Tag: "policy"

Posted October 15, 2010 by christopher

In all the talk of the need for competition in broadband (or in the mobile space), there is remarkably little attention paid to the difficulties in actually creating competition. A common refrain from the self-interested industry titans (and their many paid flacks) is: "keep the government out of it and let the market decide."

Unfortunately, an unregulated market in telecom tends toward consolidation at best, monopolization at worse. Practicioners of Chicago economics may dispute this, but their theories occur in reality about as frequently as unicorn observations. In our regulatory environment, big incumbents have nearly all the advantages, allowing them to use their advantages of scale to maintain market power (most notably the ability to use cross-subsidization from non-competitive markets to maintain predatory pricing wherever they face even the threat of competition).

The de-regulatory approach of telecom policy over the past 10 or more years has resulted in far less competition among ISPs, something Earthlink hopes to change with a condition of the seeming inevitable NBC-Comcast merger. Requiring incumbents to share their lines with independent ISPs is one policy that would greatly increase competition - but the FCC has refused to even entertain the notion because big companies like AT&T and Comcast are too intimidating for the current Administration to confront.

In the Midwest, Windstream is cutting 146 jobs as part of its acquisition of Iowa Telecom. When these companies consolidate, they can cut jobs to lower their costs... but do subscribers ever see the savings? Not hardly. The result is less competition, which leads to higher prices. Consider that Comcast is the largest cable company, but they are known better for their poor record of customer service than low prices enabled by economies of scale.

We need broadband networks that are structurally accountable to the community, not private shareholders located far outside the community. The solution is not more private companies owning broadband infrastructure, but more private companies offering competing services over next-generation infrastructure that is community owned by coops, non-profits, or local governments.

Photo by...

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Posted October 13, 2010 by christopher

In a TNR Review, Larry Lessig uses The Social Network to explain why we must maintain an open Internet. This fits exactly into our recurring theme on MuniNetworks.org that rules and structure matter greatly.

The full review is excellent and worth reading, but this is the key for our purposes (it comes toward the middle of the article):

Instead, what’s important here is that Zuckerberg’s [Founder of Facebook] genius could be embraced by half-a-billion people within six years of its first being launched, without (and here is the critical bit) asking permission of anyone. The real story is not the invention. It is the platform that makes the invention sing. Zuckerberg didn’t invent that platform. He was a hacker (a term of praise) who built for it. And as much as Zuckerberg deserves endless respect from every decent soul for his success, the real hero in this story doesn’t even get a credit.

Too few appreciate how revolutionary the Internet is because one does not have to ask permission to create content and distribute it via the Internet. However, there is a lot of money to be made and power to be had by forcing creators to ask permission -- this is what big companies like Comcast and AT&T want to do. They want more control over the Internet to further their interests.

The tragedy—small in the scale of things, no doubt—of this film is that practically everyone watching it will miss this point. Practically everyone walking out will think they understand genius on the Internet. But almost none will have seen the real genius here. And that is tragedy because just at the moment when we celebrate the product of these two wonders—Zuckerberg and the Internet—working together, policymakers are conspiring ferociously with old world powers to remove the conditions for this success. As “network neutrality” gets bargained away—to add insult to injury, by an administration that was elected with the promise to defend it—the opportunities for the Zuckerbergs of tomorrow will shrink. And as they do, we will return more to the world where success depends upon permission. And privilege. And insiders. And where fewer turn their souls to inventing the next great idea.

Prior to an important decision in 1968, one had to ask...

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Posted October 11, 2010 by christopher

David Rosen and Bruce Kushnick discuss the ways in which telephone companies have bilked Americans for over $300 billion - increasing their profits while failing to deliver the services they promised.

The scam was simple. Starting in 1991, Verizon, Qwest and what became AT&T offered each state -- in true "Godfather" style -- a deal they couldn't refuse: Deregulate us and we'll give you Al Gore's future. They argued that if state Public Utility Commission (PUCs) awarded them higher rates and stopped examining their books, they would upgrade the then-current telecommunications infrastructure, the analog Public Switched Telephone Network (PSTN) of aging copper wiring, into high-speed and two-way digital optical fiber networks.

State regulators, like state politicians, are seduced by the sound of empty promises -- especially when sizable campaign contributions and other perks come their way. Hey, what are a few extra bucks charged to the customer every month for pie-in-the-sky promises? And who cares about massive tax breaks, accelerated depreciation allowances and enormous tax write-offs? The promises sound good on election day and nobody, least of all the voter, reads the fine print.

Few have the expertise necessary to decipher the many scams these companies have pulled as ineffective public utilities commissions do little to safeguard the public interest. This is the larger problem with embracing regulation as a solution for ensuring essential infrastructure benefits the many rather than the few. PUCs are inevitably "captured" by the industries they are supposed to regulate (think BP Gulf Oil Spill). Public ownership is a structural solution that offers fewer opportunities for massive companies to game the system to their exclusive advantage.

The article offers some in depth examples of how this regulation system has failed.

