Fast Lane, Slow Lane, No Lane, End Game in Telecommunications.
Part X in the series based on the new report “It’s All Interconnected”.
Fixing Net Neutrality Doesn’t Fix America’s Communications Issues — It Just Covers Them Over.
With over a million electronic comments filed at the FCC in the Open Internet proceeding, it is now clear that Net Neutrality (NN) has captured the attention of the tech savvy, activists, and the FCC. But, what is not clear to most is that Net Neutrality is simply a feign— it covers over the underlying problems of communications in America.
NN doesn’t have anything to do with getting America upgraded or more importantly, stopping the “No Lane”— the end game if AT&T, Verizon, Comcast and Time Warner continue on their path. These companies are the incumbent wireline and cable companies that control most of the wires in the US — and that also means that they control all wireless services. Control of the wires also gives them control over all services, including competitor services, but more importantly it gives them the ability to control who gets upgraded and who doesn’t, or who will be ‘shut off’ and end up in a ‘Digital Dead Zone’.
The “No Lane”.
- Verizon and AT&T have announced that they will be ‘shutting off the copper’; in upgraded areas they will force customers to move to the upgraded service (and more expensive) or be ‘shut off’; in areas that are not upgraded, customers will have to ‘migrate’ to their wireless service.
- AT&T’s proposed IP transition trial plan for the Carbon Hill Alabama test site is to shut off 60% of the working phone lines and offer customers a wireless-only substitution, as opposed to upgrading these areas to U-Verse.
- Verizon New York has stated it will only upgrade areas with FiOS where there are existing commitments, leaving 80% of the State’s municipalities on the old copper.
Rural areas? Who cares? AT&T’s VIP plan (which was designed to help push through AT&T’s IP transition plan and the proposed AT&T-Direct TV merger), admitted that it was not going to upgrade most customers for cable competition.
But the reality is — AT&T, with all of its hype about U-Verse, as of second quarter 2014, had only 5.8 million premises with U-Verse video in their 22 states. According to AT&T, the current ‘pick up’ rate was only 20%, so AT&T’s U-Verse covers 29 million premises out of 76 million or about 38% of their territories with upgraded services. And while AT&T talks about ‘fiber optic’ services, it’ll add 1/76th of the current lines — at best.
And Verizon? Its second quarter 2014 results shows that the company only has 5.4 million FiOS TV users. Verizon’s take up rate was 35%, or about 15 million premises passed, and out of 27 million households, that’s only 55% potentially covered, or about 20% of the total.
Between the two largest phone company incumbents this means that they only have about 11.2 million out of 120 million households with direct wired cable-broadband competition today – that’s less than 10% of households.
But it gets worse because these numbers are for ‘premises’, meaning households and businesses, so the number of even lower.
Meanwhile, Verizon plans to ‘harvest’ customers — i.e., raise rates and replace the copper with more expensive (and less capable) wireless, like VoiceLink — the same 2G-styled wireless service that can’t do basic data applications and that caused a revolt on Fire Island, New York.
At a recent investor meeting, Citi Investment Research asked Fran Shammo, Verizon’s CFO, about “the homes where you don’t have FiOS. I think it’s… maybe roughly 8 million homes.
Fran Shammo responded: VoiceLink and ‘harvesting’ is the plan.
“Outside of the FiOS footprint obviously, really we are taking two measures there. One is the Wireless portfolio and replacing some of that that old voice legacy copper voice with our LTE voice product that Wireless has been selling across the nation for almost two years now called Home Phone Connect. Within Wireline, they have a very similar product called VoiceLink which in essence is the same thing.
“So we will try to replace that copper legacy with those technologies. But look, I mean, outside, this is kind of where you say it’s you have to nurture it and harvest what you have and we know that we are not going to be able to compete with speed in that environment and we will continue to do the best we can.”
There have been complaints nationwide about the shutting off of the networks in this forced migration.
