AT&T Gets Loyal Lawmakers To Push A Broadband Tax For 'Big Tech'

from the you're-not-helping dept

Hoping to capitalize on legitimate animosity against "big tech," AT&T lobbyists and policy makers have been busy recirculating a fifteen-year-old talking point. Namely, that big tech companies should throw billions of dollars at big telecom companies to subsidize their broadband deployments. The argument that AT&T has been pushing since 2004 or so is that since big tech companies get a "free ride" on telecom networks (which has never been true), they should pay telecom giants billions of additional dollars... just because.

The argument never made any coherent sense. Tech giants like Netflix and Google pay not only billions of dollars for bandwidth, they also spend billions of additional dollars on cloud, transit, undersea cable, CDN, and other broadband infrastructure. U.S. consumers and businesses alike also pay an arm and a leg for bandwidth courtesy of limited competition. When it comes to U.S. telecom, nobody gets a free ride.

Telecom giants like AT&T also invest billions of dollars in telecom infrastructure. But they also receive billions upon billions in taxpayer subsidies, dubious tax breaks, and regulatory favors in exchange for network upgrades that are always mysteriously half-delivered. There's not a day that goes by where some telecom company isn't getting ridiculous sums of money for projects that don't make sense or simply never get deployed. So if you were serious about reforming the FCC's USF or subsidy systems used to expand broadband access, that would be the place to start.

Instead, AT&T has asked captured regulators like FCC Commissioner Brendan Carr to push for a broadband tax on tech giants. Carr recently pushed the idea in a an editorial over in a Newsweek Op/Ed, and since then outlets from CNET to Axios have been parroting the idea as if it's a good faith effort. It's not. It's an AT&T policy and lobbying missive being dressed up as a legitimate idea by corrupt lawmakers and regulators.

Now, Senators Roger Wicker, Shelley Moore Capito, and Todd Young have introduced a doomed bit of legislation dubbed the Funding Affordable Internet with Reliable (FAIR) Contributions Act. It too suggests that "big tech" has gotten a "free ride" on US telecom networks and should be subject to a new tax to fund broadband deployments:

"For too long, Big Tech has been able to profit off of the critical infrastructure used for common day-to-day activities while not helping at a sufficient level to improve those capabilities with broadband investment in states like West Virginia. With communications platforms moving away from telephone networks toward internet heavy platforms, it’s important now more than ever that we start looking at ways that Big Tech can step up and help close the digital divide and secure true universal service for West Virginians."

Again, the gross irony here is that for the better part of twenty years, West Virginian lawmakers have been in persistent thrall to regional telecom monopoly Frontier Communications. This generally involves doing everything the telecom giant asks, then throwing billions in unaccountable subsidies at the company in exchange for jack shit. The same problem is repeating itself in most states across America. So to come out and suggest the country's broadband shortcomings are Google's, Netflix's, or Amazon's responsibility to fund and fix is fairly laughable.

Our broken and corrupt telecom regulatory approach is precisely why US broadband is so expensive, patchy, and slow by global standards. Yet you'll note that the AT&T loyal Republicans (and some Democrats) pushing this stuff never acknowledge the need for reform of the telecom industry and the subsidies we throw its direction. They're usually not even capable of acknowledging the sector has any problems.

Josh Hawley and friends have spent several years hyperventilating over "big tech monopolies" but rarely (if ever) acknowledge the problems with regional telecom or energy monopolies. They're using legitimate concerns about "big tech" to push policies of interest to "big telecom." But with very few exceptions, the modern GOP is genuinely not interested in fixing any problems. They're interested in keeping campaign contributions from the likes of Comcast and AT&T flowing. And their only interest in "big tech" is finding leverage that will force them to carry race-baiting disinformation, a cornerstone of modern GOP power.

That's not to say "big tech" doesn't have ample problems that need fixing. It's also not to say that the subsidy and FCC funding mechanisms propping up our feeble broadband efforts aren't in dire need of reform. But this "big tech gets a free ride and therefore should throw billions at the telecom industry" is not a serious argument, and anybody treating it as such hasn't been paying attention to more than fifteen years of telecom history. If you want to fix the US broadband industry and improve service the path is obvious: tackle regional monopolization and the corruption that enables and protects it.

Filed Under: big tech, brendan carr, fair share, fcc, free ride, universal service fund

Journalist Demands Google Give Up Its 'Fair Share' To Newspapers

from the this-again? dept

I have to admit that it's been really kind of sad to watch journalists with little understanding of economics or business flail around blaming the likes of Craigslist and Google (especially Google) for their own failure in building better business models. The latest is a well-written, but poorly thought-out and argued, piece by Peter Osnos, the Vice-Chairman of the Columbia Journalism Review, suggesting reasons why Google needs to pay up its "fair share" to newspapers. There are numerous problems with the logic in the piece, but they can be summarized in two basic camps: a misunderstanding of the internet and a misunderstanding of economics.

