Yesterday, the Federal Communications Commission formally introduced its omnibus National Broadband Plan to America, Congress, and the telecommunications industry.  The FCC seeks nothing less that a transformation of broadband to better meet the needs of Americans for years to come.

The 376-page plan recognizes broadband is no longer a novelty.  It’s now becoming one of the essential utilities of life — joining power, telephone and water service as something virtually every American will eventually have in their home.  But while the Commission lays the general groundwork for future regulatory policy to help achieve that goal, it ignores the historical reality that made universal service for utilities possible.

I am a strong believer in reviewing past mistakes to avoid repeating them in the future.  That is why Stop the Cap! occasionally turns back the clock and reviews history.  Railroad robber barons, telephone company monopolies, and electric service providers all abused their positions and consumers paid through the nose for service until the government finally broke up the anti-competitive trusts that limited competition.

Just like today’s broadband players, in the early 20th century, electric companies asked for and received favorable treatment by Congress.  The industry argued such treatment was required to make investors comfortable with the enormous amount of investment required to construct power generation facilities, run wiring to homes, and obtaining easy access to American streets and backyards.  Regulations must be kept to a bare minimum, providers demanded.  Anything else, they claimed, would discourage critical private investment, would create job losses, and slow deployment of service to millions of Americans.  Sound familiar?

By the time the American public realized electric companies were abusing their monopoly positions to charge outrageously high prices, the half-measures legislators proposed to control rates and improve service were often ineffective.

Just as with electric service, any broadband plan that seeks to tinker around the edges of the problem will not solve the problem.  Providers will find loopholes, lobbyists to help water down the provisions they dislike, and lawyers to mount endless legal challenges to stall reform.

The warning signs are already apparent in the FCC plan.  The agency seeks to cooperate with some of the biggest players in the industry that are responsible for what the FCC calls “the critical problems that slow the progress of availability, adoption and utilization of broadband.”

That ultimately means working with existing providers instead of creating the right conditions to welcome new players into the market.

The anti-competitive, de facto duopoly pricing power available to cable and telephone companies has created an enormous digital divide for rural Americans who cannot pass “Return on Investment” means tests, prices broadband service out of reach for many, and seeks even higher pricing while proposing to limit service with Internet Overcharging schemes like “usage-based billing” and “usage limits.”

Where one lives is often the most important factor when considering broadband speed and service quality.  It’s the luck of the draw.  A customer on one side of the street may have the option of Verizon FiOS, a true fiber-to-the-home service providing equal upstream and downstream speeds far higher than the national average.  Across the street, a customer may only be served by another telephone company offering 1Mbps DSL with no alternatives.

Other Americans live within viewing distance of a utility pole where cable or telephone broadband service stops, giving them the choice of paying $10,000 to extend service, or living with dial-up or satellite fraudband.

Few phone or cable companies will ever consider invading another’s turf, even if customers begged.

But it gets worse.

The service customers can obtain from a provider varies even within its service area.  Verizon FiOS and AT&T U-verse is available in some neighborhoods, but not others.  What stops or slows service expansion?  Anything from a management decision on a whim to concerns by private investors, market conditions, cost controls, or changing revenue expectations that inhibit uniform service across the community.  Local governments used to manage this problem with franchise agreements that made approval conditional on supplying service across an entire community, but companies like AT&T lobbied their way to statewide franchising reforms that can eliminate local oversight.

The cable television industry has a better track record of providing uniform broadband service to customers in their respective service areas, but at what cost?  Time Warner Cable COO Landel Hobbs recently told a group of investors pricing for its Road Runner service can be increased at the company’s whim.  Comcast has already increased prices on its broadband service. Both companies have either tested or implemented usage limits and restrictions on their customers.

What makes these things possible?  Limited competition and insufficient oversight.

The FCC’s solution to limited competition includes vastly expanding wireless frequencies available to mobile broadband providers.  But here’s the problem.  The government will auction those frequencies off to the highest bidders, which are most assuredly the dominant industry players AT&T and Verizon.  For millions of Americans, that means no extra competition at all because their phone, broadband, video, and wireless service all come from these two companies.  The only way smaller players can compete in a bidding war is through consolidating mergers, which reduce the number of competitive choices in many cities.  If the government wants competition, it should provide incentives to spur its development.

