Mar 1 2007

Net Neutrality and the Supermedia Monopolies

Deregulation’s history of empty promises

Internet's Univere, by CLUC

(cc image: CLUC)

The leaders of the nation’s largest cable and telephone companies are telling lawmakers something familiar: New national policies are required to connect everyone to what they call a “superbroadband” Internet highway. If Washington supports their political agenda, the companies vow that the nation will benefit from advances in healthcare, improvements in the quality of life for senior citizens, and major boosts for jobs and the economy.

But, say corporate executives, we are stymied by rules, regulations and local and state policies. Congress, the FCC and the White House must get government out of the way.

They claim that the emergence of the Internet has set the stage to remove most of the public policies and safeguards that now govern media and communications—everything from limits on media ownership, to rules governing equal time for political candidates, to requirements that communities receive public-service programming. Competition, we are assured, will address any problem once handled by law or regulation and also bring us the promised digital cornucopia.

To help win their goal of privately controlling what will be the most powerful media and communications system ever developed, Comcast, Verizon, AT&T and others have unleashed teams of lobbyists. A large war chest doles out campaign cash; companies say they will spend whatever it takes. To help ensure success, they are bankrolling a major public relations campaign. Bucolic and reassuring images of American families, happily satisfied as their children connect swiftly online to an educational website or they all sit down to watch an on-demand program, are shown on TV, in print and online.

It’s a not-so-subtle message to lawmakers: All you have to do to bring everyone this miraculous digital future is to quickly act on our behalf. Supporting their call for what they label “new rules” is a loud chorus of allies, part of a long chain of academics, think tanks and nonprofit “consumer” groups. Newly minted front groups, flush with industry cash, go state by state to help the big media win even more favorable policies.

Going, going, gone?

The rush to get government assistance is a standard reflex of the communications industry. But now, securing favorable treatment has taken on an urgency. Phone and cable giants fear that if the online medium is permitted to continue to offer a vast, unlimited array of content and services, such as video programming or low-cost telephone connections, their revenues will wither. They have built their businesses as government-sanctioned monopolies, with the Baby Bells dominating telephone and cable controlling multichannel TV. Now the Internet poses a fundamental challenge, since it permits practically anyone to also offer what these giants do.

So the cable and phone companies are relying on their lobbying and financial prowess to seize control over the Internet’s future, especially now that it has become the high-speed, always-connected medium called broadband. Since they provide more than 90 percent of such broadband connections in the United States, the cable and telephone industries believe they are in a prime position to become the key Internet gatekeepers. Their clout over broadband has recently been made more secure by a series of favorable decisions, all of which they heavily lobbied for, by the Bush FCC.

Their vision for the Internet is a turbocharged selling machine, sending us a never-ending lineup of digital entertainment, interactive advertising, virtual gambling and data-collecting forms of online social networking. Also up for grabs are many of the nation’s broadcast radio and TV stations and daily newspapers. The few remaining limits on media consolidation will likely be severely weakened or eliminated by the FCC. Consequently, there will be a further shrinking of the number of conglomerates dominating our local and national media.

Soon, larger media monopolies will emerge, as the cable and phone companies that control vast expanses of online communications seek to also acquire newspapers, broadcast stations and TV networks. Such deals, the media lobby will declare, will be the only way to save journalism, deliver public-interest programming and ensure new and innovative services. Eventually, the owners of the so-called competing broadband Internet wires of the cable and telephone industry will likely consolidate as well. Instead of having a communications environment that promotes freedom, creativity and expression, we could witness a dwindling number of major corporations controlling the most powerful media outlets.

The Bush administration, the GOP-controlled Congress and FCC, and too many corporate-friendly Democrats have endorsed such a scenario. It was FCC chair Michael Powell and his successor Kevin Martin who led the commission to approve policies in 2002 and 2005 permitting cable and phone companies to gain greater leverage over the broadband Internet. With these new rules, the cable and telephone industries can operate their broadband service without regard to what had made the Internet a vibrant medium of expression to begin with. Under the regulations governing the old Internet, using dial-up connections, the medium was required to treat all content in a nondiscriminatory manner.

