April 14th, 2010
Net Neutrality: The Wrong FCC Decision.
The Wrong Legal Opinion. The Wrong Fight –
Infrastructure, Competition and Control
Over the Network Are the Issues, Not Net Neutrality.
Opening the Networks in a Traditional
Way Will Not Solve the Current Problems.
Is It Time to Give AT&T the “Broadband” Networks and We Keep the “Public Switched Telephone Networks”?
>Is Net neutrality dead? CNET Many people are wondering
if the recent appeals court >decision >against the Federal Communications
Commission means it's curtains for an open
Internet.
>http://news.cnet.com/8301-30686_3-20001886-266.html?part=rss&subj=news&tag=2547-1_3-0-20
A recent court decision ruled (with caveats) that the
FCC did not have the authority over the cable companies’ Internet service
provisioning, and the complications known as “Net Neutrality” (NN),
such as blocking or in some way limiting a customer’s service.
Unfortunately, NN is simply a failure of a market without adequate competition.
We have been dragged off the focus of the real issue,
the infrastructure. There is a phone and cable wire in homes and
businesses, etc. Those wires should allow someone
to pick and choose the services over that wire, and if their Internet
or broadband provider blocks or degrade their service, the customer
can find another provider. Instead, there are only 2 providers
in most markets with the same collusive-conditions – block all competition.
You can’t go elsewhere.
Thus, even if the Net Neutrality issue
was ‘cured’ by the FCC, the problems are much deeper and they
would still continue to plague
The underlying problem
is that the phone and cable companies have taken control of
And it wasn’t because AT&T, Verizon et al didn’t
receive financial incentives. As we have written previously, the phone
companies made massive commitments to rewire entire states, schools,
libraries, etc., and received billions
per state to do these upgrades– yet, the work was never done. See our
report on the subject outlining the fiber optic plans of AT&T, Verizon
and Qwest that were supposed to be completed, paid
through the financial incentives given in 26 states. http://www.newnetworks.com/FCCCITIbroadband.pdf
We estimate the companies already received $320 billion
and counting, as the companies continue to get phone rate increases
to pay for fiber optics and other services.
Thus, vesting control to AT&T and Verizon has not
proven to be a wise move when
But it gets worse and more devious. Not only was the
money to be used to upgrade the states’ utilities, the Public Switched
Telephone Networks, pocketed by the companies,
but just to show you how slight-of-hand this ‘broadband network’ discussion
goes, AT&T is now claiming that there are really two different networks
– the old “Public Switched Telephone Networks”, (PSTN), also known as
the state phone utilities, and the new shiny “broadband network”.
In fact, AT&T has filed with the FCC to start to
close down the Public Switched Telephone Networks. It claims that the
PSTN is a drain on broadband investment. We’ve written about this
previously:
http://www.niemanwatchdog.org/index.cfm?fuseaction=ask_this.view&askthisid=00443
It’s absurd on its face because there is really only
1 phone network, the critical telecommunications infrastructure of the
state, collectively called the state utilities
--- and we believe that they have been hijacked illegally. Let me explain:
It was the utilities that were supposed to be upgraded to fiber optic
services. It was the utilities that were opened to all forms of competition
by the Telecom Act and state laws and it is the utilities that are currently
funding Verizon and AT&T’s new networks in the form of higher phone
rates, which keep getting raised.
And yet, over a 25 year history, there’s been a total
failure to properly upgrade these utilities – the Public Switch Telephone
Networks . The failure is clear; we’re 15th in the world in
broadband for a reason ---and after 25 years of AT&T and Verizon’s
rule, we sit here today and are bickering about net neutrality.
Opening the networks in a traditional way will not
solve the current problems.
There are many who call for ‘opening’ the networks
for competition. We’ve been on record supporting fully opened infrastructure
since 1992. The current strategy is centered on an ‘arcane’
but important definitional issue that is haunting this entire discussion
--- “telecommunication service” vs “Interstate information service”.
The previous FCC reversed the Telecom Act when the agency closed
competition by changing a definition – claiming that broadband (a former
telecommunications service) and the Internet service (that rides over
the infrastructure) was one product – an ‘interstate information service”
and not a “telecommunications” service.
And what it means in English is – Telecommunication
services have obligations. ‘Interstate information
services’ do not (with caveats). And AT&T, Verizon and the
cablecos obviously do not want obligations. I
also note that this argument is also jargonized in the industry by calling
telecommunications services “Title II”; other areas have different ‘titles’.
