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Coronavirus and the Telecom Crisis

The current Corvis-19 pandemic provides a unique vantage point to assess key social institutions of American life. Sadly, none has failed so gravely as the nation’s health care system, especially as underwritten by the private insurance model. The crisis of the U.S. healthcare system raises the deeper, more fundamental, question as to whether health care is a privilege or a right, a private business or a social utility?

This debate over the role of social services, whether private or public, defines other activities including housing and food, water, electricity and even roadways and telecommunications. The logic of capitalism demands that everything be turned into a commodity, something bought and sold, from one’s labor power to the air we breathe. And yet, as has occurred numerous times, the logic of the market – while beneficial for a select few — has failed the public at large. In such cases, the power of the redistributive society intervened.

When the Corvis-19 crisis is contained and an effective vaccine widely adopted, a day of reckoning will come for the private insurance system of health care. The same question will be raised regarding other social institution, especially the nation’s telecommunications system. Would Americans be better served by the current quasi-monopoly of private telecom companies or by publicly owned communications utilities?

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The Corvis-19 pandemic has exposed the underlying weakness of the U.S. health care system based on private insurance. It has also exposed the limitations of the private, minimally “regulated,” telecommunications industry.

The policy of shelter-in-place to contain coronavirus has led to a significant increase in broadband usage. As one report notes, “in the week from March 11 to March 18, 2020, the average daily broadband data usage per user in the United States was 6.3 GB during the office hours, an increase of 41.4 percent compared to January.” It also points out that there’s been a 25 percent increase in overall average bandwidth usage between January and March 11-18, 2020 – from 12.19 GB to 15.45 GB. It concludes, “the increase is most likely due to more people working from home and overall restrictions for people to stay at home.”

Sadly, this report does not document the inequities inherent in the current private-market telecom system. Former FCC attorney Gigi Sohn estimated that some 141 million people in the U.S. lack access to fixed broadband at speeds of 25 Mbps, the FCC’s base definition of broadband.

Another report estimates that “42 million Americans, including a quarter of rural residents, lack access to broadband internet — and this doesn’t even include the people who don’t have broadband because they can’t afford it.” It goes on to warn, “nearly 5 million households with children, half of adults earning less than $30,000, and roughly six out of ten households in poor cities like Flint, Michigan and Trenton, New Jersey have no home broadband connection.”

In addition to the lack of connectivity, these poorer families with children tend to be dependent on smartphones – as distinguished from Internet-enabled devices (e.g., desktop or laptop PCs or tablets) to get online. In addition, an increasing number of hospitals and medical centers are relying on telemedicine to safely screen and treat patients (especially with Corvis-19) and the lack of Internet connectivity will restrict remote services. Making matters worse, data caps on broadband services are forcing low-income subscribers to ration online access.

According to the latest data from BroadbandNow, there are 2,665 Internet service providers (ISPs) operating in the U.S. These providers fall into six types: (i) Digital Subscriber Line (DSL) (882 ISPs); (ii) copper (business T1/T3) (235); (iii) cable (447); (iv) fiber-optic (1,297); (v) fixed wireless broadband (1,568); and mobile broadband (LTE)(52).

These providers reach an estimated population ranging from just a few thousand to hundreds of millions. However, the telecom industry is dominated by a handful of huge conglomerates, the 21st century telecom trust — the top five telecom providers in 2018 (and the annual revenue) were: AT&T ($170.7 billion); Verizon ($130.9 bil); T-Mobile ($43.3 bil); Sprint ($33.6 bil); and US Cellular ($5.2 bil).

Unfortunately, the development of broadband has resulted in the U.S. becoming a second-tier communications country. A July 2019 report from the Organization for Economic Co-operation and Development (OECD) ranked the U.S. 15th of the 34 OECD countries in terms of broadband usage. The country’s position is pretty bleak per data rate. For mobile, it didn’t make the top 25 countries assessed; for fixed broadband, it ranked 11th at 130.9 Mbps – Singapore ranked first at 200.12 Mbps.

Compounding this picture, Americans pay more for inferior services. A 2019 report in Forbes assessed 6,313 mobile data plans in 230 countries and found that Americans pay the most for a gigabyte of data. Fees ranged from $0.26 in India and $0.27 in Kyrgyzstan to $6.66 in the United Kingdom and $6.96 in Germany. Costs in North America were the highest, averaging $12.02 in Canada and $12.38 in the U.S.

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The tug-of-war between the dictates of capitalist self-enrichment and the needs of the public good defines the modern era. In the decades before the Civil War, three innovative technologies helped transform the U.S.’s emerging industrial economy — canals, railroads and the telegraph. In the decades after the Civil War, there was increased concerns over the concentration of power by those with significant influence or control over key sectors of social and economic life.

As David Gabel points out, “the telegraphy was the nation’s first high-speed information network,” essential for an efficient railroad system and the integration of banking and brokerage houses into a national economic market. In 1876, the telephone was introduced and, according to the Bureau of the Census, “By 1899 telephony … not only had surpassed telegraphy in physical and financial magnitude, but by its very growth had seriously restricted the expansion of telegraphy.”

However, in 1877, the Supreme Court, in Munn v. Illinois, sought to limit the absolutist power of private interests, the tendency toward monopoly market control. In this early case, it ruled against grain-elevator operators. A decade later, in 1887, Congress adopted the Interstate Commerce Act that regulated the railroad industry, particularly its monopolistic practices. That same year, the Court extended the thinking behind the Commerce Act to telecommunications. It ruled, in Chesapeake & Potomac Tel. Co. v. Baltimore & Ohio Tel. Co.:

The telegraph and telephone are important instruments of commerce, and their service, as such, has become indispensable to the commercial and business public. They are public vehicles of intelligence, and they who own or control them can no more refuse to perform impartially the functions that they have assumed to discharge than a railway company, as a common carrier, can rightfully refuse to perform its duty to the public.

