The next big spectrum land grab is over 700 Megahertz (MHz.) It’s the promised land of “beachfront property” that broadcasters are set to vacate on February 19, 2009, when the transition to digital television is supposed to be complete. Lots of folks are jockeying now to lock up these airwaves.

Besting the television broadcasters was the battle back in 2005. The high-tech industry teamed up with wireless carriers, and with the public safety officials, to push for DTV legislation forcing broadcasters out of the 700 MHz band.

The gizmo-makers have sought the frequencies for more than a decade. Same with spectrum-poor wireless carriers like T-Mobile. They joined up with Cisco, Dell, Intel and Microsoft to form the High-Tech DTV Coalition in 2005.

They struck a pact with public safety officials, who were also motivated against the broadcasters. Congress had promised public safety 24 of the 108 megahertz once the DTV transition was complete.

With the February 2006 passage of the DTV legislation, 60 of those 108 megahertz will be opened at auction by January 2008. Police and firefighters will get their due. The additional 24 megahertz within the band is already owned by Access Spectrum, Aloha Partners, Pegasus Communications and Qualcomm.

So how will those 60 megahertz get sliced up?

Verizon Wireless has been rumored to bid for up to 30, half of what’s available. Other players, including DirecTV, Echostar, Google, Intel, Skype and Yahoo!, have joined a push to ensure that the wireless licenses will be nationwide– and to potentially compete with the incumbents.

But if you don’t want to actually pay for the best frequencies, there’s always the good old-fashioned way: convince politicians to give it to you. Morgan O’Brien has perfected this strategy. He used it in 1990 to convert his radio-dispatcher frequencies into cell-phone licenses and jump start cellular carrier FleetCall.

In 2002, his company, then called Nextel, did it again. With the help of Rudy Giuliani and his Giuliani Partners lobbying firm, Nextel partnered with public safety. It eventually persuaded the FCC to agree to its plan swapping a disjoined band of frequencies for a contiguous 10-megahertz national license.

“If there were a Nobel Prize for lobbying, I would give it to Nextel and Morgan O’Brien,” said J.H. Snider, research director of the New America Foundation’s Wireless Future Program.

But O’Brien’s third attempt, a company called Cyren Call, is turning into a dud. Again, he’s rallied public safety officials, who say that 24 megahertz is not enough for interoperable communications. Cyren Call wants to devote 30 of those 60 megahertz and to a Public Safety Broadband Trust. Conveniently, O’Brien’s company would manage the spectrum. And during down-times (i.e., when there are not wide-scale emergencies), Cyren Call would resell commercial service over the airwaves.

This dual commercial/public safety use would allow Cyren Call to make more efficient use of the spectrum than traditionally done by public safety. But it would also take spectrum off the market. In December, the FCC rejected the Cyren Call, saying: 24 megahertz was enough for public safety.

Those eager to bid on the new airwaves didn’t want to take any chances. That was particularly so after Sen. John McCain, R-Ariz., a champion of the DTV transition, appeared to favor Cyren Call in a January press release.

“Morgan O’Brien’s plan was such a sword of Damocles: half of all the spectrum that they were counting on buying would go away,” said Jerry Brito, senior research fellow at George Mason University’s Mercatus Center (link to http://www.mercatus.org/), who has researched the interoperability dilemma.

The techies resurrected their old DTV coalition. But this time, they went after public safety. Janice Obuchowski, who had been the executive director of the coalition, joined former FCC Chairman Reed Hundt to float an alternative, Frontline Wireless, which would gobble only 10 additional megahertz for public safety. And the coalition funded an attack on Cyren Call, which they said would disrupt the DTV transition and harm consumer welfare.

This time around, Verizon Wireless is an eager participant in the DTV coalition. “Cyren Call’s leaders are the same people who, while at Nextel, created the 800 MHz rebanding scheme,” a reference to the spectrum swap by lobbyists for Verizon, who bitterly opposed the swap.

