Verizon Just Obliterated Ajit Pai's Justification For Killing Net Neutrality

from the ill-communication dept

If you'll recall, FCC boss Ajit Pai has spent the better part of the last few years insisting that giving the telecom industry whatever it wants will somehow magically boost sector investment, jobs, and competition. Of course if you've paid attention to history you'll probably notice that in telecom, it never actually works that way. Former FCC boss Mike Powell (now the top lobbyist for the cable industry) engaged in much of the same behavior in the early aughts, promising that if you obliterate consumer protections and regulatory oversight of ISPs, telecom Uptopia magically springs forth from the sidewalk. Instead, we got Comcast.

It's a cycle of dysfunction Americans just can't seem to learn anything from.

Since the start of his tenure, Ajit Pai and the GOP have taken a flamethrower to numerous, basic consumer protections ranging from basic privacy rules governing the sale and collection of your private data, to net neutrality rules that protect consumers and competitors from being nickel-and-dimed by lumbering telecom monopolies. He's also attacked efforts to bring competition to cable boxes, has slowly dismantled broadband programs for the poor, attacked states rights' to protect consumers or build their own networks, and basically neutered the FCC's ability to protect you from monopoly power.

More recently, you'll recall the massive tax cuts were supposed to spur investment, the telecom sector included. As was Ajit Pai's recent policy order neutering local authority over cellular tower placement. Both, like net neutrality, were supposed to result in a dramatic spike in next-gen "5G" network deployment, and a big boost in sector investment overall. This week, Verizon made it clear that none of those things would actually be happening, despite the $2 billion in savings Pai's 5G "reform" alone provided Verizon:

"Verizon Wireless says it will not move faster on building its 5G cellular network despite a Federal Communications Commission decision that erased $2 billion dollars' worth of fees for the purpose of spurring faster 5G deployment...in an earnings call last week, Verizon CFO Matt Ellis told investors that the FCC decision won't have any effect on the speed of its 5G deployment. Verizon also said that it is reducing overall capital expenditures—despite a variety of FCC decisions, including the net neutrality repeal, that the FCC claimed would increase broadband network investment.

That net neutrality hampered broadband industry investment has been the cornerstone of Ajit Pai's entire justification for removing those rules, despite this claim never being adequately supported by the facts. Again, that claim was directly contradicted by SEC filings, earnings reports, and more than a dozen public CEO statements. And here it is again being disproved by the industry itself, just as they were by Powell's empty promises in the early aughts. All the bogus, massaged ISP economist claims to the contrary can't save this turd of an argument when the evidence is sitting right in front of you.

Telecom sector investment doesn't magically explode just because you let AT&T, Verizon, and Comcast directly dictate your tech policy agenda. Gutting essential consumer protections doesn't magically "unhinder the free market," it simply lets lumbering, politically-powerful giants double down on a generation of nickel-and-diming captive customers, with neither regulatory oversight nor healthy competition acting as guide rails.

Targeted deregulation can help healthy markets if it's aimed at eliminating bureaucracy that hinders competition or innovation, but anybody claiming that mindless deregulation can cure telecom either is lying to you for financial gain, or doesn't understand how the U.S. telecom market works. People tend to take Libertarian or free market theories cultivated from other sectors, and apply them to a telecom sector that's uniquely broken and corrupt, failing to understand that blind deregulation won't work here. Steadily weakened antitrust protections similarly aren't the panacea these folks believe.

What the telecom sector desperately needs is even-handed, intelligent tech policy and regulatory solutions with an unwavering focus on one thing: driving broadband competition in whatever form that takes. There's a million ways to accomplish this, from eliminating ISP-written, protectionist state laws banning your town and city from exploring creative alternatives to purely private networks (like public/private options), to actually holding giant ISPs accountable when they try to hamstring both direct broadband or streaming video competitors.

What you don't do is let companies with an obvious, vested interest in less competition and no guard rails completely dictate tech policy, then repeatedly lie about the amazing net benefits this mindless fealty will have. For whatever reason, despite history repeatedly and painfully illustrating the perils of this approach in the form of some of the worst service of any kind available in America (call Comcast customer support or spend a week using a West Virginian Frontier DSL line if you need first-hand experience on this front), it's a lesson the United States stubbornly refuses to learn.

