Tag Archives: monopoly

The Breakup of AT&T

I finally got around to reading a book that’s been on my list for a long time. The book is The Deal of the Century: The Breakup of AT&T by Steve Coll. This book came out in the 1980s and chronicled the events and the big personalities involved in the divestiture of AT&T into the Baby Bells on January 1, 1984. I worked with Southwestern Bell until just before divestiture and watched how the topic consumed everybody inside the old Ma Bell business. The monopoly that has been steady for a century was suddenly a perilous place to work, and career employees found their futures to be uncertain.

This is blog is not a book review, although I recommend this book for anybody that wants to understand how we ended up with the telecom industry we have today. The book has two focuses. It looks at the court cases involved in the processes. People may not remember that the antitrust case against AT&T had been going on for a long time before Judge Harold H. Greene took over the case. He brought discipline to the prosecution and singlehandedly got the case on track.

The book also looks at the big personalities involved in the case. In addition to Judge Greene was John D. deButts and Charles Brown, the presidents of AT&T that fought, but eventually agreed to the divestiture.  On the prosecution side was Assistant Attorney General Charles Brown and outside counsel George Saunders. Also playing a big role from Congress was Peter Rodino from New Jersey and Tim Wirth from Colorado. The book describes the chain of events and interplay of personalities that eventually led to breaking up AT&T.

Looking back 36 years after the breakup it’s easy to see how divestiture changed the telecom industry in both good and bad ways. On the plus side, it introduced competition. The premise of the divestiture was about allowing competition for long-distance service. It’s probably hard for kids today to believe that making a long-distance call required an affordability assessment when talking to somebody outside the local calling area cost ten cents or more per minute – at wage levels a fraction of today. Long-distance has gotten so cheap today that it is thrown in on telecom products. Nobody thinks twice about calling somebody and talking for an hour on a cellphone or across a computer link.

However, the idea of competition didn’t end with divesture and there is a straight line between the AT&T divestiture and the Telecommunications Act of 1996 that allowed competition for local service in addition to long-distance. That spelled the end of the telecom monopoly.

Probably the best outcome of the breakup of AT&T was the way that competition opened up the development of the Internet. If Judge Greene had not been successful, we may not have seen the success of the dial-up ISPs that relied on telephone lines to function. An AT&T monopoly would have been able to fend off and maybe block cable company broadband networks. Without robust long-distance competition, we probably wouldn’t have seen the same successful development of the cellular industry – it likely would have remained as a tool for corporations and the wealthy.

But there is a flip side to the successes due to competition. Increased competition led to decreased regulation. As long-distance companies and the cable companies pummeled the regulated telcos we saw federal and state regulators allow the telcos to deregulate. That deregulation is probably the biggest factor that has culminated in today’s badly deteriorated and non-functional rural telecom networks. The idea of carrier-of-last-resort has seeped away over the years and regulators stopped insisting that regulated telcos take care of the needs of rural customers. In most parts of rural America, the telecom landscape is probably the worst it’s been for a century. Nobody is tasked with making sure rural America has broadband.

Unfortunately, the idea that everything in the telecom world ought to be open to competition ignores the fact that landline networks work best as monopolies. We’ve seen the consequences of the competition movement in two big ways. In urban areas, the cable companies have largely become the new monopolies, but nobody seems to want to invoke that word or talk about invoking monopoly regulation. In rural areas, every big telco has largely walked away, and nobody wants to make infrastructure investments that don’t make high rates of return. The only long-term solution to having broadband everywhere is a regulated environment that ensures that most rural places share in the benefits of affordable communications. The challenge we face is figuring out a path from today’s fully deregulated world back to something that will work for rural America. I’ve heard dozens of simplistic suggestions on how to make this work again, but it’s a puzzle that I’m not sure can be solved.

Are Cable Companies a Broadband Monopoly?

One of the products my consulting firm offers are statistically valid surveys, and conducting surveys has let us get a close look in many communities at the mix between cable broadband and telco DSL. In the last few years, the percentage of DSL subscribers in towns with a good cable company network has plummeted.

