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Goliath Regulator Asks For More Davids

In a column published today, Chairman Genachowski explains why the U.S. Needs 'Gigabit Communities.' It starts off with an accurate observation...

Walking the floor of the Consumer Electronics Show last week, I kept thinking of that line from Jaws, “You’re going to need a bigger boat.” All the Internet-connected, data-hungry gadgets that are coming to market sent a strikingly clear message: we’re going to need faster broadband networks.

... It’s essential to economic growth, job creation and U.S. competitiveness.

Yes! If only the head of the Federal Communications Commission understood what is preventing us from building those networks. Hint: It isn't a lack of demand. Google was inundated with applications for its gigabit service. Hundreds of communities have built their own networks (some of which he praises).

Local businesses get it. Mayors get it. City councils get it. And unlike Chairman Genachowski, they know what the problem is: little incentive for massive, established cable monopolies to invest in networks when they are harvesting record profits and subscribers have no other choices. Wall Street not only gets it, it actually rejoices in it!

Comcast's traditional Cable Communications continues to grow and generate copious cash flow.. We're big fans of the firm's Video and High-Speed Internet businesses because both are either monopolies or duopolies in their respective markets.

What is our FCC Chair doing about this problem? He helped Comcast to grow even bigger, with more market power to crush those rivals that he is calling on to build gigabit test beds.

Chairman G wants to spur hundreds of David's while refusing to curb Goliath's power. Bad news, Mr. Chairman, Goliath actually wins most of the time. Rather than doing his job, Genachowski is begging others to do it for him.

DC Revolving Door FCC - /> Comcast

More and more, he sounds more like a cable lobbyist than a public servant. This is actually a pattern: the head cable lobbyist in DC is a former FCC Chief himself and a recent FCC Commissioner left for a job at Comcast just months after pushing for the Comcast/NBC merger.

The revolving door helps to explain why the FCC has refused to take meaningful action that might threaten the cozy relationship between supposed competitors that have divided the market to their benefit.

Consider that Chair Genachowski fully supported bandwidth caps before walking that back a tiny bit. But now the cable industry has admitted what the FCC should have known all along, bandwidth caps are about increasing revenue rather than managing congestion.

He seems to spend far more time with the big cable and DSL lobbyists than with the local governments and businesses that are actually building next-generation networks.

Local governments are essential for expanding needed networks and have a tremendous track record of spurring economic growth. Most started by trying to work with large incumbents but were rebuffed. Presently, some 19 states limit their ability to build networks and in some cases engage in partnerships with groups like Gig.U. While some FCC Commssioners, like Mignon Clyburn have spoken out forcefully against these restrictions, the Commission itself has done little to prevent them.

New testbeds are great but they don't solve our problem. We need an FCC Chair that will wrestle with the real problem: far too much of our essential telecommunications infrastructure is controlled by de facto monopolies unaccountable to the communities that depend upon them.

Captive Audience

As Susan Crawford notes in her new book Captive Audience, our entire economy depends on a few powerful corporations that are effectively unregulated by either a competitive market or by smart government policy.

The result of this deregulatory environment? Well, I just have to wonder when this sentence of his column was written:

"Make no mistake, if the U.S. doesn’t continue to invest in our broadband infrastructure, somebody else will take the lead."

It would have made sense ten years ago. Take a look at the international rankings, Mr. Chairman. And it has only gotten worse since you took over.

Having Susan Crawford as the Chair of the next FCC would do wonders to making the FCC responsive to the needs of all America, not just the cable and telephone companies. But Comcast's David Cohen is far too big a Democratic Party fundraiser for that to happen, which is why we need more Rootstrikers to recognize that until we resolve campaign finance corruption, it will be hard to fix any other problem.

Revolving door graphic adapted from AJakeS & Life of Riley under Creative Commons.

Susan Crawford, Captive Audience, and How to Kill the Cable Monopoly

Susan Crawford, author of the just-released Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age, is our guest for the 29th episode of the Community Broadband Bits Podcast. A former adviser to President Obama, she has been a leading figure in the struggle to preserve an open Internet.

