One of the more far out there arguments against Net Neutrality has consistently come from conservative astroturf groups, who receive plenty of corporate funding to advocate a pro-business agenda using arguments that appeal to a conservative audience.

Newsmax, one of the more widely-read conservative websites, has gone all out on the theory that Net Neutrality is an attempt by President Barack Obama to take control of the Internet, potentially even leading to censorship.  In an unconvincing video segment, Newsmax.TV reporter Ashley Martella interviews Ryan Radia, an Information Policy Analyst at the Competitive Enterprise Institute, a pro-business think tank.

Newsmax TV: Net Neutrality is a "regulatory power grab" (4 minutes)

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A number of conservative blogs and news sources have latched onto one echo chamber claim: “CBS News recently reported that a cyber security bill would give Obama the emergency powers he’d need to control the Internet.”  When a link to the actual report is not provided, that should ring warning bells in your head.  Unfortunately, too many people simply accept statements as fact and never bother to check them out.  If Katie Courac is warning the country about an Obama power grab online, I want to know about it.

Stop the Cap! is one of the few, the proud, the fact checkers.

As with most of the memes attacking Net Neutrality on political grounds, there is considerable exaggeration at work here.  We could find two references on CBS News’ website to the aforementioned claim, and both turned out not to be news reports, but one blog entry and a reprinted news article from a conservative news site¹:

• Senate Proposal Gives President Authority Over Internet, by Declan McCullagh, a senior correspondent for CBS News’ Web site.  (August 28, 2009)
• An Unconstitutional Internet Power Grab, by Bruce Henderson, reprinted with permission from The New Ledger, a conservative news site founded by Ben Domenech of RedState blog fame. (September 1, 2009)

An Associated Press wire story this past weekend covering proposed legislation also appears on CBS News (and thousands of other websites).

At issue is S.773, The Cybersecurity Act of 2009, a Senate bill introduced by Sens. Jay Rockefeller (D-West Virginia) and Olympia Snowe (R-Maine) to establish an effective defense against cyber attacks on the United States.  Some early drafts of the proposed bill had some language, long since discarded, that could have raised privacy concerns, but it’s disingenuous at best to suggest this bill’s language, known to Newsmax and others propagating these near-hysterical conspiracy theories, would give any power to the Obama Administration to silence dissent and “control the Internet.”

In fact, this legislation does not even originate with the White House.  Jena Longo, deputy communications director for the Senate Commerce committee, de-fanged the hysteria back in late August in a statement:

The President of the United States has always had the Constitutional authority, and duty, to protect the American people and direct the national response to any emergency that threatens the security and safety of the United States. The Rockefeller-Snowe Cybersecurity bill makes it clear that the President’s authority includes securing our national cyber infrastructure from attack. The section of the bill that addresses this issue, applies specifically to the national response to a severe attack or natural disaster. This particular legislative language is based on longstanding statutory authorities for wartime use of communications networks. To be very clear, the Rockefeller-Snowe bill will not empower a “government shut down or takeover of the internet” and any suggestion otherwise is misleading and false. The purpose of this language is to clarify how the President directs the public-private response to a crisis, secure our economy and safeguard our financial networks, protect the American people, their privacy and civil liberties, and coordinate the government’s response.

Radia, for his part, illustrates the effort to co-opt conservatives who distrust the Obama Administration into coming along for the ride for an industry friendly snowjob opposing Net Neutrality, with helpful prodding from Martella:

Martella: Could this lead to censorship?

Radia: There is the possibility of that.  What we have seen lately is the Obama Administration and agency officials attempt to increase their power over government networks.  Just a few weeks ago, CBS News reported that a cyber security bill would give Obama emergency powers to control the Internet.  Under a Net Neutrality regime, we could see the FCC tell companies what data they can and cannot prioritize.

Martella’s wild “censorship” reference was jarring because it comes out of the blue with no supporting preposition.  In fact, it’s pro-Net Neutrality advocates that fear providers could engage in censorship, because there have been instances where providers have done just that.  Net Neutrality impacts private Internet providers by demanding they do not block, impede, or interfere with third party website content.

