FCC Approves Verizon Purchase of Cable AWS Spectrum

The U.S. Federal Communications Commission has approved a modified plan for transferring spectrum from a consortium of cable operators to Verizon, and though not strictly related, a set of agency agreements whereby the cable companies and Verizon can resell each other’s services.

The approval also clears the way for spectrum transfers to T-Mobile USA and and an exchange of spectrum between Leap Wireless and Verizon as well.

The decision was expected, once the cable companies and Verizon agreed to limit the terms of the agency agreements and any systems developed between the cable operators and Verizon as a result of their collaboration for a limited number of years.

Verizon will purchase spectrum in the Advanced Wireless Services band from Comcast, Time Warner Cable, Cox Communications and Bright House Networks, while selling some of its spectrum to competitors T-Mobile USA and Leap Wireless.

The FCC's approval forbids Verizon from reselling cable products and services where Verizon FiOS service already exists, principally. The U.S. Department of Justice earlier had demanded those same concessions as part of its clearance of the deal on antitrust grounds.

FCC to Study New Definitions for "Broadband"

The FCC now is preparing to consider a wide range of standards and definitions for broadband that likely will change the "speed" definitions, perhaps adding quality and pricing metrics for the first time, as well as standards for mobile and satellite broadband.

There is little question that the U.S. broadband situation is “rapidly evolving,” as the Federal Communications Commission notes. Also, the 2010 National Broadband Plan recommended that the Commission “review and reset” its benchmarks every few years. 

In 2010, the Commission raised the minimum speed threshold for broadband to a 4 Mbps downstream, 1 Mbps upstream service. And it appears likely the FCC will do so again by the time of its next report in 2013.

The FCC now wants to consider raising the speeds used to define the minimum levels for “broadband,” adding latency and usage cap benchmarks, at least for fixed terrestrial broadband service.

But the Commission also logically now wants input on whether to add specific benchmarks for satellite and mobile broadband, which have become more important, for purposes of analysis, over time.

The FCC also might assess bandwidth based on the number of users in a household, the number of devices or apps expected to be used in homes.

Where streaming high definition TV, video conferencing, or online gaming, 6 to 15 Mbps could be required as a minimum, the Commission seems to suggest.

The 2010 National Broadband Plan recommended that the Commission set a goal of 100
million U.S. homes having affordable access to actual download speeds of at least 100 Mbps and actual upload speeds of at least 50 Mbps by 2020. The FCC wants imput on whether the Commission should identify multiple speed tiers  to assess the country’s progress.

The FCC might also consider whether “affordability” goals should be added, as well, including such criteria as service prices.

In the technical realm, the Commission is looking at whether latency should be considered as an additional threshold for broadband, possibly adopting a 100-millisecond latency threshold for fixed services.

If mobile broadband data is collected, the FCC also will have to decide what speed benchmarks make sense, as well as setting latency requirements for mobile broadband.

The FCC even wants to include Wi-Fi hotspots in its analysis, including private in-home or in-building networks as well as public hotspots, in assessing mobile broadband deployment and availability. All of the changes, if adopted, would create a more complete and nuanced view of the actual status of broadband deployment, if arguably a bit more subjective as well.

Percentage of Tablets Sold with Native 3G/4G Capability Declines 12%

In the second quarter of 2012, the majority of tablet shipments were Wi-Fi-only. In the second quarter of 2012, less than 27 percent of new shipments included a mobile broadband (3G/4G) modem module, down 12 percent from the second quarter of 2012, ABI Research says.

In the April to June quarter of 2012, tablet shipments reached nearly 25 million units,  with total shipments growing 36 percent quarter-over-quarter and 77 percent year-over-year.

Apple iPad shipments represented nearly 69 percent of worldwide volumes, ABI Research says. Samsung had 8.1 percent and ASUS shipped four percent, while RIM shipped one percent.

Worldwide shipments of media tablets are expected to exceed 100 million units in 2012.

FCC Suspends Special Access Rules, Uncertainty Grows

The Federal Communications Commission has concluded that its 1999 rules on market-based special access rates "have not worked," so the FCC is suspending its rules. At stake are special access revenues of incumbent LECs of about $16 billion annually, and also business costs for rival suppliers who lease such circuits to connect their own customers.

At stake is the market cost to a competitive supplier to gain access to high-bandwidth circuits serving customers who cannot be reached by any single supplier's own network. But the markets have changed, and some would say dramatically, over the intervening years.

What remains uncertain, as the FCC collects new data, is the impact of new supply side changes such as circuits sold by cable companies, for which no mandatory access to competitors is required, or other facilities-based suppliers that might be able to supply DS-1 type circuits, for example. As always, the definition of "the market" and "the suppliers" will be important.

Businesses might well be able to buy high capacity circuits from cable operators, who do not have to allow third parties access to those services. The issue is whether services for business customers, or costs of doing business for competitive local exchange carriers, is the policy objective.

One historic limitation of cable networks was their initial concentration on residential areas. Over the last couple of decades, though, business customers have become more important, and cable operators now are aggressively selling services to business customers, including business grade high speed access services operating up to 100 Mbps.

It is true there are not mandatory access requirements for cable operators. But neither is it true that telco bandwidth now is the only alternative, especially outside the densest areas of business customer concentration.

In the "Pricing Flexibility Order," the Commission adopted rules intended to allow price capped service providers to show that certain parts of the country were sufficiently  competitive to warrant pricing flexibility for special access services.  

But the FCC does not believe its rules have worked as expected, "likely resulting in both over- and under- regulation of special access in parts of the country." But some will argue that the FCC's suspension of its rules likely will result in the re-imposition of price controls.