It’s not unusual to see DSL market penetration in bigger towns of 10% or less, meaning in most cases that the cable company has essentially won the competitive battle. In most of these towns, we rarely see many DSL customers getting speeds faster than 15 Mbps on the DSL connection, and often a lot less.

We still occasionally see a town with a higher DSL penetration, often due to a telco like AT&T that upgraded the market to offer 50 Mbps DSL that uses two copper lines. But even in these markets, the cable companies have won most of the customers.

The primary reason we see people keeping DSL is price. We often find people paying $35 to $45 for a DSL connection who can’t or won’t upgrade to a more expensive cable modem connection. Many of these folks will hang on to the low-price connection until the day when the telco inevitably retires the telephone copper.

It’s obvious to me that the cable companies are already monopolies in most markets. Any company in any other sector that captured 85% to 95% market share would be deemed a monopoly. I think the cable companies now meet the simple market share test.

Another way to identify monopolies is by noting examples of monopoly behavior. Economists have created a list of changes that are typical monopoly behavior. For example:

  • Price Gouging. Monopolies raise prices over time when there are no competitors to keep them in check. Wall Street has been encouraging the big cable companies to aggressively raise broadband prices. All of the big ISPs have started the process of annually raising rates.
  • Poor Service. Customer service tends to worsen from monopolies because they have no incentive to do better. The big ISPs were already rated as being the worst among all industries at customer service, and there is no reason to think it will ever get any better.
  • Monopsony Power. This term refers to the tendency of monopolies to exploit their purchasing power by forcing low prices on their supply chain. Perhaps the best example of this is Comcast swallowing up the programmers that supply cable TV content.

The reason it’s important to always refer to the big cable companies as monopolies is that we have laws that can kick-in to curb monopoly abuses. However, it likely takes widespread recognition that the cable companies are monopolies to have any hope of awakening monopoly remedies.

The government has a wide range of possible ways to regulate and/or curb monopoly abuses:

  • Governments can fund or support competitors. In this country that likely means having grant programs to support those who would build networks to compete against the cable companies. There are no grants I know of that will fund a competitor to a cable HFC network.
  • The remedy that monopolies hate the most is price regulation. We don’t have to harken back very far into the past to a time when the FCC enforced price regulations over cable companies.
  • One of the most natural ways to regulate monopolies is to enforce some kind of rate of return regulation. Capping monopoly profits will hold down rates.
  • Both the FCC and the Federal Trade Commission have the authority to fine companies for monopoly abuses. These companies are so large that it’s hard to hurt them through penalties, but it is an arrow in the regulatory quiver.
  • Another interesting solution is divestiture – like was imposed on AT&T in 1984. Companies like Comcast are now conglomerations of multiple businesses including broadband networks, entertainment and content creation, and side businesses like cellular, smart home, and numerous other sidelines. Breaking these giant companies into pieces has some merit.

The FCC has gone out of its way to declare that it no longer has any authority over broadband, and thus little or no control over the big cable companies. But this could be changed quickly by by changing the law, and a new Telecom Act could push the FCC back into its original role as a broadband regulator. If the monopoly abuses grow too great, this can also end up at the Justice Department, which had a major role in the divestiture of AT&T.

The Dirty Secret of Coaxial Broadband

The US has clearly pinned our hopes for providing modern broadband on the big cable companies. At the end of 2019, the big cable companies had almost 68 million customers compared to 33 million for the big telcos. Any discussion of broadband in urban markets is mostly a discussion of big cable company broadband. Cable companies will continue to grow market dominance as urban DSL customers continue to migrate to cable modem. In 2019 the big cable companies added 3.1 million customers while the telcos lost over 600,000 customers.

The big cable companies have all advertised to their customers that they had upgraded to the latest technology in DOCSIS 3.1 and can now provide gigabit broadband – for an expensive price in most markets set well over $100 per month.

