Sidecut Reports

Since we couldn’t make it to Aspen this year to participate in the expected discourse on one of our favorite topics — network neutrality — we here at Sidecut Reports humbly offer our “Top 10″ list of net neutrality influencers, the people leading the debate into 2009, what we are calling Phase II of the net neutrality deliberations.

With no further ado, the drumroll please:

SIDECUT REPORTS PRESENTS
THE NET NEUTRALITY TOP 10 INFLUENCERS

The movers and shakers in the net neutrality debate, as of August 2008:

1. Jim Cicconi, AT&T — Still the man with the most pawns and the best grasp of the board.

2. Kevin Martin, FCC Chairman — A lame duck, but with a few big quacks left.

3. Rick Whitt, Google — Looks like Phil Mickelson, and his company plays policy like Phil — sometimes a champion, sometimes hitting from behind the concession stand and off a tree. Capable of major victories, but still not Tiger-solid.

4. Rep. Ed Markey, D-Mass. — Driving the House Bus. A big bus but not a tank.

5. Joe Waz, Comcast — I get knocked down, then I get up again… just like another famous fighter from Philadelphia?

6. Ben Scott, Free Press — Riding the big wave of momentum. How long can the Silver Surfer stay afloat?

7. Lawrence Lessig, Stanford – Always effective as the lone voice storming the castle; can he compromise if he is on the other side of the ruling walls?

8. Tom Tauke, Verizon – Maybe not even the real source of power at Verizon but a former congressman who knows which strings to pull. Can pull hard with Ivan Seidenberg behind him.

9. Blair Levin, Stifel, Nicolaus — If not the next FCC commissioner, he will know who it is before anyone else (and will explain why to Wall Street).

10. Sen. Barack Obama, D-Ill. — First he has to win. Then Reed Hundt’s troops can take over.

Honorable Mention: Tim Wu, Columbia Law School; Kyle McSlarrow, NCTA; Eric Schmidt, Google; Walter McCormick, USTA; Chris Libertelli, eBay/Skype; Gigi Sohn, Public Knowledge; Jessica Rosenworcel, Senate Commerce Committee; Jonathan Adelstein, FCC; Phil Weiser, University of Colorado; Preston Padden, Disney.

Need to know more about net neutrality, or why such leading influencers think that 2009 will be a big year for possible passage of net neutrality legislation? Then order our Sidecut Report on Net Neutrality, which contains complete analysis of the recent FCC decision, as well as a net neutrality timeline and interviews with all the top players in the debate.

As you can tell from our spiffy new button to the right, our promised report on net neutrality — Net Neutrality Phase II: The Battle of 2009 — is now live and ready for ordering via instant download. By combining our long background of reporting and analysis of the issue with interviews of leading legislators, top policy execs from the biggest companies, as well as representatives of the leading public-interest groups, we have produced a definitive in-depth look at the network neutrality issue, which by all accounts is headed for a big year in 2009.

While I’ll get to some of the report highlights in a bit, I want to point out first that here at Sidecut Reports we have no agenda and no skin in the network neutrality game, something that makes us much different from many players in the debate. By trying to stay as objective as possible, our goal was to produce an agenda-free look at network neutrality, which we consider a vital issue in any discussion about the future of broadband, networks, and the digital economy.

So what’s in the 34-page report? Starting with the FCC’s recent order punishing Comcast for its blocking of peer-to-peer applications, our report examines all technical and political parts of the debate, and how proponents and their opponents will position themselves following the November elections. Highlights of the report include:

• Why the FCC’s recent Comcast order isn’t much more than a starting point for the “next phase” of the net neutrality debate
• Why some close observers put the odds of Congress passing some kind of net neutrality legislation “better than even” in 2009, especially if Barack Obama wins the Presidential election
• What the big telcos, AT&T and Verizon, are planning to do and say to prevent passage of any new net neutrality legislation
• How Google and consumer groups Free Press and Public Knowledge are teaming up to educate the public and regulators on why they think there is a need for baseline net neutrality rules
• How any and all outcomes might affect the investment outlook for companies from startups to large service providers
• Why the debate is getting less rhetorical and moving toward more collaboration between opposing sides

The report also contains a network neutrality historical timeline, as well as the Sidecut Reports ranking of the “top ten” individuals influencing the network neutrality debate. The new report is available for immediate download.