Susan has long been an advocate of communities deciding for themselves if a community owned network is a wise investment and recognizes the benefits of smart government policies to prevent big companies like Comcast from dominating the telecommunications arena.

We talk about her book and reactions to it -- big cable and telephone companies are attacking her under false pretenses by either putting words in her mouth or misrepresenting her main points. But we also discuss the steps concerned people can take to bring force some accountability on the big monopolies.

We have previously noted Susan's words and presentations here and we noted some Captive Audience reviews here.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 17 minutes long and can be played below on this page or subscribe via iTunes or via the tool of your choice using this feed. Search for us in iTunes and leave a positive comment!

Listen to previous episodes here.

Thanks to mojo monkeys for the music, licensed using Creative Commons.

Susan Crawford's Captive Audience Book Reviewed

I quickly read the just-released Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age, and came away quite excited by Susan Crawford's new book.

Susan Crawford has been supportive of community owned networks and a loud voice against the poor policies that have allowed a few massive cable and telephone companies to monopolize our telecommunications. Her new book is a good resource for those just getting interested in this issue.

After the book was released last week, Susan Crawford appeared on the Diane Rehm show -- an excellent 50 minute interview that comes highly recommended. Be aware that the cable/telephone industry is engaging in character assassination to prevent Susan's message from reverberating around the country.

The book led to Sam Gustin's article in Time, "Is Broadband Internet Access a Public Utility?"

State and local laws that make it difficult — if not impossible — for new competition to emerge in broadband markets should be reformed, according to Crawford. For example, many states make it very difficult for municipalities to create public wireless networks, thanks to decades of state-level lobbying by the industry giants. In order to help local governments upgrade their communications grids, Crawford is calling for an infrastructure bank to help cities obtain affordable financing to help build high-speed fiber networks for their citizens. Finally, U.S. regulators should apply real oversight to the broadband industry to ensure that these market behemoths abide by open Internet principles and don’t price gouge consumers.

Art Brodsky also reviewed the book on the Huffington Post. He leads with a reminder of the damage done by the NFL's replacement refs, an apt comparison given how poorly the FCC and Congress have protected the public.

Susan will be our guest for the Community Broadband Bits Podcast (episode 29) on Tuesday, Jan 15, and I will be offering periodic thoughts on passages from the book in coming days/weeks.

Susan Crawford Discusses Captive Audience at Berkman Center

Susan Crawford's new book, Captive Audience: The Telecom Industry & Monopoly Power in the New Gilded Age, looks to be an excellent read for anyone regularly perusing this site. It is becoming available at bookstores near you. (For why we discourage buying from Amazon, see our Amazon Infographic.)

Susan did a one hour presentation at Harvard to celebrate the release of her new book last week. Video below. We will feature an interview with Susan on a podcast in early 2009.

Video: 
See video

AT&T, Others Overcharge Subscribers Based on Secret Bandwidth Meters

Imagine going to a gas station, putting 10 gallons into your car's 12 gallon tank, and driving off only to find your needle only approaches half a tank? This scenario is quite rare because government inspects gas stations to ensure they are not lying about how much gasoline they dispense.

But when it comes to the Internet, we have found measurements of how much data one uses is unregulated, providing no check on massive companies like AT&T and Time Warner Cable. And we are seeing the results -- AT&T is not open about what its limits are or how to tell when one has exceeded them.

Stop The Cap has noted that AT&T has advertised unlimited bandwidth for its DSL/ U-verse product while chiding and charging customers who exceeded certain amounts of monthly usage. Customers were quietly warned and charged $10 for each additional 50 GB over 150 GB for DSL subscribers or 250 GB for U-verse customers.  Clearly, "unlimited" has several definitions, depending on whether one is a customer or an ISP.