“Cyren Call is dead,” said a telecommunications industry lobbyist. But when will public safety realize that? It isn’t clear yet whether they will gravitate toward Frontline, a kind of Cyren Call-lite. At least Frontline agrees to bid on the special 10 megahertz they’re seeking.

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Gone was the push for sweeping telecommunications legislation, hemispheric-wide free-trade agreements and limitations on Internet taxes. Only a Republican Congress and White House could agree upon those.

A new priority has emerged: overhauling the nation’s patent system. Seemingly out of nowhere, it is suddenly all the talk of Washington’s political-corporate machinations.

For the big boys of the technology industry – Apple, Cisco, Dell, Microsoft and Intel – swatting down patent litigation has been a steadily increasingly nuisance. Just last month, Microsoft defended against an infringement claim against AT&T at the U.S. Supreme Court.

But why should so-called “patent reform” rocket to prominence with Democrats in power? Two words: Big Pharma.

Drug companies have been never been chummy with the Democrats. In the past two decades, pharmaceutical manufacturers and their employees have given more than twice as much — $29.9 million versus $14.8 million – to Republicans than to Democrats. Democrats have returned the favor by pushing for re-importation of prescription drugs, lower drug prices, and other anathema topics. Changing patent laws fits into the same category.

Computer and software companies pride themselves on their even-handedness. They dispensed $31.5 million, versus $30.2 million, for Republicans over Democrats during a similar period. And the high-tech camp cannily plays to the vanities of those who govern, whether that is bridging the digital divide or keeping stock options from being listed on balance sheets.

Now the big tech titans have a new best friend: California Democrat Howard Berman, the chairman of the Judiciary Subcommittee on Courts, the Internet and Intellectual Property. Berman has been a patent skeptic for years, having sponsored legislation to limit the validity of “business method” patents. Last month Berman called patent legislation his panel’s “highest priority.” And he blasted Big Pharma, which is content with the status quo, for using their Republican ties to kill legislation last Congress.

With Democrats in charge, the big tech players love to frame the patent issue as one of Big Pharma versus Silicon Valley. They’ve formed a Coalition for Patent Fairness, and they say that patent law must adapt to the more inter-dependent nature of innovation.

There is some truth to this argument. Tech companies use patents differently than do drug companies. A laptop may encompass 1,000 patents or more. A blockbuster drug, by contrast, could be a single precious piece of intellectual property.

That makes the patent-blocking and patent trolling problem much more acute for information technology than for biotechnology. Threats of injunction (like Verizon vs. Vonage) loom large, as the long-running legal wrangling over BlackBerry made apparent. And with many ludicrously granted patents out there – like exercising a cat – patents indeed can be more of a burden than a benefit to innovation.

Now, however, an increasing minority of tech companies are crying foul and fighting back. Led by Qualcomm in a new lobbying force called Innovation Alliance, these chip-design companies see a thinly veiled ploy by dominant tech incumbents. “Patent reform,” they say, would hobble their disruptive technologies and their business model. It is centered on licensing, not manufacturing, their intellectual property.

Innovation Alliance is particularly concerned about the way the Patent Fairness group – with the active support of Berman, and also Sens. Patrick Leahy, D-Vt., and Orrin Hatch, R-Utah – want a “second window” where questions of validity linger at the Patent and Trademark Office.

“The proposed ‘second window’ allows a patent to be challenged throughout its life, and subjects patent owners to new kinds of administrative litigation,” Irwin Jacobs, the engineer who co-founded Qualcomm, said on Thursday at the Heritage Foundation. Jacobs has become a one-man Diogenes against the “patent fairness” trend. At least he is spoiling the IT vs. Big Pharma storyline.

Nervously in the middle is the rest of the business world. In a group that lobbyists are calling “Pharma-lite,” a third group was born last week: the Coalition for 21st Century Patent Reform. Its big players are 3M, Caterpillar, Eli Lilly, General Electric, Johnson & Johnson and Proctor & Gamble. It’s unclear where they come down on the key issues in dispute. But it is clear that Qualcomm and the chip-designers want nothing to do with their lobbying efforts.

