Government Sues Sprint For Overcharging For Wiretaps Under CALEA

from the everybody-loses dept

As we just got done discussing, AT&T, Verizon and Sprint recently were able to dodge a long-running lawsuit alleging the companies have been dramatically overcharging the government for wiretaps for more than a decade. The lawsuit was filed by former New York Deputy Attorney General John Prather, who spent thirty years in the AG's office (and six years on the Organized Crime Task Force in NY) helping to manage wiretaps and invoices for wiretap provisioning. Prather filed the suit on behalf of the U.S. government, but telco lawyers were able to have the suit dismissed by arguing that Prather couldn't technically sue the telcos under the False Claim Act as a whistleblower, because he filed the original complaint while working for the government.

Now it appears that at least one of the telcos is being focused on for round two, with the news that the government is suing Sprint for overcharging for wiretaps under CALEA. Under CALEA phone companies are allowed to recoup "reasonable expenses," but the lawsuit claims that Sprint overcharged the government to the tune of $21 million, overinflating charges by approximately 58 percent between 2007 and 2010. The Prather case claimed the telcos overcharge for taps in general, but have historically dodged culpability by simply hitting the government with large bills that don't itemize or explain why a wiretap should magically cost $50,000 to $100,000.

Sprint appears to have been specifically nabbed by the Justice Department’s Inspector General because it wasn't clever enough about passing on the costs of modifying its network to adhere to CALEA back to the government, something the law prohibits:

"Despite the FCC’s clear and unambiguous ruling, Sprint knowingly included in its intercept charges the costs of financing modifications to equipment, facilities, and services installed to comply with CALEA. Because Sprint’s invoices for intercept charges did not identify the particular expenses for which it sought reimbursement, federal law enforcement agencies were unable to detect that Sprint was requesting reimbursement of these unallowable costs."

It should be interesting to see if AT&T and Verizon face similar lawsuits down the road, or if their lawyers and accountants were simply better at obscuring overbilling. It's kind of a lose-lose scenario for you and me either way. Not only do we get to be spied on, we likely paid for these wiretaps both on the taxpayer side and on the telco side as the companies passed on both real and imaginary wiretap costs to you.

Filed Under: calea, john prather, new york, wiretap
Companies: at&t, spring, verizon

AT&T's 'IP Transition' Will Make U.S. Broadband Even Less Competitive

from the ill-communication dept

AT&T has spent a massive amount of time the last few years harping on the need to speed up the "IP transition." On its surface the idea seems reasonable; the nation needs to begin migrating from older copper DSL and phone technology toward new IP solutions, such as wireless and fiber to the home, the former being easier to deploy to rural areas, and the latter having much lower maintenance costs while being able to deliver faster speeds. AT&T is going state-by-state insisting that if lawmakers gut consumer protections governing these older networks, newer, better networks will spring forth from the ashes to help forge a better tomorrow, as this charming video makes clear:

Aren't those little railroad men saddled with antiquated regulations and ancient technology adorable?

The problem is that AT&T's version of the network of tomorrow for millions of users is going to mean significantly fewer choices and worse, more expensive service than ever before. While it's true many people are moving away from copper phone service, unmentioned by AT&T's video is the fact that millions of customers remain on copper-based DSL because it's the only choice they have and the only one AT&T offered. While AT&T has selectively upgraded some users to their faster but still not fiber to the home U-Verse VDSL platform (about half of their fixed-line network), tens of millions of AT&T and Verizon's DSL customers aren't going to be upgraded anytime soon. Instead, they're going to be hung up on or sold to smaller telcos with even less interest in upgrading them than AT&T did.

Enjoy the magic of tomorrowland, everyone!

While new DSL deployments and upgrades can be expensive (AT&T has always had the funds, they've just long placed investor returns well above offering quality product and support), existing DSL customers are perfectly profitable. They're simply not profitable enough for impatient investors, whose eyes are squarely fixed on wireless with its low usage caps and per gigabyte overages, even if wireless is not (especially at AT&T prices) an adequate replacement for a fixed line. Refusing to upgrade fixed-line networks could almost be excused if it wasn't for the fact that, with their other hand, AT&T has long lobbied for protectionist legislation across multiple states banning towns and cities from upgrading themselves - - even in cases where nobody else will.

