Sometimes you have to wonder who telecom front groups hire to push their agenda.  In the Stop the Cap! e-mail box came a news tip last week that a new study proved beyond doubt that passing Net Neutrality would put up to 1.5 million jobs at risk by the year 2020.  Just as bad, the study warns, broadband investment would plummet as a result, causing an investment retreat worth up to $5 billion dollars.  They thought I should know.

All of this ruinous news results from a government that wants to make sure your Internet Service Provider doesn’t block, impede, or censor the traffic of independent websites that don’t  pay a protection fee to keep their content online and accessible.  What’s that I smell?  The easily recognized scent of plastic grass — more astroturfing from a broadband industry intent on keeping broadband regulation as far away from them as possible.

The Employment and Economic Impacts of Network Neutrality Regulation: An Empirical Analysis, by Dr. Coleman Bazelon — working on behalf of something called “The Brattle Group, Inc.,” is a real page-turner.  I tore right through it myself.

Just reading the background of Dr. Bazelon rang all sorts of warning bells:

• Dr. Bazelon consulted and testified on behalf of clients in numerous telecommunications matters;
• Dr. Bazelon frequently advises regulatory and legislative bodies;
• Dr. Bazelon was a vice president with Analysis Group, an economic and strategy consulting firm.

More ordinary folks use a different, less fancy term to cover all this: lobbyist tool.

The key finding for the report:

New network neutrality regulations proposed by the FCC could slow the growth of the broadband sector, potentially affecting as many as 1.5 million jobs, both union and non-union, by the end of the decade.

So how does Bazelon come to this conclusion?

The academic literature on possible effects of network neutrality regulation does not provide a consensus view on whether such regulations should be expected to help or harm the broadband sector, although several economists have concluded that such regulation would be harmful.

I tore right through Bazelon's report.

Many of those economists were paid by the broadband industry to conclude that in their own “reports.”  Many of Bazelon’s footnotes reference himself, telecommunications company executives, or other connected parties who have a financial interest in opposing Net Neutrality or broadband regulations.

At the heart of Bazelon’s theory is that content-related jobs, those involving the development of the websites you like to visit to read, listen, watch, or download from, cost more money to create than broadband “dumb pipe” jobs.  In other words, if you’re developing iTunes content or a network to stream Netflix movies, your job cost more (and probably pays more) than a line splicer at AT&T who is rolling out 3 Mbps DSL service in Rolla, Missouri.

So, if we penalize content developers with Internet Overcharging schemes or speed throttles that discourage your use of iTunes or Netflix, AT&T can use the savings from dramatically lower demand and hire more people to wire up communities for basic DSL service.  That’s okay, because it creates new jobs: “to the extent that the absence of network neutrality regulations leads to a transfer of ‘wealth’ (or sector revenues) from the Internet content sector to the broadband sector, such a transfer would be expected to have a positive impact on employment.”

That’s a great deal for you, right?

Net Neutrality doesn’t impede bigger profits for broadband providers – it just insists that they don’t earn those profits parasitically on the back of someone else’s content.  If your cable or phone company owned Netflix, there wouldn’t be an issue.  They would provide a service and earn from it.  But they don’t, and demand a piece of the pie anyway.

By the way, Bazelon’s myopic report completely misses another fundamental fact.  In today’s non-Net Neutral world, large phone companies like Verizon and AT&T have slashed tens of thousands of jobs just fine without pesky Net Neutrality or other broadband regulations getting in the way.  It’s like telling a New Orleans resident standing in four feet of water during Hurricane Katrina that if we don’t do something about the levees next year, the city could be flooded.

The author also states the obvious:

Broadband open access and net neutrality regulations are both regulatory interventions aimed at restricting a broadband network owner’s ability to exercise market power. The first acts at a structural level to eliminate any potential market power in the provision of the good; the second acts at a behavioral level restricting the broadband provider’s ability to benefit from any such market power.

Sounds like a plan to me and millions of other consumers who see the results of the industry’s market power workout routine… in the form of ever-increasing monthly bills.

Bazelon's vision for the Internet's future

Bazelon is even willing to predict some winners and losers with the FCC’s proposed Net Neutrality regulations:

Under the strict network neutrality regime being considered by the FCC, different Internet content might flourish. In particular, some Internet content is less commercial and generates very little revenue. Content that does not generate much economic value may be advantaged by a network neutrality regime. It is worth noting, however, that such content, by not primarily being engaged in the economy, does not significantly impact employment. Larger commercial sites have the potential of doing better or worse under network neutrality regulations. On the one hand, potentially lower costs of access should benefit them; on the other hand, potentially less developed broadband infrastructure could harm their businesses. With some content winning and some content losing, there is no reason to believe that the total amount of content will be more or less (or more or less valued by Internet users) under one regime or the other. Some business models will do well under one regime, others under the other regime.

