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The End to Net Neutrality

by DAVID ROSEN

Verizon, AT&T and the American Legislative Exchange Council (ALEC) are spearheading a three-pronged attack against net neutrality, the open Internet and other open forms of digital communications.  If they succeed, telecommunications will be further “deregulated” and, thus, further privatized and monopolized.  As a consequence, telecom services will get more expensive, local requirements subordinated to the whims of huge corporate monopolies, competition and innovation will suffer and U.S. world ranking in terms of broadband speed will further decline.

Last year, many within the broad tech, Internet and media communities – as well as ordinary citizens — organized to halt the Hollywood studios and record companies from pushing new “anti-piracy” laws through Congress.  The battle against SOPA-PIPA is a model campaign for the next battle against the Communications Trust to preserve net neutrality, an open Internet and America’s very communications future.

One front in the campaign to end net neutrality is being pushed by Verizon.  In 2011, it initiated a federal suit against the FCC’s authority to regulate digital communications.  Currently, the FCC adheres to what is known as the “Open Internet rules,” an extension of the analog-era 1934 Communications Act.  They require all Internet Service Providers (ISPs) — like Verizon – to maintain “net neutrality” standards, thus treating all data equally and barring them from slowing down or blocking websites.

Verizon argues that in the new world of digital communications, it is morphing from an old-fashioned “common carrier” or distribution pipe into a publisher, somehow analogous to CNN or the New York Times.  It insists that FCC regulatory practices violate its 1st Amendment right to edit, prioritize or block its customers’ access to Internet content.   Many reject this contention.

In 1995, Verizon was created out of the merger of Bell Atlantic (covering New Jersey to Virginia) and the New York Bell operating company, NYNEX (covering Maine through New York).  In 2000, it acquired the independent phone company GTE and, in 2005, it acquired MCI, followed in 2008 with the acquisition of another independent, AllTel.  The FCC challenge may foreshadow Verizon’s long-term plans to follow in the footsteps of cable companies like Comcast and TimeWarner and integrate content ownership with near-monopoly control over distribution.

The federal D.C. Circuit Court is expected to rule on this sometime soon.  It is a pretty conservative and somewhat split Court.  In December 2012, it supported the FCC’s regulation of Verizon Wireless over data roaming services.  However, in 2010, it ruled that the FCC could not stop Comcast from blocking BitTorrent’s video sharing program. Stay tuned.

A second front is being pushed by AT&T and involves new Congressional legislation that would essentially end all regulatory obligations.  AT&T insists, “this [traditional] regulatory experiment will show that conventional public-utility-style regulation is no longer necessary or appropriate in the emerging all-IP ecosystem.” No accountability – problem with your bill, too bad; slow bandwidth speeds, good luck; rural customers, get f**ked; schools, hospitals, police stations, pay up or good-by.

To cover-up this campaign, AT&T’s PR flacks recently promoted a new “$14 Billion” investment plan to upgrade its network.  The nation’s leading media outlets — the New York Times, The Wall Street Journal, The Washington Post, Reuters, Fox News, Los Angeles Times, Forbes and Bloomberg – all gave it prominent coverage.  None of the established media asked the most obvious question:  What have the telecoms, telco and cable, been doing for the last 20 years?

Two decades ago the telecoms promised to build Al Gore’s “Information Superhighway” and were deregulated to do so.  Since then, they’ve pocketed an estimated $350 billion to build a post-modern digital telecom system.  What do we have today?  A 2nd-rate communications system!  Further deregulations – toothless regulation – will likely only make things worse.

A third front is taking place outside the Washington beltway. ALEC “model legislation” ending traditional telephone company accountability requirements has been adopted by 23 states. This legislation removes a host of current obligations, including providing basic service filing pricing information, meeting quality-of-service standards, provid basic service, provide Lifeline services or operate as the “carrier of last resort.”

* * *

The telecommunication industry is loosely regulated monopoly.  Broadly speaking, wireline phone and cable companies are “natural monopolies,” industries that require high start-up investment costs to build the infrastructure required to offer the services they provide.  Such monopolies are traditional in electricity, water and natural gas, regulated by federal, state and/or local entities.  As such, these regulated monopolies face limited if any competition.

Once upon a time, AT&T, the old Ma Bell, was a regulated monopoly.  In 1984, it was broken up into seven regional monopolies and two long-distance providers.  Over the intervening three decades, “deregulation” has led to ever-greater telecom market consolidation.  The new Ma Bell duopoly of AT&T and Verizon dominate phone and wireless services.

Cable is “regulated” as another natural monopoly.  Local governments regulate or oversee cable services through franchise agreements.  Over the last half-century, the cable industry grew into a network of micro-monopolies, with (for the most part) a single operator controlling a local territory.  Today, the more local the “regulator,” the less authority it has.  Like the telcos, cable companies face little to no meaningful competition.

