Consumers are hit hard by the spectrum crunch.  As more people utilize the current wireless broadband infrastructure, service will get poorer and spottier, and prices will rise to meet the demands of stressed network.  We’re already seeing evidence of higher prices after the blocked merger of AT&T and T-Mobile, which has caused prices for consumers of both providers to rise due to the lack of spectrum as both desperately need to provide for their expanding consumer base. 

As FCC Chairman Genachowski recently noted at CTIA’s annual conference, wireless devices now reach more people globally than electricity or running water.  And this immense growth will only continue in the coming years as more and more of the developing world adopts wireless devices.  So what does that mean for consumers? 

For years, wireless broadband providers, analysts and the tech industry have been explaining the need for more spectrum for innovation and to better serve consumers who expect faster speeds and higher quality service at an affordable price.  Unfortunately, there’s still a lot of hard work that needs to be done to bring new spectrum to market.  Congress recently passed legislation to authorize the FCC to conduct incentive auctions of broadcast spectrum – a great first step – but it will be years before any of this spectrum is actually deployed to service consumers.   In addition to the pending incentive auctions, the government and the mobile broadband industry must work closely together to identify additional spectrum resources that could be repurposed for commercial uses.  While these long-term initiatives are critical to meeting the crunch over the coming years, secondary market transactions are critical to alleviating short-term spectrum needs. 

Currently, the FCC is reviewing an important secondary market transaction as Verizon Wireless is attempting to purchase a large block of fallow spectrum from SpectrumCo.  Verizon Wireless is committed to deploying this spectrum quickly to better service its customers and build out its LTE network.  The FCC should encourage transactions like this and any others that help ensure that dormant or underutilized spectrum is put to its best use to meet consumer demands and drive the deployment of new technologies.  A robust and well-functioning secondary market is critical to meeting the goals of the FCC’s National Broadband Plan and approving this deal will send a clear signal that the FCC is committed to fostering a healthy secondary market.

All of these consumer benefits could be derailed by the looming spectrum crunch.  Fortunately the crunch can be alleviated if spectrum is allocated appropriately with a comprehensive approach to spectrum policy that includes a healthy secondary market, open incentive auctions and continued efforts from the government to identify and repurpose spectrum.

Zack Christenson writes on digital tech issues of the American Consumer Institute

Phoebe:  “Grandpa?”

Me:  “What do you need, hon?”

Phoebe:  “I need an iPad like Grandma’s.”

In silence, I pretended to focus on our shopping list, hoping the 5-year-old’s attention span would let the request lapse quickly.

Phoebe:  “I really, really need an iPad, pleeeease.”

Me:  “But you have a Wii and you’re good on Guitar Hero and the other games.”

Phoebe:  “Grandma’s iPad has better games.”

Me:  “Which games does she have?”

Phoebe:  “Angry Birds and Water and she lets me download other ones.”

Me:  “Grandma said she’d help you use Khan Academy.”

Phoebe:  “Grandma says her games help me learn.”

In silence, I recall that Mossberg said to wait until fall to buy any laptop or PC since by then Windows 8 will be out and new PC’s will have touch screen technology.  PCs are better bang for the buck; faster, more storage, and more durable – a compelling argument.   But, on second thought, do I really want Phoebe exposed to the malware and privacy loss typical on Internet Explorer?  I’m left without a better idea, but I avoid mentioning a laptop or desktop anyway.

Phoebe:  “I can read some of the games.”

Me:  “Well, iPads might break easily.”

Phoebe:  “I play with Grandma’s iPad when I sit in her big comfy chair.  I don’t take it outside.”

Me:  “Yeah, but all the really cool kids want cellphones – not those iPads.”

Phoebe:  “Nuh-uh, no one of my friends has a cell phone.”

More silence, while I pick up grocery items pretending to be focused, but really just lacking argument ideas except for the outrageous cost of iPads.

Phoebe:  “Donny says old people don’t understand iPads.”

Me:  “Oh hey – look over there, the checkout line is really short.   Here’s our list – check that everything on it is in our basket.”

Phoebe:  “If I got an iPad, I could teach you how to use it.”

Alan Daley is a retired businessman living in Colorado following public policy from the consumer’s perspective and learning to not underestimate grandchildren.

The threat to the freedom of the internet comes, he claims, from a combination of governments increasingly trying to control access and communication by their citizens, the entertainment industry’s attempts to crack down on piracy, and the rise of “restrictive” walled gardens such as Facebook and Apple, which tightly control what software can be released on their platforms.