In other words, in Bazelon’s world, the formerly level playing field where content is king and website value is decided on its merits is replaced with a corporate-controlled broadband network where only the big, well-financed players will get to play.  If you’re CNN or Amazon.com, you’ll have no problem meeting the protection racket prices providers could demand to guarantee your content isn’t blocked or slowed to a crawl.  But if you’re a poor blogger, a new business start-up, or use the web to argue for and against various causes, get to the back of the line (if you are allowed in the line in the first place.)

The Internet gets reincarnated as Prodigy, for those old enough to remember using that online service.

Ultimately, Bazelon believes only big broadband providers can create economic success stories in our online future.  Making them play by certain rules will kill that success, he argues.

Only one problem – when Bazelon gazes up into the sky, he sees AT&T logos everywhere he looks.  That’s because Mobile Future, the group that paid for the study, is yet another creature of AT&T.  To hide the fact this is yet another AT&T front group, several of AT&T’s usual friends also turn up on the membership roster.  Just a few days after calling out LULAC – the League of United Latin American Citizens for selling out the Latino community to AT&T’s agenda, here they are again — joined at AT&T’s hip as a member of Mobile Future.

A selection of other Mobile Future (brought to you by AT&T) members

Asian Business Association – No national website, which already makes this suspicious, but the San Diego chapter admits AT&T is a corporate sponsor.

Asian Women in Business – AT&T underwrote their website.

Bump.com – The company is self-described on Mobile Future’s website as “the world’s largest purpose-formed safety, communication and marketing network. BUMP uses safe and convenient voice recognition and ALPR (automatic license plate recognition) to provide drivers worldwide with a communication platform that promotes safety on the roads and builds a unique global network.”  They should win an award for puffery.  In fact, this “world’s largest” enterprise doesn’t even have a website.  It claims it was founded in 2009, but its Facebook page just showed up April 15th of this year with a handful of photos showing… license plates.  Why license plates?  Because the group’s real aim is to set up a registry of those willing to receive text messages sent by typing in someone’s license plate and quietly linking it to your cell phone.

The Century Council – Public interest group padding.  Ask yourself what a group fighting underage teen drinking and driving built from and run by distilleries has to do with mobile broadband, Net Neutrality, spectrum demand, and wireless phone taxes — the primary issues Mobile Future seeks to address.

Climate Cartoons – The group’s CEO is a Washington, DC lobbyist specializing in fighting telecommunications issues.  Among Arnold Consulting Group’s “accomplishments:” building a “telecommunications coalition that successfully opposed federal and state ‘Net neutrality’ legislation” and a “cable television coalition that successfully opposed federal, state and local efforts to enact open access broadband regulations.”  Need I say more?

Hispanic Technology and Telecommunications Partnership – Another LULAC — follows AT&T policy initiatives around like a friendly puppy.  HTTP was busted by Ars Technica when asked whether AT&T had any hand in helping the group draft its opposition to Net Neutrality.  HTTP’s Sylvia Aguilera insisted she initiated the drive to oppose Net Neutrality, but was silent on whether AT&T helped draft the letter opposing it.

That’s only halfway down their so-called “coalition” list.  You get the point.  The only name that truly matters among all of Mobile Future’s members is AT&T because they are the ones spreading the money around to pay for it.  At the same time, if AT&T is writing contribution checks to your public interest group, or hiring your consulting/lobbying firm to represent your agenda, those are two compelling reasons for both to hurry on over to sign up for the cause in this, and other astroturf front groups.

On behalf of Climate Cartoons, which purports to “lure people into earth friendly behavior,” please be sure to give all due respect to this latest industry-backed study from Dr. Bazelon by tossing it into the nearest recycling bin.

Plale

Consumer advocates are celebrating the defeat of telecommunications bills designed to favor AT&T’s corporate interests in Wisconsin.

Assembly Bill 696 and Senate Bill 469 were designed to give AT&T and other telephone companies the option of no longer being classified as telecommunications utilities.

Once that happened, the state Public Service Commission would lose the authority to oversee much of their operations.  In practical terms, it means phone companies could raise their rates at will and never have to justify them by reporting their profits and expenses to the Commission.  Another provision would have eliminated the PSC’s authority to deal with phone service complaints on behalf of consumers and businesses.  But considering the bills would have also eliminated the universal service requirement, AT&T and other phone companies could have simply disconnected land lines in unprofitable areas of the state and left rural Wisconsin with no phone service to complain about.

The legislation was introduced by Senator Jeff Plale in the Senate and Representative Josh Zepnick in the Assembly.  Both men are Democrats serving districts in Milwaukee.

