SCN: Broadband

[Steve]

x-no-archive: yes

=====================


(Jeffrey Benner, Salon)---The Federal Communications 
Commission is quietly handing over control of the broadband 
Internet to a handful of massive corporations.  

In March, the FCC ruled that cable companies do not have to open 
their networks to competing Internet service providers, or ISPs. A 
FCC proposal to extend the same exemption to DSL service is 
pending. If approved, the proposal will allow local phone 
companies, now down to four "Baby Bells," to deny other DSL 
providers access to local phone networks. Currently, all DSL 
providers are guaranteed access to phone networks under the 
FCC's interpretation of federal telecommunications law.  

Telecommunications, cable, and media companies (increasingly 
one and the same) and their allies in Congress have campaigned 
for years to deregulate most aspects of the telecom industry. 
Under the current administration, and the leadership of FCC 
chairman Michael Powell, those efforts have finally begun to pay 
off.  

The trend profoundly concerns consumer advocates and some 
Internet policy experts. They warn that if the FCC goes through 
with its plans, cable companies and the Baby Bells will quickly 
establish a monopoly on broadband service over their own 
networks. Consumers accustomed to thousands of competing ISPs 
to choose from for dial-up narrowband Internet access will be left 
with just one or two options for broadband service. 

One worry is that the lack of competition will yield high prices and 
poor service. But the far more urgent concern is that media 
conglomerates will use their control over broadband pipes to 
restrict access to content, information, or technologies that 
compete with their own content or otherwise threaten their 
interests.  

"The past two decades on the Internet have been a uniquely 
consumer-friendly environment," says Mark Cooper, research 
director at the Consumer Federation of America. "Now that is up 
for grabs. The essential ingredient of the Internet was preventing 
the owner of the facilities from dictating content. Now, eight cable 
companies will decide what the public will be offered, not 8,000 
ISPs." The CFA, along with the Media Access Project, the Center 
for Digital Democracy, and the Consumers Union are challenging 
the FCC ruling on cable broadband in federal court.  

Despite those dire warnings, the FCC's policy on broadband 
enjoys strong support. Companies with a stake in the matter are 
gung-ho for it, at least for their own networks, and many 
independent economists and public policy experts also find the 
FCC's deregulatory approach to broadband enlightened and long 
overdue. They scoff at the idea that the freewheeling Internet can 
be controlled by any company or group of companies. And they 
argue that the current regulations, particularly the open-access 
requirements for DSL, actually discourage private investment in 
new broadband infrastructure and technology. Who wants to build 
a new network -- whether it's DSL, satellite, or "fiber to the home" --
 if you then have to share it with competitors?  

If the government steps aside, they say, robust competition will 
develop between different technology "platforms" such as cable, 
phone, satellite and local wireless, giving consumers plenty of 
choices and stimulating a build-out of broadband infrastructure at 
the same time.  

"If you have competition between platforms, consumers will be 
better off," says Randolph May, a communications policy expert 
with the Progress and Freedom Foundation. "The problem is that 
regulation impedes investment and new entrants to the market."  

Further complicating the picture is the massive consolidation in the 
media and telecommunications industries that has been building 
for years. That consolidation is expected to accelerate as the FCC 
throws out limits on how large and broad media companies can 
grow. Once those limits are gone -- some have already been 
eliminated -- it is quite plausible that a single media company could 
control the broadcast television stations, newspapers, radio and 
broadband Internet access in a single city.  

Even some conservatives worry about this concentration of power 
among the very companies seeking unregulated control over 
broadband Internet access. Kenneth Arrow, a Stanford economist 
who won the Nobel Prize for his free-market theories, supports the 
deregulation of broadband. But he also expresses concern about 
pushing reliance on the free market too far. "I am worried about 
concentration in the media," he says. "That does bother me."  

The heart of the anti-deregulation camp's argument is that the 
narrowband Internet owes its phenomenal success as an engine of 
innovation, creativity and economic growth to government 
regulations that guaranteed open competition. Current 
telecommunications regulations, originally written to break up the 
Bell telephone monopoly, require open access to phone lines for 
all ISPs and forbid the Baby Bells to tweak with the content flowing 
over their networks. 

If such protections are not extended to broadband service over 
cable, and are lifted from DSL over the phone lines, those against 
deregulation fear that the openness, innovation, and creativity that 
made the narrowband Internet revolutionary will wilt in the tight fist 
of corporate control. Huge media companies -- increasingly fearful 
of the threat posed by the Internet to their proprietary content -- will 
jump at the chance, they say, to lock things down.  

"There is a fundamental battle going on," said Larry Lessig, a 
Stanford law professor and an expert on Internet history and 
policy. "There is a strong political movement to remove all 
obligations to keep the network open and the Internet as we knew 
it."  

