Catalyst House

Finally, Net Neutrality is Within Sight

net 1Today, we celebrated. FCC Chairman Tom Wheeler has signaled that the Commission is finally making real progress on net neutrality. But the fight isn’t over by a long shot.

Proponents of net neutrality claim that big telecom companies seek to impose a tiered service model in order to control the pipeline and thereby remove competition, create artificial scarcity, and oblige subscribers to buy their otherwise uncompetitive services. Many believe net neutrality to be primarily important as a preservation of current freedoms. Prominent supporters of net neutrality include Vint Cerf, co-inventor of the Internet Protocol, and Tim Berners-Lee, creator of the Web.

See also: Secret Multi-Billion Dollar Wireless Scam, Reed Hundt’s True Legacy

Until recently “net neutrality” was little more than a buzzword to most Americans, an arcane concept within an equally arcane sector of telecommunications law. But fierce resistance to a plan proposed last spring by Chairman Wheeler that Internet advocates said would have undermined net neutrality — the concept that all data on the Net must be treated equally by Internet service providers (ISPs) — has pushed this once obscure idea into the DC limelight.

Joshua Kopstein at Al Jazeera America

“The plan Wheeler announced last May would have permitted ISPs such as Verizon, Comcast and Time Warner to give faster, priority access to sites and services able to pay for it as long as those deals were deemed commercially reasonable. But in a surprising about-face, he is now proposing rules that ban that practice by treating wired and wireless broadband Internet as a public utility under Title II of the Telecommunications Act — much like the telephone system.”

But Wheeler has changed his tune for the better –

“The Internet must be fast, fair and open. That is the message I’ve heard from consumers and innovators across this nation,” Wheeler wrote today in an article for Wired. “That is the principle that has enabled the Internet to become an unprecedented platform for innovation and human expression … The proposal I present to the commission will ensure the Internet remains open, now and in the future, for all Americans.”

This sudden turnabout of recent months has shocked the big telecoms and even net neutrality advocates, who until recently had relatively few powerful allies in their corner. Read more

Secret Multi-Billion Dollar Wireless Scam
Reed Hundt’s True Legacy

Last month we politely called it a “Great Airwaves Giveaway” – how major telecoms had ripped off the system by gaming billions in airwave licenses without proper compensation, with a little help from the FCC dating all the way back to the early 90s FCC of then Chairman Reed Hundt.

The Secret $8 Billion Wireless Scam

Well, it gets worse, so now the gloves are off: AT&T, T-Mobile and Verizon gamed the regulatory system and were able to garner over $8 billion worth of discounted spectrum by posing as “very small businesses.” It was a massive rip-off of wireless spectrum that blocked legitimate small competitors from offering services, as they were “out-bid” by deep-pocketed impostors.

Is this the legacy that past FCC Chairman Reed Hundt is so proud of? (see Reed Hundt’s latest and The Great Airwaves Robbery)

On May 11, the U.S. Senate Judiciary Committee held a hearing astutely titled, “The AT&T/T-Mobile Merger: Is Humpty Dumpty Being Put Back Together Again?”

At the hearing, Chairman Patrick Leahy, D-Vermont, raised a fundamental challenge: “At present, four companies control nearly 90 percent of the national wireless market. The proposed acquisition would further consolidate an already concentrated market for wireless communication.”

SOURCE:  David Rosen and Bruce Kushnick | AlterNet

The four companies that control the market (and their estimated market share) are: AT&T (26.8%), Verizon (26.0%), Sprint (22.9%) and T-Mobile (11.0%). With the merger of AT&T and T-Mobile, AT&T (44.0%) and Verizon (30.5%) will control nearly three-fourths of the market; Sprint’s share will increase to 16 percent; and the rest of the providers will drop to 6.3 percent.

If history is our guide, the FCC will approve the merger and come up with loosey-goosey voluntary commitments. And Verizon will most likely seek to acquire Sprint. This will return the U.S. to a wireless duopoly.

In 1984, when AT&T was broken up, only two wireless licenses were allowed per market. The local Bell Operating phone companies received one of the licenses for their entire territories and the second license was put up for bid.