Complaints have also come in from SuddenLink customers and others. The ISP charged usage based customers for bandwidth usage when they didn't even have power. Simlarly, AT&T customers began to complain about inaccurate meters from the beginning of the program. This from a 2011 DSL Reports story - one of many comments from AT&T customers:

AT&T's data appears to be wholely corrupted. Some days, AT&T will under-report my data usage by as much as 91%. (They said I used 92 meg, my firewall says I used 1.1 Gigs.) Some days, AT&T will over-report my data usage by as much as 4700%. (They said I used 3.8 Gig, dd-wrt says I used 80 meg. And no, this day wasn't anywhere near the day they under-reported.)

Most of us don't keep track of our bandwidth usage, because there is no easy way to do it. For the most part, we have to take the word of our Internet service providers, but who is ensuring that they are accurate? Mismeasuring could be the result of incompetence or fraud, but the FCC has not stepped up to ensure consumers get what they are promised.

DSL Reports has extensively covered this AT&T bandwidth cap story and its refusal to open its meters to verification. One customer recorded a persistent pattern of inaccuracuracies, finding that AT&T was over recording the households daily usage by about 20-30%. The user contacted AT&T support to get a definition of "metered usage" because there was no definition on its website. From the article (and reposted from Slashdot):

Boy, did I get a surprise. After several calls, they finally told me they consider the methodology by which they calculate bandwidth usage to be proprietary. Yes, you read that right; it's a secret. They left me with the option to contact their executive offices via snail mail.

As long as there is no meaningful competition for broadband customers, AT&T will face no market penalty for abusing its customers. And unfortunately, the FCC has been asleep at this wheel as well. Also from Karl at DSLReports:

Worse perhaps, is that regulators in both the United States and Canada haven't shown the slightest interest in the problem despite the fact that ISPs are billing like utilities, with nobody but the consumer confirming whether their meters are accurate.

We have yet to hear of a credible reason to need bandwidth meters on wired networks. The companies that have invested in modern networks -- from community fiber to Verizon's FiOS -- see no need to count bits. It only seems to be those who don't want to invest and cable companies that want to slow the growth of over-the-top video pushing these limits.

AT&T's Many Broken Merger Promises

AT&T and others regularly woo their regulators and policymakers with promises to built increase investments or expand networks in return for deregulation or merger approval. A recent Gerry Smith Huffington Post article examines a familiar pattern of broken promises made by telcos, what has developed into a chronic wham-bam-thank-you-ma'am attitude by these massive corporations.

We actually have a name for this, Kushnick's Law: "A regulated company will always renege on promises to provide public benefits tomorrow in exchange for regulatory and financial benefits today." 

Smith revisits promises made back in 2006 when AT&T merged with BellSouth. AT&T promised to roll out broadband to every customer in its territory by 2007. Tell that to Cedric Wiggins from rural Mississippi. From the article:

But five years after that deadline, Wiggins, 26, is still waiting. Inside his trailer, his only affordable Internet option is a sluggish dial-up modem that takes five minutes to load the online job listing sites he has visited since being laid-off as a truck driver in May. Every few months, he calls AT&T to ask when he will receive a faster connection. The answer never changes.

“They said they don’t offer it in my area right now,” he said. “There’s nothing I can do.”

Smith found that promises made to gain merger approval are traditionally broken and/or so weakly constructed that the players can comply with little or no effort. Empty promises continue to be accepted by the feds and conveniently forgotten, except people like Wiggins.

No one knows the pattern better than those on the inside:

“We have a problem at the commission, historically, with following-up on merger conditions,” said Michael Copps, who served on the FCC from 2001 to 2011, and who voted to approve the AT&T-BellSouth merger. “A lot of these conditions that get attached are not that great, and they are not always really enforced.”

AT&T tells Smith it kept its promise, but would not respond when pressed for details about where it had expanded. Self reporting is accepted from the FCC on merger conditions, putting the burden on the public to demonstrate noncompliance -- though most of the public is rarely even aware that such promises were made.

Promises are often littered with loopholes. From the article:

AT&T committed to provide Internet service at minimum speeds that were hardly faster than dial-up, they say, while pledging to deliver “alternative technologies,” including satellite Internet, through as much as 15 percent of its territory. And at the time, satellite Internet was already available through nearly all of BellSouth’s turf, making AT&T’s commitment “utterly meaningless,” said Dave Burstein, editor of the telecom industry publication DSL Prime.

