“We Will Build the Information Superhighway”

That’s what lobbyists for the telecommunication companies promised in the mid-1990s, in the run up to the Telecommunications Act of 1996. What the industry’s lobbyists were trying to beat back was municipally owned telecommunications utilities, which are far more common in electric, gas, and even cable television than those living in urban New York might expect. State- and local government- owned electric and gas utilities employed 88,343 full time equivalent workers in the U.S. in FY 2014, according to U.S. Census Bureau data. Excluding water and sewer utilities, private utilities employed 500,000 people in 2014, according to the Bureau of Labor Statistics.

The telecom companies got their way. There would be no equivalent of the federal government’s rural electrification program for high speed internet. So 20 years latter did the industry keep its promises, or was the general public bamboozled by lobbyists and campaign cash?

In the words of a former Federal Communications Commissioner

https://transition.fcc.gov/Speeches/Powell/spmkp802.html

Congress’ blueprint for the information age, the Telecommunications Act of 1996, promises a lot: the benefits of free markets and competition, technological revolution, a nurturing environment for entrepreneurs willing to work hard and compete, and a chance for all Americans to share in the bounty. It is a grand promise. The Act, in effect, promises that an unshackled deregulated market will provide to any one with the desire a chance at a better life. The Act commands regulators and industry to move away from the monopoly-oriented, over-regulatory origins of telecommunications policy and toward a promised land in which the market, rather than bureaucracy, determines how communications resources should be put to their highest and best uses.

Free markets and competition?

Many risks await in the land of deregulation: risk that the policies we adopt may sometimes lead to anti-competitive effects or may harm consumers in other ways; risk that the communications companies we work for may be acquired, downsized or driven out of business; and risk that, as individuals, we will not vie successfully for the many choice jobs that competition will create.

The former commissioner went on to talk about the need for the telecommunications future to be “race and gender neutral.”   I guess today’s concern might be transgender neutral. But I have another concern. The regulations were reduced, but the competition has failed to arrive.

In the past many economists considered utilities to be “natural monopolies.” It is inefficient, it was believed, to have multiple competing power mains, water mains, and telecommunication company wires running down a single street to serve the same customers. Eventually a monopoly would emerge, it was believed, and as a result the government either had to own the monopoly or regulate it in the public interest.

The telecommunications act of 1996 was predicated on the idea that natural monopolies do not exist. No matter how costly it is to duplicate service, and no matter the risk that the monopolist could suddenly cut prices and improve service to drive any new entrant out of business, competition would eventually arrive.

Even for the “last mile” from a central location to an individual home, according to the act, someone would install new wires. Eventually there would be three or more wires, and three or more competing companies to choose from. Or at least multiple firms willing to pay the owners of the existing wires a fee to provide service over their infrastructure. Here in my neighborhood of Windsor Terrace, New York, however that has not happened.

My first internet service provider, and the first company that I purchased a telecommunications bundle from, was AT&T. But the aging wires on which my AT&T service traveled are owned by Verizon, and fail frequently.

Since I wasn’t a Verizon customer, Verizon would try to avoid fixing them as long as possible. It would claim that the problem was an AT&T problem, while AT&T claimed it was a Verizon problem, or that the problem was in my house, and refuse to come out and inspect its own equipment. This hassle only ended when I both switched to Verizon AND purchased an inside wire maintenance plan. The system still fails, but they come out and fix it, and don’t claim it’s in my house.

AT&T, meanwhile, got the hint and no longer offers telecommunication services over someone else’s last mile of wire.

As far as I know, no one else does either, at least around here.

I’m not the only person in New York, by the way, with telecommunications infrastructure problems. Others have it worse. I once went to withdraw cash at a local bank branch and was told the ATM machines were down because the telecommunications network was down, something that happens every time it rains. I have a friend who is a school principal and was having the same problem at her school. It sounds like something that might happen in Calcutta (or should I say Kolkata).

But there was good news. Verizon had agreed to a contract with the City of New York to install fiber-optic service for high speed internet to every home in New York City. A big job, but soon those crumbling old copper wires installed by Alexander Graham Bell would be gone, replaced by something that one might find in a developed country such as South Korea.

Then something happened. Was it Hurricane Sandy that set things back? Maybe. Was it a strike or two? Maybe. But something else may be going on.   First Verizon announced that it would stop expanding Fios, other than in places where it has a pre-existing deal and has no choice.

http://arstechnica.com/business/2015/01/verizon-nears-the-end-of-fios-builds/

And then it announced that it had met its contractual obligations to New York City – even though one-third of the people can’t get Fios. The landlords won’t allow it, Verizon claims, but I have a one family house and have no landlord.

I’m now beginning to get the idea that Fios will, in fact, never come to my block — or anywhere else — if Verizon has its way.

Verizon not expanding FiOS, but says redlining claims false

In a national sense, however, Verizon believes it has met its obligations.

http://gizmodo.com/after-billions-in-subsidies-the-final-verizon-fios-map-1682854728

How much fiber have our competitors built over the last few years?

So in this world of competition, the world promised in 1996, not only has Verizon stopped rolling out improved infrastructure but the other previously-regulated local telecom companies have not yet even started. And perhaps never will.

I can tell you this, in every single market where we offer FiOS Cable has had to up their game BIG TIME!…This last point is a big deal, because our entry into every market has not only improved the state of broadband for our customers but for the entire marketplace. We’ve dragged our competitors up the speed ladder with us.

So even with a duopoly, with two high speed wires in the ground rather than expected three or more, there are benefits to consumers. But aside from those who already have it, no one else will get it, it seems.

In fact I’m not sure Verizon wants me as a customer anymore. I finally got frustrated enough about paying more for DSL than Verizon advertises for Fios that I called and asked for a rate decrease. OK, they said, we’ll decrease your rate.

