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No Scale Advantage in Netflix Speed Ranking

Netflix has continued to publish monthly rankings of ISPs average speed in delivering Netflix video content to subscribers. Though they first published data about the largest, national ISPs like Comcast, AT&T, and the link, they have an expanded list with many more ISPs.

I recognize two municipal networks on the expanded list of 60 ISPs. For March 2014, the Chattanooga EPB network is ranked 4th and CDE Lightband of Clarksville, Tennessee, is ranked 7th.

With the exception of Google Fiber and Cablevision, the top 10 are regional or somewhat smaller ISPs. Combined with the significant spread across the rankings of the biggest ISP, we see no empirical evidence for any kind of benefits to subscribers from scale. That is to say, Netflix data shows that bigger ISPs do not deliver better customer experience.

We do see more evidence that fiber networks deliver faster speeds on average, with cable following, and DSL trailing distantly. This is why DSL networks are losing customers where people have a choice and cable is gaining (most often where there is no fiber option).

Any claims by Comcast that allowing it to merge with Time Warner Cable would result in better service should be subject to extreme skepticism. Many much smaller networks deliver faster connections and raise rates far less often that Comcast, which is at the high end of frequency in rate hikes.

The problem with the biggest companies is that they focus on generating the highest returns for Wall Street, not delivering the best experience to Main Street.

Crap Cable Threatens Cloud Services

For my money, the best headline of last week was "The U.S.'s crap infrastructure threatens the cloud." The rant goes on to explain just how crummy our access to the Internet is.

As a patriotic American, I find the current political atmosphere where telecom lobbyists set the agenda to be a nightmare. All over the world, high-end fiber is being deployed while powerful monopolies in the United States work to prevent it from coming here. Some of those monopolies are even drafting "model legislation" to protect themselves from both community broadband and commercial competition.

He nails a number of important points, including the absurdity of allowing de facto monopolies to write the legislation that governs them. However, Andew Oliver's article is a bit muddled on the issue of "monopoly." I have argued with several people that the term "monopoly" has historically meant firms with large market power, not the more stringent definition of "the only seller" of a good. It is not clear how Oliver is using the term.

Because of this confusion, you can come away from his piece with the firm idea that it is primarily government's fault we have a duopoly of crap DSL and less crappy cable. He repeatedly says "state-sponsored monopolies." However, no local or state government may offer exclusive franchises for cable or telecom services and the federal government hasn't officially backed monopolies for decades.

This is a key point that many still fail to understand - a majority seem to believe that local governments bless monopolies when local governments actually are desperate for more choices. This is why they fall all over themselves to beg Google to invest in their community or they build they own networks (over 400 communities have wired telecom networks that offer services to some local businesses and/or residents).

Poor laws and regulations have helped the massive cable and telephone companies to maintain their status - that is why they spend so much on lobbying and political contributions at all levels of government. They want to and have successfully corrupted the process, neutralizing the power of government to protect consumer interests and prevent a few firms from dominating the market.

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What is missing from the conversation is Wall Street's role. Wall Street abhors competition, particularly for something as essential as Internet access because rigorous competition drives down profit margins. Wall Street puts a massive premium on consolidation and preventing competition. It wants a few firms to control this market so they can regularly increase fees and increase shareholder value (at the expense of the rest of our economy).

It isn't JUST federal and state government policy that is rewarding the duopoly, there are a host of reinforcing factors. And while government did indeed establish monopoly for the phone system 100 years ago, it resulted in a fantastic universal service network - so those who might argue a government sanctioned monopoly was never a good idea have a high burden to prove it.

As to how we have moved from a monopoly service model to having choices... well, lobbyists have been paid a lot specifically to mangle that process to benefit a few corporations. Our government has been corrupted and we have to live with the effects every day. But even without government, we would almost certainly we stuck with a monopoly, perhaps even worse as we would lack the few consumer protections we still have.

I was heartened to see the Obama Administration block the AT&T - T-Mobile merger as it suggests that there is a spark of hope for antitrust rules to prevent further consolidation. Stopping consolidation is the first step to having real choices because massive corporations amass not just economy of scale advantages over rivals, but find it much easier to influence the rules in their favor and to disadvantage competitors.

Returning to a fact from Oliver's article, he pays $1500/month for 30 Mbps symmetrical fiber. If he lived in Monticello, he would pay $100/month for that business connection. Community owned fiber is not merely about the technology, it includes numerous other benefits including radically lower prices that help local businesses to succeed.