Smith also looks into a 2009 promise made by CenturyLink in order to get approval to buy Ebarq in the South and Midwest. CenturyLink promised to bring wired Internet access to 90% of the population within three years but 87% of those customers already had it. Meeting that commitment was almost meaningless. 

Monopoly Money

But we cannot simply leave the blame at the feet of the FCC or other agencies. Smith details how the gigantic AT&T/BellSouth merger almost fell through, but for the efforts of AT&T's lobbyists. FCC Commissioners received a letter signed by 29 members of Congress - all but two had each received significant contributions from AT&T and BellSouth PACs and PAC employees over three election cycles, according to InfluenceExplorer.com.

When the deal was finally approved, expectations were high:

AT&T had made “real, tangible, and important broadband commitments” and there would be “no exceptions for sparsely populated areas,” Copps said at the time.

AT&T’s commitment “will only further encourage the deployment and adoption of broadband networks into yet unserved or underserved areas,” Chairman Kevin J. Martin and Commissioner Deborah Taylor Tate said back then.

The 2006 CEO, Ed Whitacre, doubled his salary to $31 million, stock price almost doubled, and $5 billion in dividends went out to investors. The following year, stock went up another 16% and the company paid another $8.7 billion in dividends. Clearly, AT&T reaped the rewards for making promises, but it is equally clear that they also reaped rewards for breaking promises. Even 2006 backers of the deal now realize AT&T has not lived up to its commitment:

“It gives me heartburn,” said Tyrone Ellis, who as chairman of Mississippi’s public utilities committee in 2006 wrote to the FCC to urge approval of the deal, citing the promise of rural broadband throughout AT&T’s territory. “They didn’t follow through. But I don’t have the power to force their hand. The FCC does.”

Meanwhile in Mississippi, Wiggins and his neighbors sit on the unfortunate side of the digital divide. Looking for a full time position, paying bills, conducting business, public safety, and the ability to communicate with loved ones are all hampered by the lack of anything beyond dial-up or expensive satellite.

lFCC Logo

For years now, the FCC and other agencies have allowed harmful consolidation while failing to attach meaningful conditions. We just examined how Comcast gamed the FCC to take over NBC -- the public gained practically nothing in allowing a massive company even more market power. 

The problem with such massive companies is not just that they can squash competition and raise prices with impunity. Their scale and dominance allows them to shape how the entire industry is regulated by the public. They buy legislation in DC and state capitals with near-impunity. They slow innovation, harming the economy. 

Communities are smart to depend on themselves for essential infrastruture, not promises from distant mega-corporations. 

Comcast Gamed FCC for Internet Essentials "Concession" in NBC Merger

Last year, when Comcast unveiled its Internet Essentials program, the corporate powerhouse received accolades from FCC Chairman Julius Genachowski. The program was promoted as an example of corporate philanthropy helping to bridge the digital divide.

Comcast received all kinds of positive media coverage for its program. Most of that coverage failed to note that the FCC required Comcast to integrate the program as one of the supposed concessions offered in return for Comcast being able to take over NBC -- giving the largest cable monopolist in the US even more market power.

DSLReports has publicly exposed what many of us suspected all along -- the program was not a concession on Comcast's part. Internet Essentials was originally conceived as a program that would offer slower connections to certain low income households at affordable rates that nevertheless remain profitable for Comcast.

A recent Washington Post Technology profile on Comcast's Chief Lobbyist David Cohen, notes how the program was actually conceived in 2009, but:

At the time, Comcast was planning a controversial $30 billion bid to take over NBC Universal, and Cohen needed a bargaining chip for government negotiations.

“I held back because I knew it may be the type of voluntary commitment that would be attractive to the chairman” of the Federal Communications Commission, Cohen said in a recent interview.