Once AT&T has gutted any remaining consumer protections and regulations on copper lines (which were over time quite heavily subsidized by taxpayers, but who cares, right?), they're going to walk away from many areas -- leaving users with either the choice of more expensive wireless (many rural users won't be able to get), or a suddenly emboldened and stronger cable monopoly. AT&T and Verizon are quietly ceding huge swaths of America's fixed-line broadband market to cable, who'll be sure to jack up prices in the face of less competition than ever. This before you even factor in the smaller ISPs that might have been using those telco lines to offer competing services (whoops, sorry!).

The use of "all IP" is also quite a lovely bit of conflation and misdirection, given the company's U-Verse and DSL users are already IP-based. You'll see the "all IP" rhetoric popping up in an endless series of editorials (like this one by Steve Forbes) AT&T has been running nationwide to convince people they really don't need that DSL line they're using. Larry Downes at CNET recently informed readers that AT&T's simply interested in "connecting more Americans to the broadband ecosystem." Nothing quite says connecting more Americans like disconnecting Americans.

The FCC recently started paying closer attention to this "IP transition" when Verizon's version of it involved refusing to repair east coast DSL customers after Hurricane Sandy. Instead, after waiting months for repairs, customers were given something Verizon is calling Voice Link -- a wireless service that locals complained was dramatically less functional and reliable than their previous copper DSL and phone lines, failing to offer basic features or data, leaving Comcast (which had no problem financing coaxial repairs) as the only regional fixed-line broadband competitor in many of these areas. Verizon was using the storm as cover to back out of areas they no longer want to service, though they fell under criticism by the New York AG for violating PSC rules.

To tackle the general technical problems with the "IP transition" (will my home security system still work? Can I even get a reliable LTE signal in my basement? Will 911 work?), the FCC has proposed a series of observed technical trials. AT&T has announced that their version of these trials will involve migrating two tiny towns to presumably LTE wireless and U-Verse over the next few years, after which AT&T and the FCC will likely proclaim the trial to be a smashing success. Ignored by AT&T, the FCC, and the press so far has been the fact that as AT&T and Verizon back away from DSL, they're going to be leaving an even less competitive broadband market than we have now -- at a time when everyone pays endless lip service to improving broadband competition.

The next time you read in the press about the "IP transition," (and you'll be reading about it a lot) notice how quickly everybody applauds the idea that copper is just so lame, old fashioned and unnecessary. Then notice how, buried under the pageantry, nobody seems to recognize that what's actually happening here is simply the lopping off of unwanted DSL customers that companies are refusing to upgrade. That in turn will lead to a stronger cable monopoly across half the country, resulting in cable companies -- like the freshly-merged Time Warner Cable Comcast -- feeling free to impose more draconian usage caps than ever before. Welcome to the "all IP" networks of tomorrow. Watch that first step.

Filed Under: broadband, competition, dsl, ip transition
Companies: at&t, verizon

Telcos Dodge Suit Claiming They Overcharged For Wiretaps, But At Least They'll Have To Pay Their Own Legal Costs

from the not-so-hard-justice dept

AT&T and Verizon's ultra-close relationship with government surveillance efforts have been profitable in innumerable ways. Obviously being a loyal patriot means you'll have a better chance of grabbing multi-billion dollar military and government communications contracts. Carriers also pass on most of the costs of outfitting their network for easier surveillance (like those live fiber splits AT&T whistleblower Mark Klein exposed) directly to you, the consumer. Lastly as we've discussed more than a few times whenever pricing sheets leak, they make a pretty penny on law enforcement wiretap requests. Maybe a bit too pretty.

Back in 2009, former New York Deputy Attorney General John Prather filed a lawsuit on behalf of the U.S. government, accusing Verizon, AT&T, Sprint and Qwest (now CenturyLink) of overcharging federal, state and city governments for services under CALEA. Prather, who helped lead the NY AG's Organized Crime Task Force from 2002 to 2008 as part of thirty years as a prosecutor, was intimately familiar with wiretap procedure and spent years in charge of invoices for wiretap provisioning. Prather claimed telcos had aggressively been price gouging law enforcement for some time, jacking up prices year over year without any sensible explanation why some wiretaps should cost in some cases $50,000 to $100,000 each.

