Who Knew? ISP’s are Telecommunications Providers After All!

The verdict is in! On February 26th in a highly charged and historic decision the Federal Communications Commission voted 3 to 2 to declare that broadband internet service providers are indeed telecommunications companies. This subjects them to the “common carrier” rules laid out in Title II of the Communications Act of 1934 and therefore can be regulated as utilities. This is a great victory for those who support the doctrine of “Net Neutrality”. It has been over a year now since a federal court ruled against the FCC’s guidelines for an Open Internet and forced them to abandon the no discrimination or blocking of content provisions that had the telecoms in such a tizzy.  After receiving over 4 million comments (the largest number ever recorded)  Tom Wheeler, chairman of the FCC, has kept his promise and rewrote the rules to bring them into compliance with the court and preserve the doctrine of “Net Neutrality” which, of course, the vast majority of commenters had supported.

Thought of the Day

"Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it's the only thing that ever has." -- Margaret Mead"

In a 400 page Ruling the FCC has reinstated the provisions that prohibit broadband providers from blocking or slowing delivery of any lawful content through their networks for any reason other than “reasonable network management” and bans so-called paid prioritization for the sake of faster delivery. In the next few weeks the order will be published in the Federal Register and nearly all the provisions will take effect 60 days after that unless a court steps in with a preliminary injunction.

Regrettably, that is not only a possibility, it is quite likely. Already the major telecom companies are lawyering up to challenge the new rules. ATT has sent the FCC notice that they intend to challenge this “blatant power grab” by the government. Ajit Pai, a former lawyer for Verizon and one of the two Republican members of the FCC who voted against the rules, claims in his dissent that the FCC is “turning it’s back on Internet freedom” . . . “for one reason and one reason alone. President Obama told us to do so.”  (Damn that Obama, there he goes again taking away our freedoms!) 😉

As expected, Congress has taken up the matter with a proposal by Senate Commerce Committee Chairman John Thune (R-S.D.) and House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) That reads:

“To amend the Communications Act of 1934 to ensure Internet openness, to prohibit blocking lawful content and non-harmful devices, to prohibit throttling data, to prohibit paid prioritization, to require transparency of network management practices, to provide that broadband shall be considered to be an information service, and to prohibit the Commission or a State commission from relying on section 706 of the Telecommunications Act of 1996 as a grant of authority.”

Now that sounds pretty good at first until you get to the part where they return to classifying broadband as an information service which means that it cannot be regulated under Title II as a “common carrier”. And then, for good measure, they throw out section 706 of the 1996 Telecommunications Act that ordered the FCC and state telecom regulators to encourage the timely deployment of “advanced telecommunications capability” to all Americans. Thune and Upton proposed to eliminate any rule-making and enforcement authority associated with that provision, which a federal appeals court has said could be used to impose net neutrality rules. The bill would actually leave the FCC with less authority than it had before. Wheeler was also expected to use the provision to preempt state laws that discourage or bar local governments from building broadband networks.

While there is good reason to celebrate the FCC’s decision, this battle is not over, not by a long shot. One thing is for sure, though, the vast majority of people want a free and open internet without discrimination and without a provision for paid prioritization. The giant telecoms have their work cut out for them, but a lot of money is at stake and we shouldn’t count them out just yet.

Net Neutrality – The FCC Strikes Back (sort of)

It looks like Tom Wheeler, the chairman of the Federal Communications Commission (FCC), is following through with his promise to rewrite the Open Internet rules that were vacated by DC Circuit Court of Appeals in January. Though many are skeptical that the proposed rules will be enough to protect consumers. In a Notice of Proposed Rule-Making (NPRM) the FCC will be asking for public comment on new rules that would allow internet service providers to charge streaming content providers, such as Netflix and Amazon, more for preferential treatment as long as the same deals are available to others on “commercially reasonable” terms. The FCC would use its authority to review these arrangements to ensure that they don’t harm consumers and competition.

