1. Changes in State and Federal Telecommunications Policies: How Do They Affect US All? SCAN NATOA 16 th Annual Spring Conference and Star Awards Long Beach, CA June 21, 2012 Nicholas Miller Best Best & Krieger 2000 Pennsylvania Ave. NW Washington, D.C. 20006 (202) 370-5309 (direct) (202) 256-0163 (cell) Nicholas.Miller@bbklaw.com

2. Introduction

3. Overall California’s Recent Experience The National Broadband Plan Net Neutrality Cable/TelCo Spectrum Swap Local Government Response

4. California’s Recent Experience--A tough set of years in California: State and Local budgets DIVCA CPUC Failure to Regulate Cable Proliferation of cellular sites Collocation Rights of Way Uncertain local authority

5. The National Broadband Plan and BTOP Obama Platform Industry Response End-Game

6. The National Broadband Plan and BTOP Obama platform: –Broadband (esp. fiber) Everywhere –Net Neutrality –Universal Access

7. The National Broadband Plan and BTOP Industry Response: –94% of homes passed by Broadband –Focus limited Federal dollars on: Reaching remaining 6% Subsidizing non-subscribers to subscribe Eliminating “local barriers to competition”

8. The National Broadband Plan and BTOP End Game: –Avoid political confrontation with Telcos and Cable Local and State governments –More spectrum to wireless Better data speeds Use wireless to reach the “6%” –Federal Subsidies to Broadband Adoption Middle Mile fiber to Anchor Institutions Public Safety Interoperability

9. Net Neutrality Need: –Equal regulatory treatment of all telecommunications services –Non-discrimination among content by carriers –Interconnection rights for all networks

10. Net Neutrality FCC Dithered and Dodged -- Unwilling to Confront Problem of Powell FCC deregulation of “Information Service” platforms as “Telecommunications Services” Final Rules: –Wireless not covered –No broad standards –Case by case adjudication of problems –Jurisdiction Based on Title I Ancillary Authority –No reliance on Title II Telecommunications Authority

11. Net Neutrality Bottom Line: –Serious appellate challenge may send back to FCC –Rules are Not a fix to the real problem Wireless is the dominant discriminatory platform Cable not subject to same rules as Telcos for same services Regulatory Arbitrage is Rampant –Failure to Require non-discriminatory interconnection: Disappearance of CLECs Consolidation of internet backbone providers

12. Cable/Telco Spectrum Swap Telcos moving to wireless Cable moving to wireline Mutual agreement to “jointly market services”

13. Cable/Telco Spectrum Swap Re-monopolization/Market Allocation is the Goal Regulatory Arbitrage is the Opportunity

14. Cable/Telco Spectrum Swap Economic Price Theory: –Profit Maximization Comes from Charging “Full Value EACH Consumer will Pay”—i.e. Price Discrimination (otherwise known as “data caps”) –Competition Limits Extreme Monopoly Profits by Allowing new providers to enter and offer lower prices –If no competition among platform providers, only regulation will limit price discrimination

15. Cable/Telco Spectrum Swap The strategy? –Telcos walk away from “telecommunications service” regulation Abandon “traditional POTS” State legislation deregulating IP service platforms Avoid overbuilding cable broadband facilities Concentrate investment in unregulated wireless Argue that spectrum limits compel “data caps” –Cable walks away from entering wireless Offers traditional voice and broadband by wire free of competition No substantial additional investment required Joint marketing with telcos avoids “over the top” competitive threat Is it Here? –See the California Legislation Proposing to deregulate IP platforms

16. Conclusion Incredible ground has been lost to deregulation—back to the world of 1920 Local Governments stand at risk for –Higher user telecomm fees –Lower rents for use of public property –Loss of significant economic development opportunities It’s the Economy, Stupid