We grant the application of Comcast Corporation (Comcast), Time Warner Cable Inc. (Time Warner), Time Warner Cable Information Services (California), LLC (TWCIS) and Bright House Networks Information Services (California), LLC (Bright House) for approval of the transfer of control of TWCIS and Bright House to Comcast. In addition, we grant the application of Comcast, TWCIS and Charter Fiberlink CA-CCO, LLC (Charter Fiberlink) to transfer a limited number of business customers and associated regulated assets of Charter Fiberlink. — Proposed Decision of California Administrative Law Judge Karl J. Bemesderfer

In a decision widely expected by observers for almost a year, the California Public Utilities Commission (CPUC) is poised to conditionally approve the merger of Comcast and Time Warner Cable with dozens of pages of conditions to appease state politicians, concerned commissioners, and interest groups seeking to protect Californians from the competitive impact of what will easily become the state’s largest cable provider, serving 84% of households.

Administrative Law Judge Karl J. Bemesderfer issued his lengthy “proposed decision” in February, acknowledging the deal’s opponents have proved their contention the merger is not in the interests of Californian consumers, but then recommends approving it anyway:

In more concrete terms, the proposed merger between Comcast and Time Warner reduces the possibilities for content providers to reach the California broadband market. While the FCC’s pending reworked Net Neutrality rules may mitigate some of this effect, the sheer dominance of Comcast’s post-merger position causes us concern.

Parties have made a convincing showing of the anti-competitive consequences that Comcast’s post-merger market power may have on the deployment of broadband in California, and of anti-competitive harms that would occur in California if the merger is consummated. We are also persuaded by evidence of Comcast’s Internet Essentials program’s weak performance in closing the digital divide in California and fulfilling universal service goals, and thus do not view it as a mitigating factor without additional conditions.

While the protesters and intervenors vigorously assert that we should deny the applications outright, they also urge us, in the alternative, to impose conditions ameliorating the potential harms should we decide that such conditions are within our powers and sufficient to render the resulting transaction not adverse to the public interest.

While we are troubled by the protesters’ and intervenors’ many examples of potential harms that may flow from the merger, we believe that those harms may be mitigated by the imposition of conditions on our approval consistent with our powers under state and federal law.

Bemesderfer proposes a lengthy list of conditions the cable giant must meet for at least five years after merging, including offering discounted Internet service programs, improve customer service, provide free backup batteries for Comcast phone service, and promise it will stop lobbying against community broadband projects.

But the judge said nothing about Comcast’s runaway rate increases likely in a de facto monopoly environment, its own vice president’s prediction that all Comcast broadband customers will be enrolled in a usage-based billing scheme within five years, and lacks specificity explaining the enforcement measures the CPUC will take against Comcast if it fails to meet the commission’s conditions.

The five-member commission could take up Bemesderfer’s recommendations as early as the end of this month, but is more likely to postpone consideration until later this spring. The commission can adopt, change, or discard Bemesderfer’s recommendations.

Accusations that the CPUC has grown too cozy with the companies it regulates only grew louder after consumer groups complained Bemesderfer bent over backwards trying to get Comcast’s merger deal closer to the concept of “the public interest.” For them, it isn’t nearly close enough.

“To read the recent 100-plus-page decision from the CPUC, you wouldn’t think this proposed merger is good for anyone,” writes Tracy Rosenberg, executive director of Media Alliance, which opposes the deal. “The regulator approved the merger with more than two dozen conditions to mitigate the bad impacts on Californians.”

Rosenberg hints the CPUC is ill-equipped to effectively watch over a multi-billion dollar telecom giant like Comcast. By proposing an ambitious set of requirements the CPUC cannot possibly enforce or defend in court with its current limited budget. Taxpayers may have to dig deep to cover legal bills likely to pile up in Sacramento if Comcast decides to rid itself of CPUC meddling in the courts. Comcast has already announced strenuous objections to at least 20 of the 25 conditions Bemesderfer recommends imposing.

Comcast to California: Hey, slow down a moment. We don’t like your pre-conditions.