Radia plays mix ‘n match with two different issues to create a magical blend of nonsense — the cyber security bill which conservatives fear is an Obama power grab and Net Neutrality’s consumer protections against abusive broadband network management.

The Obama Administration’s advocacy of Net Neutrality is not about increasing power over government networks.  CBS News did not report that a cyber security bill would give Obama emergency powers to control the Internet — it printed a blogger’s opinion and a reprint from a conservative news site that hypothesized such a bill, if it existed, would do that.  Radia defines Net Neutrality as the FCC telling companies what data they can and cannot prioritize.  Actually it just preserves the open network that has made the Internet so unique.  But on behalf of his provider friends, that issue is force-merged into the Obama “Internet takeover” theory, with the hope it will energize conservatives to also oppose Net Neutrality.

Radia’s arguments are hardly convincing.  He repeats the unpersuasive and undocumented fears that “Net Neutrality … is a rule that would stifle innovation, would reduce network investment, and it would decrease consumer choice in the broadband market.”  It sounds like he also bought a ticket to OppositeLand, where reality is defined as the exact opposite of the truth.  As is the case in Canada, it is the lack of Net Neutrality protection which stifles innovation from new high bandwidth applications that cannot succeed in a marketplace rich with Internet Overcharging schemes and speed throttles.  Online video for Canada is just one of several applications that have been stifled by provider controls.  There is no evidence Net Neutrality would reduce investment in networks.  Customers clamoring to use those networks and the diversity of online content is much more likely to stimulate network upgrades to maintain quality of service.  How consumer choice in the broadband market (which most consumers believe is hardly robust) would be impacted negatively is never explained.

Radia accidentally justifies why FCC policy alone is not enough to guarantee Net Neutrality protection when he points out Congress has not specifically authorized the FCC to get involved in the network management of service providers.  A bill in the House of Representatives would do just that, however.

Radia’s assumptions that consumers are pleased with the competitive marketplace, particularly for wireless, are dubious at best, particularly when he makes this stunning statement:

“If you want a walled garden, a device where a company controls and helps guide the user experience, you can get an iPhone.”

Of course, many iPhone users have complained openly and loudly about the fact they are stuck with AT&T — AT&T retains an exclusive arrangement with Apple in the United States to sell the phone for use on AT&T’s network.  They also aren’t too happy being limited by both companies in selecting applications to run on the phone, something managed by Apple and AT&T unless the customer “jailbreaks” the phone to bypass the restrictions.  The result is a stifled iPhone user experience on an overloaded AT&T wireless network, higher pricing on service plans for the iPhone, and consumer choice limited to deciding whether to live with these restrictions or go without.

Radia suggests Net Neutrality is being pushed just by a handful of “so-called consumer groups that believe that since their preferences are not being matched in the market, that they should use the hand of government to force these rules upon the private sector.”  His problem with that is that he believes (along with the providers who spend millions lobbying) that consumers are well served by today’s marketplace filled with proprietary business models.

Of course, real consumer groups can’t exist without consumers that actually support them, and as we’ve documented since this site launched, consumers are not well served by the limited competitive marketplace, and the abuses that come from that, and they’ve complained loudly and regularly to those providers about those practices.  They aren’t listening.  So consumers are turning to the public officials who regulate and oversee such markets to attempt to force them to listen.

Newsmax’s efforts to give mainstream media credibility to a sensationalized claim was only outdone by Radia himself on his own bio page:

Ryan is a frequent contributor to the Technology Liberation Front, the technology policy blog dedicated to preserving freedom and liberty in the information age. His ideas have been referenced by technology writers including Andrew Sullivan of The Atlantic’s Daily Dish, Karl Bode of Broadband Reports, and Mike Masnick of Techdirt.

Karl Bode found it ironic Radia would reference a piece he wrote, because Bode’s article trashed Radia and his friends for claiming a cable price war was resulting in consumer savings.  The Techdirt piece Radia links to didn’t exactly give him a seal of approval either:

Last month, we mocked some mainstream press reports claiming both a broadband price war and the fact that broadband prices were rising. There doesn’t really seem to be much of either, as broadband prices have remained pretty constant, even accounting for promotional pricing. However, with Comcast getting ready to significantly boost speeds (yes, with its broadband caps, Ryan Radia is wondering if the actual “price war” is hidden by the fact that it’s in price per megabit.

