net neutrality

Verizon’s smartphone direction still chasing AT&T?

Verizon is apparently planning a total smartphone blitzfor the holidays, including the already-discussed Droid from Motorola, but also according to rumor, a new HTC Android smartphone and perhaps a third model as well.

The Verizon moves are, we think, are calculated to make things complicated for AT&T and Apple with the iPhone for the holidays. A multiplicity of models at various sizes and price points makes sense at this stage in the market, but there is no question Apple still has the cachet that other smartphones have so far been unable to match.

We think all of these smartphone wars are a signal that whatever the FCC might do with wireless net neutrality, operators are committed to the mobile web.

FCC includes pivotal issue in Net Neutrality NPRM

The FCC isn’t “considering” net neutrality rules as a formal order; they’re “proposing” specific actions. That’s the meaning of what happened yesterday at the public meeting. The FCC approved its net neutrality Notice of Proposed Rulemaking (NPRM) by unanimous vote, but Republicans dissented in part, just enough to keep alive the partisan bickering that’s characterized Washington and to reflect their concern with some of the points.

If you look at the document closely, you find it really consists of four parts. One codifies the original principles of net neutrality that were published in 2005. The second requires that providers treat lawful traffic in a non-discriminatory way and publish any traffic management policies. Both these sections (which are subdivided further in the NPRM) are largely accepted by all. The third element asserts the FCC’s position that these principles be applied across access types, meaning wireline telco, cable, and wireless. This raises some ire in the industry, and also with some Republicans.

The final point, in our view this is the most controversial, asks for comment on the specialized services that are IP-delivered and share the broadband pipe with the Internet. The FCC wants to know how to define these and what rules (including the six defined in the first and second parts we’ve outlined) should apply to these special services.

This last issue is pivotal because should the FCC decide these services are also to be regulated in some way, they could impose access-sharing requirements on telco IPTV offerings. We think it will be months before any order comes out of this process, but just the fact that the FCC is thinking about the third and fourth issues here could force operators to consider what would happen to their mobile and wireline walled-garden services if access connections had to be wholesaled to competitors at a fair price.

Regulatory issues are never covered well in the media, and the public interest in this one will likely make it worse. Make no mistake; the key to the future is in the single issue of those managed or special services!

Policy clues surface as FCC hits its stride

The FCC is hitting its stride in regulatory policy terms, primarily relating to the issues of next-gen voice. In one matter, the FCC has already asked Google for specific details on Google Voice, in response to AT&T filing a complaint that the service was really a regulated voice service and was discriminating against open call routing to exchanges with high reciprocal compensation rules.

Now the FCC’s chairman is making it clear that his FCC thinks mobile services are the really hot regulatory issue. Genachowski applauded the AT&T decision to open its mobile network to VoIP services and the Verizon Wireless partnership with Google. He still feels that mobile services aren’t necessarily as competitive as the FCC would like. The knotty issues for mobile are the application of net neutrality and the question of open handsets and handset subsidies.

AT&T swipes at Google in net neutrality debate

AT&T is punching back at Google’s long advocacy of net neutrality, accusing the company of violating its own principles with Google Voice. The primary issue is that Google blocks calls to rural exchanges that charge high termination fees per call. Google says that’s because Voice is a free service, and that in any event, it’s not a telco and isn’t bound by net neutrality principles.

The free voice argument is a weak one because Google doesn’t admit telcos could reject net neutrality principles for lack of profit, and the net neutrality argument is a weak public position at a time when the FCC is considering broader net neutrality scope.

We think the play will raise some essential questions about whether net neutrality needs to be carefully structured to avoid creating what in effect is market-by-avoidance.

FCC net neutrality proposal confuses the issue

Reviewing FCC Chairman Genachowski’s comments on the net neutrality process, we find that there are a number of interesting points.

• First, the FCC is indeed proposing to apply net neutrality to wireless, which is something that’s already caused concerns among wireless providers. Wireless is the last bastion of profitability for the operators, after all.
• Second, the FCC is making it very clear that net neutrality rights will apply only to lawful content, and in fact Genachowski specifically said it would not apply to P2P that infringes on copyright. That means that the ISPs would be free to interfere with “non-lawful” traffic.
• Third, and perhaps most significantly, the FCC is saying that while it is important to offer managed services, which we assume means services with managed QoS, in parallel with the Internet, these can’t be allowed to compromise Internet service capacity and quality growth. This could pose the risk that the FCC might reverse its long-standing position on IPTV.