The rules are not expected to be made public before a May 15 FCC meeting to discuss them. Following a public comment period, a commission vote on the rules is likely to occur sometime in the summer.

Wheeler says the FCC will not allow an internet ‘slow lane’. While the proposed rules would allow for paid priority access, he said the focus on the so-called “fast lane” ignored that non-priority traffic would have to be “sufficiently robust to enable consumers to access the content, services and applications they demand.”

Tom Wheeler-Chairman FCC
Tom Wheeler – Former head of the National Cable and Telecommunications Association (NCTA) 1976-1984. Now chairman of the FCC.

In his official FCC blog the Chairman lays out some good arguments for the course that he is pursuing. He reminds us that the court did not throw out the rule requiring providers to manage their networks in a transparent manner, making oversight possible (nice of them). In theVerizon v. FCC  decision the D.C. Circuit laid out a blueprint for how the FCC could use Section 706 of the Telecommunications Act of 1996 to create Open Internet rules that would stick, and this is the course he pursuing (see my post: Net Neutrality – To Be or Not to Be).

Tom Wheeler seems to be acting with good faith to find a way forward that the majority of people will find acceptable. He seems genuinely determined that no ISP will be allowed to block or slow down any legal content but the goal is to also have rules in place that will encourage broadband providers to continually upgrade service to all. As demand for bandwidth increases network congestion becomes a bigger and bigger problem. Managing network congestion is very complicated and expensive. He believes the best way to do this is by exercising the FCC’s authority,  upheld by the court,  to enforce the “commercially reasonable” standard that is in the communications act of 1996. Here is what he says are not “commercially reasonable” on the Internet:

Michael Powell
Michael Powell – Former chairman of the FCC under George W Bush now head of the National Cable and Telecommunications Association (NCTA).
  • Something that harms consumers is not commercially reasonable. For instance, degrading service in order to create a new “fast lane” would be shut down.
  • Something that harms competition is not commercially reasonable. For instance, degrading overall service so as to force consumers and content companies to a higher priced tier would be shut down.
  • Providing exclusive, prioritized service to an affiliate is not commercially reasonable. For instance, a broadband provider that also owns a sports network should not be able to give a commercial advantage to that network over another competitive sports network wishing to reach viewers over the Internet.
  • Something that curbs the free exercise of speech and civic engagement is not commercially reasonable. For instance, if the creators of new Internet content or services had to seek permission from ISPs or pay special fees to be seen online such action should be shut down.

This course of action is the easy way out for Mr. Wheeler as it stops short of reclassifying broadband service providers as telecommunications providers subjecting them to regulation as public utilities.  He has this power under Title II of the Communications Act but he has only threatened to use it if providers abuse their power.  He knows there would be massive backlash from Republicans and Business Groups if he tried. Michael Powell, former FCC Chairman under George W. Bush, now working as head of the National Cable and Telecommunications Association (NCTA) has come out strongly against it. It was he who, back in 2002, classified cable broadband as an “information service” rather than a telecommunication service that got us into this mess.

Corporate profits (after taxes) as a percentage of Gross Domestic Product (GDP). Notice how it has more than doubled since 2000 going from less than 5% to over 11%. This is what I mean when I say chronic binge profiteering.

Powell’s simplistic argument that all one has to do is look at the state of disrepair of public infrastructures – bridges, roads, electric grid etc.- controlled by public utilities, to see why regulations are bad is specious; sidestepping a major cause which is Wall Street apathy driven by an intense and selfish focus on maximizing corporate profits for a few and to hell with the public good. Are we to just pretend that the financial collapse of 2008 was an accident and the massive greed of the banks and corporations had nothing to do with it? Six years later while communities everywhere are still struggling to pick up the pieces corporate profits have never been higher  – check it out, it’s from the Bureau of Economic Analysis.