On March 13 the FCC commissioners ruled, 3-1, that cable 
broadband is an "information service" rather than a 
"telecommunications service." By toggling definitions just so, the 
commission cleverly managed to exempt cable broadband -- widely 
acknowledged as the key communications network of the future -- 
from all the rules that apply to telecommunications services under 
the Telecommunications Act of 1996. The most important piece of 
telecom legislation in 60 years, the act, among other things, 
requires telecommunications companies to open up their networks 
to competition.  

This open-access requirement is the reason you can choose from 
among hundreds of long-distance carriers and from among 
thousands of ISPs for dial-up access to the Internet. Under the law, 
local phone companies must allow other companies to sell services 
over the phone lines, even if they compete with the phone 
company's own services or products. 

The Telecommunications Act also forbids network owners from 
meddling with content on their network. This is why narrowband 
users -- and thus far, DSL users -- can fax, or talk, or download 
music off the Internet without permission or fear of interference 
from the local phone company. The rules were written to prevent 
the owners of the telephone wires from using their power over the 
lines to control content or stifle competition.  

Over the past several years, as cable companies have begun 
offering services generally considered to be telecommunications -- 
Internet access, digital telephone service, video conferencing -- 
there has been an increasingly bitter battle between cable 
companies and consumer advocates over whether open-access 
requirements and other regulations that apply to 
telecommunications should also apply to cable. The March ruling 
settled the question: Telecom rules won't apply to cable 
broadband.  

The 1996 act defines "telecommunications" as simply "the 
transmission, between or among points specified by the user, of 
information of the user's choosing, without change in the form or 
content of the information as sent and received." Consumer 
advocates argue this should apply to cable broadband. 

Although the act, and the FCC, have long referred to high-speed 
Internet access as "advanced telecommunications services," the 
FCC decided in its March ruling that cable broadband is really 
better described as an information service. Although technically 
still under FCC jurisdiction, there are no significant regulations on 
information services, which include services like voice mail. As a 
"declaratory ruling," the commission reached its decision without a 
hearing or public comment period.  

FCC commissioner Michael Copps, the lone Democrat on the four-
member commission, wrote in his dissenting statement that the 
ruling amounted to a breach of the Constitution.  

"Today we take a gigantic leap down the road of removing core 
communications services from the statutory frameworks 
established by Congress," Copps wrote, "substituting our own 
judgment for that of Congress and playing a game of regulatory 
musical chairs by moving technologies and services from one 
statutory definition to another. Last month I remarked that we were 
out-driving the range of our headlights. Today I think we are out-
flying the range of our most advanced radar."  

But the FCC is not stopping there.  

For years there has been clamoring from all sides that the same 
regulations should apply to all types of broadband access, 
although opinions differ on what the rules should be, or if there 
should be any at all. Public policy for broadband is particularly 
confusing, because the service is offered over cable, phone and 
wireless connections, and each of those sectors has traditionally 
had a separate set of regulations. Chairman Powell has made it 
plain he would like to clear up the confusion and have consistent 
rules.  

In February, the FCC proposed lifting the current open-access 
requirement for DSL service. No decision has been reached yet, 
but now that the FCC has ruled that cable companies will not have 
to open their networks to competition, and given Powell's 
enthusiasm for consistent regulations -- or lack of them -- it seems 
a safe bet the FCC will let the Baby Bells shut out their 
competitors, too. The logic is essentially that one monopoly 
deserves another.  

The prospect of broadband provision reduced to a few 
competitors, each with a monopoly on their own platform, scares 
the hell out of consumer groups that have fought the creation of 
corporate monopolies over media and information sources for 
years. Because media conglomerates such as AOL have begun 
buying up the pipes that deliver the content they produce, the 
situation seems even more ominous. 

In short, consumer advocates worry these companies will mess 
with content in order to force the Internet to serve their own 
interests. They argue, for example, that a cable company will never 
allow streaming video to flow over its cable broadband lines if it 
competes with its cable television service. Even the right to "click 
through" to the Web won't be guaranteed, they warn, and 
companies are likely to turn the Internet into walled gardens of 
their own content -- think AOL with no escape hatch to Google.  

"The path the FCC is currently on will change the Internet that you 
know," said Cheryl Leanza of the Media Access Project (MAP), a 
public interest telecommunications law firm. "Currently, rules 
prevent phone companies from controlling content in any way. 
There is no content protection for cable, and the FCC has 
proposed to take away the protections on content discrimination 
for DSL. The impact will be breathtaking."  

Like consumer advocates, free-market supporters trumpet the 
importance of competition among ISPs, and fear a monopoly on 
broadband. But they think the access requirements and the other 
rules in the Telecom Act stifle rather than secure competition, 
innovation and investment, and the monopolist they are concerned 
about is Uncle Sam. "I'm a lot more worried about John Ashcroft 
than John Malone," quipped Gerald Faulhaber, chief economist of 
the FCC from 2000 to 2001, referring to the attorney general and 
to one of the top power brokers in the cable industry.  