“Public Knowledge, TURN, National Association of State Utility Consumer Advocates, NASUCA et al write to the Federal Communications Commission today to express concern about reports that have surfaced across the country indicating carriers are forcing customers off of traditional copper-based phone service. Complaints often state that customers are being involuntarily moved to fiber or IP-based service (or some combination thereof), even if those new technologies fail to serve all of the user’s needs or will be more expensive. Denying basic phone service to people who have relied on the network for decades violates the network compact that has successfully guided our communications policy for one hundred years.”
In short, the real issue isn’t simply about Net Neutrality issues, but about being able to even get competitive broadband, Internet, phone and cable services at reasonable prices. Net Neutrality doesn’t fix price gouging and “harvesting”, or a lack of cable competition, or making sure that your basic phone service gets repaired if the wire is damaged during a storm.
And right now the entire US is a battleground as whole areas of the America are being ‘shut off’ or migrated’ — with or without their consent.
As we wrote, Verizon has a stealth plan in place to shut off the copper in areas where the company has laid FiOS and it is doing this using a ‘below-the-radar’ procedure called Section 251, where the FCC simply rubber stamps Verizon’s application — no proper notice or hearings. And as we uncovered, in the Rockaways, New York City, (an area that covers a population of 50,000), Verizon appears to have refused to fix the copper after the Sandy Storm, even though it was an emergency, and left thousands waiting over 5 months to put in fiber.
This Is Not to Say that Net Neutrality’s Principles and Goals Aren’t Important.
All of the Net Neutrality issues are important and need to be dealt with. Reddit’s list from their Open Internet filing includes:
- Ban blocking;
- Ban technical discrimination;
- Ban paid prioritization;
- Ban discriminatory exemptions to bandwidth caps;
- Mandate ISP transparency; and
- Apply both to fixed and mobile access pipes to the Internet; and
- Ensure that last-mile interconnection is not used to get around the above rules. As a technology company, we favor good solutions. While some of these solutions may be politically difficult, failing to adopt them will be fatal to the wider Internet economy and an existential threat to our company.
Net Neutrality Doesn’t Give You a Choice of ISPs.
NN may stop your Internet service from a ‘slow’ lane problem, but it doesn’t open the networks to direct competition. Today you can’t choose a competitive Internet Service Provider — ISP on the cable or telco wires, much less a different cable provider.
“Net Neutrality is not Open Access. Indeed, Tim Wu, who is credited with crafting the Net Neutrality concept, took great pains to distinguish Net Neutrality from Open Access in his original paper that introduced the topic.
“Open Access is about opening essential infrastructure to competition. Net Neutrality accepts that there is no Open Access, and regulates Internet access rather than the essential facilities.”
And as we wrote in 2012, you can’t really be free if there is there is no choice of an entrance ramp to the Internet. Ironically, in the 1990’s, the Telecommunications Act of 1996 was established to open up this ‘last mile’ or some call it ‘first hundred feet’ so that customers had a choice of ISPs. And competition drove innovation and Internet growth.
Net Neutrality was caused, in a large part, because now AT&T and Verizon got the government (the FCC) to protect their monopolies over the wire, all the time claiming they were doing it for competition.
Bottom line — if you had a choice of ISPs and broadband providers, then if your ISP blocks or degrades your service, you could simply choose another company that doesn’t.
Net Neutrality Doesn’t Stop the Mergers
Time Warner and Comcast are the two largest cable providers so allowing them to get larger without direct competition is ridiculous. Worse, both companies have a marketing deal with Verizon Wireless. In the Verizon territories, not only is Verizon not building out their networks, but in the areas they don’t upgrade they have a de-facto ‘do-not-compete’ agreement where they bundle Verizon Wireless with the cable triple play.
Moreover, as we outlined elsewhere, Time Warner and Comcast had signed agreements with the FCC called the “Social Contract”, which required the companies to wire schools in their area (for free) for broadband Internet service; customers were charged up to $5.00 a month, starting in 1996, which was supposed to terminate in the year 2000, but we can find no proof that the companies stopped adding this extra charge to cable bills nor wired the schools.
