(Image courtesy of: Rick Snapp)

CenturyLink customers in Utah were rudely interrupted earlier this month by an ad for CenturyLink’s pricey security and content filtering software that left their internet access disabled until they acknowledged reading the ad.

Dear Utah Customer,

Your internet security and experience is important to us at CenturyLink.

The Utah Department of Commerce, Division of Consumer Protection requires CenturyLink to inform you of filtering software available to you. This software can be used to block material that may be deemed harmful to minors.

CenturyLink’s @Ease product is available here and provides the availability of such software.

As a result of the forced ad, all internet activity stopped working until a customer opened a browser session to first discover the notification, then clear it by hitting the “OK” button at the bottom of the screen. This irritated customers who use the internet for more than just web browsing.

One customer told Ars Technica he was watching his Fire TV when streaming suddenly stopped. After failed attempts at troubleshooting, the customer checked his web browser and discovered the notification message. After clicking “OK,” his service resumed.

A CenturyLink spokesperson told KSL News, “As a result of the new law, all CenturyLink high-speed internet customers in Utah must acknowledge a pop-up notice, which provides information about the availability of filtering software, in order to access the internet.”

In fact, according to a detailed report by Ars Technica, CenturyLink falsely claimed that the forced advertisement was required by Utah state law, when in fact the company would be in full compliance simply by notifying such software was available “in a conspicuous manner.”

CenturyLink chose to turn the Utah law to their profitable advantage by exclusively promoting its own product — @Ease, a costly ISP-branded version of Norton Security. CenturyLink recommended customers choose its Advanced package, which costs $14.95 a month. But parental filtering and content blocking tools are not even mentioned on the product comparison page, leaving customers flummoxed about which option to choose.

In effect, CenturyLink captured an audience and held their internet connection hostage — an advantage most advertisers can only dream about. CenturyLink countered that only residential customers had their usage restricted, and that because of the gravity of the situation, extraordinary notification methods were required.

But as Ars points out, no other ISP in the state went to this extreme level (and used it as an opportunity to make more money with self-interested software pitches).

Bill sponsor Sen. Todd Weiler (R), said ISPs were in compliance simply by putting a notice on a monthly bill or sending an e-mail message to customers about the software. Weiler added that ISPs had all of 2018 to comply and most had already done so. AT&T, for example, included the required notice in a monthly bill statement. CenturyLink waited until the last few weeks of the year, and used it as an opportunity to upsell customers to expensive security solutions most do not need.

With the demise of net neutrality, ISPs that were forbidden to block or throttle content for financial gain are now doing so, with a motivation to make even more money from their customers.

Just had @CenturyLink block my internet and then inject this page into my browser (dns spoofing I think) to advertise their paid filtering software to me. Clicking OK on the notice then restored my internet… this is NOT okay! pic.twitter.com/NtCZUeJF8I

— Rich Snapp (@Snapwich) December 9, 2018

The telecom industry wants a new tax on broadband services to pay for rural broadband expansion.

Nearly two years after FCC Chairman Ajit Pai announced the formation of a new federal advisory committee on broadband development, the telecom industry-stacked panel has recommended implementing a new tax on websites and online subscription services like Netflix, Hulu, and Amazon Prime Video and turning over the proceeds to many of the same companies dominating the Committee.

The proposal is part of a large set of recommendations from the Broadband Deployment Advisory Committee (BDAC) designed to promote and streamline broadband expansion, especially in rural areas. If adopted by the states, the new tax would create a large broadband deployment fund that could be accessed by telecommunications companies like AT&T and Comcast to expand service without having to pay back the funds or give up part ownership of the taxpayer-funded expansion.

What caught many by surprise was the sweeping impact the new tax could have on the internet economy, because online businesses, streaming services, and even many website owners could be subject to the tax, if enacted:

Entities that financially benefit from access to a broadband system located in the state, including advertising providers, shall contribute to the Broadband Deployment Fund.

A comprehensive piece by Jon Brodkin on Ars Technica points out defining the meaning of “entities” and “advertising providers” will be crucial to determine who will have to pay the tax and who won’t:

Article 11 of the BDAC’s model state code would create a Rural Broadband Deployment Assistance Fund, paid for by contributions from broadband providers and “Broadband Dependent Services.”

The definition of “Broadband Dependent Services” is where things get interesting. An earlier version of that definition—available in this document—reads as follows:

“Broadband Dependent Service” means a subscription-based retail service for which consumers pay a one time or recurring fee which requires the capabilities of the Broadband Service which the consumer has purchased and shall also include entities that financially benefit from access to a broadband system located in the state, including advertising providers.

The BDAC met on December 7 and pared that definition back a bit to exclude “entities that financially benefit from access to a broadband system.” Video is available here; the discussion on the definition starts around 2:04:45.

BDAC Chair Elizabeth Bowles, who also runs an Arkansas-based wireless Internet service provider called Aristotle, expressed concern that the original version of the definition “was including every small business in America,” potentially forcing them all to pay the new tax.

Nurse

AT&T has been one of the strongest advocates for the new tax, and argued it should be as expansive as possible.