Read more

The Great Airwaves… Giveaway?

In the early 90s, we fought hard against the advent of high bid auction of commercial airwaves. (See USIMTA/USIPCA Lobbying History & Airwaves Auction Winner) We argued at the FCC and before Congress repeatedly, until we were hoarse and blue in the face, that auctions of communications spectrum, like cellular phone and wireless broadband frequencies would stifle competition and freeze out the several thousand small independent “wildcatters,” whom we represented … and who we were, as well.

But we always assumed that once an auction mechanism replaced the lotteries of construction permits (ie, FCC licenses) that the airwaves would in fact be sold to the big players.

But alas, since 1993 when spectrum auctions were mandated by Congress, the US Govt. has quietly given away well over a half trillion dollars in spectrum (90% of all licensing, in fact!) that was supposed to be auctioned to the highest bidder. A 2007 study demonstrates that the lotteries that were occurring prior to 1993 were much more honest and transparent.   Well duuhh.

“The third rail of spectrum policy is the rotten, special interest politics that has driven lawmakers to give away the public’s airwaves to private interests without public compensation. In the vast stream of government reports seeking to reform spectrum policy since 1993, one looks in vain for more than a token acknowledgement, let alone a serious and sustained discussion, of this giveaway.”

The Art of Spectrum Lobbying

America’s $480 Billion Spectrum Giveaway:

How it Happened, and How to Prevent it from Recurring

Read more




WASHINGTON, March 27, 1995 /PRNewswire/ — In an industry known for huge conglomerates and on the heels of “the mother of all auctions” that raised $7.7 billion for the U.S. treasury, an unlikely auction winner was among those invited to meet today with President Clinton.

FCC PCS Auction Proceeds Presented to Treasury

Clinton, Gore, and FCC Chairman Present $8 billion check to Treasury

“I feel like Lynnea in the Land of the Giants,” said Ms. Bylund. “And after all, it’s only fair that at least one woman wins in the `mother’ of all auctions,” she said.

Earlier this month, the FCC concluded an unprecedented four-month auction of “A” and “B” block PCS spectrum. PCS is a new generation of low cost wireless voice, data, and video devices providing for anytime- anywhere, personal and business communications. Telecommunications industry watchers have called PCS licenses the “telephone franchises of the 21st century.”

Several blocks of spectrum licenses, set aside for small businesses and women and minority owned business, remain to be auctioned.

Ms. Bylund, a resident of the Los Angeles area, also heads up two national trade organizations that principally represent small business concerns in emerging wireless technologies — United States Interactive and Microwave Television Association (USIMTA), established in 1990, and United States Independent Personal Communications Association (USIPCA), established in 1991. The two organizations represent more than 4,000 members, including system owners/operators, small business license applicants, wireless entrepreneurs, equipment manufacturers, law firms and consultants.

10 – 10 – 10

USIMTA/USIPCA – started 1990

catwp.USIMTA1Lynnea was the founder of two small business-based wireless trade associations – USIMTA and USIPCA – and has lobbied on Capitol Hill and at the FCC where she has spoken out strongly against the cable TV monopoly, illegal spectrum warehousing and ill-conceived congressional schemes to auction our nation’s precious airwaves to the highest bidder. Lynnea is a founder and former CEO of a Washington DC telecommunications consulting and management company that had holdings in several operating and near operating wireless communications systems and companies.

USIMTA Newsletter Spring 1992 Washington DC

USIMTA Newsletter Fall 1992 Washington DC  

USIMTA Newsletter Spring 1993 Washington DC 

USIMTA Newsletter Fall 1993 Washington DC


World’s Biggest Auction Winner

In 1995 Lynnea Bylund became the first female in the world to be awarded a Broadband PCS operating permit – she was one of only 18 winners, along with Sprint, AT&T, Pacific Bell, etc., in the biggest cash auction in world history raising a whopping $7.7 billion – her company was awarded licenses to operate wireless systems in Hawaii and American Samoa – South Seas Satellite Communications Corporation and Proteus, Inc.