Originally, the FCC expected rather more robust market entry by new competitors, starting in the areas of highest business demand, and then gradually extending elsewhere throughout a metro area.

The FCC says "recent data indicates that competitors have a strong tendency to enter in concentrated areas of high business demand, and have not expanded beyond those
areas despite the passage of more than a decade." In other words, competitive providers have tended to cluster their investments in the areas where potential customer density was highest, and have tended to underplay investments elsewhere.

A reasonable person might say that is about what a rational supplier might do, if the financial return was too low, and the risk too high, in the outlying areas. "Incumbent LECs generally concede that competitors have focused on areas in which demand  for special access services is very concentrated," the FCC says.

"Demand for special access services is highly concentrated in a relatively small number of dense urban wire centers and ex-urban wire centers containing office parks and other campus environments," the FCC says.

Verizon told the FCC that more than 80 percent of demand is generated in eight percent of its wire centers, allowing new competitors to address a large portion of demand through targeted investments.

SBC, for example, states that a large percentage of its demand for DS1 and DS3 services
runs within 1,000 feet, or about three city blocks, of existing alternative fiber. The implication is that competitive local exchange carriers could extend their networks if they wanted. CLECs tend to say that is untrue, in large part because the incumbents make such expansion unduly expensive.

But CLECs also argue that there are other important barriers to entry, including the delays in or
impossibility of securing municipal franchise agreements, rights-of-way agreements, building access agreements, and building and zoning permits.

In 2006, the U.S.  Government Accountability Office (“GAO”) analyzed 16 metropolitan areas in which the Commission  had granted pricing flexibility and found that facilities-based competitors served fewer than six percent of  buildings with at least a DS1-level of demand.

But a rational executive also would note that it virtually never makes financial sense for a CLEC to build its own facilities to serve even a confirmed customer with that level of demand.

The point, CLECs argue, is that there perhaps "never" will be a business case for extending CLEC facilities much beyond their current state.

TW Telecom relied on data supplied by Verizon in arguing that, between 1996 and 2004, non-incumbent LEC channel termination buildout to commercial buildings increased from 24,000 buildings to  approximately 31,467 buildings (a change of 7,467), in contrast to the “millions of buildings served by  incumbent LEC fiber.

In 2005, WilTel estimated that competitors had deployed to 25,000 buildings,  whereas Sprint asserted in 2007 that only 22,000 buildings had competing connections.

Moreover, TW  Telecom has argued that competitors serve only three to five percent of
commercial buildings nationwide.

Proponents of special access price regulation rely on three central arguments to support a retreat to strict price regulation. Such proponents argue that markets for special access are unduly concentrated, rates of return are very high and prices are lower in more heavily regulated markets than in markets with the most pricing flexibility.  

Economists at the Phoenix Center for Advanced Legal & Economic Public Policy
Studies argue that those assertions are not correct, but additionally do not prove the presence of undue market power. The Phoenix Center further argues that much hinges on the definition of "a market."

55% Say They Order Restaurant Food Using an Online or Mobile App at Least Monthly

More than half of the respondents in a national survey said they use an online or mobile application to order food from a restaurant on at least a monthly basis.

Splick-it, a Colorado-based food ordering services provider, queried 7,122 American consumers for the survey. The sample included 70 percent of respondents between 20 and 40.

Only 25 percent of respondents said they never use online or mobile food ordering services, while a combined 21 percent reported using those services on a daily or weekly basis.

Will 60 Million U.S. Households be Using Peer-to-Peer Payments in 2014?

Javelin Strategy & Research expects 60 million American households to be using person-to-person payments by 2014, a forecast some might find aggressive. PayPal, which launched in 1999, has offered P2P payments using the Web, initiated by use of a PC, for some time. 

Since then, PayPal has extended that capability to smart phones. But what will it take for millions of households to acquire the habit? That's the rub, some would say. 

As with many other new behaviors, it helps if the transactions are the sorts of activities that a user frequently has to conduct. That is one reason transit payments seem to make a lot of sense. Other apps often seen as driving such behavior, such as paying a friend when a restaurant bill is split, might not happen so often. And that will raise the hassle factor, and lower the perceived value. 

Then there is the question of business model. Lots more people will adopt the behavior if there are no transaction fees. But some services do require payment of a fee. 

Popmoney charges 95 cents per payment to send. If a request for money is made and the money is delivered, the same charge applies. Dwolla charges 25 cents to receive money in amounts greater than $10. 

Is that a big barrier? For some it might be. In developing markets the use case is much more clear. Where it is very time consuming, or dangerous, to send money to an organization or a person, mobile P2P transfers offer high value, with or without a transaction fee. 

In developed markets, the value might be relatively slight, and any transaction cost might be viewed as unacceptable by many users. Bill payment might provide some insight. Lots of people pay bills using e-banking. But those transactions generally do not impose fees, so the barrier to adoption is low, and users can see the advantage of not paying a check cashing fee, paying for postage and getting mail to a postal drop-off location. 

Most people probably can point to instances where e-payments requiring a significant fee (several dollars, for example) don't happen, though lots of other payments, not requiring a transaction fee, are made. 

 

Areas of Potential Verizon, Cable Company "Lessened Competition" are Few, Really

The Department of Justice has been concerned about potential lessening of competition if Verizon, Comcast, Cox Communications, Time Warner Cable and Bright House Networks were allowed to fully sell each other's services. 

With the caveat that many of the areas of overlap, shown in this map in purpose, are areas of high population density, the potential danger was largely concentrated in Verizon's fixed network footprint in the U.S. Northeast, with the addition of some areas of Southern California and the Tampa, Fla. area.