It’s easy to think of urban cable systems as up-to-date and high tech and ready and able to deliver fast broadband speeds. While this is true in some cities and in some neighborhoods, the dirty secret of the cable industry is that their networks are not all up to snuff. Everybody is aware of the aging problems that have plagued the telephone copper network – but it’s rare to hear somebody talking about the aging of the cable company copper networks.

Most of the cable networks were built in the 1970s, with some even a little older. Just like with telephone copper networks the coaxial networks are getting old and a network built around 1970 is now fifty years old.

Cable coaxial networks suffer more from deterioration than do telephone copper networks. The copper wires in a coaxial system are much larger and the wires hanging on poles act like a giant antenna that can receive a range of different frequencies. Any physical opening into the wire through a splice point or from aging creates a new ingress point for external frequencies – and that equates to noise on the coaxial network. Increased noise translates directly to decreased performance of the network. The capacity of the older coaxial networks is significantly lower than when the networks were first constructed.

Another issue with coaxial networks is that the type of coaxial cable used has changed over time and some of the coax used in the early networks can’t handle the capacity needed today. Some older coax has been replaced in urban networks, but not all. Coaxial networks in smaller towns still can contain a lot of older-generation coaxial cables.

These issues mean that coaxial networks don’t always perform as well as is touted by the cable companies. I can use the network in my city of Asheville NC as an example. Charter announced nationally that when it upgraded to DOCSIS 3.1 that it had a goal of raising broadband speeds everywhere to 200 Mbps. My speed at the modem is 135 Mbps. I’m not complaining about my speed and I’m glad they increased my speed, but there must be issues in the local network that stopped Charter from achieving its 200 Mbps goal.

We undertake surveys and citywide speed tests across the country and we often see that the performance of coaxial networks varies by neighborhood. We’ve seen neighborhoods where there are more outages, more variance in download speeds, and overall slower speeds than the rest of the city. These problems are almost certainly due to differences within a city of the quality of the coaxial network.

Cable companies could bring older neighborhoods up to snuff, but such upgrades are expensive. It might mean replacing a lot of drops and any runs of older coaxial cable. It might mean replacing or re-spacing amplifiers. It often means replacing all of the power taps (the devices that connect homes to the distribution cables). The upgrading effort is labor-intensive, and that means costly.

I think this means that many cities will never see another unilateral increase in broadband speeds unless the cable companies first make big investments. The cable companies have increased speeds every few years since 2000 to keep ahead of the telcos and to make customers happier with their service. I fear that since cable companies are becoming de facto monopolies in most cities that they have lost the incentive to get faster if that means spending money. The coaxial networks and speeds that we have in place today might be what we still have a decade from now, only with coaxial networks that are another ten years older.

Broadband and Presidential Politics

For the first time in my memory, broadband has entered into presidential politics. This is an important milestone for rural broadband – not because of the proposals being made by candidates, but because it indicates that the voices of those without rural broadband have reached upward to the top of the political system.

I’m sure that when the presidential candidates go to rural areas that they are asked if they can help find a solution for the lack of broadband in many rural counties. For years I’ve heard from county Boards and Councils that broadband has bubbled up to the top of the list of issues in many rural counties. Rural residents are tired of having to make an extraordinary effort for their kids to do homework, tired of not being able to work from home, and tired of not being able to engage in things the rest of us take for granted.

Candidate proposals are big on rhetoric, but short on details. Some of the stated broadband policies are as follows:

  • The current administration is spending $16.4 billion this year for the largest federal broadband grant program ever. They are also spending $9 billion to expand rural cellular coverage.
  • Senator Bernie Sanders would provide $150 billion in grants and technical assistance for cities and municipalities to build publicly-owned fiber networks as part of a larger Green New Deal infrastructure initiative. That plan obviously extends far beyond a solution for rural broadband, and when cities are thrown into the mix, $150 billion is not going to bring fiber broadband everywhere. He further would regulate broadband as a utility and require that all ISPs offer a low-price ‘basic internet plan’ to make sure that the Internet is available to everybody.
  • Senator Elizabeth Warren has proposed $85 billion for public broadband as part of a larger infrastructure plan.
  • Mayor Pete Buttigieg has proposed an $80 billion Internet-for-All plan that would bring broadband to unserved communities.
  • Former Vice-president Joe Biden supports a $20 billion grant program for rural broadband.
  • Senator Amy Klobuchar proposes perhaps the most workable plan that would provide grants to service providers willing to serve rural America. She has likely based this plan on the successful Border-to-Border grant program in Minnesota.