As Congress digs into the weeds, they’ll discover how patents cut both ways. Qualcomm, for example, currently faces its own infringement suit from Broadcom. This reality at least drives a universally shared impulse to improve the quality of patents when the first emerge from the PTO.

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Washington’s political operative and consulting class has been energized by the early start to the 2008 election. And no one is ignoring the Web this campaign cycle. Call it Politics 2.0, and watch how it changes the media power balance when it comes to political discourse.

Consider YouTube’s YouChoose ’08, which last month launched its online channels for presidential candidates – and has 13 of them in a fortnight. Yahoo’s presidential election site is attempting to build community around Flickr photo-shoots of candidates on the stump. MySpace is likely to start a presidential space of its own.

Sure, every major candidate has paid lip service to glories of the Internet since 1996. Bill Clinton invoked the “information super-highway” and connecting classrooms to the Internet. Bob Dole clumsily mangled his campaign’s Web address during a presidential debate.

That was all window-dressing. Their teams – and their successors’ teams’ in 2000 and 2004 – mostly hired a few geeks to play politics on computers. The real campaigning went on in the broadcast television networks and in the pages of The New York Times and Washington Post.

That’s about to change. There is an energy about electoral politics and the Internet that is different this time around. Almost all of it has to do with maturation of software and social networking models that could upset the pre-ordained dance between candidates, media and voters. Already, we’ve seen John Edwards make YouTube a big part of his campaign, with others close behind.

To put it in other words, can Web 2.0 in 2008 truly displace the “MSM” as the premier medium of political discourse? Can the blogosphere bring down the mass-market media stage?

It could. Or at least it might. So says Joe Trippi, former campaign manager to Howard Dean. Sure, Dean lost. But Chuck DeFeo, who was eCampaign Manager for Bush-Cheney ’04, agrees completely with Trippi’s analysis. Now he’s trying to harness conservative backlashers – the people who do “not believe that Dan Rather was reflecting” their views – to congregate at Salem Communications’ Townhall.com.

Trippi and DeFeo were only two of the geek-politicos that gathered last week for Politics Online, the annual conference of the Institute for Politics, Democracy and the Internet at George Washington University. Optimism about the Politics 2.0 was high.

Even NYU Journalism Professor Jay Rosen, who predicted that candidates would use Web 2.0 technologies as a “symbolic gesture” but “keep things exactly the same,” was bullish on blogs and wikis. They would do for citizen journalism what his previous calling – promoting “public journalism” in an (unsuccessful) effort to get the press to focus on election issues, and not the horse race – could never do.

Also represented at the conference were the creators of innovative sites like TechPresident and PresVid.com, or “the YouTube Campaign.” Online strategies herald new voter engagement that will “make politicians more accountable, creating a virtuous circle where elected officials who are… less top-down are rewarded with greater voter trust and support,” wrote TechPresident creators Andrew Rasiej and Micah Sifry.

But if Politics 2.0 benefits smart politicians and engaged voters, who loses from this new turn of affairs? The mainstream media!

Indeed, the most entertaining part of Politics Online came from a panel that pitted bloggers versus MSM: Rosen and Jeff Jarvis of Buzzmachine.com and PresVid against Jim Brady, executive editor of the washingtonpost.com, and David Plotz, deputy editor of Slate (now owned by the Washington Post).

Plotz said that Web traffic shows that horse race is what readers want – and don’t “want to eat their vegetables.”

“Journalists are convinced that no one wants ‘issues’ stories,” countered Rosen. “I don’t think that is going to change. The wild card is all the people excluded by the earlier process and all the things they can bring.”

If there’s a king-maker in Politics 2.0, it won’t be the likes of The New York Times or the CBS evening news.

By there may still be an opening. Consider an off-handed comment at the conference by Eliott Schrage, vice president of global communications for Google: “We have reached out to all the candidates and invited them to come to Google, to talk technology and policy, and maybe even grab lunch. And we are going to put those videos up if we can, and if the candidates permit us, on our web sites as well.”