Zepnick

Potentially motivating the legislation were substantial campaign contributions from AT&T.  For Plale, who is the top recipient of telecom contributions among all Democrats across the state, AT&T provided $4,000 and the cable industry donated $6,446 from 2003 through 2009, according to the Wisconsin Democracy Campaign. Zepnick received $1,400 from cable providers and AT&T during the period.  In total, at least a half million dollars in contributions from the phone and cable companies have been spent on Wisconsin legislators over the past six years.

Zepnick’s legislative maneuvering to push through the bill in the waning days of the state legislative session collided with Senate Majority Leader Russ Decker, who pulled the rug out from under AT&T and other telecom interests by referring the bill to the Legislature’s budget committee for review — a black hole from which the bill had no chance of emerging.

That triggered a reaction from Zepnick and his friends in the telecom front group community.

Zepnick told Wisconsin newspapers he wasn’t sure what to make of Decker’s diversion of his legislation, which political observers suggest is nonsense.  At the end of every legislative session, large numbers of orphaned bills are dumped in study committees or never taken up in both bodies.

“If it doesn’t get done, that’s going to be a huge missed opportunity for Wisconsin,” Thad Nation, executive director of AT&T-backed Wired Wisconsin told the Associated Press.  Nation claimed the bill would have traded regulatory authority away in return for more investment in the state by communications providers. “As other states move forward, Wisconsin will be left behind.”

Consumer advocates suggested Nation had it exactly backwards.

“It eliminates the regulations the Public Service Commission has used to ensure affordable and reliable landline telephone service for decades,” said Charlie Higley, executive director of the Citizens Utility Board, who told the AP three million landlines still exist in Wisconsin.  That turns back the clock on service standards.

Nation

With AT&T and other providers left to increase rates at a whim, the only thing moving forward, and upwards, would be Wisconsin phone and cable bills.

Not every legislator bought AT&T’s position that less regulation equals more service.

Rep. Gary Hebl (D-Sun Prairie), opposed the legislation from the day it was introduced, suggesting he would push for amendments to ensure the PSC would continue to protect landline phone customers and, for the first time, extend that power to cell phone service.

“If a service provider is not doing their job, consumers should have recourse. That’s one of our jobs as legislators,” he told AP. “We have to be sure that consumers get the service they paid for and it’s properly provided to them.”

As late as last week, AT&T had a dozen lobbyists working the Wisconsin legislature for votes.  Wired Wisconsin, which is actually an extension of corporate lobbying firm Nation Consulting, pushed the idea that Google would bypass Wisconsin for its Think Big With a Gig fiber to the home network if the state didn’t adopt the deregulation bill the firm was promoting.

Ultimately, the proposed legislation passed the Wisconsin Assembly but was never taken up by the state Senate.  Since being shelved for the session, Wired Wisconsin has moved on to re-tweeting Broadband for America pieces bashing Net Neutrality and FCC broadband oversight.  As Stop the Cap! readers know, Broadband for America is the largest telecom Astroturf effort ever, with dozens of members that are funded by Verizon or AT&T or equipment manufacturers whose businesses depend on contracts with large telecom companies.

Reach Out and Touch Someone... With Cash

Stop the Cap! readers Terry and Scott write to let us know it was an Astroturf weekend in the pages of the New York Times‘ ‘Letters to the Editor’ section as two traditional allies in big telecom’s fight against Net Neutrality and broadband regulation blasted the newspaper’s recent pro-FCC regulatory authority editorial.

Mike Wendy, vice president of the Progress and Freedom Foundation, a disingenuously-named telephone and cable-backed front group, was first up, proclaiming the bipartisanship of the glorious Telecommunications Act of 1996 which made unregulated broadband’s growth possible:

Over the last five years alone, American companies — incentivized by the absence of Internet regulation — have invested more than half a trillion dollars to build broadband infrastructure. Consequently, this has exploded broadband choice and access, boosting jobs, productivity and commerce, as well as other important societal-civic benefits, for more than 90 percent of America. This growth will continue, fostered by vibrant competition among cable, wireless, wire line and other evolving means.

It is understandable that you ignore the second fact: it reveals an inconvenient truth. The Telecommunications Act of 1996, which put Internet services outside of 75-year-old telephone regulations, was passed by a Republican Congress and signed into law by a Democratic president, in an overwhelmingly bipartisan manner. The Bush-era regulatory changes, which ensure that Internet services get treated in accord with the law, only followed through on the pro-deregulatory, pro-marketplace intent of the law.

Speaking of inconvenient truths, it took the newspaper’s editors to fully disclose that “the writer is vice president of […] a think tank that takes support from the information technology, telecom, wireless, media, cable and content industries.”  Kudos to the Times for disclosing that — too often such hackery goes unchallenged, without informing readers who is paying for it.