So why is Google afraid of Facebook and Apple, enough to lump them in with oppressive governments as threats to freedom? Well, maybe they’re truly worried about freedom. But also possible is that Facebook and Apple they don’t play by Google’s rules. Brin even says so in his interview– “You have to play by their rules, which are really restrictive. The kind of environment that we developed Google in, the reason that we were able to develop a search engine, is the Web was so open. Once you get too many rules, that will stifle innovation.” This may be true, but many would argue that private companies really have the ability to do what they will with their own technology.

Without access to the the worlds 3^rd largest site (Facebook) and one of the world’s largest online retailers for music, movies and apps (iTunes) Google is being cut off from two potentially large sources of revenue. Without the ability to crawl Facebook, Google is missing out on a treasure trove of data on almost 1 billion users. This is valuable data that Google would love to be free and open, so it could be collected and sold to its customers. Dan Frommer at ReadWriteWeb does an excellent job explaining just how powerful Facebook’s advertising targeting is, and why Google might be so envious of it. And without access to iTunes, Google probably feels cut off from a huge emerging sector—the mobile web and the associated app market. It’s evident Google desperately wants to be involved in these markets,–hence, their launch of Google+ and Google Play.

Many users of Google’s free products wrongly believe that they are Google customers. Truthfully, the average Internet user is the product. Google makes billions by collecting information on Internet users, storing it (oftentimes without their knowledge) and selling it to their customers—companies who purchase advertisements. And you don’t have to use a Google owned website in order to be the product Google is selling. They work with millions of smaller websites to install their cookies so your movements can be tracked. Because of this business model, Google brought in nearly $38 billion in revenue last year, 96% of it from advertising.

Don’t misunderstand—it’s a completely legitimate business model, one that’s created thousands of jobs, generated billions in of commerce for the economy, generated more billions in profits for thousands of shareholders, and has had an unquantifiable impact on the worlds technological innovations. I point all this out to show that the complaints over freedom are might seem hollow coming from Google. Facebook users accept a terms of service, and for the most part, most users know their information is being stored and used by Facebook and its advertisers. Apple sells you a product, and the consumer knowingly hands over his or her money, knowing full well that they’re somewhat restricted in the use of the product, whether its by how many copies they’re allowed to make, or if their iProducts can work outside of Apple environments. Many consumers might enjoy the privacy that Facebook and Apple can afford, something they haven’t been getting from Google recently.

Brin says that Google wouldn’t exist without an open Internet. Certainly, Google built its dominance based on an Internet where everything was open and users could easily be tracked. The open Internet made Brin rich beyond probably his wildest dreams. And this is what Brin and Google executives are most likely worried about (and rightfully so) more than anything—Google losing its spot at the top of the Internet heap. It seems as though Brin and Google might be less worried about Internet freedom, and more worried about data they can collect and subsequent ad dollars they can collect.

Zack Christenson writes on digital tech issues for the American Consumer Institute

Many communities have experimented with municipal broadband over the years.  I’ve detailed many of them in the past, including the towns of Mooresville and Davidson, North Carolina, who borrowed $92 million to finance the purchase of an ailing broadband Internet provider. After spending taxpayer dollars on this program, the city found itself having to borrow even more, while struggling to keep up with the pace of new technology and upgrading the required infrastructure.  Reason and Americans for Tax Reform, as well as one ACI scholar, have detailed more failures in public financed broadband.  Municipal broadband programs have proven to be such a failure that 20 states have passed laws against publicly financed broadband programs.

Although many states have banned the practice of municipal broadband, NTU’s new study shows that many governments still have an appetite for it.  Just last year, more than 100 networks were built or being built in 33 different states. The study goes on to show some of the costs associated with the failed broadband plans:

The hidden costs to taxpayers from municipal broadband are considerable and growing ominously. Annual debt service costs for nine broadband networks in Tennessee have risen from just over $100,000 in 2001 to nearly $12 million in 2010. Last month, one sponsoring entity of this project, Chattanooga’s Electric Power Board, faced a downgrade in its debt in part due to concerns over the reliability of its revenue stream from cable and Internet operations. In Utah, the “UTOPIA” network’s $202 million debt is four times larger than the combined general obligation debt of its 11 member cities (general obligation debt is commonly used to finance municipal infrastructure).

Municipal broadband networks can also be poor investments. Despite a business model built on leasing broadband “backbone” as opposed to providing actual service, Memphis Networx failed to turn a profit and was sold at a loss of over $27 million.  A somewhat similar arrangement in Burlington, Vermont, led to $17 million of unpaid funds to its parent city, along with allegations of fiscal malfeasance.  In places such as Lompoc, California and Marietta, Georgia, subscription rates have fallen short of break-even targets by 50 percent or more, stranding taxpayers with operating liabilities.