At the heart of the argument that the free market will save us lies 
the belief that competition between DSL, cable, satellite, local 
wireless and other technology "platforms" not yet imagined will be 
more than enough to guarantee that consumers will get the 
Internet when, where, and however they want it. Even if one 
company enjoys a monopoly on one of those platforms, the theory 
goes, it will not amount to a monopoly on high-speed Internet 
access overall. Better still, they say, encouraging a horse race 
between platforms will mean that billions of dollars in private 
investment will pour into broadband infrastructure and equipment.  

"It's clear the FCC is moving toward putting cable off-limits to 
regulation [under the Telecommunications Act], and I think that's a 
great idea," said Faulhaber, who now teaches economics at 
Wharton. "I wish Michael Powell would do more to encourage 
platform competition. As long as people think this will be regulated, 
no competitor is going to jump in."  

Competition between platforms would indeed steal an awful lot of 
thunder from those making dire predictions that mega-corporations 
are about to capture control over the next generation of the 
Internet. If my cable company won't let me click through to the Web 
or get streaming video, I can get DSL, or a satellite dish, or a 
wireless connection.  

But the likelihood that robust competition will actually develop for a 
majority of households remains a hotly contested question. As of 
June 2001, the latest official statistics available from the FCC show 
2.7 million U.S. households using DSL, 5.2 million using cable 
modem, and 200,000 broadband via satellite. Fifty-eight percent of 
U.S. zip codes (not necessarily households) had more than one 
broadband option available. Twenty percent of zip codes had no 
broadband service at all.  

Advocates of broadband deregulation tend to be very optimistic 
about the potential for interplatform competition to improve; its 
critics are not.  

The pessimists say that cable is too far ahead, that DSL doesn't 
have the bandwidth to compete with cable on key applications like 
video streaming, and that satellite broadband -- besides its tiny 
market share -- works well for downloading but not uploading. "In 
the abstract, no one would deny that 10 different platforms would 
be good," said Leanza of the Media Access Project. "But it's naive 
to assume that most people will have more than one platform 
available."  

Optimists point out that DSL is catching up and network upgrades 
would make it just as fast as cable modem, that satellite is a real 
option just needing time to develop, and that new options like local 
wireless, fiber to the home, even networks over power lines, will 
take off if local, state and federal bureaucracies would stop 
standing in the way.  

In the most extensive independent study of broadband to date, the 
National Research Council came to a mixed conclusion regarding 
interplatform competition. The report found that interplatform, or 
"facilities based," competition, is important and should be 
encouraged. But it also predicted it would not take hold 
everywhere and should not be relied on exclusively for consumer 
protection.  

"The report found that facilities-based competition is important, but 
don't assume you're going to get it," says David Clark, a computer 
scientist at MIT and a coauthor of the NRC study. Some locations, 
like big cities, might get three competitors, others two, and some 
just one, he said. Nevertheless, Clark cautiously endorsed the 
current FCC policy of deregulation.  

"The gamble is to get broadband out there, no matter what it looks 
like," Clark said. "You might try for a level of competition you don't 
get. You might gamble and lose. But I would say, get it out there."  

That is a gamble consumer advocates are not willing to take. In 
their view, the best possible outcome of the bet is bad, the worst 
case catastrophic. "Even if three top platforms reached every 
household, we will be trading hundreds of [ISP] choices for three," 
says Leanza, but she thinks even that number is too much to hope 
for. "Deregulation can only work if competition is in place," Leanza 
says. "You can't have both deregulation and monopoly, and that is 
where we are headed."  

Viewed in the context of the FCC's campaign to deregulate media 
and telecommunications in general, the concerns about who will 
control broadband become even more urgent. With quite a bit of 
prodding from the courts, the FCC has been tossing out or 
rewriting rules, called "ownership caps," that limit how large and 
broad media conglomerates can grow. 

The cap on how large cable companies can grow is gone. So is a 
limit on how many broadcast television stations one company can 
own. A "cross-ownership" rule forbidding cable companies from 
buying broadcast television stations has been scrapped. Another 
that forbids ownership of newspapers and television stations in the 
same market is under review, as is a restriction against owning 
more than one broadcast television station in the same city.  

Analysts agree the regulatory changes already made will soon 
unleash a new wave of consolidation in the media sector. Among 
companies that deliver broadband, the consolidation is already 
under way. 

In December, AT&T agreed to sell its cable division to Comcast, in 
a deal valued at $72 billion. If approved, the combined company 
will have 27 million subscribers, or about 40 percent of the cable 
market. EchoStar and DirecTV, the top two satellite television 
companies, have also announced plans to merge. The combined 
company would essentially have a monopoly on satellite television. 
The two companies argue they need to merge in order to compete 
with the likes of AT&T Comcast.  

