Comcast and the "new" open cable platform

Earlier this week, I wrote about cable's "Tru2way" announcement. So, here is a bit more on this.

Continuing on the theme I began developing late last year, this announcement suggests that cable TV operators are beginning to dis-integrate their networks, separating services from platform. So, will CATV move to an "open" (wholesale) platform on which multiple "retail" services will be provided from multiple providers? Is this another instance of "functional/structural separation"?

British mobile operators 3 and T-Mobile UK share network elements

I have gotten interested in the potential reorganization of the mobile telephone industry ... not necessarily because of Google's potential market entry, but because of actual events (see this and this). This article from the NY Times adds additional evidence.

The question is, are we on the cusp of a sea change in the mobile industry? If the industry does split into wholesale/retail components, what are the implications for telecom policy? Would this make the interest in "structural" or "functional" separation more intense?

Sprint could spin off WiMAX division

This has been quite a month for the wireless industry. Between Verizon's recent announcements (see this and this) and the earlier news regarding Sprint and WiMax. In this article, Sprint interim CEO Saleh said:

... that Sprint was currently examining its plans for widespread WiMAX deployment in 2008 and deciding “if it’s the right course for us.” He then said that in the future, Sprint’s WiMAX division could take “multiple forms,” including one scenario where Sprint would “contribute our [WiMAX] asset to some kind of entity and find investors who are willing to fund the deployment of WiMAX.” Sprint would then buy services from that entity and resell them are on the market, he said.

I find the wholesale scenario most interesting (especially given my interest and work in secondary use and secondary markets for spectrum). This amounts to the creation of a wholesale WiMAX infrastructure from which Sprint would lease capacity for a potential retail operation. This is not unheard of in this industry. Note that Sprint is the carrier for MVNOs (Mobile Virtual Network Operator) like Virgin Mobile. Also, many of the carriers have sold or outsourced their towers to companies such as Crown Castle and American Tower. So, I am wondering a couple of things as a result of this announcement:

• Is the Sprint retail brand going to separate from its carriage services in its 2G and 3G (i.e., CDMA) operations as well? If they do, then Sprint (retail) will be just another MVNO on the Sprint (carrier) network. If they don't I wonder what spinning off WiMAX really buys them. This is roughly akin to the functional/structural separation that is being discussed (and in some cases implemented) in the wireline industry.
• Is the Verizon annoucement a signal that the industry is in the process of restructuring itself into separate handset, retail and wholesale services components? If this is the case, it suggests that the economic and strategic benefit of integrated package delivery is coming to an end; that the transaction costs that have driven this integration have decreased significantly so that a new industry organization can become feasible.

It is clear that it could take a few years for this scenario to play out ... we have yet to see what AT&T has in mind in this regard, as well as the carriers in other countries that have a highly sophisiticated mobile industry.

EU announces new (proposed) telecom regulation framework

In case you missed it, you might find this of interest. If you follow the links, you can get to the (draft) legislative documents. Note that these documents do not represent final policy, though it seems likely that the final policy will be close to what is published today.

• As expected, functional separation is one of the options available to regulators. Do you think that this will be widely used?
• The framework proposes a "European Telecom Market Authority". How do you think this will play out, especially with regard to NRAs?
• What about the spectrum reform proposals? Will they help?

Anyway ... enjoy your reading!

Update (2007-11-14): Here is Forbes' take on this announcement and here is CNET's. Interestingly, few of the major news outlets reported on this.

Update (2007-11-15): This item reports that French and German regulators question the need for the Telecom Market Authority. Will this reform proposal face a long road to adoption?

Network Neutrality (again)

You can probably figure out that I am skeptical about the appropriateness and efficacy of ex ante internet regulation. At the same time, I believe that the Internet should not subject users to undue restrictions. So, I think the approach that the NNSquad is terrific. This group has no regulatory powers, but can discover and report incidents, like the recent Comcast/BitTorrent incident (see this for an analysis/discussion). This kind of "regulation by information" may just be the most effective approach, especially as we reason through what "reasonable" user expectations are (or should be) and what "reasonable" provider behavior is (or should be) as the market evolves and as application requirements evolve. (By the way, here is another opinion on this group.)

Do you think that regulation by information is strong enough? Do you think that ex ante regulation (or even functional separation) is necessary anyway?

Vivian Reding on Telecoms regulation

You might find this speech by EU Commsioner for Information Society and Media interesting. Here are some points from her speech:

I have come to the conclusion that the instrument of functional separation should be added to the remedies tool box of national telecom regulators ...

... a symbol for the single market for telecoms is the creation of the new European Telecom Market Authority which will be an integral part of the reform package.

As you would expect, there are many caveats to those points in the speech. It clearly is a preview to the new regulatory frameork that will be forthcoming in the next month.

Operational Separation of Telecom in New Zealand

You might find this item of interest. This kind of separation has been proposed as a possible solution to the "net neut" concerns, and BT in the UK is proposing to do this voluntarily. Forbes has reported on this as well (see this). New Zealand will (once again) be a laboratory for advanced ideas in telecom policy.

Walled gardens and innovation

The topic of "walled gardens" comes up here (and elsewhere) from time to time (see this, for example).  So, you might find this article, by economist Tom Hazlett interesting.  As his article points out, there is a tension here ... on the one hand, people seem to like their "walled gardens" -- that is, closed systems where the user experience is controlled.  Recent examples include the iPod-iTunes, AT&T-iPhone, or the Microsoft Zune "gardens". 

On the other, these systems often lead to systems that can be viewed as restrictive and/or anticompetitive.  The recent EU antitrust actions and the interest in structural separation and "wireless Carterfone" are also examples of this.

I don't agree completely with Hazlett.  I think that the pursuit of walled gardens promote innovation.  By analogy, consider the competitive era in US local telephony (1894-1920). A winner-take-all battle drove network investment and innovation.  When the battle was over, innovation lagged.

Google as a telecom carrier

This item is most interesting, and adds weight to some speculation I blogged about earlier (see this, for example). If this happens as reported, Google begins becoming both a service provider and a transport provider. If Google does bid on (and win) spectrum in the upcoming auction, they have the ability to move further in this direction.

How does this play in the structural separation model?

Update (2007-09-24): Nicholas Carr posted this item on his blog, which raises some interesting questions, not so much for Google, but for the kinds of industry trends posited by John Hagel and others.

Structural Separation

There has been a bit of a debate going on that argues, in essence, since network neutrality seems infeasible, let's separate transport from services. BT in the UK has taken this approach, which has apparently been hailed by EU Commissioner Viviane Reding. I have a few questions about this idea:

• We have tried structural separation in the past in the US ... some of us remember Computer I and Computer II. Is this proposal different? Why? How?
  
• While structural separation, in theory, does remove incentives on the part of network operators to discriminate, to what extent would infrastructure investments be inefficient? That is, can transport providers make more efficient investments if they know (and can confidently predict) upcoming services and their deployment? Part of this is a problem of opportunism and asset specificity that Williamson predicted would result in increased transaction costs (and hierarchy).
  
• Assuming that the above questions are resolved, how would this be implemented? Do you think it could happen voluntarily (as it did in the UK)?