Photo courtesy of JSquish via Wikipedia Commons

Locally Owned Networks Protect Privacy and Limit Consumer Surveillance

Since the story broke about the NSA domestic spying practices, debate among concerned citizens has revolved around the Big Brother surveillance model. Most of us shudder at the thought of our federal agencies from DC watching, noting, and recording our actions. However, there is another type of Internet surveillance that largely escapes notice and likewise threatens our liberty. 

Both types of surveillance are perversely encouraged by a poorly regularly market that allows big corporations to profit from violating our privacy.

We have long known that our online habits are being recorded and combined with other personal data that allows companies to show us personalized ads. But Free Press recently offering a compelling explanation for how this model can harm us. From the Dana Floberg article:

And about those “personalized ads” — this isn’t about Facebook learning you prefer Coke over Pepsi. This is about corporations targeting us where we’re vulnerable. This is about your Latina neighbor who sees ads for risky high-interest credit cards. This is about your cousin who just got laid off and now sees ad after ad selling him dangerous fast-cash offers and subprime mortgages. This is about your friend who lives in a rougher part of town and sees higher prices whenever he shops online. This is about all of us.

These ads aren’t personalized — they’re predatory.

Floberg goes on to describe how shopping sites alter prices based on income and location so more affluent shoppers can access better prices and coupons. These sites both use and reinforce stereotypes as they take advantage of the most vulnerable in our society.

Without laws to protect consumers, there is little we can do to stop this predatory behavior. Just as the market encourages corporations to violate our privacy to sell its goods, big corporations are also profiting in their work with law enforcement at all levels.

An AP article by Anne Flaherty notes that AT&T charges $325 to activate a wiretap and $10 per day to maintain it. Verizon charges the government $775 for the first month and $500 per month after that to continue it. It is hard to believe these charges are in line with actual costs. 

Meanwhile, the other massive providers are undoubtedly aware of what allegedly happened when Qwest CEO Nacchio refused to help the NSA illegally spy on Americans - the NSA cancelled a lucrative contract with Qwest. This provides a major disincentive to follow the law, particularly when they can expect retroactive immunity after violating the law for years.

What would become of any provider who dared to say "no" to the NSA? We found out when Xmission, serving consumers via UTOPIA said "no" - absolutely nothing happened. No fearful complicity at local Xmission. Xmission is focused on serving its customers, not Wall Street.

Massive corporations collect information from millions of customers; the more data, the higher the value. Even if a municipal network tried to collect and sell private data, the opportunity to profit would be limited because their reach is localized. 

Community owned networks, whose focus is on serving the community rather than maximizing profit, have no reason to collect and sell data. In fact, it is a revenue source to avoid. With a local customer base and more accountability, selling data would violate the trust that gives their brand a competitive edge. When it comes to protecting privacy, supporting smaller scale providers that are rooted in the community is a far better protection than anything Washington, DC, can or will provide.

AT&T and American Eagle spying image created by the Electronic Frontier Foundation and available via Wikimedia Commons.

Utah's Xmission Keeps Customer Data Private

We have not wirtten much on the NSA spying scandal but encountered a recent article in the Guardian that our readers can appreciate. Rory Carroll reports that Xmission, one of the local Internet service providers working with UTOPIA, has long refused to turn over private data to local, state and federal officials absent a proper warrant.

"I would tell them I didn't need to respond if they didn't have a warrant, that (to do so) wouldn't be constitutional," the founder and chief executive, Pete Ashdown, said in an interview at his Salt Lake City headquarters.

Since 1998 he rejected dozens of law enforcement requests, including Department of Justice subpoenas, on the grounds they violated the US constitution and state law. "I would tell them, please send us a warrant, and then they'd just drop it."

Xmission recently published a transparency report, which the Electronic Freedom Foundation referred to as "one of the most transparent we've seen."

We spoke with Pete Ashdown of Xmission last year in the third episode of our podcast and hold him and his firm in high esteem.

Unlike large, distant corporate providers focused on short term profit, local providers like Xmission understand the value of accountability and character. Big corporations are generally more interested in winning big government contracts than protecting the rights of their subscribers.