In the case of P&F, it’s all our favorites:

Translation: We don't represent consumers

• AT&T
• Comcast Corporation
• Cox Enterprises
• National Cable & Telecommunications Association
• Time Warner Cable
• T-Mobile
• USTelecom – The Broadband Association
• Verizon Communications

Of course, those big dollar amounts representing industry investments ignores the even bigger profits reaped from those investments, particularly in barely-competitive broadband.  Nobody in the broadband industry is lining up for a bailout, that’s for certain.

As to the group’s assertion that bipartisan bliss made telecom deregulation all worthwhile, the only thing they managed to prove is that both political parties are ready and willing to be suckered into believing the broken promises of lower pricing and better service for their constituents (helped along with a generous campaign contribution to ease any disappointment later on.)

President Clinton, who signed the Act, considers it one of his mistakes after he saw the results.

Just days after the governor of Arizona signed a highly controversial border enforcement measure into law, LULAC labels Net Neutrality opposition its "top news story." Is this a group that represents the real interests of America's Latino community, or that of its backers AT&T and Verizon?

Next up is a letter from Brent A. Wilkes, Executive Director, League of United Latin American Citizens (LULAC).  He doesn’t like Net Neutrality either, and regurgitates familiar industry talking points our readers can recite in their sleep:

We’ve seen more than $200 billion invested in broadband networks — more private investment than anywhere in the world — and the Internet in the United States has been an unquestioned success.

Second, network neutrality regulations are largely a solution in search of a problem. The F.C.C. adopted “Open Internet” principles in 2005. Since then, there have been only a few alleged breaches that were quickly resolved under this framework.

On the other hand, net neutrality regulations could shield the companies that make billions in profits from the Internet — search engines and other providers — from contributing toward the $350 billion in investment broadband upgrades needed to handle bandwidth demands, which double every two years. That would shift these bandwidth costs exclusively — 100 percent — onto consumers and could thereby deter broadband adoption in Latino and other communities.

Net neutrality could also bar broadband providers from managing, in a nondiscriminatory manner, the few bandwidth-hogging applications and services that can consume nearly all of a neighborhood’s bandwidth. If and when critics identify a real problem, Congress should quickly grant the F.C.C. the express authority to fix it.

Now why would a Latino interest group be so ready and willing to carry the industry’s water in the pages of the New York Times?  Whenever AT&T and Verizon have a public policy concern, LULAC is sure to follow.  For years, this group has been a part of more than a few industry-backed astroturf campaigns designed to trick consumers into buying their corporate agenda.  For disadvantaged Latino communities already hard hit with an ever-expanding price tag for telecommunications services, it’s shameful to see a group openly advocating an agenda that extracts more money from consumers’ wallets.

LULAC has received millions in support from General Motors, AT&T and Verizon

LULAC was there as a card-carrying member of both TV4Us and Consumers for Cable Choice, front groups promising consumers in states served by AT&T that statewide video franchises would lower their cable bills.  LULAC was front and center in the cheerleading section.  Only Latino Wisconsins, along with everyone else, got rate increases instead.  Thanks, LULAC!

Telecom analyst Bruce Kushnick tears the lid off:

This “deception … is about playing on America’s caring about the public interest and about minorities getting a fair shake,” Kushnick says . Worse, “these organizations have very deep-pocketed funders with lobbying groups, PR firms and others to get them the loudest ‘volume’ in the media or access to regulators and legislators. They often overwhelm the message of independent consumer groups.”

LULAC was there in states like New Jersey when Verizon was looking for its own statewide franchises.  To not offer them, LULAC suggested, would harm Latino communities across the region.  Actually, for many of them, the fact their cable and phone bills continue to march relentlessly higher actually hurts more.

The group is an equal opportunity sellout.  During discussions about XM Radio and Sirius merging, LULAC was ready with a letter of support for the merger.  Because when you think about pressing concerns for today’s Latino community, dwelling on the merger of two satellite radio services is a real front burner issue.

When Verizon wanted to acquire Alltel, guess what group was there to cheer the deal on:

LULAC supports this merger because the networks of the two companies are largely complementary. That means that when the merger is complete, even more consumers will enjoy the innovations Verizon Wireless plans to bring to market in years to come.

It’s getting hard to find a cause célèbre for AT&T or Verizon where LULAC doesn’t have their back.

But why?

Money, of course.

AT&T and Verizon have both donated millions of dollars over the years to LULAC.  General Motors, which had a direct interest in the outcome of the XM/Sirius merger is a donor as well.

Don’t fall for hackery.  Net Neutrality protects consumer interests and guarantees online freedom, something especially important as the forthcoming immigration reform debate begins anew.  That’s an issue Latinos are concerned with.  Too bad those issues don’t generate multi-million dollar contributions, which might get groups like LULAC to stop advocating against the interests of their own members.

