Esoteric Dissertations from a One-Track Mind

July 8, 2007

FTC against Net-Neutrality

Filed under: culture, politics — codesmithy @ 1:43 am

Information Week ran this story stating that the United States Federal Trade Commission is warning against Net-Neutrality legislation. I came across it by 3 hops, via Crooks and Liars via Digg (note, the first link will disappear within a month).

The crux of the argument against Net-Neutrality is that:

Proposals to impose new regulation actually threaten further advancements in broadband Internet connections. That hurts consumers by denying them new and better services – Verizon executive vice president Tom Tauke

The fact that the U.S. is currently 16th in Broadband access and falling and that American consumers are paying more for less than their counterparts in other parts of the world behooves us to at least examine the claims. Is American regulation the problem that stifles innovation? Or more specifically, what happens when we deregulate?

One data point for deregulation is Enron, which after a limited deregulation in California gamed the energy trading trading markets causing brown-outs and sky-rocketing energy costs for consumers in the state. Although, the great irony of the situation that Grey Davis, the recalled California Governor, was replaced by Arnold Schwarzenegger, a Republican in favor of more deregulation.

Another more important data-point is the missing fiber-optic networks which were supposed to be built by the teleco’s during the 1990’s and into the 2000’s. Invariably, they were not built.

Phone companies were once regulated like other utilities, under the “rate of return” model. Profits were essentially capped somewhere between 11-13% (as a percentage of revenues) and monitored by regulators. Under “alternative regulation” (i.e., deregulation), phone-company profits were no longer required to undergo the same scrutiny. Many services have very high profit margins and with a lack of examination, Bell profits (return on equity) jumped to 30%, more than double the original. The companies also received massive tax write-offs on the promise they would build fiber-optic networks (over $25 billion).

The phone companies argued for deregulation in part because they said it would allow them to use the extra profits to construct new services, including fiber-optic lines. In fact, however, such “capital expenditures” dropped from 24% of Bells’ total expenses in the early 1980s to just 14% of expenses in 2004. Instead of deploying fiber-optic lines to homes, the money was diverted to everything from overseas construction to increased pay for senior executives to funding for long-distance service and DSL and wireless connections. If the phone companies had kept up their original capital expenditure rates, an additional $92 billion would have gone into new construction and thus, high speed networks could have been built.

The problems with government investment and tax-breaks are particular pervasive. The phone companies drastically under-estimated the costs, over-promised what they could deliver, and the government offices in charge of oversight frequently just look the other way.

Further deregulation is unlikely to provide increased investment in infrastructure improvements, given that $200 billion has already disappeared. The more likely scenario is that existing bandwidth will for the most part be divided between the fast and the slow, although it will take some finagling and hoops to get it there to preserve the appearance of rectitude.

It will change the fundamental social fabric of the current Internet giving rise to much more 1 way media (like the printing-press, radio and television). Although, even if Net-Neutrality falls down, it isn’t the world is coming to an end like the 15 year-old in the video stated. However, it is a big step backwards from the egalitarian Internet that we know today, even with all of its flaws.

There will never be a hill you won’t have to climb when it comes to injustice in this world, but you have to keep climbing. The important thing is not to say, “democracy is a myth in our country.” It is to have better degradations: “democracy is very weak today in our country.” We have to make it stronger and stronger, until it becomes the profoundly realistic American way of life and crowds out the myths. – Ralph Nader

I think it is important to remember Net-Neutrality isn’t just one issue, it is an effect of too much corporate power influencing government to the detriment of its citizens. It has become clear to me that the Democrats do not offer a real alternative to Republicans. When 46% of Americans think that the President should be impeached along with 54% for the Vice-President, and impeachment is still off-the-table, we have a disconnect with public will and policy.

We can replace Democrats with Republicans, or vice-versa. However, even when Democrats were given a mandate to get out of Iraq, they still did nothing. The only real hope is through 3rd-parties, and to make them work better. One thing would to move our Plurality based voting system, to a Condorcet method.  This would eliminate the 3rd party penalty for voters that chose Nader but got Bush, even though they would prefer Gore, or chose Perot and got Clinton even though they would prefer Bush.  Viable third parties is the first step towards more meaningful reform, because your well thought out letter and calls will do nothing if the leaders won’t listen.  Both parties are full of people who won’t, we need people who will, and it starts by examining how those people are getting their job in the first place.


1 Comment »

  1. […] as a 80 mpg Diesel-electric hybrid and a complete scraping of more than one billion dollars. Much like those fiber-optic broadband networks that government paid for. It isn’t that America didn’t invest in the infrastructure to stay competitive in […]

    Pingback by Running on Fumes « Esoteric Dissertations from a One-Track Mind — November 13, 2007 @ 8:23 am

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