"At the end of this, one company in a community could own the 
newspaper, several TV and radio stations, the cable company, the 
principal ISP -- maybe even the phone company!" said Jeff 
Chester, director of the Center for Digital Democracy. "This stands 
the First Amendment rights of citizens in the digital age on its 
head."  

For those who, like Chester, are worried that deregulation will 
result in a dangerous consolidation of power among a handful of 
media companies in traditional media like television, print, and 
radio, keeping the Internet out of their control has become all the 
more urgent. In their minds, the battle for broadband could amount 
to democracy's last stand. "This is a war for the heart of the 
Internet," Chester said. "Will a few telecoms be allowed to seize 
control of it, or will it be preserved as a democratic resource? It's 
David versus Goliath."  

The cable companies and Baby Bells disagree, arguing that there 
is sufficient competition both within and between platforms and that 
more can be expected. AT&T's cable division has voluntarily 
agreed to let EarthLink sell cable modem service over AT&T-
owned cable in Boston and Seattle, and it is promising to open 
more markets soon. But skeptics say the company has been 
dragging its feet on opening access for years and is giving token 
access now to head off mandatory requirements as a condition of 
its pending merger with Comcast, another major cable company. 
As a condition of the merger between AOL and Time Warner last 
year, the Federal Trade Commission required the combined 
company to open its lines to at least three competing ISPs.  

But, oddly, the same cable corporations that oppose mandatory 
open access for their own cable networks are among the most 
eloquent and spirited advocates of continued mandatory access 
for the telephone lines. Both AT&T and AOL Time Warner have 
asked the FCC to maintain open access for DSL -- a market both 
would like to crack -- arguing that the rules protect consumers. 
Both companies oppose placing the same requirements on their 
cable networks, markets they would like to protect.  

"For decades, the FCC has successfully promoted the openness of 
our nation's wireline infrastructure," AOL Time Warner lawyers 
wrote in comments submitted to the FCC on its proposal to 
eliminate open-access requirements for DSL. "It understood that by 
ensuring non-discriminatory access to wireline networks, consumer 
welfare would be optimized."  

Hearing AOL laud the benefits that open access offers consumers 
on DSL, despite its opposition to such access for cable, triggers 
eye-rolling fits among consumer advocates who want open access 
for both cable broadband and DSL. "This double standard 
illustrates what's at stake," said Chester. "Media giants are 
manipulating broadband for their own purposes -- not the public 
interest."  

Asked why AT&T supported open-access requirements for phone 
lines of local carriers, but not for its own cable network, AT&T 
spokeswoman Claudia Jones said: "Cable and telephone are 
different animals. There is ubiquitous competition for cable. 
Satellite is really bringing competition to the cable market. But 
there is virtually no competition in the local telephone market. The 
Bells can't get what they wanted in Congress, so they are looking 
to the regulators."  

"The hypocrisy is outrageous," said the Consumer Federation of 
America's Mark Cooper. He thinks getting regulators to overrule 
Congress is exactly what AT&T's cable division has done by 
successfully persuading the FCC not to apply open-access 
requirements to cable broadband.  

In the end, the battle over broadband is about who has control 
over information. One unlikely but eloquent spokesman for the 
importance of fair access to information is FCC chairman Powell 
himself. Speaking at the Broadband Technology Summit in April, 
an event sponsored by the U.S. Chamber of Commerce, Powell 
said:  

"You name it, and information plays a vital role in making a 
decision, making a commitment, taking a risk, or agreeing to part 
with something of value. Often in these transactions the 
information one has will determine if the transaction is fair, or 
whether someone gets taken -- the taker having superior 
knowledge about the deal."  

For those who are convinced Powell's policy on broadband could 
permanently tip the balance of power over information toward 
massive corporations, the irony of his statement must be almost 
unbearable.  

But catastrophe is hardly assured. Perhaps technology and the 
free market will come to the rescue. They have before. What is 
certain is that by deregulating broadband, the FCC is taking a 
tremendous risk that could have unforeseen consequences. A risk 
few people even know they are taking, fewer still understand, and 
only four get to vote on.  

The scenario is not new. In 1981, Congress quietly eased 
restrictions on savings and loan houses, allowing them to invest 
their federally insured deposits however they pleased, even in, 
say, junk bonds. In the mid-1990s, the SEC softened rules that had 
prevented accounting firms from consulting for their auditing 
clients. Aside from a few stray government watchdogs, a handful of 
Beltway bureaucrats, and a clutch of corporate lawyers, those 
obscure but radical experiments in deregulation went unnoticed -- 
until it was too late.  


Copyright 2002 Salon.com





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