Obama's Broadband Vision vs. the Communications Trust

Dare we say it: The U.S. is a third rate telecom nation. We'd like to offer some suggestions to address this unacknowledged crisis.
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Co-authored with David Rosen.

President Obama recently announced the "US Ignite Partnership" which will create a new wave of services that take advantage of state-of-the-art, programmable broadband networks running up to 100 times faster than today's Internet."

The President's Executive Order establishing US Ignite came out two-plus years after the FCC introduced the National Broadband Plan (NBP). The goal of the plan is ambitious:

"The United States must lead the world in the number of homes and people with access to affordable, world-class broadband connections. As such, 100 million U.S. homes should have affordable access to actual download speeds of at least 100 Mbps and actual upload speeds of at least 50 Mbps by 2020. This will create the world's most attractive market for broadband applications, devices and infrastructure."

Sadly, neither US Ignite nor the NBP are likely to fundamentally improve the pathetic state of American telecommunications services. The great media secret is that, according to Europe's Organization for Economic Co-operation and Development (OECD), the U.S. ranks 17th in the world in broadband service. Dare we say it: The U.S. is a third rate telecom nation. We'd like to offer some suggestions to address this unacknowledged crisis.

According to the latest FCC data on broadband, "In June 2011, 61 percent of total reportable connections (or 125.3 million connections) were slower than 3 Mbps in the downstream direction, 10 percent (or 20.3 million connections) were at least 3 Mbps in the downstream direction but slower than 6 Mbps, and 29 percent (or 60.5 million connections) were at least 6 Mbps in the downstream direction." But in the upstream speed, 82 percent were slower than 1.5 Mbps.

And wireless connectivity is just as pathetic. For those receiving what is dubbed "4G" or LTE service, 85 percent of reception is slower than 3 Mbps and only 9 percent get at least 6 Mbps downstream; going upstream is even worse, 95 percent get 1.5 Mbps or slower data rates.

US Ignite points in the right direction, an effort to build-out the nation's wireline infrastructure. But his well-intentioned and farsighted effort confronts, head-on, the nation's telecom giants, the telephone and cable companies led by AT&T, Verizon, throw in Comcast and the other cable companies, who have a very different and self-serving agenda. Working together they are a 'Communications Trust', a cartel of companies who have taken control of communications so that they can get rid of regulations, raise rates and block competition.

But the real story is the massive skunkworks campaigns on both the state level, such as what happening in state legislatures, and at the federal level, including the FCC and Congress, to close down all wired services, including the Public Switched Telephone Networks, (PSTN) or DSL service, (which relies on the copper wiring) or even the obligation to provide wireline services in rural areas or where ever they don't want to serve. At the same time, Verizon and AT&T have been privatizing other parts of the PSTN, such as the advanced services like FiOS or U-Verse, or the profitable business or data services, which use the PSTN wires and plant --- which have been directly funded by phone customers, many times through rate increases for 'infrastructure' building.

Verizon has even taken the next step and is now marketing some of the cable companies' products with their wireless services, meaning that there is going to be no cable competition, much less choice in competitive broadband Internet providers. And while AT&T and Verizon are 'wireless-happy', truth is wireless can never deliver competitive high speeds or even cable competition. Meanwhile, America's infrastructure is being allowed to deteriorate.

It will harm the economic growth in most of America and is creating a new digital divide -- the U.S. vs. the rest of the world.

Whoever wins in the 2012 election, a radical, redemptive telecom policy is required. With the U.S. ranking 17th in the world in broadband, a bold initiative is required or else the long-term national interest will suffer. In order to be a global competitor, the President's US Ignite and the FCC's NBP goal of 100 Mbps needs to be implemented, now.

To fulfill the promise of US Ignite and NBP proposal, we propose the following eight correctives, enhancements to the Obama administration's initiatives.

#1. Recommit to the PSTN.

AT&T and Verizon are no longer maintaining the copper wiring of PSTN, even though almost 90 percent of customers are still using this copper wiring; nor is it going to support DSL. AT&T's advanced U-Verse service still relies on the aging copper wiring.

The consequences of not properly maintaining the PSTN are already being questioned. The New York State Attorney General's office has filed with the State Commission, claiming that Verizon network reliability is deteriorating, that wireline complaints are way up and that "Verizon's poor service has caused hardship for residential, small business and local government customers."

#2. Upgrade the Wireline Infrastructure.

As we pointed out in previous articles, the PSTN was supposed to be upgraded over the last 20 years to a fiber optic future, replacing the old copper wiring. In New Jersey, Verizon was supposed to have 100 percent of the state finished by 2010 with services capable of 45 Mbps in both directions, and almost every state had some state-based commitments to do upgrades, which included schools, libraries and hospitals.