All of these plans must be taken with a grain of salt because we know that many proposals made on the campaign trail are often forgotten by January after an election. We further have to be skeptical of presidential candidate promises for spending, because Presidents don’t get to spend the big dollar amounts being thrown around – Congress holds those purse strings. It’s possible that none of these candidates gets elected. It’s also possible that one of them gets elected and still would be unable to make headway on the rural broadband issue. For example, there might still be a split House and Senate, making it a challenge to agree on spending priorities. The federal government might get pulled in other directions for a wide variety of reasons and never get around to the rural broadband issue.

As somebody who understands what it takes to run an ISP, some of these ideas scare me. For example, the idea of handing broadband networks to municipalities scares because I know that the majority of local governments have zero interest in taking on that role. If this responsibility was thrust upon them many of them would do a lousy job. Even should networks be handed to governments for free, many are ill-equipped or unwilling to administer and maintain a network. The idea that we could legislate the creation of well-run government-owned ISPs everywhere is not in touch with the realities of the expertise required to own and operate a network. On the flip side, I hate the idea of giving any money to big ISPs to provide better broadband. We’ve seen how poorly that can go in the CAF II program.

I also always cringe whenever I hear the idea of regulating broadband as a utility. I am not against the idea of regulation, but the chances are that the federal government and politicians would goof it up and would create an absolute disaster. Regulating something as complex as broadband is a complicated endeavor and would be hard to get right if done at the federal level – if done poorly we could end up undoing the good than many ISPs have already done.

As an example of the challenge of regulating the industry, I can’t think of any easy mechanism to somehow drag all of the existing communities, telcos, cable companies, and fiber overbuilders that provide broadband into a regulated regime. Most of the entities that have built fiber have already taken on significant debt to build fiber networks. Short of the government paying off their existing loans, it’s hard to think how these companies could begin offering low regulated prices and still meet their existing debt obligations. I can easily list a hundred other issues that could go awry when regulating the industry. I am highly skeptical that Washington DC can figure out all of the nuances of how to do this the right way. I’m a lot more comfortable with the way we originally regulated telephone service – the federal government established broad policies and state regulatory bodies filled in the details.

I am just happy to see broadband being discussed during the election cycle. The same thing is happening at the state and local level, which is one of the main reasons that we’ve seen so many state broadband grant programs being formed. All of the lobbying being done by folks without broadband is finally seeing results – at least in promises being made by politicians. We just need to keep up the pressure until the political talk turns into broadband networks.

Is Telephony a Natural Monopoly?

For my entire career, I’ve heard it said that telecommunications is a natural monopoly. That was the justification for creating monopoly exchange boundaries for telcos and for issuing exclusive franchise agreements for cable companies. This historic reasoning is why the majority of Americans in urban areas are still stuck with duopoly competition that is trending towards a cable monopoly.

I worked for Southwestern Bell pre-divestiture and they were proud of their monopoly. Folks at Ma Bell thought the telephone monopoly was the best possible deal for the public and they constantly bragged about the low rates for a residential telephone line, usually at something less than $15 per month. But when you looked closer, the monopoly was not benefitting the average household. Long distance was selling for 12 cents to 25 cents per minute and a major percentage of households had monthly phone bills over $100 per month.

I’ve been doing some reading on the history of the telephone industry and found some history I never knew about – and which is different than what Ma Bell told employees for 100 years.