Formerly, the FCC required that the public have a choice of Internet service providers, which had numbered in the thousands. Yet the cable and phone industries now have been given near-monopoly status as broadband providers. They can deny any competitor access to their lines. More disturbingly, there are no federal regulations preventing cable and telephone companies from discriminating against any online content they compete with or dislike. That the self-serving interests of a few giants could end up threatening the potential of the Internet to serve democracy and fair competition illustrates the corruption and intellectual bankruptcy of U.S. communications policy-making.

Industry and its political supporters have hijacked the policy process, using the rhetoric of deregulation, to relegate the public into the passive role of consumers, reduced to whether they might have more channels to watch or pay a few cents less for them. In Congress and at the FCC, the economic welfare of the owners of media and telecommunications outlets regularly trumps the interests of citizens. Instead of policies that benefit average Americans and serve the nation as a whole, broadcasters, cable, phone and new media companies have been showered with federal favors so they can maximize earnings.

Repetitive Promises Syndrome

Much of what is now being touted as rewards for Americans once Washington approves industry’s broadband agenda are the same commitments made by the same interests only a few years ago. Our lawmakers frequently forget about such past promises from corporate lobbyists. Perhaps that’s because federal candidates since 1990 have been given more than $183 million in campaign contributions by the communications lobby—$115 million of that since the 2000 election. The phone, cable and broadcast industries have spent $344 million for lobbyists since 2002 alone. As the media and communications industries aggressively push for favorable legislation, their spending significantly increases at the local, state and federal levels.

Essential to the plans of both the largest cable and phone companies is ensuring that they can operate their broadband Internet systems as private networks. These giants don’t want any government role overseeing the rules of the digital road. That’s because they want to make sure that their content and that of their highest-paying customers receives first-class treatment as it’s sent via their wires or wireless servers to digital TV sets and personal computers. Those who can pay the most will see their programming or applications travel in so-called fast lines; those who can’t pay the tab will be relegated to less optimal online thoroughfares. Under this plan, the United States is to have a digital medium where all Internet content is regarded as varying forms of commercial-paying freight.

Blueprints for how both cable and phone companies plan to operate their broadband networks are reflected in numerous white papers written by many of the leading Internet technology firms. Through their power as controllers over the flow of data coming into our homes, say these documents, phone and cable companies can run a system optimized to generate revenues from every transaction, monitor our online habits, and pick and choose which content and applications are to be favored. Since everyone’s online usage can now be accurately metered, Comcast, BellSouth and others are urged to create “Bronze, Silver and Gold” service plans that will limit how much content one can download as well as the speed of a connection.

Now also rolling off the assembly line are both hardware and software permitting “deep packet inspection” of users’ content. They have names such as “SmartFlow,” “NetEnforcer,” “NetPure,” “NetRedirector,” and “IP Control System.” All Web and other broadband communications can now be monitored, classified and controlled in real time to give broadband providers granular control over service. Companies behind these products make a point to remind their potential cable and telephone clients that they can be used to limit unprofitable peer-to-peer applications or even ban them.

Peer-to-peer technology offers Internet users the ability to participate in the creation of potentially more democratic forms of communication.

Independent content, including video programming, can be easily and inexpensively distributed to millions of users through such software. Consequently, peer-to-peer technology is seen as a potential competitive threat to the phone and cable companies that seek to impose new revenue-generating business models for broadband. The companies will claim that disabling peer-to-peer distribution will prevent illegal copying of music and movies; their real motive, however, will be to use NetEnforcer-style technologies to eliminate as much competition as possible to their own and allied ventures.

Quality of disservice

Such plans by cable and the Bell companies have alarmed several leading new media companies, including eBay, Amazon, Google and Microsoft. They each recognized that their ability to do business has been based on an online architecture where all content is permitted to travel freely. Now they face interlopers who plan to change the rules of the Internet and become everyone’s not-so-silent partner or, worse, potential competitor.