Is it possible that the most consequential media pilgrimage a candidate makes in the 2008 election will be to Google’s headquarters in Mountain View, rather than to the mid-town Manhattan news rooms of The Times or the CBS Evening News?

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Consider the statements made by Google Senior Policy Counsel Andrew McLaughlin at the Tech Policy Summit in San Jose on Feb. 27:

“Net neutrality will ultimately be solved by competition in the long-run,” describing fiber, broadband over power lines, and wireless efforts to crack “the existing telco-cable duopoly.”What he said next got many bloggers talking:

“Cutting the FCC out the picture would probably be a smart move. It is much better to think of this as an FTC or unfair competition type of problem.”

That would be the Federal TRADE Commission, the new kid on the net neutrality block. Promoting the authority of the FTC, and constricting the Bell-friendly Federal COMMUNICATIONS Commission, has been a pet project the market-oriented Progress and Freedom Foundation think tank. (Conspiratorialists, take note: Google became a “supporter” of PFF sometime between April 4 and Dec. 26 of 2005.)

More significant is what McLaughlin said next. Peter Pitsch, Intel’s director of communications policy, asked: “I inferred from what you said about [net neutrality] that you would not object to [carriers] making a particular offering, as long as that offering were made available on a non-discriminatory basis?”

“That is my view,” replied McLaughlin. He described a “strong” view of neutrality in which carriers are forbidden from charging companies for quality-of-service (QoS) guarantees “because that breaks the free and open model” of the Internet. “There is a more pragmatic view that it is OK [to charge] as long as it is done in a non-discriminatory way.”

“The first view, the strong view of net neutrality, has some very powerful arguments, but the reason we wouldn’t go for it” is purely pragmatic, McLaughlin said. Bell companies are going down the road of paid QoS, so it would be better to find a non-discrimination rule that worked.

“The danger of paid QoS is that it becomes the normality default, and the best efforts Internet is left to atrophy,” he continued. That would be a disaster for all of us. Competition, through different network alternatives, is going to ameliorate that danger.”

McLaughlin’s statements have caused a fair bit of angst within Google, and also within several of the so-called “Group of Six” companies that coalesced last year to take on the Bells. (The others were Amazon, eBay, InterActive Corp., Microsoft and Yahoo!)

A lobbyist at one of these five companies voiced resignation and disgust. “We have always known that someone would walk” from the coalition – and that it would be a cash-rich companies like Google that did so. The fact that Google walks, in the view of this source,
“proves that we need a law” on net neutrality.

Microsoft deserted the gang as early as last July, when it took its name off an It’s Our Net communiqué urging Senators to reject net neutrality compromises. Microsoft, torn between its desire for telecom liberalization and its fear of Whitacreization, desperately wanted compromise. And now, apparently, so does McLaughlin.

In fairness, the Google/McLaughlin view still seeks some form of net neutrality legislation – but just not leading versions by Sen. Byron Dorgan, D-N.D., and Sen. Olympia Snowe, R-Me., or by Massachusetts Democrat Ed Markey, the newly minted chairman of the House Internet and Telecommunications Subcommittee. Both of those bills would require QoS enhancement to be funded by consumers, not businesses.

Here, by contrast, is the Google/PR view: “No one has yet figured out how to offer QoS for content applications in a way that does not discriminate, so in Google’s view, it should not be allowed.” As to McLaughlin’s heresy, Adam Kovacevich, the company’s official public policy spokesman, said, “This is an area when Andrew has a personal view.”

Conspiratorialists have also been pointing to an August 2006 forum (of the Progress and Freedom Foundation) in which David Drummond, Google’s general counsel, took issue with Tod Cohen, director of government affairs for eBay, who wanted net neutrality rules applied to wireless devices. “We are not sure that the wireless world is the same, and this may be where we part company,” said Drummond. A few months later, Google and Verizon Wireless announced their deal allowing “V CAST consumers to access a selection of YouTube videos from their mobile phones exclusively for a limited time.”

