Regulation - What is it Good For?

Why We Have Crappy Rural Broadband

I believe that there are two simple reasons why we such poor landline infrastructure in rural America – the big telcos decided to walk away from rural America and the regulators let them do it.

It’s easy to contrast the rural areas served by the big telcos and the smaller telephone companies. A large percentage of the smaller telcos have built fiber in rural America and are offering broadband today as good as anything found in any city.

By contrast, the big telcos all stopped supporting copper many decades ago. The existing copper networks were largely built or rebuilt in the 1960s and 1970s by AT&T. However, soon after AT&T was split into the Baby Bells they decided to stop spending money to support rural America.

For example, I clearly remember in the 1980s when Bell Atlantic, which became Verizon, wanted to sell off the entire telco property in West Virginia. I worked with several groups trying to buy the network there. It became quickly clear that the telco had slashed maintenance for the West Virginia copper network. Bell Atlantic had shut down local customer service centers and steadily reduced the number of repair technicians. Bell Atlantic still happily collected the monopoly revenues in the state but didn’t roll any profits back into the network.

The big telcos didn’t only walk away front rural America. To rub salt in the would they worked hard to keep others from serving in the areas they abandoned. The big telcos undertook an aggressive policy of stopping anybody else from competing against them. They lobbied in every state legislature to pass laws to stop municipalities and electric cooperatives from competing against them. They worked tirelessly to weaken the 1996 Telecommunications Act and dragged their feet and took every opportunity to make it harder for CLECs to compete.

Their fight against competition hasn’t stopped. Just last year the big telco lobbyists were able to insert language in the new federal $600 million ReConnect grant / loan program that makes it hard to use the grant money to compete against the big telcos.

I was recently on a panel at the Broadband Properties convention and another panelist made a comment along the lines of, “it’s natural for the big ISPs in the industry to try to squash competition – that’s what big companies are expected to do”. That sentiment only works if the big telcos have been engaging in normal competition – but instead their actions have been monopoly abuse.

I don’t think you can find another industry where the monopoly abuses have been so blatant. I can’t think of another industry where the biggest companies not only kill off small competitors, but also aggressively lobby to keep competition out of the market. There is a gigantic difference between competition and monopoly abuse, and the lack of rural broadband can be chalked up almost entirely to monopoly abuse.

Susan Crawford recently suggested that the only long-term solution for rural broadband is to treat rural broadband networks as a regulated utility. What’s sad is that before 1980 that’s exactly what we had, but the regulators blew it and allowed the big telcos to walk away from their regulatory responsibilities.

I firmly believe that both state and federal regulators were completely complicit in allowing the big telcos to walk away from their networks. Some states tried to make the telcos do the right thing, but over time the big telcos wore down regulators by constant lobbying and by non-stop foot-dragging on anything required by regulators.

Not only did regulators not enforce existing regulations, but in most states they unbelievably deregulated the big telcos and lowered or removed any obligation of the big telcos to do a good job. It was easy to justify deregulation in urban competitive markets where cable companies competed with the telcos, but deregulation should never have been allowed in rural America where the telcos own the only landline network.

Regulators turned a blind eye as the big telcos ignored rural America for decades and then rewarded them by deregulating and shielding them from the consequences of the mess they had made of rural copper networks. I defy any regulator to tell me that they were looking out for their rural constituents when they deregulated the telcos. They should honestly all be ashamed, because protecting the public against monopoly abuse is one of the primary purposes of regulation. Regulators are the second culprit in why we have crappy rural broadband.

I’ve always wondered why some smart lawyers haven’t latched onto this story as the basis for a huge class action suit. The damage to rural America from not having broadband are almost incalculable. How do you even begin to quantify the damage to households with no broadband connection today – when it was clearly the responsibility of the big telcos to serve their monopoly customers and the responsibility of the regulators to make them do it?

6 replies on “Why We Have Crappy Rural Broadband”

(hopefully not a repeat) but this fits in with my general theory about the problem using private companies to offer what are essentially, or literally, public goods.

The public needs general, universal telco. But after the consent decree, for a while, growth is only in wireless so landlines get less attention and they sell off pay phones. Then growth stops there and the Telcos start to throw all the other unprofitable pieces overboard, despite their ongoing value to the public. And when the whole business goes to hell? 5g, which is a giant con being dressed up as build-it-and-they-will-iot.

Poor and hard-to-serve people always lose, by definition because they don’t represent opportunity for profit.

Just like for profit roads never eliminate tolls, for profit education has the wrong feedback cycles, and for profit prisons are incented towards creating more prisoners and never decreasing sentences… not rehabilitation or better outcomes for society.

Speaking of “regulated utilities”: did you know that, nationwide, electric utilities use millions of telco copper wire circuits (POTS, dial-up modems, T1) to manage transmission and distribution? To Doug’s point about the age of that copper (50+ years old), the conductivity is slipping, the poles those wires hang on are rotting away, etc. etc. Talk of “smart grid”, etc is just that. The cost for a for-profit electric utility to build its own network is staggering. Perhaps a series of electric outages due to aging, ill-maintained telco infrastructure might either a) provide a wake up call to provide universal IP broadband or b) drive consumers to “roll their own” power (solar panels and storage).

Great post, Doug, providing some much needed historical perspective on longstanding tensions and conflict between big telco (starting with AT&T) and the federal government that predates the Internet era. And helps explain why the transition to IP from analog POTS has and continues to be fraught now we’re a generation into the IP era.

“I’ve always wondered why some smart lawyers haven’t latched onto this story as the basis for a huge class action suit. The damage to rural America from not having broadband are almost incalculable.”

Certainly one could make a viable argument for damages suffered by a large number of similarly situated individuals, i.e. the plaintiff class. The problem as you note is both the nominally regulated and public policymakers and regulators are complicit in producing the damages, weaving a very complex web of actions occurring over decades that would make if difficult to define a cause of action and allocate fault.

Leave a ReplyCancel reply

Exit mobile version