Prather claims he filed a complaint with the FCC in 2004, who did nothing about it. Prather's lawsuit was dismissed a few months back (pdf) after the court claimed his insights were conjecture in that he didn't provide enough first hand evidence of fraud. That degree of proof was required because, according to telco lawyers, Prather technically couldn't file a whistle blower lawsuit under the False Claim Act and claim he himself was the "original source of the information" -- because he filed the original complaint while working for the government.

As a tiny win however, the court this week stated that phone company lawyers couldn't prove that Prather was filing the lawsuit simply to harass the phone companies, and as such they're be required to at least pay their own legal costs related to the case:

"Furthermore, the phone companies "fail to show that Relator's action was 'clearly vexatious' or 'brought primarily for purposes of harassment' as there is no evidence that relator pursued this litigation merely to annoy or embarrass defendants," the ruling states. "Conversely, Relator asserts that he brought this action 'in an attempt to bring to light the fraud of the telecommunications carriers, and to help insure that the Law Enforcement Agencies would not be hindered in their investigation of crime.'"

Understand that Verizon and AT&T have a long and proud history of taking all manner of subsidies, tax breaks or other incentives for services never delivered, and when they do deliver, over-charging like any good unaccountable government contractor. The combination of excellent lawyers, an apathetic government afraid of taking on larger companies and the fact that phone companies are simply damn good at it -- has historically allowed them to get away with pretty much whatever they've wanted. Actually requiring the phone companies to pay their own lawyers may not not sound like much, but when AT&T and Verizon lawyers are involved, it's dramatically more than you'll usually see in cases like this.

Filed Under: john prather, telco, whistleblowing, wiretap
Companies: at&t, centurylink, qwest, sprint, verizon

Verizon Thinks 'The Most Important Concept Of Net Neutrality' Is Giving Verizon More Money

from the feel-healthy-yet? dept

It's pretty clear at this point that after nearly a decade of histrionics and hyperbole on all sides that the definition of net neutrality has been somewhat warped. That's in no small part thanks to the larger carriers like AT&T and Verizon, who have consistently done their best to argue that they need to be allowed to engage in "creative" and "innovative" new pricing (read predatory price gouging) or they simply won't invest in the networks of tomorrow. Between the recent peering debates and Verizon's defeat of FCC neutrality rules things are as murky as ever.

Verizon's defeat of the FCC's neutrality rules was a double-edged sword for the company. On the one hand, they killed the rules (which they helped craft with Google and AT&T, and as a result did little), but on the other end, their real goal was to kill FCC authority to regulate broadband for good. Instead, the court re-enforced that the FCC does in fact have some (albeit shaky) authority to regulate broadband providers and impose neutrality rules, they just have to argue their case differently. All in all, things are murky as hell on the net neutrality front, but apparently not for Verizon CEO Lowell McAdam:

"McAdam addressed the U.S. Federal Communications Commission's proposed net neutrality rules during a conference call about the company's acquisition of Vodafone's 45 percent stake in Verizon Wireless. The FCC's move this month to resurrect net neutrality rules should provide "clarity" for the broadband industry, said McAdam, whose company successfully challenged an old version of the regulations in court."

So McAdam apparently believes by throwing a stick in the spokes and killing the existing neutrality rules (which again, most ISPs liked because they did little to nothing, and didn't touch wireless), his company has brought "clarity." But what McAdam thinks is the most important thing for people to take away from the neutrality discussion is that paying Verizon increasingly more money is the truly important part:

"McAdam dismissed concerns that his company would selectively block or slow some Web content. "We make our money by carrying traffic," he said. "That's how we make dollars. So to view that we're going to be advantaging one over the other really is a lot of histrionics, I think, at this point." But McAdam suggested that broadband power users should pay extra. "It's only natural that the heavy users help contribute to the investment to keep the Web healthy," he said. "That is the most important concept of net neutrality."

That people already paying an arm and a leg for bandwidth never somehow pay their "fair share" has long been the cornerstone of the industry's effort to impose usage caps and overage on wireless and wired networks alike. In reality, it has never been about heavy users paying more, it has always been about all users paying more. And more. And more. One thing I believe Verizon can take comfort in is that while there's some uncertainty about what the new FCC rules will be, I think they'll largely be superficial in nature and will go to great lengths to avoid tramping Verizon's right to make the Internet "healthier" through abusive pricing practices.

