Archive for January, 2011

Commerce Department Green Paper – a lot of Opinion, not a lot of Data

Friday, January 28th, 2011

TPI President Tom Lenard filed comments with the Department of Commerce today regarding its proposed privacy framework.  His take: the Green Paper contains little data or analysis to show whether its framework will improve or reduce consumer welfare.  Moreover, the proposal “violates the spirit, if not the letter, of President Obama’s recent executive order on regulation, which stresses the need to evaluate both benefits and costs.”

Lenard strongly urges the agency to:

  • Collect current data on the privacy and data management practices of major web sites.  It is impossible to make an informed policy decision without an accurate understanding of current privacy practices.  The most recent available data appear to be from 2001.
  • Produce evidence showing that current practices are harming consumers. The agency’s privacy framework will only produce benefits to the extent it alleviates identified harms. 
  • Review what we know about how consumers value privacy. In addition to referring to current studies, the agency should also perform additional studies as a basis for estimating the benefits of a new privacy framework.
  • Estimate the costs of its privacy framework and alternative proposals. These estimates should include direct pecuniary costs to firms from devoting more resources to privacy and the indirect costs of having less information available.
  • Produce sufficient evidence of a reasonable expectation that the benefits of its proposal are greater than the costs.  Otherwise the proposal should not be adopted.

Tom’s brief comments can be found here.

Research Opportunity – Program on Digital Communications

Sunday, January 23rd, 2011

For the second year, Time Warner Cable is sponsoring a research program on digital communications.  Scott Wallsten was asked to write an essay for the 2010 program, which was published by both TWC and in the Federal Communications Law Journal.  Other authors from last year’s collection include John Palfrey, Dale Hatfield, Nicol Turner-Lee, and Christopher Yoo.

The details:

Time Warner Cable has announced the second year of its Research Program on Digital Communications, which awards stipends designed to foster research dedicated to increasing understanding of the benefits and challenges facing the future of digital technologies in the home, office, classroom and community. The 2011 Research Announcement sets forth the program’s guidelines and the list of research questions. Researchers affiliated with universities and not-for-profits are eligible to apply for the stipends.  Applicants are asked to write a three page summary outlining their approach to one of the topics and to submit a brief resume for each author. Multidisciplinary teams are encouraged, to provide the broadest possible insights. More information can be found at the research program website or by following http://twitter.com/TWC_RP. The deadlines for submission of applications are April 1, 2011 and November 1, 2011.

Net Neutrality Regulation’s First Target: Small Wireless Competitors?

Friday, January 14th, 2011

Telecommunications regulations have a long history of protecting incumbents, often because incumbents are able to use the regulatory process to insulate themselves from competition.  Unfortunately, we already see the seeds of that outcome in the response to a restrictive data plan offered by MetroPCS, but in this case due not to the actions of incumbents, but rather to the actions of some public interest groups.

MetroPCS, a regional mobile provider, offers a number of service plans with different voice and data combinations.  Its cheapest plan is $40 per month and offers unlimited voice, messaging, and web access.  The unlimited web access, however, does not allow access to certain sites like Netflix and Skype, but does allow access to YouTube.  Access to the full Internet requires a more expensive plan.

Net neutrality advocates argue that the restricted plans violate at least the spirit, if not the letter, of the new regulations.  The advocates may very well be correct, and that’s the problem.

MetroPCS is a small player in the mobile market, as the table from the FCC below demonstrates. It has no market power. Subscribers are not “locked in” when they sign up because they don’t have to sign contracts.

Wireless Subs Year-End 2009

Source: FCC 14th Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services. 2010. P.9. Note that these are voice subscribers.

MetroPCS must believe that this combination of unlimited voice and unlimited use of a restricted set of web services will appeal to some people, and that walling off certain parts of the Internet will reduce its costs.

As an entrant in a high fixed-cost market, MetroPCS must find ways to differentiate itself from the larger carriers and reduce costs if it is to succeed. While it sounds appealing on its face to make the entire web accessible to MetroPCS subscribers, requiring MetroPCS to offer precisely the same services as larger carriers could leave it with no sustainable business model.

Allowing MetroPCS to experiment with business plans does not, however, mean that it should mislead consumers.  Our perusal of its website and calls to customer service left us confused about which services, exactly, it excludes from the plan.  Presumably MetroPCS uses a well-defined algorithm for deciding which sites it excludes. It should be able to explain that algorithm to potential subscribers, though any harm is limited due to the absence of contracts, meaning that consumers can switch plans or cancel if they find the restrictions too onerous.

Despite this (hopefully soon-to-be-rectified) transparency issue, this plan is a business model that one of the smallest players in the mobile industry hopes will help it to compete successfully against its much bigger rivals.

Prohibiting MetroPCS from offering its new plan would benefit the large, incumbent carriers, not consumers. Let MetroPCS experiment.  It would be a shame if the Commission’s first enforcement action under the new regulation reduces wireless competition.