Phone line shrinkage at AT&T

I have blogged before about the decrease in access lines (see this, for example). While it is not surprising given the increase in wireless only households, this article over at GigaOm shows that the decline has been in the 6% per year range for AT&T, not the 3% range.

As the article correctly points out, this is one of the reasons that the large ILECs have been aggressive in rolling out their broadband infrastructures. Since consumers are increasingly opting for wireless for voice, the only way that the ILECs have to continue receiving a share of the consumer's communications expenditures is to build out broadband, which enables them to compete with cablecos for television and internet access expenditures.

If they don't they have to depreciate their infrastructure at a faster rate than consumers are leaving it, else investors (the company owners) will be left holding the bag. Of course, this is an end-game that they would only play if they decided to cede the marketplace to other access providers. There is no sign that ILECs are interested in that strategy!

Net Neutrality in the UK

I found this article over at Ars Technica interesting and worth reading. The article describes an ongoing "discussion" between the carrier BT and the content provider BBC. BT is using tier-based categories to implement a price discrimination. While this is normal in telecom (and arguably necessary since these industries have marginal costs below average costs), the challenge is that the consequence of this (bandwidth limitation, in this case) affects the business of content providers (in this case BBC).

What is interesting about this is that there is a problem of joint action by parties with competing interests. BT has to make substantial investments to enable access to broadband content, so it is hard to argue against their right to earn a reasonable return on this investment. At the same time, BT needs content providers (like the BBC) to develop compelling programming so that users will find it worthwhile to pay for the investment. The BBC wants to have its programming available to as many viewers as possible (to maximize their returns) at the highest quality level possible.

So, BT wants broadband prices on the higher side to maximize its benefits whereas BBC wants them on the lower side to maximize theirs. It appears that BT has set its lowest tier such that viewers can see the BBC content at its basic level of quality. Higher quality levels (which require more bandwidth) require a higher monthly fee

While I am not an economist, this seems to be a bargaining problem of the kind discussed by Oliver Williamson (and Ronald Coase, for that matter). Thus, either we see an allocation of rights and costs that is socially efficent (Coase, in the absence of transaction costs) or we see vertical integration (Williamson, in the presence of high transaction costs) or government intervention (to reduce transaction costs).

We should have seen this coming ...

It seems that many FCC decisions are challenged in Appeals Court, so this one, challenging the "white spaces" decision, shouldn't come as a surprise. This could turn into an entertaining "food fight", though, pitting the powerful National Association of Broadcasters (NAB) against the well connected White Spaces Coalition.

On a related note, you might find this editorial by Tom Hazlett interesting. Hazlett writes:

The new Obama Administration got Congress to fast-track an 11th-hour delay, pushing back the mandatory analog switch-off until June 12, 2009.

But many TV stations wanted to cut their analog broadcasts anyway. In truth, they believe that over-the-air transmissions are a waste, not worth the electricity it takes to send them. Hence, some 420 TV stations pulled the plug last week, joining another 200 analog stations that had already signed off.

Later in the article, he writes:

One hundred million households now pay $600 or so per year to avoid [over the air broadcasting], subscribing to cable or satellite. Well over 90 per cent of TV viewing takes place in households opting out of broadcast delivery. And for a very small additional investment – no more than $3bn – every last rabbit-eared home in America could join them.

Yet, the US is subsidizing off-air receivers; $1.5bn has been allotted for digital set-top converters (two $40 vouchers per family), and the Obama “stimulus” pumps in $650m more. This is not merely money down the drain. In extending life-support to DTV signals that hog hugely valuable frequencies, consumers lose hundreds of billions worth of wireless service. The bandwidth available to iPhones, Blackberrys and GPhones and other emerging technologies would double were TV air waves to accommodate mobile apps as requested in 1985.

Why don’t all broadcasters – digital and analog – just unplug? First, their licenses mandate that they broadcast TV signals, and they cannot legally sell the air waves used for more valuable services. And second, because their signals continue to reach one key target audience: Congress. Those appreciative entertainment fans reward stations with “must carry” rights forcing cable and satellite operators to provide their subscribers all local channels. The off-air transmission is a side show; gaining free cable carriage the main event.

If you agree with Hazlett's viewpoint, the NAB's challenge to the white spaces decision is consistent with a "do whatever it takes" strategy to preserve the existing business model, regardless of whether they are viable in the long term.

New spectrum license fee in the US?

Spectrum license fees are one way to encourage spectrum users to use spectrum efficiently. The trick is to set the fees properly; if they are set too high, then spectrum will be underutilized with respect to their social benefit, and set too low and it doesn't accomplish efficient utilization. On page 126 of his recent budget proposal, the President is proposing increasing revenues from spectrum licenses to US$550M to US$50M over four years, 1000% increase.

There is little but speculation about which spectrum will be taxed, since the Office of the President is apparently saying little about this. The PFF has remarked that, if applied to mobile carriers (which have already paid for licenses through auctions), the tax is quite regressive. According to this item, this fee may just apply to broadcasters. If this is the case, it will help motivate broadcasters to refocus on being programming producers (and possibly aggregators) since it will cost them ever more to transmit their product to an ever-diminishing audience at even higher costs than before. Michael Marcus just posted this related item.

A couple of telecom-related URLs

I need to break the "radio silence" ... I've been pretty busy with administrative projects and travel, so blogging has taken a back seat.

I have been working on dynamic spectrum access (DSA) for a number of years now. A paper on one of my projects, together with Arnon Tonmukayakul, is coming out in Netnomics shortly. In addition, I presented a paper on DSA and the FCC White Spaces decision at the recent iConference. Hopefully, the papers will be made available soon.

So, given this, I found this site to be of interest. You can use it to find the TV white spaces at a particular address.

If you go back through this blog, you'll find that I have been interested in (OK, critical of) comparative studies of broadband penetration. So, I found this site interesting, which looks at broadband from the point of view of connectivity rather than penetration. From this perspective, rankings (for what they're worth) look quite different.