[Insertion by editor Christopher:] After all, what does Comcast care if I hate its assistance in shredding the Constitution, it isn't like I have another choice for high speed Internet access in my home.[end Insertion]

According to Ashdown:

The agency's online snooping betrayed public trust, he said. "Post 9/11 paranoia has turned this into a surveillance state. It's not healthy."

This is an important reason to build an economy with businesses rooted in local economies that are focused on local needs - they are far less likely to betray our trust because they actually face consequences for doing so.

FCC to Regulate Comcast, or Vice Versa?

If this merger is approved, I have little doubt that Comcast-NBCU will retain hundreds of attorneys and lobbyists to exploit gaps and loopholes in any conditions and regulations. Once we allow companies to become this powerful, the FCC does not regulate them. They regulate the FCC.

We Can't Shop Our Way to a Better Economy

Our colleague at the Institute for Local Self-Reliance, Stacy Mitchell (too brilliant to be a relation of mine), recently gave an incredible presentation that focuses on some of the threats to our economy and how we can build stronger, more resilient communities.

She doesn't discuss broadband explicitly, but much of her critique of the largest corporations in banking and the food system applies to the big cable and telephone companies. Highly recommended.

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New Book Investigates How Big Companies Like AT&T Rip Us Off

A  recent book by David Cay Johnston, The Fine Print, examines specifically how big companies have found ways to take advantage of the tax and regulatory systems to their benefit and to the detriment of consumers. The sad part - we don't even realize it.

Johnston discusses how big companies and their leaders exploit tax rules to re-distribute wealth upwards. Johnston also examines how this exploitation is almost never covered in the media, encouraging big companies to stoop to new lows in ripping off consumers. Telecommunications is one of the industries he covers in the new book.

In the first chapter (read the first chapter via Democracy Now!), Johnston describes how friend and journalist, Bruce Kushnick, came across twenty years' worth of telephone bills in his elderly aunt's possessions. Kushnick tracked the changes in her bills, systematically reviewing and comparing every charge. Kushnick found an array of confusing and cryptic "fees," "charges," and "taxes." The end result:

When he cross-checked his aunt’s telephone bills over the years, he could hardly believe the numbers. His aunt paid $9.51 for her local phone service in 1984. By 2003 her bill had swollen fourfold to $38.90. In the two decades since the breakup of the AT&T monopoly, even after adjusting for inflation, his aunt’s telephone cost $2.30 for each dollar paid in 1984. And that was without any charges for long-distance calls.

Johnston notes the method used by telecoms to increase prices over time:

Bit by bit, the line items grew, and others were added. It was easy to miss the escalating prices because they came separately over time—a nickel on one line of the bill, a quarter or two on another. With many small line items, people tended not to notice how the total was creeping upward much faster than the rate of inflation or the size of their income.

As we continue to watch, big telcos like AT&T take every opportunity to ensure their monopolistic advantage so they can continue these types of activities. Our readers know about the millions invested in lobbying to prevent municipalities from taking steps to providing the means to encourage competition. We see over and over again how any whiff of potential threat to a monopoly will bring swift and heavy retribution.

Johnston also spoke with NPR in a recent interview on Fresh Air. During the conversation, he talked about how the drive to bring benefits of ubiquitous connectivity has fizzled:

We've paid, between cable company rate increases and telephone company rate increases, over a half-trillion dollars to get the Internet.

But what quietly happened without much attention is that the Internet, the standard that these companies had to meet, was a very low standard, far below the quality of the Internet that people have in other modern countries. America invented the Internet, so by the fact is it started out as number one. We now rank 29th in the speed of our Internet, according to Pando Networks.

LUS Logo

In the interview, Johnston talks about Lafayette, Louisiana, and how AT&T, Verizon, and other big telcos have used legislatures and influence to twist regulations as a way to maintain their monopolies:

We are paying super-high prices for low speeds and poor quality, and a number of cities that did not have quality high-speed Internet have built municipal systems. And a good example I tell in the book is about Lafayette, Louisiana. The town fathers there were not going to get electricity over 100 years ago, so they created a municipal electric system.

Well, they also built a municipal Internet, and it is so high-powered and so fast that a lot of the work done for the Pixar animated movies is done, not in Hollywood, but in Lafayette, Louisiana.

Well, the response from AT&T, Verizon, Cox, Time Warner and the other cable and telephone companies has been to go to the legislatures and say we want a law passed that either blocks or makes virtually impossible to build municipal systems. That's competing with our business interests. And that's part of the whole strategy they have: We want to be monopolies without competition; we want to run the system in our interest to maximize our profits, with no regard for the overall economy of the United States.