“It basically is everybody [that should be taxed] because this is a societal objective,” said Chris Nurse, assistant vice president for state legislative and regulatory affairs at AT&T. “Universal service is a societal objective. We want to spread that $20 or $30 billion burden more broadly so the tax is low on everybody.”

Google Fiber policy chief John Burchett objected, claiming under AT&T’s vision, everyone who has an internet connection would be taxed. In his view, AT&T’s proposal was “absurd.”

As the debate raged on, it became clear AT&T was once again looking for a way to be compensated by companies like Amazon and Facebook — using its ‘pipes’ without contributing towards the cost of the network.

“Who are we cutting out and who are we leaving in?” Nurse asked. “Today it’s basically the telephone companies [who pay] and not Google and not Amazon and not Facebook, right? And they’re gigantic beneficiaries from the broadband ecosystem. Should they contribute or not? Someone has to pay.”

Burchett

In the end, the BDAC settled on adopting a compromise over what broadband entities will be subject to the new tax:

“Broadband Dependent Service” means a subscription-based retail service for which consumers pay a one time or recurring fee, and shall also include advertising-supported services which requires the capabilities of the Broadband Service which the consumer has purchased.

This compromise definition primarily targets the new tax on streaming video services — the ones AT&T itself competes with. But it will also cover any websites sponsored with online advertising — like Facebook and Google, ISPs, subscription services delivered over the internet, as well as AT&T’s broadband competitors.

The proposal also seeks to guarantee that rural residents be granted access to affordable broadband, but the industry-dominated Committee chose to define “affordable” as the cost of internet access in urban areas, which some would argue isn’t affordable at all.

The draft proposal has been criticized by many stakeholders, including the National Rural Electric Cooperative Association, representing electric cooperatives. The group implied the new proposal was just the latest attempt to get the telecom industry’s wish list enacted.

“Instead of focusing on solutions for unserved and underserved rural communities, many of the recommendations focus on issues specific to urban areas where broadband is already available,” said NRECA CEO Jim Matheson. “Ignoring the precedent of federal law and laws in 20 states, the state model code would treat co-op poles like those belonging to large investor-owned utilities. The state model code would also cap pole attachment rates in state statute, effectively making those rates permanent. This code, in effect, increases regulatory burdens while giving co-ops less time and less money to comply with those regulations.”

The National Multifamily Housing Council also objected to another proposal approved in the draft.

“Article 8 of the MSC grants broadband providers the unilateral right to install facilities in all multifamily residential and other commercial buildings and mandate construction of broadband facilities at the property owner’s expense without regard to the rights and concerns of the owner,” the organization claimed. “NMHC/NAA and its real estate industry partners argued that Article 8 of the MSC is riddled with many practical and legal problems. Among the most serious issues with the MSC is that it interferes with private property rights, disrupts negotiations and existing contracts between property owners and communications service providers and will lead to costly regulation and litigation at the state level without any assurance of actually spurring broadband deployment.”

AT&T would be among the biggest beneficiaries of the tax fund, already receiving $428 million annually from another rural broadband fund to expand wireless internet access in rural areas. If Nurse’s predictions are correct, the tax could collect $20-30 billion, far more than has ever been spent on rural broadband before.

Liccardo

Critics also contend the BDAC’s industry-friendly proposals are predictable for a Committee created by FCC Chairman Ajit Pai and well-stacked with telecom industry executives and lobbyists. The former head of the BDAC was arrested by the FBI on fraud charges, and San Jose Mayor Sam Liccardo quit the Committee in January, writing, “the industry-heavy makeup of BDAC will simply relegate the body to being a vehicle for advancing the interests of the telecommunications industry over those of the public” in his letter of resignation.

Whatever the BDAC ultimately decides, the final proposal has a long road to travel before becoming law. Each state can choose to adopt the proposal, part of it, or none of it. In the end, it is just a “model code” for states to consider. But it will be part of the argument made by the telecom industry that laws must be streamlined to prevent delays in deploying service, and that those benefiting from broadband should cover more of the costs to provide it.

Ironically, the person most likely to be embarrassed by the model code could be FCC Chairman Ajit Pai, who has almost universally rejected new taxes and fees on broadband services. But his approval is not required to advance the argument and the model code to the states, where the telecom industry’s lobbyists are waiting to begin advocating the passage of new state laws enacting its recommendations.

From the producers of Dividing Lines:

Across the country, state legislatures have created barriers to community involvement in expanding internet access.

In Tennessee, lobbyists from AT&T, Charter, and Comcast spread huge campaign contributions around the state legislature. AT&T’s influence is felt in the governor’s own broadband expansion legislation, which was tailor-written to allow the phone company to collect huge taxpayer subsidies to expand inferior DSL into rural parts of Tennessee.

Meanwhile, some local communities seeking to build state-of-the-art fiber to the home networks capable of delivering 10 gigabit service found that doing so would be illegal under state law.

Think about that for a moment.

A multi-billion dollar telecom company is allowed to expand its slow speed DSL network with taxpayer-funded grants while your local community is forbidden to bring fiber optic service to your home even if your community votes to support such a project. Exactly who is the governor and state legislature working for when it comes to resolving Tennessee’s rural broadband nightmare?

