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Internet’s Biggest Frauds: Traffic Tsunamis and Usage-Based Pricing

Providers’ tall tales.

Year after year, equipment manufacturers and internet service providers trot out predictions of a storm surge of internet traffic threatening to overwhelm the internet as we know it. But growing evidence suggests such scare stories are more about lining the pockets of those predicting traffic tsunamis and the providers that use them to justify raising your internet bill.

This month, Cisco — one of the country’s largest internet equipment suppliers, released its latest predictions of astounding internet traffic growth. The company is so confident its annual predictions of traffic deluges are real it branded a term it likes to use to describe it: The Zettabyte Era. (A zettabyte, for those who don’t know, is one sextillion bytes, or perhaps more comfortably expressed as one trillion gigabytes.)

Cisco’s business thrives on scaring network engineers with predictions that customers will overwhelm their broadband networks unless they upgrade their equipment now, as in ‘right now!‘ In turn, the broadband industry’s bean counters find predictions of traffic explosions useful to justify revenue enhancers like usage caps, usage-based billing, and constant rate increases.

“As we make these and other investments, we periodically need to adjust prices due to increases [in] business costs,” wrote Comcast executive Sharon Powell in a letter defending a broad rate increase imposed on customers in Philadelphia late last year.

In 2015, as that cable company was expanding its usage caps to more markets, spokesman Charlie Douglas tried to justify the usage caps claiming, “When you have 10 percent of the customers consuming 50 percent of the network bandwidth, it’s only fair that those consumers should pay more.”

When Cisco released its 2017 predictions of internet traffic growth, once again it suggests a lot more data will need to be accommodated across America’s broadband and wireless networks. But broadband expert Dave Burstein has a good memory based on his long involvement in the industry and the data he saw from Cisco actually deflates internet traffic panic, and more importantly provider arguments for higher cost, usage-capped internet access.

“Peak Internet growth may have been a couple of years ago,” wrote Burstein. “For more than a decade, internet traffic went up ~40% every year. Cisco’s VNI, the most accurate numbers available, sees growth this year down to 27% on landlines and falling to 15-20% many places over the next few years. Mobile growth is staying higher — 40-50% worldwide. Fortunately, mobile technology is moving even faster. With today’s level of [provider investments], LTE networks can increase capacity 10x to 15x.”

According to Burstein, Cisco’s estimates for mobile traffic in the U.S. and Canada in 2020 is 4,525 petabytes and in 2021 is 5,883 petabytes. That’s a 30% growth rate. Total consumer traffic in the U.S. and Canada Cisco sees as 48,224 petabytes and 56,470 petabytes in 2021. That’s a 17% growth rate, which is much lower on wired networks.

Burstein’s findings are in agreement with those of Professor Andrew Odlyzko, who has debunked “exaflood/data tsunami” scare stories for over a decade.

“[The] growth rate has been decreasing for almost two decades,” Odlyzko wrote in a 2016 paper published in IPSI BgD Transactions. “Even the growth rate in wireless data, which was extremely high in the last few years, shows clear signs of a decline. There is still rapid growth, but it is simply not at the rates observed earlier, or hoped for by many promoters of new technologies and business methods.”

Burstein

The growth slowdown, according to Odlyzko, actually began all the way back in 1997, providing the first warning the dot.com bubble of the time was preparing to burst. He argued the data models used by equipment manufacturers and the broadband industry to measure growth have been flawed for a long time.

When new internet trends became popular, assumptions were made about what impact they would have, but few models accurately predicted whether those trends would remain a major factor for internet traffic over the long-term.

Peer-to-peer file sharing, one of the first technologies Comcast attempted to use as a justification for its original 250GB usage cap, is now considered almost a footnote among the applications having a current profound impact on internet traffic. Video game play, also occasionally mentioned as a justification for usage caps or network management like speed throttling, was hardly ever a major factor for traffic slowdowns, and most games today exchange player actions using the smallest amount of traffic possible to ensure games are fast and responsive. In fact, the most impact video games have on the internet is the size of downloads required to acquire and update them.

Odlyzko also debunked alarmist predictions of traffic overloads coming from the two newest and largest traffic contributors of the period 2001-2010 — cloud backups and online video.

Odlyzko

“Actual traffic trends falsified this conjecture, as the first decade of the 21st century witnessed a substantial [traffic growth rate] slowdown,” said Odlyzko. “The frequent predictions about ‘exafloods’ overwhelming the networks that were frequent a decade ago have simply not come to pass. At the 20 to 30% per year growth rates that are observed today in industrialized countries, technology is advancing faster than demand, so there is no need for increasing the volume of investments, or for the fine-grained traffic control schemes that are beloved by industry managers as well as researchers.”

That’s a hard pill to swallow for companies that manufacture equipment designed to “manage,” throttle, cap, and charge customers based on their overusage of the internet. It also gives fits to industry executives, lobbyists, and the well paid public policy researchers that produce on spec studies and reports attempting to justify such schemes. But the numbers don’t lie, even if the industry does.

Although a lot of growth measured these days comes from wireless networks, they are not immune to growth slowdowns either. The arrival of the smartphone was hailed by wireless companies and Wall Street as a rocket engine to propel wireless revenue sky high. Company presidents even based part of their business plans on revenue earned from monetizing data usage allegedly to pay for spectrum acquisitions and upgrades.

McAdam

Verizon’s CEO Lowell McAdam told investors as late as a year ago “unlimited data” could never work on Verizon Wireless again.

“With unlimited, it’s the physics that breaks it,” he said. “If you allow unlimited usage, you just run out of gas.”

The laws of physics must have changed this year when Verizon reintroduced unlimited data for its wireless customers.

John Wells, then vice president of public affairs for CTIA, the wireless industry’s top lobbying group, argued back in 2010 AT&T’s decision to establish pricing tiers was a legitimate way for carriers to manage the ‘explosive growth in data usage.’ Wells complained the FCC was taking too long to free up critically needed wireless spectrum, so they needed “other tools” to manage their networks.

“This is one of the measures that carriers are considering to make sure everyone has a fair and equal experience,” Walls said, forgetting to mention the wireless industry was cashing in on wireless data revenue, which increased from $8.5 billion annually in 2005 to $41.5 billion in 2009, and Wall Street was demanding more.

“There were again many cries about unsustainable trends, and demands for more spectrum (even though the most ambitious conceivable re-allocation of spectrum would have at most doubled the cellular bands, which would have accommodated only a year of the projected 100+% annual growth),” Odlyzko noted.

What the industry and Wall Street did not fully account for is that their economic models and pricing had the effect of modifying consumer behavior and changed internet traffic growth rates. Odlyzko cites the end of unlimited data plans and the introduction of “tight data caps” as an obvious factor in slowing down wireless traffic growth.

“But there were probably other significant ones,” Odlyzko wrote. “For example, mobile devices have to cope not just with limited transmission capacity, but also with small screens, battery
limits, and the like. This may have led to changes of behavior not just of users, but also of app developers. They likely have been working on services that can function well with modest
bandwidth.”

“U.S. wireless data traffic, which more than doubled from 2012 to 2013, increased just 26% from 2013 to 2014,” Odylzko reported. “This was a surprise to many observers, especially since there is still more than 10 times as much wireline Internet traffic than wireless Internet traffic.”