The idea of universal access to broadband Internet is good, but its implementation by government entities often has the opposite of its intended effect.  Government-owned broadband networks almost always operate at a loss, see more service interruptions, and generally have fewer satisfied customers than their private counterparts.  Private enterprise can generally enter the market and provide reliable and cheaper service for consumers, and not saddle taxpayers with an overwhelming debt, as the NTU study has shown often happens.

There could be a better way to ensure high-speed Internet to more consumers—open up more spectrum and allow for an environment where private industry can provide Internet to consumers at an affordable rate.  By financing public Internet, governments are often saddling citizens with hidden costs and debt under the guise of “free” Internet.

Zack Christenson writes on digital policy issues for the American Consumer Institute at www.theamericanconsumer.org.

We support the FCC’s action against Google, but this small fine will not serve to change the behavior of a company with a market capitalization in excess of $200 billion. The company has consistently shown disregard for consumer privacy, and its pattern of action warrants greater scrutiny by regulators and members of Congress.

Because Google has dragged its feet with the FCC and consistently shows itself unresponsive to privacy concerns, it is time for Members of Congress to get to the bottom of the Wi-Spy matter by holding hearings on Capitol Hill. Google must operate within U.S. privacy and consumer protection laws, and hearings will give the company an opportunity to explain how it will prevent future violations.

In the FTC’s newly released consumer privacy plan, the agency calls for industry to adopt best practices to head off any privacy concerns that consumers might have. The FTC chairman, Jon Leibowitz, acknowledges that we’re seeing this being done already in the area of Do Not Track legislation, where the vast majority of large Internet companies are voluntarily signing on to allow consumers to opt out of Internet tracking for advertising purposes. But the report goes on to suggest new laws that Congress can pass that would theoretically protect consumers from privacy intrusions. These laws include “enacting general privacy legislation, data security and breach notification legislation, and data broker legislation.” So although many of the proposals laid out are currently suggestions and are “voluntary,” the Obama administration plans to introduce legislation that would strengthen privacy regulations. What exactly these laws would look like remain to be seen.

Not everyone is a fan of the administrations attempts to impose regulations or guidelines. Some are worried about the costs associated with these regulations, would the policing would fall to, and if the consumers would best be served in this situation. In his testimony before the committee, Berin Szoka, president of TechFreedom, said:

“…both the White House and FTC propose principles that, while noble in their aspirations, may prove counter-productive for consumers if transposed without a careful consideration of the real world trade-offs inherent in regulating consumer data practices. Both documents present reformulations of the Fair Information Practice Principles. While the White House framework is perhaps the best articulation of the FIPPs thus far, the FIPPs alone cannot protect consumers effectively—at least not without imposing significant costs and burdens on consumers.”

Many opponents of the plan also contend that these guidelines and regulations could be a true job killer. A study was recently released that showed the app economy has created 466,000 jobs. This is a market that only a few short years ago didn’t exist. The app economy, according to a new book of essays published by the American Consumer Institute, is currently a $5 billion industry, and will be worth $54 billion in the next four years. And according to a study by the Boston Consulting Group, the digital economy made up about 4.7% of the US GDP in 2010, and will account for $4.2 trillion of the G-20’s GDP by the year 2016. Apple claims to be responsible for creating 514,000 jobs alone. Would these new privacy regulations hurt this huge section of the US and the world economy?

Congressman Fred Upton seems to think it’s worth exploring. In his opening statement at the hearing, he said:

I am highly skeptical of Congress’ or a government regulator’s ability to keep up with the innovative and vibrant pace of the Internet without breaking it. Consumers and the economy as a whole will not be well served by government attempts to wrap the web in red tape. And we cannot ignore that Internet companies have a strong incentive to protect their users – it’s called consumer choice. Today’s online consumers are savvy customers who will not be loyal to a company that puts their personal information at risk. The next big thing is just around the virtual corner.

It remains to be seen if these hearings will have any effect over some companies that seem to constantly be in the news regarding privacy concerns. As The American Consumer points out, Google was largely absent from the hearings, even in the face of a string of embarrassing privacy concerns. Concern over Internet privacy is sure to be with us for some time, and it’s an open question if government regulators or Congress will feel the need to step in.

Zack Christenson writes on digital/tech policy issues for the American Consumer Institute