Phillip "The only New Deal my cable company brought to the table was a $150 monthly broadband bill for exactly the same level of service I had when paying $50" Dampier

Joe, a regular Stop the Cap! reader noticed the National Review this morning published another one of their “in the pocket of big telecom” editorials proclaiming Net Neutrality is “anti-consumer.”  Right into the first paragraph, it was clear the editors either fundamentally misunderstand the reality of today’s broadband industry or honestly didn’t care as long as it suited their business-friendly agenda.

Readers, you need not go along with the charade.  While the publishers of National Review can probably afford to buy their way around anything the phone and cable industry can dream up, you probably cannot.  What those opposed to Net Neutrality frame as “freedom from government intrusion” is in reality an attempt to keep your broadband provider from screwing around with your connection in hopes of charging you more for the same service you used to have.

Turn on your TV these days and within minutes you are likely to see several commercials from your local cable, satellite, or telecommunications company trying to convince you that their cable, DSL, or mobile broadband services are superior to those of their competitors. That’s because the market for broadband service is robustly competitive: If service providers didn’t advertise, they would lose business.

Actually, most of the advertising I see on my television comes from free ad inserts Time Warner Cable hands themselves during ad breaks on national cable channels.  My local phone company, Frontier Communications, hasn’t advertised on television for quite awhile.  The mobile broadband advertising I see fights over coverage and who has the coolest new device.  They aren’t advertising on price because they almost all charge exactly the same $60 for 5 GB of usage per month.

None of this represents “robust competition” when one of the players on the wired side is absent from the airwaves and the wireless folks have convenient cartel-like pricing for wireless broadband.

They would also lose business if they did something that made their customers unhappy, such as slowing or blocking the delivery of popular content over the Internet. Or they might gain customers if they created a model that, for a fee, guaranteed uninterrupted high-speed access to certain services, such as telemedicine, video conferencing, or some other use of the Internet we have yet to imagine. This competition directs broadband toward its most efficient uses. It is pro-consumer in that it allows for the proliferation of choices and pressures companies to offer a variety of pricing options.

Of course, the editors who wrote this did not have to fight back a 300 percent rate increase with an Internet Overcharging scheme that would have limited broadband access in at least five cities to start.  Let’s test their theory by asking a few questions.  First, did anyone ask for this kind of pricing to begin with?  Answer: No.  Second, did the plan make customers unhappy?  Answer: Emphatically yes.  Third, upon hearing from customers that they did not want this kind of pricing, did they discard the plan?  Answer: Not on your life.  Fourth, did it take two members of Congress to drive the company to finally pull back their plan?  Answer: You bet.

Now ask the same types of questions about slowing down your web connection to make room for the neighbor up the street willing to pay more to get more while you enjoy less for the same price you’ve always paid.

Lesson learned: when you effectively have a duopoly or monopoly in your market, you don’t have to listen to customers — they have to listen to you.  Indeed, even where competition exists, there is every indication the competitors would themselves increase prices or limit service to rake in additional revenue.  That happens routinely even in more competitive industries like the airlines — something you realize when you try and check bags and are asked for a credit card.  In Canadian broadband, foreshadowing a non-Net Neutral USA, when one player limits usage and throttles connections, the competitor more often than not joins in.

The other fallacy raised in this useless editorial is that Net Neutrality somehow bars companies from offering all of those wonderful innovative Internet applications.  It’s a common talking point straight out of the industry’s playbook.  Nothing precludes the broadband industry from expanding and improving their networks to offer all of these services.  Under Net Neutrality, they simply wouldn’t be allowed to do it on the backs of their other Internet customers, whose connections are automatically impeded to make room for that “innovation.”  The saddest part is that the only innovation at work here is price-gouging customers instead of upgrading networks.

It would be a huge mistake to impose by fiat a single business model on the carrier side of the Internet.

Tell that to AT&T and Verizon who have exactly the same pricing in their business model for mobile broadband service.  Is it a huge mistake for them?

Specifically, they want the government to prohibit broadband providers (such as Comcast) from discriminating against content providers (such as Google) by, for instance, charging them different rates for different levels of network service. They argue that, in the absence of such regulation, broadband providers can act as self-appointed censors, slowing down or blocking content they don’t like. Keep in mind that in no instance has this actually happened. So far, broadband providers have acted only to slow down noisome bandwidth hogs in order to manage traffic and ensure a high quality of service for the majority of their customers. Net-neutrality proponents counter that other customers — those unhappy about the slowdowns — lack meaningful options; that is, that the market for broadband service is not sufficiently competitive.

It is -shocking- the government would want to make sure broadband providers don’t block or discriminate against other people’s content.  We can’t have that!