Eligibility depends on four factors:

  • Participants must reside in an area serviced by Comcast
  • Participants must not have an overdue Comcast bill or have unreturned equipment
  • Participants could not have had Comcast service within the last 90 days
  • Participants must have at least one child in the house that qualifies for free or reduced lunches

Comcast Logo

When the program launched in 2011, only households with children qualifying for free lunches under the National Free Lunch Program were eligible. After residents in Philadelphia expressed their derision at the narrow eligiblity, Comcast broadened the criteria to include those that qualified for reduced lunches. Even with this one requirement relaxed, eligibility is narrow. From a 2011 DSLReports article released when the program was new:

Once you've eliminated those who don't qualify for the school lunch program, eliminated those who already have service (not uncommon even in poor homes), and eliminate those who also owe Comcast money (also obviously not uncommon in poor homes), how many customers will Comcast actually wind up having to serve at the $10 price point? Even then, they'll only have to offer it for a few years, making it significantly less of a difficult merger condition than it might originally appear.

The Philly.com article notes that Comcast estimates 2.3 million people nationwide are eligible for the program. Even though meeting the participation criteria is incredibly difficult, Comcast blames low participation rates to on the people they are supposed to be helping:

Comcast says it has found that the biggest barrier to Internet Essentials' adoption is that many people in poor neighborhoods don't understand the Internet (emphasis added by me).

"They think it may be used for Comcast or the government to spy on them," said David Cohen, the program's chief booster and an executive vice president at Comcast.

I am one of those 2.3 million, used to help Comcast increase its market power with the NBC merger. Very few of us think much about the government or Comcast spying on us. In fact, we spend most of our time thinking about paying the bills. If Comcast or the government DID spy on us, we know they would be pretty damn bored.

As a lower-income single parent of two children that qualify for reduced lunches, our household qualifies largely because a subscription to paid TV is a luxury that we have chosen to avoid for several years. But believe it or not, I DO understand the benefits of Internet access and so do all the parents of all the kids that I know who are similarly situated. In fact, the kids understand the Internet, too.

As an experiment, I called Comcast and am happy to report that a very nice lady helped me. After answering all the questions she presented, my application for the Internet Essential program is on its way. 

I hate to report stories like this for multiple reasons. First, there is the conscious decision on the part of Comcast to cynically delay a program supposedly designed to benefit the most vulnerable populations. Then there is Comcast's obvious goal of positive media attention for their hated brand rather than effectively advertising the program to the vulnerable populations.

DSL Reports Logo

There is a policy lesson that DSLReports nails:

On the plus side, some people got less expensive broadband, which certainly isn't a bad thing. On the other hand, you've got a Comcast lobbyist who delays a program for the poor in order to profit handsomely by buying NBC, and an FCC claiming credit for a show pony program just to earn political points and to avoid imposing tougher conditions. As we'ved noted previously, hollow programs that do little but sound great has been a constant theme at an agency too timid to actually regulate.

The obvious question that has been utterly ignored by just about all the press coverage of this program is if Comcast makes a profit on its $9.95 service, why is the price so high for everyone else? Comcast, AT&T, and others are constantly crowing about how much competition supposedly exists in U.S. broadband but their profit margins and capacity to incease rates year after year proves the opposite is true.

We need to continue pushing the FCC to protect the rights of all Americans, not just a few big cable and telephone companies.

Community Broadband Bits 23 - Harold Feld from Public Knowledge

One hundred years after Teddy Roosevelt and AT&T agreed to the Kingsbury Commitment, Harold Feld joins us on Community Broadband Bits podcast to explain what the Kingsbury Commitment was and why it matters. In short, AT&T wants to change the way telecommunications networks are regulated and Harold is one of our best allies on this subject.

AT&T is leaning on the FCC and passing laws in state after state that deregulate telecommunications. Whether we want to deal with it or not, these policies are being discussed and consumer protections thus far have taken a beating. This interview is the first of many that will help us to make sense of how things are changing and what we can do about it.

We also discuss the ways in which the Federal Communications Commission and Federal Trade Commission spurred investment in next-generation networks by blocking the AT&T-T-Mobile Merger on anti-trust grounds.