Many believe that was around the same time smartphones achieved peak penetration in the marketplace. Virtually everyone who wanted a smartphone had one by 2014, and as a result of fewer first-time users on their networks, data traffic growth slowed. At the same time, some Wall Street analysts also began to worry the companies were reaching peak revenue per user, meaning there was nothing significant to sell wireless customers that they didn’t already have. At that point, future revenue growth would come primarily from rate increases and poaching customers from competitors. Or, as some providers hoped, further monetizing data usage.

The Net Neutrality debate has kept most companies from “innovating” with internet traffic “fast lanes” and other monetization schemes out of fear of stoking political blowback. Wireless companies could make significant revenue trying to sell customers performance boosters like higher priority access on a cell tower or avoiding a speed throttle that compromised video quality. But until providers have a better idea whether the current administration’s efforts to neuter Net Neutrality are going to be successful, some have satisfied themselves with zero rating schemes and bundling that offer customers content without a data caps or usage billing or access to discounted packages of TV services like DirecTV Now.

Verizon is also betting its millions that “content is king” and the next generation of revenue enhancers will come from owning and distributing exclusive video content it can offer its customers.

Odlyzko believes providers are continuing the mistake of stubbornly insisting on acquiring or at least charging content providers for streaming content across their networks. That debate began more than a decade ago when then SBC/AT&T CEO Edward Whitacre Jr. insisted content companies like Netflix were not going to use AT&T’s “pipes for free.”

“Much of the current preoccupation of telecom service providers with content can be explained away as following historical precedents, succumbing to the glamour of ‘content,'” Odlyzko wrote. “But there is likely another pressing reason that applies today. With connection speeds growing, and the ability to charge according to the value of traffic being constrained either directly by laws and regulations, or the fear of such, the industry is in a desperate search for ways not to be a ‘dumb pipe.'”

AT&T and Verizon: The Doublemint Twins of Wireless

A number of Wall Street analysts also fear common carrier telecom companies are a revenue growth ‘dead-end,’ offering up a commodity service about as exciting as electricity. Customers given a choice between AT&T, Verizon, Sprint, or T-Mobile need something to differentiate one network from the other. Verizon Wireless claims it has a best in class LTE network with solid rural coverage. AT&T offers bundling opportunities with its home broadband and DirecTV satellite service. Sprint is opting to be the low price leader, and T-Mobile keeps its customers with a network that outperforms expectations and pitches constant promotions and giveaways to customers that crave constant gratification and change.

The theory goes that acquiring video content will drive data usage revenue, further differentiate providers, and keep customers from switching to a competitor. But Odylzko predicts these acquisitions and offerings will ultimately fail to make much difference.

“Dumb pipes’ [are] precisely what society needs,” Odylzko claims and in his view it is the telecom industry alone that has the “non-trivial skills” required to provide ubiquitous reliable broadband. The industry also ignores the utility-like built-in advantage it has owning pre-existing wireline and wireless networks. The amortized costs of network infrastructure often built decades ago offers natural protection from marketplace disruptors that likely lack the fortitude to spend billions of dollars required to invade markets with newly constructed networks of their own.

Odylzko is also critical of the industry’s ongoing failure of imagination.

Stop the Cap! calls that the industry’s “broadband scarcity” business model. It is predicated on the idea that broadband is a limited resource that must be carefully managed and, in some cases, metered. Companies like Cox and Comcast now usage-cap their customers and deter them from exceeding their allowance with overlimit penalties. AT&T subjectively usage caps their customers as well, but strictly enforces caps only for its legacy DSL customers. Charter Communications sells Spectrum customers on the idea of a one-size fits all, faster broadband option, but then strongly repels those looking to upgrade to even faster speeds with an indefensible $200 upgrade fee.

Rationing Your Internet Experience?

“The fixation with video means the telecom industry is concentrating too much on limiting user traffic,” Odlyzko writes. “In many ways, the danger for the industry, especially in the wireline arena, is from too little traffic, not too much. The many debates as to whether users really need 100Mbps connections, much less 1Gbps ones, reveal lack of appreciation that burst capability is the main function of modern telecom, serving human impatience. Although pre-recorded video dominates in the volume of traffic, the future of the Net is likely to be bursts of traffic coming from cascades of interactions between computers reacting to human demands.”

Burstein agrees.

“The problem for most large carriers is that they can’t sell the capacity they have, not that they can’t keep up,” he writes. “The current surge in 5G millimeter wave [talk] is not because the technology will be required to meet demand. Rather, it is inspired by costs coming down so fast the 5G networks will be a cheaper way to deliver the bits. In addition, Verizon sees a large opportunity to replace cable and other landlines.”

On the subject of cost and broadband economics, Burstein sees almost nothing to justify broadband rate hikes or traffic management measures like usage caps or speed throttling.

“Bandwidth cost per month per subscriber will continue flat to down,” Burstein notes. “For large carriers, that’s been about $1/month [per customer] since ~2003. Moore’s Law has been reducing equipment costs at a similar rate.”

“Cisco notes people are watching more TV over the net in evening prime time, so demand in those hours is going up somewhat faster than the daily average,” he adds. “This could be costly – networks have to be sized for highest demand – but is somewhat offset by the growth of content delivery networks (CDN), like Akamai and Netflix. (Google, YouTube, and increasingly Microsoft and Facebook have built their own.) CDNs eliminate the carrier cost of transit and backhaul. They deliver the bits to the appropriate segment of the carrier network, reducing network costs.”

Both experts agree there is no evidence of any internet traffic jams and routine upgrades as a normal course of doing business remain appropriate, and do not justify some of the price and policy changes wired and wireless providers are seeking.

But Wall Street doesn’t agree and analysts like New Street Research’s Jonathan Chaplin believe broadband prices should rise because with a lack of competition, nothing stops cable companies from collecting more money from subscribers. He isn’t concerned with network traffic growth, just revenue growth.

“As the primary source of value to households shifts increasingly from pay-TV to broadband, we would expect the cable companies to reflect more of the annual rate increases they push through on their bundles to be reflected in broadband than in the past,” Chaplin wrote investors. Comcast apparently was listening, because Chaplin noticed it priced standalone broadband at a premium $85 for its flagship product, which is $20 more than Comcast’s non-promotional rate for customers choosing a TV-internet bundle.

“Our analysis suggests that broadband as a product is underpriced,” Chaplin wrote. “Our work suggests that cable companies have room to take up broadband pricing significantly and we believe regulators should not oppose the re-pricing. The companies will undoubtedly have to take pay-TV pricing down to help ‘fund’ the price increase for broadband, but this is a good thing for the business. Post re-pricing, [online video] competition would cease to be a threat and the companies would grow revenue and free cash flow at a far faster rate than they would otherwise.”

American Enterprise Institute’s Shallow Formula for Broadband Nirvana

AEI: If you bought broadband service, that means you like your service and don’t need or want anything better.

The American Enterprise Institute wants the FCC to judge to quality of America’s broadband based on what customers are able to buy today and how much they are willing to pay to get it.

Section 706 of the Telecommunications Act of 1996 requires the FCC to report to Congress whether broadband “is being deployed to all Americans in a reasonable and timely fashion.” As part of that process, the FCC must determine if Americans are getting internet connections capable of providing “advanced telecommunications capability.”

If the FCC reports to Congress that the country’s biggest telecom companies are letting their customers down with inadequate service or no service at all, that can create conditions for the FCC to step in and start insisting on more competition and oversight as well as setting benchmarks for providers to meet. If the report shows that broadband service is adequately provided, the FCC need not regulate, and in some cases such a finding will fuel calls to further deregulate the industry by getting rid of “unnecessary regulation.”