In part two of this series, watch State Senator Janice Bowling describe how much influence AT&T has over the Tennessee state legislature. (5:31)

WASHINGTON (Reuters) – Four industry groups representing major internet providers and cable companies filed suit on Wednesday seeking to block California’s new law to mandate net neutrality rules.

The groups represent companies including AT&T Inc, Verizon Communications Inc, Comcast Corp and Charter Communications Inc. The lawsuit came after the U.S. Justice Department on Sunday filed its own lawsuit to block the new law.

The lawsuit filed by the American Cable Association, CTIA – The Wireless Association, NCTA – The Internet & Television Association and USTelecom – The Broadband Association, called California’s law a “classic example of unconstitutional state regulation” and urged the court to block it before it is set to take effect Jan. 1.

U.S. Attorney General Jeff Sessions said on Sunday in a statement that the “the California legislature has enacted an extreme and illegal state law attempting to frustrate federal policy.”

This marked the latest clash between the Trump administration and California, which have sparred over environmental, immigration and other hot-button issues.

In December, the Federal Communications Commission said in repealing the Obama-era rules that it was preempting states from setting their own rules governing internet access.

California Attorney General Xavier Becerra said on Sunday the Trump Administration was ignoring “millions of Americans who voiced strong support for net neutrality rules.”

The Trump administration rules were a win for internet providers but opposed by companies like Facebook Inc, Amazon.com Inc and Alphabet Inc.

Under President Donald Trump, the FCC voted 3-2 in December along party lines to reverse rules that barred internet service providers from blocking or throttling traffic or offering paid fast lanes, also known as paid prioritization.

In August, 22 states and a coalition of trade groups representing major tech companies urged a federal appeals court to reinstate the rules. The states argue that the FCC cannot preempt state rule because it is not setting any limits on conduct by internet providers.

A federal judge on Monday set a Nov. 14 hearing in Sacramento on the Justice Department lawsuit.

Gov. Brown

Within hours of California’s Gov. Jerry Brown signing the state’s sweeping new net neutrality protection law, Attorney General Jeff Sessions filed a federal lawsuit to block the law, calling it an illegal attempt to bypass the Federal Communications Commission and its chairman Ajit Pai, which the Trump Administration argues has the sole authority over the nation’s internet service providers.

“States do not regulate interstate commerce — the federal government does,” Sessions said in a statement. “Once again the California legislature has enacted an extreme and illegal state law attempting to frustrate federal policy. The Justice Department should not have to spend valuable time and resources to file this suit today, but we have a duty to defend the prerogatives of the federal government and protect our Constitutional order. We will do so with vigor. We are confident that we will prevail in this case—because the facts are on our side.”

The Department of Justice claimed in its lawsuit that California’s open internet protection legislation was blatantly against the public interest because it imposes a host of rules on the conduct of companies like AT&T, Verizon, Comcast, and Charter that are contrary to the administration’s deregulation principles.

“[This new law] unlawfully imposes burdens on the federal government’s deregulatory approach to the internet,” the lawsuit stated. “The United States concluded that California, through Senate Bill 822, is attempting to subvert the federal government’s deregulatory approach by imposing burdensome state regulations on the free internet, which is unlawful and anti-consumer.”

FCC Chairman Ajit Pai wholeheartedly supports the lawsuit, releasing his written comments praising it as part of the Justice Department’s media release.

“I’m pleased the Department of Justice has filed this suit,” Pai wrote. “The internet is inherently an interstate information service. As such, only the federal government can set policy in this area. And the U.S. Court of Appeals for the Eighth Circuit recently reaffirmed that state regulation of information services is preempted by federal law.”

“Not only is California’s internet regulation law illegal, it also hurts consumers,” added Pai. “The law prohibits many free-data plans, which allow consumers to stream video, music, and the like exempt from any data limits. They have proven enormously popular in the marketplace, especially among lower-income Americans. But notwithstanding the consumer benefits, this state law bans them.”

The Trump Administration fears the new California law will set a de facto standard of net neutrality protection across all 50 states, because California’s market size makes it difficult for telecommunications companies to apply one standard in California, while maintaining different standards everywhere else.

Sessions

The California net neutrality law restores most of the rules ISPs followed during the Obama Administration, including bans on blocking or throttling internet content and outlawing paid prioritization schemes, which would allow ISPs to charge content providers extra to guarantee their internet traffic was prioritized over other traffic. The new law also covers interconnection agreements between ISPs, which are cited as largely responsible for traffic slowdowns on websites like Netflix and YouTube. Some ISPs have used these traffic exchanging agreements as leverage to seek compensation from internet content companies in return for higher capacity, less congested connections between a content provider and the ISP’s customers. The FCC did not address this issue in its own, now repealed, net neutrality rules.

California’s attorney general promised to defend the new law in court and oppose the Justice Department lawsuit.

“We will not allow a handful of power brokers to dictate sources for information or the speed at which websites load,” said Xavier Becerra. “We remain deeply committed to protecting freedom of expression, innovation and fairness.”