But it is more than that. Telecommunications
services would allow for competition; interstate information services
do not have that obligation.
Unfortunately, there is a dark caveat –The history
of the previous opening of the networks in 1996 shows us that simply
reopening the networks can’t work. The reason is that the phone companies
will harm the competitors in many ways that helps to put them out of
business, but also harms customers who use the competitors as they are
the brunt of the incumbents’ unstated rule to harm competition. Worse,
they would still be in control of the networks; they would still have
power over the agenda, pricing etc.
If you believe in a fairly-priced, vibrant, fiber optic,
really, really fast, open to all competitors, broadband
future, there is only one solution:
Separate Verizon and AT&T’s broadband networks
from the local phone utilities. Since AT&T claims there are 2 networks
– a broadband network and the “PSTN”, the utilities --- Then let’s give
AT&T what it wants – the ‘broadband network’, which today is just
a phantom in accounting, as AT&T’s entire broadband product U-Verse,
travels over the existing phone utility wires. Verizon’s FIOS,
is, at best, a fulfillment of state obligations to
upgrade the utility. (For example, 100%, the entire state of
The other reason to do this would be to stop the illegal
flows of money going from the utilities today, including the major phone
rate increases, to fund the companies’ other products and services.
Under the old utility models, extra profits were created by raising
rates to pay for broadband. Today, the company has been draining the
utilities money – having local ratepayers illegally fund other projects,
sometimes even overseas.
Also, we estimate that over the last two decades customers
paid about $3000.00 per household in customer overcharging, meaning
that the customers ended up as ‘defacto’ (*read illegal) investors,
as they were charged for a fiber optic service they never received.
And, schools, libraries and hospitals in many states were also to be
upgraded to fiber optics. Shouldn’t the state investigate whether we’re
paying and paying and paying for the same services that never got deployed?
Stopping the flow of monies
out of the utilities would be sufficient to supply everyone in the state
with fiber-based broadband; no need for any more funding. Prices
would go down as the ‘broadband’ companies would actually have to pay
for items like ‘advertising’ which they now mooch for free.
The utilities are also required to be ‘ubiquitous’
– today, everyone has phone service available as part of the law. In
most states, the broadband plans called for everyone, low to high income
neighborhoods, rural, urban and suburban municipalities alike to be
served.
Another benefit would be that these networks would
be open to competition. While the wire may be ‘regulated’ as there are
not going to be lots of companies to rewire the states, and since the
plan was and should be to upgrade the current obligation – phone service
for everyone with a new wire that can handle faster speeds -- competition
was also part of state and even federal laws. The
Telecom Act of 1996, as well as state laws all had provisions for competition.
It drives innovation, growth of the economy.
More to the point, since customers were are still defacto investors,
customers were supposed to have choices for service providers. Separating
the companies from the wires would guarantee choice.
And competition solves the Net Neutrality problem ---
You get harmed, you find someone else. Let the market, not the duopoly,
control the companies’ behavior.
One other serious concern today and the future: Stop
the continuous rate increases, especially on low income, low volume
customers that are happening in almost every state – in the name of
broadband.
Over 1/3 of the
In short, Net Neutrality
is a symptom of a larger problem. Breaking up AT&T and Verizon would
be better than what we have today – A “Please Sir, may
I have another?’ market where those who
were the caretakers of, that’s the “Public Switched Telephone
Networks”, failed for 25 years to properly upgrade the networks,
and yet now claim it’s private property for personal use.
Trust them again? You got to be kidding me.
So, let’s give AT&T what it wants: AT&T, you
keep your broadband networks. We’ll take back the utilities and use
the current funding to do the upgrades. Please make sure you pay us
back for all of the monies that you have received over the last two
decades for network upgrades that you were required to do and never
did, and the use of the utility rights of way and advertising and…
Sound unreasonable? Hardly.
26 years ago AT&T was broken up because of its market power. The
Telecom Act of 1996 failed to open and keep open the ‘last’ mile, the
wiring to customers’ homes, businesses, etc. And the mergers helped
to rebuild Humpty Dumpty. As a country we have nothing to show for it
– We’re 15th in the world.
And now they want to even degrade, block or harm your
service. There’s no competition to go to, is there? We need to break
up Ma bell… again.
For a full discussion of the last 25 years of telecommunications
history, including AT&T, Verizon and Qwest's revenues, profits,
construction, employees, etc--- or a plan on how to restructure
telecommunications see:
AT&T Breakup 25th Anniversary
event. http://www.isoc-ny.org/?p=618
Bruce Kushnick
New Networks Institute