We don’t know exactly what the FCC has in mind (nor does anyone else (which likely includes the FCC!), but this announcement could create more uncertainty than clarity, which could influence U.S. providers’ investment in broadband. A Senate bill to block the order has been introduced, but it has no chance of passing. The House net neutrality bill will, according to sponsors, move forward.

Google and wireless regulation in the U.S.

There’s more debate on the smartphone VoIP front as both Google and T-Mobile deny there were any deliberate restrictions placed on Skype for the T-Mobile Android handsets. Google said there was no full-feature Skype implementation offered as yet for Android, and T-Mobile said it had put no pressure on Google to restrict VoIP applications.

All of this stems from the fact that Apple limited iPhone Skype to WiFi connections and blocked Google Voice (for, said Apple, reasons of lack of support for the iPhone’s distinctive GUI). We think these issues may combine with the Comcast net neutrality appeal to create some momentum for legislative intervention, though the FCC may also look into the matter. If the FCC takes action, it may help uncover just what basis the FCC will claim for regulation of net neutrality issues; the net neutrality principles published by the FCC were not part of an order and thus have no direct legal status.

Comcast appeals FCC traffic management order

Comcast has decided to appeal the FCC’s order for the cable giant to stop metering P2P traffic, even though Comcast ceased that practice even before the FCC order was issued. The goal of the company is to test the FCC’s net neutrality principles, which since they were not contained in an FCC rulemaking/order, are likely not to have force of law.

The move, which is supported by some other ISPs, may well backfire on the industry because an FCC decision that did not, in fact, have enforceable net neutrality principles (which the agency has long said it did) would certainly result in the introduction of legislation. That might be far more restricting, and it might open other issues as well.

We said when this order was issued that Comcast would be foolish to appeal it, and Comcast appears to have been just that.

Broadband stimulus details signals coming regulatory trends

The details of the funding policy statement for the broadband stimulus package may shed some light on future trends in access and offer some hope that regulators may understand advanced services issues. The document notes that for many services, the performance perceived by the user is more related to the “middle-mile” or aggregation infrastructure than to access speed per se. It also acknowledges that there will be applications that require performance levels that cannot be provided within the context of the public Internet, where customers are necessarily oversubscribing the network to make costs rational.

As a result, the document indicates awareness that there may be applications that will share the high-speed access network but not be the Internet. These alternative uses would not be subject to net neutrality principles, at least as the policy-makers currently see it. This position, taken two years ago or even a year ago, might have encouraged more wireline telco investment, but it may now be too late for that to happen.

Wireless Internet: Should “net neutrality” apply?

The FCC is being asked for a ruling on whether its net neutrality principles apply to wireless Internet. This step comes after AT&T limited the use of Skype on smartphones.

There will be a lot of interest in the FCC’s response. On the surface, the issue seems clear to us. The FCC has said before that the service matters, not the technology. On that basis, it would appear that the four net neutrality principles articulated by the FCC would apply to the Internet, period.

On the other hand, is wireless broadband the same “service,” and the question is, do the rules (promulgated in the context of a wireline access order) really apply here? The risk for operators is that OTT players can use Internet access to bypass core services like voice, yet the market is moving to a one-price-for-all mode anyway. We think AT&T will lose this one and probably should not have fought in the first place.

FCC could enter cable bandwidth management fray

Comcast has, as we had predicted, asserted to the FCC that its voice service is not carried over the Internet or Internet access infrastructure, and is therefore neither subject to their traffic management policies nor to the FCC’s four principles of net neutrality.

They’re right, of course. Cable, or PacketCable specifically, divides the data path, and broadband Internet and Comcast VoIP do not share capacity. The question now is whether the FCC will decide that it doesn’t matter whether the stuff is separate or not. We think such a decision would be the regulatory equivalent of junk science: It would imply that common carriage on any facility imposed the regulatory burdens of the most regulated service on all services.

These are not logical times, however, and regulations are never logical. The biggest risk here is that the FCC would do something that would overturn the original 2005 decision that broadband was not a “telecommunications service” and thus was not subject to unbundling provisions of the Telecom Act. That was a highly speculative ruling that stood largely because the RBOCs bought AT&T and MCI, who were bankrolling opposition.

Vuze, the online video company, has also asked the FCC to look into the Cox plan for bandwidth management. This shows that cable company needs to control bandwidth use, primarily uplink bandwidth for P2P, but also streaming bandwidth will be increasingly colliding with the over-the-top (OTT) players’ desires to pump content at no incremental cost. The shared-media nature of the cable plant is the industry’s biggest risk, as DOCSIS 3.0 is the biggest asset, and moving to DOCSIS 3.0 is useful only if content doesn’t just expand to fill the new pipe too.