Wall Street certainly won’t help much.  They loathe heavily competitive markets now, because inevitable price wars limit their returns.  Getting initial investment to construct new networks is problematic because investors don’t want excessive competition.  Providers howl it’s unfair for government to help their competitors, but their incumbency provides them with built-in benefits unavailable to new entrants.

The FCC recognizes the importance of broadband service as America’s next utility, but is afraid to regulate them as such.  They may have good reason not to try.  Comcast is presently suing the Commission in federal court, claiming they don’t have jurisdiction over broadband policy.  Should Comcast prove its case, the National Broadband Plan could be just another thesis for improved broadband, with no backing authority to implement its recommendations and regulatory changes.

That brings us to Congress.  While the FCC may bring its best intentions to the table with the National Broadband Plan, it’s very likely lobbying will force changes to what finally gets implemented, if anything.

The telecommunications industry never has a problem finding financial resources to hire lobbyists and spread lavish campaign contributions all over Washington.

They’ve already bought and paid for an enormous astroturf group called Broadband for America with 200 member organizations, virtually every single one backed by AT&T or Verizon money or personnel, or equipment providers who stand to earn substantially from broadband improvement.  They are running TV ads telling viewers private providers should be left alone to get the job done, something they’ve had a decade to accomplish with insufficient progress in key areas.

Many in Congress, especially on the Republican side of the aisle, will agree with BfA’s “hands-off” advocacy.  Early reaction from Republicans regarding the Broadband Plan is not favorable.  Rep. Cliff Stearns (R-Florida), the ranking Republican on the House Energy and Commerce communications, technology and the Internet subcommittee, told the Washington Post he wants the agency to stay focused on bringing access to people who don’t have it.

“I am concerned, however, that the plan may contain stalking horses for investment-killing ideas, such as so-called net neutrality mandates or a return to outdated, monopoly-era regulation,” he said.

Many Democrats with large telecommunications companies headquartered in or near their districts are likely also to advocate caution.

Regardless of what the FCC recommends, Congress will ultimately control the outcome.

Here are our recommendations you should consider sharing with your elected officials:

Congress and the FCC must be willing to stand up to the telecommunications industry which is not delivering world-class broadband service.  The United States is falling behind in access, pricing, and speed.  Simply accepting the provider argument that they should be left alone in an unregulated, duopoly marketplace is not an option;

Congress must deliver to the FCC clear authority to regulate broadband service and enforce Net Neutrality.  Recent court cases argue the Commission presently lacks that authority.  Congress should take every possible step to ensure the courts this isn’t the case.

Increased oversight of the broadband industry is essential.  Why does an industry making billions in profits need to consider usage limits and usage-based billing designed to deter residential use of broadband service?  Such limits are designed to protect cable-TV revenue that could disappear if Americans dump their television channel packages in favor of watching everything online on their existing broadband account.

Congress should not stand for an unregulated duopoly controlling a service that is becoming as essential as water, energy, and the telephone.  As broadband becomes an essential utility, why is the government not stepping in when the COO of the nation’s second largest cable company — Time Warner Cable, tells investors he can raise broadband prices on a whim?  Is this the 21st century version of the Robber Baron Era?  Robust competition guarantees no executive can make such a statement.  Congress must act to bolster competition, including financial and tax savings incentives for new providers willing to enter markets of all sizes;

Wireless mobile broadband spectrum auctions do not promote competition because the biggest incumbent players are sure to win the bulk of the frequencies, guaranteeing more of the same anemic competition.  Some of the newly available blocks of frequencies should be reserved for bidders who do not currently serve the market where those frequencies are available.  Only that guarantees new competition in wireless;

Free or deeply discounted access to basic Internet service at broadband speeds should be a part of any National Broadband Plan, to ensure access to every American who wants it.

Tomorrow, the Federal Communications Commission is anticipated to release its long-awaited National Broadband Plan (NBP) for the United States.

