Phillip “It’s hard to trust a group that so spectacularly flip-flopped on Internet policies when its benefactor AT&T changed its tune” Dampier

When Republican FCC Commisioner Ajit Pai turned up last week at a telecom symposium to warn a more activist FCC could ruin broadband providers’ efforts to charge consumers more money for less service, he was speaking to a very friendly audience.

The conservative Phoenix Center, which ran the event, has been spewing out industry-friendly “research reports” for years that attempt to justify the country’s sky-high broadband pricing. It also promotes a “hands-off” mindset on industry oversight, calling it common sense and consumer-friendly.

Unfortunately for the group and its supporting authors, it has a serious credibility problem — exposed as an industry-funded “think tank” operating as a mercenary research arm for AT&T and other phone companies. In fact, the same group that today generates endless research condemning Net Neutrality had a very different position in 2004 when it published an Op-Ed entitled, “Net Neutrality: Now More Than Ever.”

What changed? Its benefactor. In 2004, AT&T was a competing long distance carrier fighting local phone companies. Today it –is– one of those phone companies. With its Baby Bell owners controlling AT&T’s purse-strings starting in 2006, the Phoenix Center dutifully flip-flopped to maintain continuity with the ‘new AT&T,’ strongly opposed to most forms of broadband regulation.

So it comes as no surprise the Phoenix Center continues pumping out cheerleading “research reports” that attempt to bolster credibility to forces opposing Net Neutrality and supporting an Internet Overcharging free-for-all with the help of usage billing and caps.

One particular bit of nonsense that completely ignores marketplace reality came in Phoenix Center Chief Economist Dr. George Ford’s report, “A Most Egregious Act? The Impact on Consumers of Usage-Based Pricing.”

For example, Ford argues:

A prohibition of differential pricing renders a single price that lies between the low price for the restricted service and the high price for the unrestricted service. Therefore, prohibitions against usage based pricing forces some consumers to pay more for services they do not want or use, while others are allowed to pay less for services they do. The prohibition, in effect, results in a transfer of wealth from one group of consumers to another, and profits are also reduced. Overall consumer welfare is diminished, even though some consumers are better off.

We’re number one… in prices, even with the increasing prevalence of usage-based pricing Ford believes benefits consumers. (Image: CRTC)

But Ford completely ignores the current conditions in today’s broadband market that have made it easy for providers to promulgate an unpopular end to flat rate, unlimited broadband in favor of a highly-flawed, usage-based billing policy:

1. Ford ignores the broadband market is essentially a duopoly for most consumers and effectively a monopoly in rural America. That gives providers what they call “pricing power,” the ability to increase prices at will and change pricing models because consumers are dependent on the service and have limited options to take their business elsewhere;
2. The only “transfer of wealth” involved here is from consumers to providers. While profits soar and costs drop, Ford complains that those using the service more are somehow subsidized by lighter users, when it fact providers enjoy a 90-95% gross margin on broadband. As Time Warner Cable CEO Glenn Britt admitted, the most significant cost attributed on the cable company’s balance sheet for broadband comes from its backbone traffic costs, which are minuscule in contrast to the increasing prices the cable company charges for its broadband service;
3. Consumer welfare is reduced primarily from the high costs charged by providers, made possible by scant competition that would otherwise drive prices downwards, not from expenses associated with broadband traffic;
4. Ford is careful not to advocate for a true usage-based billing system that would be a revenue nightmare for his benefactors. In a strict usage-based pricing model, customers would pay a small fee for infrastructure, support, and equipment expenses and a variable charge based on actual usage. But no provider in the United States advocates for this system. Instead, providers force consumers into tiered broadband plans that include different usage allowances the vast majority of customers will either not exhaust or will exceed, which raises profits even higher with usage overlimit penalties. With no unused usage rollover, most customers are in the same position Ford claims will diminish consumer welfare: paying for service they do not want or use;
5. Most consumers favor unlimited, flat use plans even if they could save money with a usage-constrained pricing model. Since keeping customers happy with a more expensive unlimited plan they like instead of a lower priced plan they don’t want would seem to enhance provider profits. But Ford ignores this reality, perhaps understanding providers are actually laying the groundwork to broadly monetize Internet usage. Whether a provider adopts usage-based billing or a strict cap on usage, which is growing in most households, the inevitable result is still the same: more profits, less cost from constrained usage. Inevitably this will force customers into higher-priced, higher-profit upgrades that deliver a higher usage allowance, again something consumers simply do not want. This is already a reality in the wireless marketplace, and is well-acknowledged by both AT&T and Verizon Wireless.