In case you are new to Sidecut Reports, a little background: We are an independent editorial research company that provides business professionals with deep background, up-to-the minute information, and decision-making analysis on pertinent topics that goes far beyond blogs at a price far less than that charged by traditional analyst operations. Led by longtime industry journalist Paul Kapustka, Sidecut Reports provides in-depth looks into topics at the intersection of telecommunications, the Internet and public policy. The net neutrality report is our second report, following the release earlier this year of our Sidecut report on WiMax, which looks at the current market for WiMax wireless services in the U.S.

Readers of our Sidecut Report on WiMax weren’t surprised to read in USA Today that the big telco likes WiMax, despite a strategic direction tilted in favor of Long Term Evolution (LTE) for its main 4G strategy.

In our report, we offered some details of AT&T’s current WiMax deployments, which include one in Alaska and one in Pahrump, Nev. In our post “Five Things You Didn’t Know About the Clearwire WiMax Deal,” we added more analysis, saying that “AT&T may be hedging its bets by keeping its toes wet in matters WiMax. This may be more important in the future, when WiMax standards at the 700 MHz level emerge.”

In the USA Today story (a sidebar to a longer interview with CEO Randall Stephenson) new AT&T CTO John Donovan talks about how WiMax is appealing in rural deployments, especially where AT&T may not have copper assets. The USA Today story also says that WiMax is “cheap to install and maintain,” an idea that our readers know about (and we highlighted in a report excerpt about the WiMax TCO Advantage.)

If nothing else, Donovan’s affinity for WiMax should give cheer to WiMax gear manufacturers, who may sell their equipment side-by-side with all that LTE stuff Ma Bell plans to deploy. And maybe they can stop believing those LTE will kill WiMax stories whose sources are suspect.

Need to know more about WiMax? Order our recently updated WiMax report, with full analysis of the “new” Clearwire deal and the motivations for investors Comcast, Google, Intel and others.

As expected, the FCC went through with its wrist-slap of Comcast today, voting 3-2 in favor of calling Comcast naughty for its BitTorrent-throttling efforts. Here’s the official release from the FCC, which basically tells Comcast to stop using the management techniques in question, explain its techniques more clearly to the FCC and to users, and to detail how it will do things differently in the future.

Wow, some penalty!

Given that Comcast has already publicly stated that it doesn’t use the packet-reset technique anymore, and is moving to more open, protocol-agnostic measures, some of today’s action may seem like a moot point. But while the order itself may not amount to much, it is significant as a turning point in the overall network neutrality debate — serving as a marker of where the issue turned from theoretical to discussions of a more practical nature about what reasonable network management might be, how it might be disclosed, and who might best adjucate potential complaints or infractions going forward. We will explore all these bigger themes as well as the expected legal, legislative and regulatory tussles coming in 2009 in our upcoming Sidecut Report on net neutrality, which should be available early next week. (If you want an email update when the report is available, ping me at kaps at sidecutreports.com.)

In the meantime, we’ll leave you with a quote from FCC chairman Kevin Martin, courtesy of the Twitter stream from our pal Drew Clark, who attended the meeting:

If we aren’t going to stop a company that is looking inside its subscribers’ communications, blocking that communication when it uses a particular application regardless of whether there is congestion on the network, hiding what it is doing by making consumers think the problem is their own, and lying about it to the public, what would we stop?

Good question!

Other reports: Stacey over at GigaOM has a comment from Comcast; Declan McCullagh at C/Net has some more details on the legal underpinnings of the order; we have received the public statements from both Verizon and AT&T, which both laud the FCC for its decision and go on to say that clearly, no new net neutrality regulations or laws are needed. And Rep. Ed Markey (D-Mass.) sent us a note that also praised the decision but ended with the following statement:

I intend to continue monitoring practices in the industry and pressing for passage of my legislative framework for addressing these issues in the months ahead.

To answer your question — yes, the network neutrality debate is back with us again. Get ready for Phase II!

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FCC commissioner Robert McDowell leaped into the opinion-making fray in the net neutrality debate today, with an editorial in the Washington Post that some have called a sober assessment of the debate, while others have deemed it just more talking points from a former lobbyist.