Alexander Graham Bell was granted many patents for telephone service in 1876. During the 18-year life of the original patents, Bell telephone held a monopoly on telephone service. Bell Telephone mostly built to large businesses and to rich neighborhoods and the country still predominantly communicated via telegraph. Bell Telephone was not considered much of a success. By 1894 there was still less than 5 telephones in the country per 1,000 population, and there were only 37 average calls per day per 1,000 people.

As soon as the patents expired, numerous competitors entered the market. They built to towns that Bell Telephone had ignored but also built a competing network in many Bell Telephone markets. By the end of 1896, 80 competitors that had grabbed 5% of the total telephone market. By 1900 there were 3,000 competitive telephone companies.

By 1907 the competitors had grabbed 51% of the national market and had also driven down urban telephone rates. AT&T’s returns (AT&T had officially become the name of Bell Telephone) had dropped from 46% annually in the late 1800s to 8% by 1906. After 17 years of monopoly, the country had only 270,000 telephones. After 13 years of competition there were over 6 million phones in the country.

The death of telephone competition started when Theodore Vail became president of AT&T in 1907. By 1910 the company was buying competitors and lobbying for a monopoly scenario. Federal regulators stepped in to slow Bell’s the purchase of telephone companies after Vail tried to buy Western Union.

In a compromise reached with the federal government, AT&T agreed to stop buying telcos and to interconnect with independent telephone companies to create one nationwide network. That compromise was known as the Kingsbury Commitment. Vail used this compromise to carve out monopoly service areas by only agreeing to interconnect with companies that would create exchange boundaries and further agree not to compete in AT&T exchanges. With almost the opposite result that federal regulators had hoped for, the Kingsbury Commitment resulted in a country carved into AT&T monopoly telephone service areas.

From that time forward federal regulators supported the new monopoly borders, cementing the arrangement with the Telecommunications Act of 1934. State regulators liked the monopolies because they were easier to regulate – state regulation turned into rate-making procedures that raised rates on businesses to keep lower residential rates. AT&T thrived in this environment because they were guaranteed a rate of return, regardless of performance.

The history of telephone service shows that the industry is not a natural monopoly. A natural monopoly is one where one provider can produce lower rates than are achieved by allowing competition. Competing networks forced lower telephone rates at the turn of the last century. After the establishment of the AT&T monopoly we saw monopoly abuse through high long distance rates that didn’t drop until MCI challenged the monopoly status quo. Today we have a world full of multiple wires and networks and the idea of natural monopoly is no longer considered as valid. Unfortunately, many of the vestiges of the regulations that protect the big telcos are still in place and still create hurdles to unfettered competition.

DOJ Opposes AT&T / Time Warner Merger

The US Department of Justice filed an antitrust lawsuit against AT&T opposing the upcoming merger with Time Warner. The filing was surprising since it came so late in the merger process with the proposed merger on the table for much of 2017.

There are those saying that the DOJ objections are political, but the DOJ objections are all legitimate. Some of the major concerns of the DOJ include:

  • The merger could disadvantage AT&T rivals like Comcast and Charter by forcing them to pay hundreds of millions more for access to Time Warner programming.
  • The merger will slow the industry transition to online video through OTT and MVPD providers.
  • The vertical integration of last-mile network and programming gives AT&T the ability to create an unfair advantage over competitors.

I don’t think AT&T or anybody can dispute these objections with a straight face, and in fact, these findings are exactly what AT&T has in mind. AT&T already has major synergies between its various business lines. For example, the latest expansion of the AT&T FTTP network is largely taking advantage of fiber routes that are already in place to support the cellular network. It’s something that AT&T probably should have taken advantage of long before now. AT&T also is starting to take advantage of the synergies between its large acquired DirecTV customer base and its cellular products. It’s also the existing programming contracts of DirecTV that have enabled the successful launch of the MVPD offering DirecTV Now.