Wheeler, himself a former head of the NCTA from 1976 – 1984, should know better than anyone that it is inevitable that abuses will take place. “Commercially reasonable” is a very subjective term that can mean whatever you want it to. Does he really believe that this will protect consumers from the ill effects of the industry’s chronic binge profiteering problem? Rather than just threaten to, he needs to take a deep breath and get it over with – force them to go cold turkey – declare broadband internet, once and for all, a public utility. He can do this by simply calling it by its true name – a telecommunications service – which everyone already knows it is. Truth can set you free. He needs to act on his principles and stand up to the Plutocrats.  Doing so he would win the gratitude of decent, hardworking people everywhere. Unfortunately, it doesn’t look like he’s up to it. We’ll see. I’m afraid a public intervention is going to be needed.

He would do well to read the 2011 article  “Of the 1%, by the 1%, for the 1%”  in it the Nobel-Prize winning economist Joseph Stiglitz wrote:

Of all the costs imposed on our society by the top 1 percent, perhaps the greatest is this: the erosion of our sense of identity, in which fair play, equality of opportunity, and a sense of community are so important. America has long prided itself on being a fair society, where everyone has an equal chance of getting ahead, but the statistics suggest otherwise. …There is ample evidence that something has blocked the vaunted “trickling down” from the top 1 percent to everyone else. The cards are stacked against them. [There] is this sense of an unjust system without opportunity.

Alexis de Tocqueville once described what he saw as a chief part of the peculiar genius of American society—something he called “self-interest properly understood.” The last two words were the key. Everyone possesses self-interest in a narrow sense: I want what’s good for me right now! Self-interest “properly understood” is different. It means appreciating that paying attention to everyone else’s self-interest—in other words, the common welfare—is in fact a precondition for one’s own ultimate well-being. Throughout history, this is something that the top 1 percent eventually do learn. Too late.

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Net Neutrality – To Be or Not To Be?

No one owns the Internet. It is a network of networks sharing a common infrastructure for the mutual benefit of all.

The benefits of open access to all the wonders on the World Wide Web is something most of us take for granted these days – enriching our lives and providing opportunities we wouldn’t have otherwise. For many, it is not just a luxury, it is a necessity. Developed with tax-payers money for the use and benefit of everyone, our ability to freely access all the content available on the network is due, in part, to the forward thinking of the builders who were guided by a principle known as  “Net Neutrality” Neutrality, as used here, simply means internet service providers (ISPs) should give all lawful traffic equal and unfettered access to the network without bias or prejudice. They must not block or discriminate based on content or source of that content and they must provide their services in an open and transparent manner to all.

Given that access to the internet is a vital and integral part of American life it is the Federal Communications Commission’s (FCC’s) responsibility to regulate the internet to ensure that this principle of “Net Neutrality” is enforced for the benefit of us all. The goal is to “preserve the Internet as an open platform enabling consumer choice, freedom of expression, end-user control, competition, and the freedom to innovate without permission.”

At least it was until a recent Federal Court ruling decided it wasn’t. In a lawsuit that Verizon brought against  the FCC challenging the validity of “net neutrality” a DC Circuit Court of Appeals has ruled in Verizon’s favor – throwing the principles of non-discrimination and no blocking of content out the window.  This controversial decision severely impacts the ability of the FCC to enforce a legitimate and very important public policy. It hinged largely on a technicality centered around the definition of “common carrier” and the fact that broadband providers are not classified as public utilities, and therefore, not subject to the same kind of regulations. FCC has decided not to appeal to the Supreme Court – leaving some legal scholars wondering why not?

Should the profits of a wealthy few trump the public good?  THAT is the question.

ISP’s own only a small part of the Internet “pipelines” – They are more like the gate keepers to the network of networks that rely on the ISP’s to provide the last few miles of common infrastructure to reach their users.