I actually agree this time that McDowell’s essay is more sensible than most from the GOP side of things, even with a few slips into “regulations will kill the Internet” territory of tired telco BS. Generally it’s not a bad read and it does well to note that in previous instances of Internet pipe-clogging, it was engineers, not lawyers and lobbyists, who solved the problem. A good thing to remember.

What is interesting is to see McDowell say that technical and business solutions are the only way to fix net neutrality problems, at one point claiming the FCC itself simply can’t move fast enough to deliver sensible regulations in Internet time. (So maybe, it’s best we don’t rely on Bob and his co-workers!) But you have to wonder how such “collaborations” might occur in a real world, where typically one party has market power and the other doesn’t. McDowell says the government can step in if needed, but if there are no rules or no clear jurisdiction, then how and when will the government decide to act?

McDowell says, “Sometimes shining sunlight on issues produces amazingly beneficial effects, and the public interest groups that raised the BitTorrent matter should be praised for doing so… Let’s stick with what works and encourage collaboration over regulation.”

A great idea, but would Madison River have stopped blocking Vonage, if not for the FCC’s actions? Would Comcast have listened to the Free Press complaint, or would it have just gone on denying there was a problem, if not for the threat of potential regulator penalties?

For every Comcast-BitTorrent agreement, there is an Ed Whitacre, ready to say you can’t ride his pipes for free. Ed is retired now, but many who would argue with him remember… and perhaps aren’t as willing to trust in collaboration as McDowell is.

(UPDATE: Adds Clearwire response.) As we predicted in our Sidecut Report on WiMax, the “new” Clearwire deal, with its heavy-hitter lineup of investors and their $3.2 billion in capital, was sure to attract the attention of the big telcos, namely AT&T and Verizon. In our predictions we guessed that the big telcos would turn up the heat on Clearwire any way they could, and today it looks like we were right since AT&T just filed a rather lengthy complaint with the FCC, suggesting that Clearwire’s merger application needs a bit more work.

While politely suggesting that AT&T “does not fundamentally oppose the underlying transaction,” the big telco nevertheless accuses Clearwire of not accurately disclosing the full amount of 2.5 GHz spectrum it has access to, perhaps in an attempt to escape greater FCC scrutiny. Of the several complaints AT&T has, this seems to be the most worthy, especially since (as AT&T points out), other carriers (like itself) have been held to very strict spectrum accounting methods during mergers. As AT&T says:

While AT&T does not fundamentally oppose the underlying transactions, the regulatory process must be consistent for all providers, and the FCC must subject Sprint Nextel and Clearwire to the same standard under which it reviews all other carriers.

(What that really means: Hey Kevin, slow these guys down!)

Being somewhat cynical in nature, we had asked Clearwire CEO Ben Wolff specifically about the company’s FCC filing in our recent interview with him, since it appeared even to our non-legal eyes that there was a mountain of spectrum-transfers that looked ripe for questioning. At that time, Wolff said “all the feedback we’ve gotten [on the FCC filing] is generally positive. There don’t seem to be any concerns, nothing contentious.” Wolff did say that Clearwire expected to have a “higher profile” with the new deal, and had always kept a significant presence in Washington to handle regulatory matters. “The wind is blowing in our direction,” said Wolff about regulatory issues. “We can never be too lax, but we are on the right side of the story.”

A quick parsing of some of the comments already filed on the proposed merger does find many in support of Clearwire’s intentions, including WiMax provider DigitalBridge and Voice over IP provider Vonage. In an email reply, Clearwire spokesperson Susan Johnston added: “in detailed spreadsheets and text spanning more than 300 pages, Clearwire and Sprint documented all of their spectrum holdings in minute detail and described the myriad public interest benefits of the transaction. With this filing, the FCC has all of the data and information it requires to perform any competitive analysis it might find warranted.”

Still, given AT&T’s clout with the Kevin Martin-led FCC, it should be interesting to see if and how the commission reacts to the telco’s complaint.

