Here comes the Astroturf
Deborah Taylor Tate, a Bush-appointed ex-commissioner on the Federal Communications Commission is now earning her paycheck regurgitating telecommunications industry talking points of behalf of the astroturf group, the Free State Foundation.
In an editorial in today’s Washington Times (thanks to reader Mitchell for alerting us about it), Tate perfectly falls in line with the talking points Stop the Cap! readers can repeat in their sleep, right down to ripping off AT&T’s “grandmother” analogy from several weeks ago. Her employer, the Free State Foundation, has a long history of advocating pro-industry positions in opposition to consumer interests. Having a former credentialed FCC official doing the industry talk is designed to impress.
Tate, who was never impressive as an FCC commissioner and maintains her ongoing unimpressive credentials at FSF, phones it in with a fact-free piece entitled, “Paying for Use is Fair,” in which she directly advocates for Internet Overcharging schemes, attempting to convince readers it will somehow save them money on their broadband service.
Her efforts to tell the story of “paying for what you use” will be comical to those in the communities where such “experiments” were conducted, because Tate either doesn’t know or care about the details of the market experiments she writes about.
Most broadband consumers would be astounded that some members of Congress want to block our ability to pay for broadband Internet use in precisely the same way we now pay for other commodities: Pay more if you use more; pay less if you use less.
Most consumers would be astounded an ex-FCC commissioner got the basic facts wrong about the basis of such pricing schemes. No broadband provider has ever offered a “pay for what you use” pricing scheme. They have only offered “pay MORE for what you use, and a lot more if you use more than you thought.”
This comes on the heels of Time Warner’s rapid retreat from a pilot test of pay-for-use broadband pricing, bowing to congressional pressure and protests from consumer groups. Studies have indicated the top 25 percent of users have consumed 100 times more bandwidth than the bottom 25 percent. So, what is fair about one-price-fits-all if someone uses 100 times more than you do?
At least Tate barely acknowledges another basic truth about these pricing schemes: the overwhelming majority of Americans do not want this kind of pricing model, and more than half would leave their existing provider if they tried to force them into one.
The “studies” Tate writes about do not exist. They are claims by the providers themselves, which have never allowed for an independent review of the raw data the companies claim to base their findings on. Nor does it account for the industry’s “need” to increase every consumer’s broadband bill with overcharging schemes based on limited consumption allowances and credit card-like overlimit penalties and fees. Indeed, this is an industry with profits well into the billions of dollars whose costs are actually declining, along with their willingness to invest in growing their networks. One need only review quarterly and annual financial reports issued by the providers’ themselves to learn the truth. These companies are not hurting for profits.
Even where monopolies exist, pricing has generally been based on the notion that customers are charged more if they consume more and less if they use less. Obviously, beyond basic necessity, they could exercise some self-control, and could even save money through metering that measured consumption. This is especially true in an environment where consumers have options for providers of broadband, cell phones and now, in many cases, electricity.
Broadband pricing has been flat rate since the service was launched by phone companies providing DSL and cable operators launched cable modem service in most areas of this country. That’s because broadband has been cheap, capacity plentiful, and profits high. Absolutely nothing has changed in that equation, except a desire by broadband providers to dramatically grab additional profits, reduce demand with threats of overlimit fees or service being cut off for overuse, and attempts to invest less in their networks. Controlling online video is critical for most of the providers who find that a competitive threat to their television service business model.
Tate doesn’t bother to contemplate increased competition, seeming happy enough to acknowledge monopolies do exist and then moving on to something else. That mimics the FCC’s position over the past eight years, so that comes as no surprise either.
Whether run by local co-ops, governments or profit-making firms, any network has substantial capital costs to build out infrastructure, provide service, expand capacity and meet higher demand, particularly at peak periods. The same network cost issues also apply to Internet service providers. Expanding bandwidth and capacity for the exponential growth of Internet traffic is expensive. Updating security applications to prevent cybercrime are increasingly necessary for government, business and individuals, driving up costs even further. The supply of fiber optic cable and computer servers is not infinite, and we are already facing network constraints. We have all experienced the network being slowed by periods of heavy usage. Broadband providers — just like wireless providers — should be allowed to use a consumption model without government interference as long as consumers know and understand what they are paying for.
To date, there has been a surprising uniformity in billing for broadband Internet service. But why should a grandmother who checks e-mail once a day or makes an occasional purchase online be charged the same monthly rate as a researcher downloading massive data files or teenagers watching full-length movies every day? Why not provide consumers the freedom to monitor and control their own use — and to benefit from volume-based rate packages?
AT&T should consider legal action against Tate for plagiarizing their talking points. In fact, her entire argument is part of the grand Re-education campaign we’ve written about since Time Warner Cable temporarily shelved their overcharging scheme back in April. The “exaflood” nonsense, the “it’s expensive to spend money to upgrade our networks” whining, and the hissyfit over consumers using their service just as these same providers marketed them are all in there.
Deborah Taylor Tate: The Marie Antoinette of Internet Pricing
At least Tate is consistent — she never cared about consumers like you and I during her stay on the FCC, and she still doesn’t care about consumers by doing the bidding of groups like the Free State Foundation.
What do Washington Times readers think? Not much of Tate or her positions. Among them:
“Wow, did you just pull a page out of the telecom’s lobbyist manual to come up with this article? They are doing this to prevent new technologies from making them an antiquated model, and they are doing it to get more money out of the customer. I promise it has nothing and I mean nothing to do with saving your grandma a single cent.”