The National Review needs to consider studying up on history.  The cable industry, for example, is notorious for blocking competitor access to its content.  To this day, the industry is fighting to keep the cable networks they own off competitors’ lineups.  The same company that provides your broadband service wants to make sure their telephone competitor cannot show a regional sports channel they own.  At least one broadband provider in the United States tried to block competing Voice Over IP phone companies from being used on their broadband service.  The same “blocking” mentality popped up in Canada where a broadband provider purposely blocked a website critical of that company.  Want access to cable programming online but don’t have a cable-TV package?  Good luck.  TV Everywhere projects are specifically designed to block non-cable TV customers from accessing that programming online.

National Review‘s afterthought admission that providers like Comcast were diddling with customers’ Internet speeds is waved away as somehow the fault of bandwidth piggies, another common meme in the talking points packet provided by the broadband industry.  Never mind the company had effectively spied on customers to determine what they were doing with their connections, that they first denied reports they were throttling, effectively throttled everyone — piggies or not — and then quickly stopped when the FCC protested.  If Comcast wasn’t doing anything wrong, why not inform customers first?  After all, the “majority of customers” would want throttling to preserve their “high quality of service,” right?

Of course they don’t, and when customers found out the company charging them good money to provide a service was also trying to systematically reduce its value with speed throttles, they howled in protest.  Who knows what online application would fall next to the throttle?

This would effectively mean applying to broadband providers the rules designed for landline telephone companies in the 1930s. We know Obama wants to emulate FDR, but this is getting ridiculous.

Oh now see how they tried to be funny with the slap against Obama and FDR?  The National Review would have been the magazine defending the railroad robber barons and utility trusts — unregulated monopolies — back during FDR’s day.  They’d be just as wrong then as they are now.  The only New Deal my cable company brought to the table was a $150 monthly broadband bill for exactly the same level of service I had when paying $50.

The current regulatory framework for broadband was constructed by Michael Powell’s Republican-majority FCC, classifying broadband as an “information service.”  It was bureaucratic incompetence because it relied on vaporware authority that a court found, to nobody’s surprise, didn’t exist.  The court does recognize the FCC’s authority to regulate “telecommunications services,” so by simply reclassifying broadband as such, the basic question of authority is solved.  The National Review pretends this will automatically mean 1930s-like regulations as applied to copper wire-phone companies, but that’s not true.  The National Review simply doesn’t want the FCC to have any authority in the first place.

But the FCC’s authority to reclassify broadband to suit its desires is also open to legal challenge. As a result, we are sure to hear louder calls for Congress to regulate the Internet or to grant the FCC the explicit authority to do so. These calls should be ignored. The Internet has thrived in the absence of homogenizing federal regulations, and this organic development should be allowed to continue so long as competition can act as a check on anti-consumer practices.

The calls to enshrine Net Neutrality, stop Internet Overcharging, and force open broadband markets and expand service all do not come in a vacuum.  They are ideas born from past provider abuses that have demanded consumer protections in response.  Who would have dreamed up Net Neutrality if AT&T’s Ed Whitacre didn’t insist Internet traffic could not use his pipes for free.  What about when the industry started toying with developing premium tiers of service that relied on slowing down the connections of their other paying customers.  Why worry about forcing markets open to additional competition?  Oh yeah, because of statements like those from Landel Hobbs (Time Warner Cable COO) who told investors Time Warner Cable could use its market position in broadband to jack up prices whenever they chose.  And they did.

The National Review‘s “hands off” attitude is the same one they’ve had towards banks, and now every American is paying for that mistake.  Let’s not repeat it.

Besides, as it stands these companies compete vigorously against one another in a way that is beneficial to consumers. If one of them makes an unpopular business decision, its customers can go elsewhere. If, however, an unelected FCC chairman dictates uniformity in the services these companies provide, then there is nowhere Americans can turn for innovations the government may have strangled in the cradle.

Where exactly do consumers in rural areas go for alternative broadband when their monopoly phone company provider limits their service or charges them confiscatory pricing?  Where do residents go when both providers limit service?

Consumers have far more power to deal with the “unelected FCC Chairman” than dealing with intransigent phone and cable companies.  Elections every few years have consequences.  There are no elections for Comcast, Verizon, Cox or AT&T.  They’re effectively Providers-for-Life in the communities they serve.

The National Review has little to fear from a broadband dark ages where innovation disappears.  Somehow, an industry that rakes in billions in revenue every year will manage to get by living under basic guidelines that require them to earn their money fairly and spend some of those profits to keep up with very profitable demand.  They’ll sue anyway, of course.  But that could buy us enough time to spur additional competitive choices in a duopolistic market for broadband, helping put to work those free market principles of fierce competition the National Review believes in.

[Article Correction 4/15/2010: The original piece laid blame for the classification of broadband as an “information service” on former FCC Chairman Kevin Martin.  In fact, the classification was made by former FCC Chairman Michael Powell, who served during the first term of the Bush Administration.  We regret the error.]