Not surprisingly, findings since 2001 have varied depending on which political party holds the majority on the Commission. Under President George W. Bush, the FCC consistently found broadband service was being adequately deployed to Americans. The FCC also set the bar pretty low on broadband speed, claiming anything at or above 4/1Mbps service constituted “broadband.” That definition comfortably accommodated DSL service from the phone companies.

Wheeler – Argued for better broadband and more competition.

During the Obama Administration, the FCC set the bar higher. With dissent from the Republican minority, the FCC raised the minimum speed that could be defined as broadband to 25/3Mbps, immediately excluding most DSL and wireless connections. In 2015, former FCC Chairman Thomas Wheeler specifically excluded satellite and wireless connections from that formula, despite objections from FCC Commissioner Ajit Pai. Particularly under Wheeler’s watch, the Democratic majority frequently complained about inadequate broadband and competition, and used Section 706 as its authority to override state laws in North Carolina and Tennessee that placed onerous restrictions on municipal broadband networks. Wheeler felt such laws were anti-competitive, but the courts ruled the FCC exceeded its authority and overturned his pre-emption orders.

Under the Trump Administration, FCC Chairman Ajit Pai seems to be headed down a similar path taken during the Bush Administration, which was optimistic about the state of broadband service and, as a result, applied a lot less pressure on the telecommunications industry.

Chairman Pai is seeking to overturn current Net Neutrality regulations and seems ready to support efforts to undermine the broadband speed standard established by his predecessor. That would allow mobile/wireless companies to offer 10/1Mbps speed and have it qualify as broadband service. Even better, ISPs — wired or wireless — would be considered “competitive” in many cases, even if only one provider offered service in the area.

Pai’s proposal was met with serious objections from Democratic Commissioner Mignon Clyburn who claimed even the current 25/3Mbps standard no longer met the definition of “advanced telecommunications capability.”

“The statute defines advanced telecommunications capability as broadband that is capable of ‘originat[ing] and receiv[ing] high-quality voice, data, graphics, and video telecommunications. High-definition video conferencing is squarely within the rubric of ‘originating and receiving high-quality… video telecommunications,’ yet the 25/3Mbps standard we propose would not even allow for a single stream of 1080p video conferencing, much less 4K video conferencing. This does not even consider that multiple devices are likely utilizing a single fixed connection, or the multiple uses of a mobile device.”

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Pai: Wants broadband providers and the competitive marketplace to determine whether broadband is good enough.

AEI dismissed the entire debate, claiming the only people who will respond to the FCC’s request for comments on the subject will be “pundits, special interests, and companies with skin in the game.”

Instead, AEI proposes the FCC rely on watching customers navigate their broadband options — a monopoly for some, duopoly for many others — and only address problems if something unusual emerges. AEI’s test is to see if “a location or demographic is inexplicably different and purchases less than would be expected.”

If something odd does happen in a particular area, AEI argues there could only be two reasons for that:

  • Barriers to competition;
  • Outdated government regulations and policies standing in the way of progress.

Missing from AEI’s list of possibilities is the presence of an abusive monopoly provider, a comfortable duopoly among two providers with no interest from a third competitor to enter the market, or an area served by two lackluster providers that won’t invest in their networks.

AEI’s test depends entirely on gathering data about what internet services are available for sale in any particular area now and then study who is buying what. But this does not measure customer satisfaction or consider whether those speed tiers and prices are adequate.

Under AEI’s test, “if a geographic area does not have broadband, the FCC could use the results of its customer study to determine what customers in the area would likely find valuable. Then, the FCC could do a cost-benefit study and an economic feasibility study — and conduct a reverse auction if a subsidy is potentially needed — to determine what, if any, financial incentive might be appropriate for the area.”

In other words, the same think tank that has been on record for decades opposing government subsidies to private companies now wants to offer telecom companies government funding to build what would become largely unregulated privately-owned broadband networks that would run with little or no oversight.

AEI’s willingness to let “customers express their opinions through their purchases” is hardly an adequate replacement for current broadband policies designed to keep the U.S. competitive with the rest of the world and ensure adequate service and competition. As any cable subscriber knows, you can subscribe to Comcast or Charter/Spectrum and still loathe your options and want something better. AEI doesn’t appear interested in seeing you get those options, much less preserve what little oversight, consumer protection, and broadband benchmarks we have now. Neither does current FCC Chairman Ajit Pai.

The Truth About Corporate-Backed Net Neutrality Opponents

It’s never too late to start your own policy institute or astroturf-phony consumer group. In reviewing some of the comments against Net Neutrality, I encountered a particularly odious set of organizations and individuals associated with a number of “institutes,” “centers,” and “Americans for This for That.” Most are funded by the Koch Brothers or quietly work with the American Legislative Exchange Council (ALEC) or other conservative and corporate donors that back “consumer-sounding” groups that literally work against the best interests of consumers.

The “groups” touting their unified opposition to Net Neutrality as “Over 65 Groups Against Obama FCC Internet Regulations,” is a major stretch, considering some are run out of UPS Stores or post office boxes, others haven’t updated their websites in years, have no web presence at all, or don’t discuss Net Neutrality (or any internet public policy) on their websites. Many are “asterisked” to reflect the fact the letter signer is expressing their own personal views and not necessarily those of the groups they are affiliated with.

Several signers are with groups operating under different names but share the same parent group or telephone number. Ironically, these birds of a feather often flock together and many of the same people also signed joint letters on a range of disparate public policy campaigns. They always take the side of corporate interests, usually coal, chemical companies, tobacco, oil and gas, and big cable and phone companies.

FCC Chairman Ajit Pai announces his opposition to Net Neutrality at a FreedomWorks and Small Business & Entrepreneur Council-sponsored event at the Newseum in Washington, D.C. Both organizations signed the letter opposing Net Neutrality.

Their joint letter opposing Net Neutrality relies on claims harvested from industry-funded and backed sources and dark money players including Hal Singer, Will Rinehart, and George Ford. Let’s take a closer look at who is signing:

  • Grover G. Norquist, Americans for Tax Reform: Everyone knows Grover. He’s been backed by deep pocketed conservative donors for years, usually fighting to keep taxes low for his friends. But now for some reason he is the first signer of this letter to the FCC opposing Net Neutrality.
  • Leigh Hixon, Alabama Policy Institute: A member of the Koch Bros./ALEC-backed State Policy Network.
  • Phil Kerpen, American Commitment: Kerpen has been affiliated with a lot of different groups. We tangled with him before and when he was working for Americans for Prosperity. Koch money.
  • Daniel Schneider, American Conservative Union: Lobbying organization.
  • Steve Pociask, American Consumer Institute: The telecom industry’s 100% fake “consumer group” that astroturfs industry talking points.
  • Center for Citizen Research: Just another name for the phony American Consumer Institute.
  • Lisa Nelson, American Legislative Exchange Council: Corporate funded group that writes its own state legislative bills and finds Republicans willing to call them their own.
  • Christine Harbin, Americans for Prosperity: Prosperity for the Koch Bros. (who founded this group) anyway.
  • Robert Alt, The Buckeye Institute: Koch money and a history of problems with accuracy.
  • Jeffrey Mazzella, Center for Individual Freedom: Hides its donor list, but there are ties to Big Tobacco and Karl Rove.
  • Grant Maloy, Center Right Coalition of Orlando: So small, it doesn’t even have a website.
  • Chuck Muth, Citizen Outreach: A Nevada blogger and Republican operative. Their bizarre issues agenda suggests possible funding. It includes “free market sugar, ‘contact lens’, and patent trolls.” Nothing about Net Neutrality.
  • Michael J. Bowen, Coalition for a Strong America: Funded entirely by the Koch Bros.’ Wisconsin Club for Growth, this group operates out of a UPS Store mailbox in Beaver Dam, Wisc.
  • Matthew Kandrach, Consumer Action for a Strong Economy: “The only thing making it possible to call his organization an ‘organization’ is that, along with its vice president, they make an organization of two people.” Amateurish combination of bad links and no spell-checking, a-la their Issues list which includes “Banking & Investmets” (sic).
  • Col. Francis X. De Luca USMR (Ret), Civitas Institute: Koch money.
  • Katie McAuliffe, Digital Liberty: “Digital Liberty is a project of Americans for Tax Reform,” which means it’s a Grover operation pretending to be more than what it actually is.
  • Hance Haney, Discovery Institute: Donor list is kept top secret to “avoid harassment” but this group usually obsesses about promoting “intelligent design” but also loves to lobby on telecom issues, which means industry money is extremely likely.
  • Adam Brandon, FreedomWorks Foundation: Its immediate predecessor was founded by the Koch Bros. Washington Post: “wealthy donors [sway] the direction of FreedomWorks and other political groups, which increasingly rely on unlimited contributions from corporations and financiers for their financial livelihood.” A handful of those donors are said to be responsible for the bulk of FreedomWorks’ annual budget.
  • Annette Meeks, Freedom Foundation of Minnesota: Conservative group that got the bulk of its funding from DonorsTrust, “the dark-money ATM of the conservative movement.”
  • Richard Watson, Florida Center/Right Coalition: See “Center Right Coalition of Orlando.”
  • David Barnes, Generation Opportunity: Koch money.
  • Ray Chadwick, Granite State Taxpayers: Lists National Taxpayers Union, Americans for Tax Reform, New Hampshire Tea Party Coalition, and Americans for Prosperity as “affiliates,” but also calls itself “non-partisan.”
  • Joseph Bast, The Heartland Institute: Close ties to ALEC and now hides its donor list.
  • Mike Krause, Local Colorado Project: No website at all, but we believe it is affiliated with the “Independence Institute,” a group closely tied to ALEC.
  • Andrew Langer, Institute for Liberty: Started as a one-man operation with a $25k budget until the corporate donors moved in. Now the group refuses to disclose its donor list, but SourceWatch discovered it shared a phone number with the National Taxpayers Union.
  • Tom Giovanetti, Institute for Policy Innovation: Ties to Koch Bros. and ALEC.
  • Seton Motley, Less Government: Close ties to ALEC and part of the Heartland Institute’s plethora of groups.
  • Daniel Garza, The LIBRE Initiative: Astroturf en español. A Koch operation trying to pass itself off as a Latino group.
  • Bartlett Cleland, Madery Bridge: It’s a bit hilarious to find a corporate lobbying firm listed as one of the 65 “groups” against Net Neutrality. But at least it’s a case of being honest. Like most of the others, there is a financial incentive to take that position.
  • Dee Hodges, Maryland Taxpayers Association, Inc. – Website hasn’t been updated for over a year. Nothing about Net Neutrality. Zombie group?
  • Mike Wendy, MediaFreedom: We exposed Mike Wendy’s close ties to the telecom industry back in 2010, and we notice his and several other names listed among the 65 “groups” here were part of the ridiculous Progress & Freedom Foundation (now defunct), which was the final destination of the generously filled money train from some of the biggest telecom companies in the country. MediaFreedom is comprised primarily of Wendy’s blog attacking media reform groups like Free Press. His bio shows an endless journey working for a number of groups quietly funded by the cable and telephone companies.
  • Henry Kriegel, Montanans for Tax Reform: Their website has not been updated in years and the rest appears to be little more than a post office box in Bozeman.
  • Brent Mead, Montana Policy Institute: Ties to Koch Bros. and ALEC.
  • Scott Cleland, NetCompetition: The Payola Pundit. Mr. Cleland doesn’t like to talk about his close ties to ALEC, where he served as co-chair of the Telecommunications and Information Technology Task Force. Members of that committee include Comcast and AT&T.
  • Lorenzo Montanari, Property Rights Alliance: Really Americans for Tax Reform under yet another name.
  • Don Racheter, Ph.D., Public Interest Institute: Five people on a college campus in Iowa. Ties to ALEC. Claims to be non-partisan but attacked “liberals” all over its website.
  • Mike Stenhouse, Rhode Island Center for Freedom & Prosperity: You guessed it. Ties with ALEC and Franklin Center, which funds reporters of all things.
  • Paul Gessing, Rio Grande Foundation: Ties to Koch Bros., ALEC, and Franklin Center.
  • Tom Struble, R Street Institute: Broken record — ties to Koch Bros. and Franklin Center.
  • Karen Kerrigan, Small Business & Entrepreneurship Council: Has unnamed “corporate partners.” Ironic opponent of Net Neutrality, considering it is supposed to represent the interests of small startups, entrepreneurs, and small businesses — exactly the types that would be discriminated against by giant ISPs unconcerned about Net Neutrality.
  • James L. Martin, 60 Plus Association: The corporate astroturf version of AARP funded by the Koch Bros. Mr. Martin is a prolific letter-signer when corporate interests are involved. Check out this letter on another issue and notice how many of the groups signing that letter just happen to be involved in this Net Neutrality opposition campaign.
  • David Williams, Taxpayers Protection Alliance: The Taxpayers Protection Alliance (TPA) is part of the network of front groups funded by the Koch Bros. and their political network.
  • Berin Szoka, TechFreedom: “Sucking on the teat of the phone and cable companies” who donate tens of thousands of dollars to TechFreedom to act as their sock puppet.
  • Gerrye Johnston, Women for Democracy in America, Inc.: Very, very odd organization (it’s now MEN and Women for Democracy by the way.) Internet public policy is so far afield from their mission statement, you’d need to book a flight to find it.
  • Mary Adams, Maine Center-Right Coalition: See Center Right Coalition of Orlando. We think this group is normally concerned about illegal immigration, but there does not seem to be a formal coordinated web presence.

Kansas’ Double-Down on Trickle-Down, Deregulation Flops as Residents Leave the State

We will mail it to you on floppy disks because your internet connection is too slow to download it.

While FCC Chairman Ajit Pai and Sen. Ron Johnson (R-Wisc.) decry government regulation as responsible for destroying capital and incentives to invest, the state of Kansas this week ended its all-out experiment with deregulation and trickle-down economics on steroids, with a Republican-dominated state legislature calling it a giant flop.

In charge of the Grand Experiment in Trickle-Down, Doubled-Down is Gov. Sam Brownback, who has systematically hobbled the state’s social spending and investment programs since becoming governor in 2011. He adopted his ‘vision thing’ from Reaganomics proponent Art Laffer, who apparently forgot the Reagan Administration’s penchant for all things deregulation was not all sweetness and light and had to be tempered by President George H.W. Bush after he was elected in 1988.

But what if history could have a second chance? What if a state kept its pledge of no new taxes and slashed regulation and oversight to the bone. Would it result in a free market paradise where government got out of the way for the public good? Would lower taxes result in more tax revenue as Kansas businesses boomed? Would infrastructure take care of itself?