Harold is senior Vice President of Public Knowledge and writes the Tales of the Sausage Factory blog.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 22 minutes long and can be played below on this page or subscribe via iTunes or via the tool of your choice using this feed. Search for us in iTunes and leave a positive comment!

Listen to previous episodes here.

Thanks to mojo monkeys for the music, licensed using Creative Commons.

Antitrust Enforcement Yields Increased Investment in Wireless

We have long argued that smart antitrust policy promotes investment and competition in the market. Allowing a few firms to consolidate too much power allows them to ignore our needs because we lack alternative service providers. In economic terms, they can use their market power to prevent market entry from innovative new firms.

Harold Feld recented provided more empirical evidence for our view by comparing the present cellular wireless market against that of 20 months ago. He notes new investment from abroad in T-Mobile and Sprint and that U.S. Cellular plans to expand its footprint; AT&T is planning upgrades in its spectrum holdings. Bottom line - investment is starting to happen, which was not the case a year ago. 

Feld breaks out details in FCC and DoJ activities to show the relationship. In addition to the DoJ and FCC mutual block of the AT&T/T-Mobile deal, Feld notes the FCC's new attitude regarding regulatory reform. From the Feld blog:

On top of this, the FCC sudden[ly] started getting all serious about regulatory reforms designed to keep carriers other than AT&T and Verizon in the game as serious players. This included not just the long-awaited data roaming order (which now looks like it will probably survive review by the D.C. Circuit after all), but also revisiting special access, 700 MHz Interoperability, and renewed interest in clarifying the spectrum screen/possibly reviving the spectrum cap. While the last three are still in progress, the fact that the FCC is even talking about them in a serious way is so radically different from what folks expected at the beginning of 2011 that it puts heart into investors and competitors who were looking for some sign that anyone in DC gave a crap or if competitive wireless would end up going the way of competitive telecom and competitive ISPs.

Feld acknowledges that there will be those that jump to conclusions and discourages an all-or-nothing viewpoint in favor of a more measured approach. Also from his blog post:

The actual lesson is: “the argument that antitrust enforcement and/or other types of regulation always  discourage investment and cannot possibly create jobs or promote innovation is just as wrong as the argument that all mergers are bad and a regulatory response is always appropriate.” Or, put another way, efforts to apply simplistic approaches to complex issues are usually wrong (and often disastrously so).

When properly applied, antitrust enforcement and light-touch regulation actually encourages investment and thus creates jobs and stuff, whereas an unregulated consolidated free-for-all encourages stagnation and collection of monopoly rents in lieu of investment and innovation.

Markets work best when no single player can dictate terms. While we are so far from that ideal in telecommunications as to wonder if it is even possible, some antitrust is surely better than none. Better to have four national cellular carriers than just three (or two).  

And on the wireline side, limiting the predatory behavior of the Comcast and other cable giants will encourage investment and new competition -- both from the private and public sector. But that is precisely what the big guys are lobbying against -- the opportunity for new competition.

Community Broadband Bits 18 - Dewayne Hendricks

Dewayne Hendricks is a serial entreprenuer, innovator, and wireless expert. Wired magazine labeled him a broadband cowboy back in 2001. And he is our guest on the 18th episode of Community Broadband Bits.

Our discussion focuses on the promise of wireless technologies and how a few entrenched interests in DC (the big broadcasters and wireless telephone companies like AT&T) are preventing innovative approaches that would dramatically improve the capability of all our modern technologies.

Hendricks is a prolific tweeter that comes highly recommended from us. And he has kindly recommended two papers readers may want to read following our conversation: David Weinberger's "The myth of interference" and Paul Baran's "False Scarcity" [PDF].

We look forward to inviting Dewayne back soon to discuss the Fiber versus Wireless debate. Let us know if you have any other questions we should ask when he returns!

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 26 minutes long and can be played below on this page or subscribe via iTunes or via the tool of your choice using this feed. Search for us in iTunes and leave a positive comment!

Listen to previous episodes here.

Thanks to Fit and the Conniptions for the music, licensed using Creative Commons.