Tuesday, February 24, 2015

Is FCC violating process again with Net Neutrality action? Or just being Shortsighted and Stupid?

The first two FCC attempts to impose some "network neutrality" rules were vacated by the Federal Courts because the rulemaking was based, in large part, on imputed authority that the FCC did not statutorily have (see earlier post here), further supported by evidence that the FCC had violated its own procedures for rulemaking.  At the time of the second Court decision, many policy folks (myself included), commented that if the FCC wanted to move forward with Net governance and regulation, the best approach was to base a claim for regulatory authority under Title II of the Communication Act - which does cover telecommunication networks.
With the FCC deciding that it will issue a rulemaking addressing Network Neutrality this Thursday, without publicly releasing the actual rules being considered, the FCC would again be clearly violating the spirit, if not the letter of its own (statutory) rules on due process.
The FCC, when considering new rules and regulations, is supposed to undertake a multistage process that starts with a public Notice of Inquiry, a period to allow public (and industry comment), then a Notice of Proposed Rulemaking that outlines the proposals, followed by more opportunity for public comment.  Normally, if the FCC wants to consider substantive changes to proposed rules and regulations, it posts a Further Notice outlining the changes, and offers an additional period for public comment.
Tom Wheeler, the current head of the FCC, argues that the FCC has already gone through several NOIs, NPMs, and public comment periods.  However, the proposed regulatory framework for those appears to be totally different from what is to be acted on this week.  While the FCC doesn't have to refile Further Notices for every little change in the rules, because the proposals that had been discussed are substantially different from those to be voted on, this case clearly violates the both the spirit of the rulemaking process in that it hasn't allowed any time for public review and comment on what seems to be a wholly different set of rules and arguments than what had been previously proposed and discussed.  In addition to tossing claims of being "transparent" onto the growing dustheap of broken promises of transparency by this administration.  (In fact, as a Senator in 2007, Obama called the FCC's attempt to pass rules without full public disclosure and opportunity for public comment "irresponsible.")  Furthermore, the FCC is supposed to be an independent regulatory authority, not one that would toss aside several years of proposed rulemaking and public discussion to (allegedly) adopt - in full and without review, discussion, or amendment - a plan written by political operatives in the White House.

Regardless of the ethics of the current Chairman's behavior, and the potential authority Title II provides for regulating telecommunication networks, bringing the Internet under Title II is not necessarily reasonable or appropriate - in large part because of the statutory language in the 1934 Communication Act and the 1996 Telecommunication Act.
The 1934 Communication Act gave the FCC regulatory authority in two areas: Title I dealt with radio transmissions (including broadcasting), and Title II dealt with, basically, telephone networks.  More specifically, it was designed to deal with the existing local monopoly wired, switched, telephone system.  (The FCC was granted oversight of cable systems - redefined as multichannel video delivery services - by the 1984 Cable Act).
With the rise of the first use of wired telecommunications for computer communications in the late 1950s and 1960s, the FCC examined the question of whether computer networks should be regulated under Title II.  They reached a conclusion that it would not fall under Title II for several reasons: the computer network (later expanded to information) services typically did not own and run the actual wired networks they employed, but rather leased lines from telephone companies (the separation of service from network is explicit in FCC definitions of those terms.
There is a hard and fast statutory line separating the information services that utilize telecomm networks, and the telecomm-based distribution networks that deliver those services.  The current language would seem to explicitly exclude Information Services from falling under Title II. Also, on the technological side, the developing computer networks and information services used quite different technologies than telephony, and so the part of Title II that deals with technical standards would be largely irrelevant (if not applied) and inappropriate (if applied).  But most importantly, the FCC felt that trying to set standards and apply Title II regulation to computer networks and information services would restrict developments and innovations by imposing a governance structure that favored certain uses over others.

The main philosophy of Title II's network regulatory approach is that networks should act as common carriers (a regulatory philosophy borrowed from railroads and freight services). The essence of common carrier status is that the network should not discriminate among its users - that they shouldn't give favored treatment to one user over another. 

 One of the widespread fallacies in Network Neutrality discussions is that common carriers can't treat users differentially (thus everyone should have the same rate for internet connectivity). Actually, there's a long history of permissible differential treatment, as well as a long history pointing out the social benefits that can be acheived through appropriate cross-subsidies. Telecomms can treat users in different localities differently, and more critically, can differentiate on the basis of level of service. All they need to do is show that the costs of providing a particular type of network connection are different (a content-neutral rationale). The FCC has even allowed differential treatment for certain general classes of services (911, toll-free numbers, added-charge numbers). Furthermore, the 1996 Telecommunications Act removed many aspects of telecomm regulation from FCC oversight.
 In addressing the Title II approach, policymakers and pundits need to recognize that i) Title II is largely limited to telecommunication network operators, and the existing statutory language is not readily, or easily, extendable to Information Services and most ISP operations; ii) many of the aspects of the 1934 Act that regulators want to rely on for the new Internet rules have been superseded by the 1996 Act; and some issues are addressed by other laws and statutes (for example, copyright and privacy laws that expressly address ISPs, Information Services, and digital network operators). Many of the areas and concerns that Network Neutrality proponents are primarily concerned with may not be covered by a simple extension of Title II regulatory authority to the Internet.