The proposed road map to better broadband is supposed to bolster availability in rural communities, improve access in urban and suburban areas, and lay the groundwork for 21st century service and speeds.

FCC Chairman Julius Genachowski and Blair Levin, executive director of the FCC Broadband Initiative, have provided plenty of clues along the way.  But one thing is certain — the true impact of the NBP will be to pass a de facto national stimulus program for corporate lobbyists, who will spend the rest of the year loving the goodies in the plan and lobbying away the parts they don’t.

Everyone but consumers have plenty of cash on hand to pay for a full assault on Capitol Hill, bending the ears of lawmakers to deliver the changes they can believe in, and outlawing the changes they don’t.  Since those words will be underlined with fat campaign contributions, more than a few lawmakers are likely to listen.

National Public Radio’s Morning Edition asked the question, will the National Broadband Plan come up short? (4 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

The Winners

Public Institutions: To be a health care provider, a school, or library is a good thing these days.  Some of the most generous and non-controversial elements of the NBP will be directed to public institutions.  The cosmetic impact can’t be beat.  Every elected official sees great potential from ribbon-cutting a showcase project that improves health care, local schools, or a nearby public library.  To all three will come fast access fiber connectivity, tele-learning funding, and support for educating the public about broadband.  Libraries will be given special attention to address connectivity, schools will likely find free or low cost fiber in their future, and the digitization of health care records and results will also promise improvements in health care delivery.

None of these projects will create a significant competitive impact on current broadband players, and even earmark-wary politicians will pose for the cameras to launch an inner-city library’s fiber project.  Public safety will also be provided for with plans to improve connectivity and leveraging broadband for our first responders.

Wireless Companies: It can’t hurt to be a big telecommunications company with a wireless division, either.  That’s because one of the major priorities for the NBP will be finding additional wireless spectrum to improve mobile data services in hopes they can provide increased access in rural communities and increased competition in urban ones.

More airways for mobile data will be “a core goal,” FCC Chairman Julius Genachowski said in February.  That means AT&T and Verizon stand to gain the largest benefits from expanded spectrum.  Smaller carriers like T-Mobile and Sprint will also benefit to a lesser degree.  The FCC wants to double the number of frequencies available to wireless carriers — 500MHz that must be reallocated from other uses and delivered to providers in new broadband spectrum auctions.

Those with the deepest pockets will win the most spectrum, which assures in priority markets where spectrum is in demand, AT&T and Verizon will likely outbid others.

With a mobile broadband future at stake, that guarantees added pressure on smaller players to merge so they can pool resources to compete for needed airwaves.  That could ultimately reduce competition and choice among wireless providers. Pricing is unlikely to drop either, so long as providers try and recoup their auction expenses.

Levin, in particular, is a proponent of wireless competition.

“We don’t know necessarily whether wireless is going to provide perfect competition to wired. But we do know it’s a very important piece of the puzzle,” Levin believes.

Consumers know better, especially in a country replete with $60-for-five-gigabytes monthly usage plans.

Since wireless broadband is increasingly delivered by the same companies providing wired broadband, wired providers show few signs of fear from bolstered wireless competition.  AT&T U-verse and AT&T Mobility are AT&T.  Verizon FiOS, DSL, and Verizon Wireless are all Verizon.  Comcast and Time Warner Cable are both major investors in Clearwire, a wireless “competitor.”

Equipment & Infrastructure Providers: If you haven’t bought shares in Corning, manufacturer of fiber optic network components, or Cisco, which supplies broadband infrastructure, you might want to consider it.  Both companies, among dozens of others, stand to reap millions in profits from the sale of components to construct 21st century broadband.  All of the major equipment manufacturers and their respective trade associations have already submitted piles of comments to the FCC to help identify priorities and speed implementation of the NBP.  Not only do they promote the use of their products, they also speak in terms of helping to create  thousands of new jobs for those building the next generation of broadband.  What’s not to like about that?