In other words, if prices remain constant, but your speed doubles, isn’t that something of a price decrease? Radia chalks this all up to competition in the market, but it should at least be admitted that the speeds (even these higher speeds) still pale in comparison to other countries where there is much greater competition than in the US, where most people still are limited to only two real choices. Either way, as someone who’s still stuck on a home connection that runs around 500k (below the new 768k cutoff for “real” broadband) despite being in the center of Silicon Valley, I’m still not convinced that these greater speeds are so readily available yet.

We invite Radia to link to our spanking as well.

¹Using search terms “obama emergency internet” and “emergency internet” on the CBS News website.

Courtesy: vgm8383

Bay area residents are fuming over Comcast’s latest round of rate increases.  The din grew so loud, Drew Voros, the Oakland Tribune Business Editor, noted “the annual outcry over Comcast rates is louder than any rate increase for electricity or water I have come across. A possible exception being California’s energy crisis earlier this decade.”

Voros then casually dismisses consumer outrage by telling his readers “cable TV is not a utility. It is not a vital service with transparency, public input and debate. There is no recourse for poor service through regulatory bodies or the ballot box.”

We know where this is going.

Voros doesn’t suggest that the rate increases are unjustified and unwarranted, nor does he have a bad word to say to Comcast, although he does fixate on one aspect of the regulatory framework (the wrong one) that he believes is at the core of the problem of unchecked rate increases.

His suggestion is to watch free over the air television or try DirecTV, Dish Network or AT&T’s U-verse.

Let’s explore those alternatives.

For some, assuming they get reasonable reception, and many Bay Area residents do not, getting local over the air signals might be good enough, but won’t help with those pesky rate increases on broadband service, or for those channels like C-SPAN or cable news outlets residents access to get coverage of events local broadcasters ignore.

DirecTV and Dish Network are also fine alternatives, assuming you have permission from a landlord to install the reception equipment, and/or your view to the satellite isn’t obstructed by trees or buildings.  AT&T U-verse is an even better potential choice, assuming it’s actually available in your area.

For everyone else, it’s Comzilla or go without.

Voros then goes too far into the weeds and gets lost in what suspiciously looks like “blame the government” rhetoric:

What many TV viewers do not realize is that the franchise agreements are loaded with fees and payments to the cities, funded through annual rate increases. There’s give and take between cable companies and the cities they serve. It’s a business deal with you in the middle.

But consumers are not bound by any franchise agreements, and the options for television services have grown immensely since the first cable TV line was connected in the 1970s. That is why the franchise agreements are out of date. Technology has overtaken that legal document. There’s no monopoly on television content delivery.

Comzilla attacks San Francisco with rate hikes.

Ask any city official if they’d rather enjoy the incremental increase in franchise payments (which amounts to a fixed percentage, usually 3-5% of gross revenue) made possible by the annual rate hike, or the peace and quiet from constituents not upset over an industry that routinely increases rates well in excess of inflation.

Doing away with the franchise system to resolve cable rate hikes would be like using a ShamWow to deal with the after-effects of Hurricane Katrina.

Most cable companies used to include the “franchise fee” as part of the cost of the monthly service, but now routinely break that charge out onto its own line on your bill (and many never lowered the price for the original service, pocketing that as a hidden rate increase as well).  A rate increase may add a few pennies to the franchise fee on a customer’s bill, but then there is the other $3-5 dollars to consider.

Franchise agreements are negotiated for wired providers.  AT&T had to obtain one to provide U-verse.  That’s because local communities demand that a business tearing up their streets provide something in return for the community.  That usually includes: a small percentage of gross revenue, an agreement to provide free service in community centers, government offices, and public schools, and that they set aside several channels for Public, Educational, and Government access, known collectively as “PEG channels.”  It’s a very small price to pay for an industry that earns billions in profits.

Those agreements typically are renegotiated every ten years, so if consumers object to the franchise fee arrangement, they can appeal to local government to reduce or eliminate it.