Ars Technica’s Jon Brodkin chronicles Comcast’s objections in a convenient clickable format:

The table of contents of Comcast’s 46-page report gives a sense of just how much the cable company disagrees with California’s proposed conditions. Here are the main bullet points as written in Comcast’s argument; we’ve added hyperlinks and additional text in italics to further explain the requirements and Comcast’s objections:

The proposed decision improperly expands the scope of the proceeding beyond the commission’s jurisdiction and authority.

• The proposed decision would impose sweeping common carrier utility type regulation on the merged entity’s broadband and VoIP services in derogation of federal and state law.
• Other conditions in the proposed decision exceed the commission’s authority or are otherwise unlawful. [According to Comcast, these conditions include requirements related to Lifeline phone service, diversity, website design standards, backup batteries, video programming, non-interference with competing voice services, buildout requirements, opposition to municipal broadband projects, and privacy complaints.]

The proposed decision adopts intervenors’ [merger opponents] flawed analyses and claims regarding market share and competition.

• The transaction will not increase market power or reduce consumer choice.
• The FCC’s new definition of “advanced telecommunications capability” has no relevance to this proceeding. [The Federal Communications Commission recently said that Internet service must provide at least 25Mbps download speeds and 3Mbps upload to qualify as broadband or “advanced telecommunications capability.” That decision increased Comcast’s “broadband” market share to 56 percent nationwide.]
• Concerns regarding future overbuilding are baseless and unsupported by the record. [The question here is whether Comcast and Time Warner Cable would ever compete against each other directly if they cannot merge.]
• The transaction presents no risk to edge providers [companies that deliver content and applications over the Internet], the highly competitive internet backbone, or consumers’ access to broadband content.

Other factual findings in the proposed decision are invalid and do not support the suggested conditions.

• TWC is not a “policy competitor” to Comcast. [The California judge’s proposal said TWC is a “policy competitor” to Comcast because it has different positions and business models. “For example, Time Warner has applied to the Commission to offer Lifeline as a tariffed service, while Comcast has not,” the judge wrote.]
• Mandatory diversity measures are unnecessary. [Comcast says California’s requirements amount to mandatory race-based quotas that violate state law and the US Constitution.]
• Concerns regarding Comcast’s battery backup program and other network safety issues are based on inaccurate assertions.
• The transaction will not harm wholesale offerings.
• Internet Essentials is successful by any objective metric and the program’s extension to TWC and Charter areas will provide substantial public interest benefits. [Internet Essentials is a low-cost Internet service for the poor that Comcast was required to create in exchange for approval of its 2011 acquisition of NBCUniversal. California wants Comcast to expand program eligibility further than Comcast is willing to. Comcast objects to a requirement to double download speeds from 5Mbps to 10Mbps. California also wants Comcast to achieve a 45 percent adoption rate among eligible consumers, which Comcast says is an unrealistic goal.]
• The proposed decision imposes unlawful rate and performance regulations based on inaccurate assumptions about TWC services and is in all events unjustified. [California wants Comcast to offer standalone broadband service for five years at prices not exceeding those charged by Time Warner Cable.]
• The proposed decision adopts incorrect data regarding Comcast’s quality of service and network safety and reliability.
• The “benchmark” competition theory adopted in the proposed decision is refuted by the record evidence. [California proposes an annual report requirement because the merger would eliminate the commission’s ability to compare reliability, customer service, prices, and service offerings of Comcast and TWC.]
• Other suggested conditions are unauthorized and unnecessary. [This section further covers a requirement to not interfere with voice services. Comcast says “it is unnecessary because Comcast does not interfere with voice services or degrade customers’ ability to complete calls.” This section also addresses a website accessibility requirement, which Comcast says is unnecessary because the company “already offers a comprehensive and user-friendly website that benchmarks to best practices for website accessibility.”]

Rosenberg argues a merger like Comcast and Time Warner Cable should have been easy to reject just on the basis of its size and scope.

“Economists use a scale called the Herfindahl-Hirschman Index to measure the level of concentration in a market,” Rosenberg said. “Anything with an HHI increase of more than 200 points is likely to enhance market power. The HHI increase for the merger of Comcast and Time Warner Cable is a 4,927-point increase in the fixed broadband market.”

