Law

Paul Kouroupas has written an interesting series of posts about the state of telecommunications regulation around the world. He postulates a hypothetical company, CoolCo, that is an ISP that wants to sell Internet access, voice over IP, email, instant messaging, and web hosting to residential customers, while not owning any of its own transmission facilities. CoolCo wants to expand its services to include dedicated circuits for business customers, and is majority owned by U.S. investors with a Thai investor who owns 15% of the company. Kouroupas then looks at how CoolCo would fare in Europe, Latin America, Asia, and the United States with respect to licensing requirements, license fees and other fees, foreign ownership restrictions, tariff, contract and pricing rules, interconnection rights and obligations, and the efficiency and effectiveness of the regulatory process. He begins with Europe–licensing requirements are nonexistent; operators must simply “register and abide by a set of basic consumer protection obligations and regulations.” License fees are nominal and consistent across the entire EU. There are no universal service fees or foreign ownership restrictions. There are no tariff requirements, no contract requirements beyond “conformity to basic legal precedence,” no pricing rules “other than basic non-discrimination requirements.” No regulator approval is required to set prices. Interconnection is mandatory, some states require unbundling of services by the incumbents. The regulatory process is relatively efficient and does not consume the bulk of CoolCo’s resources. In Latin America, Kouroupas looks at Argentina, Brazil, Chile, Mexico, Panama, Peru, and Venezuela, the countries where Global Crossing operates, and shows that there is a large amount of variation between countries, with Argentina, Brazil, and Chile being more open and adaptable, and Mexico, Panama, Peru, and Venezuela having more heavy-handed regulation. All have licensing requirements, with the less-regulated three and Peru requiring only a single license for CoolCo’s offerings, while Mexico, Panama, and Venezuela require separate licenses for each service offered. All have license fees as a percentage of revenue, ranging from 0.5% to 3%. Universal service fees fall in the same range. Only Mexico has foreign ownership restrictions. Mexico, Peru, and Venezuela heavily regulate prices, tariffs, and form of contracts. Most countries require some form of interconnection, but in Mexico the incumbent (Carlos Slim’s Telmex, which was privatized in the worst possible way) has been the recipient of multiple complaints for taking steps to avoid or delay the implementation of interconnection. In most countries the incumbent telco is the largest employer in the country and has considerable influence over the regulatory process, which often fails to complete by the legal time limits, leaving competitive telcos in legal limbo for months or years. Kouroupas then turns to Asia, looking specifically at Australia, Hong Kong, Japan, Singapore, South Korea, and Taiwan, with a brief look also at China and India. The former countries, unsurprisingly, are more open than the latter two, though the level of bureaucracy is also high in Japan and Taiwan. China, India, and South Korea have foreign ownership restrictions, at least for facilities-based operators. Finally, he looks at the United States, which is hampered by a lack of consistency and coherent regulations, especially with respect to VoIP. Licenses are not required at the moment, but the FCC appears to have opened the door for it, and there are some specific requirements that now apply such as CALEA and E911. VoIP providers will have to contribute to the universal service fund by assuming that 64.9% of their traffic is interstate, which means paying 10.5% of 64.9% of their revenue. Foreign ownership restrictions exist, but CoolCo should not hit them at the moment due to its foreign ownership of less than 25% and its not requiring licensing, but this could change. There are no tariff, contract, or pricing rules that apply. For VoIP there are currently no interconnection rights and unbundling is limited. The regulatory process exists at both the federal (FCC) and state (public utility commissions) level. At the federal level, regulation is incredibly inefficient; at the state level it varies considerably from state to state but is generally more efficient than at the federal level and has promoted competition. The overall picture is one of uncertainty about the future. I’ve only touched on the highlights of the detail in Kouroupas’ posts, but it’s clear that CoolCo will find Europe to be the easiest region to establish business in today. Check them out.

Under the headline “The end of the high road,” The Economist reviews Joseph Margulies’ new book, Guantanamo and the Abuse of Presidential Power. The review begins: IN HIS new book on the American jail at Guantánamo Bay, Joseph Margulies recounts the story of a prisoner who told his interrogators of plans to use bacteriological weapons. The man named many others involved, and before long his interrogators had confessions from 35 further prisoners, “page upon page of chilling, meticulously detailed admissions”. The problem is that the prisoners he is writing about here were not suspected members of al-Qaeda, but American soldiers. The questioning took place 50 years ago and the interrogators were North Korean. ...

Ed Brayton calls out both the NY Times and those accusing the Times of treason for reporting that the U.S. government is data mining in financial data from SWIFT. He points out that the Times is criticizing the U.S. government for doing what the Times itself editorialized in favor of the government doing, and also points out that it hasn’t really revealed anything of significance that the Bush administration hadn’t already publicly said it was doing. Further, the only actually new thing reported–that the government is accessing large amounts of data with broad subpoenas, rather than specific transactions–was also reported by the Wall Street Journal, but without it being hit with the same criticisms as the Times. This is a significant outbreak of inconsistency.