Filed Under: 5g, ajit pai, capital expenditure, deregulation, fcc, investment, net neutrality, regulation
Companies: verizon

Details Leak On How Secret Global Treaty Will Force Countries To Further Deregulate Financial Sector

from the yet-another-ratchet dept

WikiLeaks has been rather quiet recently -- probably something to do with Julian Assange being stuck in the Ecuadorian Embassy in London for the last two years. But today, we saw a flash of the old, dangerous WikiLeaks, with its publication of a major leak concerning the Trade In Services Agreement (TISA). Although Techdirt wrote about this in April, for many this is the first time they have heard about this secretive deal, which has probably come as something of a shock given the global scale of its ambitions and its likely impact. Here's how WikiLeaks describes its latest release:

Today, WikiLeaks released the secret draft text for the Trade in Services Agreement (TISA) Financial Services Annex, which covers 50 countries and 68.2%1 of world trade in services. The US and the EU are the main proponents of the agreement, and the authors of most joint changes, which also covers cross-border data flow. In a significant anti-transparency manoeuvre by the parties, the draft has been classified to keep it secret not just during the negotiations but for five years after the TISA enters into force.

Despite the failures in financial regulation evident during the 2007-2008 Global Financial Crisis and calls for improvement of relevant regulatory structures, proponents of TISA aim to further deregulate global financial services markets. The draft Financial Services Annex sets rules which would assist the expansion of financial multi-nationals -- mainly headquartered in New York, London, Paris and Frankfurt -- into other nations by preventing regulatory barriers. The leaked draft also shows that the US is particularly keen on boosting cross-border data flow, which would allow uninhibited exchange of personal and financial data.

The leaked document itself is pretty dry and inscrutable, so wisely WikiLeaks has asked an expert in the field, Professor Jane Kelsey of the Faculty of Law, University of Auckland, New Zealand, to provide a detailed commentary, and this is the best place to start when coming to grips with the leak. Here's her chilling summary:

The secrecy of negotiating documents exceeds even the Trans-Pacific Partnership Agreement (TPPA) and runs counter to moves in the WTO towards greater openness.

The TISA is being promoted by the same governments that installed the failed model of financial (de)regulation in the WTO and which has been blamed for helping to fuel the Global Financial Crisis (GFC).

The same states shut down moves by other WTO Members to critically debate these rules following the GFC with a view to reform.

They want to expand and deepen the existing regime through TISA, bypassing the stalled Doha round at the WTO and creating a new template for future free trade agreements and ultimately for the WTO.

TISA is designed for and in close consultation with the global finance industry, whose greed and recklessness has been blamed for successive crises and who continue to capture rulemaking in global institutions.

A sample of provisions from this leaked text show that governments signing on to TISA will: be expected to lock in and extend their current levels of financial deregulation and liberalisation; lose the right to require data to be held onshore; face pressure to authorise potentially toxic insurance products; and risk a legal challenge if they adopt measures to prevent or respond to another crisis.

One of the most worrying features of the TISA proposals is the following:

The crucial provision is Art X.4, which would apply a standstill to a country's existing financial measures that are inconsistent with the rules. That means governments must bind their existing levels of liberalization for foreign direct investment on financial services, cross-border provision of financial services and transfers of personnel. The current rules will be the most restrictive of financial services that a government would be allowed to use. They would be encouraged to bind in new liberalization beyond their status quo.

This is the familiar "ratchet" that we see in copyright law. Here, it means that restrictions on the financial industry can only be reduced, never increased, no matter how badly they screw up the global economy (again). Doubtless proponents of TISA will claim that signatories to the agreement will -- of course -- retain their sovereignty and ability to take "prudential measures" for the good of their people, just as they have said regarding corporate sovereignty in TPP and TAFTA/TTIP. But as Kelsey points, part of the leaked document shows that is simply not true:

the article is comprised of two sentences that contradict each other. If a government takes a prudential measure that is inconsistent with the agreement, it cannot do so as a means to avoid its commitments under the agreement! So any prudential measures must be consistent with the other provisions in the agreement.

Put another way, governments will have total freedom to legislate in any way they please provided it is compatible with TISA -- which means that it must be in favor of the financial industry, not the public. Another section that is written entirely for the benefit of the financial companies, not the public, concerns the protection of personal data:

nothing shall be construed to require a Party to disclose information regarding the affairs and accounts of individual consumers. That means TISA does not affect states' ability to require disclosure of information, presumably to the government, about individuals. It is not concerned with protecting personal privacy or preventing those who hold the personal data from abusing it for commercial or political purposes.