In plain English, “California customers have nowhere to run,” Rosenberg writes. “If they had a choice, many of Comcast’s customers wouldn’t be their customers. If the merger with Time Warner goes through, that choice is about to get a whole lot worse.”

Instead of accommodating a merger proposal that seems clearly the opposite of the public interest, Rosenberg suggest an easier alternative.

“If something takes two dozen onerous conditions to prevent significant damage, then maybe the public is better off without it,” Rosenberg writes. “On March 26, the commission will vote on the Comcast-Time Warner Cable merger. A million conditions can’t make this a good enough deal. There comes a time to just say no.”

Could this be Comcast’s next target?

As Wall Street continues contemplating mom and dad at the FCC and Department of Justice calling off Comcast’s elopement with Time Warner Cable, some analysts believe Comcast will have to spend the money now burning a hole in its pocket on something.

“Given the strength of Comcast’s balance sheet and an insatiable appetite for acquisitions, we do not believe Comcast would be content with its existing portfolio (no different than after they failed in their 2004 attempt to buy Disney),” wrote Richard Greenfield from BTIG Research.

Greenfield has grown increasingly pessimistic about the Comcast-Time Warner Cable deal since realizing regulators were not going to follow the usual procedure of rubber-stamping approval with mild, short-term conditions to appease politicians. As President Barack Obama highlights telecommunications public policy in his second term, the cable industry (and broadband in particular) has come under unprecedented scrutiny and visibility in the press.

This winter, the FCC redefined broadband speed to mean a connection offering at least 25Mbps. That virtually eliminates DSL as a meaningful competitor, and would hand a combined Comcast/Time Warner Cable over 55% of broadband homes in the United States. The FCC’s approval of Net Neutrality and regulating broadband as a public utility led the audience in attendance to give a standing ovation to Chairman Thomas Wheeler and the two Democratic commissioners voting in favor of the policy change. The public sentiment is clearly against industry deregulation and unfettered deal-making, particularly when it involves Comcast, one of the most-loathed corporations in America.

Greenfield

Greenfield notes momentum is on the side of consumer groups fighting for Net Neutrality, oversight, and an end to cable industry consolidation.

Assuming Comcast’s deal with Time Warner Cable fails, what can Comcast spend its money on without running into a regulator buzzsaw?

Comcast could easily continue a mergers and acquisitions strategy if it avoids attempting to dramatically increase its cable footprint. For instance, Comcast could still choose to sell some of its less important cable systems to Charter Communications — already part of the proposed Time Warner Cable transaction — and make up that subscriber loss by acquiring Cablevision, which provides service in the important suburban New York City market. Of course, the Dolan family is notorious for not selling to anyone, and a considerable number of extended family members are employed as executives in the company.

Cable operators have returned to a strategy of hedging their content costs by spending billions to acquire content producers and sports teams in hopes of moderating their price demands. In the 1980s and early 1990s, large cable operators insisted on owning a piece of nearly every cable network shown on their systems. Today, having an ownership stake in the cable networks one negotiates with at contract renewal time is a helpful advantage.

Comcast has several attractive acquisition targets Greenfield believes it can consider:

• Time Warner (Entertainment): Not affiliated with Time Warner Cable, owning Time Warner (Entertainment) would gain Comcast important cable networks like TNT, HBO, and the Warner Bros. studio.
• Netflix: Acquiring one of the best assets cord cutters have might prove difficult with regulators in Washington, but buying the ultimate TV Everywhere experience could deliver a digital platform that puts Comcast’s own online content portal to shame. The deal would also come with the talent that made Netflix an international success. If Comcast were to acquire Netflix, it would combine a superior streaming platform with an enormous content library.
• Acquire online video content sites and producers: Linear live television continues to be challenged by an array of on-demand content and video clips from various websites like Vice — videos that could be further monetized by matching Comcast’s advertising sales team with online media.
• Next generation online video set-top box manufacturers: The traditional cable box is dead to a lot of subscribers who prefer the simplicity (and price) of Roku and other similar alternatives. Current cable boxes are huge, expensive, and simply lack the creative imagination of the competition. If Comcast can’t beat Roku, it could buy it.
• Buy Sprint or T-Mobile: Greenfield believes Comcast lacks a wireless component in its product lineup as consumers increasingly move towards portable devices. Comcast would be financially foolish to build a network from the ground up, so acquiring an existing one makes more sense. AT&T and Verizon Wireless are likely out of reach, but Sprint and T-Mobile are not. Both carriers’ parent companies seem ready to sell, if the price is right. Of the two, Sprint might be willing to sell first. Sprint’s owner — Japan’s Softbank — has discovered the United States is a huge country that can swallow up endless amounts of investment and still leave it saddled with a second-rate network.