Voros also suggests consumers try to obtain television programming online.  That is also sometimes possible, but as Stop the Cap! readers know, that also takes a broadband connection, and Comcast just raised the price for many of their customers for that as well.  With the industry’s new TV Everywhere project, dropping your cable subscription, as Voros suggests, will also likely cut you off from many of your favorite cable shows online — TV Everywhere is for paid television subscribers only.

The industry has every angle covered, right down to suing to remove the exclusivity ban on cable networks and programming.  Should the DC Court of Appeals agree, Voros’ contention that there’s no monopoly on television content delivery will also be thrown into doubt.

The solution is not to blame “outdated” franchise agreements.  The cable package business model is the larger problem.  Customers are expected to pay for ever-growing and more costly basic and digital cable packages filled with channels they don’t want.  Of course competition should be encouraged, but allowing consumers to choose and pay for only the channels they wish is a far better solution to runaway cable pricing.

Delta, part of the Vancouver metro area, British Columbia

Stop the Cap! reader Rick has been educating me about some of the new-found aggression by Shaw Communications, one of western Canada’s largest telecommunications companies, in expanding its business reach across Canada.  Woe to those who get in the way.

Novus Entertainment is already familiar with this story.  As Stop the Cap! reported previously, Shaw launched fire sale pricing on its cable, broadband, and telephone services ($9.95 a month for each) and target marketed those limited special offers in and around buildings wired for Novus service.  Novus protested to the BC courts, claiming Shaw was engaged in predatory pricing behavior.

A few days ago, an Ontario court judge dismissed a suit brought by Rogers Communications against Shaw over Shaw’s plans to buyout Mountain Cablevision, a smaller cable provider serving parts of southwestern Ontario.  Rogers was upset because the purchase violated a “covenant” between the two telecom giants not to compete in each others’ service areas.

Now, Shaw’s trucks are rumbling down the roads of Delta, a community south of Vancouver,  as work begins on constructing a cable system that will directly compete against Bragg Communications’ Delta Cable.  Shaw also has won approval from the Canadian Radio-television Telecommunications Commission (CRTC) to competitively wire Ladner and adjacent neighborhoods southeast of Vancouver.

Shaw president Peter Bissonnette told industry news site Cartt.ca the wiring of Delta and Ladner comes as a result of “people there saying they would like to get Shaw.”  So now residents can look out their windows and see Delta Cable’s wiring on one side of the street and Shaw’s wires on the other.

Another success story for head-on competition leading to lower prices and more choice, right?

Not so fast.

As Cartt.ca reports (one article view is available for free, subscription required thereafter), there is a history to be considered here, and that may include another agenda beyond the “consumers wanted us so we came” explanation.

There’s a bit of history to the Delta system and Shaw, however. Back in 2006, when then-owner John Thomas decided to sell Delta Cable and Coast Cable, many assumed he would sell to Shaw. After all, Thomas was on Shaw’s board of directors. However, aware of the fact most of his employees would likely be out of work if nearby Shaw bought it, he instead surprised most by selling to what was then Persona Communications, for about $90 million.

Some months later, Persona itself was purchased for a reported $750 million by Bragg Communications, which does business, of course, as EastLink, primarily in Eastern Canada.

Cartt reports it is no secret Shaw wants the Delta region as part of its greater Vancouver service area, and the traditional route by which most cable companies do this is by buying out the incumbent provider.  Bragg Communications understands this, and has sold some of its own systems in the past, most recently in Saskatchewan.  But so far, not in Delta.

Bissonnette was cagey when asked if Shaw had pursued the buyout route, which is always cheaper than overbuilding an area with all new wiring.

“They know what we are doing. There’s always more than one way to skin a cat you know,” he said.

If Shaw adopts the same aggressive strategy in Delta they have used against Novus in downtown Vancouver, it will likely make Delta’s current cable system unprofitable.  Bragg would be forced to consider either engaging in a sustained price war, something Shaw is in a better position to handle because of revenue earned from non-competitive areas, or eventually sell the Delta Cable system at a fraction of its original value.

For comparison, Delta Cable charges $26 a month for analog basic cable plus $26.95 a month for a robust digital channel package.  Broadband service, with a 62GB usage cap is $39.50 per month.  They don’t seem to offer telephone service.  Shaw promoted a digital/basic combination package in downtown Vancouver for $9.95 a month and broadband for an additional $9.95.  Shaw to Delta Cable: Compete with that.