Filed Under: bandwidth, broadband, fcc, net neutrality
Companies: at&t, google, verizon

Government Still Pretending That Letting Phone Companies Hold Mass Surveillance Data Would Improve Privacy

from the NSAT&T dept

You'll recall the Obama administration asked for input on what should happen to collected NSA data as part of the highly cosmetic reforms proposed back in January. Now reports have emerged that the Obama administration is being presented with four options by its lawyers in terms of phone communications data collection and storage. Anonymous sources tell the Wall Street Journal that one of the options is dismantling the program entirely, which of course won't be happening anytime soon. Another option continues to be to place data collection in the hands of the phone companies:

"Obama administration officials have sought to preserve the collection of phone records in a way that raises fewer concerns about privacy. One way of doing that would have the phone companies retain the data, officials said. The NSA would then tell the companies when it needs searches of call records concerning specific phone numbers the agency believes are connected to terrorism. The companies would provide the results to the NSA."

Except as we've discussed repeatedly, the line between intelligence operations and phone companies has been largely obliterated courtesy of AT&T and Verizon's patriotic enthusiasm to do whatever is asked of them -- and then much, much, more. AT&T, for example, has a proud history of not only letting the NSA tap completely into their network in real time, but they've historically even given advice on how best to bypass privacy and wiretap laws, at times even volunteering their time as intelligence analysts. Yes, letting AT&T manage the data when they're already indistinguishable from government sounds like a revolution in intelligence processing and privacy protection.

Before Snowden, when it was originally found that the telcos were illegally spying on countless Americans years back, the laws were simply changed -- which clearly worked out well for everyone involved. The biggest problem for the government making this shift to telcos playing an even bigger role in non-transparently spying on U.S. citizens? They're going to want even more legal protection and, inevitably, more taxpayer money:

"Several lawmakers have proposed legislation on Capitol Hill that would take this approach. But telecommunications companies oppose this option. Phone companies likely would demand liability protection and possibly other conditions to avoid outside demands for data—for instance, for run-of-the-mill legal cases such as divorce proceedings."

Another option according to the Journal is to have the FBI hold on to that data. That's the same FBI, who with telco help has already been doing much of the NSA's spying anyway, and has its own long, proud tradition of ignoring the law whenever it suits them. While the government pretty clearly hopes the public takes these moves as a serious effort to protect privacy, effectively all we appear to be doing is shuffling a deck of dysfunction stocked with a litany of the same old rotten players.

Filed Under: fbi, nsa, privacy, surveillance
Companies: at&t, verizon

No, Netflix's New Deal With Comcast Probably Won't Destroy The Internet. Yet.

from the too-many-experts,-not-enough-data dept

The mysterious performance problems customers on large ISPs (specifically Verizon, AT&T and Comcast) have been having with Netflix streaming has just gotten slightly clearer. For months people have posted traceroutes as undeniable proof that large ISPs like Comcast, AT&T and Verizon had intentionally been throttling subscriber Netflix streams. However, as we've been noting, simple route analysis doesn't tell the whole story, and it's not always possible to determine where video transit breakdowns are occurring without direct access to ISP network data (data they hide completely).

Adding a sliver of insight into the problems, Netflix and Comcast announced over the weekend that they had struck a new interconnection deal that involves Comcast providing Netflix with direct access to the Comcast network. The announcement itself says little, other than to insist that Netflix "receives no preferential network treatment under the multi-year agreement." A Wall Street Journal report had a little more insider detail, noting that the two sides bypassed core network operator Cogent in an arrangement that involves Netflix paying Comcast for direct access:

"(The connection to Cogent) was starting to become overwhelmed with Netflix traffic, congesting traffic and leading to slower Netflix streams for Comcast Internet users, people familiar with the matter said. At the same time, Comcast presented Netflix with more attractive deal terms than the operator had been offering, the people said. The deal spans several years. Netflix was aiming for a long-term deal to make sure its projected traffic growth wouldn't put it at a disadvantage, one of the people said. The connection is a so-called "paid peering" deal, which connects Netflix's network to Comcast's directly. Netflix was previously using several middlemen to access Comcast's network."