The phone and cable companies run two different types of natural monopolies, one “open,” the other “closed.”  The best way to understand the difference is by considering the TV set top box.  Because the telco network is “open,” one can purchase a separate 3rd party Internet set top box from Apple, Roku or Boxee and access Over-The-Top (OTT) TV programming.  However, one can’t do the same with cable service that is, in effect, “closed.”

In 1996, the FCC requested the cable industry to “open” the cable box to 3rd parties.  It has steadfastly resisted repeated efforts to open its network to 3rd set-top boxes providers.  In October 2012, the FCC further strengthened the hand of the cable companies by granting them the right to encrypt broadcast channels or 1st tier programming.  It did this ostensibly to block consumers from “stealing” cable programming.  (Comcast is working the Boxee on an approved 3rd-party box.)

Way back when, both phone and cable providers used copper wires to run their very different networks.  Telcos employed “twisted pair” to carry analog voice signals while cable companies used “coaxial” cable to offer analog television programming; wonderfully appropriate for the analog age, twisted pair didn’t support video and coax didn’t support voice.  The telecom world was simple.

Well, those technology days are over, but telecom companies won’t give them up.  With digital communications, all data is 1s and 0s.  This should, in principle, encourage competition.  Yet, it has led to the very opposite, decreased competition.  The most revealing example of this process is the decisions by both AT&T and Verizon to cease building out their respective “next-generation” networks, U-Verse and FiOS, respectively.  As of December 2012, FiOS had 4.7 million subscribers; as of September 2012, U-Verse had 4.3 million TV and 7.1 million Internet subscribers.  More troubling, Verizon has entered into a $4 billion non-compete, “joint marketing agreement,” with TimeWarner and other cable companies.

* * *

The Communications Trust of telcos and cable companies, not unlike the giant media conglomerates, are moving to exercise greater control over telecommunications.  Their strategies are noteworthy.

One involves regulating data traffic.  Telcos endlessly complain about data bottlenecks and the need to impose restrictive data management methods to better regulate online traffic.  This is their oft-repeated claim to end net neutrality.  The basic problem with this argument is that, while the telecom network “backbone” is robust, the “last mile” to one’s home is woefully inadequate to support high-speed broadband.  And why is it inadequate?  This is the question, the industry, the Congress nor the media will ask.  Why?  The telcos still rely on the old “twisted pair” copper phone line and haven’t really invested in upgrading the last mile.

A second strategy involves gaining greater control over content, its ownership and/or copyright.  This was most clearly evident in last year’s battle over SOPA and PIPA, Congressional bills pushed by the Hollywood studios and record labels under the guise of “anti-piracy” legislation to control what streams on the web.  Verizon’s challenge to the FCC’s regulatory authority is a comparable effort.

A third approach is for the giant conglomerates to gain greater control over the market through vertical consolidation.  A generation ago, AT&T was broken up and now a new “Ma Bell” of AT&T and Verizon is back bigger and badder then ever.  Also a generation ago, GE pioneered the model of corporate control over content.  It successfully integrated (i) content creation with NBC production, (ii) content distribution through NBC broadcast channels and Owned & Operated stations) and (iii) content reception through GE TV sets.

Today, a new era of vertical integration is taking shape.  Cable companies Comcast, TimeWarner and Cablevision have proven that integrating content and distribution fattens the bottom line.  The capstone of this new business model is Comcast acquisition of GE’s old content business, NBC-Universal.  Similar efforts seem to part of the long-term development strategies of Apple and Google.  One can only wonder if AT&T or Verizon will move into the “content” business by acquiring Sony Entertainment or Yahoo, both stumbling companies?

The telecom trust is moving to impose data caps to neutralize net neutrality requirements and to end the Public Switched Telephone Network (PSTN), the underlying telecom system.  These efforts further the consolidation of communications by the monopolies.

Last year people successfully organized to fight SOPA-PIPA legislation.  This year, public interest and other groups are organizing to fight effort by telecoms to further privatize telecom service and block all regulatory oversight.  The AARP, Rural Strategies and others effectively resisted efforts by telcos in Kentucky and Ohio to raise rates and limit service.  Groups in New York and Washington, DC, are organizing to take on the telecom trust at both the state and federal level.  Stay tune.

David Rosen writes the blog, Media Current, for Filmmaker and regularly contributes to CounterPunch, Huffington Post and the Brooklyn Rail, check out www.DavidRosenWrites.com; he can be reached at drosennyc@verizon.net.

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David Rosen is the author of Sex, Sin & Subversion:  The Transformation of 1950s New York’s Forbidden into America’s New Normal (Skyhorse, 2015).  He can be reached at drosennyc@verizon.net; check out www.DavidRosenWrites.com.

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