If there is any doubt that Clearwire might be a worthy competitor, it may make sense to read what both AT&T and Verizon have to say. In its complaint, AT&T offers the following statement:

In June 2008, Sprint Nextel Corporation and Clearwire Corporation filed at the Federal Communications Commission its application for merger approval. Our attached FCC filing shows that the combined company will become the largest holder of licensed and leased mobile spectrum of any other carrier, have a service that will be commercially available later this year, have financial backing from Google, Intel, and three of the nation’s largest cable television companies and be fully capable of substantially impacting competition in the mobile communications market.

Verizon, in a filing regarding its proposed merger with Alltel, had this to say about Clearwire:

A new competitor will soon be entering the wireless broadband market. Sprint Nextel and Clearwire recently announced a deal with cable providers Time Warner, Comcast and Brighthouse, chipmaker Intel, and google, under which Sprint Nextel’s and Clearwire’s next generation wireless broadband businesses will be combined to form a new wireless communications company. The combined company will have access to an average of 150 MHz of spectrum in the top 100 markets and an average of
100 MHz in areas outside of the top 100 markets - making it the largest spectrum holder in the Unites States. The merger of ALLTEL and Verizon Wireless will enable Verizon Wireless to compete more effectively with this significant new player. The Clearwire venture plans to serve a substantial portion of the U.S. population by the end of 2009, and must be considered a strong entrant in the mobile marketplace.

Well, if they say so!

Need to know more about WiMax? Order our recently updated WiMax report, with full analysis of the “new” Clearwire deal and the motivations for investors Comcast, Google, Intel and others.

Too late to call the company for more info, but we did want to note that San Francisco WiMax gear vendor Soma Networks announced Friday that it had secured a new $51 million round of financing, from investors including Daiwa Securities Group, Ridgeway Capital Partners and others.

Soma, whose executives we interviewed as part of our Sidecut Report on WiMax, had told us they would be seeking additional funding to help the company fulfill its big WiMax contract with Bharat Sanchar Nigam Ltd (BSNL), India’s state-owned telecommunications company. The deal with BSNL was announced earlier this year.

For WiMax followers, Soma’s a pretty interesting company — they have been around almost 10 years, starting with wireless mesh technologies before finding their way to WiMax. Privately held, Soma had previously raised around $200 million in financing, but needed a boost to start fulfilling the big BSNL deal.

So what does the investment round say about WiMax? Here’s a quick excerpt from our Sidecut Report on WiMax that quotes company exec Tom Flak:

For several players in the WiMax market, the overnight sensation is something that has been years in the making. “We’ve been waiting a long time for this market to arrive,” said Tom Flak, chief marketing officer and senior vice president of operations at WiMax gear provider Soma Networks of San Francisco. Flak said that Soma, like other WiMax infrastructure players, is bullish on the near-term future, as standards firm up and production prices go down. End-user equipment, Flak said, is now about “half the price” of pre-standard WiMax gear, which should lead to a lot of WiMax activity in 2008. “With WiMax, you can stop wondering if the technology is viable,” Flak said. “It’s really market-share grabbing time.”

Sounds like the investors in Soma’s new round are doing some market-grabbing themselves. Not a surprise to anyone who has read our report, which offered the following as one of its conclusions:

If WiMax delivers on service providers’ plans of being cheap, easy and pervasive, then there are big opportunities today for venture investors, businesses, application and device developers, as well as infrastructure and service-provider players, who still have time to get in ahead of the mass-market adoption part of the curve.

Soma’s other interesting angle is that they are the equipment provider for AT&T’s hush-hush WiMax network in Pahrump, Nev. Want to know more WiMax inside stuff? Order the report.

From the looks of it, the second round of the Net Neutrality debate is going to be a lot like the first: Lots of blather and not a lot of attention paid to facts, as warring factions try to tilt public perception in their favor. Surprising? Hardly, given the stakes of the game. Disappointing? Certainly, especially for those who were hoping that there could be more consensus-building discussions instead of the he-said/she-said arguing of the past, which hasn’t really served either side well.

Today’s editorial by Richard Bennett in the San Francisco Chronicle is a case in point: While Bennett, a self-proclaimed networking expert, makes valid points about the need for regulators to closely examine the market power of Google’s search advertising deals, his emotional one-offs on several items raise two red flags: Not only are some of them inaccurate, but their almost word-for-word mimicry of similar opinions voiced recently by the major telcos, AT&T and Verizon, shows there might be more to his argument than just the concerns of an average netizen.