Pai

Republican FCC Commissioner Ajit Pai has warned forthcoming court rulings on Net Neturality could set the stage for more active oversight of Internet Service Providers, including a possible ban on usage-based pricing and data caps.

Speaking at the 2012 Annual U.S. Telecoms Symposium at the Phoenix Center in Washington, D.C. Dec. 6, Pai said 2013 will be an important year for broadband policy.

“The most important action probably will not occur either at the FCC or on Capitol Hill,” Pai said. “Instead, it will take place in the federal courthouse about a mile away on Constitution Avenue.”

The D.C. Court of Appeals is currently weighing a court challenge from Verizon that argues the federal agency has no regulatory authority to implement and oversee the open Internet policies that are the cornerstone of Net Neutrality.

Republicans have traditionally been hostile to the concept of Net Neutrality, because it restricts private providers from using network management concepts that could open up new revenue streams. Without Net Neutrality, providers could artificially reduce the performance of certain websites while enhancing others, usually based on financial agreements.

Many Democrats and consumer advocates want Net Neutrality to guarantee that all websites are treated equally, and that paying customers deserve a service unfettered by artificial obstacles or additional expense imposed by providers.

Even if the court finds in favor of Verizon, Pai fears the FCC’s Democratic majority will respond by emphatically asserting its oversight powers, reclassifying broadband as a “telecommunications service.” Since the Bush Administration, broadband has been regulated as an “information service,” subject to more restricted oversight.

“Should the D.C. Circuit uphold the FCC’s order, I would expect to see revitalized efforts to expand the Commission’s regulation of the Internet,” Pai said. “In particular, I would not be surprised if the FCC looked into whether we should stiffen our oversight of the network management practices of wireless broadband providers and whether we should begin to regulate usage-based pricing.”

“Under no circumstance will I support […] reclassification,” he added. “I am convinced that grafting the creaky, burdensome common carrier regulations onto the Internet would dramatically slow broadband deployment, reduce infrastructure investment, frustrate innovation, hamper job creation and diminish economic growth.”

Current FCC Chairman Julius Genachowski has expressed repeated support for usage-based pricing in the market as an innovation in Internet pricing. With the chairman and his Republican colleagues in agreement, it seems unlikely the agency will consider curtailing the practice. So far, the FCC has not even responded to repeated requests to further investigate usage pricing and data caps.

(Image: Science Blogs)

While perusing the website of the chief telecom regulator in this country this afternoon, Cassandra, a rural independent telecom industry regulatory analyst, encountered into the misguided, the confused, and the tinfoil hat crowd overrunning the agency’s electronic comment submission system regarding proposed changes to the nation’s Emergency Alert System (EAS) and government policy regarding broadband regulation.

Chief among them was a public comment from a woman named Denise claiming she was being abused by her husband.

“Denise, you do realize you are looking for psychological help with your abusive spouse in a government rulemaking docket about broadband, right,” Cassandra tweeted.

That was just a preview. In the aforementioned EAS docket, the FCC website proudly promotes one recent comment from Debra, who has yet to figure out how to type in the big box or how to get that caps lock off (we deleted some personally identifying information, although the FCC website retains it, warning the public in advance “the filing you are making is a public filing. Any information that you submit will be available to the general public.”):

Amidst filings from broadcasters, cable operators, equipment manufacturers, and various special interest groups, the very wide variety of submissions from John Q. Public ranged from sober and thoughtful to… well-down the rabbit hole.