While Title II can be a better foundation for asserting regulatory authority, just claiming that "We've changed our minds, information services and ISPs fall under Title II" is not likely to pass judicial review - because what they do doesn't fit the existing statutory language. Doing a sweeping assertion of authority is what got the FCC in trouble in previous attempts, and going the Title II route without serious review - if the action isn't quickly overturned - is going to create a virtual minefield of implementation problems and legal challenges - with the FCC and the Courts having to then decide which of the 100+ pages of telephone regulations should apply to the Internet, its backbone network providers (who already effectively act as common carriers anyway), ISPs (many of which are a mix of network operators and information services), and the Information Services that provide the content and services to users.  Should Universal Service apply to ISPs? Should ISPs be subject to the specific taxes applied to telephony (including one designed to help retire the Spanish-American War debt - which was paid off about 100 years ago - but still shows up on your telephone bill). Should the FCC's authority over pricing in the Internet apply only to interstate and international connections (the only price authority the FCC has over telephone rates under Title II in the 1934 Act, and which was sunseted out in the 1996  Act - leaving the FCC without statutory authority to regulate telecomm (ISP) rates and services)?

In other words - going the Title II route really needs extensive discussion of the proposed rules and policies to work out the problems and kinks that would be associated with that approach.  But the current FCC Chair and Democratic Commissioners seems determined to take the easy and quick approach of simple proclamation and promulgation of a massive set of new regulations, rather than doing the smart thing of working out the details and gaining some consensus from the various stakeholders that would be impacted by the new rules.  Or even considering if there is really any need for a massive overhaul and imposition of governmental (possibly politicized) oversight and control of a significant, and efficient major sector of the economy, and an increasingly vital source of information by both private and public sectors.

As I said with the last two FCC attempts at grabbing Internet oversight - this is too important, and too critical, to take short cuts.  If the FCC is going to do this, they need to do it the right way - with true transparency and plenty of opportunity for the public to point out the problems and pitfalls that always comes with trying to set uniform rules for very complex systems.  And first asking the most important question - do we really need to impose any kind of regulatory structure on the an efficient, innovative, and highly flexible Internet and Information Services sectors?

Thursday, February 12, 2015

A bad week for US News Industry

It's been a tough news week for U.S. news outlets and journalists.  Of course, by now most of us have heard the main headline-grabbers - Brian Williams being called out for "elaborating" his account of being under fire in Iraq and his subsequent suspension from his position as Managing Editor and anchor of the NBC Nightly News, and Jon Stewart announcing that he will be leaving Comedy Central's The Daily Show.
As NBC now formally investigates a growing number of allegations that Williams had sensationalized and/or exaggerated his personal involvement in other news stories (Katrina, etc.), most journalists and pundits feel that he has so damaged his credibility that he's unlikely to return in a senior news position.  And while one anchor is being punished for sensationalizing and manipulating "the truth" in his news coverage, Jon Stewart, who made his career from sensationalizing and manipulating his coverage of news stories, said he'd had enough.
Stewart was increasingly being challenged over whether he slanted stories and left important elements out in his efforts to sensationalize stories and to challenge guests on his program.  Stewart has long held that his show was satire and thus should not be held to the same standard as traditional news, although he also wanted the imprimatur of news for his program.
One consequence of the two announcements has been a level of self-examination within the news business over just how important credibility and straight factual coverage is, or should be, for both reporters and news outlets.  (And the somewhat facetious suggestion making the rounds that Brian Williams should just take over for Jon Stewart - where he wouldn't be expected to be objective and honest)
A less controversial, and more disheartening, story was last night's announcement that CBSNews' Bob Simon had been killed in a car crash in New York City.  Simon was a passenger in a limo whose driver apparently lost control, and was hit by another car.
On a slightly lighter note, a local TV news crew from San Francisco were assaulted and robbed of their equipment as they were wrapping up after a live remote.  And that robbery and attack was only the latest in a growing number of attacks on TV news crews in the San Francisco area.  The situation was so bad that for a while some news stations hired security for their remote crews.

Added: This week has also seen the release of the latest World Press Freedom Report, which states that 2014 saw a "drastic decline" in press freedoms - and that respect for journalists and press freedom saw declines in two-thirds of the countries in the world.

