How Most Broadband Providers Have Focused On Decreasing Competition; Not Innovation

from the indeed dept

Ryan Single has an excellent piece at Wired that details how incredibly misleading telcos are being in claiming that the FCC's attempt to reclassify broadband access will lead to less "innovation." He highlights how far behind other countries the US has fallen, and how hard the telcos seem to work at not competing and not investing in innovation. Basically, Singel points out what many of us have pointed out all along. All of this posturing by telcos is about lowering their own costs (i.e., not investing) and squeezing more money out of customers, in an attempt to please Wall Street:

The dirty secret of ISPs is that even as broadband usage on their networks continues to increase 30 to 40 percent a year, their annual costs for shipping data onto and off the net's main pipes continues to fall.

The problem isn't the cost of shipping data.

The problem is that the large ISPs answer to Wall Street and instead of planning and investing for abundance, they prefer to spend their time thinking of ways to extract more money from customers without having to invest significantly in future-proof infrastructure.

He does note that Verizon may be the exception, but as we recently pointed out, with CEO Ivan Seidenberg on his way out, the company has shifted gears and is pulling back heavily on investing in new infrastructure. Seidenberg has long fought Wall Street, pointing out that putting down fiber was the best long-term bet, but the short-term thinkers on Wall Street didn't want to hear about high capital expenditure that would cost a lot initially, but not pay off until later. And, now, without Seidenberg leading the charge, Verizon is going back to not wiring up fiber.

Singel highlights how all of the "innovation" that seems to come out of the telcos isn't consumer focused at all. Nearly all of it is about limiting consumers with artificial rules and barriers to try to squeeze more money out of them:

In the last couple of years, ISPs "innovated" by changing how they handle users who type in a URL that doesn't exist. Under net protocols, the ISP's DNS servers are supposed to report an error code to your browser in those circumstances. Instead, ISPs are now serving up pages with ads, sometimes in ways that introduce huge security risks.

As a reaction, Google set up a fast, ad-free DNS service. And if you want to see what real innovation in DNS looks like, take a look at OpenDNS, which has built fraud protection, security measures and optional web content filtering into its robust DNS service.

ISPs have also long insisted on customers using "installation" software that did nothing but drive customers onto ISPs' web properties to get ad dollars; tried to sell -- for a monthly fee -- wireless home network capability you could set up easily with a $50 router (and then blame service problems on any home wireless networks you didn't buy from them); and even hijack address-bar searches that might otherwise, per the browser settings, use an actually useful search engine like Google.

ISPs also recently dipped their toes into another innovation: Selling access to everything their customers do online in order to build profiles on them and secretly insert targeted ads into other company's web pages.

From there, he covers just how much effort the telcos put into regulatory efforts to block competition in the face of overwhelming consumer demand:

It's literally not in telecom executives' best interest to invest in broadband and solid networks.

That's why you get companies like Time Warner trying to squeeze customers into limits on the amount of data they can use -- not because bandwidth is expensive -- but because building a real network is. It's far better, in their minds and for the stock price, to focus on bleeding as much from their current customers using self-serving policies instead of gaining loyalty by making networks that are generous, quick and reliable.

When towns get tired of begging for fast internet -- only to be told it doesn't make financial sense for telecoms, they sometimes decide to build their own fiber networks.

And then telecoms sue the cities -- as they did in the case of Monticello, Minneapolis, and run to state legislators to write laws outlawing citizens from organizing their own networks as Time Warner Cable did in the case of Wilson, North Caroline, which set up its own fiber network known as Greenlight.

All of this is a pretty accurate description of what's actually happening. The one point where I disagree with the article is Singel's assertion that what the FCC is doing in response to this makes sense. While I agree it's not nearly as big a deal as the telcos are making it out to be, I still think that supporters of the FCC's move are underestimating what will result, and what kind of loopholes the telcos will gleefully make sure are present. With the recent reports coming out, saying that the telcos are willing to "agree" to legislation on this topic, combined with the fact that they've hired up a ton of ex-high level government officials to help craft any rules, suggests that what comes out in the end will be a lot more "friendly" to the type of short-term Wall Street-driven "innovation" that the telcos want.

Filed Under: broadband, lobbying, net neutrality, regulatory capture