Meanwhile, the proposed AT&T and Direct TV merger eliminates Direct TV from competing with AT&T in its 22 states for cable and broadband. AT&T claims that it will expand their “VIP” offerings and have fiber-to-the-home in multiple locations but, as we showed, in AT&T’s merger with BellSouth, it claimed it would have 100% of their territories covered with broadband (at least 200Kbps in 1 direction), but the current AT&T plans claims thar the company needs the merger and the IP transition because it can’t supply broadband to 25% of their territories today with wired service… and their IP trials shows holes in broadband coverage today.
Net Neutrality Doesn’t Fix Speed or Customer Service Issues.
Net Neutrality doesn’t fix the fact America is 29th in the world in broadband speed, or 32nd in cost per megabit, or that Comcast and Time Warner are two of the “most hated companies in America”.
- “Comcast and Time Warner Cable are the two most hated companies in America according to the American Customer Satisfaction Index… Comcast and TWC have the lowest customer satisfaction ratings of any ISPs in the United States.”
- The US is 29th in Speed as of July 20th, 2014 — “Based on millions of recent test results from Ookla Speedtest, this index compares and ranks consumer download speeds around the globe.”
- 32nd in “The median monthly cost in US Dollars per megabit per second”.
The Underlying Problem: “There is reason to believe that providers are cooking the books.”
All of this has a dark underbelly. As we’ve outlined in this series, there are a host of questions about Verizon New York’s book keeping or its ability to raise basic phone rates for ‘massive deployment of fiber optics’, which appears to have funded the wireless company’s fiber to the cell towers, among other issues.
On July 1st, 2014, a newly formed group “Connect New York Coalition” filed a petition with the New York State Public Service Commission to investigate the telecommunications companies in New York State – including Verizon.
Consisting of AARP, Consumer Union, Communications Workers of America, Common Cause, among others, the press release states that:
“15 major consumer and labor organizations and a bi-partisan group of 69 elected officials announced today the formation of the Connect New York Coalition, a major new effort to reverse the decline in telephone service and ensure high-quality advanced telecommunications services for all New Yorkers.”
Based, in part on the PULP-New Networks report (the basis of this series) and New Networks previous report, the Petition stated:
“There is significant evidence challenging the notion that legacy systems are money losers, and evidence indicating that even if they are, the losses have been inflated by accounting techniques. There is reason to believe that providers are cooking the books. If true, the consumers of the state are being either manipulated or defrauded.
“The Commission allowed Verizon rate increases in 2006 and 2008 based, in significant part, upon the assumption that the revenue from the higher rates would lead Verizon to invest in fiber optic lines, presumably for the benefit of wireline customers. Serious questions exist regarding the extent to which funds may instead have been used to build out the network for the benefit of wireless customers. Publicly available reports, while fragmentary, suggest that Verizon may have included construction costs for significant benefit of its wireless affiliate to be included in the costs of the Verizon New York wireline company, thus adding to its costs and tax losses.”
A Litany of Other Issues
I assume the reader has their own list of issues, but a few to add:
- There is a total lack of audits of the companies cross-subsidies. Worse, much of the data that is being used by the FCC and state regulators are deceptive or manipulated to the point that it reinforces the bad public policies.
- There is a massive coordination by these companies working as a ‘trust’, which includes large skunkworks networks that create major campaigns with co-opted non-profits, coin-operated think tanks and the creation of telco-based-‘model’ legislation through a group called ALEC, the American Legislative Exchange Council, where Verizon and AT&T work together, and with politicians, most of whom are campaign-financed by these companies, roll out legislation to erase the companies’ regulations and obligations or block municipalities from building out their networks where the incumbents have failed to deliver.
In short, Net Neutrality won’t get America where we need to go or fix the major problems in the US.
Conclusion of the Series: We Solved Net Neutrality — and have a Plan for Solving America’s Communications Issues.