DSL Prime: Politics, Policy, and Corruption

Once the key players admit the facts, everything else will fall into place.

by Dave Burstein of DSL Prime and Future of TV and the Web Video Summit [July 30, 2007]

Editorial: Start with the Facts
Bravo Kevin Martin
Kevin Martin presented a simple statement to Congress. "All Americans should enjoy the benefits of broadband competition availability, high speeds, and low prices. In much of the country, consumers have a choice of only two broadband services: cable or DSL. And in some parts of the country, consumers do not even have that choice."

This is in marked contrast to the many in D.C. who claim "U.S. broadband is competitive." Two players are better than a monopoly, but are more often than not "weak competition" at best. It also refutes the Pollyanna claims "U.S. policy is working." Of all unlikely people, George Bush in 2004 made one of the clearest statements on this. "We ought to have a universal, affordable access for broadband technology by the year 2007, and then we ought to make sure as soon as possible thereafter, consumers have got plenty of choices when it comes to purchasing the broadband carrier. See, the more choices there are, the more the price will go down. And the more the price goes down, the more users there will be. And the more users there will be, the more likely it is America will stay on the competitive edge of world trade." (via FP) Bush's observation is on target, that weak competition yields high prices. High prices discourage users. Simple, eh?

A special DSL Prime is coming on wireless. Kevin Martin's new baby required intensive care, so I'm going to self-censor negative comments about FCC policy until August, except about the 700 megahertz auction and issues immediately pending. Martin deserves praise for two recent pro-competitive moves. He resisted enormous pressure from the cable industry and refused yet another extension of the requirement they let consumers choose the set top of their choice. His proposal for the wireless auction similarly affirms one of the Four Freedoms—connecting devices of the consumer's choice.

Policy
Dear Commissioner McDowell
A recent speech by a high official even included the erroneous comparison between figures including mobile wireless and figures without that has been withdrawn from Kevin Martin's recent comments. The arguments that the U.S. is not behind in broadband have about as much logical rigor as creationist arguments against evolution, and appeal to those with a religious belief that the U.S. system of deregulation is best. The illogical assertions gain notice when echoed by the large D.C. "love for sale" crowd.

Incidentally, saying the U.S. is behind does not, prima facie, imply U.S. policy is wrong. It can be defended as "appropriately limited government" and also "likely to have better results in the long run." The difference between U.S. results and several of the countries doing better is small, about a year or two's growth. The U.S. has a major handicap if, as data suggest, poor people are less likely to buy broadband. We have more poor people than other wealthy nations, as DSL Prime reported last issue.

After I wrote this, I discovered Derek Turner of Free Press made this same point and more in a paper 'Shooting the Messenger' Myth vs. Reality: U.S. Broadband Policy and International Broadband Rankings. His exposition is so clear FCC Commissioner Robert McDowell should read it and probably needs to follow up with a correction on the article he wrote for the WSJ.

Corruption, continued
Stories I wish weren't true
Christian Sapsizian of Alcatel "has agreed to cooperate," with a U.S. investigation, after pleading guilty to millions in bribes in Costa Rica. Christian now has to prove his cooperation by helping the "ongoing investigation" before December sentencing, or face 10 years in jail. Deputy Chief Mark F. Mendelsohn and Trial Attorneys Charles Duross and Mary K. Dimke of the Criminal Division's Fraud Section of the U.S. Justice Department are now trying to discover who else was involved in approving $13 million in bribes. Christian, a mid-level executive, has refused to play the sap.

"Siemens said it is still trying to get to the bottom of Europe's biggest corruption scandal," Mike Esterl and David Crawford report in the WSJ. "It disclosed 'a significant increase' in the number of suspicious business-consulting contracts that are under review." Over $500 million of improper payments have been previously reported.

UTStarcom reports, "in December 2005, the U.S. Embassy in Mongolia informed us that it had forwarded to the Department of Justice ("DOJ") allegations that an agent of our Mongolia joint venture had offered payments to a Mongolian government official in possible violation of the Foreign Corrupt Practices Act ("FCPA"). We, through our Audit Committee, authorized an independent investigation into possible violations of the FCPA, and we have been in contact with the DOJ and SEC regarding this investigation. The investigation has identified possible FCPA violations in Mongolia, Southeast Asia, India, and China, as well as possible violations of U.S. immigration laws." The DSLAM supplier has serious liquidity problems outside China, and required consent from note holders to avoid default.

Copyright 2007 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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