I imagine a day when I might have a choice of high speed Internet providers. I live less than 1.5 miles from downtown Los Angeles and there is no FTTH (Fiber To The Home) and my wireless is at best, unreliable. My only broadband option is Time Warner Cable. So I guess you could call that a marketplace--my choices being slow vs. unreliable vs. Time Warner Cable. This is what I like to call a Markopoly; when a market really isn't a market.

Recently Senior Republican FCC Commissioner Ajit Pai appeared on The Communicators, C-SPAN's weekly series featuring interviews with people who "shape our digital future" where he compared FCC regulatory oversight--specifically net neutrality--to outdated models such as 19th century railroad regulation. 

The Fox Broadcasting Company holds all rights to Family Guy

The Fox Broadcasting Company holds all rights to Family Guy

What he was referring to was the The Interstate Commerce Act of 1887 that required railroad rates be "reasonable and just," while at the same time preventing government from setting the rates. This was born of the massive public outcry against the railroad baron's monopolies and price gouging.  It also brought market transparency to unfair pricing practices whereby special back room deals favored large partner entities and discriminated against smaller customers. Sound familiar?

But in Ajit's world--regulation is bad. He was formerly the Associate General Counsel at Verizon Communications Inc., the very company that sued the FCC and won a court challenge against net neutrality. At Verizon's urging, the District of Columbia Circuit Court rejected a key part the FCC's regulatory implementation of net neutrality. Republican FCC Commissioner Pai made statements publicly defending Verizon and the ruling against  his own FCC thanks to the revolving door between the railroad--er, I mean--media barons and Washington DC. 

During his CSPAN interview, Ajit made a case that competition is creating a healthy marketplace by pointing out that television, telephone and internet are "no longer silos, my telephone at home for example is my video provider - cable companies are making inroads on telephone companies market share when it comes to voice and in terms of broadband competition too, the vast majority of people have a number of different choices."

Let's break down his statement.

I agree telephone has benefitted hugely from the breakup of the Ma Bell monopoly thanks to the 1982 antitrust suit against AT&T that enabled widespread competition, innovation and competitive pricing in both local and long distance markets. Indeed, telephone is now a true marketplace and Mr. Pai, thanks to anti-trust actions and government regulation, you are correct, the vast majority of people have a number of different choices.

And to a lesser extent, I acknowledge his rationale on television. While cable TV is still a geographic monopoly, a marketplace has emerged through competition from satellite, and in some rare geographies, FTTH alternatives. I'll agree people have choices.

Where I take issue is the analysis found in his afterthought comment--where he slipped in the phrase: "and in terms of broadband competition too" at the end of his statement. Really? Is broadband a marketplace? A monopoly? Or a markopoly?

For rural customers, dial-up, more rarely DSL, and expensive Internet satellite services are far from a viable alternative to high speed broadband. Wireless carriers may someday be an alternative, but they still lack widespread or meaningful penetration into home networks. Additionally the dreaded data caps, although annoying on handsets, are total deal killers when it comes to watching Netflix at home. And FTTH has less than 10% penetration in the high-speed broadband market.

Do you live in a broadband marketplace? Try consulting the broadband map maintained by Mr. Pai's FCC to see what broadband alternatives (defined as greater than 3Mbps) exist at your address. When you get all excited about the long list of results, do some homework and you'll likely see similar results to mine:

I have 5 separate wireless providers (although I have horrible service where I live) so even without data caps, wireless is not an option.

I have Megapath DSL (copper) and AT&T DSL (copper) who both told me I'm too far from the switch to get broadband speed DSL, although Megapath said I could connect my existing cable to their system and get 50Mbps service for $379 per month.

Which leaves me Time Warner Cable. I live in a monopolized market, not a marketplace. Thank you FCC for the misleading data--now I see where Ajit gets his talking points, he just makes them up.

Mr. Pai's intellectually dishonest comment that "the vast majority of people have a number of different choices" is true perhaps for voice services and television, it is absolutely not true for high speed broadband unless you define "choices" as low quality, low speed, high priced alternatives to cable-speed broadband, if they even exist. He is intentionally conflating separate issues to make his policy position seem rational.

Had industry insider Ajit Pai been a commissioner in 1982, should we believe he'd have supported the government breakup of the Ma Bells? Likely not. Clearly not a very republican, or insider thing to do. However--and its a big however--the AT&T breakup was the very government action that delivered his holy grail of a telecommunications marketplace--the very market he points to as evidence that the government shouldn't interfere. In the off chance he might claim to be supportive of the government's AT&T break-up, then Mr. Pai, remember this exact history lesson as you consider the upcoming Comcast/Time Warner merger. 

If FCC Common Carrier Title II rules applied to ISPs, we might have multiple competitive options at the end of our cable, like many do with DSL at the end of their copper.

But wait, it gets even worse.

Companies like COX Cable, Comcast, Time Warner, Verizon and AT&T are high paying members of The American Legislative Exchange Council (ALEC), the right-wing public policy organization that manufactures beneficial legislation for corporate members in the form of ready-to-vote bills that are 1.) adopted by right wing legislators and 2.) promoted by ALEC's national network of lobbyists to get these Trojan horses passed in various state legislatures. 

How to turn money into more money.

How to turn money into more money.

ALEC has nine "task forces" including the Criminal Justice Task Force; (the force behind Arizona's Papers Please Law and Florida's Stand Your Ground Law). The Public Safety and Elections Task Force (behind the majority of State Voter ID Suppression Laws) and for our purposes; ALEC's Telecommunications & Information Technology Task Force.

Commissioner Pai has met with, and been a featured speaker for ALEC's Telecommunications & Information Technology Task Force who aggressively pushes bogus legislation to ban broadband competition by municipalities. One example was Kansas bill SB 304, the anti-competition bill to limit Internet network investments.  It just so happens that the ALEC board of directors includes Sen. Susan Wagle, (R) Vice Chair of the Kansas Senate's Commerce Committee, and Ray Merrick (R), Speaker of the Kansas State House of Representatives. 

In response to SB 304, a letter to state lawmakers was signed by a variety of tech companies including Google who stated: "SB 304 would prevent municipalities from working with private broadband providers, or developing...broadband infrastructure that will stimulate local businesses development, foster workforce retraining, and boost employment."

So what was this really all about? Google Fiber in Kansas City. Let me rephrase that; the threat of competition to cable's monopoly. It is the unrestrained and transparent efforts of a few media barons to prevent ANY competition, fair or otherwise.

But it's not just Kansas, last year North Carolina became the 19th state to create barriers to community networks, effectively outlawing competition.

Once the Comcast and Time Warner merger happens (as it indeed might) the market power of such a behemoth will only embolden the broadband monopoly machine.

Ajit Pai is swearing to "to maximize the benefits of competition and innovation for all American consumers."

Ajit Pai is swearing to "to maximize the benefits of competition and innovation for all American consumers."

I find this amusing, during his FCC confirmation Mr Pai said: "In discharging my responsibilities, I always would be mindful of the implicit goal of communications policy: to maximize the benefits of competition and innovation for all American consumers, whether they live in a big city or rural Kansas." 

Hey Mr. Pai, its time to share the pie.

AuthorRichard Cardran