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Tom Tauke, Verizon’s erudite executive vice president for public affairs, made a valiant attempt the other day to try to salvage the policy deal his company made with Google. In a speech at the Technology Policy Institute’s telecom forum in Aspen, he brought out arguments old and new to argue why it was that an agreement forged between two big companies to their benefit should be accepted.
In the end, however, Tauke’s case came up short in two general areas and in a few specific ones. First, the internal contradictions of an Internet divided against itself cannot stand. Second, the defense skirted the uber-issue of how to implement any programs, Verizon’s, Google’s, or anyone’s, without the Federal Communications Commission having any authority to do so.
As a framework issue, it’s not sufficient to say that the plan meets President Obama’s campaign promise of “non-discrimination and transparency on the Internet,” as Tauke claimed. It would be acceptable if the Internet existed only in the wired world, but, alas, it doesn’t. As FCC Chairman Julius Genachowski has said, it’s the same Internet, whether reached from a personal computer or from a mobile phone. So by excluding the wireless world from even the minimal suggestions the two big companies made, they cleave out all of the future growth in Internet usage from wireless devices and networks. Between the two of them, Verizon and AT&T control about 70 percent of the wireless market, so it’s easy to see why they want the high-growth sector to be fenced off.
If one believes, as Genachowski does, that, “There is only one Internet,” and that half of the access to it is excluded, then it doesn’t square to say, as Tauke did, “We decided to promote open Internet access.” Yes, Verizon and Google took some strides in that direction, but they left out some significant parts of the equation by leaving out wireless. Yes, there are capacity issues and yes, the technology is different. But, no, discrimination is not different in a wired world from an unwired one.
The other over-riding issue is whether the FCC has any authority to implement any plans at all. Tauke skipped over that part, saying that was an issue that “Congress needed to clarify.” There are a couple of responses here. First, the philosophical basis of kicking the issue to Congress is an incorrect one. While he didn’t mention it in his speech, the Verizon comments to the FCC on Genachowski’s “Third Way” regulatory proposal to have the FCC take back some authority over broadband argue that Congress did not intend for the FCC to “regulate the Internet.” As Genachowski has said repeatedly for the past year, the FCC is not going to “regulate the Internet.” It simply wanted to reverse a decision which took broadband Internet access out from the “telecommunications services” bucket of FCC authority into a more vague one, “information services,” an approach which the U.S. Appeals Court for the D.C. circuit shot down in flames this past April.
Tauke was correct to say that, ten years ago, Verizon did call for the openness of Internet Service Providers like RoadRunner, which was a service offered by the cable industry. Of course back then, the telephone companies were under the FCC’s regulatory authority and had to keep their networks open to competitors which wanted to buy access to their facilities. Cable operators had no such obligations. Verizon (its predecessor, really) only wanted cable to open up because telephone companies had to. Nowadays, with cable and telephone companies on the same page, it would be difficult to see Verizon splitting from the cable industry on whether telecommunications facilities should be open and shared. Closed is the watchword today.
At the time when the switch was made, neither Verizon nor any other telecom company argued that only Congress could decide such a basic issue, but then the decision was in their favor. Arguing that only Congress should decide something is the refuge of large industries that know they control the votes to do what they wish in Congress, should Congress actually get around to acting on anything.
Beyond the two great philosophical shortcomings, the Verizon proposal as defended by Tauke has other flaws. It’s fine to talk about consumers having transparency in how their network operators manage traffic, but it is hardly, as he said, “the key to making the market work.” There is no market. The FCC found in its National Broadband Plan that 96 percent of housing units had a choice of two or fewer broadband providers. According to the Plan, 13 percent of the country had only one, and 5 percent had none. For many consumers, a choice between high-priced cable or inadequate digital subscriber line (DSL) service from a telephone company isn’t much of a choice at all. Wireless consumers, stuck with long-term contracts, wouldn’t even be able to switch without losing money.
The notion that other data services should be somehow exempt from regulation, subject only to “monitoring” by the FCC is similarly ludicrous. The FCC can “monitor” to its heart’s content as the industry siphons off popular web sites and applications from the Internet. The comparison that Tauke made in Aspen, as he had before, to a “virtual private network” (VPN) providing Internet and collaborative services to company employees misses the point. A VPN is just that – a private network that connects all of the employees in one enterprise. On the other hand, a public network has different obligations to serve everyone.
Similarly, the idea that self-governance in the telecom industry is a substitute for effective regulation should be dismissed. From the very start of the telephone industry in this country through the more recent disasters of the financial services and lending industries, the lesson has been that the public interest ignored is the public interest destroyed. We’ve seen where the industry’s investment policies have taken us. One can quibble about whether we are 15th in the world, 21st, or whatever, but the direction since most regulations have been lifted has been consistent – down.
We agree that innovation and investment should be encouraged. However, investment responds to business cycles. Within the same regulatory environment, investment ebbs and flows. And that’s just for the telecom industry. Let’s not forget all of that investment by Web companies that would be shaken loose by a more open Internet environment.
Powerful lobbying by Verizon and friends has probably killed any chance of reasonable FCC authority over broadband. That doesn’t make their plans any more palatable. They would be bitter pills if we needed to swallow them.