Why the sudden interest on Comcast's part in getting a deal done? They're likely not too excited about the fact that they've been receiving bad press for poor Netflix streaming performance at the same time they're trying to sell regulators on the purported technical benefits of their $42 billion acquisition of Time Warner Cable.

Despite a lot of Internet hand-wringing about the deal and counter-kvetching about said hand-wringing (all based on no actual data, mind you) -- the agreement on its surface appears to be good for everybody involved except Cogent. That's thanks to the fact that in this case, Comcast appears to have been willing to make apparent concessions on price and deal length in order to keep up appearances for the merger. Netflix pays the same money they were paying Cogent to Comcast (or less), Comcast makes revenue they weren't making before, and customers get better streaming performance at no added costs (since Netflix is probably paying about the same, for now).

The problems are twofold: one, these deals are kept highly secret so promises of "no special treatment" aren't something people can confirm, and as Timothy Lee at the Washington Post discusses, the continued expansion of last mile ISPs into CDN and transit markets over time (note this is not new) could potentially lead to higher prices and less competition overall across the Internet's core:

"The fact that Netflix agreed to pay Comcast suggests that Cogent will likely lose its fight with Verizon as well. And as Cogent's chief executive Dave Schaeffer told Ars, "once you pay it's like blackmail, they've got you, there's nowhere else to go. They'll just keep raising the price in a market where prices [for transit] are falling." Indeed, in the long run, this development threatens the survival of independent backbone companies like Cogent. If it becomes industry practice for backbone providers to pay residential ISPs, companies like Cogent will become mere resellers of access to the networks of large broadband companies. Or they may be cut out of the loop altogether, as large customers such as Netflix cut deals directly with broadband providers such as Comcast."

I'm not sure Lee helps his argument by bringing net neutrality into the discussion though, as this is again more about market power than neutrality (for the moment). It's also worth noting that Cogent has a reputation of being difficult in peering disputes, and when a breakdown happens, more often than not Cogent is at the heart of it for not following through on truly balanced peering. Cogent was busy telling media outlets last week that it was Comcast and Verizon that were to blame for recent slowdowns. To hear Cogent tell it, Verizon and Comcast have been refusing to upgrade their interconnection links, largely because the ISPs want to move from an era of settlement-free interconnection, to one where the ISPs play a larger role in transit and get paid:

"This isn't the kind of problem consumers can solve by purchasing a faster Internet connection, because they'd be paying only for a faster path to Verizon's network, not a faster path to the rest of the Internet. In some cases, Verizon has actually purchased and installed the necessary equipment to upgrade ports, but not turned it on, according to (Cogeco CEO) Schaeffer. "They actually put it in, so they spent the money, but they just politically have not been willing to turn it on in order to ensure that Netflix will not work as well as Redbox," he said. When Netflix can't get through to Cogent, it sends traffic through other providers, but Schaeffer claims that "everybody is full." So what are they fighting over? Schaeffer said Verizon "wants a price that is about 10 times the market price for transit." Again, transit is a service that takes traffic across the entire Internet, whereas peering is just a connection between two networks."

To intentionally belabor a point again though, nobody can confirm anything either side says because the details aren't released. Meanwhile, while the Comcast deal might not be bad, the worry among consumer advocates is that in a world where ISPs get bigger and more powerful and transit options are reduced and replaced under absolutely no transparency, the overall industry could get less healthy. With Comcast controlling the last mile conduit, an ever-increasing slice of the core networks, and the media content itself, you start to see the monopsony concerns Comcast's expansion could raise among antitrust regulators.

Remember of course this deal only impacts Netflix on Comcast, there's continued ongoing problems for Netflix and YouTube traffic reaching the networks of a number of larger ISPs (Time Warner Cable, AT&T and Verizon), with no indication of when they'll get resolved. While I don't think the FCC's Wheeler is going to do much of anything meaningful on broadband competition, net neutrality, or prices, I do think he'll work to find some way to bring a dash more transparency to these disputes if everybody involved can't start getting along. Mainstream services grinding to a halt with nobody willing to admit fault and everything kept in the complete dark is simply bad for business. For everyone.

If this is all tl;dr for you, all you need to know is that if you're on Comcast and your Netflix streaming stinks you should either see improvements right away, or sometime over the next few months as the changes are implemented.

