Teletruth News Analysis: PART TWO: November 29th, 2007

NOTE: This is the second in a series examining how the FCC's brand of deregulation harmed America's economy and digital future.

Part One: 56% drop in wireline competition since 2004.


Part TWO: Summary:

To read the details of Part Two:

Killing Off 7000 Independent Internet Service (ISPs) Providers by the FCC Created Net Neutrality Problems -- a 74% Drop in Companies Since 2000.

The FCC Used Bad Data and Undue Corporate Influence to Destroy the Small ISPs, Violating Section 257 of the Telecom Act.

The FCC, FTC and DOJ Supported Actions that Blocked Small ISPs from Migrating Their Customers to Faster Services, Failed to Enforce Laws, Harming Choice and Increasing Duopoly Controls.


US Internet Service Providers (ISPs) Source: Census



















According to the Census, in 2000 there were 9335 independent, mostly small ISPs operating in America. By 2005, there has been a 74% drop in the number of independent ISPs in the US.


In Part One we discussed the drop of 10 million competitive lines since 2004 caused by the FCC's bad deregulatory decision. But that problem pales with the intentional killing off of 7000 independent ISPs, essentially causing Net Neutrality issues at every level.


If you are reading this and think that AT&T, Verizon and Comcast are "ISPs" - you need to rethink the definition. More to the point, you've been fooled. Those worrying about Net Neutrality issues missed the main point - that the FCC closure of the independent ISP market by eliminating the ability of these companies to migrate their customers to broadband was bad for America's Digital Future, but also gave total control to those who own the wires - the cablecos and telcos -- a duopoly at best.

It was these independent, innovative, entrepreneurial companies that brought America to the Internet and World Wide Web, not AT&T or Verizon.

Let me be clear about the terms "broadband", "Internet", "phone line" and "ISP" to show some important difference. Let's start with regular "dialup" Internet Service as a model.

A customer uses a computer modem and dials over a regular phone line the number of an ISP provider. This company connects the caller from the PSTN --- the Public Switched Telephone Network--- to another network called the "Internet" or World Wide Web -- a different, data network.

The "connection to the Internet" is NOT the same thing as the phone line and the phone service. There is also no tie to the speed of the connection, in this case top modem speed of 56kbps. So, an ISP is the company that connects the customer to the Internet, regardless of the speed of the connection.

Broadband, (for this discussion), is anything faster than dialup, such asADSL, ISDN or even fiber-based U-Verse or FiOS.

And Net Neutrality? If you had the ability to choose an independent, competitive Internet Service Provider, you can keep your fast service but can switch if someone blocks, degrades or limits your services. Unfortunately, we now have the owners of the wires controlling not only the networks but the services over those networks as well. It is an anti-trust case waiting to happen.

This was NOT the model we paid for or even agreed to -- We've been wronged, especially if you use or used an independent ISP.

In 1996, the Telecom Act opened up the utility, the PSTN, so that the monopoly would no longer have ultimate controls and customers would have choice. The Telecom Act mandated 'line sharing' so that the customer could use their same phone line for both voice calls as well as DSL -- a faster service over the old copper phone line.

Previously, the utility was restricted from bundling local, long distance, DSL, (broadband) and the ISP service because of anti-trust concerns or potential anti-competitive practices. (NOTE: The 'line sharing' portion is offered by a competitive local exchange company, CLEC, to an ISP to use.)

The independent Internet Service Provider was also allowed to receive wholesale rates to offer DSL ---the ISP could use the phone company supplied DSL service with their own ISP service. (NOTE: In many states, DSL upgrades were paid for by customers through excess phone charges, not by the phone companies, so the customers had rights for using this DSL service with an independent ISP.)

By 2000 there were 9335 ISPs according to the Census. Ironically, new-AT&T and Verizon were not even in the Top 10 of US ISP providers. Also, over 50% of all customers who went online were handled by small, independent ISPs, not the phone companies.

The decline in companies came for a few reasons.

First, the FCC refused to enforce basic laws, allowing anti-competitive behavior by AT&T (SBC), Verizon and Qwest, predatory pricing of wholesale rates where the wholesale rate could be more than the retail rate, or sub-standard customer service, such as not showing up for an installation.

Second, The FCC rewrote the Telecom Act to remove "line-sharing" and other requirements so that ISPs could not migrate their customers to faster services. Over 7000 companies were put out of business.

This change was caused because the FCC redefined the combination of 'connection to the Internet" and the "faster" networks as one item, calling the bundle an "interstate information service". This changed the 100 year definition that declared that the networks were separate from the applications that went over the networks -- i.e., while the ISP part was an 'information service', the wire and the speed of the connection was a "telecommunications" service with various obligations.

Thirdly, you've been deceived because the story you have heard from the FCC and FTC is the fictional version of what happened. The FCC actually rewrote the entire history of the Internet and broadband. For example, the Agency used 8-year old data, presenting erroneous picture for the number of ISP companies. The FCC also failed to examine how their decisions would hurt small businesses.

The FCC's attack on small businesses in direct violation of Section 257 of the Telecommunication Act has been happening at every level of discourse at the FCC, from current media consolidation issues, spectrum issues, and competitive issues, including erasing the small business obligations for broadband.


"a) ELIMINATION OF BARRIERS- Within 15 months after the date of enactment of the Telecommunications Act of 1996, the Commission shall complete a proceeding for the purpose of identifying and eliminating, by regulations pursuant to its authority under this Act (other than this section), market entry barriers for entrepreneurs and other small businesses in the provision and ownership of telecommunications services and information services, or in the provision of parts or services to providers of telecommunications services and information services." `

"(b) NATIONAL POLICY- In carrying out subsection (a), the Commission shall seek to promote the policies and purposes of this Act favoring diversity of media voices, vigorous economic competition, technological advancement, and promotion of the public interest, convenience, and necessity."

Another way of looking at this is that the wire-suppliers-corporate control over the FCC's activities has led to bad policies decisions that only favor those who can best afford to lobby, regardless of the public interest consequences.

Even the FTC is to blame. Their recent report on broadband concluded that Net Neutrality was not a problem, and calls the market "Broadband Internet" providers, tying the pipe and the application. Heavily quoting AT&T and Verizon sponsored 'experts', the FTC claimed that there were only 'hundreds' of providers, missing the 9000 that once existed.

To quote of a John Stewart, Comedy Central-like phrase "oops'"

To top this off, the FCC is currently contemplating the strip-mining of the remaining safeguards on something called "Special Access", which is the ability of companies to rent parts of the networks for use in broadband and even wireless competition. Known as "forbearance", this is just another term for removing the opening sections of the Telecom Act and once again harming the remaining small businesses. We will address this again, as the FCC's decision is due December 5th, 2007. See:

Without the competitors, as discussed in Part One, to balance out the forces of these massive companies, AT&T and Verizon, who don't compete on wireline services, have been able to rebuild Ma Bell and will continue to gain more controls, not less.

To read the entire Part Two including exhibits and links and readingmaterials:

Bruce Kushnick, Teletruth