To find out, Brownback slashed the state’s income tax, eliminated the top income tax bracket and delivered a disproportionate share of the tax cut benefits to the economic motivators (also known as Kansas’ richest families) who would supposedly use the surplus to invest in businesses and jobs. At the urging of the powerful small business lobby, backed by the Koch Brothers and their octopus of astroturf anti-tax groups demanding reform, Brownback zeroed out taxes on “pass-thru” income, which effectively allowed anyone running a LLC or small business to evade taxes.

There were moderate Republicans in Kansas that warned about the prospects of Brownback’s questionable assertion that low taxes and low funding of the state government would bring a new era of growth and prosperity. But dark money and Koch’s political machine saw to it those politicians were “de-elected” and replaced with Brownback’s army of minions.

In addition to creating budgetary ruin with tax revenue cratering, essential digital infrastructure crashed and burned. Deregulation and a mediocre state broadband expansion effort didn’t make internet service in Kansas better. In fact it got worse, along with the finger-pointing over who was responsible.

Last fall, Kansas Sen. Pat Roberts brought then FCC commissioner Ajit Pai to the community of Allen to meet with executives working for a dozen small telephone companies who were having trouble upgrading their networks across the great expanse of rural Kansas.

Brownback

Roberts wasn’t ready to claim federal government regulation was responsible for the mess. But Pai’s reflexive claims that deregulation incentivizes for-profit companies to invest in better broadband simply wasn’t working in Kansas either. The only solution for The Free Marketeers in rural Kansas turns out to be handing out government money to expand rural broadband, except in Kansas, there was very little money to be had after Brownback took an ax to the state budget.

The Wichita Eagle unintentionally drew a contrast between the thinking of providers that want to blame everyone else for the problem and plain reality for Brian Thomas, who works for the Blue Valley Tele-Communications Company.

“It really all comes down to a quality of life perspective,” Thomas told the newspaper. “I think we all live that. That’s our jobs, to provide that.”

The newspaper noted that without government money, the only way private companies could afford to pay to replace thousands of miles of ancient copper phone wiring in favor of fiber would be to make internet service so expensive that only businesses and the ultra-wealthy would be able to afford it.

So while Brownback’s great social experiment carried on, internet expansion and upgrades stalled in many communities across Kansas. In Allen, where Pai met to extol the virtues of private investment, the town librarian at Allen’s public library got some help from the Manhattan (Kansas) library system to install an inexpensive Wi-Fi hotspot that, once switched on, almost immediately filled its parking lot day and night with what the newspaper called “internet-starved townspeople.”

Allen County, Kan.

“There are several people who will watch movies outside” after hours, town librarian Nikki Plankington said. “The kids use it for the Pokemon Go thing. I don’t know what that’s all about, but the kids use it.”

While the public library did its part, Kansas’ for-profit private internet providers are going in a different direction – complaining a lot and asking for handouts with no strings attached.

The Eagle reported Pai’s meeting with rural telecom executives turned into a ‘whine and cheese’ reception. The phone companies had a laundry list of dislikes they wanted the deregulation-minded Pai to fix for them while they pondered upgrades:

  • The Universal Service Fund/Connect America Fund, financed by ratepayers through surcharges on their phone bills, was “obsolete” and didn’t provide enough money.
  • The federal government didn’t allow ISPs to chase after the deepest pockets to pay for their upgrades — popular online websites like Netflix and Amazon.com.
  • The FCC’s definition of broadband as 25Mbps ignored the fact Kansas phone companies wanted to deliver considerably lower speed service, claiming customers don’t want more than 10Mbps.

If the government could be lobbied to lower standards, eliminate regulation, and deliver or at least compel a cash welfare infusion from content providers and ratepayers, there was no need to ask rich Kansans to stop counting their money long enough to invest some of it in better broadband.

Catherine Moyer from Pioneer Communications claimed it was unfair to ask companies and customers to pay for upgrades when those internet titans like Netflix, Amazon, and Google make countless billions in profits using Pioneer’s network with absolutely no compensation for doing so.

“My customers and the customers here in Allen and all the customers in Wichita for that matter that have voice service pay a proportion of their bill,” she said. But, “there’s a whole group of people and companies utilizing the network that don’t pay into the fund in any meaningful way … so they haven’t helped build out this network.”

When the newspaper suggested she was effectively asking for higher taxes and paid lanes for internet content companies like Netflix that Moyer claimed was consuming 35% of Pioneer’s available bandwidth, she didn’t seem to have any objections.

“It’s not necessarily what people want to see, but in the same light, if you want these networks and you want these speeds, you have to somehow fund that. And who should fund it?” Moyer asked.

The next issue that doesn’t work for Kansas telecom companies is the FCC’s standard that broadband service be at least 25Mbps, and if a phone or cable company wants public dollars to build out their networks, they better choose a technology capable of delivering that kind of speed.

“One thing that kind of concerns me a little bit is having the FCC dictate, or Washington dictate, the level of speed I’m required to have in order to maintain a certain level of funding,” said Archie Macias of Wheat State Telephone, which serves rural communities in Butler, Cowley, Chase and Lyon counties. Macias is upset because his system uses fiber optics that can easily handle 25Mbps, but his customers only want to pay for 10Mbps.

“I’m not going to build a network that’s like having 500 channels on a TV that you’re going to watch 12 or 13,” he told the newspaper.

Wheat State currently offers four broadband plans in areas where fiber service is available:

  • $39.99 Pro (10/2Mbps)
  • $49.99 Multi-Pro (15/3Mbps)
  • $69.99 Power-Pro (25/5Mbps)
  • $79.99 Mega-Pro (50/20Mbps)
  • $10 discount when bundled with other services

What customers choose for broadband service is often an issue of pricing, not speed.

In more populated parts of Kansas, customers are still trying to cope with DSL service that has not seen significant upgrades for a decade. Since Brownback isn’t doing much to help, and tax cuts and deregulation have failed to inspire the kind of robust broadband expansion “light touch” regulation is supposed to provoke, a lot of Kansans are leaving the state for good.

An abandoned farm.

One of those threatening to flee is Christianne Parks, who lives in Allen and endures not-even-close-to-being-broadband.

“Eventually, I probably would get bored out of my mind and leave,” 19-year old Parks told the newspaper when asked what she would do if her broadband situation did not change.

Last fall, the newspaper pinpointed some of the real problems afflicting the state’s economy and missing from the list were taxes and regulation. Deregulation-inspired consolidation in the state’s critical agribusiness sector decimated rural farms and the local economies that depended on them. When the farmers leave, Main Street businesses soon follow. The 1970s and 1980s was the era of the Rust Belt in the northeast and midwest. Now parts of the midwest including Kansas risk being labeled a Wheat Belt of economic deterioration.

Since 2000, 81 of Kansas’ 105 counties have lost population, according to the U.S. Census Bureau. The consensus is that trend will get worse, according to the newspaper – especially among young people – until and unless someone can find a way to get better internet service to the outlands. Brownback’s hands-off policies favoring providers are in contrast to New York’s more aggressive rural broadband funding program that seeks to achieve near 100% penetration of broadband service in the state over the next few years. New York regulators also compel companies doing business in the state to share some of their wealth from mergers and acquisitions, most recently requiring Charter Communications and Altice to expand their broadband networks to improve service and reach customers they don’t serve today.

The free-market-solves-everything concept celebrated by Pai and the Koch Brothers has now been tested and failed in Kansas. Among the few bright spots for broadband in Kansas are civic-minded telephone or cable providers that look beyond return on investment formulas in their community, and more commonly community-owned broadband networks or co-ops with a motive beyond profit — delivering decent broadband to maintain, sustain, and grow their local economies.