A sampler, left unchanged from the originals, except to remove the names of the innocent and embarrassed:

The Anti-Government Crowd:

I think it is an Orwellian-type demonstration by the Federal Government to impose a nation-wide test of the EBS. A “test” would be at 2am. This is clearly a demonstration by the powers that be that government can and will seize power of all communications whenever they see fit.  In the event of a national disaster, the one voice that I want to hear certainly isn’t the government’s.

Those Who Watched that whole Jack Bauer “24” box-set in one weekend:

It concerms me that this annoucement gives terroists an opportunity to take advantage of the test, since no one will be looking for a real notice.

The “You Are Scaring Me” Corner:

Why in the world wouldn’t there be newspaper articles and cable and network news information regarding FCC/FEMAs “big plan?” Do you purposefully WANT to scare the living daylights out of senior citizens? Why would you warn only federal agencies? I beleive there is something more sinister going on that is related to this plan. I am going to make sure that everybody knows about it and that your offices are saying it will not say it’s a test. How interesting that it’s happening right now. If I don’t start seeing news about it in the paper and on TV/radio, I am going to raise hell. Do something now. So far, I have notified fire departments that had no clue, old age homes, and city hall. You people are crazy if you think I’m going to allow a panic in MY town.

The Guy With a Landlord Problem:

I must worst file million of complaints against U.S. HUD Park Tower Apartments, in Portland OR, that they tampered my Facebook that I posted my comments that I do not felt safely reside in this danger situation. I must go in the court at requests for bringing me in justice requests that Park Tower Apartments in foe issues involved with their Facebook addresses. […] (bad employees) made in huge banana noses and bad people of employees with Park Tower Apartments address report to the court immediateness. Please tell U.S. Homeland Security pulls me out of this evil housing addresses because of they used Facebook issues as their employees’ Facebook accounts. Please tell Facebook about Park Tower Apartments in bad employees addresses as notifies to U.S. Senators at requests. thank you for pulling me out of this dangerous housing immediateness!

A loon

The Man on the Run:

NYPd has informed feds that I’m not on their radar but keep getting stalked from place to place. Last place the fire alarms tripped like today was at 500 pearl, street. nyc aug 3, 2011. depts got caught doing this at 339 west 39th feb 28, 2010 . the eavesdropping device went from the phones to the fdny system because fed attys advised me they botched the police brutlaity case in the fbi . this is in court now

I Copyrighted EAS First and the Feds Violated It So I Am Suing for $87 billion

EAS infringes copyright as asserted in lawsuit: […] The ORDER directs the Clerk to issue summonses and directs the U.S. Marshal to serve the Defendants.

Defendants include twenty-four government agencies, government individuals, including Federal Communications Commission and nine corporations sued in the United States District Court Eastern District of Arkansas. The case cites organized theft of intellectual properties asserting the defendants are responsible for massive piracy of multiple copyrighted works that are generating billions of dollars in illegal proceeds in concert with private enterprises causing more than $87 billion dollars in damages to the legal owners of copyrighted intellectual properties.

[…]This case relates to letters by the Plaintiff requesting the United States Attorney General Eric Holder stop government theft of private intellectual property….

“People: the FCC cannot solve all your problems,” Cassandra tweeted. “They have enough of their own.”

FCC Chairman Julius Genachowski’s cowardly lion act. The rhetoric rarely matched the results.

Washington insiders are predicting Federal Communications Commission chairman Julius Genachowski will leave his position early in President Obama’s second term.

It cannot come soon enough, as far as we’re concerned.