In an attempt to offer something constructive, here’s a version of network neutrality–let’s call it Lippard Network Neutrality–that seems to me to be reasonable, providing me with what I want as a consumer of Internet services and what I would want if I were managing security for the provider of those services: 1. Nondiscrimination Companies that provide facilities-based wireline broadband (i.e., those who own the last-mile wires) to residences must provide unrestricted Internet access to their customers who wish to purchase Internet access, allowing the use of any Internet service or application that does not violate any laws or cause degradation or disruption to the service or other customers. The provider may engage in filtering for consumer-grade service in order to prevent the spread of malware and the sending of spam, including (for example) SMTP filtering or redirection to the provider’s mail services, but must allow the purchase of business-grade service under which customers may operate their own mail servers. The provider retains the right to suspend service or quarantine users that send spam, become compromised with malware, or engage in illegal activity or activity that disrupts the service. 2. Unbundling Providers must unbundle Internet access from other services sold over the same connection, so that a customer may use the entire capacity of the circuit for Internet access. These two requirements would give me what I want as a customer, as well as give the provider the ability to recover their costs, provide services that use QoS, provide additional filtering to protect their network and the rest of their customer base from malware, and so on. I think it’s quite reasonable for a basic consumer Internet service to do port 25 filtering, force the use of the provider’s mail servers, and to do network-based filtering of malware–but I would like the ability to pay extra for completely unfiltered Internet service and take steps to protect myself. And in fact, that’s what I’m currently paying Cox for today–I pay for business-grade service to my home in order to run my own servers here, though I could put those servers into a colo facility and get the same effect, which is what I would do if Cox decided to discontinue offering business-class service to residences. Because that option exists, it would not be necessary to mandate that providers must provide business class service as I described above, but I’d still want to be able to ensure that I could access my remotely hosted services from home. How this differs from what many network neutrality advocates are arguing for: 1. I don’t prohibit QoS or tiering, as that is a genuinely useful network feature where I expect to see future innovation of services that depend on it. 2. The nondiscrimination provision is written to allow some kind of less-than-full-Internet walled garden service at low cost–so long as customers can still purchase real Internet service. (I think such a service would be under competitive pressure to allow access to the full Internet, for the same reason AOL ended up allowing full Internet access–otherwise the service wouldn’t attract enough users to be a successful product offering.) 3. I don’t prohibit differential pricing for different services and classes of service. 4. I don’t set any restrictions on contractual arrangements (apart from these two restrictions), including interconnection agreements or who pays. I think that should be left to private negotiation and competition. 5. I don’t extend these requirements to other types of Internet providers such as backbone providers or those providing business services, as those are areas with plenty of competition. 6. I don’t extend these requirements to wireless providers, because I think that with sensible market-based allocation of spectrum, there could be plenty of independent competition with much less capital expenditure than for wireline deployment. I could possibly be persuaded that there is a place for common carriage requirements, especially for access circuits to businesses, which is where the last-mile providers could really engage in anti-competitive behavior against backbone providers that don’t own a lot of last-mile wires (e.g., Level 3, Global Crossing, Sprint), now that the major telco last-mile providers have each merged with a major backbone provider themselves (Qwest/U.S. West, AT&T/SBC/BellSouth, Verizon/MCI). This requirement currently exists in the law for telcos, and unlike the common carriage requirement for DSL, is not planned to go away next year. I would not put the above into the purview of the FCC, at least not with their current dispute resolution procedures which favor the telcos. Paul Kouroupas at Global Crossing (also my employer) has been arguing for “baseball-style” or final arbitration dispute resolution, where each side submits their best and final offer to an arbitrator, who chooses the best. This provides incentive for each side to try to reach the best agreement up front, as well as a process that can proceed quickly, without any government involvement or expense. This suggestion is the second point of Global Crossing’s proposed REFORM legislative agenda. (Unbundling and common carriage of bottlenecks such as last-mile access circuits are the sixth point.) Comments, criticisms? I should add that I believe what I’ve spelled out above is pretty close to what I’ve heard is in Sen. Stevens’ telecom reform bill, though I haven’t read it and I suspect he applies the nondiscrimination and unbundling requirements more widely than to residential broadband. ...

Two Michigan legislators have proposed a bill requiring all foundations operating in the state of Michigan to give at least 50% of their giving in any three-year period to charities based in Michigan. This is an example of a ridiculously short-sighted piece of legislation that will have an unintended consequence precisely the opposite of its intended purpose–it will cause foundations to move out of Michigan and discourage new ones from being created there. This bill is directed specifically at the Ford Foundation, which does seem to have some real issues, but this misguided cure is worse than the disease. Hat tip to Trent Stamp of Charity Navigator, who calls it “about the silliest thing I’ve ever heard.”