When Google’s views on net neutrality flared early last month month on this blog Paul Kapustka said that “if Google were to suddenly change course on network neutrality or Web TV, it would probably pick a more prominent place and person to make the announcement.” How much more prominent must it be than the top public policy official speaking in Silicon Valley?

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When XM and Sirius Satellite Radio announced their proposed merger two weeks ago, the first to oppose the union was the National Association of Broadcasters. If satellite radio didn’t compete with terrestrial radio, this merger would be a lot more troubling – and a lot less bothersome to NAB.

NAB’s motive is transparent: it always seeks to harm XM and Sirius. Broadcasters have done that for 10 years, and they’re doing it still. Yet the two satellite companies have lured more than 13 million into paying nearly $13 a month for the news, talk and music they used to get for free.

The one lobbying group that might have something useful to say about this merger is the Recording Industry Association of America. Having had their own high-profile battles with the satellite companies, RIAA is the “enemy of the enemy,” if you will. But RIAA has decided to keep quiet. Why the silence? Read on.

The recording industry, whether performing artists or “suits,” is not exactly a friend of the broadcasters. For more than a generation, musicians and disc jockeys have been arguing over who should be paying whom for airplay. The power of the NAB is the alleged reason why the United States, along among industrial nations, does not recognize a copyright in the public performance of songs played over AM and FM radio.

RIAA has its reasons for remaining neutral. On the one hand, said its president Cary Sherman, satellite royalties could be lower without two competitors in the marketplace. On the other hand, Sherman said, the recording industry is pleased that XM and Sirius tout the Apple iPod as competition. That’s what the RIAA has been arguing in their copyright lawsuit against XM Satellite Radio. At last week’s House Judiciary Committee hearings, they were conspicuous by their absence.

A small matrix would help lay readers sort through this copyright thicket. Music copyrights protect at least two things: the sound recording and the underlying musical composition. The other dimension concerns whether the copyright covers reproduction or public performance:

With reproduction royalties three orders of magnitude higher than the performance rights, the recording industry has an interest in reclassifying a “performance” in Quadrant 2 as a “reproduction” or a “distribution” subject to the Quadrant 1 rates. That’s what RIAA companies are trying to do against XM Satellite Radio.

But at least satellite radio already pays the performance right in Quadrants 2 and 4! They’ve had to, under the 1995 law for digital transmissions. Broadcasters and their analog transmissions were exempted from Quadrant 2.

It’s also clear that a lot of outstretched hands complicate any legal music business. Internet music companies like America Online, Apple and Yahoo! pay for a public performance right to webcast, or stream, Internet radio. They still have to worry about music publishers arguing for a cut. And when they pay the big bucks to RIAA and Harry Fox for “download” services, the American Society of Composers, Artists and Performers in turn demands a percentage of revenue on the grounds that a download is also a performance. Last week the Digital Media Association, the techies’ trade group, filed a legal brief rejecting that view.

In spite of attempts at double-dipping, copyright experts say that the line between these quadrants is thin. “On the Internet, there is no difference between a stream and a download – the only difference is whether the bucket is emptied after the play occurs,” says Fred von Lohmann, senior intellectual property attorney for the Electronic Frontier Foundation.

Von Lohmann opposes RIAA’s lawsuit against XM – which is also part of a legislative push by the recording industry – because it cramps the freedom of device manufacturers to implement time-shifting technologies. He’s also opposes the recording industry’s attempt to lay the groundwork for eventually collecting sound recording revenue from the big radio broadcasters. There is no evidence a performance right is necessary to stimulate music creation, says Von Lohmann.

Not all copyright skeptics agree. Consider the perspective of Public Knowledge Executive Director Gigi Sohn, a critic of both the NAB and the RIAA. With so many other ways to get music and audio content, Sohn said at last week’s Judiciary Committee hearing, she wasn’t unduly concerned about monopoly power by an XM-Sirius combination. On the contrary, her concern was that the merger might be grounds for imposing a PERFORM Act mandate.