Filed Under: broadband, streaming, throttling
Companies: at&t, cogent, comcast, netflix, time warner cable, verizon

Politicians Freak Out Over New FCC Neutrality Moves, Not Realizing They Probably Won't Do Anything

from the I-have-absolutely-no-idea-what-I'm-upset-about dept

Now that I've had some additional time with the FCC boss Tom Wheeler's new net neutrality proposal and have talked to a few lawyers and consumer advocates, I'm starting to think the agency's announcement was almost entirely political theater. All the FCC really said is that it wouldn't appeal the Verizon case, and would begin a meandering public conversation about how to vaguely protect the Internet under shaky Section 706 authority the FCC knows it doesn't have. Layered on top were empty promises about improving competition and some empty threats about reclassifying ISPs as common carriers if they don't behave (which is supposed to be a threat, but every ISP lobbyist on K Street knows they won't do this if they weren't willing to do it already).

In short, the FCC vaguely promised to maybe think about some stuff after a glacial, year long conversation. Cue the absolute, unbridled, partisan hyperbole shitstorm:

"Ranking Republicans called the FCC's efforts to revive net-neutrality rules "a solution in search of a problem," and plan to fight any new rules. Rep. Marsha Blackburn of Tennessee will introduce legislation in the coming weeks to block what she calls the "socialistic" proposal. "Federal control of the Internet will restrict our online freedom and leave Americans facing the same horrors that they have experienced with HealthCare.gov," Blackburn said in a statement."

You apparently don't understand that the FCC's proposal won't actually do anything, but you do know it's certainly socialist and freedom killing? The sad part is that issues like a healthy, functioning Internet with competitive balance really shouldn't be partisan at all. It's in the interest or everyone that networks work well and that honest, healthy competition improves service and drives down costs, while limiting the bad behavior of large network gatekeepers.

Well ok, not everyone. If you actually want to understand whether a policy will be good or bad for consumers, ignore all the think tanks and politicians and watch the ISP response. Specifically watch AT&T, which has the biggest lobbyist operations and the biggest mouth when truly consumer-friendly policy gets passed. AT&T supported the original rules because they had oodles of loopholes and didn't cover wireless (Verizon only sued in the hopes of killing off FCC authority entirely). Note how AT&T thinks all this socialist freedom killin' is just a splendid idea:

"AT&T, the second-largest wired broadband provider in the U.S., said it believes the FCC has the authority under Section 706 to preserve Internet openness...."AT&T has built its broadband business, both wired and wireless, on the principal of Internet openness," AT&T said in a statement. "That is what our customers rightly expect, and it is what our company will continue to deliver. That is also why we endorsed the FCC's original rule on Net neutrality, and is why we pledged to adhere to openness principles even after the recent court decision."

Knowing the FCC pretty well after more than a decade of watching them, what I think you'll ultimately see at the end of this new "conversation" is a cross-industry set of self-regulatory voluntary guidelines "prohibiting" ISPs from doing the kinds of things they never intended to do anyway -- like blocking your access to entirely legal websites. There might be particular cases where the FCC pushes for greater transparency in peering debates (especially if the ongoing Netflix standoff doesn't improve), but nothing that will truly rattle any slats. The primary goal here is making sure incumbent ISPs maximize revenues and keep the campaign contributions coming. Consumer protection is just pillow talk. For both parties.

What you won't see in any way (and probably wouldn't be enforceable under 706 anyway) is hard rules governing the more subtle sort of things network neutrality folks should actually be worried about, such as predatory pricing and the use of broadband usage caps as a weapon (like AT&T's "sponsored data"). This, unfortunately for consumers, is considered "creative pricing innovation" by both the current FCC and industry alike, and the only ones who should be freaking out at the moment are the people who are going to foot the bill for all this supposed creativity.

Filed Under: fcc, net neutrality, section 706
Companies: at&t, verizon

Wall Street Journal Manages To Make The Netflix, ISP Streaming Kerfuffle Even Muddier

from the yes-I-said-kerfuffle dept

Major ISPs have slowly seen their Netflix streaming experience deteriorate over the last six months, major carriers like Comcast, Verizon and AT&T all dropping like a stone in the Netflix ISP streaming ranking index. We've discussed how, despite a bevy of well-intentioned claims, these ISPs are intentionally throttling connections for their own gains, there's still not really enough evidence to conclusively prove ISPs are up to no good here. Much of the network data just isn't publicly available, and there's an ocean of peering and CDN relationships between you, Netflix and your ISP that muddy the waters further.