And while the debate of how honest and credible news should be continued, the reputation of major news outlets was taking flack from other recent events. First, a continuing litany of complaints from the Washington press corps of a lack of access and transparency from the Executive Branch (and most notably from the White House), to allegations of blatant efforts to manipulate pool coverage reporting and spy on reporters.  Add to that the President's recent habit of ignoring major news outlets in favor of politicized web outlets and talk shows in the granting of interviews, and you have major news outlets questioning their role and importance.
Then came a story in the New York Observer about an activist who outlined how he intentionally manipulated media coverage.
The unspoken conspiracy... that exists between journalists and those seeking publicity is very real. If you have a story that provokes—real or not—they have the time. Give them the promise of traffic and a little plausible denial and you’re in.
In the story, the activist provides a blueprint for how to plant and hype a story, essentially through astroturfing controversy and building "growing concern" through social media.

Such a revelation would normally be dismissed, especially by self-proclaimed "elite" news outlets, which would claim that while such activities might catch their attention, the stories would still be subjected to rigourous fact-checking and reviews to ensure that the resulting stories complied with their normal standards of objective reporting.  The much-vaunted "layers and layers" of review position, however, took a big hit with the recent UVA rape story - which very quickly and publicly unraveled, but only after the initial (now thoroughly discredited) story had been unquestioningly reprinted by a large number of news outlets.  Meanwhile, the argument that journalistic norms are applied consistently is now taking a hit as stories about potential GOP presidential candidates' history in high school and college are actively being investigated and challenged by major newspapers - newspapers who uniformly argued that it was improper to look at the backgrounds of Democratic Presidential candidates in recent election cycles.
And NBC's current concern with credibility and objectivity seems somewhat hypocritical, given the behavior of its cable news channel (MSNBC) - identified as the most blatantly partisan news source by Pew Research.

All of this is feeding the American news-consuming public's increasingly critical opinion of traditional news outlets, and may be part of their increasing reliance on online sources for news.

Sources - Bob Simon of '60 Minutes' Bob Simon killed in car crash, New York Post
KTVU news crew attacked, robbed in Hayward, SFGate
EXCLUSIVE: How This Left-Wing Activist Manipulates the Media to Spread His Message, New York Observer

Freedom Of Press Witnesses 'Drastic Decline' Globally Amid Emerging Threats To Journalists, International Business Times

Edit track: Added brief paragraph on World Press Freedom report, along with source link.

Tuesday, February 10, 2015

New challengers for Cable, Multichannel

Cable really started having trouble as it transitioned into its third stage - Cable as broadband (see Bates & Chambers, 2004).  A large consequence of this transition was the opportunities digital content and media provided for competition - first through DBS (satellite), then through telco-based broadband/video providers.  The last couple of years has continued the onslaught, with the spread of mobile devices and video streaming that's led to the growth of "cord-cutting", particularly among younger TV content consumers.

In addition to the explosion of competition, the cable/multichannel provider market (which includes DBS and telco-cable services) is having to deal with the growing demand for carriage rights for channels and content - leading to substantial increases in the cost of channels which are inevitably passed through to increased costs for multichannel customers (see Bates, 2014).  While the multichannels consider breaking their bundles, or going "a la carte" (offering single channels to viewers), the online streaming markets have been booming, offering a wealth of content choices for a fraction of the price.  Until recently, though, that has not included live carriage of major networks.

Carriage of major network content actually started a couple of years ago, when the major broadcast networks started making some of their primetime series to audiences through their own websites, multichannel on-demand services, and even some streaming video services.  Then CBS upped the ante, announcing their own subscription streaming service that would greatly expand access to network content, and both HBO and Sony have announced plans that would offer access to their channels and content online, and independent of having a multichannel subscription.  (TV Everywhere also boasts streamed access to cable channels, but require that consumers subscribe to those channels through a multichannel provider).

The degree to which these streaming efforts are impacting the TV marketplace is reflected in the FCC's recent announcement that it's considering revising its definition of multichannel service to include online sites that offer multiple channels or streams.

Still, DishTV's announcement that it will offer US consumers a SlingTV bundle of basic cable channels (without requiring a Dish subscription) for an initial price of $20/mo. is a significant new competitive challenge.  The basic package includes top channels in many niche categories (ESPN, ESPN2, TNT, TBS, Food Network, HGTV, Travel Channel, Adult Swim, AMC, Cartoon Network, Disney Channel, ABC Family, CNN, El Rey and Galavision, as well as access to Sling TV’s video-on-demand library), with three add-on bundles at $5/mo (Kids Extra, News/Info Extra, Sports Extra). And there seems to be a buzz growing about Apple assembling something similar to the SlingTV bundles for its own entry into the OTT market.