Greenfield is only speculating and there are no indications Comcast is seriously considering a next move should the Time Warner Cable deal be killed in Washington. But it does signal Wall Street does expect Comcast to do something.

The first legal “bricks of paper” arriving from Bell’s attorneys in the case of Bell v. Ordinary Canadian consumers arrived at the home of Jean-François Mezei of Pointe-Claire, Que.

A Manitoba university student and consumer groups who won their case against Bell’s preferential treatment of its mobile streaming video service are now being threatened with demands they personally cover Bell’s legal expenses as the phone company appeals the ruling in court.

The dispute involves Bell Mobile TV Service — a $5/mo optional add-on that allows Bell’s mobile customers to stream up to 10 hours of video programming, some of it from Bell-owned television networks like CTV, without it counting against the customer’s usage cap. Each additional hour costs $3. The service prices usage based on time, not data usage, which lets Bell stream very high quality video to customers. Competitors like Netflix do not have this option and their customers are billed based on the amount of data consumed, which is around 800 percent higher than what Bell Mobile TV charges.

University of Manitoba graduate student Benjamin Klass filed a complaint with the Canadian Radio-Television and Telecommunications Commission (CRTC) in 2013 accusing Bell of violating Net Neutrality and creating an anti-competitive marketplace for online video. ​Twelve of the 43 channels available on Mobile TV — including CTV, TSN and The Movie Network — are owned by Bell Media, a subsidiary, like Bell Mobility, of the media behemoth BCE.

Klass alleged the practice was a clear violation of Canada’s laws governing broadcasting: “No Canadian carrier shall, in relation to the provision of a telecommunications service or the charging of a rate for it, unjustly discriminate or give an undue or unreasonable preference toward any person, including itself, or subject any person to an undue or unreasonable disadvantage.”

The CRTC agreed with Klass and in late January ruled in favor of Klass’ complaint, giving Bell and Quebec-based Vidéotron (which offers a similar service) until the end of April to close them down in their present form.

BCE, the parent of Bell Mobility, told the CBC it was “shocked” by the CRTC’s ruling, suspecting the complaining groups mislead regulators into thinking Bell favored its own content over others.

“There’s a hint here that the government believes Bell Mobile TV delivers only Bell Media content,” spokesman Jason Laszlo said. “They should know we offer mobile TV content from all of Canada’s leading broadcasters in English and French.”

Laszlo added Bell-owned content only comprises 20% of Bell Mobile TV programming and that the ruling would deprive more than 1.5 million current Bell Mobile TV subscribers from getting the service after the spring deadline to shut it down.

The CRTC and consumer groups argue that is beside the point.

“At its core, this decision isn’t so much about Bell or Vidéotron,” CRTC chair Jean-Pierre Blais said at a breakfast luncheon in London, Ont., in late January. “It’s about all of us and our ability to access content equally and fairly, in an open market that favours innovation and choice. The CRTC always wants to ensure ­— and this decision supports this goal ­— that Canadians have fair and reasonable access to content. It may be tempting for large vertically integrated companies to offer certain perks to their customers. But when the impetus to innovate steps on the toes of the principle of fair and open access to content, we will intervene.”

Consumer group OpenMedia says Bell’s motivation isn’t to create a level playing field or provide customers with more options for online video. It’s about artificially inflating the cost of accessing services like Netflix and other independent video companies that are innovating away from the traditional pay television package.

“Bell is doing everything in its power to make the Internet more like cable TV,” said OpenMedia campaigns manager Josh Tabish. “They want the power to pick and choose what we see by forcing competing services into a more expensive toll lane online.”

