The Real Story Behind Net Neutrality: The Killing Off of Competition in the US.
This is an excerpt of our fling that details how the independent wired ISPs were forced out of business via regulatory capture of the FCC and the original Net Neutrality proceedings. Moreover, the filing detailed the different ways the companies have manipulated the actual accounting of lines in service and how the data and presentation is deceptive, but was used to make public policies.
The chart above shows that starting with the opening of the wired state telecommunications public utility networks to small and large competitors based on the Telecom Act of 1996, by 2000, (according to the US Census), there were 9,335 ISPs, and other sources claimed that these companies handled the majority of the internet and world wide web subscribers.
NOTE: These companies were wired ISPs that used the existing utility networks; they were not the wireless ISPs, WISPs, who have traditionally serviced more rural areas due to the fact that most wireless service has issues with buildings. The Internet service is NOT the physical wires. The ISPs of the 1990’s started offering‘dial-up’ where the customer connects over their home or business line, or used DSL, the faster copper-based service. But, they were also blocked from using the upgraded fiber lines and the FCC closed the right of these companies from using even DSL.
After the FCC closed the networks to competition (combined with a total failure to enforce basic laws), as the chart shows, within a decade, competition had come and gone and the term “ISP” ended up being used for the wired phone and cable companies that, with the help of the FCC, took over the small ISP business.
And this was all based on a totally garbage analysis that claimed that the large companies — the cable and phone companies, would compete with the wireless companies — called “inter-modal” competition. Instead, the companies would all collude in multiple ways. For example, Comcast and Charter are reselling Verizon Wireless under their own brand, and Verizon, which controls the East Coast from Massachusetts to Virginia, would not properly upgrade their wired utilities to fiber, but leave the copper networks to mostly deteriorate, thus not bringing in high speed fiber-based broadband competition.
Net Neutrality, then was a band-aid so that the big boys would place nice. However, there has been no discussion of the actual harms created in this debacle.
This current Net Neutrality decision doesn’t address or fix the basic problems that were put in motion 2 decades ago. The FCC is not reopening the networks to direct competition, known as “unbundling”, so that customers can have a choice of providers. And, there will be no audits or investigations or anything dealing with examining the current customer overcharging, or the current manipulation of the current ‘cost accounting’, both of which we filed with the FCC numerous times.
And with no ‘rate regulation’ discussions, this overcharging will just continue, on multiple levels. Without competition, prices will not be brought down, and without audits, or the ability to investigate price increases without the actual cost accounting analysis means the companies can continue to make claims that are patently not true.
This next quote is the FCC jargon from the new order. Notice the word ‘forbearance’, which means — even if there are laws and regulations on the books, we will not address or enforce them.
“Establish broad, tailored forbearance — including no rate regulation, no tariffing, no unbundling of last-mile facilities, and no cost accounting rules — in the Commission’s application of Title II to broadband Internet access service providers.”
In short, the FCC’s Title II is not Title II in language or spirit. We will address these issues in upcoming stories, but this excerpt focuses on the foundation of how Net Neutrality was created — The FCC helped to put thousands of small, wired-ISPS companies out of business by regulatory fiat, not competition.
Net Neutrality rules, then, were supposed to make sure that the big boys did not harm the public through overt means like blocking or degrading their ISP service. But without the cost accounting requirements, and no rate examination, and no competition with open networks, this is just more noise that will be taken to court.
The entire NN play was to shut down competitors that used the state public utility wired networks.
Let’s examine some of the attacks made on the small ISPs by the government that was supposed to be protecting competitors and enforcing the laws.
Section 257 of the Telecom Act specificially was created so that the small competitors would be protected from monopoly controls and harms.
“(a)Elimination of barriers
Within 15 months after February 8, 1996, the Commission shall complete a proceeding for the purpose of identifying and eliminating, by regulations pursuant to its authority under this chapter (other than this section), market entry barriers for entrepreneurs and other small businesses in the provision and ownership of telecommunications services and information services, or in the provision of parts or services to providers of telecommunications services and information services.”
Yet, just a few years after the ink was dry, under the Republican FCC, six inter-related proceedings were released that were designed to kill off competition.
Patty Fusco, Managing Editor, ISP Planet, March 1, 2002 wrote:
“We’ve been begging the FCC to establish a National Broadband Policy. On Feb. 14th the FCC took action-only it might turn out to be as bloody for ISPs as the St. Valentine’s Day Massacre was for George ‘Bugs’ Moran’s North Side Gang in Chicago, circa 1929.”
Who needs actual competition? In fact, the independent ISPs had consistently presented data to the FCC to defend their small businesses and it had fallen on deaf ears. The head of the Texas ISP Association, (TISPA) recounted his meeting with Chairman Powell and senior staffers at the FCC Enforcement Bureau.