Instead, Verizon and AT&T have stopped upgrading the U.S. infrastructure, leaving over half of America with no fast broadband from the telcos, and therefore no cable competition. AT&T announced it will no longer expand U-Verse, its slow, expensive "advanced" network that has a top speed of about 24 Mbps because AT&T never bothered to upgrade the utility plant to fiber. U-Verse, in fact, runs over the old copper wiring the connects customers' homes and offices -- and it is harming 22 states, not only because it will never, ever be able to get to 100 Mbps, much less 1 Gbps, but because half of AT&T's territories will never get any high speed, much less cable competition.

Verizon has stopped expanding FiOS its "advanced" network which passes about ½ of the households in its territories -- where 'passed' could mean that there's a wire somewhere in the zip code. While FiOS is a good product, and Verizon announced faster tests (which are being done so that they can look like good guys) again, over half of its 10+ state territories will never get cable competition.

#3. Wireless is Not Enough.

Wireless is being promoted as a substitute for wireline, but is it a meaningful alternative? No! In another article we found if someone used wireless for just 1 month of cable viewing they'd be paying over 1,000 dollars. Yet, Verizon is pushing rural areas where they are not upgrading to go to expensive wireless services.

#4. Open the Regulatory Process.

The FCC, along with many state legislatures and Public Utility Commissions, have been essentially taken over by AT&T, Verizon and their friends, lobbyists or "think tank" experts that promote corporate interests. A revealing example is the FCC's Technical Advisory Council (TAC). It is calling for the closing of the PSTN and using data supplied by AT&T and Verizon; TAC's plan is to "transition" or "sunset" the network because the phone companies are ostensibly "losing lines" and losing money.

TAC's director is Tom Wheeler, the former head of the wireless association, CTIA, and served as the head of the cable association, the NCTA. Worse still, of the 50 TAC representatives over half have a direct financial relationship with AT&T and/or Verizon, not to mention that AT&T and Verizon are members of the council. The campaign to "close down the PSTN" is being driven by companies with a vested interest in the outcome of the deliberation, i.e., the replacement of wireline with wireless services.

As we write elsewhere, the loss of lines and money is also being manipulated for moving the public policy to the phone and cable companies' wishes. For example, the access line accounting is essentially made up as it is only including a specific class of voice services, commonly called POTS, plain old Telephone service, while it leaves out the fact that DSL, special access lines, data lines and even U-Verse and FIOS are not included in the accounting. Worse, the 'losses are created because many of these services, and other 'affiliates of Verizon and AT&T are able to dump expenses into the PSTN while have the revenues and profits go into other corporate buckets.

Also on the federal level, Congress is expected to examine removing all telecommunications regulation (known as Title II) by redefining all communications as an "information service" (known as Title I). This is just to finish the job started by the former FCC Chairman Michael Powell who now heads the cable association, NCTA. Under Powell, the agency redefined 100 years of telecommunications law by claiming that broadband was an "information service" and not a communications service.

The FCC, and the upcoming Congressional review, and even the changes in state laws are all basing their approach on the claim that America needs to move traditional wireline phone services to "VoIP" or digital voice services that use the Internet protocols, thus rebranded as an "information" service. While veiled as innovation, this technology play is just a play to remove all regulations on all services.

This rebranding is also taking place at state public utility commissions (PUC). For example, in California, AT&T and Verizon have created an ALEC bill that uses this "information" play to remove remaining regulations on phone service.

#5. Bring Back Competition, End Subsidizing Failure

AT&T and Verizon figured out that they can cry poverty and get the government to invent new ways to give them more money, while they don't do their build outs. The FCC's NBP created new fees which will be charged to customers like the "Connect America Fund"; it is named after an astroturf group, Connected Nation, created by AT&T and Verizon. There is also a new "mobility" fund, a new "Access Recovery Charge" and even a redesign of the Universal Service Fund. These new fees reward those like Verizon and AT&T who failed to properly upgrade their networks.

AT&T and Verizon also control 'Special Access' fees which are charges for access to the networks by the wireless companies and broadband providers. Special Access fees provide telecoms profit margins of 80 percent as compared to historically being 11.25 percent. The FCC has been sitting on this issue for at least 5 years or more, but the FCC may have to move as the courts are already moving on this.

Of greater concern is the apparent collusion between wireline, wireless and cable providers. Verizon has cut a deal with Time Warner as well as Comcast to market their wireless services, instead of competing, upgrading their own networks or expanding Verizon's FIOS. This leaves no cable competition. This leaves no broadband competition or even Internet competition.