Klass (Image: CBC)

Bell’s legal strategy going forward is an homage to the one American wireless companies used for years to avoid Net Neutrality.

Bell Mobility argues that Bell Mobile TV is a broadcasting service, not a telecommunications service and therefore doesn’t fall under the jurisdiction of the Telecommunications Act.

Since the CRTC was not receptive to that argument, Bell is taking the matter to the Federal Court of Appeal, asking it to overturn the CRTC ruling and grant the company court and legal costs paid for by the Canadian consumers that brought the original complaint.

Jean-François Mezei of Pointe-Claire, Que. is among them and has been the unhappy recipient of several parcels containing “bricks of paper” from FedEx he suspects is just the beginning.

Mezei has been tweeting about ongoing developments in the case, and asked Bell, “how come you have no press release bragging about how Bell Mobility is suing individual citizens who participated in [the CRTC complaint]?”

Klass told CBC News he hasn’t yet made up his mind how to respond to the court filing, but admitted it is unnerving.

“In that regard, it really strikes me as a method of intimidation,” he said. “Right off the bat, it has a chilling effect. It appears that Bell is simply pursuing the argument, that it unsuccessfully made to the CRTC, through the court.”

AT&T has approached DirecTV about a possible acquisition of the satellite provider in a deal expected to fetch at least $40 billion, spare change for AT&T’s $185 billion operation.

The Wall Street Journal reports the deal would combine DirecTV’s 20 million customers with AT&T’s 5.7 million U-verse customers, rivaling the size of a combined Comcast and Time Warner Cable.

The idea for the merger came after Comcast and Time Warner Cable struck their deal in February, and a person familiar with the merger talks reports DirecTV is receptive to a deal with AT&T. AT&T CEO Randall Stephenson reportedly saw the next wave of consolidation in the American cable market as a potential game-changer, forcing AT&T to refocus its growth priorities back towards the United States instead of Europe.

Satellite companies like Dish and DirecTV are at an increasing disadvantage because growth in television subscriptions has stalled. Neither satellite company has a competitive broadband offering, and as more Americans gain access to wired broadband, many choose to bundle service with the company that provides Internet access.

DirecTV’s growth has fallen every year since 2010 and starting in 2013, the company began losing more subscribers than it signed up.

A combined AT&T-DirecTV would market satellite television nationwide, U-verse TV and Internet where available, wireless phone and broadband service, and rural satellite Internet access.

AT&T has explored an acquisition of a satellite provider for more than a decade and already partners with DirecTV to sell AT&T landline customers a bundle including the satellite provider’s television service.

As with most significant acquisitions proposed by AT&T, the Justice Department and the Federal Communications Commission will likely scrutinize any merger deal carefully. Both companies must prove the deal is in the public interest. But the Journal reports the FCC might be amenable to the deal because it considers satellite television without broadband a threatened business. Lobbyists are likely to argue the joint company would be the best positioned to compete effectively with a combined Comcast-Time Warner Cable.

If a deal appears likely, Dish Network is expected to face immediate pressure to also merge with an existing cable or telephone company.

Another alternative attempted in the past was a direct merger between DirecTV and Dish, an idea regulators nixed more than a decade ago. Today, such a deal would not solve either company’s difficulty providing broadband service.

Consumer groups are likely to oppose the merger because it further consolidates an industry they believe already sorely lacks competition. AT&T’s lawyers are reportedly already laying the foundation for a major lobbying campaign to promote the deal.

[flv]http://www.phillipdampier.com/video/WSJ ATT Approaches DirecTV for Merger 5-1-14.flv[/flv]

The Wall Street Journal provides more insight into the proposed merger of AT&T and DirecTV and how government regulators are likely to see the deal. (2:51)

Oh the humanity!

Last week, advocates for an Open Internet were up in arms over a report in the Wall Street Journal indicating FCC chairman Thomas Wheeler was about to solve his Net Neutrality problem by redefining it to mean the exact opposite of its intended goal to keep Internet traffic out of provider-established toll lanes.