By 1901, the Court ruled in Western Union Tel. Co. v. Call Publishing Co. that the telegraphy was a common carrier and, as such, required to provide services on a nondiscriminatory basis. Nine-years later, with the Mann-Elkins Act (1910), Congress extended common carrier or public utilities status to telephones and telegraphs.

On September 21, 1932, the U.S. was in the throes of the Great Depression and Franklin D. Roosevelt was running for president. Not unlike today’s health crisis, he addressed a major social crisis of the day, faltering electrical service. “My answer has been, as it is tonight, to point out these plain principles,” Roosevelt told his audience in Portland, OR. “That where a community — a city or county or a district — is not satisfied with the service rendered or the rates charged by the private utility, it has the undeniable basic right, as one of its functions of government, one of its functions of home rule, to set up … its own governmentally owned and operated service.”

In 1934, following his election and amidst a deepening Great Depression, Pres. Roosevelt supported the enactment of the Communications Act of 1934. He recommended the creation of the Federal Communications Commission (FCC), writing: “I have long felt that for the sake of clarity and effectiveness the relationship of the Federal Government to certain services known as utilities should be divided into three fields — transportation, power and communications.” Under Title II of the Act, the FCC came to regulate telecommunications networks as common carriers.

Other key social sectors – the gas, electric and water industries – followed similar patterns of evolution. From privately owned and operated systems with weak municipal oversight (late-19th century); to a period of aggressive municipal regulation (Progressive era); to extensive municipal/state regulation and/or ownership (post-WW-II era); and, currently, deregulation, with limited state/municipal control and increased competition.

In the decades between the Great Depression and post-WW-II period, a spirit of state/municipal regulation was widespread. However, in the wake of the oil crisis of the mid-1970s and Pres. Ronald Reagan’s push at deregulation in the ‘80s, a new era of aggressive privatization of the economy was launched. Among the major initiatives of the period were the breakup of AT&T in 1984 into a long-distance company and seven regional Bell Operating Companies (RBOCs) and Congress imposing traditional rate regulation on cable television services.

It was under Pres. Bill Clinton that telecommunications was deregulated. He insisted that the 1996 Telecommunications Act would “promotes competition as the key to opening new markets and new opportunities.” And he argued, “it will protect consumers by regulating the remaining monopolies for a time and by providing a roadmap for deregulation in the future.”

***

Susan Crawford, a Harvard law professor, has been the strongest advocate for the replacement of the private operator, quasi-monopoly telecom system for one based on a public utility model. She has written, “a utility is not a luxury. Utility services can be sold by private or public entities, but they are always subject to public obligations to reach everyone at a reasonable price, with a service meeting public quality standards.” She reminds us, “services that start off as luxuries can become utilities as their centrality to life becomes clear.”

Digging deeper, Crawford lays out her analysis:

Utilities are things, physical networks, that public utility commissions regulate: electric, gas, communications, water, and wastewater, mostly. These commissions typically ensure that utilities provide reasonably priced, adequate, and efficient services to customers, while allowing the companies involved to recover their costs plus a fair return to their investors. These physical networks are considered to be “affected with the public interest.” They often have franchises from the government that give them benefits like special rights of access to rights-of-way in exchange for their promises to serve.

Over the last few years, states and municipalities have heard Crawford’s call for telecom as a public utility. One estimate finds that “more than 560 communities across the country are served by municipal networks and more than 300 are served by a cooperative.” Electric Power Board (EPB) of Chattanooga, TN, implemented the world’s first community-wide 10-gig Internet service, available to more than 170,000 homes and businesses. Other cities implementing telecom as a public utility plan are Virginia Beach, VA, that connects the city’s government buildings, schools, fire stations, and more. By connecting these sites, the city reportedly saves at least $500,000 per year. Schools in Portland, OR, are connected through a publicly owned network that cut costs by more than half (to $616 from $1,310 per month per site) and achieve speed 40 times greater. After a failed undertaken with Verizon, New York City is exploring implementing an open-access broadband network.

Bruce Kushnick, team leader of the Irregulators, a group of independent telecom expert challenging the FCC and various state telecoms, notes that the designation of “public” utilities is part of Illinois, New Jersey and California regulatory oversight (e.g., California Public Utility Commission).

The National Conference of State Legislatures (NCSL) notes that as of the 2019 legislative session, “45 states and Puerto Rico addressed broadband in issue areas such as educational institutions and schools, dig once, funding, governance authorities and commissions, infrastructure, municipal-run broadband networks, rural and underserved communities and taxes.” It adds, “thirty-one states and Puerto Rico enacted legislation or adopted resolutions.”

(The American Public Power Association reports that “about 2,000 cities with public power utilities or ‘munis,’ and more than 900 cooperatively owned power companies that collectively serve over 100 million Americans.”)

As expected, the telecom companies are aggressively fighting back. Some 26 states have adopted laws that seek to either restrict or prohibit municipally owned broadband networks. In 2018, they spent over $92 million to block or ban public telecom utilities.

When the Covid-19 pandemic is finally contained, a day of reckoning over the various failures of the American social system will likely come. Foremost, Sanders’ call for a Medicare for All plan may well gain political support in the face of the failure of the private insurance model tied to one’s employment. In a similar spirit, an increasing number of localities may move to offer municipally owned broadband services and push a campaign to – yet again – break-up the 21st century telecom trust.

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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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