Senate Internet Hearings

The Senate Commerce Committee held two hearings on Internet-related topics this week, a fairly non-controversial affair on spectrum and a more raucous gathering on the FCC.  The spectrum hearing – held in the Communications, Technology, Innovation, and the Internet Subcommittee – addressed the question of licensed vs. unlicensed spectrum, so it wasn’t entirely harmonious.

The FCC Oversight hearing – held by the full committee – featured the always contentious issue of the FCC’s authority enact preemptive regulations on ISP marketing practices (AKA “net neutrality”), so it was quite bit more heated. Press coverage the hearings was disappointing, but by the end of the day some insight did emerge. Let’s chart the path.

Spectrum Hearing: To License or Not to License?

As the Internet continues its transformation from a sit-down medium to a mobile one, the question of ensuring it has adequate spectrum to grow remains unanswered. Dividing the spectrum pool between licensed and unlicensed allocations continues to mystify regulators, but it’s not really that complicated. Unlicensed spectrum is ideal for small networks in homes and offices, but all networks of larger scale need licenses.

This is the case because of a relatively non-technical factor: outdoor networks are expensive and indoor ones aren’t. To build a network on the scale of the four nation-wide celluar systems (and dozens of regional ones) requires investment. Towers – of which we have 250,000 or more in the US – require permits, backhaul, and civil engineering. These costs are borne by carriers with an expectation of a financial return.

Wi-Fi networks are built by consumers who purchase sub-$100 routers that connect to their wired broadband connections. Wi-Fi piggybacks on existing broadband networks and requires no permits, no new construction, and no expectation of revenue.

Because Wi-Fi spectrum is free and Wi-Fi channels are large – 160 Mhz with current standards – there is no motivation for users to worry about efficiency. Consequently, the Wi-Fi industry uses spectrum access mechanism that are grossly inefficient and constantly has its hand out for more spectrum.

Spectrum Efficiency

Mobile broadband systems are models of spectrum efficiency. They have to share spectrum among millions of users over large distances – the entire nation – so they’re constantly making technical improvements. But mobile operators are constantly in need of additional spectrum because allocations are miserly and consumer expectations are always expanding.

In a perfect world, Wi-Fi would adopt some of the efficiency mechanisms that are key to successful mobile operation and mobile operators would get regulatory permission to utilize fat channels – maybe not the 160 Mhz that Wi-Fi has but much more than the 10 – 20 they currently have.

Microsoft argued for more Wi-Fi, and even offered the failed TV White Spaces systems as evidence that they too can operate over long distances. This argument misses the point because we already know that licensing isn’t a feature of signal propagation. The question is whether profit-driven enterprises are willing to invest in extensive networks without protection from radio interference. The answer to that question, so far, is a resounding “no.”

Roger Entner made the argument for wider channels, and I hope it registered. We can’t have wider channels without new allocations in bigger blocks, and that’s not really on the table yet. The MOBILE NOW Act will help because it makes new high-band spectrum available, but we need more low-band spectrum as well. This needs to come from government.

FCC Oversight Hearing: Clarifying the FCC’s Mission

The FCC is engaged in the the fifth labor of Hercules, the cleaning of the Augean Stables. The former FCC chairman left a huge mess behind: an Internet saddled with unnecessary (and maddeningly vague) regulations, a faulty finding that it’s just another telephone network, a privacy regime that distorts a market that didn’t exist during the telephone era, and a subsidy program that’s only half-reformed.

These moves were obviously made with the expectation that they would bring netroots activists to the polls in November, which doesn’t appear to have happened. If it did, there weren’t enough of them to make a difference. So we’re saddled with a raft of inappropriate regulations that failed to produce the desired result.

But Chairman Pai is up to the challenge. He hasn’t been intimidated by the attempts of some to bully him, and he has a clear vision of the task ahead. That doesn’t mean he has an easy task, because every cleanup job can be done by various combinations of FCC action and Congressional reform. The ice is starting to break thanks to the Congressional Review Act resolution introduced by Senator Flake.

Hopefully, this will be followed by bill taking Title II off the table and taking us back to light-touch regulation in time to open the investment purse for the 5G buildout. A rational advertising market – in which ISPs can compete with the incumbent ad networks on an equal basis – will help make the business case for 5G investment. And make no mistake, we’re not going to have radically small cells without massive investment.

Media Coverage

Media coverage was disappointing because many stories grossly distorted the hearings, especially the FCC oversight hearing. PC World claimed it was all about senators expressing displeasure with Chairman Pai’s agenda: its title “Senators push FCC to keep its net neutrality rules”  is missing the words “Minority of.” The article quotes Democratic senators Booker and Markey, members of the minority party who lack the power to maintain the status quo.

Another article highlighted questions by new Democratic members on Chairman Pai’s reaction to the President’s remarks on the media being “enemies of the people.” These questions were obviously asked in order to embarrass or intimidate the Chairman, but the freshmen members badly missed the mark by playing that card. Pai is made of sterner stuff.

The Hill’s coverage emphasized the potential FCC review of the proposed merger of AT&T with Time Warner. This is another case where new members of the committee have failed to grasp the FCC’s role in merger reviews. If no spectrum licenses are changing hands, there’s no FCC review.

This isn’t skullduggery, it’s simply the law. The DoJ will have its swing at the piñata, but the FCC won’t play a role. The Chairman kindly offered to double-check with counsel to ensure the law wasn’t rewritten without his knowledge.

We need better press treatment of Internet issues on the Hill. PC World in particular needs to improve its game.

A Path Forward?

The best coverage of the day was a Bloomberg Technology segment with economist Hal Singer. Singer has been researching investment by ISPs in the wake of the 2015 Open Internet Order. He found a five percent shortfall for 2016, the opposite of the claim repeated by former Chairman Wheeler and fellow Democrats by conflating content costs with capital investment.

Singer argues that we don’t need net neutrality regulations any more than we need regulations governing the nature and pricing of content licenses on cable TV networks. There’s a general “duty to deal” on the part of content creators who also operate networks, but the law doesn’t spell out details.

Singer’s contention is that the problems net neutrality tries to prevent are highly fact-based and specific. That means they’re best addressed in fact-based adjudication.

This doesn’t mean a court case, but rather an administrative law proceeding at the FCC.  The key questions for the process would be whether the accused ISP is impairing competition or innovation. That does seem to be the point of net neutrality.

As a technical matter, it is the case that the Internet is more like cable TV than like the telephone network. While the Internet does support interpersonal communication, its primary role is publishing audio, video, pictures, and text. And like cable TV, it’s a platform in which advertising is a very important source of revenue. This is an idea worth exploring.

The atmosphere on Capitol Hill is not conducive to performing the cleanup of the mess Tom Wheeler left behind at the FCC. 2016 was colored by election-year drama with a flurry of measures enacted poorly. Even if you believe Wheeler was on the right track, as many still do, there’s not much question that a number of errors, omissions, and inconsistencies need to be corrected.