Their growing concern over a fundamental change in how the Internet serves Americans prompted Vinton Cerf, considered one of the co-founders of the Internet for his work on its basic protocol and now Google’s “Chief Internet Evangelist,” to write Congress in November 2005 warning that

allowing broadband providers to segment their IP offerings and reserve huge amounts of bandwidth for their own services will not give consumers the broadband Internet our country and economy need. Many people will have little or no choice among broadband operators for the foreseeable future, implying that such operators will have the power to exercise a great deal of control over any applications placed on the network.

Cerf’s Google, other leading new media companies and public-interest media groups such as Free Press, Common Cause and Public Knowledge called on Congress to pass a “network neutrality” safeguard. This would prevent cable and telephone companies from exiling unaffiliated content or slowing users down who go to competing sites. It would also require a broad, open lane for everyone to use.

Cerf would get his reply in the form of a candid expression from the CEO of then SBC (now AT&T), Edward Whitacre, who told Business Week (11/7/05):

Why should they be allowed to use my pipes? The Internet can’t be free in that sense, because we and the cable companies have made an investment, and for a Google or Yahoo! or Vonage [an online company selling telephone service] or anybody to expect to use these pipes [for] free is nuts!

Whitacre’s sentiments were loudly echoed by other executives from Verizon, BellSouth and the cable industry.

But obscured by these battles among the country’s Internet giants was the reality that they all shared the same goal.

They each wanted to perfect a digital media system that would allow them to target content and advertising to individuals—all to assist in the delivery of personalized pitches and to “keep . . . and monetize your eyeballs” (Global Telecoms Business, 11-12/05). While communications company executives regularly offered up litanies that the public had greater choice today to select content and even bypass advertising, they were collectively engaged in ensuring that an all-encompassing interactive marketing system would play a defining role in digital media.

Community broadband

As cable and telephone companies rushed to operate private broadband networks, communities began to recognize that they should provide their residents with Internet service. It was not a “red” or “blue” state issue; cities in states such as Louisiana, Wisconsin, Tennessee and Pennsylvania created what’s known as community or municipal networks.

There were a number of reasons driving interest in wired cities. For some, it was to build a high-tech infrastructure that would attract business and help keep young people from looking for opportunities elsewhere. For others, it was a way to assist education or the most inexpensive method of making Internet affordable, especially for low-income residents. A few recognized the importance of community bandwidth—broadband assets controlled by the public—that could provide a wide range of services. Unlike the cable and phone industries, where decisions were made by private fiat, here would be a form of communications service more accountable to local residents.

But in a clear indication of their interest to oppose all forms of competition, phone and cable companies launched an attack on such efforts. Whatever form such networks took, including “fiber-to-the-home” wired networks or wi-fi, major cable and phone companies declared, as Groucho Marx told the college faculty in Horse Feathers, “Whatever it is, I’m against it!” The phone companies fought all the way to the Supreme Court in one case, successfully undermining the ability of local governments to create their own broadband facilities.

Comcast and Verizon lobbied side by side in 2004 to pass legislation in Pennsylvania, so alarmed were they by the city of Philadelphia’s community wireless plans. Now any other city in that state will find it impossible to do the same. In three small neighboring cities in Illinois—St. Charles, Batavia and Geneva—SBC and Comcast fought plans by groups such as the Chamber of Commerce and the Jaycees to build a community fiber-optic network. The citizens’ group backing the “Fiber for Our Future” referendum went down to political defeat twice, in 2003 and 2004, after a well-funded advertising and misleading public relations campaign.

Meanwhile, as they entered the broadband video business, the phone companies also laid siege to the only policy left that helped ensure that communications networks served the public-interest of the communities in which they financially prospered. Having to negotiate a contract—known as a franchise—with local officials to make certain that broadband addressed specific community needs such as health, education, or public safety would delay the creation of a national superbroadband network, claimed AT&T to the FCC in 2006. Verizon pledged to spend whatever it took to get Congress to junk oversight by local government, saying “it’s the cost to get into the market” (Telecommunications Online, 2/9/07).