We wrote the definitive case study of Lafayette's fiber network in our Broadband at the Speed of Light report. Also from the NPR interview:

So what I'm arguing in the book is we need to have a balanced policy. We need to have a policy not just written by and for telephone and cable companies but written to promote the entire economy. If we wired our whole country with a super-fast Internet that can handle all telecommunications services, and we charged appropriately so that the companies earn a respectable profit for it, and the customers pay a reasonable price, I think you would see industries, that no one can imagine today, arise.

In his book, Johnston also covers how big companies and the very wealthy exploit the tax system to avoid contributing to the tax roles. There are even issues of public safety - utility companies receiving waivers to avoid inspecting gas lines due to slack regulations - that have resulted in catastrophe and that are almost never covered in the news.

Democray Now! describes the book:

"The Fine Print: How Big Companies Use "Plain English" to Rob You Blind"... claims you are being systematically exploited by powerful corporations every day. He writes that these companies squeeze their trusting customers for every last cent, risk their retirement funds, and endanger their lives. And, says Johnston, they do it all legally. We’ll ask him to explain the fine print.

The book has also been noticed by VentureBeat's John Koetsier, who focuses on what this type of environment does to our Internet situation:

Slower Internet than Bulgaria. Data rates 38 times more expensive than Japan. And only 5 percent of the upload speed generally found in France.

In his new book The Fine Print, Pulitzer Prize-winning journalist David Cay Johnston tell us, among other things, what’s wrong with the Internet in America. The answer is fairly depressing: It’s too slow, too expensive, and … too controlled by a duopoly of AT&T and Verizon.

Here are two interviews with Johnston, who talks about his book, his findings, and the state or corporate power in the Unted States.

New Minnesota Networks Face Tough Challenges

MPR News recently ran two stories on the trials and tribulations of new and prospective broadband networks. Conrad Wilson's story about the continuing Monticello drama and Jennifer Vogel's account of factors affecting the American Reinvestment and Recovery Act (ARRA) projects give us a good idea of the many hurdles in the way of building new fiber-optic networks.

We have reported many times on the drama that has unfolded in Monticello. The municipally owned fiber-optic network has faced some withering challenges and yet perseveres.

Monticello asked for a modern communications network but the existing service providers, the cable and phone companies, insisted the city was "sufficiently wired." Conrad's reporting suggests otherwise:

Bill Tapper, who owns a cabinet company with clients around the world, recalls a time just a few years ago when the Internet was so slow it hurt business.

"The service we had in Monticello was horrible," he said. "My employees would sometimes take the data home where they had a better Internet connection than we did and do their uploads at night."

Tapper said he lost out on business, but at the time the established Internet service providers like phone and cable TV companies told Tapper and other frustrated business owners in town that the city was wired sufficiently.

Fibernet Monticello

After the community voted in favor of a publicly owned fiber-optic network, the incumbent provider, TDS, filed a lawsuit. The lawsuit strategically succeeded in stalling the development of the new network but did not destroy the project. Even though the incumbent provider describes pre-network status as "just fine before the city got involved," TDS took advantage of the delay they caused to began building their own fiber network.

Currently, subscribers in Monticello are benefitting from their high-speed fiber in ways beyond expanded and improved access. Because of the threat of competition, Charter is wooing the community with below rock-bottom (albeit temporary) rates.

But Minnesota has recently considered some legislation from State Rep. Linda Runbeck, R-Circle Pines, that would revoke local authority to decide if a community should build a network. She was quoted in the MPR story:

"You're putting the public sector right up against the private sector," Runbeck said. "It's clearly a very competitive industry ... It's a high risk industry. Why should we put that risk on the taxpayer?"

Why?? Perhaps because local employers were sending employees home to be more productive. Businesses need better connections that the few big cable and phone companies want to provide.

She states she will introduce the same bill next session and though her bill is dead this year, it continues to collect co-sponsors. Not a good sign for Minnesota's rural communities.

Jennifer Vogel's story on what has slowed the completion of some ARRA funded projects is a reminder of how hard it is to work in this space.

Because of the many projects funded by the ARRA, fiber is in demand and hard to obtain. Unsurprisingly, the price has increased, driving up the estimated costs of the 18 approved Minnesota projects. Contributing to the higher prices are problems with manufacturing, due to the earthquake loss of a major Japanese production plant a year ago.