For what I later found out was intentionally slowed internet service, the slowest they offer, service so slow that it sometimes often stops working entirely. More and more often, which is not good for working at home, or writing a blog on the side. (In fairness, my aging modem and router, which Verizon will now replace, may be part of the problem). The last time Verizon sent a tech here – to be fair and honest, I was shocked to find that this time it was in my house, as their DSL gizmo had failed – she suggested that we go back to paying more for better service – but not as good as Fios.

Or we could just stop using Verizon. That’s what my wife suggests – just give up and go cable. Something I had resisted, but I sometimes get the feeling Verizon might like that. If all their non-Fios landline customers go away, they’d have the excuse to end the Fios rollout in NYC – no more demand.

It is only by a quirk of history – at first the telecom companies could not provide over the wire television – that we even have two wires in the ground (or rather on the poles in the backyards) rather than the monopoly economists who believe in “natural monopolies” would have predicted. Unfortunately, the second wire is owned by these guys.

http://gothamist.com/2016/06/09/twc_can_suck_it.php

Last year TWC was statistically ranked the worst American company in terms of customer satisfaction.

How does this level of competition compare with what the telecom companies promised in 1996?

To be fair, there is another side to this story. According to Consumer Price Index data from the Bureau of Labor Statistics, the price of the average good or service, adjusted as best they can for quality, increased 47.6% from May 1998 to May 2016.

The price of Telephone Services, on the other hand, decreased by 1.8%. Long distance calls, which were once expensive, are now just included as unlimited in a bundle, the way local calls used to be. So cheap there isn’t even a meter on them.

The cost of Internet Services, according to this source, decreased by 24.9% from May 1998 to May 2016. Whereas I am now sometimes dissatisfied with DSL, back in 1998 I only had dial up service, which is far slower.

It is unlikely, moreover, that those debating the Telecommunications Act of 1996 envisioned that in a mere 20 years 13 year olds would carry communication devices far more powerful than the communicators used on the TV show Star Trek, which was set 200 years in the future from now (and 250 years from its original broadcast).

But according to the CPI the quality-adjusted cost of Wireless Telephone Services decreased 42.9% from May 1998 to May 2016, making smartphones possible. One of the reasons the telecom companies stopped investing in high-speed land line access is that they invested in wireless networks instead.

The Act commands regulators and industry to move away from the monopoly-oriented, over-regulatory origins of telecommunications policy and toward a promised land in which the market, rather than bureaucracy, determines how communications resources should be put to their highest and best uses.

So they provided and we got something, just not what had been predicted in 1996.

So for all those executives, engineers, installers, and investors who made this happen, I’m not a willfully-blind ingrate. Telecommunications and information technology, moreover, are one of the few parts of the U.S. economy where there has been any significant investment in the Generation Greed era at all. What we have mostly seen is financial engineering, and mergers to limit competition as the U.S. otherwise retreats from the hurlyburly of entrepreneurship into the gray twilight of corporate oligopoly.

Even so, one can’t do everything on a cell phone. Most of the other devices, even those connected via Wifi, rely on those same wires. And what has happened to the quality-adjusted cost of Land Line Telephone Services according to the BLS? It’s data in this category only starts in 2010. From May 2010 to May 2016 the overall CPI increased 10.1%, but the cost of Land Line Telephone Services increased 13.3%.

So now what? In some Red States, where state and local government has not yet already been bankrupted by debts and retroactively increased public employee pensions, some communities are moving ahead with – guess what? – municipal-owned telecommunications utilities.

http://chattanoogagig.com

Sounds like a good place to relocate your information-based business to – from New York. Then there is another de facto monopoly utility, Google, which has decided to use some of its profits to invest in new competing high-end, higher priced landline networks in a few lucky areas.

https://fiber.google.com/newcities/

Outside the Northeast, which is cash cowed by existing special interests of all kinds. Here, you are either ripped off by public monopolies or private monopolies, while everyone on the inside gets paid and some money is transferred to more competitive locations elsewhere.

At least one industry watcher, a techie writing for other techies, made the claim a nearly decade ago that the whole 1996 act was a ripoff, but the lobbyists have managed to get all the promises forgotten.

http://www.pbs.org/cringely/pulpit/2007/pulpit_20070810_002683.html

Rather than just use and old quote from Mr. Cringely I wrote to him and asked him if he had changed his mind, and if he thought we were robbed. He looked into it, and responded this way.

We were robbed. I’ve found nothing to suggest that my old column you found was wrong or that things are notably better today. It was a matter of big companies gaming the system. They were paid but didn’t deliver. And in large part they got away with it because the FCC, itself, is/was hidebound and simply not up to the task of monitoring performance and demanding compliance. That’s what happens when you have a revolving door between government and industry.

So even in the glittering world of information technology, a case where things are in fact better despite our nation-wide inadequate investment in infrastructure things are not as good as they could be, and not as good as was promised.

So what are our options now? Perhaps if ordinary people had representatives in Congress, someone would ask those questions.

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One thought on ““We Will Build the Information Superhighway”

  1. larrylittlefield Post author

    It occurs to me that this is a case where industry experts are much more upset than the general public. The general public is less upset because things are improving, but industry insiders are upset because they know what could be, what was promised, and what could be coming as the old copper systems slowly degrade without reinvestment or replacement.

    Which may be why politicians always sell the future to put off the consequences for the serfs for the deals they have cut in the present. The general public will not notice, and not blame anyone, until things actually start to become worse. And by then the beneficiaries have cashed in their winnings and moved on, the link between thieves and thefts are shrouded by the difference in time, and scapegoats can be blamed.

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