Former FCC chairman Michael Powell created the current definition of the Internet as “an information service” that has been repeatedly invalidated by the courts. Today he is the president of the nation’s largest cable industry lobbying group, the NCTA. (Image: Mark Fiore)

“Regulators are proposing new rules on Internet traffic that would allow broadband providers to charge companies a premium for access to their fastest lanes,” said the report, quoting an unnamed source.

Wheeler’s proposal follows the agency’s latest defeat in the courts in its latest effort to define net policy. The D.C. Court of Appeals objects to the FCC’s rule-making powers under the current “light touch” regulatory framework introduced by former FCC chairman Michael Powell. Since the first term of the Bush Administration, the FCC has avoided reclassifying broadband as a “telecommunication service,” which would place it firmly under its regulatory authority. Instead, it has continued to define the Internet as “an information service,” under which there is little precedent to support Net Neutrality rules.

The Wall Street Journal reported Wheeler was planning to introduce a new Net Neutrality policy that would ban blatant attempts to censor or block access to Internet websites, but would allow providers to monetize access to its broadband pipes by giving preferential treatment to traffic from certain content providers. Wheeler’s proposal would allow any company to pay for faster access to customers, so long as providers charged an undefined fair price to all-comers.

Wheeler said the FCC would have the authority to deal with providers unwilling to maintain a level playing field for content companies willing to pay extra, but was much more vague about how the regulator would protect websites unwilling to pay extra for traffic guarantees.

Net Neutrality proponents contend Wheeler’s proposal is exactly what Net Neutrality was supposed to prevent – an Internet toll lane only affordable to deep-pocketed giant corporations. For everyone else, including startups and smaller companies, customers could experience the type of slowdowns Netflix users experienced earlier this year — congestion-related buffering that disappeared almost instantly once Netflix signed a paid contract with Comcast for a more direct connection.

“With this proposal, the FCC is aiding and abetting the largest ISPs in their efforts to destroy the open Internet,” said Free Press CEO Craig Aaron. “Giving ISPs the green light to implement pay-for-priority schemes will be a disaster for startups, nonprofits and everyday Internet users who cannot afford these unnecessary tolls. These users will all be pushed onto the Internet dirt road, while deep-pocketed Internet companies enjoy the benefits of the newly created fast lanes.”

“For technologists and entrepreneurs alike this is a worst-case scenario,” Eric Klinker, chief executive of BitTorrent Inc., a popular Internet technology for people to swap digital movies or other content, told the Wall Street Journal. “Creating a fast lane for those that can afford it is by its very definition discrimination.”

It’s even worse than that for consumer groups like Free Press.

Charging another fee to get content on your broadband connection represents a massive business opportunity for broadband companies. But Free Press’ Craig Aaron says it would be a bad deal for Web companies, especially those that can’t afford to pay more for premium service. National Public Radio’s Morning Edition reports. Apr. 24, 2014 (1:58)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Providers love the idea of monetizing the use of their Internet pipes. (Image: Mark Fiore)

“This is not Net Neutrality. It’s an insult to those who care about preserving the open Internet to pretend otherwise,” said Aaron. “The FCC had an opportunity to reverse its failures and pursue real Net Neutrality by reclassifying broadband under the law. Instead, in a moment of political cowardice and extreme shortsightedness, it has chosen this convoluted path that won’t protect Internet users.”

Wheeler, a former industry insider that presided over both the wireless and cable industry’s largest lobbying groups had a friendlier reception from his former colleagues.

One top cable executive admitted, “I have to say, I’m pleased.”

The cable industry claims they need to attract more investment to manage upgrades of their broadband networks now coming under strain from the online video revolution.

“Somebody has to pay for this, and if they weren’t going to let companies pay for enhanced transport and delivery…it just seemed like this was going to come back to the consumer,” said the cable executive.

So far neither Wheeler or the FCC has released the draft proposal for Net Neutrality 2.0 and won’t until just before it votes on it next month.

A day after the story leaked, Wheeler wrote a damage control blog post to correct what he called “misinformation” about the proposed rules:

Wheeler is keeping the exact language of his Net Neutrality proposal to himself until just before holding a vote on it.

To be very direct, the proposal would establish that behavior harmful to consumers or competition by limiting the openness of the Internet will not be permitted.

