When it comes to expanding access to the Internet across the US, the federal government has long looked first to the private sector, ignoring hundreds of years of experience showing that unaccountable private companies cannot be trusted to sufficiently invest in or govern essential infrastructure.

Inevitably, they price access to high and invest too little as they maxmize their profits -- thereby minimizing the profits of all other parts of the economy.

So let's take a little survey of the progress we see from these companies.

We have long railed against the Verizon -> FairPoint fiasco in New England that left Verizon much richer at the expense of residents and businesses in rural Vermont, New Hampshire, and Maine particularly. Well, FairPoint creditors have realized the depth of Verizon's scam and are suing Verizon for $2 billion. Read the complaint [pdf].

According to the complaint (pdf), Verizon not only made out like a financial bandit up front, but took advantage of regulatory delays to strip mine the assets of anything of value, including core IP network components, business services, and localized billing and support assets required to support the three states. Verizon then billed out their support assistance for millions per month during the very rocky transition, during which time 911 and other services saw repeated outages, resulting in millions more in refund penalties.

Karl Bode is right to criticize the state authorities that allowed this fiasco to occur. Their inability to regulate in the public interest has hurt everyone stuck in the mess. While we can expect powerful companies like Verizon to try to game the system at every opportunity, there is no excuse for making it so easy for them.

As long as we are talking about Verizon shedding its rural investments, let's take a look at how Frontier is doing since it inherited thousands upon thousands of FiOS customers as part of its recent deal with Verizon. Frontier has decided the best approach is to transition those customers from the next-generation FTTH network to an older, slower, less reliable, DSL alternative. Find me another country where a major company is moving customers away from fiber-optic connections. This is a national embarrassment.

Rather than investing in better technology, Frontier has literally doubled down on DSL by marketing a second DSL line to customers. Connect one computer to one line and the TV/video game unit to another one. Of course, it turns out they are lying (or incompetent) when it comes to how much they are charging for it...

In other words, that $13.50 1.5 Mbps (if you're lucky) DSL line is actually closer to a $50 1.5 Mbps DSL line once Frontier gets done slamming you with additional fees. These kinds of below-the-line fees have been a mainstay at phone companies for decades, essentially allowing them to engage in false advertising and covertly jack up the advertised price post sale. It's a practice that has yet to see any real attention of regulators, even those ceaselessly professing dedication to "transparency." It helps that Frontier serves a lot of uncompetitive markets where users have no other options, resulting in "deals" like this one.

Let's move on to the nation's largest cable company, Comcast. We recently noted Comcast's dubious distinction as the least trusted company in America. It was simultaneously the second least trusted. I'm guessing we won't see that award plastered on the side of the vehicles their poorly compensated contractors drive around.

Occupy Philly, the City of Brotherly Love offshoot of Occupy Wall Street, recently demonstrated at the Comcast Center to bring attention to Comcast's corporate tax dodging. Hey -- I thought Comcast routinely said it wasn't fair that non-profit entities don't pay taxes!

Finally, the big cable companies in general have been singled out in a study showing that Americans lost $38 billion in wages last year while waiting for technicians and delivery people. Cable companies were the worst at making people wait - prompting one person to say "SCAMCAST should be their name."

There is plenty more of examples like the above, but I'm done writing about them today. Just recall that the federal government prefers that this group of unaccountable corporations build, own, and operate the most important utility of the 21st century. We prefer local ownership that is accountable to communities. Time Warner Cable has actually been sued for its terrible customer service!

We watch in frustration as the federal government, dressed as Charlie Brown asks AT&T, wearing Lucy's blue dress and smiling brightly, if she really will hold the football properly this time. "Oh yes, Charlie, this time I really will create all those jobs if you let us buy T-Mobile," says AT&T Lucy.

Over at HuffPo, Art Brodsky recently revisited AT&T's promises in California to create jobs, lower broadband prices, and heal the infirm if the state would just deregulate the cable video market -- which it did, 4 years ago. California upheld its end of the bargain -- wanna guess if AT&T did? Hint: Charlie Brown ended up on his back then too.

The answer comes from James Weitkamp (via Art's HuffPo post), from the Communications Workers of America, a union that all too often acts in the interests of big companies like AT&T and CenturyLink rather than workers:

"AT&T and Verizon have slashed the frontline workforce, and there simply are not enough technicians available to restore service in a timely manner, nor enough customer service representatives to take customers' calls. Let me share some statistics. Since 2004, AT&T reduced its California landline frontline workforce by 40%, from about 29,900 workers to fewer than 18,000 today. The company will tell you that they need fewer wireline employees because customers have cut the cord going wireless or switched to another provider, but over this same period, AT&T access line loss has been just under nine percent nationally. I would be shocked if line loss in California corresponds to the 40 percent reduction in frontline employees.