What this DOJ suit does not acknowledge is that AT&T is just trying to keep pace with Comcast. Comcast has already integrated programming with a last-mile network when the DOJ and FCC let the company buy NBC Universal in 2009. And now that Comcast is entering the cellular business I have a hard time seeing any real difference between what Comcast has today and what AT&T is trying to become with this merger.

The question that must be asked is if the DOJ is going to block the AT&T merger, then shouldn’t their next step be to ask for the divestiture of the Comcast business lines? If they are not going to pursue that, then this filing is largely political. But if the concern is monopoly abuse, as the DOJ document indicates, then they should pursue the only fully-integrated monopoly like the one that AT&T is asking to create.  In fact, Comcast has already gone far past where AT&T is headed and also bundles in smart home, security and even solar panels with other telecom services.

There is no question that Comcast, and AT&T, if they are able to complete the merger, will have a competitive advantage over any other last-mile network provider. Any other ISP that wants to offer video will have to pay significant amount of money to these two companies as part of competing with them. It can be argued that Comcast cable also has to buy the various Comcast programming – but the fact is that when calculating earnings all intercompany purchases cancel out, so whatever Comcast pays itself for programing is largely funny money. And this gives these big conglomerates an instant $5 / $10 advantage per month in costs over any rival.

It’s an interesting filing, and if the DOJ sticks to its guns this is likely to end up at the Supreme Court. My gut tells me that the courts are going to have a hard time saying no to AT&T for trying to create the same synergies that their primary rival Comcast already has.

We haven’t even seen the full power of the new Comcast bundle yet. The company has so many possible ways to tie down a customer and make it hard to break the bundle. Once Comcast has millions of cellular customers and millions of smart home customers they are going to be a fierce competitor against any newcomer. Combine this with the fact that they will soon have gigabit broadband available everywhere and they can match broadband speeds in any market (while keeping prices higher in non-competitive markets). That is the real power of the big conglomerate ISPs – the ability to compete unfairly in any one market by charging more elsewhere.

I doubt that the DOJ petition will hold up. We don’t really need another company with the same market power as Comcast – but stopping the second big conglomerate is already too late.

Comcast and Competition

comcast-truck-cmcsa-cmcsk_largeThere was a short interview in Fortune recently with Comcast CEO Brian Roberts about Comcast’s views on competition. Roberts’ responses are a very good summary of the state of cable competition in the country in general.

First, when asked about competition today Roberts said that Comcast feels competitive pressure every minute and that he thinks the market is getting increasingly competitive. That’s an interesting comment. There are certainly markets where people are building fiber to compete against Comcast. We see CenturyLink building fiber in a number of large cities. Verizon has announced that it’s going to expand FiOS in Boston. Google is slowly building fiber, although not yet in many Comcast markets. And there are a tiny number of municipal fiber builds, mostly in more rural markets.

But to offset those new fiber competitors it’s obvious that Comcast is crushing DSL in its many markets. The older DSL equipment is just becoming too slow and DSL customers are finally upgrading to faster cable modem service. Overall Comcast added a net of almost 1.4 million new broadband customers in 2015. So for every customer they might have lost to fiber they have picked up many more from competing with DSL. Because Comcast’s cable modems are so superior to DSL, in the vast majority of its markets Comcast now has a virtual monopoly on real broadband.

Roberts was also asked about the company’s interest in competing outside of Comcast’s cable service territories. Unsurprisingly Roberts said that the company has no plans to expand its footprint. The FCC has been bringing the pressure on cable companies to become more competitive. But I am not aware of an example where one of the major cable companies has ever competed against one of their neighboring cable providers. In other places like Europe and Canada there are markets where cable companies compete against each other – but in this country there is an obvious tacit agreement among the cable companies to not step on each other’s monopoly turf.

Finally, Roberts was asked about current news that Comcast might be thinking about offering a competitive cellular product. The company tried this a few years ago together with some other cable companies but then ditched the attempt. Roberts says that the company is exploring the concept (something they probably have been doing for a decade) but that – unless the company can find some unique value proposition – they probably won’t enter the cellular market. Interestingly, one of the values of the merger between Charter and Time Warner is that it gives Charter the contracts that allow the company to offer an MVNO cellular product. We’ll have to watch to see if anything comes of that possibility.