DC Circuit Court

The U.S. Court of Appeals for the District of Columbia has ruled the Federal Communications Commission has no authority to tell the nation’s largest cable operator to stop throttling broadband traffic crossing its network.  In a widely anticipated 36-page unanimous decision, the Court found the Commission exceeded its authority when it censured Comcast in 2008 for interfering with BitTorrent traffic.

The implications of the ruling could derail Commission plans to enforce Net Neutrality and implement the wide-ranging National Broadband Plan announced in March.

Judge David Tatel, writing for the court, found the Commission erred when it relied on policy statements issued by Congress as the basis for its authority to regulate broadband service:

The teaching of Southwestern Cable, Midwest Video I, Midwest Video II, and NARUC II—that policy statements alone cannot provide the basis for the Commission’s exercise of ancillary authority—derives from the “axiomatic” principle that “administrative agencies may [act] only pursuant to authority delegated to them by Congress.” Policy statements are just that—statements of policy. They are not delegations of regulatory authority.

Tatel

The seed for today’s authority-stripping ruling was first planted by the Bush Administration, which favored telecommunications deregulation.  When the FCC was tasked with finding a way to regulate fast-growing broadband, the Republican majority on the Commission was receptive to industry arguments that over-specific broadband regulation could hamper broadband development and have unintended consequences on private investment.  Urged instead to develop a general policy towards broadband, then FCC Chairman Michael Powell presided over the development of an “Internet Policy Statement” containing four informal principles the agency would rely on when assessing broadband:

1. Consumers are entitled to access the lawful Internet content of their choice.
2. Consumers are entitled to run applications and use services of their choice, subject to the needs of law enforcement.
3. Consumers are entitled to connect their choice of legal devices that do not harm the network.
4. Consumers are entitled to competition among network providers, application and service providers, and content providers.

The Commission’s often vague Internet Policy Statement was fatally flawed from day one, according to some legal experts.  First, the Statement was never codified by the Commission’s own rulemaking procedure.  Second, the Commission framed the broadband policy as a set of “guidelines,” a term considered legally vague.  Third, the FCC relied on the concept of “ancillary” authority — borrowing regulatory authority from so-called “policy statements” coming from Congress, to claim jurisdiction.

Even though some in the industry favored total deregulation of broadband, most providers agreed to adhere to the Four Principles, until Comcast decided it had the right to throttle down the speed of customers using file swapping software.  That violated Principle #2, and the Commission censured Comcast for purposely interfering with network traffic.

Comcast sued, claiming the Commission lacked the authority to regulate its network management policies.  Comcast first denied it was throttling broadband traffic, but later admitted the company was purposely governing the speed available to such software applications to protect their other customers.  Comcast argued that certain file swapping software does in fact harm its network (Principle #3) because the software utilizes as much broadband capacity it can find to move files back and forth.  Since Comcast customers in a neighborhood share a limited amount of bandwidth, a small number of customers ‘maxing out their connections’ running such software could potentially slow down everyone  else in the neighborhood.

Ultimately, today’s court decision agreed with Comcast — the Federal Communications Commission lacks authority over broadband.

It also did the industry one better by warning any regulatory authority the Commission believes it has over broadband better be backed up with specific authority granted by Congress, or the court may find those policies vulnerable as well.

In short, the court just fired a warning shot suggesting the FCC has no authority to enact Net Neutrality protections or the National Broadband Plan, at least not under Kevin Martin’s flawed approach.

The ruling comes as no surprise.  The attorney for the FCC found a hostile reception from the court during oral arguments back in January.  Where was the specific authority, granted by Congress, to oversee broadband policy they asked?  Why is the Commission relying on general principles to govern broadband?  By the end of the session, the FCC’s lead attorney was foreshadowing the imminent loss of his case by asking the court to make the decision against the FCC a teachable moment — giving advice in the ruling as to how to write policies that -will- survive a court test.  The court wasted no time telling the attorney that wasn’t their job.

Public interest groups and others advocating Net Neutrality and the National Broadband Plan issued statements warning about the implications of an industry freed from regulatory oversight.

S. Derek Turner, research director for Free Press:

“The decision has forced the FCC into an existential crisis, leaving the agency unable to protect consumers in the broadband marketplace, and unable to implement the National Broadband Plan. As a result of this decision, the FCC has virtually no power to stop Comcast from blocking Web sites. The FCC has virtually no power to make policies to bring broadband to rural America, to promote competition, to protect consumer privacy or truth in billing. This cannot be an acceptable outcome for the American public and requires immediate FCC action to re-establish legal authority.