In recent interviews for our upcoming Sidecut Report on Net Neutrality, I was reminded once again just how good the telcos are at playing the lobbying game by synchronizing their messaging. In separate interviews at the recent NXTcomm show, the top policy execs for both big telcos — AT&T’s Jim Cicconi and Verizon’s Tom Tauke — both stressed the ideas that A) the Net Neutrality debate was started by, and mostly run by, Google; and B) that privacy concerns, especially those related to online advertising, were a much bigger problem than net neutrality, which was already being solved anyway by business-to-business solutions. Clearly, I thought, these are the new marching orders for the telco side of the issue.

Both those ideas are embodied in Bennett’s essay, in which he accuses Google of a “political head-fake,” using net neutrality to distract regulators from the privacy concerns. I would posit that you could flip that coin on its head, and say that it’s the telcos who are raising a big stink about privacy in order to try to move net neutrality to a back burner. To me, they seem like two separate issues that should be resolved on their own merits. But neither am I naive! Welcome to Net Neutrality, Round Two.

While I still hope to interview Bennett for the upcoming report — it’s clear from his writing and public testimony that he knows more about networking than your average law professor — there are several points in his column that shouldn’t go unchallenged. The first is his claim that net neutrality is a topic that “Google thrust into the political spotlight two years ago.” The reality is that Google, if anything, was late to the game and supremely unorganized in its approach to net neutrality, not really getting its act together until it hired former MCI lobbyist Rick Whitt in early 2007. If anything, it was former AT&T CEO Ed Whitacre’s not on my pipes bromide that made net neutrality a front-page topic, more so than anything Google did or said.

Bennett also says Google gets a free pass from the tech press, and that despite its “squeaky-clean” image, Google also has relations with “Washington power brokers,” perhaps an attempt to sketch Google as some nefarious broker of back-room deals. I’m not sure where Bennett is reading his so-called “cheerleading” for Google — most everything I can find in searches on the topic are straightforward, balanced news accounts, with plently of growing cynicism about Google and its endeavors in things like Street View. My pal Om has been anything but a Google cheerleader, like others questioning how Google will square its open networking ideals with the exclusive partner deals that were part of its $500 million investment in WiMax provider Clearwire.

On the D.C. influencer side, all I can say is it wasn’t Google who convinced Congress to change its mind and grant immunity to telcos in their FISA-related lawsuits. According to AT&T’s Cicconi, he oversees a staff of some 700 people. Google’s Whitt, on the other hand, is one of only three Google people “on the Hill,” and he is still the only one with a focus on the FCC. So who exactly is to be feared in Washington?

You could keep picking Bennett’s essay apart — claiming Google had “largely abandoned” net neutrality earlier this year is just laughable — but at some point you just get tired of the game, and wish there was a better way. Fortunately, many of the other players on both sides seem to be eager to work together to find solutions that don’t require political endgames; today’s surprise agreement between Vonage and Comcast to work together on networking concerns is just another signal that maybe there is a better place for the debate, centered around what is reasonable network management, and how it can be achieved so that both sides feel their concerns have been considered, and become part of the implementation. Other interviews we’ve done with folks like Public Knowledge and Comcast reflected such ideas.

Given Bennett’s past calls for more technical expertise and less political interference in debates about matters Internet, it’s surprising to read that he now thinks that regulators, and not market players, should intervene. But it is pretty clear who agrees almost exactly with everything he says today.

“The carriers try to frame this as being between themselves and Google — I’m a veteran of MCI so I saw this in the ’90s,” said Whitt in our recent interview. “They came after MCI as the poster child of the CLEC side, and unfortunately, they did a pretty good job.”

Will the same game work again? That will be one of the questions we ask in our upcoming report, which unfortunately has been slowed a bit by my recent surgery. If you want an email update when it’s ready, drop me a line at kaps at sidecutreports.com and I will ping you when it’s done.