As all of this was occurring, the United States has slipped further down the list of countries with the most penetration of broadband to homes, ranking 16th in 2005. South Korea and Canada, having regulatory regimes permitting serious broadband competition along with a more proactive governmental role, were able to offer higher broadband transmission speeds at much lower costs than in the United States. The United States, which was where much of the Internet innovations had taken place, was now trailing Iceland, Belgium and Finland.

But the Bush administration rejected the notion that the United States is falling behind or offering Internet users a slower and more expensive network than other countries. It claimed that all was rosy, especially now that cable and phone companies were being given the incentives to quickly roll out broadband. Broadband “deployment,” as it is called, was the key overall concern for U.S. Internet policy. Based on Section 706 of the Telecommunications Act, phone and cable companies had been able to successfully argue that nothing else really mattered other than helping them to make as much money as possible so they could deploy their broadband facilities.

Neither Congress nor the FCC appeared worried about supporting policies that placed broadband deployment before any concern related to broadband democracy. Sadly ignored as a consequence of laying wires out at any cost were the needs of tens of millions of low-income Americans who couldn’t afford Internet service at all.

Not fit to print

Most of these issues and debates have been ignored by the news media. One of the consistent themes about media ownership and communications in general has been the failure of the press, especially TV news, to report and explain the issues to the public. The print press has generally exiled such stories to its business pages, away from the view of many readers; broadcast and cable TV news has largely engaged in a press blackout. These practices continue today, even as Congress prepares a major new communications law. But since practically every media company is lobbying for some form of special provision, such self-censorship and outright censorship is viewed as a form of job and wealth preservation.

The role that the mainstream media plays in our lives is frequently mocked by commentators across the political spectrum. One of the most potent criticisms is that they are largely irrelevant. Digital technology, it is claimed, has now made nearly everyone a publisher. Citizen journalists, the blogosphere, never-ending innovation producing low-cost technologies and the endless information resources available to the public have fundamentally changed the media equation. There is an also understandable skepticism, if not disagreement, that the big media and communications companies will make a dent in the Internet’s ability to further challenge and undermine the dominant media system.

But the lessons of U.S. media history tell us we shouldn’t take for granted that technological innovation will win the day. Commercial media culture has been working to become stronger and more relevant in the digital age. Big media will use all the resources at their disposal to take advantage of a political system where money and power go hand in hand. Technologies and the goodwill of many people will have to square off against the most successful and entrenched interests on the globe.

We have already seen Congress bend to special interests in the form of legislation awarding the so-called dinosaurs of old media greater control over copyright, look away as music and movie companies launched an attack on peer-to-peer networks, champion the interests of marketers by refusing to pass online privacy safeguards, and now hand phone and cable companies the keys to the broadband kingdom. It’s no wonder that some netizens are saying that it is time to issue a new “Declaration of Independence in Cyberspace,” just as they did back in the mid-1990s.

Such a call is timely. Our communications system is at a crossroads, and the country’s digital destiny is at stake. The long-awaited convergence of digital media with the older media of radio, TV and newspapers has arrived. That’s why those who care about having a media environment that nurtures a democracy should fight to create a different media future.

The giants from our commercial media and telecommunications industries will bring us a wondrous, interactive, intelligent and personalized distribution system for entertainment, advertising and marketing. But this system will not meaningfully foster civic expression, robust journalism and diversity of ownership, and it will no doubt reflect the race and class divisions that haunt the United States. Our foremost commitment should be to ensure this system reflects our highest aspirations as a society. That’s why it’s crucial to recall our recent media policy past and try not to permit communications history to repeat itself.

Jeff Chester is the executive director of the Center for Digital Democracy. This is an excerpt from his book Digital Destiny: New Media and the Future of Democracy (New Press, 2007).