Telecom Giants Win Auction & Meet Clinton


MacNeil Lehrer

MR. SOLMAN: And speaking of American Samoa, Lynnea Bylund is president of the South Seas Satellite Communications Corporation, bidding on one of the two PCS licenses for that remote outpost of the American market. Somewhat less secretive than Sprint, she shared her strategy with NewsHour reporter Ron Dunsky.

The MacNeil/Lehrer NewsHour – Lynnea Bylund (in bold)

February 3, 1995, Friday Transcript #5156

MR. MAC NEIL: Next, a novel approach to some novel technology. The Federal Communications Commission is nearing the end of a long and complicated auction the government hopes will yield big bucks. Business Correspondent Paul Solman reports.

Lynnea Bylund Interviewed on MacNiel-Leher

MR. SOLMAN: The right to use our airwaves.

SPOKESMAN: Let the auctions begin.

MR. SOLMAN: Now the government used to give these rights away on an exclusive basis to the radio and TV frequencies in different areas of the country, for example. And even as much lower frequencies began to be used, the so-called cellular telephone, the government was still giving away our airwaves by lottery. MIT economist Jerry Hausman thought that was sort of foolish.

JERRY HAUSMAN, Economist: They did the cellular lottery for Cape Cod, a dentist won sold it a week later for $40 million. Now, I’ve never really thought the dentists are the truly needy in this country, and so it’s much better for taxpayers to get the money than the truly needy dentist who won the Cape Cod cellular franchise.

MR. SOLMAN: This is actually going to make a difference to the two of us as taxpayers?

JERRY HAUSMAN: Yes. In fact, it’s going to lower the deficit. The government’s going to get the money, and let’s say it’s twenty to forty billion dollars, that’s real money even in Washington nowadays.

MR. SOLMAN: And, remember, it’s your real money and mine. Even Hausman’s low estimate, $20 billion, would work out to about $200 per American household for the PCS licenses. Okay. Time out for a brief moment of science here on the NewsHour. This some of you may recall from physics class is the electromagnetic spectrum, cosmic rays up here at the highest frequencies and shortest wave lengths down through X-rays, visible light, that’s those colors you see, radar, TV, that’s about there, radio, and down here at the lowest frequencies and longest wave lengths, cellular telephone right about there maybe, and now personal communications services, or PCS, down even lower. Now, let’s cut through the actual science part of this because the business person simply needs to know that way down in the PCS band you need to put up more transmitters to give the phones a reasonable range. And that costs money. But the payoff could be tremendous, according to Reed Hundt, chairman of the Federal Communications Commission, which is running the PCS auction.

REED HUNDT, Chairman, FCC: We will see about 1 percent added to the Gross National Product of this country through the development of a mobile communications interest, about 300,000 new jobs in mobile communications alone, and another 700,000 jobs that are jump-started into being because of the global communications business.

MR. SOLMAN: In short, this could be a boom industry, and at a pre-auction press conference featuring, by the way, not one but two FCC officials who bore a startling resemblance to the Vice President, we were given a sampling of the world beyond cellular, so-called personal communications services, or PCS, featuring Dick Tracy wrist phones, wireless computers, and the latest in mobile phones made by Motorola.

UNIDENTIFIED WOMAN: It’s a handset that you can use to walk through the streets of Washington, D.C., and communicate. MR.

SOLMAN: So I can just make my little calls here — this is just like a cellular phone?

UNIDENTIFIED WOMAN: Sure, but it has total quality which is comparable to your wire line service that we’re accustomed to using in our offices, except for you’ll have that capability walking through the streets.

MR. SOLMAN: Because this is digital?

UNIDENTIFIED WOMAN: Yes, completely digital.

MR. SOLMAN: So bottom line, how much is a license for PCS worth, considering there will be two licenses per region? Well, consider the current value of the more powerful cellular band, where there are also two licenses per region.

JERRY HAUSMAN: The way that the world has typically done it, it’s all — it’s called a “per pop” basis.

MR. SOLMAN: Per op?

JERRY HAUSMAN: It’s per population. So the prices vary anywhere between 95 dollars if you go into the South and Alabama per pop, and if you look at New York or San Francisco or Los Angeles, the value is probably about $300 or even more per pop.