One of the biggest disappointments of the Obama Administration has been the poor performance of a chairman that originally promised a departure from the rubber stamp-mentality that allowed Big Telecom providers to win near-instant approval of just about anything asked from the Republican-dominated FCC of the Bush Administration. If only to underline that point, former FCC Chairman Michael Powell joined Republican ex-commissioner Meredith Atwell-Baker on a trip through the D.C. revolving door, taking lucrative jobs with the same cable industry both used to oversee.

We had high hopes for Mr. Genachowski when he took the helm at the FCC — particularly over Net Neutrality, media consolidation, and predatory abuse of consumers at the hands of the comfortable cable-telco duopoly. Genachowski promised strong Net Neutrality protections, better broadband — especially in rural areas, an end to rubber stamping competition killing mergers and acquisitions, and more aggressive oversight of the broadband industry generally.

What we got was the reincarnation of the Cowardly Lion.

The Washington Post reviews Genachowski’s tenure during the first term of the Obama Administration and reports he has few unabashed supporters left. Telecom companies loathe Genachowski’s more cautious approach and consumer groups hate his penchant for caving in when lobbyists come calling. In short, another Democrat that talks tough and caves in at the first sign of trouble.

“His tenure has been nothing but a huge disappointment because he’s squandered an opportunity to give consumers the competitive communications market they deserve,” Derek Turner, head of policy analysis at public interest group Free Press told the Post. “If someone like him upholds compromise, it quickly leads to capitulation, which is what he’s done. He folds…to the pressure of big companies.”

Genachowski’s Record:

• Heavily promoted rural broadband and oversaw a review program measuring actual broadband speeds against those claimed by providers. But much of the money available for improving rural broadband has been separately awarded to “middle mile” and “institutional networks” that are not accessible to most consumers or businesses. Genachowki has heaped automatic praise on many of the phone companies winning broadband funding, despite the fact many of them are satisfied giving consumers no better than 4Mbps service;
• Reformed the outdated Universal Service Fund, which long outlived much of its usefulness, into a broadband expansion fund. But some unintended consequences have led to some rural providers suspending network upgrades because of funding uncertainties still unresolved;
• Approved a blockbuster merger deal between Comcast and NBC-Universal that included temporary “hard-won” concessions Comcast later admitted they were going to offer anyway – merger or not. The result is a new high bar for tolerating super-sized media consolidation with no serious consideration of the impact on consumers. The latest evidence: support for Rupert “Phone Hacker” Murdoch’s latest efforts to buy more newspapers in the United States;
• Rejected an AT&T/T-Mobile merger deal, but only after the Justice Dept. took the lead dismissing it as an anti-consumer, anti-competition nightmare. Within hours, Genachowski’s office issued a “me, too” press release condemning the deal he said little about earlier;
• Demanded a strong Net Neutrality framework to protect the open Internet, but utterly caved under pressure from politicians receiving hefty corporate contributions from AT&T and others. The resulting loophole-ridden “protections” do not apply to wireless, and the industry-approved compromise is now the subject of a lawsuit filed by some of the same companies that earlier applauded Genachowski’s flexibility;
• Genachowski handed out his direct phone numbers to the CEO’s of the top Big Telecom companies, and has been directly lobbied by those “super-citizens,” while ordinary consumers are stuck filing comments with the FCC’s arcane Electronic Comment Filing System. Genachowski also directed closed-door meetings be held on the subject of Net Neutrality with large telecom companies. These meetings were closed to the public with no consumer representatives on hand;
• Genachowski refused to reclassify broadband as a “telecommunications service,” which would give the agency clear-cut authority to oversee the service. Instead, he has stuck with former FCC Chairman Michael Powell’s odd interpretation of broadband as “an information service,” not subject to much review by the agency;
• Appropriately nixed Philip Falcone’s LightSquared venture, the biggest threat to GPS navigation around. But Genachowski’s controversial early boosting of the venture, including support for expedited special permission to launch the network without the usual scrutiny, resulted in an embarrassing about-face after long-standing critics’ fears of navigation interference were vindicated;
• In 2012, Genachowski’s cozy relationship with the industry reached whole new levels with unabashed support for Internet Overcharging schemes like usage caps and consumption billing, despite no evidence justifying them. The FCC has continued to ignore repeated requests for a review of these pricing schemes.