New Jersey state law requires that by 2010, 100 percent of the state is to be rewired with 45-mbps, bi-directional service. To meet this goal, Verizon collected approximately $13 billion in approved rate increases, tax break and other incentives related to upgrading the Public Switched Telephone Networks. To cover its tracks, Verizon submitted false statements year after year, claiming that it was close to fulfilling its obligations. For example, in its 2000 Annual Report, it claimed that 52 percent of the state could receive "45-mbps in both...

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Posted October 5, 2010 by christopher

Tim Wu, a professor and long time champion of network neutrality, discusses why getting these policies right is so important.

Perhaps more interesting is the reaction from David Isenberg and Tim Wu's comment to that reaction.

The take-home lesson? Network neutrality is important, but is less of a permanent solution than networks that are structurally designed to work in the public interest rather than primarily manufacturing private profits.

This video is no longer available.

Posted October 4, 2010 by christopher

In an editorial for the October, 2010 issue, Scientific American explains "Why broadband service in the U.S. is so awful, and one step that could change it." This is an excellent shorthand explanation for the poor decisions of the FCC during the Bush Administration. Unfortunately, these decisions are being carried forward by the Obama Administration's FCC.

It was not always like this. A decade ago the U.S. ranked at or near the top of most studies of broadband price and performance. But that was before the FCC made a terrible mistake. In 2002 it reclassified broadband Internet service as an “information service” rather than a “telecommunications service.” In theory, this step implied that broadband was equivalent to a content provider (such as AOL or Yahoo!) and was not a means to communicate, such as a telephone line. In practice, it has stifled competition.

And the solution?

Yet, puzzlingly, the FCC wants to take only a half-step. Genachowski has said that although he regards the Internet as a telecommunications service, he does not want to bring in third-party competition. This move may have been intended to avoid criticism from policy makers, both Republican and Democrat, who have aligned themselves with large Internet providers such as AT&T and Comcast that stand to suffer when their local monopolies are broken. It is frustrating, however, to see Gena chowski acknowledge that the U.S. has fallen behind so many other countries in its communications infrastructure and then rule out the most effective way to reverse the decline. We call on the FCC to take this important step and free the Internet.

Well said. Read the whole the piece.

Posted June 30, 2010 by christopher

Bruce Kushnick, a telecom analyst, has long pushed for telcos to live up to the bargains they struck with individual states and federal agencies over the years as part of deregulation policies. They were deregulated and (surprisingly enough) failed to make good on their promises. For the most part, governments have refused to punish them or even learn the lesson that companies like AT&T and Qwest simply cannot be trusted.

If you have ever stared at an incomprehensible telephone bill and wondered just how badly you were getting ripped off, you will be interested in this article discussing the many ways we are ripped off by these companies. Small wonder these companies are so profitable and can afford their legions of lobbyists.

But that is that, and what's done is done, right? Well, Kushnick has another article about the Obama Administration's FCC and approach to expanding broadband.

Long story short, the proposed changes will increase the costs most of those with the least ability to pay and the least likely to benefit from the spending. This approach of expanding broadband is awful - more subsidies to terrible telephone companies that have poor service in rural areas because they are structurally incapable of meeting the infrastructure needs of communities. Massive companies like AT&T and even smaller big companies like Qwest are strangling rural communities while they lobby for bills to prevent those communities from solving their own problems.

Expanding broadband access and availability has costs and some taxes may need to be raised. But those funds should be used responsibly by expanding broadband coverage from entities that are dedicated to serving the community (munis, coops, nonprofits) rather than simply padding the corporate profits of companies that provide terrible service to communities and upgrade far too slowly.

Posted May 27, 2010 by christopher

Bill Schrier, Seattle's Chief Technology Officer (informally, Chief Geek), recently explored the ways in which limited competition in broadband has kept prices too high for many Americans and suggests high prices should be a cause for concern on the level of network neutrality. He is right not only in noting the problem, but noting that there is no solution to it forthcoming from the states or feds.

However, communities can take control of broadband prices by building their own networks. Not only can they guarantee lower rates, they effectively force lower rates from incumbents (and often increased investment) by merely increasing local competition.

Due to limits in law and FCC policy, building a network is really the only power of local governments to ensure the community has the broadband access it needs to succeed.

I have long found it amazing that local governments have the power to set a limit on the lowest tier of cable TV prices but no ability to require a basic tier of Internet. What is more important to communities? Cable TV or broadband?

The City of Seattle – and other cities and counties – can regulate cable TV to a limited extent. Therefore we can demand cable companies provide a low cost basic service – $12.55 in Seattle for Comcast, for example, and there’s even a discount to that low rate for low-income residents – more details here.

The State of Washington – and other States – can regulate telephone service, and require telephone companies to provide a low cost basic phone rate, e.g. $8 a month for 167,000 households.

But NO ONE regulates broadband/Internet access. Consequently ISPs can charge whatever the market will bear. So in our present monopoly or duopoly environment throughout the nation – that is little choice for most of us – prices are at $30, $40 or more for even moderate speed access. Higher speed access is $100 or more. And that means low-income, immigrant, seniors and other households cannot afford access to the Internet. So they and their children are denied what is probably the most important pathway to education, information, jobs and higher income – access to the Internet. Even middle income households or neighborhood businesses cannot get affordable truly fast (e.g. 5 megabits per second symmetric) broadband.