Recovery from the “free market miracle” train wreck started last fall, when a wave of moderate Democrats and Republicans were elected with a pledge to do everything possible to kill Brownback’s vision of paradise. This week, the Republican-dominated legislature had enough of living in Brownback’s PretendLand and overrode his veto of their plan to raise income taxes across the board and kill his legalized tax evasion scheme for business owners to bring in an additional $1.2 billion over the next two years to invest in Kansas.

The improved broadband that could result may give something for the state’s wealthiest citizens to do in their free time besides count their money.

New Report Attacking Municipal Broadband Thin on Facts, Heavy on Hypocrisy

When the multibillion dollar telecom industry wants to push its narrative about telecom public policy, it employs an army of secretly funded astroturf groups, corporate-backed “policy institutes,” professional lobbyists, and ex-regulators and politicians that help move their agenda forward.

One of the latest methods to win influence is finding researchers willing to produce scholarly reports offering “independent” analyses of regulatory policies or telecom company business practices. It has now become a cottage industry, with the same select few authors regularly writing papers that align perfectly with the interests of cable and telephone companies that sponsor the groups, think tanks, or schools that employ them.

The blurred line between academic independence and “research-for-hire” has become increasingly indefensible at the nation’s think tanks, where politically motivated individuals and corporate donors funnel millions in funding with the expectation the think tank, its leadership and researchers will fall in line with the political views of the donor and act accordingly. When they don’t, the checks stop coming or a donor-led coup d’état similar to what happened in April at the Heritage Foundation can follow.

The idea that a think tank represents an independent body of researchers tackling random issues of the day without bias is quaint and often a thing of the past. These days, some think tanks and policy institutes dependent on corporate and big donor contributions are little more than willing corporate tools in policy and regulatory debates. Last month, this reached a new level of absurdity with the announcement that the MGM Resorts — a Las Vegas casino, was starting its own policy institute co-chaired by retired Sen. Harry Reid and former House Speaker John Boehner. Neither will be working for free. The stated purpose of the MGM think tank is to “concentrate on comprehensive, authentic and relevant national and international policy issues that impact the travel, tourism, hospitality and gaming industries and the global communities in which they operate.”

In short, it’s another way for the casino industry to lobby while operating under a veneer of independence at the University of Nevada, Las Vegas.

If a researcher cannot find work at a policy institute or think tank, they can always produce research papers under the auspices of a university or business school that welcomes corporate funding. These institutions assume they are protecting their credibility and reputation with claims of a firewall between industry money and research, yet too often the reports that result from this arrangement are embarrassingly industry-aligned. Questions of conflict of interest are also increasingly common when a researcher turns up at hearings to deliver ostensibly independent testimony on issues like regulation or their views about multi-billion dollar mergers and acquisitions that are in perfect alignment with the companies that donate to that researcher’s employer.

Yoo

Researchers like Christopher Yoo at the University of Pennsylvania Law School in Philadelphia bristle at the notion corporate dollars play any role in his research or findings, despite the fact he was accused of a major conflict of interest testifying strongly in favor of Comcast’s attempted merger with Time Warner Cable in 2014. Yoo defended the Comcast deal at every turn, telling Congress the merger would have little impact on consumer prices or competition, despite the fact ample antitrust concerns ultimately torpedoed the deal.

Yoo avoided disclosing the fact he had ties to Comcast’s chief lobbyist David Cohen, who sat five seats to his right at the hearing. Cohen served as chairman of the board of trustees at the University of Pennsylvania and Comcast is an extremely generous financial donor of the university — two obvious conflicts of interest that observers expressed shock were not disclosed in advance. Yoo focused instead on delivering testimony we characterized back in 2014 as “a nod in Cohen’s direction with an affirming, ‘whatever he said.'”

When the media called him out on the subject, Yoo downplayed any connection or conflict.

“The views of any other person in the university administration do not have any impact on my academic views or any public statements I make,” Yoo told the Washington Post. He added the Center for Technology, Innovation, and Competition that he founded was only “a tiny little bit” funded by the cable industry. We’ll fact check that claim shortly.

Like Harry Reid and John Boehner, Christopher Yoo does not work for free. Despite his claims that as a tenured professor, his academic freedom is protected, Mr. Yoo’s recent written work has been so closely aligned with the interests of the nation’s cable and phone companies, he comes alarmingly close to being an academic version of a corporate sock puppet.

Yoo is hardly the only researcher that has an amazing record of producing studies that coincidentally line up in perfect unison with the public policy interests of giant cable companies. Daniel Lyons of Boston College Law School prodigiously writes papers defending the cable industry’s practice of data caps. He’s been hard at work since 2012 trying to convince anyone that would listen that data caps are good for consumers, competition, and innovation. Like Yoo, Lyons was also a big supporter of Comcast’s attempted purchase of Time Warner Cable, “spontaneously” and “independently” penning long letters to the editor to newspapers all around the country defending the deal.

So what causes researchers to suddenly decide to write about some topics but not others? Random chance or money?

Last month, Yoo unveiled his latest paper, “Municipal Fiber in the United States: An Empirical Assessment of Financial Performance,” co-authored by Timothy Pfenninger.

Yoo claimed in his executive summary that the “current emphasis on infrastructure projects in the United States has intensified the debate over municipal broadband.” That’s news to us. In fact, the high water mark of the municipal broadband debate occurred in the last administration when FCC Chairman Thomas Wheeler sought to nullify corporate ghostwritten municipal broadband bans passed by several state legislatures.

Yoo decided he would be a “helper” for cities contemplating repeating the success of EPB, the municipal power company in Chattanooga, Tenn., that built a successful public gigabit fiber to the home broadband network for the city and nearby communities. The “widespread news coverage” of EPB that Yoo wrote about, without mentioning it was almost exclusively positive, has apparently inspired a number of other communities to contemplate repeating Chattanooga’s success story.

In what we like to call Yoo’s “Fear, Uncertainty and Doubt” opening, he warns “city leaders who turn to existing municipal fiber analyses for guidance will discover that these studies limit their focus to the supposed success stories instead of systematically analyzing these systems’ financial performance.”

So instead of those studies, Yoo offers his own, which he claims “fills the information gap” by creating a whole new systematic analysis, using Yoo’s own hand-crafted criteria, to judge the success or failure of municipal broadband.

He doesn’t waste any time hinting municipal broadband is a bad idea, puts cities at risk for defaults, bond rating reductions, and taxpayer bailouts. In fact, Yoo characterized municipal broadband as a mere distraction from more important priorities he claims communities have. And besides, there is evidence showing “little current need for [the] high broadband speeds” that community broadband networks offer that incumbent cable and phone companies won’t.

Yoo’s take is like bringing a boyfriend home to your parents who claim they support and love you no matter who you date but then spend the next two hours telling you why he’s all wrong for you.

Follow the Money

We thought it would be useful to look into Yoo’s claims and conclusions more carefully. As always, we focused on two things: fact-checking the evidence and following the money.

It took very little time to turn up more red flags than one would find at a May Day parade in Red Square.

Academics with conflicts of interest or uncomfortably close ties to the telecom industry and the reports they peddle often escape scrutiny, because their research can intimidate journalists unprepared to challenge their premise, research, or conclusions without a substantial investment of time and fact-checking. But as we’ve learned over the years, there are very clear warning signs when more investigation is necessary.