That said, the Wall Street Journal this week complicated things somewhat with a report on the streaming shenanigans that offers this curious, anonymously-sourced paragraph, which suggests big ISPs are letting peering links saturate intentionally:

"Until the standoff gets resolved, the bulk of Netflix's traffic continues to flow across Internet intermediaries, including low-cost carrier Cogent Communications Group. People familiar with Cogent's and Netflix's thinking say the cable and telephone companies are delaying upgrading existing connections. Executives at major broadband providers, meanwhile, privately blame the traffic jam on Netflix's refusal to distribute its traffic more efficiently."

Again though, nobody can prove any of this because the network and peering data needed to do so is held tightly by all parties involved. Peering disputes generally involve core Internet companies agreeing to exchange equal amounts of data at hand-off points, often without compensation under confidential agreements. Historically, there have always been occasional skirmishes between companies as that balance gets out of whack. In recent years, those battles have intensified as last mile ISPs like Comcast have pushed for significantly more money to carry traffic, as we saw with the Comcast Level 3 peering fight from a few years ago.

In these disputes it has always been a goal to make the other guy look like the greedy one for leverage, though the Netflix problems have reached a new level. Netflix offers ISPs free access to their own Open Connect Content Delivery Network, which improves streaming performance. Larger ISPs have refused to join, not wanting to give what they see as a competitor to their own services (like Verizon RedBox streaming) any leg up, instead relying on their own CDNs that, theoretically, should offer equally decent performance. That those ISPs are suddenly seeing such dismal streaming performance suggests someone along the chain is being either cheap, incompetent, or is up to no good. Potentially all three.

Incumbent ISPs don't exactly have what you would call a stellar reputation for playing nice with disruptive companies or competitors, thus the theory that AT&T, Verizon and Comcast are intentionally letting these peering points saturate then pointing the finger at Netflix in the hopes of making them look bad. If that's the goal it's not working: data released this week suggests that Netflix just reached a three year high in customer satisfaction -- despite the price hike and Qwikster nonsense of a few years back. If the goal is to make Netflix look stupid, it doesn't appear to be working so far, and as the lowest rated industry in these kinds of rankings, it's probably futile for pay TV companies to try.

The whole mess is a good example of how net neutrality violations, should they occur, might not knock you over the head with their obviousness as traditional discourse has suggested. In fact, they might not even be provable. ISPs are too smart, and too wary of getting socked with new regulations. Instead, what you'll see is gatekeeper abuses dressed up under the guise of legitimate technical issues. Verizon Wireless, for example, blocked activation of Google's Nexus 7 tablet on their LTE network for six months, blaming Google and obscure technical certification issues (while selling users their own, inferior tablet in the interim). Wireless carriers also blocked Google Wallet from devices for proclaimed security reasons, while at the same time pitching their own, Isis mobile payment platform.

People were quick to cry foul in both instances. Do incumbents have a history of this sort of thing? Yes. Can you prove carriers were up to no good in either instance? No. It all makes the point that you probably could get away with net neutrality violations without regulators batting an eyelash. You just need to be a little bit clever about it -- with a dash or two of believable technical jargon for good measure. It also makes the point that with real neutrality violations inhabiting such murky territory, we're going to see a lot more people crying net neutrality wolf -- which only helps those engaged in anti-competitive shenanigans.

Filed Under: isp, net neutrality, streaming
Companies: at&t, comcast, netflix, verizon, wall street journal

Cue The Hyperbole And Hysteria: FCC Outlines Timid, Murky Plan To (Maybe) Defend Net Neutrality

from the hysterical-and-useless dept

The dysfunctional hyperbolic screaming match known as the net neutrality debate is about to be doused in napalm. The neutrality discussion has been in a holding pattern since Verizon managed to defeat the FCC's net neutrality rules in court. Despite some press commentary, the loss wasn't quite the killing blow many imagined, since the rules themselves quite intentionally didn't do all that much (no protection for wireless, plenty of loopholes allowing ISPs to blame anti-competitive behavior on network security issues or congestion), and the court ruling did state the FCC still has some authority to regulate broadband ISPs.