Phillip “Do you want to depend on AT&T for phone service that could be gone with the wind for weeks?” Dampier

Superstorm Sandy is getting credit for exposing the thin veneer of the “wireless future” some phone companies want to give their most rural customers after disconnecting their home phone lines in favor of wireless service.

Unfortunately for the providers selling you on the wireless revolution, reality intruded last month when Category 1 Hurricane Sandy arrived. In its wake, the storm obliterated a significant amount of wireless phone service for weeks in some of the most urbanized sections of the country, while leaving underground, traditional wired phone service largely untouched.

The storm that blew into the northeastern U.S. Oct. 29 left a legacy of interrupted or inadequate cell service that lasted more than two weeks. AT&T and Verizon Wireless reported their networks were not fully restored until Nov. 15. Sprint and T-Mobile are still addressing some issues with their networks as of today.

Although the storm was enormous in scope, it was only a Category 1 hurricane. It could have been much worse.

So where did things go wrong?

Although some sites lost their wired backhaul connection which connects the tower to the provider, the biggest problem was commercial power interruption. Without power, many providers were caught flat-footed with inadequate on-site backup plans to keep cell towers up and running until regular power could be restored.

The wireless industry fought tooth and nail against common sense regulations proposed by the Federal Communications Commission after Hurricane Katrina devastated infrastructure and power facilities in southern Louisiana and Mississippi.

The FCC proposed that every cell tower be equipped with on site battery backup equipment that could sustain service for a minimum of eight hours — sufficient time for power to be restored or company engineers to arrive with more robust generators.

Providers howled about the cost of outfitting the nation’s 200,000 cell sites with even a conservative amount of backup power. The cellular industry lobbying group and Sprint sued, calling it a wasteful and unnecessary mandate. The Bush Administration eventually dropped the whole matter in November 2008 as part of its war on “burdensome” regulation.

Since then, providers have been free to design their own emergency backup plans, or have none at all. Few have made those detailed plans public, giving customers information about how likely their cell phone will work in the event of a disaster.

Verizon Wireless has been the most aggressive, voluntarily adopting the proposed FCC standards and outfitting all of their cell sites with a minimum of eight hours of battery backup power. Other providers have backup facilities at some sites, often with lower capacity batteries that won’t last as long.

Sandy illustrated that even eight hours might be inadequate. Many cell sites were on generator power for more than a week, assuming engineers could regularly reach each tower with equipment and fuel.

Other cell sites could not be returned to service immediately because of major wind damage or flooding. Those that were in service were often overburdened by enormous call volumes.

Meanwhile, unless your landline provider’s central office was flooded, your phone line kept working during and after the storm, especially if your neighborhood wiring is buried underground.

In many cases, it was the only thing working, because traditional phone lines are independently powered and not dependent on electric service in your home to operate. That is what kept your dial tone humming even as your smartphone’s battery ran out.

Ironically, the network that performed the best through the storm is the same one AT&T and Verizon would like to phase out, starting in rural areas. AT&T wants to completely abandon wired service in its most rural service areas, where calling and waiting for emergency assistance is already a hindrance. AT&T plans to spend billions to bolster its rural cell tower network to cover the landline areas it wants to abandon, but those communities would be entirely dependent on the reliability of that network, because AT&T’s competitors are unlikely to build additional infrastructure to compete.

As Sandy just demonstrated, if high-profit Manhattan customers could not be assured of reliable cell phone service from any company that provide service there, how likely is it that a customer in rural Kansas will be in real trouble summoning help over AT&T’s wireless infrastructure in the event of a cell tower failure, wiping out the only telecommunications service available in nearby towns?