The great thing, by the way, is that the comments on the article highlight pretty much every mistake that Osnos makes -- and, of course, as is oh-so-typical in these situations, Osnos does nothing at all to engage or respond to the comments that call out his mistakes. You want to know why newspapers are failing? It's not because of Google, it's because of this viewpoint that some journalists still hold that they're the masters of the truth, handing it out from on high, wanting nothing at all to do with the riff raff in the comments.

So, what's wrong specifically with the article? Well, he uses as his basis the idea that cable companies (and their subscribers, really) pay TV networks to be carried in cable packages, and suggests that Google should be doing the same thing -- paying newspapers as if they were networks. Of course, there are a few problems there. Television is a broadcast medium with a limit on what can be provided. The economics are entirely different than a communications medium with unlimited "space" for content. Suggesting the two are the same is simply wrong. The economics are entirely different. In one case, you have significant scarcities in terms of what gets "offered." That's not the case with the internet. Ignoring that destroys Osnos' entire argument.

Even more to the point, as one of the commenters to Osnos, Kimota, notes: "It's interesting that cable television was held up as a good example of how to extract subscription fees for content. The American Customer Satisfaction Index from the University of Michigan said in 2007 that cable and satellite TV suffered 'the lowest level of customer satisfaction among all industries covered.'" When your idea of how to save the newspaper business is to take a model mostly beloved by consumers and ask it to mimic a model almost universally hated... that's a problem, right?

The second big problem with Osnos' analysis is that he doesn't appear to understand how Google makes its money. He simply looks at the fact that it's making a ton of money, while newspapers are not, and assumes that Google's actions draw in the money that should have gone to newspapers (hence the "unfairness"). But as Scott Rosenberg notes in the comments again, this is a fundamental misunderstanding of how Google makes its money, which has little to nothing to do with news, but in targeted advertisements on transactional searches (searches where people are looking to buy something):

Google makes its money mostly from targeted advertising on product searches and other narrow, directed searches. The advertising on news-related searches is not nearly as valuable. Google could remove all newspapers and journalism content from its Web search catalog tomorrow and lose very little of its revenue. The links to news it provides are valuable to its users but not terribly valuable to its advertisers.

Finally, Osnos makes another big mistake, common among newspaper folks, that whoever breaks the news is obviously the most valuable source. Yet, as we were just discussing, being first doesn't always mean that you have the most useful information. Related to this, Osnos complains specifically about how Sports Illustrated broke a story, but Google News pointed more people to the Huffington Post coverage of that particular story, stating:

Most galling was that The Huffington Post's use of an Associated Press version of SI's report was initially tops on Google, which meant that it, and not SI.com, tended to be the place readers clicking through to get the gist of the breaking scandal would land.... Why did The Huffington Post come up ahead of SI.com? Because, even Google insiders concede, Huffington is effective at implementing search optimization techniques, which means that its manipulation of keywords, search terms, and the dynamics of Web protocol give it an advantage over others scrambling to be the place readers are sent by search engines. What angered the people at Sports Illustrated and Time Inc. is that Google, acting as traffic conductor, seemed unmoved by their grievance over what had happened to their ownership of the story. An SI editor quoted to me Time Inc's editor-in-chief, John Huey, noting crisply that, "talking to Google is like trying to talk to a television."

This, of course, is a gross distortion of reality, and implies totally incorrectly that somehow the Huffington Post has some power over Google that SI.com could not replicate. The fact that Sports Illustrated and other publications have made bad decisions in optimizing their content isn't Google's fault. It's their own fault. Here, let me put this in terms that old "paper" folks might get: If more people go to my store than your store because I put a better ad in the Yellow pages, it's not the fault of the Yellow pages publisher. It's your fault for having a crappy ad. By doing a better job optimizing its content, the Huffington Post effectively better "advertised" itself to Google.

Of course, old school publications like Sports Illustrated could just as easily do the same thing themselves, but they haven't. On top of that, they could offer more useful features and services that attract more people such that they specifically seek out SI's coverage. But, instead, they treat the community the same way Osnos seems to: the riff raff can comment, but they aren't a part of the "real conversation" that occurs outside of the community.

Osnos wants fairness, but the system is amazingly fair. Much more fair than it ever was in the past, in fact. The problem isn't about "fairness." It's about Osnos being upset that in a level playing field pretty much everyone but the newspapers have figured out how to play the game better. What's fair is that the newspapers haven't been able to adjust and their revenue and readership is reflecting that.

Filed Under: economics, fair share, fair use, journalism, peter osnos
Companies: google