Matt Stoller at MyDD wrote a blog post titled “Please lie to me about Net Neutrality” in which he repeated Tom Foremski’s statement about Cox blocking Craigslist with a “blacklist,” even though he was already aware that the issue had nothing to do with a blacklist. Now that the facts are well-known and accepted (including by Craig Newmark), he now insists that he never said anything to imply that Cox was intentionally blocking Craigslist, contrary to the written record, and accuses George Ou and David Berling at ZDNet of being “lying liars." Look, Matt–why don’t you just show some integrity and admit that you were mistaken to continue to repeat Foremski’s statement after you knew there was no blacklist, and mistaken to claim that this issue has something to do with the kind of discrimination that network neutrality regulations intend to prohibit. When caught uttering falsehoods that you should have known were falsehoods, you should come clean and apologize, rather than engage in ad hominem arguments against those who point it out. Your continued demonization of your adversaries damages your credibility.

Telco 2.0 has a nice list of types of connectivity options from a business and pricing model standpoint: NameTechnical relationship of service and connectivityFinancial relationship of service and connectivityExamplesvertically integrated interactive serviceIntegratedIntegratedPSTN, mobile voice, SMSvertically integrated broadcast serviceIntegratedIntegratedFM radio, DVB-Hstand-alone best-effort connectivitySeparateSeparatedial-up, today’s broadbandQoS and billing enhanced connectivityApplication-aware; session/control plane integratedIntegratedIMSservice-funded connectivityApplication-aware; no technical integrationIntegratedSkype Zonesuser- or community-built free connectivitySeparateSeparateOpen Wi-Fi, basic muni service, meshlocal unrouted connectivityVariesNo monetary exchangeBluetooth, Family Radio Serviceother connectivityApplication-agnosticTieredParis Metro pricing They go on to give projections of the relative significance of each of these options from today through 2016–they foresee huge declines in the vertically integrated interactive service model and expansion of all of the others, with the greatest growth in the stand-alone best-effort connectivity model. That much is a pretty easy prediction based on the replacement of the PSTN with IP. What’s notable, though, is that there are other models besides stand-alone best-effort connectivity which they also see growing substantially, with QoS and billing enhanced connectivity the largest of those, through next-gen telco services like IMS. Those who advocate network neutrality regulations should be careful not to endorse rules which would prohibit or impair the possibility of innovations using business models other than stand-alone best-effort connectivity.

Back on January 8, I wrote a posting titled “Cell phone call records available online." In that post, I wrote about sites on the Internet where you can pay a fee and get the calling records for cell phones and long distance call records for land lines. The companies providing these services are typically private investigators who use “pretexting”–pretending to be the legitimate owner of the phone–in order to con phone companies into turning over the data. Some also used social engineering or exploited server security flaws to gain access to phone provider online web portals. Subsequent to the publicity around that story, there was a brief attempt to pass a law making “pretexting” illegal for telephone records as it already is for financial records. Frankly, I think unauthorized use of someone’s phone provider web portal account should already be illegal under most state computer crime statutes, and obtaining phone records through misrepresentation should constitute theft by deception or violation of identity theft statutes, but I am not a lawyer. Now, we are learning who some of the major users of these services are: various offices of the Department of Homeland Security and the Department of Justice, including the FBI; police departments in California, Colorado, Florida, Georgia, and Utah, and most likely hundreds of other police departments. These agencies are bypassing legal processes to obtain private phone records without warrants from private companies engaged in highly unethical if not illegal activity. Hat tip: Ed Brayton at Dispatches from the Culture Wars.

BLDGBLOG has some photos and information about China’s mobile execution chambers, used to bring state lethal injection capability to poor localities that can’t afford to build their own execution facilities. Amnesty International says they have evidence that Chinese police, courts, and hospitals are engaged in the organ trade, and suggest that the mobile death vans may be involved. BLDBLOG cites USA Today reporting that there are 68 different crimes punishable by death in China, more than half of which are non-violent offenses such as tax evasion and drug smuggling. All executions are recorded on audio and video, and shown live to the local law enforcement authorities. The only other country which had mobile death vans that I’m aware of was Germany under Adolf Hitler. The Einsatzgruppen’s mobile killing units were known as “death vans,” which used carbon monoxide gas for execution.

Matt Stoller has a post up at MyDD dated June 14 titled (with ironic accuracy) “Please lie to me about Net Neutrality” in which he gives the following as an example of unwarranted site blocking that shows the need for net neutrality regulations: There’s a pervasive myth that there has been no discrimination on the internet against content companies. That is simply untrue. For one, Craigslist has been blocked for three months from Cox customers because of security software malfunctions. ...