Incorrect accounts have reported that the earlier policies of the Commission have been abandoned. Two points are relevant here:

1. The Court of Appeals made it clear that the FCC could stop harmful conduct if it were found to not be “commercially reasonable.” Acting within the constraints of the Court’s decision, the Notice will propose rules that establish a high bar for what is “commercially reasonable.” In addition, the Notice will seek ideas on other approaches to achieve this important goal consistent with the Court’s decision. The Notice will also observe that the Commission believes it has the authority under Supreme Court precedent to identify behavior that is flatly illegal.
2. It should be noted that even Title II regulation (which many have sought and which remains a clear alternative) only bans “unjust and unreasonable discrimination.”

The allegation that it will result in anti-competitive price increases for consumers is also unfounded. That is exactly what the “commercially unreasonable” test will protect against: harm to competition and consumers stemming from abusive market activity.

But Wheeler ignored one glaring change his proposal would make – permitting providers to monetize the performance of select Internet traffic. Currently, customers choose from a menu of available Internet speeds. Under Wheeler’s definition of Net Neutrality, a provider selling “up to” a certain amount of speed is under no obligation to actually deliver that speed. But that same provider could sell “insurance” to content producers promising certain network packets will have a better chance of reaching the customer on a timely basis, while non-paying content might not. That could make all the difference between a watchable streaming movie and one constantly pausing to “buffer.”

As long as everyone is free to pay Comcast, Time Warner Cable, Verizon and AT&T the same (more or less) for preferred treatment, all is well in Wheeler’s world.

Tim Wu, a law professor at Columbia University, coined the phrase “Net Neutrality.” He discusses how the Federal Communications Commission’s proposed changes could affect the average consumer and it’s not good news. From NPR’s All Things Considered. Apr. 24, 2014 (3:51)
You must remain on this page to hear the clip, or you can download the clip and listen later.

The New York Times editorial page wasn’t fooled:

Dividing traffic on the Internet into fast and slow lanes is exactly what the Federal Communications Commission would do with its proposed regulations, unveiled this week. And no amount of reassurances about keeping competition alive will change that fact.

[…] In this new world, smaller content providers and start-ups that could not pay for preferential treatment might not be able to compete because their delivery speeds would be much slower. And consumers would have to pay more because any company that agrees to strike deals with phone and cable companies would undoubtedly pass on those costs to their users.

The F.C.C. proposal claims to protect competition by requiring that any deal between a broadband company and a content provider be “commercially reasonable.” But figuring out what is reasonable will be very difficult, and the commission will struggle to enforce that standard. The rules would also prohibit broadband companies from blocking content by, for example, making it impossible for users to access a service like Skype that competes with their own products.

[…] Mr. Wheeler is seeking public comment on this option, but he is not in favor of it. Even though the appeals court has said the F.C.C. has authority to reclassify broadband, the agency has not done so because phone and cable companies, along with their mostly Republican supporters in Congress, strongly oppose it.

Michael J. Copps, a former FCC commissioner confirmed big telecommunications companies are spending millions to lobby for rules that would allow them to tilt the scales in their favor.

Wheeler’s “is a lot closer to what they wanted than what we wanted,” Copps told the New York Times. “It reflects a lot more input from them. The courts did not tell Wheeler to take the road that he is reportedly taking.”

That Wheeler would take an approach that coincidentally follows a model heavily favored by the telecommunications companies he used to represent should come as no surprise. Stop the Cap! repeatedly warned Wheeler’s appointment as FCC chairman would likely lead to disaster for consumers. A lifelong industry lobbyist (and investor) is unlikely to develop a world view that strays too far beyond the industry’s groupthink on telecom policy.

Wheeler may actually believe his policies represent the best way forward for the telecommunications industry he now oversees. A lot of supporters of Zeppelin Luftschiffbau used to believe blimps were the future of aviation, until May 6, 1937 when the Hindenburg burst into flames and crashed in Lakehurst, N.J.

[flv]http://www.phillipdampier.com/video/Fiore Goodbye Net Neutrality Hello Gilded Age Internet 2-14.flv[/flv]

Mark Fiore uses animation in his editorial cartoon explaining the demise of Net Neutrality and the beginning of the Internet’s Gilded Age. (1:53)