Given the sensitivity of data protection issues in Europe, this is likely to become a major stumbling block to the ratification of TISA by the European Parliament, assuming it gets that far. Indeed, it's significant that one of the leading German newspapers, the Süddeutsche Zeitung, used the headline "U.S. grab account data of European citizens" when reporting on the leak (original in German.) That underlines the fact that alongside the new information that the WikiLeaks document reveals about the secret negotiations, another important aspect of the leak is that the mainstream media in Europe are finally aware of TISA, and are likely now to start exploring critically its effect on key areas like privacy and public services.

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Filed Under: deregulation, financial sector, regulations, secrecy, tisa, trade agreements

How A Random Lawsuit About Telco Policy Probably Resulted In Broad, Secret Law Enabling NSA To Spy On You

from the well-that's-fun dept

We've written many times about the FISA Amendments Act (FAA), of which there is a secret interpretation that certainly appears to allow the NSA to spy on all sorts of email communications without a warrant -- something that is not at all obvious upfront (and, in fact, which many in Congress apparently do not know about). While Senators Wyden and Udall have been working hard to try to force the government to reveal either the secret interpretation or how many Americans have been spied on, the rest of Congress appears to not want to know, while rubber stamping the renewals to let the effort continue.

There have been some questions about how all of this came about, and just why law enforcement officials keep insisting the FAA is so vital. Julian Sanchez may have worked out some key details, and provides a very compelling explanation. Seven years ago, the Supreme Court ruled in the Brand X case (the same day the Grokster ruling came out), basically saying that cable networks did not qualify for "common carrier" status, because they were "information services" rather than telco services. The direct end result was that broadband providers no longer had to share lines with service providers. But, as Sanchez notes, there may have been an unrelated indirect impact: by removing the common carrier designation, the NSA may have lost its legal authority to "tap" live communications on such networks without a warrant. Sanchez explains the nitty gritty:

“If FISA’s reference to ‘common carrier’ were interpreted in accord with the Communications Act,” Kris and Wilson explain, explicitly citing the Brand X decision, “information (such as e-mail) being carried on a cable owned and offered by a cable modem service provider would not be a ‘wire communication’ under FISA, and acquisition of such information would not be ‘electronic surveillance’ under” the definition that applies to traditional phone calls.

Sanchez provides a lot more detail, which is worth reading in full, because it's quite complex. However, it suggests that the Bush administration's focus on "deregulating" cable may have undercut the NSA's "spy on everyone" program through a simple definition change. The FAA, then, was put in place (partly) to once again enable the NSA to get access to a bunch of live communications legally, whereas it's quite possible that the FISA court had found, in light of Brand X, that the efforts had been against the law. Now, you can argue that the change due to the Brand X decision is no big deal, because it was just clarifying some rules, and dealing with antiquated language in the statute. But, again, since so much of this happened in secret, if Sanchez's story is accurate, it more or less allowed the government to write very broad rules, such as those now allowing such broad surveillance.

So the FISA Amendments Act allows the government to target foreigners and capture conversations with Americans — with no warrant required, so long as they aren’t actually trying to wiretap the American via a technical loophole.

But if the government’s problem is an inability to reliably determine the location of parties to a communication, it’s not clear why we should be confident that interception under this broad new authority can reliably avoid acquiring many purely domestic communications. Even if it can, blanket authority to acquire the international communications of Americans — with no requirement that the foreign side of the conversation be suspected of any connection to terrorism or espionage‹seems like an incredibly broad way of addressing the issue.

Perhaps Kris and Wilson are correct that a narrower solution to the problem would have been unworkable. On the other hand, perhaps legislators would have tried a bit harder to craft a viable narrow solution if they, and the general public, had clearly understood exactly what the problem was.

Sanchez goes on to point out that if this story is accurate, and if the FISA court had basically upended the feds' spying program becuase of some definitional issues, a more reasonable and transparent approach would simply be to work together with lawmakers and civil liberties experts to actually focus in on the specific problem. Instead, it appears they may have used this loophole to massively expand spying capabilities, with no public oversight at all.

