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Smoke monsters

Wed, 06/16/2010 - 10:49am
Brian Santo

AT&T is joining many other broadband service providers threatening to cut back on capital spending if the FCC moves forward with its plan to reassert its authority over broadband.

AT&T CEO Randall Stephenson told The Wall Street Journal that his company would have to “rethink” its spending on rolling out U-verse if the FCC were to assert regulatory authority over broadband.

To review: The FCC several regimes back decided that broadband was an information service, not a communications service, a facile distinction that meant broadband would not be regulated as telephony was and is.

A couple of years ago, Comcast got caught fiddling with BitTorrent traffic; the regime at the time at the FCC responded by deciding Comcast’s actions were unfair; Comcast sued claiming the FCC had no authority over broadband, and therefore no authority to censure the company for fiddling with BitTorrent traffic or anything else; and U.S. courts agreed.

Now there’s another new regime at the FCC, and this one wants to be able to encourage broadband adoption and usage. No one is arguing with the goal; there’s general agreement that broadband adoption is a public good. But in order to encourage broadband adoption and usage, the FCC needs to be granted some regulatory authority over broadband.

The current chairman, Julius Genachowski, appears to be both reasonable and flexible. His initial solution was to strip the scary elements away from current telephony regulation and apply the rest to broadband. He’s said publicly that he’s amenable to industry self regulation with an FCC backstop to insure that the industry does what it promises.

The industry and its free-market enablers are going bonkers about the threat of regulation. AT&T is just the latest company to whine about how regulations chill innovation, code for “I don’t want this and if you do it I won’t spend my money and make the economy go.”

The problems with the free market are: a) free markets are NOT efficient, b) free markets are free to ignore the public good or even work in contravention to the public good, and c) the “free market” is a fairy tale.

Stephenson, just like every other industry executive, is blowing smoke. Broadband is the technological lever that has been moving the first real competition in telecommunications this country has seen since the beginning of the last century.

Forgoing technological innovation is unthinkable. It can be slowed, though, which might just suit some companies, because technological innovation is expensive. That’s why Verizon has slowed its rollout of FiOS to a crawl, a decision it made long before Genachowski ever ventured his “third way.” Could AT&T be looking for a convenient excuse to do likewise?

But let’s go back to the root of the problem – the original, nonsensical decision to classify broadband as an “information service.” The reason that determination was made was because the industry whined that if broadband were to be classified as a communications service, it would be regulated, and that would have had a chilling effect on the growth of the Internet.

In other words, the industry threatened to withhold capital spending if Congress regulated broadband. With the country experiencing a peak in “free-market” philosophical frenzy at the time, Congress was only too happy to believe the threat.

Given the explosive growth in broadband usage globally, you can make either argument: you could say that the explosive growth came because there was no regulation, but it’s just as possible to argue that consumer demand for those exact same services was clearly so high that consumers would continue to demand them even if they were regulated.

The WSJ, with its anti-regulatory bent, will continue to elicit free-market dogma from free-market warriors like Stephenson, and that’s just fine. Blowing smoke worked once, and it will work again.

People on both sides of the issue seem to be slowly coalescing around the voluntary Broadband Internet Technical Advisory Group (BITAG or TAG), which might represent a “fourth way,” if you will.

Established by a former FCC commissioner, BITAG plans to find technological approaches to address network neutrality issues. That’s critically important, and it’s got the support of the NCTA and includes representatives from AT&T, Cisco Systems, Comcast, Dish Network, EchoStar, Google, Intel, Level 3 Communications, Microsoft, Time Warner Cable and Verizon.

Forming and joining BITAG lets the industry look like it is doing something, and it is. But it’s only addressing half the issue – the network neutrality half.

The issue of encouraging broadband adoption is not being addressed, and it still needs to be.


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