The initial problem for the big multichannels is that the basic service plus an add-on or two, provides access to much of the channels desired by a big segment of current multichannel subscribers, but at a fraction of the cost of the bigger bundles of channels that multichannels now offer.  Multichannels will have to respond with similar mini-bundles at competitive prices, or significant loss in customers to cord-shaving or cord-cutting.

Sources - Sling TV Debuts With Major Cable Channels, MediaDailyNews
Cable-TV Desperately Searches for Ways to Stop the Cord-Cutting, The Street

Editted - added pics.

Infographic: Top Mistakes on Mobile

From Formstack:

Friday, February 6, 2015

Infographic - The changing face of mobile

From the 2014 U.S. edition of Deloitte's Global Mobile Consumer Survey.

Mobile finally hitting TV, desktop usage

Research on smartphone penetration shows that there is a clear generational gap in smartphone penetration.  The gap shows clearly in a Nielsen report from last fall, and in recent Pew Research Center findings.

Penetration is one thing, and actual usage is another.  A number of recent reports show distinct generational differences in both frequency of use, and in the types of applications and uses.  Most of these reports, however, have yet to really establish that smartphone ownership and usage have had a serious impact on either TV viewing or Internet use on laptops or desktops.

A recent study by Millward Brown Digital (MBD) finds that 77% of Millennials (those aged 18-34) report using a smartphone on a daily basis compared to 60% of Gen Xers (aged 35-50).  While this fits in with previous research, the MBD survey also reports generational differences in other media habits. They report smaller, but still consistent, reports of daily TV viewing (77% for Millennials, 86% for Gen Xers, and 91% of Boomers), and daily use of laptops or desktops (58% for Millennials, 67% for Gen Xers, and 71% for Boomers).
The difference is enough that MBD's research director, Joline McGoldrick, indicated that online marketers are not only finding mobile as a growing segment of the advertising marketplace, but that marketers should take into account the emerging generational differences as well. Advertising placement on mobile is one of the fastest growing ad segments, with a 60% growth rate this year, and predictions that mobile will account for more than 20% of all ad revenues by 2018.

Source -  Millennials Spend More Time With Mobile, Impacts TV Time, Mobile Marketing Daily

Infographic - History of Phone System Development

From Compare Business Products, a review of the history of telephone system development as an infographic.

Tuesday, February 3, 2015

Tidbits from Superbowl viewers

eMarketer released some recent poll stats on Superbowl viewers.

Almost half (46%) of smartphone and tablet owners reported they were likely to use a second screen while watching the Superbowl this year.  About a third said they'd likely be on social media, while one in five thought they'd be on sports cites or apps.  Grouping at just under 20% were the following uses: playing games, watching videos, checking news, and getting weather updates.

Another study looked at how people thought about Superbowl ads. It was no surprise that people overwhelmingly thought of them as primarily entertainment. About one in five thought the ads contributed to brand awareness.  Other than that, people didn't like the ads as advertising.  16.6% saw them as a waste of money that could better be used to keep product prices low; just under 10% thought they made the game too long; and about 7% saw them as unnecessary interruptions.  Only about 10% thought that the ads might encourage them to seek more information about products, or influence they buying habits.

Boom in online ad dollars - for some

Analyst Gordon Borrell puts the growth rate for online advertising dollars at 40% for 2014, and 42% for 2015.  Some firms could see online ad gains of 30% or more.  But for others, online dollars aren't going to be able to offset traditional advertising losses.

In particular, Borrell noted that newspaper print advertising is looking at continued advertising revenue declines of 10% annually.  Even when adding in the weak growth in online ad revenues for newspapers, total newspaper advertising revenues are predicted to fall 4.8 % in 2015.
Furthermore, the report notes that even in markets where newspapers have strong digital news content, advertisers are shifting to more targeted sites for directed and targeted advertising efforts.

With targeted ads remaining the fastest growing sector, having an audience is not enough - you need to be able to demonstrate having the right targeted audience.  Newspapers have had trouble doing that for their online editions.  In fact, Borrell predicts that online "Internet pure play" sites will grab about three-quarters of local online advertising revenues - mostly at the expense of traditional media outlets.
The report suggests that traditional media strategies towards online advertising tend to fall into one of three basic approaches:
Traditional media companies stuck in the analog world, selling a little digital stuff because it’s easy, but not really believing there’s good money in it; traditional media companies that are more excited about the prospects but still reticent (or unable) to invest more in order to grow quickly; and traditional media companies that have seen the light and are determined to grow again, investing heavily in digital by hiring people or acquiring companies.
Borrell estimates that about half of traditional media outlets fall in the first group - which explains why they're losing out in local advertising markets - which is increasingly focused on highly targeted content and audiences.

Source: Analyst Gordon Borrell sees local digital ads soaring in 2015, but not for newspapers, Poynter.org