MR. SOLMAN: That’s per head, per person.

JERRY HAUSMAN: Per person.

MR. SOLMAN: In other words, say a billion dollars for a cellular license in San Francisco to a half billion for LA, maybe three billion for New York. Moreover, this business has been growing at a mouthwatering 35 to 40 percent a year. Add in the greater clarity and privacy of a digital signal, and you begin to see why PCS is going like gangbusters wherever it’s already available, like England. If they’d had PCS sooner, those sizzling cellular calls of the chatty royals wouldn’t have been picked up by nosey scanners. Barely a year old in England, PCS is already getting major use and has been signing up 25 percent of all new mobile phone customers. Hong Kong has four competing PCS companies, and they’re all growing, and Australia has decided to ditch cellular altogether in favor of PCS. But PCS also has certain disadvantages. It requires more transmitters, more money, to buy out everyone from police and fire departments to ambulance and oil companies who currently have rights to this part of the spectrum. And, remember, cellular has a big head start. So what are the new PCS licenses going to go for per member of the population?

MR. SOLMAN: What’s the range you can get in LA, for example?

JERRY HAUSMAN: You could get a range of between let’s say $25 and $125.

MR. SOLMAN: That’s a heck of a range for an auction.


MR. SOLMAN: A heck of a range and for the companies involved a heck of a high-stakes game. In fact, this auction could be a matter of life and death for today’s phone companies.

JERRY HAUSMAN: It’s a really tough decision for these large companies who have been regulated monopolies for the last fifty, sixty years, and now all at once face a new technology, face decisions, you know, like we saw in computers 30 years ago, should IBM be a tabulating company forever, or should IBM go into computers? IBM did and have 30 years of being a great company. Other companies who were way ahead of IBM in electronics at the end of World War II decided not to go into computers. Sperry Rand – – do we know who they are anymore?

MR. SOLMAN: Thus, the bidders are under intense pressure which the government is trying to exploit to maximize its take. So the FCC has created an elaborate auction, simultaneously selling off two PCS licenses in each of the country’s 51 calling areas, in a process that could take weeks even months. There are booths on site where you can log in your bid, or, if you prefer, the FCC has operators standing by to take your call. Finally, you can log into the FCC computer from any location, no matter how remote.

COMMERCIAL SPOKESPERSON: Remember when Sprint’s fiberoptic network just meant a great phone call?

MR. SOLMAN: Sprint is not only using fiberoptic lines but according to the New York Times is submitting encrypted bids over them, “from a sealed war room at a secret location somewhere in Kansas City. Security is so tight that visitors are blindfolded when to the site.” But everybody, no matter where they are, plays by the same rules as Gina Kenney of the FCC explained.

GINA KENNEY, FCC: The first week we bid once a day. The second week we’ll have two rounds. And the bidding stays open on all the markets until each one is closed. In other words, New York, the bidding on New York won’t close until the bidding on American Samoa closes, for example.

MR. SOLMAN: And speaking of American Samoa, Lynnea Bylund is president of the South Seas Satellite Communications Corporation, bidding on one of the two PCS licenses for that remote outpost of the American market. Somewhat less secretive than Sprint, she shared her strategy with NewsHour reporter Ron Dunsky.

RON DUNSKY: How much did you bid?

LYNNEA BYLUND: South Seas Satellite Communications Corp.: We started very low. We started at $6.

RON DUNSKY: $6, 6 American dollars, are you serious? Why so low?

LYNNEA BYLUND: We really don’t know what these licenses are going for. We don’t know what this particular license will be going for, so we wanted to start low. That’s part of our strategy. We’ve been working with game theorists to put a strategy together, and we felt that coming in, opening with a very low bid was the way to go, and then we can see how others bid.

MR. SOLMAN: Now, the South Seas Satellite strategy in American Samoa was fairly straightforward. As her game theorists advised her, even a measly $6 bid would keep Bylund in the game, and if no one countered, snag a license covering 50,000 people for the price of a pina colada. But the big players have a more complex bidding problem, not only how much to bid but also how many markets and which to bid, so they need more complex game theory, and to explain that, we need a few more moments of your time, plus two leading game theorists, Adam Brandenburger of Harvard and Barry Nalebuff of Yale, who agreed to show us the kinds of exercises they’ve been putting their multibillion dollar clients through to sharpen their bidding savvy. Again, they talk in dollars per person and the lingo “per pop.”