In a nut shell, the court was asked to decide whether internet providers, like Verizon, be able to charge high bandwidth users like Netflix and YouTube higher premiums for higher speeds. While this may sound reasonable, it contradicts the FCC’s 2010 Open Network Rules (see page 14) which state clearly and with good reasons why internet providers may not block, edit or discriminate based solely on content.

To allow otherwise gives the ISP’s – who in many areas of the country have little or no competition –  the undeserved and unwarranted power of being able to unilaterally threaten content providers with slower service unless they meet their demands to  pay more. The ruling now makes it legal (though not ethical) for ISP’s to partially – or even completely – block legitimate content of other providers whose content competes with their own. — so much for “end-user control, competition, and freedom to innovate without permission”.

Dick Wiley and Bert Rein-LLP
Thanks to Wiley Rein LLP’s legal team the court threw out that unfair no unreasonable discrimination rule along with the odius no blocking provision. Here’s what they have to say about themselves — “Wiley Rein holds a commanding grip on the communications market, and its prolific record of success in contentious matters can be attributed to the fusion of [its] highly rated regulatory group with a contingency of litigation expertise held by the firm’s brilliant and unequivocally effectual communications litigators.” — Wow! So there you have it. And it probably doesn’t hurt none that Dick Wiley was chairman of the FCC during the Nixon and Ford administrations.
This ruling against the FCC will fundamentally alter the relatively level playing field that has, up until now, characterized the Internet, essentially, turning it into an auction house selling to the highest bidders.

This opens the door (flood-gate?) to the concept of “pay to play” on the internet. Their plan is to have two lanes – a fast lane and a slow lane. This means the average website will now have to settle for a smaller slice of the limited available bandwidth (pipeline) along with much slower connections or compete with the big guys for bandwidth by paying a higher price. This becomes ever more important as consumer demand for video streaming grows. This gives those who can afford it an unfair advantage in marketing their products using what should be a public utility much like telephone, electric, and water companies – which are, by law, to be fairly and reasonably regulated as “common carriers” for the good of all (you might want to ask your Congressman about that). Remember, the ISP’s are already – very profitably – collecting hefty fees from all of us, the end users – though, apparently, it’s not enough to suit them. We pay them because they promise to connect us to any legally available content we chooseNOT to arbitrarily degrade the content  of competitors so we’ll settle for their’s just because it’s a better connection. Also remember – it’s not like most of us have a lot of choice (if any) of how we connect.

Lowell McAdams CEO of Verizon
Made close to $16 MILLION dollars last year. $14 MILLION the year before and $23 MILLION the year before that. For his extra hard work this year his bonus is due to increase from $9.2 MILLION to $11.1MILLION. (but hey, he earned it – right?)

In the past, access to video media platforms that could reach a mass audience was basically limited to the corporations. With the Internet, everyone has access to such platforms – at least they did. Allowing paid prioritization will shift power away from the small companies with limited capital, the startups on a shoestring, the lone but brilliant innovators, the legions of altruistic open-source programmers and content providers who believe in the promise of the internet to make a better world – the ones who are really behind the internet’s economic and technological growth – returning it to a few giant multi-national corporations like Verizon, AT&T, Comcast and Time-Warner-Cable; companies run by people whose sole purpose is to grow and maximize profits in any way they can in order to justify to their investors the tens of millions of dollars they collect in bonuses.

Maintaining a system of inequality and disparity of wealth that is surpassing even that of the “robber barons” of the late 19th century, these “last mile bottleneck” monopolies can now become the gate-keepers to online content and will be in a position to stifle or buy out any innovation that threatens their plans to control the new media economy.

For an enlightening inside look at Verizon’s corporate culture checkout the Proxy Statement for their 2014 Annual Meeting for Shareholders. Page 21 should be of particular interest as it deals with a shareholder’s proposal (Item 5) for management to provide more clarity regarding its position on “Net Neutrality” – Board of Directors recommendation? Vote No. The same goes for Item 6, a proposal to make a report on the amount of money that is being spent on Government and public lobbying efforts ($31 million in 2012) – Vote No.