That left the door open to a number of FCC options. Would they appeal? Would they reclassify ISPs as common carriers to solidify and broaden FCC authority? Would they give lovely speeches substituting theatrics and show ponies for policy while doing as little as possible? Would they try to draft different rules claiming new-but-still-shaky authority under Section 706 of the Telecommunications Act? Based on what I can see, it's going to be a combination of the last two.

According to an FCC announcement today, the agency is not going to appeal the Verizon loss. Instead, they're going to slowly contemplate new rules governing broadband carriers, using shaky Section 706 authority over net neutrality issues (which many argue don't exist) to fight "improper blocking of and discrimination" of content on a "case by case" basis. The FCC has launched a public proceeding (pdf) and request for comment to determine the structure of the rules. A statement from FCC boss Tom Wheeler makes a numeric list of somewhat-ambiguous promises, then insists the FCC will keep ISP common carrier reclassification on the table:

"2. Keep Title II authority on the table. As the Court of Appeals noted, as long as Title II – with the ability to reclassify Internet access service as a telecommunications service – remains a part of the Communications Act, the Commission has the ability to utilize it if warranted. Accordingly, the Commission’s docket on Title II authority remains open."

In other words, the FCC is warning ISPs that if they don't stay on their best behavior, the FCC will take what in telecom circles is affectionately called "the nuclear option" and broaden its regulatory authority by reclassifying ISPs as common carriers. The problem is that most ISPs and analysts know the traditionally timid and politically-sensitive FCC won't do that, but the FCC apparently hopes somebody somewhere will believe the agency has the spine for such a fight. Most consumer advocates had hoped for common carrier reclassification, arguing that anything else was just uphill legal fisticuffs.

While a good portion of the FCC's announcement is political theater (we'll think about doing some stuff, someday, after lobbyists and partisans water it down to the point of uselessness), there are a few marginally-promising portions, like this bit tacked on to the end:

"6. Enhance competition. The Commission will look for opportunities to enhance Internet access competition. One obvious candidate for close examination was raised in Judge Silberman’s separate opinion, namely legal restrictions on the ability of cities and towns to offer broadband services to consumers in their communities."

Wheeler's talking about protectionist legislation that has been written by broadband ISP lobbyists, and passed in more than 20 states. Such bills generally prohibit a town or city from even voting to improve their own broadband infrastructure -- even in cases where no private ISP will. They're usually awful measures that strip away community rights to protect lumbering, uncompetitive duopolies, and many go so far as to even clamp down on public-private partnerships like Google Fiber. Granted "looking" at a problem isn't the same as fixing it, but even commenting on these awful bills is more than the FCC has done historically.

As this site as long argued, the FCC could protect neutrality by focusing on reasonable, balanced policies that increase broadband competition. What we've gotten instead is empty lip service, with a heavy focus on "digital equality," or shoring up broadband coverage gaps (safe ideas that play well politically and ISPs tolerate because it involves unaccountable subsidies and lazy government auditing). Competition and high prices are subjects the FCC refuses to seriously address (they even refuse to publicize broadband pricing data).

As for the FCC's dubious authority under Section 706 under the Telecommunications Act, it should be noted that there's a push afoot to begin "modernizing" the Act starting this year, potentially making the FCC's shaky footing even shakier. That process is expected to take several years, during which more than a little lobbying time and money will be spent on ensuring the revision erodes regulatory authority over broadband even further. As for any new FCC's new rules, they'll take a long time to craft (again), and you can expect ISP lobbyists to have a better view of the rule-making procedures than consumers or objective experts. The end result will be rules that look good but are hollow and theatrical in nature.

With the neutrality debate so toxic, a better route for the FCC would be to instead focus almost entirely on improving broadband competition to drive prices down and quality up. Unfortunately, while the FCC says all the right things about valuing competition, the agency doesn't want to rattle the slats of deep-pocketed campaign contributors like Comcast, AT&T and Verizon. As a result we get timid, murky policy that perpetuates the status quo, ultimately resulting in mediocre and expensive broadband. On the plus side, if you enjoy large numbers of people yelling at one another with few if any of them actually understanding what they're fighting about -- you're in luck!

Filed Under: fcc, isp, net neutrality, regulation
Companies: verizon