“Are you being paid by the cable co? Seriously. Do you even realize with the utter lack of competition and the fact that the cable company enjoys a monopoly in most all of their markets, pricing for use is utterly bad for consumers.”
“Bill is right, you’re just reading talking points at this point, and not looking at the actual economics or technology behind it.”
“Deborah, Please take a moment to think for yourself instead of shilling for an industry. Metered billing has nothing to do with customer choice, please don’t pretend that it does. This is about making more money off of existing usage, while avoiding upgrading of networks and services.”
“So for instance, using the same logic and same company, when I call for traditional phone service, they are quick to sell me an “Unlimited” minute plan for $40.00/month.”
“Metered usage is nothing more than a money grab by the content providers. Their current business model is being threaten by media content being available via streaming services.”
In the end, consumers like you and I pay part of our monthly broadband bill to providers that are cutting checks to astroturf groups to advocate against consumer interests. Imagine if they spent some of that money on their network upgrades, and a little less funneled to inside-the-beltway hackery written by underwhelming ex-officials-turned-insider-special-interests.
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Mr. Kim then suggests he doesn’t necessarily like his electricity or water rates, but he conserves because there is a penalty for unrestrained use. Actually, there isn’t really a penalty at all. Gas, electric, and water service are sold on a true metered basis. There are no “bucket plans” for these services. They are also utilities, and their rates are either regulated outright, or carefully monitored in the limited competition models some states have for these services.
Your water company bears the minimal cost of pumping a gallon of water from a body of water or aquifer. It then resells that water at a per gallon rate marked up to cover all of the overhead and expenses it has, sets a little more aside just in case of a non-rainy day, and delivers it to you at a rational, non-gouging price. If you don’t want to pay, you leave the faucet off. On the Internet, the faucet drips… all the time. The only way you are assured of not paying is to unplug your modem, never check your e-mail, and avoid websites with ads, because those are now now on your dime, especially when Time Warner marks up its wholesale cost by 1000% or more for that data. It’s like getting a glass of water but handing half of it to the stranger walking by your house, who also wants you to pay him a dollar on top of that.
Time Warner is also, like many cable providers, hip deep in a conflict of interest on broadband consumption. Cable has a vested interest in forcing you to “conserve” your connection, particularly by not using those services which directly compete with its business models. Streaming video online offers the customer the possibility of foregoing a cable TV package altogether. A Voice Over IP telephone provider on the Internet makes Time Warner’s Digital Phone product redundant. A Netflix set-top box that streams movies and other video programming in competition with premium/pay per view channels represent just one more service that panics many in the upper floors at Time Warner Cable’s headquarters.
Ironically, it was the very same cable companies that are whining about Exafloods and a crisis of costs who have contributed to the demise of “long distance.” Time Warner, among others, are now pitching cheap unlimited calling plans to customers who will never pay for another long distance call. In the wireless industry, price skirmishes have already broken out with carriers marketing true unlimited calling plans or calling circles which, for most people, mean no more airtime minute watching.
When I renew my Verizon Wireless contract this December, I will be handed a new phone and the option of a better plan with more minutes at or below the price I am paying now. By that time, there is every likelihood Time Warner will be asking me to pay three times more ($150 a month) for precisely the same level of service I am receiving now for around $50 a month. One of these companies is responding to the reality that bandwidth costs are declining, and are reducing rates and offering more. The other is taking advantage of a very limited competitive market and wants to triple charges claiming they are on the edge of broadband bankruptcy — only they’re not when you read their financial reports. Guess which is which.
I am also glad you are asking real people these questions, because companies like Time Warner certainly aren’t. Any reader here can recite poll after poll. The overwhelming majority of broadband customers, even those who are not defined “at the moment” as “abusers” of the network are content and satisfied paying one monthly fee for their service. They don’t want your plan, the industry’s plan, buckets, limits, caps, overlimits, or whatever else the marketing people decide to call the equivalent of Internet rationing at top dollar pricing.
We are consumers. We are customers. We are not industry insiders and we don’t write for industry trade publications. We don’t get a paycheck from this industry. Indeed, this industry raises our bill year after year, delivers inconsistent messages about why we are now being asked to pay for “buckets of broadband,” yet still denies us the ability to choose the channels we want for our own video package, paying just for what we want.
We also are empowered and educated enough to use this incredible tool called the Internet to research the assertions some make and simply expect others to accept at face value. We now read financial reports and statements. We verify. We also discover the language of the lobbyist, the marketers, the astroturfers, and the executive elements that are now attempting to sell consumers on their scheme to pay considerably more for the exact same thing, or less. Then we compare that with the glowing results given to shareholders, and we see the chasm between the two messages. We realize what we are being sold: a soon-to-be-even-more-inflated bill of goods.
Frankly, you don’t have to be a genius to recognize that looking at a gas gauge, worrying about overlimit fees, and being stuck paying $100 more a month for broadband is not going to make anyone outside of this industry happy.
The first time a consumer gets a bill from a company with a plan like Time Warner’s, they are going to kick the bucket.
Anyone who doesn’t recognize and admit the real potential of market abusive pricing and policies in a limited competitive marketplace isn’t being completely honest, especially when the players do not offer roughly equivalent levels of service. If the future of broadband in this country is to be unregulated virtual duopolies, then perhaps consumers need to insist on common carrier status for those networks, allowing equal access to a variety of competing providers, with oversight to guarantee fair wholesale pricing and access.