Trump’s FCC, Pai: Bush is back

PaiThe new men and the issues they should face. I know several. They are smart, dedicated, and believe in what they are doing. They are hardline against regulation and have often supported the telcos against the FCC. It’s likely Trump era policies will echo Bush II. Bush’s first FCC Chairman, Mike Powell, was close to Eisenach’s PFF.  I hope they focus on government waste, such as the $100 scandal at RUS that’s been covered up or how much of USF/CAF is pure giveaway. (about half, based on what the telco CEOs are telling Wall Street.)


Ajit Pai looks to take over the FCC. He has a brilliant legal mind but needs a deeper knowledge of the facts on the ground and technology. (If I wasn’t on deadline, I’d find and include half a dozen examples. See Neutrality and investment below.)


He has a plan to extend broadband that needs to be informed by how much has been wasted in government programs to do so. He’s very well informed about the D.C. discussion, but needs to know more to recognize lobbyist lies.

In particular, he’s recommending “incentives” rather than results on sharply defined problems. Incentives are a mistake unless there’s a good reason to believe they will work. In broadband, most money spent on incentives (Stimulus, CAF, RUS) under Dems went to companies for builds they would have done anyway. Pai, who hates waste, can do better; his current broadband proposals don’t solve the problem. 


At RUS, Dems have for four years been covering up a $100M problem with Sandwich Islands. If 10% of the USF recipients are cheating, that’s hundreds of telcos. The Obama folks didn’t take serious action against more than half a dozen. The last three Chairman have persuaded USAC to avoid questioning anything and massive fraud is going on. The many honorable telcos in USF are hurt by those who cheat.


“True market policy” Someone who truly believes in markets would emphasize more effective competition. “You have competition without competitors,” his former boss Kevin Martin used to say. He has a remarkable opportunity to bring a fifth company to the market. Poker player Charlie Ergen at DISH has invested $10’s of billions in spectrum which carries buildout requirements he is totally ignoring. Charlie has said publicly he is not going to build, an eff you to the Commission. The Commission just settled a similar problem with Straight Path on fairly generous terms but Ergen thinks they will let him get away with murder. Pai should Just Say No because the law is on his side. I wouldn’t want to play poker with Charlie but this time he has a losing hand.


George Akerlof, Michael Spence and Joseph Stiglitz won a Nobel Prize for demonstrating that asymmetric information poisons markets. Washington usually ignores that. If consumers don’t have good information, market efficiency suffers. At the FCC, that should start with accurate and detailed information about speeds, limits, and terms. I’ve spent 17 years in this business and can’t tell you what the actual speed of a provider’s broadband. “Up to” speeds that don’t reflect typical experience are fraudulent. Sky in the UK is now advertising average speeds; Germany and Britain have announced rules. The market can’t do a good job regulating prices with all the confusion.


Particularly deceptive is the typical carrier’s “disclosure” on traffic management, which amounts to “Sometimes we’ll slow you down but we won’t tell you when or how much.” Comcast a while back said their traffic management was typically applied a few times a month for 15 minutes. It always delivered at least 70% of regular speeds – not bad when the regular speeds are now 50 megabits. That’s what “reasonable traffic management could be and I don’t think anyone would object. But if it was typically two hours a night, that should be disclosed.


Pai’s instinct is to reject requirements for information because he doesn’t like regulation. There’s a big difference between regulation that protects competition and that which holds back progress.


Pai’s opinions Pai’s first speech proposed (1) the FCC should be as nimble as the industry it oversees; (2) the FCC should prioritize the removal of regulatory barriers to infrastructure investment; and (3) the FCC should accelerate its efforts to allocate additional spectrum for mobile broadband. Being nimble and getting fast results is basic good management. Voice over IP was delayed for years because the FCC didn’t have the guts to decide. Go for it.


Pai has been eloquent on the need for transparency and openness. Dem Julius Genachowski had three press conferences in four years. At an event in the Bronx, the announcement said he’d answer questions. Because I wanted an accurate answer, I sent over a question in advance, “About how many previously unserved homes have received new service since you took office?” I think that was a reasonable question for a Chairman who said expanding broadband was his highest priority. At the event, he announced he didn’t have time for questions and then spent 20 minutes in the hall chatting amiably with everyone except reporters. To my dismay, Obama’s people didn’t live up to his campaign pledge of transparency. 


Pai would win kudos if once a month he held a press conference. He’s sharp enough to handle it. Since most of the best telecom reporters are not in D.C., call-ins are essential. This is a just do it. It would also be a good way to outdo the Dems. Most of the press is going to be biased against Pai, as they are against Trump. Win them over by delivering on the promises your predecessor reneged on.


