative online-related business to flourish while keeping consumer trust.

Prof. Greenstein has posted a comment on Paul’s blog (check it out here) and has separately blogged on his own space (titled “Virulent Word of Mouse” – an excellent name, IMHO) – each time taking issue with the use of the term “contrarian”. (Happily, Prof. Greenstein approves of the substance of Paul’s description of the workshop. Thanks to Prof. Greenstein – and props to Paul – for that.)

If I’m reading Prof. Greenstein’s posts right, though, I suspect that he and I are really on the same page. His concern about “contrarian” appears to be that that term suggests that anyone branded as a “contrarian” is something of a knee-jerk nay-sayer, bucking against the majority view simply for the sake of being, well, contrary. As he carefully explains, that does not reflect his attitude at all.

Rather, he insists on using actual data, subjecting those data to rigorous analysis, and only then formulating public policy based on the results of such analysis. It’s hard to argue rationally against such an approach.

The problem, of course, is that that is often not the way of Washington. Those in government – whether elected or appointed or just plain hired – often find it necessary or convenient to ignore the facts, to go all fuzzy Big Picture when the nitty-gritty details don’t happen to point in the preferred direction. And often when confronted by some calamitous situation – like a major-league economic meltdown – the Washington establishment’s willingness and ability to focus on any detail at all (much less unpleasant detail) tend to be even more, er, impaired – kind of like a thoroughbred horse trapped in a burning barn. 

So it shouldn’t be surprising that the Conventional Wisdom around Washington seems already to have reached conclusions at odds with his (and his colleagues’) analyses in the broadband area, as Prof. Greenstein acknowledges (“conventional wisdom has settled on a view that just ain’t so”). From a Washington-centric perspective, anyone questioning those conclusions may be seen as “contrarian”. That doesn’t make the questioners wrong – just contrary to the prevailing perceptions. But, as Prof. Greenstein’s workshop presentation and blog properly remind us, just because the Washington establishment has reached a conclusion, that doesn’t mean that that conclusion is necessarily correct.

We can only hope that rigorous and thoughtful analysis is brought to bear on the appropriate data before final policies are etched in stone and billions of federal dollars have been irretrievably doled out. On that I’m guessing Prof. Greenstein and I are in agreement.

While two of the six speakers did stick to the CW, the others offered a far more analytical – and far less positive – view. The four were academics (economists) whose message was that, at best, there are not enough good data to make a strong connection between broadband and economic growth, and at worst, that there isn’t even a particularly strong connection between the two. 

You can find links to a recording of the entire workshop, as well as the individual presentations, here. Here’s a big picture summary:

James Prieger (Pepperdine University School of Public Policy) stated that it is difficult to measure the economic impact of broadband. Still, he asserted that there are certainly contexts in which adding broadband would not make a significant positive impact. For example, user entities whose staff lack the training to maximize use of broadband, or whose management/production style are not likely to lead to maximized broadband use. He cited schools in particular as a prime example of this. As to employment, he noted the mixed results of broadband implementation: workers may become more productive and work can be more easily out-sourced, which can lead to reduction in the number of necessary employees in a company.

Chris Forman offered complex analyses showing that the relationship between broadband use and growth in personal income is strongest in areas with the highest income, skills, education and IT production – in other words, a “rich get richer” scenario not necessarily consistent with the concept of broadband-as-panacea. He stated that there appears to be little impact outside of urban areas, and that there is little evidence of growth in employment as a result of broadband.

Ryan McDevitt (Northwestern University) noted that pure economic growth can’t be determined solely from calculation of increases in revenue and/or available services attributable to broadband. Rather, opportunity costs and reduction of revenue from dial-up services must also be considered. McDevitt also asserted that implementation of broadband in rural areas is particularly expensive, when compared with the associated benefits over use of dial-up services.

Brent Goldfarb (University of Maryland, Robert H. Smith School of Business) focused on the uses to which broadband is currently put. He noted that the largest current consumption of broadband is for P2P file sharing, much of which is illegal (not to mention potentially harmful to the recording industry).

In contrast to this salvo of academic realism, Ralph Everett (Joint Center for Political and Economic Studies) relied on the standard statistics for the assertion that broadband has a huge positive impact on the economy and employment. And the presentation by venture capitalist Tom Wheeler (Core Capital Partners, LLC) involved no statistics at all, but rather was a gut-level emotional plea for greater broadband development, based largely on analogies to the social and economic impact of the trans-continental railroads. Hmmmmm…… 

It will be interesting to see what the FCC does with this.   We still believe that they will go with the idea that increased broadband growth is necessary or good for economic growth. Everybody seems to be saying it, including the President, the Congress, and the FCC Chairman. That must make it true, right? 

To be sure, the received truth does have an appealing credibility, supported by studies that, for whatever reason, were largely MIA at the workshop. But the workshop’s presentations should still give everyone involved in the process cause for reflection. 

The FCC’s staff must have known that the majority of presenters would present contrarian – or, at least, not entirely upbeat – approaches. Which leads us to wonder: did the staff line up this group of contrarians in an effort to create some appearance of balance on the issue? Or perhaps the workshop’s organizers were affirmatively trying to attune the public to the notion that, as the government flings billions of dollars out the door at broadband development, it could use much more information – so please recommend to Congress that that information be obtained through the Census or other means.

Stay tuned for more developments in this evolving drama.