In summary, Comcast says they see competition everywhere. It’s an interesting perspective because the company is overall as close to a monopoly as any company can be in the telecom space in this country. There is a lot of public relations and regulatory benefit for Comcast by acting besieged by competition. If Comcast was instead touting their monopoly advantage they would probably come more under the crosshairs at the FCC and at state regulatory bodies.

But I have a hard time seeing where competition is hurting the company. They are still adding customers like crazy. Revenues and profits are up. The company has made big headway in rolling out new security and home automation products. And in a large percentage of its markets the company is becoming a virtual monopoly.

Is the FCC Squelching Web Innovation?

FCC_New_LogoI am always intrigued when politics enters the telecom realm, because the vast majority of issues we wrangle with are still handled in the traditional way. Engineers innovate and regulators regulate and generally, in the telecom world, the best technical solutions have always made it to the top and good ideas have generally won their way to the market.

Recently there was a guest editorial written for Forbes by Senator Steve Daines of Montana and FCC Commissioner Michael O’Reilly. This editorial took the FCC to task for squelching innovation by creating what they called a ‘permissionless culture’ of overregulation that is stopping innovation from happening on the web. The editorial goes on to talk about how web innovation has created a trillion dollar annual economy in the US and praises such ventures as Uber, Facebook and the iPhone. They go on to talk about how companies like GroupMe didn’t require any regulatory approval to try new ideas.

What seems to have them incensed is that the FCC recently called in Comcast, AT&T and T-Mobile to talk about each of their zero-rating schemes where they favor certain content by not making it part of their data caps. And this is where their analogy starts to break apart. It starts looking like a stretch to me to call Comcast or AT&T innovators. Comcast and the other large cable companies are very close to being broadband monopolists in the vast majority of their markets, and are at best a duopolist in other markets. AT&T and T-Mobile are two of only four wireless companies with any national reach in a market that is clearly an oligopoly.

If the FCC isn’t supposed to regulate the monopolists, duopolists and oligopolists then who are they supposed to regulate? It’s clear these two guys don’t like net neutrality, and probably not regulation in general. It also seems a bit extraordinary to me to see a sitting FCC Commissioner so heavily lobbying against his own agency in public.

The key accusation they have made is that the FCC is somehow stopping innovation by discussing net neutrality with these three large carriers. Is there any chance that they are?

I think it’s a huge stretch to compare Comcast and AT&T to GroupMe and the iPhone. The particular issues that prompted the editorial are essentially billing issues and these carriers aren’t being innovative and haven’t created anything new with zero-rating.

The huge number of filed comments in the net neutrality case made it very clear that the innovators in Silicon Valley are worried about the power of carriers like Comcast and AT&T. They fear that those companies who act as the ISP for most Americans can pick winners and losers among the GroupMe’s of the world by favoring a handful of large established web companies over everybody else. Those comments made it clear that the people who are the actual innovators want the FCC to insure that new web companies and new ideas be given a fair chance in the marketplace.

And so this is where politics enters the argument. Probably one of the oldest techniques used in politics is to call something the opposite of what it really is. Do that loudly enough and often enough and many people will start believing the opposite of what is really true.

In this case the FCC is doing exactly what it is supposed to do. They haven’t taken any actions yet, but they might. They are looking into whether the various zero-rating schemes of these three companies are anti-competitive. There is no guarantee on what they will decide since the three companies are trying different ideas. But what is clear is that companies like these three have the power to pick winners and losers among web content providers.

I find it disingenuous to be calling the FCC anti-competitive and accusing them of squelching competition when the FCC is investigating companies that actually have the power to do exactly that. I guess these kinds of editorials are written to stir up people outside of the telecom industry, because I suspect most industry insiders understand the issue clearly and just shake their heads when politics enters our universe.