“This crisis is not a result of a weak congressional law, but a direct consequence of the previous two Commissions’ misguided and overzealous attempts to completely deregulate America’s communications networks. Past FCC actions created a huge loophole in the law that leaves the agency unable to protect consumer privacy or promote universal broadband access.

“The FCC must have the authority to carry out its consumer protection and public interest mission in the 21st-century broadband marketplace. The current Commission did not create this existential crisis, but it now has no choice but to face these tough jurisdictional questions head on, and do what is necessary to protect consumers and promote competition.”

Ryan Singel – Wired Magazine:

A broadband company could, for instance, ink a deal with Microsoft to transfer all attempts to reach Google.com to Bing.com. The only recourse a user would have, under the ruling, would be to switch to a different provider — assuming, of course, they had an alternative to switch to.

Companies can also now prohibit you from using a wireless router you bought at the store, forcing you to use one they rent out — just as they do with cable boxes. They could also decide to charge you a fee every time you upgrade your computer, or even block you from using certain models, just as the nation’s mobile phone carriers do today.

While this might seem like a win for the nation’s broadband and wireless companies, the ruling could be so strong that it boomerangs on them. For instance, if the FCC is left without the power to implement key portions of the National Broadband Plan — a so-far popular idea — then Congress or the FCC may have to find a way to restore power to the commission. That could leave the FCC stronger than it was before the ruling.

Gigi Sohn, Public Knowledge:

“Today’s Appeals Court decision means there are no protections in the law for consumers’ broadband services. Companies selling Internet access are free to play favorites with content on their networks, to throttle certain applications or simply to block others. In addition, as of now, the Federal Communications Commission’s (FCC) ambitious National Broadband Plan to help boost the economy is in legal limbo. The ability of the FCC to support broadband through universal service is in jeopardy, as is the agency’s ability to protect consumer privacy, ensure access to broadband-based emergency communications or promote access to broadband for the disabled. In our view, the FCC needs to move quickly and decisively to make sure that consumers are not left at the mercy of telephone and cable companies.

“If it chooses, the Commission can continue to roll the dice and let the courts decide each time it wants to try to put some consumer protections on a broadband service. The court decision left open that option.

“We have a different idea. The FCC should immediately start a proceeding bringing Internet access service back under some common carrier regulation similar to that used for decades. Some parts of the Communications Act, which prohibit unjust and unreasonable discrimination, could be applied here. The Commission would not have to impose a heavy regulatory burden on the telephone and cable companies, yet consumers could once again have the benefit of legal protections and the Broadband Plan could go forward. The American public deserves no less.

“We need to emphasize that no one is talking about regulating ‘the Internet.’ No one is talking about regulating search engines or Web sites. We are talking about re-applying policies to a telecommunications service that the FCC incorrectly abandoned. That is the most simple solution and it’s the correct one.”

The FCC, despite the decisive loss in court, claims it will carry on.

“Today’s decision invalidated the prior commission’s approach, but in no way disagreed with the importance of preserving a free and open Internet,” FCC spokeswoman Jen Howard said in a statement.

Nick Summers, writing for Newsweek’s ‘Techtonic Shifts’ blog, believes FCC Chairman Julius Genachowski is likely to aggressively respond to today’s court decision by employing the “nuclear option,” reclassifying broadband Internet as a communication service just like the nation’s phone system, bringing it fully under FCC regulation.

Would Genachowski go that far, undoing virtually all of the Bush-era FCC’s policies? Yes. In September, he gave a major address about net neutrality without ever actually uttering the phrase. But he concluded with these strong words:

“We are here because 40 years ago, a bunch of researchers in a lab changed the way computers interact and, as a result, changed the world. We are here because those Internet pioneers had unique insights about the power of open networks to transform lives for the better, and they did something about it. Our work now is to preserve the brilliance of what they contributed to our country and the world. It’s to make sure that, in the 21st century, the garage, the basement, and the dorm room remain places where innovators can not only dream but bring their dreams to life. And no one should be neutral about that.”

The importance that Genachowski et al. place on net neutrality has never remotely been in doubt. In February 2009, months before he was confirmed as FCC chairman, at a private dinner in Manhattan, Genachowski spoke about the Internet’s role in the election of President Obama and in America’s future. He was circumspect about details, but Genachowski spoke unreservedly about the need for certain core protections if the country was to remain at the fore of the Internet revolution. It’s just that important.

[flv]http://www.phillipdampier.com/video/CNBC FCC Loses Comcast Case 4-6-10.flv[/flv]

CNBC reports the FCC’s loss in court could open the door to metered broadband service in the United States.  (2 minutes)

[Article Correction 4/15/2010: The original piece laid blame for the classification of broadband as an “information service” on former FCC Chairman Kevin Martin.  In fact, the classification was made by former FCC Chairman Michael Powell, who served during the first term of the Bush Administration.  We regret the error.]