#6. Remember the Customer

According to a recent report (June 2012) from the National Regulatory Research Institute:

"Between 2010 and April 30, 2012, 21 state legislatures enacted laws that limit what Public Utility Commissions (PUCs) can regulate. Nine of these states severely limited or completely eliminated Company of Last Resort (COLR) obligations and the requirement that carriers provide a terrified basic local service product... As of the end of April 2012, deregulation legislation was pending in an additional 14 states."

Backed by model legislation promoted through the American Legislative Exchange Council (ALEC), state-based bills to get rid of any customer obligations. This means that if a customer calls and asks for their wireline phone service to be fixed or they want such service, it won't be available.

Further limiting consumer rights, the Supreme Court decided that wireless customers were bound by the wireless contracts. This means that a customer cannot take legal action against AT&T, Verizon or the other companies. Instead, a customer is now forced to "arbitrate" or take the company separately to small claims court.

Last week, Verizon sent out an email to customers which states that customers of Verizon Online Service (FiOS Internet and High Speed Internet), FiOS TV Service, FiOS Digital Voice Service, FiOS Digital Voice Inside Wire Maintenance Service, Verizon Online Additional Services "now require that you and Verizon resolve disputes only by arbitration or in small claims court".

#7. The Need for Accountability.

"Accountability" and "commitment" are dirty words for our politicians. As we mentioned, Verizon, New Jersey made commitments to rewire the entire state 100 percent with fiber optics by 2010 with services capable of 45 Mbps in both directions. In fact, the New Jersey Board of Public Utilities said that Verizon had not fulfilled their commitments. We estimate Verizon collected over $13 billion to do the upgrades of the PSTN since 1993.

And this is not unique to New Jersey. Almost every state implemented regulatory changes that gave and continues to give AT&T, Verizon and Qwest (now Centurylink) billions of dollars per state to upgrade the utility plant to deliver services to residential and business customers, not to mention all schools, libraries and hospitals. Lack of accountability is one reason why the U.S. is now a third rate broadband nation.

Accountability will also reveal how the dismantling of the PSTN through the creation of affiliates that have been moving public-funded assets out of the utility and dumping expenses into the utility. This has caused major 'losses' of the state-based utilities, which is then used to raise customers' rates even further. Further, it will reveal that there will be no cable competition to lower prices. Customers could lose their phone services, not because of competition but because the phone companies gamed the regulatory system. Jobs and economic growth will be harmed as wireless is NOT a substitute for even a wire.

#8. Look Behind the Curtain at the US Ignite Partners vs. AT&T and Verizon.

US Ignite has 100 partners that have signed on, from locations throughout the US, including Lafayette, Louisiana and Chattanooga, Tennessee, Wilson, North Carolina, San Francisco and Santa Monica California, or Urbana Illinois, or with One Community in northeast Ohio.

And if you examine the history of broadband in those states it's clear that AT&T and the cable companies either failed to properly upgrade their networks -- even though they collected billions to do so, or they attempted to or succeeded in blocking municipalities from building themselves, when it became obvious the incumbent was never going to show up.

AT&T now controls all of these states as the merged-company included BellSouth (Louisiana and Tennessee), California, (which was part of Pacific Telesis), as well as Illinois and Ohio, (which were part of Ameritech).

In the case of Lafayette, Louisiana, the town was taken to court by Bellsouth and the cable companies, the incumbents, to block their city's upgrade, even though BellSouth had no indention of upgrading their city. Chattanooga, Tennessee's story was about the same. One YouTube shows "fighting cable lobbyists who have filed a lawsuit to prevent them from offering fiber optic high speed internet and cable." Meanwhile, North Carolina became the 19th state to outlaw community broadband networks. This was not done because the public would be better served.

But there's a deeper issues. Most of these cities and even states should have already been upgraded. By 2000, both Santa Monica and San Francisco were supposed to be upgraded to fiber optics with speeds of 45 Mbps services or better, as Pacific Bell was supposed to spend $16 billion dollars -- and never spent the money and never built out the networks. Meanwhile, Ohio was to have 100 percent of schools, libraries and hospitals wired by 2000, while Illinois was also supposed to have been completed as Illinois Bell claimed they'd be spending $4 billion on the upgrades.

President Obama stated: "Building a nationwide broadband network will strengthen our economy and put more Americans back to work... By connecting every corner of our country to the digital age, we can help our businesses become more competitive, our students become more informed and our citizens become more engaged."

Sounds great. Shame the communications trust hasn't gotten the memo...

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