Filed Under: common carrier, deregulation, fisa, nsa, privacy, spying, telco policy
Companies: brand x

No, Telecom Progress Hasn't Slowed

from the wonders-of-competition dept

Megan McArdle points to a post by "cactus" claiming that progress in the telecom industry has slowed since the passage of the 1996 Telecom Act, and suggests that this is an argument against deregulation. Megan points out that cactus is likely exaggerating the responsiveness of Baby Bell customer service in the early 1990s. Here's another part of the argument that's really misguided:

"My guess is that the improvement in technology available to the consumer from 1984 to 1996 is more significant than the improvement from 1996 to 2008. (Anyone remember using a BBS?) And the improvements on the cell phone side of the business seem to come mostly on the manufactured hand-unit, which was never regulated because it isn't a natural monopoly."

The problem with this is that if we're talking about Internet access, there were no improvements at all between 1984 and 1996 in what phone companies offered to residential customers to get online. In 1984, if you wanted to get online, you got a second phone line and purchased a modem. In 1996, if you wanted to get online, you got a second phone line and got a modem. Now, the 1984 modem was probably 1200 bps, while the 1996 modem was probably 28,800 bps. And the 1984 online service was probably Compuserve, while the 1996 online service might have been a real ISP. But of course the Baby Bells weren't major players in the modem or online service markets during these years, and neither market was regulated. So touting them as evidence of the virtues of the pre-1996 regulatory regime, while dismissing the analogous improvement in cell-phone handsets since 1996, is disingenuous.

More broadly, it's just silly to claim that progress in the telecom industry has slowed over the last 12 years. Between 1984 and 1996, typical home online speeds increased from 1200 bps to 28.8 kbps, an impressive 24-fold improvement. By 2008, typical internet speeds were upwards of 3 mbps, an even more impressive 100-fold improvement. And 28.8 was the fastest you could go in 1996 without paying exorbitant charges for a dedicated data line. In contrast, some broadband providers are offering speeds as high as 20 mbps—a 700-fold improvement—for under $70/month. Now, I don't think improvements in the telecom market have been primarily due to the 1996 Telecom Act (which wasn't especially deregulatory anyway). Primarily, I think the progress was due to two things: cable companies getting into the broadband and phone markets (which which has created pressures for faster DSL and fiber roll-outs), and the government auctioning off spectrum to increase competition in the wireless market (which has provided additional competition for the Baby Bells' phone business). The former was likely sped along by some provisions of the 1996 Telecom Act, although the the "local loop unbundling" fiasco may have stunted development of DSL service during the same period. On the other hand, spectrum auctions were first authorized by Congress in 1993, so the latter can't be credited to the Telecom Act.

The bottom line, though, is that deregulation is most successful when it's designed to increase competition. A well-designed deregulatory scheme will enhance competition by removing barriers to entry and letting new firms enter the market. Poorly-designed "deregulation" will leave barriers to entry in place and simply relax regulations that limit the monopolist's ability to extract monopoly rents. There was some of each in the 1996 Telecom Act, but either way it's clear that progress continued at a brisk clip after 1996, and increased competition was a big part of that. If Congress wants that progress to accelerate over the next decade, it should look for ways to further increase competition in the telecom industry, not try to turn back the clock to the 1980s.

Filed Under: deregulation, progress, regulation, telecoms

AT&T: Deregulation Only Applies To Us

from the hypocrites dept

AT&T has spent a lot of money in the last few years lobbying against government regulation. They pushed hard to dismantle the Clinton-era DSL unbundling rules. They've lobbied against having to negotiate thousands of franchise agreements with municipalities around the country before they could offer TV service. And, of course, they've lobbied hard against network neutrality regulations. In all cases, their argument was the same: market forces can protect consumers better than FCC meddling. And I've often been sympathetic to those arguments in cases where they've faced real competition. However, James Gattuso points out that for all their bluster about free markets, AT&T only favors deregulation for themselves. In a recent letter to the FCC, AT&T threw its weight behind FCC chairman Kevin Martin's proposal to impose new regulations on the cable industry under an obscure provision of the 1984 Cable Communications Policy Act. It's awfully hard to take AT&T's position here seriously. If, as they've been arguing for the last three years, the cable market is competitive enough that the franchise system should be liberalized, then it's certainly competitive enough not to need new regulations. Conversely, if new regulations of the cable industry are needed, why should AT&T be excused from complying with the rules the same rules as the cable industry? As James points out, these kinds of flip-flops completely undermine AT&T's credibility, and are likely to hurt them in the long run. If they leap at every opportunity to impose new regulations on their competitors, who's going to take them seriously when they advocate deregulation for themselves?

Filed Under: deregulation, hypocrites
Companies: at&t