We’re not alone. This week National Public Radio updated its Ethics Handbook with “a cautionary tip sheet about relying on the work product of think tanks.

It is “our job to know about ‘experts’ conflicts of interest” and share that information with our audience (or not use experts whose conflicts are problematic).  As we’ve said, it’s not optional. Click here for related reading from JournalistsResource.org. It includes “some questions journalists should ask when researching think tanks.” Among them:

  • “Look at the think tank’s annual report. Who is on staff? On the board or advisory council? Search for these people. They have power over the think tank’s agenda; do they have conflicts of interest? Use OpenSecrets’ lobby search, a project of the nonpartisan Center for Responsive Politics, to see if any of these individuals are registered lobbyists and for whom.
  • “Does the organization focus on one issue alone? If so, look carefully at its funding.
  • “Does the organization clearly identify its political leanings or its neutrality?
  • “Does the annual report list donors and amounts? Are large donors anonymous? If the answer to the second question is yes, you should be concerned that big donors may be trying to hide their influence.
  • “Does it have a conflict of interest policy?”

The Shorenstein Center on Media, Politics, and Public Policy is even more frank in its warning to journalists who rely on think tanks and industry-based research:

[…] Entrenched conflicts of interest across the political spectrum, and pandering to donors, often raise questions about their independence and integrity. A few years ago, think tanks were seen as places for wonky scholars and former officials to bang out solutions to critical policy problems. But today, as the Boston Globe has written, many “are pursuing fiercely partisan agendas and are funded by undisclosed corporations, wealthy individuals, or both.”

Something smells funny.

Unsurprisingly, Yoo’s research was immediately distributed and promoted by a range of groups critical of public broadband to build what they believe to be an authoritative record against municipal broadband initiatives. In effect, ‘it isn’t just us saying public broadband is a bad idea, look at this ”independent” research.’

But exactly how independent is the research produced by Mr. Yoo and his Center for Technology, Innovation and Competition (CTIC)? Unfortunately, Yoo does not follow the common practice of disclosing the funding sources for his research and report. If it was funded through the Center, that should be disclosed. If a corporate donor provided funding or a stipend, that should be disclosed. If part or all of Mr. Yoo’s compensation comes from a bank account replenished in part or whole by an outside company, that should be disclosed. If he wrote the report in this spare time for fun, that should be disclosed as well.

Since Mr. Yoo doesn’t talk about the money, we will.

The CTIC’s website spends some time predicting the obvious conflicts of interest questions raised by its extensive corporate donor base.

“The Center for Technology, Innovation & Competition (CTIC) receives financial support from corporations, foundations, and other organizations that is vital to our continued growth and success,” the website states, which means without that support, there probably would be no CTIC.

Which corporations donate money is important to consider. If a substantial amount of a researcher’s funding comes from telecom companies that are either on record opposing public broadband, or would be forced to compete with a municipal broadband provider, that would represent a very clear conflict of interest.

CTIC attempts to inoculate itself from accusations it has that inherent conflict of interest with this statement on its website:

“CTIC does not accept financial support that limits our ability to conduct independent research. This allows us to produce scholarship that is free from outside influence and consistent with Penn’s ethics and values. All corporate donors agree to provide funding free from restrictions and promised results or deliverables.”

But that is not adequate enough to protect readers from researcher bias introduced by the donor funding that CTIC admits is “vital” to their existence. Consider the example of the tobacco industry, one of the first to leverage researchers willing to write papers created to distort, downplay, or confuse the debate about the safety of tobacco products. There was no need for a tobacco company to limit researcher independence or demand a certain result. That allowed researchers to claim editorial independence, but they also understood that if their reports did not meet the expectations of the tobacco company that paid for them, they would never be made public and that researcher would never be used again.

A corporate donor is unlikely to continue funding an organization that issues reports it disagrees with or worse, publicly bolsters its competitors or criticizes its public policy agenda. Had Yoo concluded municipal broadband was an ideal solution for the rural broadband, internet speed, and competition problems in this country would AT&T, CTIA, Comcast, Charter/Time Warner Cable, NCTA and Verizon still send them checks?

While considering the veracity of Mr. Yoo’s research and conclusions, do you believe CTIC’s donors would be pleased or unhappy about the report? Here is the list of companies and groups that help keep the lights on at CTIC:

  • American Tower (owns cellular and broadcast transmission towers)
  • AT&T
  • Broadband for America (funded by the cable/telco industry)
  • Cellular Operators Association of India
  • Comcast-NBC Universal
  • CTIA (the cellular industry’s top lobbying trade association)
  • Facebook
  • Google
  • GSMA (Mobile industry trade association)
  • ICANN
  • Information Technology Industry Council
  • Intel
  • Internet Society
  • Microsoft
  • National Science Foundation
  • NCTA (cable industry’s top lobbying group)
  • New York Bar Foundation
  • Qualcomm
  • Time Warner Cable (now Charter Communications)
  • Verizon
  • Walt Disney Co.

It’s clear there are few friends of municipal broadband donating to the CTIC while we count about eight likely opponents.

Even the way Mr. Yoo introduced his municipal broadband report at a Wharton Business School “broadband breakfast discussion” opened the door to more questions. To suggest the panel was stacked against public broadband would be an understatement.

In addition to Mr. Yoo, the former mayor of Philadelphia and governor of Pennsylvania Ed Rendell — who was hired by Comcast-NBC Universal less than two months after coming out in strong support of the merger of Comcast and NBC-Universal, was tasked with keynote remarks. Joining both on the discussion panel was Frank Louthan, a Wall Street analyst for Raymond James who regularly covers big cable and telco companies for investors and wouldn’t appreciate giving the bad news to clients about municipal broadband’s profit-killing competition and Douglas Holtz-Eakin, president of the corporate dark money-backed American Action Forum who seemed enamored of all-things Comcast. In 2014, Holtz-Eakin went out of his way to write a long piece urging regulators to approve the Comcast-Time Warner Cable acquisition as soon as possible.

Anyone who wanted to hear a positive view of municipal broadband would have had to eat breakfast somewhere else.

Yoo’s “Evidence”

For the benefit of readers and local officials that want a more detailed refutation of Mr. Yoo’s study and his findings on the granular level, we point you to Community Broadband Networks’ excellent report debunking the obviously biased findings from Mr. Yoo, who appears to be working on behalf of some of America’s largest telecom companies. Mr. Yoo will claim those companies did not sponsor the study, but we remind readers that without the extensive donor support of Yoo’s group from the telecom industry, there would likely be no study.

But we found several red flags to share as well.

Red Flag #1: Changing the metrics.

Mr. Yoo hand-selects the metrics by which municipal network success or failure can be determined… by him. He relies on Net Present Value, a particularly complicated and not always accurate measurement of a network’s prospects for success or failure. Clearly, every municipal network will face some challenges. Many are in areas deemed unprofitable to serve by the commercial telecom industry. But then, municipal broadband is all about solving the problem of broadband accessibility that other ISPs won’t. These public networks don’t exist to make shareholders and executives rich, nor do they have to allocate money to pay shareholder dividends. Even commercial ISPs have their hands out looking for subsidies to wire rural areas they would otherwise never serve. There is more to the story of municipal broadband than profit and loss.

Red Flag #2: Financing concrete.