"Similarly, since 2006 Verizon California cut its frontline landline workforce by one-third, from more than 7,000 in 2005 to about 4,700 today. I venture that Verizon has not lost one third of its land lines in the state."

Note that AT&T, Verizon, and other massive incumbents like Comcast have been wildly profitable over this term.

The same trend holds in cellular wireless - as noted by the Wall Street Journal:

The U.S. wireless industry is booming as more consumers and businesses snap up smartphones, tablet computers and billions of wireless applications. But for the industry's workers, the story is less rosy.

In May, on the heels of a record year for industry revenue, employment at U.S. wireless carriers hit a 12-year low of 166,600, according to U.S. Labor Department figures released earlier this month. That's about 20,000 fewer jobs than when the recession ended in June 2009 and 2,000 fewer than a year ago.

While the industry's revenue has grown 28% since 2006, when wireless employment peaked at 207,000 workers, its mostly nonunion work force has shrunk about 20%.

This should not be a surprise. In fact, it would be shocking if the increasing consolidation of telecom created more jobs. The fewer firms in the market, the more they are likely to work together for mutual gain -- to the detriment of all the rest of us.

Rural voices are continuing to make this point, as Parul Desai recently did on the Daily Yonder:

If the merger goes through it is unlikely the two remaining larger carriers would try to compete on price.  AT&T has chosen to emphasize network improvements, speeds of service, and gains in network development that the merger will enable, rather than tout future pricing benefits. The company has indicated to stockholders that it plans to bring T-Mobile revenues per user up to match those of AT&T, suggesting that price increases may be inevitable. 

But for every Parul Desai, there is a massive organization already bought off by AT&T claiming all their members are clamoring for fewer choices and higher prices.

But that is where we are going - both in wireline and wireless. The only question is how long policy makers will pretend the telecom/broadband industry is characterized by competition at all. But the fiction of competition serves a purpose - it allows those policy makers to justify their refusal to regulate in the public interest. As long as they pretend telecom has competition, they can say there is no need to regulate because the market will prevent AT&T, Comcast, Verizon, et al., from raising prices too much and cutting back on investment.

We can do better - but it requires smart government policies on the national level as well as preserving local self-determination to choose if building a publicly owned network makes sense. Though we will not have competition in poles, wires, or towers, we can have competition in services -- telephone, cable television, and access to the Internet. We can... but will we?

As you observe (or hopefully, participate in), the debates around network neutrality or universal service fund reform, remember that many of the loudest voices in support of industry positions are likely to be astroturf front groups.  Between extremely well-financed astroturf organizations and industry-captured regulatory agencies, creating good policy that benefits the public is hard work.  It helps to study how industry has gamed the FCC in the past -- as documented by David Rosen and Bruce Kushnick in a recent Alternet article.

At the risk of being sarcastic, we can thank the FCC for working with the industry to make our phone bills to easy to read - an example is available here.

For years, I have heard Graham Richards, former mayor of Fort Wayne Indiana, brag about this "beg, borrow, buy, build" [pdf] philosophy as Mayor.  I am not insulting him -- his brash style is quite likable, but it is bragging.  He was somewhat of a celebrity among the broadband folks because he both understood the importance of broadband and had convinced Verizon to roll out FiOS in Fort Wayne when they had no plans to.  His philosophy is to first beg, then borrow, then buy, and finally build the network if necessary -- a similar approach of many local governments.  This is also often the path of least resistance (which, Utah Phillips reminds us, is what makes the river crooked).  

Graham is a terrific guy and a great evangelist for broadband (though he never jumped into a frozen Lake Superior) -- but we have long argued that his priorities were wrong in the long term.  Not owning the network means the network is unlikely to care about what the community needs.  Unfortunately, our philosophy has proven prescient.

When we last discussed Frontier's radical price increases for the FiOS subscribers they bought from Verizon, we failed to note that Fort Wayne was one of the transferred communities.  They begged for the network and they have no voice in how it is run.  So when Frontier jacks up its FiOS prices and glibly encourages people to drop their high quality FiOS cable for lesser quality DirectTV (with a long contract), the folks in Fort Wayne have little choice but to shrug their shoulders.

Serfs may occasion upon a good Lord of the Manor, but mostly they didn't.  Ownership of essential infrastructure offers long term benefits.

Photo used under Creative Commons, courtesy of Jenn Raynes