Big Broadband Users: Major companies like Google and Amazon are expected to benefit from improved broadband, especially if it also includes increased competition and open access to privately owned networks.  Constructing larger national and regional networks assures increased capacity and reduced pricing, especially if networks face additional competition.  To underscore the point, the NBP is expected to announce a review by the FCC of the wholesale rates big carriers charge for access.

The Losers

Broadcasters: The nation’s broadcasters are clearly the biggest potential losers in the NBP.  Threatened with plans to capture large amounts of the UHF television band and selling it off to wireless providers may cripple at least some of the nation’s free over-the-air broadcasters.  For some at the FCC, the fact that less than half of all Americans watch television over-the-air must have made their frequencies a rational target.  Most Americans pay a cable, telephone or satellite company to deliver local stations.  If the FCC reallocated half of the current UHF dial and sold it to wireless carriers, the remaining channel space would mean a far more crowded, interference-prone TV dial.

Some wireless industry advocates of the reallocation plan believe stations can get by with reduced power on a network of cell-tower-like relay transmitters delivering signals to more distant suburbs in their service area.  Reduced power means reduced interference, they advocate, although it also means significantly reduced coverage areas, especially for rural Americans which depend on distant stations for free over-the-air television.

Right now, the NBP reallocation proposal will likely be “voluntary,” meaning stations can give up their channel and move to a different one, earning compensation from a federal auction fund to pay 100 percent of the expenses involved with the channel change.  The National Association of Broadcasters, the television industry’s trade association, fears what begins as “voluntary” may evolve into “compulsory.”

Open Access Proponents: Least likely to be included in the NBP is a broad-reaching requirement that broadband providers open their networks, usually a duopoly in most American cities, to would-be competitors at fair terms and prices.  The industry has been down this road before with traditional telephone service, and spent countless millions fighting proposals that would allow consumers to choose different local telephone companies.  In the end, choice for residential phone service over landlines never really got off the ground because the terms and conditions never made economic sense to would-be competitors.

Should the FCC try to mandate that cable and telephone industry broadband lines be opened to third party competitors, that will unleash a full scale lobbying assault on Washington.  In an election year, antagonizing big telecommunications companies is unlikely.  Besides, the industry can always sue, claiming any open access mandate violates their corporate constitutional rights.

The Jury Is Out

Consumers: That’s you and I.  Don’t expect the FCC to announce large, government-constructed, fiber to the home projects for every American now living with a broadband duopoly that delivers the least amount of speed for the highest possible price.  When a significant minority of Americans believes any government project to improve broadband is really a Barack Obama Socialist Wiretapping project, no national scale version of municipal fiber is forthcoming.  Not even close.

Most of the media attention will likely focus on speed goals, cosmetic projects for local institutions, and general statements about increased competition.

The immediate benefits for consumers will be nebulous at best.  We’ll likely gain more from Net Neutrality protections.  The only likely direct benefit, should it come to fruition, is the plan to create a nationwide, free wireless network to ease the digital divide.  Specific speeds, technology used, and service areas aren’t known at this point.  But private providers will work particularly hard to prevent this plan from ever seeing the light of day.

Consumer complaints about telecommunications companies have been skyrocketing.  The Better Business Bureau reports that the most complaints the group received in 2009 pertained to cell phone providers and the cable, telephone, and satellite-providers.

Consumers are screaming for competition and they get rate increases instead.

Without clear measures promoting increased competition and oversight, American broadband will evolve into an expensive, usage-limited experience for most urban customers, and “good enough for you”-slow speed DSL service delivered by a de facto telephone company monopoly in rural areas.

Relief for consumers does not come from handing additional few-strings-attached benefits and resources to the same providers that are responsible for the current state of broadband service in America.

Hollywood: Lobbyists for the music and movie studios have been peppering Washington with demands that broadband-related legislation include increased penalties and restrictions to reduce copyright theft.  They seek a mandate that repeat copyright offenders be banned from broadband service, that consumer electronics incorporate digital rights management technology to thwart unauthorized distribution or access to copyrighted content, and increased financial penalties for those who try.