Removal of regulatory barriers has been a promise of the last four FCC Chairmen, both Democrat and Republican. The good news is that nearly every regulation that really held things back has already been eliminated. Pai will cut regulation and the telcos will cheer about how this will incent investment.The real result will be extremely modest. Talk about incentives is meaningless drivel unless they will actually raise investment.

Additional spectrum is a good thing but won’t make a big difference. The current auction became in at less than half previous prices because technology is improving so fast there isn’t much need for spectrum. World class engineers like Marty Cooper, Dennis Roberson, and AJ Paulraj told Washington in 2014 about the technology leaps coming; they haven’t listened. 

Pai needs engineers, not lobbyists We all know about politicians, lobbyists, and truth. On spectrum, the gap between the talk in DC and what I hear from the best engineers is very wide.  If we’re lucky, Pai and Wilbur Ross will listen to top engineers and not the D.C. lobbyists. Their natural best sources are the top technical people at the giant companies: Tony Werner at Comcast, Balin Nair at Liberty, as well as the top people at AT&T and Verizon have earned my respect. These are people I listen to very closely anytime they speak in public. Like most engineers, they are terrible liars. Their companies try to keep them away from D.C., but if you win their confidence you will learn a great deal.  

Bill Smith recently retired after two decades running the networks at BellSouth and AT&T. (Katrina was just one of his big jobs.) He’s a great guy, has earned enormous respect, and has worked effectively on D.C. committees. I’ve never talked politics with him, only tech, so I don’t know whether he is a Republican or Democrat. 

The FCC desperately needs at least one technical member.  There’s an open FCC seat for either party. It would be a brilliant move to give him a seat; we haven’t had anyone who knows networks on the FCC in at least two decades. The engineers at the FCC are excellent, but to keep their jobs they had almost always to defer to the pols. Contrary to popular belief, those on the FCC (both parties) have almost all been hard working, smart, deeply informed on the D.C. part of the issues, and honorable. I haven’t seen anything that even smells like financial corruption at the FCC; Dale Hatfield told me similar, based on his 20 years at the FCC.

Another very interesting advisor would be former Chairman Kevin Martin, who went out of his way to listen to the best technical people. Kevin told me he made his Net Neutrality decision based on what he heard from Dave Clark at MIT, one of the dozen most important builders of the Internet. I remember a tech conference where I saw Kevin sit quietly listening through two days of very dry technical presentations. Almost all the pols at events like that make their speech, maybe take meetings, and leave. Kevin was a hardcore Bush operative, but he sought the best experts he could find. He gave an ear to a broadband expert who joked he would normally be outside picketing, not having a chat in the Chairman’s office. 



Internationally, Trump’s telecom policies will be America First! The absolute priority will be security – the freedom of the NSA to do what the NSA does. (That’s why the government has put $millions into a campaign to cripple the ITU. The 14 delegates to the ITU/WCIT from three letter agencies were not there to protect freedom of speech.) We will support the interests of U.S. companies, including when they break the law. (Qualcomm.) We will protect worldwide unreasonable royalty rates, protect cartels in transit/backhaul, and encouraging blocking parts of the Internet to help Hollywood. We will offer almost no funding to help poor countries and hide that by second rate propaganda. In other words, just what the Obama people have quietly been doing for years. (I’m on a State Dept. committee and seen that from the inside.)


The New York Times took a cheap shot at Trump tech lead Jeff Eisenach, leaving the impression that he was a bought and paid for Verizon shill. Not. He’s been a small government ideologue since at least 1993, when he teamed with Gingrich to form PFF. I profoundly disagree with many of his opinions but know him to be an excellent economist.

I believe their positions were not changed because of the money they took from the telcos. Eric Rabe of Verizon once explained, “We help our friends.” Rather than paying people to support their positions, Verizon sought out those who already agreed. They funded the work and their $100M influence budget makes sure it’s very visible in DC. The evidence-based medicine people have large and convincing that medical company spending steers the public discussion their way. Telecom is more extreme because there is so little public or non-partisan money. Most of the “think tanks” and many of the Professors thrive with the telco and cable funding. The consumer point of point is typically out-numbered 10-1 in policy circles, except on Neutrality. There are fewer than a dozen advocates funded in D.C. who put the public interest and consumers first. There are more than dozens at each of AT&T, Verizon, Comcast, and Google. With pay as high as $16M/year (David Cohen of Comcast per an SEC filing,) theyy get many exceptional persuaders.     



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