But if NAB is the enemy, and if RIAA is the NAB’s enemy, Sohn did manage to find some friendly ground with the recording industry. NAB’s exemption makes no sense, said Sohn: like webcasters and like satellite radio, NAB should also pay for a performance right.

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I’m not talking about the Federal Communication Commission here. The big Bell companies currently hold sway at the communications agency. No one expects the FCC to take action on neutrality against the Bells, who reject neutrality because, they say, the Internet shouldn’t be regulated.

What I’m referring to is the action happening at another F*C-ing agency: The Federal Trade Commission. The FTC usually gets press for investigating gasoline, drug or tobacco companies. But every decade or so, the FTC also makes a bid for jurisdiction over the Internet.

Since last August, the FTC has decided that net neutrality is its business. Neither rain nor snow nor sleet nor hail can keep these determined civil servants from fulfilling their duty. Two weeks ago, when the rest of the federal workforce closed down over weather, the FTC was busy at a two-day workshop on neutrality.

What is truly bizarre about this turf grab, however, is that the FTC apparently wants power so that it, too, can do nothing about net neutrality.

“I start by admitting my surprise at how quickly so many of our nation’s successful firms have jumped in” – i.e. eBay, Google and Microsoft – “to urge the government to regulate,” FTC Chairman Deborah Platt Majoras said when she announced her Internet Access Task Force in August.

Majoras repeated the caution at February’s event: “Policymakers should be wary of regulation that are clothed in terms of protecting consumers but that in practice would hamper competition, while benefiting only certain vested interests.”

Those phrases must resonate pleasantly in Bell ears. But the Bells have no right to get boastful.

Consider what they’re up against. Last year the Bells spent more than $50 million to change the nation’s telecommunications and video franchising laws. Even with the blessing of congressional Republican leaders, their bill died when Senate Democrats took the measure hostage. They killed it when the Bells refused a net neutrality ransom.

Neutrality proponents, who style themselves as “Internet Freedom” fighters, battling for truth and virtue on the Internet (it is “open” to any application provider) couldn’t be happier that Democrats now clutch the gavels on Capitol Hill. The Democratic turnabout, and AT&T’s need to close the books last year on its merger with BellSouth all led AT&T to accept – as a compromise – neutrality rules for 30 months.

With the executioners now in charge of the legislative facilities, the Bells have decided that they really don’t want Congress to do anything about telecom, after all.

The Bells still have enough juice – and allies at the FCC – to beat back free-standing neutrality legislation. But the real danger is that neutrality will keep spreading. It’s already moving to wireless. Instead of merely neutrality over Bell and cable wires, the freedom fighters want wireless rules, too. Columbia University law professor Tim Wu, the very man who gave net neutrality its name, argued for this in a new paper he presented at the FTC event.

Wu referred to a 1968 FCC rule requiring AT&T to let the Carterphone device onto its telephone network. The Carterphone allowed mobile radios to connect with telephone wires. It has been vital to the creation of faxes and modems. In the wireless world, Wu said, “There is no Carterphone; no right to attach.”

Wu’s first example of the problem is Apple’s new iPhone, currently only available on AT&T’s wireless network.

But at the end of the day, the iPhone may demonstrate the opposite point. If the phone is any bit as successful as the iPod, other carriers will strike deals to get the phone on their networks. The real story of the iPhone is how manufacturers like Apple are reclaiming control over the design of their devices vis-à-vis wireless companies.

At the FTC forum and online, several critics took aim at the aptness of Wu’s Carterphone analogy.

But don’t underestimate the staying power of any federal commission. In the long run, by empowering a new forum for complaints, the FTC’s engagement in this issue may give the Bells the most grief over net neutrality, simply by prolonging its shelf life.

(Longtime technology and telecom policy reporter Drew Clark is a Senior Fellow and Project Manager at the Center for Public Integrity.)

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