Long Story Short: The 2006 Rewrite of U.S. Communications Policy

Posted on June 15, 2006 - 4:24pm.

Long Story Short: The 2006 Rewrite of U.S. Communications Policy

By Lauren-Glenn Davitian,
Center for Media & Democracy (VT)

The U.S. House of Representatives passed a National Video Franchising bill on June 8th 2006. This bill, known as COPE—the Communications Opportunity, Promotion and Enhancement Act of 2006 (H5252)—permits the telephone companies to get quickly into the cable TV business by sidestepping local government approval (franchises) in favor of national service approval from the FCC. The Senate will by Senator Ted Stevens – R/ Alaska, raises many of the same public interest concerns in COPE. By moving into the video business the phone companies will control both access to networks and content, much like the cable companies do today. If allowed to do so under the conditions proposed in these bills, there are serious questions about the future of open networks and prospects for real competition on the Internet (a/k/a net neutrality). Other areas of concern include: local management of the public rights of way, the redlining low income and rural communities and long term protections for public, educational and government access media.

A brief look at the telephone industry may help to explain how U.S. communications policy has arrived at this threshold.

In 1905, a short twenty years after Alexander Graham Bell launched the first telephone systems, communities across the United States took charge of their communications future and quickly set up hundreds of telephone “exchanges” to connect homes and promote local business. It did not take much longer for venture capitalist J.P. Morgan and Theodore Vail (AT&T’s first president) to buy these local exchanges in large numbers and connect them into the one and only national telephone network--known as AT&T. In order to keep the U.S. Justice Department from breaking up their fledgling enterprise, the company cut a deal with the government in 1913 , allowing them to operate as the government sanctioned monopoly in exchange for providing every home in the United States with telephone service--a/k/a universal service.

At that time, both policy makers and AT&T understood that the value of the telephone network depended on everyone being connected to it. A generation later, Congress defined AT&T as a public utility—a “common carrier” with fundamental public interest obligations attached to the company’s use of the public rights of way (where phone polls are placed) and its monopoly position. The Communications Act of 1934 created and authorized the Federal Communications Commission (FCC) to interpret and enforce universal service, non-discrimination, anti-redlining and consumer protections. The Act required that both common carriers (the phone company) and broadcasters use public resources (rights of way and spectrum) to serve “the public convenience and necessity”.

The U.S. government has long believed that communications networks are a fundamental tool for economic and community development. It did this, first, through massive public subsidies provided to AT&T in the 1940’s and 1950’s and through universal service and consumer protections. In the 1970’s, with the birth of the Internet, the FCC compelled AT&T to open its networks to competing dial-up data service providers. This is the basis of the “net neutrality” discussions that surround the current rewrite of U.S. telecom policy.

In the early 1980’s, for a variety of reasons, the government decided that competition was the best public policy of all. As many of us remember, the U.S. Justice Department called a halt to AT&T’s nationally sanctioned monopoly and broke the company into seven bell operating companies—meant to compete with each other, engender new businesses and provide customers with cheaper service and more choice.

Twenty five years later we understand that meaningful competition did not result from the break-up. Following an initial period of price cutting and new services, all of the baby bells have consolidated into three national phone companies. If the AT&T/ Bell South merger is approved, two will remain: Verizon and AT&T.

The 1996 Telecommunications Act was another attempt to protect the public interest through “competition”. And again, over the last decade, we have seen a massive consolidation of broadcasters and cable companies. Within the next few months, for example, Comcast and Time Warner will control more than 50% of the cabled households in the United States. At the same time, Comcast is the largest internet portal in the country.

The telcos would like to be treated like cable companies. The cable companies operate the networks AND own their content. Cable companies are regulated like “publishers”--not common carriers/utilities--and they don’t have to open their networks to competitors. Cable was the first to string fiber optic cable and bring high speed internet and broadband services into U.S. homes. Today, the telcos watch as digital voice services–unregulated by state utility commissions–become the fastest growing revenue generator for the cable industry.

Telephone (telcos) and cable companies—once distinguished by different technologies, regulation and business models—are melting together into the same digital bitstream known as broadband. Both industries are seeking to control both the networks AND the content offered to customers.

It is no surprise that the telcos want to get into the video business as fast as they can. But they have to “catch up” with cable companies that already have permission (franchises) to provide video service to most communities in the U.S.

To this end, the telcos have gone straight to Congress to convince them that it would be good for consumers to let them into the video business as quickly as possible. They are aggressively advancing national legislations that will make this possible--without the historic public interest provisions required of either cable companies or telcos.

Both “the COPE Act” (HR 5252) — passed by the House of Representatives by a large margin on June 8th and Senate’s Communications Consumers Choice and Broadband Deployment Act (S. 2686) have been, essentially, written by the telephone companies to speed their entry into the national video market place. While promising more competition for the cable companies, both bills have raised concerns for public advocates (of all political stripes) and private companies such as Google, Yahoo and Microsoft.

While the telcos seek to use the same networks they use to provide voice and data service they want to be treated like cable companies (with publishers rights rather than utility requirements). At the same time, they seek to bypass the primary means of ensuring that cable companies meet local needs –i.e. the local franchising process.

Highlights of the bills:

- Local Control of Public Rights of Way – The telcos seek to bypass local franchising authorities (municipalities, and in some cases states) who traditionally issue video franchises to cable companies and go straight to the FCC for permission to operate national video services. While localities may continue to collect 5% of gross revenue as a franchise fee, they lose effective control over their rights of way and determining the local terms and conditions of video franchises (including customer service, build out, support for public access channels and institutional networks). The franchising process is reduced from 180 to 30 days. See: www.natoa.org.

- Universal Service Provisions - Using the same networks to provide video as they do to provide voice and data, telcos will not have to build out to every home. Nor are there specific provisions (other than fines) to prevent “redlining” and cherry picking of the most lucrative customers.

- Network Neutrality/ Ability to Close Networks to Competitors - Telcos will not have to open their networks to competitors, offer uniform rates to all customers of the networks. Nor are they prevented (as controllers of both the network and content) from discriminating against customers based on the content they send across the networks. (For example, the telcos will be able to charge premiums for high bandwidth users.) See: www.savetheinterent.com

- Public Greenspace – Funding and bandwidth for public, educational and government (PEG) is limited to 1% of gross revenues and communities will be able to negotiate new channels every 10-15 years. See: www.saveaccess.org and www.alliancecm.org

- Consumer Protections – By moving to a national regulatory structure for video franchises, customers will have to file complaints with the FCC rather than municipal or state cable officers. See: www.consumersunion.org

- Municipal Broadband - In the Senate Bill, municipalities may operate their own broadband services – but they have to notify commercial providers first. See: www.freepress.net and www.muniwireless.com

The open questions remain—Who will win the race to re-monopolize both the networks and content we rely on in our homes and businesses?

How can a “level playing field” policy be created that ensures the public interest is protected in a broadband world?

Helpful background:

Tales from the Sausage Factory

Miller Van Eaton Law Firm

Untangling the Web of Telecom Policy

People’s Guide to the Telecommunications Act of 2006

( categories: Telcos | AT&T | HR.5252 COPE | Senate S.2686 | Verizon )