BARRY NALEBUFF, Economist: One question is: How aggressive should you bid? How many licenses should you bid for? Let’s take a specific case. Two markets, Boston and Philadelphia. Let me be AT&T. I’m the bidder who values licenses the most. I value them at $10 a pop.

MR. SOLMAN: And Adam.

ADAM BRANDENBURGER, Economist: I’ll be Sprint. I’m the smaller of the two players. Let’s say $9 a pop for me.

MR. SOLMAN: So the state of play at the moment, two bidders left, and in Boston, AT&T has the top bid $7 per pop and Philadelphia, it’s Sprint at $7 a pop. It plays to you, AT&T. What do you do?

BARRY NALEBUFF: What can I do? I’ve got to bid.

MR. SOLMAN: Now what happens next seems inevitable. Each player bids up to his limit, and the one with the higher limit, in this case Barry Nalebuff, representing AT&T, wins. And that’s the way it should be, right? Wrong, says the game theorist.

BARRY NALEBUFF: I won but not really. I got two licenses for $19, they’re worth $20. That’s only a profit of one. When we started out, I had one license at 7, it was worth 10. That was a profit of three. I lost $2 in the process.

MR. SOLMAN: So what would a game savvy player have done? Let’s roll back the clock. AT&T, what should you have done?

BARRY NALEBUFF: Do nothing. Sit on my hands, take advantage of the fact that I’ve got a great license at 7 and making $3 dollars and not try and raise the bids anymore.

MR. SOLMAN: And what should you have done, Sprint, had AT&T done nothing?

ADAM BRANDENBURGER: I certainly shouldn’t escalate the bidding. I’m in the weaker position anyway. If AT&T is going to stand pat, that’s the best thing for me too.

MR. SOLMAN: And this is just what these guys have been teaching their big clients, how and why to exercise restraint; that they could easily be better off with fewer licenses but for less money, a result of game theory’s basic technique; you put yourself in the other person’s shoes to anticipate his or reaction, and thus perhaps make a very different decision, in the auction, a different bid. Meanwhile, back at Samoa, round one was over, and the South Seas strategy had yielded some clues as to the license’s value. The $6 bid had been topped by one competitor at 10,000. The leader was up at 30,000. What lies ahead for South Seas Satellite.

RON DUNSKY: In the end, how much money do you think you’re going to have to spend?

LYNNEA BYLUND: I don’t want to give away my strategies.

MR. SOLMAN: In fact, virtually every bidding strategy had a game theorist or two behind it, partly a result of game theory being hot this year, having just won the Nobel Prize in economics. But the most significant game playing went on before the auction even began, as big corporations, the regional Bell companies, long distance carriers, cable TV, and cellular firms, formed alliances to build the national networks consumers presumably want. To Barry Nalebuff, that’s the real message of game theory in this case.

GARY NALEBUFF: It’s now about beating other people. It’s not even how you play the game. It’s what game you play. And if you’re not playing the right game, you’d better change it, and game theory helps you understand how.

MR. SOLMAN: Indeed, that’s just what the many bidders seemed to have done by building alliances which have exercised enormous restraint in the bidding so far. After the first round, bids totaled only $379 million, at the end of two months, now a mere $4 1/2 billion, only about 45 bucks per U.S household. But it’s still early. The promise of PCS remains. A Russian delegation was picking up pointers for its PCS auction. The bidding booths were full, and these days everywhere you look, it seems, there are new signs of the wireless bonanza.

RECAP MR. LEHRER: Again, the major stories of this Friday, President Clinton proposed raising the minimum wage 90 cents over the next two years to $5.15 an our, and the nation’s unemployment rate went up last month .3 of a percent to 5.7 percent. Good night, Robin.

MR. MAC NEIL: Good night, Jim. That’s the NewsHour for tonight, and we’ll see you again on Monday night. I’m Robert MacNeil. Good night.

Catalyst House