Should the FCC incorporate these concepts in the NBP, it will likely create a consumer backlash because of past memories of overzealous copyright controls that hamper legitimate use of purchased content.  It will also raise opposition from consumer electronics manufacturers.

Cable and Telephone Providers: There are benefits and risks to companies like Comcast, Time Warner Cable, Verizon, AT&T, Frontier Communications, and Windstream, among others.

Reform of the much-maligned Universal Service Fund, which currently benefits traditional telephone customers, could be a game-changer for many companies.  Currently, Verizon and AT&T pay more into the USF than they receive from it.  That is especially true for Verizon which is abandoning rural markets by selling off service areas to smaller providers.  The USF provides a subsidy for rural phone companies to deliver affordable service at comparable pricing enjoyed in larger communities.  By transitioning the USF into a Broadband Service Fund — using the money to construct and improve broadband service — many companies stand to benefit.

Frontier, CenturyLink, and Windstream are among those specializing in “rural phone service” and could use funding to defray the costs of broadband networks otherwise built with investor money.  Verizon and AT&T could earn broadband funding for projects in their service areas currently not delivering broadband, or only providing anemic DSL service.

That has cable companies worried, particularly if the funds can be used to provide service in areas where they already offer service.  Even worse, the thought of a new wireless broadband entrant in a community already served by cable and telephone company broadband.

The cable industry is also worried about a proposal to let consumers ditch cable-owned cable boxes in favor of their own purchased alternatives.

Cable companies rent tens of millions of cable boxes that they control and manage. The FCC wants consumers to be able to purchase and manage their own devices capable of utilizing the services cable operators provide, without having to pay several dollars a month to borrow one from the cable company.

Kyle McSlarrow from the National Cable & Telecommunications Association sent a letter Friday to Genachowski offering the FCC a compromise.  Offering seven points the NCTA says cable is willing to voluntarily abide to, McSlarrow suggests consumers should be able to buy such devices, but that they should not be required to access every possible service on offer from his cable members.  Indeed, such devices also must incorporate security and copyright controls to limit unauthorized access and use of cable-delivered content.

That guarantees the same success rate consumers have today with CableCARD technology, which few consumers use or understand.

Regardless of what comes from tomorrow’s National Broadband Plan, look beyond the happy talk, general promises, and visionary language.  The devil is in the details, definitions, schedules, and clear path from tomorrow’s platitudes into next year’s broadband improvement reality.

Comcast is back with another rate increase effective April 1st, amounting to 3.5 percent for many cable, broadband, and telephone customers.

Although prices vary depending on your specific service area, the range of the price increase is more consistent.

In southern New Jersey, for example, here is the breakdown — all prices are by the month:

• Expanded/Standard service cable-TV tiers are increasing $2.  Expanded service customers could pay up to $50.10, Standard customers $60.55;
• Triple Play customers will see a $5 increase in the second year of their two-year contract from $114.99 to $119.99.  First year pricing remains $99 for new customers;
• Digital Premium Packages are increasing $2;
• Economy Broadband (1Mbps) increases $2, Performance (12Mbps) increases $2, Blast! (16Mbps) increases $2, Ultra sees no price increases (but goes away for new customers effective 4/1);
• Comcast phone line prices are also increasing in certain cases;
• Each additional DVR drops by $5 — Verizon FiOS was hammering Comcast about DVR pricing.

There are no rate changes for business service customers or subscribers with “limited basic service.”  There is also no change in the company’s broadband usage allowance — 250 GB, the only part of Comcast’s service that seems to stubbornly remain at the same level year after year.

Comcast, the nation’s largest cable operator, blamed the mid-year price increases on increased programming and other business costs.

But the company is not exactly hurting.  Comcast’s 4th quarter earnings last year jumped 132 percent to $955 million dollars.  Rate increases that are designed to drive consumers into profitable service bundles, combining television, Internet, and telephone service, guarantee even better financial results in 2010.

Verizon is already capitalizing on Comcast’s rates by offering residents in southern New Jersey an even better price for Verizon FiOS — dropping from $109.99 for two years to $89.99, not including taxes and fees.  But like Comcast, Verizon wants you take a bundle of services, or else face higher prices.  The company recently increased the price for FiOS TV to $64.99 for standalone service.

