The FCC’s Dangerous Game of ‘Let’s Make A Deal’

For whatever reason, the Federal Communications Commission (FCC) continues its misguided game of  “Let’s Make A Deal” with the big telecom empires.   Since the end of June, FCC Chief of Staff Edward Lazarus has convened representatives from AT&T, Verizon, the National Cable Telecommunications Association, Google, Skype and the Open Internet Coalition in an effort to try to have those negotiators do what FCC Chairman Julius Genachowski apparently won’t do – make a decision about the future of broadband and the Internet in this country.

As far apart as the parties are, it’s increasingly unlikely that any overarching deal will be reached, even though negotiating sessions are scheduled for today (Aug. 4) and tomorrow (Aug. 5), following a marathon Saturday session on July 31.  The Empire is stuck in 2005, giving nothing up and expecting surrender from the other side. 

The rumors are rampant that Verizon will make some type of voluntary agreement with Google to have some consumer transparency with wireless services.  Whatever agreement these two big companies reach, however, is no substitute for a legally binding, comprehensive agreement in the public interest that covers not only network management but universal service and the other issues rolled up in the larger question whether the FCC even has the authority over broadband.  The authority question also looms over any action the FCC might take if there is an agreement among all the parties.

(Of course, such a deal would require Google Chairman Eric Schmidt to tell the politicians he advises, President Obama and House Speaker Nancy Pelosi, that he is bailing on one of their top tech issues.)

What the FCC (and Google) need to understand, however, is that over decades, the Bell companies have had a history of not keeping the official promises they have made, and the Commission itself has not shown any inclination to enforce them. 

The Commission would find that making a deal as ephemeral as the one under consideration is only asking for trouble.  After all, if the Bells can break legally binding agreements, they should have no problem sweeping aside an unenforceable piece of cotton candy – voluntary interim agreements that might look good, even taste sweet, but melt immediately upon being eaten.

Sorry History of Agreements

Whether the agreements are to complete mergers, or to settle cases at the state level, the set up is the same, and the results are the same.  Big promises are made, precious few are kept.  We know this from the meticulous research of Bruce Kushnick, who has tracked the mergers and cases before state regulators.

For example, the former SBC (now AT&T) agreed in 1999 to offer competition in 30 markets outside its service territory by 2002 as a condition for buying Ameritech.   The company also promised to spend $6 billion to move customers to a new fiber network. Originally, the company signed a deal to pay a $40 million fine for each market it didn’t enter.  The company got away cheap with a $40 million total fine for noncompliance.  (Of course, the FCC only required three customers in a market to be counted as “competitive.)

Bell Atlantic promised to spend $500 million to provide competitive local services around the country when it bought GTE in 1997 to form today’s Verizon, in order to provision 250,000 customer lines outside of its service territory.  No enforcers on the beat have made them pay a dime for this.

You can go back farther, as SBC created the empire that is the mostly reconstituted AT&T of today.  It promised as part of purchase agreements network upgrades in California and Connecticut that never panned out.  Bell Atlantic and Nynex promised a big fiber upgrade by 2000 for their combination.  That promise wasn't fulfilled, either.

Even without the prompting of a merger, promises were made about network upgrades. Ameritech (now part of AT&T), Nynex (now part of Verizon), Pacific Telesis (now part of AT&T) and U S West (now Qwest) all promised big upgrades in the early 1990s back when the FCC was pushing companies to install “video dial tone” services – the first effort to get competition to cable. The projects didn’t come to fruition. Bell Atlantic has a long history of promising New Jersey that it would upgrade the state, in exchange for massive rate increases.  The rate increases came first, the deployment, much slower, if ever.

Aggressive Bell Tactics Effective If Misguided

There is a simple reason that the FCC leadership feels it has been forced into this no-win negotiation scenario.  The Telecom Empire has persuaded them that it has them surrounded and the Commission is desperately looking for a way out of what they see as a tightening circle of enemies. Of course, most of those enemies are controlled by the Telecom Empire – those members of Congress beholden to the Empire for financial sustenance.  And there are many, including quite a few in the President's own party who would take Telecom Empire coin and sell out from greed, or who go along with the Empire out of sheer ignorance by not taking the time to realize the harm they are doing.

Rep. Alan Grayson (D-FL), for example, says he favors Net Neutrality but wants Congress to decide the issue of whether the Bush-era mistake moving broadband Internet service into an unregulated service basket should be corrected.  Now Grayson, a feisty liberal in most circumstances, along with another Democrat, Ben Chandler (D-KY) are being lauded by the right-wing Americans for Tax Reform as joining to fight the government's “Internet takeover.”  They are doing no such thing in part, because there is no government “Internet takeover.”  And they don't realize that without some action on the FCC's part to give the agency some jurisdiction, their favored policy of Net Neutrality will never be enacted.  Whether out of ignorance or confusion, Grayson and Chandler have effectively shot themselves in their feet for not realizing what they got themselves into.

The Telecom Empire is a very persuasive group, and it proves every day.  Chandler is a perfect example of how powerful the Empire really is.  He signed the letter the Empire wanted him to sign, not realizing that allowing Congress to decide on the status of broadband Internet service is to do the Empire's bidding.  At the same time, he slams the financial reform package as not strong enough.  What does he think will happen when the Telecom Empire gets its bill on the floor?

In fact, there are many members of Congress who voted to restrain big banks and financial institutions, yet shy away from the Empire.  A PK analysis of those Democrats who signed the May letter from Rep. Gene Green (D-ATT) opposing FCC Chairman Julius Genachowski's modest “Third Way” proposal to put a cop on the Telecom beat shows that most of them voted for the financial reforms, however modest.  Yet these same representatives will sign a letter asking the FCC not to act, knowing, as Chandler and Grayson should know, that Congress will do nothing to protect consumers or to make meaningful reforms in the telecom world that would offend the Empire.

And so, Genachowski and his team sit desperately trying to avoid what, exactly?  Being criticized by the captive Congress?  Having the right wing gin up the Noise Machine against a “government takeover of the Internet?”  The only consequence here is that failure to act means failure of the promised Obama policies.

The EPA Shows The Way

There is another way, and another example in Washington.  Just as the Telecom Empire uses the “leave it to Congress” dodge, so do their cousins, the Utilities, in trying to force the Environmental Protection Agency (EPA) not to regulate greenhouse gases.  The Utilities follow the same playbook – letters, resolutions, bills, all generated to pressure a captive and craven Congress. And it works, in large measure, as a climate bill was pulled from Senate consideration. 

Except that EPA Administrator Lisa Jackson decided to go ahead with her rulemaking to control those pollutants anyway.  She proposed a more modest rule than might otherwise have been preferred, the EPA version of the Third Way, and went ahead with it despite the harrumphing form the Hill.  The EPA didn't screw around with silly, backroom negotiations.  It carried out its public interest mandate.

It can be done.  It just takes some gumption, which is evident in some agencies, if not in others. 




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