“The meeting was Tuesday May 8th, 2001. In a nutshell, all the “bad acts” submitted to them to date have resulted in exactly “ZERO” dollars in fines. We asked for something blatant as handwriting on a wall as to the future of the complaint process as we are approaching it. We got it. WE SHOULD EXPECT NOTHING FROM THE INFORMAL COMPLAINT PROCESS. We should expect nothing from any complaints we have submitted to date.
“A couple of weeks ago we met with a senior person in the ENFORCEMENT BUREAU. After a one-hour meeting and receiving some heartfelt empathy for the plight of ISPs and the consumers who are being victimized by the illegal, anti-competitive behavior, I suggested that our best move might be to just jump out a window. He suggested we might want to consider throwing a chair out of the window first, so we wouldn’t get cut on the glass as we jumped.”
Petition for Investigation, 2003: We worked with Small Business Office of Advocacy, filed with the indie ISP associations and groups and surveyed the industry, which was used in filings with state and federal agencies.
“Drop in Access Lines was related to shutting down competitors.
By the end of 2005–2006, 7,000 small ISPs had been put out of business. And while there are a host of caveats, the main attacks came, not from market forces, but from the FCC’s failure to enforce the existing laws, or they erased the laws on the books. In fact, the FCC had ‘re-regulated’ the CLECs and ISPs out of business. And surprise, surprise, guess who was able to simply walk in and take over their business?
The phone and cable companies had a feast by taking over the market. Ironically, this was the FCC’s idea of ‘light touch’ regulation. Thus, the opening chart represented the rise and fall of the Internet Service Providers that relied on using the networks to offer customer internet service.
And while we present a travel through what is an info-dirt road, those who want open access for competitors to use will be challenged or attacked in a myriad of ways — where history will repeat itself unless America learns from the past. With this FCC new order, the odds of prevailing are not in the public’s favor.
For the Historical Record:
Here are a few links to what we filed and wrote (as Teletruth and New Networks Institute).
Part 1: Harms to Competition: 56% Drop, Thanks to the FCC Net Neutrality
Part 2: Killing Off 7000 Independent Internet Service (ISPs) Providers by the FCC Created Net Neutrality Problems — 74% Drop in Companies Since 2000.
- The FCC Used Bad Data and Undue Corporate Influence to Destroy the Small ISPs, Violating Section 257 of the Telecom Act.
- FCC, FTC and DOJ Supported Actions that Blocked Small ISPs from Migrating Their Customers to Faster Services, Failed to Enforce Laws, Harming Choice and Increasing Duopoly Controls.
- A Brief History of Internet Service Provisioning in the US.
RELEASE DATE: May 1st, 2003
- TeleTruth to FCC — The Current Telecom and DSL Laws are Not Being Adequately Enforced, Harming US Broadband and Internet Customers as well as ISPs and CLECs.
- New Networks Institute’s 4th Annual ISP Survey Reveals an Industry in Crisis.
- Teletruth Proposes That The FCC Adopt The “Broadband Bill Of Rights” As Part Of The Solution To Broadband Customer Service Issues.
- Petition — — Word, PDF
- Survey — — NNI 4th Annual ISP Survey
The Irony: Trust Us: We’re the FCC?
As Democrat FCC Chairman, (prior to Powell) Bill Kennard claimed his mandate was competition and that he was against “Regulatory Capitalism”. Kennard is now the Chairman of AT&T’s Board of Advisors. Ironically, AT&T is one of the primary examples in America of regulatory capitalism. The only difference is AT&T doesn’t have to litigate as they have captured the FCC so that has been able to control much of the results to not be seriously harmed or challenged.
“Regulatory capitalism is when companies invest in lawyers, lobbyists and politicians, instead of plant, people and customer service…. Regulatory capitalists would rather litigate than innovate.”
“It’s always easier to prowl the halls of Congress than compete in the rough and tumble of the marketplace.”
“And who can afford to tell the other side of this story? Who has the resources to outshout the phone companies?”
As Bill Kennard stated, it ain’t us. In talking about the original ‘Voice Over the Internet’ (now called ‘VoIP’ or ‘Digital Voice’) and competition that had sprung up, he pointed out that these companies were small competitors and newcomers that didn’t have resources or could afford the limos and lunches.
“Regulatory capitalism always works best for companies that have the resources and know-how to play the regulatory game. And, trust me, it’s never the newcomers. Most new industries — yours included — don’t have the time or resources to spend money on oak paneled law firms and limousine lunches.”
Fast forward to 2024 — The FCC’s new solution presents
- No audits, no investigations
- No examining of prices, much less regulating them
- The networks will not be open to competition (no unbundling)
- The companies get to ‘hide their books’ — no cost accounting.