Bill's post is well-linked and worth reading in its entirety....

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Posted May 1, 2010 by christopher

Paul Venezia is one of the few who noted a recent Lessig presentation that discusses broadband policy. Larry Lessig's presentation offers an excellent short history of broadband and telecom history - from the beginning of AT&T to the National Broadband Plan. The video runs an hour, but should be essential viewing for anyone who wants to understand why the U.S. continues to fall behind international peers in broadband. Lessig's answer is that we have lost our independence. Large corporate interests dominate the federal government as well as the state legislatures, resulting in a government that too often bends to their will. Lessig's presentation covers the essential role of government in forcing AT&T to open the phone network (paving the way for fax machines, Sports Illustrated football phones, and eventually dial-up modems). Key takeaway: the owner of a network makes the rules and determines who is allowed to use it and under what circumstances. Among other issues, he offers the most accessible explanation of what happened with the FCC/Comcast court ruling that has (temporarily - we hope) rendered the FCC unable to stop carriers from telling users what sites they can visit or adjusting the speeds to some sites based on the carriers' business model. He notes his disappointment with the National Broadband Plan - where the Obama "reality-based" Administration chose to ignore reality and take the easy road of not challenging powerful incumbent telecom interests. Toward the end, he raises the chilling prospect of the federal government instituting a form of the PATRIOT ACT on the Internet in the future. Watching this reminded me that we believe government has an essential role in building and owning infrastructure but we strongly support Constitutional checks against the government getting too involved in policing content. This is an excellent presentation - particularly for those who are not as familiar with the history of the AT&T, the FCC, Carterphone, and the competition we briefly had among service providers in the days of dial-up.

Posted September 23, 2009 by christopher

The Chair of the Federal Communications Commission has taken a stand for network neutrality - the founding principle of openness of the Internet. In short, network neutrality means the entity providing you access to the Internet cannot interfere with the sites you choose to visit - it cannot speed them up or slow them down in order to increase their profits. See video at the bottom of this post for a longer explanation.

FCC Chair Julius Genachowski recently spoke at the Brookings Institution [pdf] on the importance of an open Internet. He started by noting many of the ways we depend on services delivered over the Internet:

Even now, the Internet is beginning to transform health care, education, and energy usage for the better. Health-related applications, distributed over a widely connected Internet, can help bring down health care costs and improve medical service. Four out of five Americans who are online have accessed medical information over the Internet, and most say this information affected their decision-making. Nearly four million college students took at least one online course in 2007, and the Internet can potentially connect kids anywhere to the best information and teachers everywhere. And the Internet is helping enable smart grid technologies, which promise to reduce carbon dioxide emissions by hundreds of millions of metric tons.

However, because most Americans get access to the Internet from large, absentee-owned profit-maximizing companies who are often de facto monopolies, we have to beware the gulf between community interests and the narrow interests of these companies.

A second reason [for network neutrality rules] involves the economic incentives of broadband providers. The great majority of companies that operate our nation’s broadband pipes rely upon revenue from selling phone service, cable TV subscriptions, or both. These services increasingly compete with voice and video products provided over the Internet. The net result is that broadband providers’ rational bottom-line interests may diverge from the broad interests of consumers in competition and choice.

For this reason and others, the Chair suggested adding two new "freedoms" to the four Internet freedoms [pdf]...

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Posted September 22, 2009 by christopher

In a recent post the NY Times Bits Blog, Saul Hansell reports "Verizon Boss Hangs Up on Landline Phone Business" - something we have long known. Nonetheless, this makes it even more official: private companies have no interest in bringing true broadband to everyone in the United States.

Verizon is happy to invest in next-generation networks in wealthy suburbs and large metro regions but people in rural areas - who have long dealt with decaying telephone infrastructure - will be lucky to get slow DSL speeds that leave them unable to participate in the digital age. These people will be spun off to other companies so Verizon can focus on the most profitable areas.

For instance, Verizon found it profitable to spin off its customers in Hawaii to another company that quickly ran into trouble before unloading most of its New England customer on FairPoint, moves that enhanced Verizon's bottom line while harming many communities (see the bottom of this post and other posts about FairPoint).

Isen has been writing about it recently - picking up on FairPoint immediately breaking its promises to expand broadband access in the newly acquired territories. No surprise there.

Isen also delved deeper into Verizon's actions, with "Verizon throws 18 states under the progress train." He is right to push this as a national story - the national media focused intently on the absence of major carriers in the broadband stimulus package but they seem utterly uninterested in major carriers running away from broadband investments in rural areas.

Though Frontier likes to position itself as a company focused on bringing broadband to rural areas, it offers slow DSL broadband and poor customer service to people who have no other choices - more of a parasite than angel. As long as we view broadband as a vehicle for moving profits from communities to absentee-owned corporations rather than the infrastructure it truly is, we will farther and farther behind our international peers in the modern...

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