Mr. Yoo’s predictions that some networks may never pay off their debts or will take dozens of years or more doing so assumes almost nothing changes for those networks in the near or distant future. Broadband networks are constantly evolving, as are potential revenue sources. Imagine a cable company having to exclusively rely on cable TV revenue to pay down their debt. Then remember the day cable operators discovered they could use a portion of their existing network to sell something called “broadband” service for another $30 a month. Ancillary revenue from the introduction of innovative new products and services is precisely how the cable industry successfully boosted subscriber revenue even in mature markets where adding new customers was challenging. They followed the time-tested principle of selling more things to the customers they already have.

But then Mr. Yoo agreed with this concept himself… when he was talking about the some of the same telecom companies that write his group checks. Municipal networks are somehow… different, however:

The development of the Internet has greatly increased the value of the services that can be provided by last-mile networks. The rollout of convergent technologies, such as Internet telephony and packet video, will break down the barriers that previously limited the revenues generated by any particular transmission technology. Cable is already able to provide voice through its coaxial network, and it is just a matter of time before telephone companies are able to provide video. Application-based distinctions between transmission media will completely collapse once all applications become packetized.

He also downplays the tool of refinancing. Altice turns that concept into a weekend hobby. This European cable conglomerate’s business plan leverages debt like no other cable operator. It manages that debt by regularly repackaging and refinancing debt at lower rates as it also works to pay it down. These same options are available to municipal providers.

Red Flag #3: Municipal broadband is too expensive, or is it?

There are massive start-up costs to build broadband networks, costs that might put a community’s finances at risk, Yoo’s report concludes. That leaves the obvious impression communities should avoid going there. But that wasn’t the attitude he had in 2006, when network costs were even higher than they are today.

“The economics of the last mile have changed radically in recent years,” Yoo said. “The fixed costs of establishing last-mile networks have dropped through the floor. Switching equipment that used to take up an entire building can now be housed in a box roughly the size of a personal computer. Copper wires have been replaced by a series of innovations, including terrestrial microwave, satellites, and fiber optics, which have greatly reduced the costs of transmission.”

When he is talking about municipal broadband, he seems to tell an entirely different story. Why might that be?

Red Flag #4: Yoo misrepresents the problem.

Mr. Yoo has reflexively defended his donor base for several years across a myriad of broadband public policy issues — data caps/zero rating, Net Neutrality, mergers and acquisitions, network costs, and more. The hypocrisy emerges when his entirely different standards for municipal broadband become clear.

The toll from “personal turmoil and distraction” Yoo worries about with municipal broadband projects ignores the real problem — the lack of suitable broadband in a community with no solution in sight. Just ask families that drive their kids to a fast food restaurant to borrow a Wi-Fi connection to complete homework assignments, or the difficulty getting broadband in a neighborhood bypassed by DSL or cable. If a community defines broadband as an essential utility, it provides it even if it doesn’t turn a profit. Public infrastructure projects are not unusual. The amount of money spent by an industry worried about losing its duopoly or monopoly profits to oppose such projects could have been spent on improving and expanding service.

If a local community wants a municipal solution, it is Mr. Yoo’s donors that create most of the turmoil by ghostwriting municipal broadband bans into state law and filing groundless stall tactic lawsuits designed to protect their markets or run up costs.

Red Flag #5: There is “little current need” for high broadband speed (unless Comcast offers it).

One of the best clues that Mr. Yoo’s research isn’t as “independent” as he implies is the fact his conclusions seem to change depending on whether he is referring to a corporate ISP or a municipal provider. For example, Yoo’s study downplays the importance of gigabit fiber speeds. In one highlighted statement, Yoo declares, “The U.S. take-up rate of gigabit service remains very low, and media outlets report that consumers are questioning if gigabit service is really necessary.”

“The media” in this case is Multichannel News, a cable industry trade publication that has changed its tune about that subject recently and now publishes stories regularly about ISPs across the country moving towards gigabit speeds. In the article noted by Yoo, the story quotes a single CenturyLink executive who claims customers can live with the slower speeds CenturyLink often provides, but also admits his company is working to deploy, wait for it, gigabit-capable networks. As Stop the Cap! has explained to readers for a decade, the companies that always claim consumers don’t need a gigabit are the same ones that do not offer it to a large percentage (or any) of their customers. Yoo fails to explain why so many ISPs are preoccupied with offering fast internet speeds that he declares are unwanted, especially when a municipal provider plans to offer them.

Yoo’s allegiance to the current big cable and phone company provider paradigm is revealed when you scrutinize his reasons why community fiber is unnecessary. Take this example from his report:

“Wireless technologies—such as 5G—and legacy copper technologies—such as G.fast—are also exploring ways to provide gigabit speeds without incurring the cost associated with FTTH.”

“Exploring” is very different from “delivering.” Let’s also not forget he held a very different view when he wasn’t slamming municipal broadband:

“On the one hand, the Bell System created a telephone network that was the envy of the world and pioneered Nobel Prize-winning breakthroughs such as the transistor. On the other hand, it was extremely slow to deploy innovative technologies like DSL.”

It’s also important to note a large percentage of community broadband networks are based on fiber optics while commercial wireless companies like AT&T and Verizon are among the few willing to deploy 5G and incumbent telephone companies show only limited interest in G.fast.

And again, Yoo should take a bit of his own advice on picking or discouraging technology or municipal broadband provider winners and losers:

“At this point, it is impossible to foresee which architecture will ultimately represent the best approach. When it is impossible to tell whether a practice would promote or hinder competition, the accepted policy response is to permit the practice to go forward until actual harm to consumers can be proven. This restraint provides the room for experimentation upon which normal competitive processes depend. It also shows appropriate humility about our ability to predict the technological future.”

Red Flag #6: Innovation is in the eye of the beholder. (Subject to change on a whim).

Yoo also distorts a 2014 New York Times article by focusing on the lack of applications available to take advantage of gigabit speeds. But he ignores the fact that customers and entrepreneurs are delighted that speed is available, and offers the potential of significant innovation including very high quality video and enough bandwidth to power the explosion of connected devices in the home. Every major ISP in the country reports consumers are upgrading to faster internet packages, and some customers remain dissatisfied those speeds are still not fast enough.

Again, Yoo is suspiciously inconsistent. When major ISPs sought permission to develop faster traffic lanes for brand new services, Yoo was one of the biggest supporters of the innovation opportunities of that concept:

He hopes that the FCC’s easing restrictions on broadband providers’ ability to charge different prices for delivering different Internet content could spur innovation by allowing both established companies and startups to offer new online services tailored for the Internet “fast lane” delivery. For instance, Yoo pointed to the differentiation between standard U.S. first class postal service with overnight FedEx mail and noted how new businesses have grown around the overnight delivery option.

Apparently the distinction is that companies like Comcast have to be the mail carrier for that to be any good. If a community does it, that means it is unwanted, unnecessary, and bad.

We could go on and on, but we assume most readers get the point. Fixing facts around a narrative has been a part of the telecom industry’s cynical lobbying for decades. Let’s face facts. Yoo’s donors don’t want the competition and don’t want to be forced to invest in upgrades they should have completed long ago. Yoo’s report is part of the campaign to stop municipal broadband before it gets off the ground.

Where did we learn this? From Yoo himself, who wrote the best way to improve broadband is remove barriers that keep new providers, including municipal ones if he wants to be consistent, from launching service:

“Competition policy thus teaches us that any vertical chain of production will only be as efficient as its least competitive link. The proper focus of broadband policy is to identify the level of production that is the most concentrated and the most protected by entry barriers and to try to make it more competitive.”

“Furthermore, large, established players have more resources and experience with which to influence the regulatory process.”

Those are two things we can agree on.

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