Was it really two years ago that I asked why couldn’t Google build a Desktop Bandwidth detector? In a post from my old blog on the Pulvermedia network, I wrote:

One idea I kicked around a bit at this past weekend’s Vloggercon (in no small agreement with fellow blogger Matt Sherman, who is about 179 degrees away from me on most net neutrality matters) was the idea of Google (or Microsoft, anyone with buckets of folding money and a desire to get into online apps) buying or building an online application that would show anyone who wants to use it exactly what’s happening to their packets as they course to and fro.

Sure, that’s a simplistic view but it’s the consumer version of what all the self-proclaimed net wizards are talking about when they tell you how to “ping” a server. Why not use some of that Google cash, some of the otherwise wasted programming talent chasing Web 2.0 dreams (how many social network/hookup/map mashups do we need, anyway?) and build something we’d all like to see — a desktop dashboard that could flash red when an ISP tries to block or degrade service, or starts narrowing the pipe for Skype?

And now, apparently, that’s just what Google plans to do, according to their top policy exec Rick Whitt, in a report from Hot Hardware:

“We’re trying to develop tools, software tools…that allow people to detect what’s happening with their broadband connections, so they can let [ISPs] know that they’re not happy with what they’re getting — that they think certain services are being tampered with,” Google senior policy director Richard Whitt said this morning during a panel discussion at Santa Clara University.

Maybe I should have trademarked the idea? From my old post:

I’ve seen all the flashy demos from the equipment providers who are mining enterprise dollars in this territory, so I know it’s possible. Maybe not easy, but one little app — call it the Google Desktop Bandwidth Detector ™ — could go a long way to keeping Big Ed and his pipes honest and open.

Stay tuned for our upcoming Sidecut Report on Network Neutrality, featuring in-depth interviews with Google’s Whitt and a host of other execs on the policy and technology front lines. In the meantime, you can order our WiMax report on the state of WiMax deployment in the U.S., with the first analysis of the “new” Clearwire deal.

After a week of all 3G iPhone all the time, it’s pretty clear that the performance hurdle is being set for the “new” Clearwire and its planned nationwide WiMax network: Devices will need to look and perform reasonably like an iPhone, at as-fast or faster speeds, for lower prices, to get any traction at all. Luckily for Clearwire and its partners, those barriers aren’t insurmountable, but there’s also not a lot of time or chances to get things right. As we say in our most recent revision of our WiMax report, it’s still Game On, WiMax. But Clearwire better hurry, before Apple and AT&T run the table.

On the device look-and-feel front, it seems like Clearwire should be safe — WiMax partner Samsung is already showing a touchscreen iPhoneClone, and Google’s Android interface looks sufficiently iPhone-enough to compete, should it arrive as scheduled. On the speeds front, Clearwire should be able to make the 3G iPhone look pokey, if the company actually delivers its promised speeds of between 2 and 6 Mbps on the download side. Since Clearwire claims in its official merger filing with the FCC that its networks will support mobile two-way video, it appears that the folks on the networking side are pretty confident. That leaves us with pricing plans as the place where Clearwire might stumble in its bid to unseat the iPhone.

With an upfront cost of $199 and monthly plans of $60-70 for voice and data, the 3G iPhone isn’t cheap, so Clearwire seems to have some breathing room, especially since Clearwire service plans are likely to include a bundle of home and mobile Internet service for the same customer. But since Clearwire doesn’t plan to subsidize device costs, it will have to do a lot of marketing to convince customers that it may be cheaper in the long run to buy a more-expensive device and pay less per month; it will then have to turn around and sell an opposite story to Wall Street, claiming it can make more in revenues by signing more customers to cheaper contracts, including those for ad hoc or daily use.

Hmmm.

Clearwire may get an additional break or boost if AT&T and Apple run into network congestion problems following the July 11 availability date for the 3G iPhone. (Wonder if we can get odds on the downtime next week at NXTcomm in Vegas?) Ideally, Clearwire would start some limited public tests as soon as possible to give users a taste of what a 4G device could look and feel like. Until then, all we’re likely to hear is how much the fanboys love their 3G iPhones. The louder that chorus gets, the harder it will be for Clearwire’s song to be heard.

Need to know more about WiMax? Order our recently updated WiMax report, with full analysis of the “new” Clearwire deal and the motivations for investors Comcast, Google, Intel and others.