Time Warner Cable is offering mobile phone providers a solution to their clogged wireless networks — clog ours instead!

Business Week notes the cable company has been aggressively pitching its broadband network to cell phone companies in New York City, which can be used to transport cell phone calls and mobile data between cell towers and the providers’ operations centers.  The “backhaul” network cell phone companies rely on to move calls and data between the cell tower nearest you and your provider’s distribution network is often the source of the worst bottlenecks, especially when those networks are connected by standard copper telephone wiring, as many still are.

The more customers sharing a low capacity copper line, the slower your data speeds and greater the chance for dropped calls.  Although some providers have expanded their fiber capacity to reach busy cell towers, many more are still stuck with copper… until now.

Time Warner Cable’s offer to offload clogged cell phone networks onto the cable company’s broadband backbone has become extraordinarily profitable to the nation’s second largest cable operator.

In fact, it has become Time Warner Cable’s fastest-growing business after revenue tripled last year, Craig Collins, senior vice president of business services told Business Week.

We are talking $3.6 billion dollars in revenue in 2012 from wireless carriers alone, according to researcher GeoResults, Inc.

“Backhaul is a growth play that we are pursuing aggressively,” Collins said. “These mobile players want to get the bandwidth they need at a cost-effective price and our structure allows them to get that pretty seamlessly.”

U.S. smartphone use has grown almost 700 percent in four years, according to the U.S. Federal Communications Commission. Mobile-data volume is more than doubling annually as people use devices like the iPhone, BlackBerry and Google Inc.’s new Nexus One to send photos, watch videos and surf the Web. When networks jam, consumers face dropped calls and may find they can’t access Web pages or TV, analysts said.

Apparently the “exaflood” scare theory that suggests broadband networks are becoming hopelessly clogged does not apply to Time Warner Cable, because the company easily found plenty of free bandwidth in metropolitan New York City to profit from wireless phone traffic.

Not to be outdone, Comcast expects $1 billion from the wireless backhaul gravy train over time, according to its February 3rd conference call with investors.  Comcast is in a unique position to help ease congestion in San Francisco, where the cable operator provides service to some of the same customers who wander the city with Apple iPhones on AT&T’s overclogged Bay Area network.

Time Warner Cable CEO Glenn Britt doesn’t want to limit the potential revenue to just the wireless big boys — he wants to offer service to carriers large and small:

While Time Warner Cable declined to specify if AT&T, the lone U.S. carrier for the iPhone, is a customer, the New York- based cable company says it wants to sign carriers large and small. Chief Executive Officer Glenn Britt alluded to AT&T’s extra iPhone traffic in a December conference call.

“They want to get that into a cable as fast as they can,” Britt said, referring to overloads. His company began leasing backhaul in 2008 and posted $26 million in sales last year, less than 1 percent of the company’s total sales. Collins declined to give a forecast for 2010.

All this, of course, comes ironically to those Time Warner Cable customers who were subjected to Internet Overcharging experiments from Time Warner Cable just about one year ago.  Apparently, the exaflood only applies to consumers who face enormous broadband pricing increases and/or usage limits because of “overburdened” broadband networks.

Not so overburdened that the company can’t make room for billions in new earnings from cell phone companies, of course.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Moffett Says ATT May Need Cable to Ease Network Jams 3-8-10.flv[/flv]

[Video Fixed!] Craig Moffett discusses wireless smartphone data usage trends and Time Warner Cable’s involvement in transporting mobile phone and data across its cable broadband network (5 minutes)

[flv]http://www.phillipdampier.com/video/Sen Al Franken Grills Comcast-NBC Merger Advocates 2-4-10.flv[/flv]

Stop the Cap! has received several requests for Sen. Al Franken’s (D-Minnesota) comments during the Senate hearing in early February reviewing the proposed merger.  So here, for your viewing pleasure, is the portion of the hearing where Franken comes out swinging in opposition to the ongoing consolidation of media companies in America. (February 4th – 14 minutes)