As we often see, the bigger providers were able to jump to the front of the line when fiber did become available:

"[T]he fiber that did show up went to the folks who order more large quantities on a regular basis," said Farmers general manager Kevin Beyer. In other words, the $10 million western Minnesota project couldn't compete with bigger players with more clout. "The first orders filled should have been ours since we ordered ahead of others," he said. "But the game got changed a bit. There was a reshuffling of who mattered."

USDA RUS Logo

A bureaucratic bottleneck caused by paper work and insufficient staff at RUS adds to the disruption; the result is major delays in many projects. The situation has left communities and private builders in a tricky situation. Rather than wait for federal funds, some project leaders are striking out on their own:

Halstad [Telephone in northwestern Minnesota] was selected early and chose not to wait for stimulus dollars to be in hand, therefore securing most of the needed fiber before the shortage took hold. "We just jumped on it," said Tim Maroney, Halstad's CEO. "We didn't wait for the money to come. We started the engineering and negotiations. We took a chance."

Not all projects are in a position to take a chance, especially public projects that are under tighter scrutiny and subject to a higher level of transparency. Public networks must also contend with attacks from the private sector, which we have seen several times in Lake County. At $66 million, the project is the largest ARA approved project in Minnesota. Mediacom, which only serves a few towns in the project area, has filed a complaint with the Department of Agriculture Office of Inspector General. (See a PDF of the press release here) and the Minnesota Cable Communications Association has started a fear, uncertainty, and doubt campaign to kill the network for many rural people who Mediacom never plans to serve.

Aggressive and territorial incumbents, material shortages, and bureaucracy, are all hurdles facing the new networks. Municipal networks have the added threat of state preemption which can, and does, put the skids on great ideas to bring high-speed broadband to more people. As these projects are completed and the social and economic benefits of community networks becomes realized, we hope some of those hurdles will disappear.

Christopher Mitchell on PK's In the Know Podcast

Public Knowledge recently had me as a guest on their "In the Know" weekly podcast. Our interview is the last half of the show. The videos we reference in the discussion are embedded below.

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The Fundamental Danger of Restricting Local Authority to Build Broadband Networks

Several days at the National Conference for Media Reform in Boston gave me time to reflect on the importance of protecting local authority to build, own, and operate their own networks connecting people and businesses to the Internet. Multiple presentations focused on the importance of and strategies for ensuring access to the Internet is not controlled by a few companies -- and most of these strategies are focused at federal government agencies and Congress.

While we support these efforts, the Institute for Local Self-Reliance is not a DC-centric organization. We try to help folks in DC learn about what is happening outside the beltway, but our passion and work focuses directly on helping local communities invest in themselves and preserve their self-determination. 

Access to the Internet will likely be the key infrastructure investment that determines how well communities fare in the coming years. Unfortunately, they have very little control over how those investments are made when the networks are owned by private, absentee companies. Efforts like Universal Service Fund reform, fixing the FCC, re-writing the telecom act, and ensuring network neutrality depend on overcoming incredibly powerful (due to their scale and lobbying power) interests in Washington, DC. But local communities have very little power outside their borders... with some in state capitals and practically none in the nation's capital.

Attacks at the state level on the fundamental right of communities to build this essential infrastructure are intended to eliminate their one means of gaining some control over their digital future. Too many states already ban or limit local authority to build these networks -- and with the Time Warner Cable bill to crush community networks in North Carolina picking up steam and South Carolina's similar attack even on broadband stimulus projects, we will see hundreds more communities with no power to ensure their citizens and businesses have access to fast, reliable, and affordable access to the Internet.

This is deeply concerning.  Taking away the one tool communities have to meet connectivity needs locally reducses them to begging providers to invest.  Many communities have already traveled this route and the results are rarely good.  

We strongly encourage you to talk to your legislators - (if you are in North Carolina, you need to do this IMMEDIATELY - the Senate is poised to act; see Stop the Cap! for more information) to say that communities must have the freedom to choose locally whether a community network is appropriate (and what that would mean, as there are a variety of approaches).

Talk to city leaders too, to make sure they are communicating with state officials, national officials, and relevant organizations (like National League of Cities, National Association of Counties, etc). Cable and telco lobbyists are constantly spreading lies and trying to preempt local authority. If decision-makers do not hear from you, the lobbyist message resonates all the more.