For a time, up to 28,000 households in the area may enjoy some benefits from a sustained price battle, unless Bragg capitulates and sells out early, but in the end, if Shaw engages in the kind of allegedly predatory pricing it has in downtown Vancouver against Novus, the benefits will be short-lived, and Shaw always has time to make up the difference down the road.

Phillip Dampier

FCC Chairman Julius Genachowski recorded a YouTube video to talk to Americans about the development of a national broadband plan for the United States.

In optimistic, flowery language, Genachowski invited Americans to submit their ideas and suggestions not only regarding broadband, but also the priorities Americans think the FCC should have in the future.

The most important part of the five minute video comes right in the beginning when Genachowski called broadband critical to the nation:

“Broadband is our generation’s major infrastructure challenge. It’s for us what railroads, highways and electricity were to past generations.”

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Genachowski would do well to remember America’s experience with all three of these important history lessons.  The broadband plan Genachowski envisions is subject to the same type of intrusive, anti-consumer tactics that wreaked havoc on past generations of consumers.

The railroad industry’s cartel of ownership and control is a familiar tale.  The Rise of Monopolies tells the story:

The need for all of these industries to stay successful was worrisome for railroad owners. To avoid the loss of production in any of these areas, large corporations attempted to stabilize their situations by pooling markets and centralizing management. By combining all of the fields into one conglomeration, the railroads had a new power, as they acquired control of many facets of the new economy. This body now had the ability to “squeeze out competitors, force down prices paid for labor and raw materials, charge customers more and get special favors and treatments from National and State government” (Chalmers). The railroads had all the power, because they controlled all the prices. Since the new residents of the West could not survive without the use of the railroads, they were forced to pay whatever rates the railroad companies set.

With these huge stores of capital, the railroad companies were able to finance political campaigns through whatever and whomever was needed in government. With this control in Washington, there was no way to stop the overwhelming control of this industry over society. The entire nation was subject to the whims of this monopoly.

It took direct government intervention to break up the railroad monopoly and protect consumers and businesses from the abusive practices of a transportation industry that can make or break you based on pricing and service, with little competition.

Public highways became an important asset that still pays off today.  The Eisenhower Administration’s deployment of the interstate highway system, at the size and scope required, would not have been accomplished by the private sector on its own.  Today’s federal highway system is largely self sustaining through the collection of gasoline taxes paid by drivers.

As Americans struggle with several incumbent providers that refuse to provide 21st century broadband technology, with little competition to drive that infrastructure investment, an uneven variety of broadband networks have emerged, from fiber to the home in some areas to an indefinite reliance on aging DSL slow speed technology for millions of rural Americans, or worse, inadequate satellite broadband.

It may be time to consider the same kind of national approach with a publicly owned fiber network private providers of all kinds can use to serve customers with a uniformly high speed, high quality user experience.

Electricity and the development of rural America is another very familiar tale to any rural broadband user.  From TVA: Electricity for All:

Although nearly 90 percent of urban dwellers had electricity by the 1930s, only ten percent of rural dwellers did. Private utility companies, who supplied electric power to most of the nation’s consumers, argued that it was too expensive to string electric lines to isolated rural farmsteads. Anyway, they said, most farmers, were too poor to be able to afford electricity.

The Roosevelt Administration believed that if private enterprise could not supply electric power to the people, then it was the duty of the government to do so. Most of the court cases involving TVA during the 1930s concerned the government’s involvement in the public utilities industry.

In 1935 the Rural Electric Administration (REA) was created to bring electricity to rural areas like the Tennessee Valley.

Many groups opposed the federal government’s involvement in developing and distributing electric power, especially utility companies, who believed that the government was unfairly competing with private enterprise. Some members of Congress who didn’t think the government should interfere with the economy, believed that TVA was a dangerous program that would bring the nation a step closer to socialism. Other people thought that farmers simply did not have the skills needed to manage local electric companies.