Starting on page 30 you may find interesting the discussion of how fair and reasonable they are in the “performance based” compensation of their executives. For example on page 41 you will see that for 2014 Mr. McAdam’s “incentive opportunity” was increased from  625% of his base pay to 750%. His base salary is $1,480,769 dollars. This increases his incentive from $9,254,806.25 dollars to $11,105,769.50 for a raise of $1,850,961.25 in 2014. (That ought to get him moving, right?) This is on top of his stock options and the $780,874 dollars in “other perquisites” of course; like, security  for his home, “financial planning services” (definitely need that), life insurance, personal use of the company jet, travel expenses for the Mrs. etc.  – but I digress.

Think about how well cable TV has worked in providing us choices in programming – the tiered packaging, the exorbitant add-on fees, the poor service and quality of content. This is what could happen to the Internet. It is no exaggeration to say that this could have a huge impact on how the internet will be used in the future – potentially affecting the daily lives of millions of Americans in negative ways. Schools, libraries, e-government services, licensed databases, job-training videos, medical and scientific research, and many other essential services – all rely on open, affordable access to the internet.

The internet is a resource that was developed with taxpayers money. Unbiased access to the internet  should not be a privilege open to a few but a right enjoyed by all. An open internet is key to a vibrant cultural, economic, and civic life, and the FCC has an obligation to protect it. This means the FCC needs to reclassify broadband internet providers as telecommunications companies subject to the same “common carrier” rules as the other public utilities. These rules need to be strong enough to protect an open internet from the greed and power of the giant corporations.

But we needn’t despair just yet, there’s still hope. Many organizations are now mobilizing to support net neutrality. They come from widely varied political backgrounds including groups such as the  American Library Association, Public Knowledge,  MoveOn.org, Free Press, Consumer Federation of America, AARP,  the Media Access Project  TechNet, and Tim Berners-Lee (the inventor of the World Wide Web). And, of course, Netflix has come out strongly in favor.

Tom Wheeler
Tom Wheeler – Chairman Federal Communications Commission

The FCC simply has to re-establish its legal authority and begin to vigorously enforce the fair and reasonable Open Internet Rules already in place (just read the first page summary and decide for yourself). Fortunately, the FCC claims that it has not abandoned the principle and is talking about rewriting the rules to satisfy the Court.

We’re in this mess because the FCC in 2002, under Michael Powell, reclassified broadband cable companies as information service providers, knowing full well that information services (or content providers) aren’t subject to the same regulations as telecommunications services (phone and digital communications providers).

This is the crux of the problem – how to regulate providers who are engaged in both. This technicality of determining “common carrier” status was first defined in the Communications Act of 1934 and later was ammended in the Telecommunications Act of 1996. A discrepency between the two versions is the reason the Court gave for ruling in Verizon’s favor. For an illuminating (or NOT) discussion of the Courts thinking See page 45. Besides reclassifying broadband as a telecommunications service, the FCC needs to augment the rules with common sense ideas like these.

It’s hard to not be cynical but if enough people, informed with the facts, stand up and make their views known change can happen. It just isn’t right that the greed of a wealthy few can ride rough-shod over justice and common decency in this country. We should not have to accept a fast lane for the haves and a slow lane for the have-nots  The promise of the Internet is too important to sell to the highest bidder – it belongs to us all.

“The success of contemporary citizen activism depends upon the ability to ferret out key information, often against the efforts of powerful interest, and the skills to put such information to effective use.” Harry C. Boyte. CommonWealth: A Return to Citizen Politics. 

You can help make a difference by contacting your Congressman and adding your name to these petitons.The first is a petition to President Obama, and the second a petition to the FCC to restore “Net Neutrality”. Do it now, and pass this on; at least you’ll be able to tell your kids you tried to do something.