Any community wrestling with a municipal broadband project to provide service the private market refused to offer is already acquainted with this familiar story.  So are many rural consumers who are waiting, and waiting, and waiting, for the private market to bring broadband to their communities.  Unfortunately for them, the private market has already written them off as “not profitable enough” to provide service.

The electrification of America did not lead to a socialist takeover of America.  It led to the development and sustainability of rural communities and their local economies.  Agriculture remains one of America’s most important success stories, and without widespread electrification, this story might not have been written.

Scare tactics and horror stories have come whenever a private monopoly or cartel faces the threat of competition, regulation, or a municipal option to provide needed services communities are denied by the private sector.

The fear mongering was there when the railroad monopolies faced investigation and regulation, the “socialism” scare was heard when government attempted to undertake public infrastructure projects of many kinds from highways to utility service, and the same kinds of rhetoric is heard today about “socialist takeovers of the Internet” and “municipal broadband unfairly competes with private providers,” and the logical opposite “the government can’t do anything right.”

Unfortunately, the FCC has a long history of cozy relations with lobbyists who understand how to work within the agency’s nearly-impenetrable bureaucracy.  A review of the broadband plan submissions to the FCC reveals a large  number of them come from lobbying groups and the providers themselves.  Most consumers were left typing comments into a box on the web submission form, with every indication those remarks will be deemed “not serious” by FCC staff.

This time, Chairman Genachowski has to show more than a YouTube video inviting consumers to share their input.  We’d like actual evidence the consumer point of view is actually being taken seriously for a change, and is not simply one tiny noise drowned out in a loud crowd of special interests with profit agendas to protect and public policy to influence.  The FCC already knows what consumers want: widely available, fast, reasonably priced broadband free from Internet Overcharging schemes protected with robust Net Neutrality policies enforced by law.

If the existing providers want to erect roadblocks to competition, oversight, and hell-or-high-water-broadband-deployment, it’s time to break them up and get them out of the way.  That’s broadband we can believe in.

Professor Rodney Tiffen

The Sydney Morning Herald ran a piece Friday morning that had absolutely nothing nice to say about the former leadership of Telstra, Australia’s “Private Telecom Monopoly.”

Sol Trujillo was the George W. Bush of telecommunications. For both, the American way was the only way. Being the biggest meant you did not have to do diplomacy, and both were better at starting wars than finishing them. Both used patronage and punishment to ensure a like-minded leadership group that made worse decisions more harmoniously.

Australians remain unimpressed with the tumbleweeds that routinely blow across the Land Down Under’s broadband superhighway — the result of a combination of failed government leadership, special-interest dominated public policies which put the interests of private companies ahead of their own citizens, and the predictable emergence of greedy telecommunications providers delivering the least possible service at the highest possible price for millions of Australians.

Rodney Tiffen, professor of government at the University of Sydney, calls out a succession of Australian governments which have repeatedly dropped the broadband ball, and have left the country with comparatively overpriced service with ludicrous Internet Overcharging schemes that punish citizens with usage caps, outrageous reductions in their broadband speeds or, worse, overlimit fees and penalties:

Australian consumers suffered particularly from the stringent caps placed on downloads and the high expense of exceeding the cap. While in nine of the countries no explicit caps were placed on broadband subscriptions, Australia was one of only four countries (with New Zealand, Canada and Belgium) where all survey offers included caps, and among these four was by far the most expensive when the caps were exceeded – an average of 11 cents per megabyte compared with 1 cent for the others.

Tiffen rejects the argument that Australians have to pay more because Australia has low population density.

“It should also be remembered Australia has a higher percentage of people living in large cities (defined as those with more than three-quarters of a million people) than any of the other countries (measured by the Organization for Economic Co-operation and Development),” Tiffen writes.

The key policy issue Tiffen identifies is: what is a natural monopoly and when does competition produce more dynamism and responsiveness to consumers? Since telecommunications reform came on to the public agenda about two decades ago, there had been a bipartisan failure to address this central question.

Tiffen wants Australia to recognize the mistakes America made dealing with its cable television industry — “replete with cases where a company controlling the delivery platform has favoured its own company’s channels over its competitors.”

“Indeed a private monopoly at a key gate-keeping point often leads to less competition in services than there would be with a publicly owned or regulated infrastructure,” Tiffen argues.