Saturday, June 24, 2006

The Best Regulations Telco Money Can Buy

Sparking the Revolt
Charles Cooper, the executive editor at CNet, wrote an article today about the way telcos spin and deceive lawmakers into voting against the best interests of their constituents.

"Since the completion of last year's telecommunications mega-mergers, small and medium-size businesses have been getting hosed--with Uncle Sam playing the role of complicit bystander," he writes.

Cooper is referring to the SBC-AT&T and Verizon-MCI mergers announced in 2005. Telco lobbyists spun these mergers as pro-consumer and pro-business developments. Prices will plummet they crowed.

But since the late fall, prices for local private lines have done the opposite -- increasing for both consumers and businesses. "Maybe I missed the fine print on the press releases but how do they square price increases with the public interest?” Cooper asks.

Today, these newly re-assembled telco giants are spending tens of millions of dollars to spin lawmakers with the same arguments against Net Neutrality. But decision makers in Washington might want to check voters’ pocketbooks before rubber stamping legislation to gut Net Neutrality.

Cooper cites research by Simon Wilkie, which found that as long as AT&T and MCI remained independent, "competition naturally curbed the Bell companies' ability to ram through price hikes." Once they merged and that competition disappeared, presto-change-o! Higher prices.

In the Net Neutrality debate, telcos seek to leverage their monopoly control of DSL and FTTH broadband markets to erect new tollbooths on the exits and on-ramps of the information Superhighway.

They say this control will be good for consumers and businesses. But what other options do we have?

Many of the Web innovators and start-ups -- that historically have have been the engines for new ideas and economic growth online -- won't be able to pay the toll for access to AT&T, Verizon and BellSouth's gated lanes. And customers will be subject to limited Web choices and higher prices from monopoly ISPs that pick and choose content.

If a frustrated user decides to take her business to a more open ISP, she will face few to no choices in the market. (Remember, that more than 95% of the broadband market is controlled by major phone and cable providers. And they call this “Net Competition”).

The telcos -- with the aide of their sundry Astroturf front groups -- argue that they need to charge companies an extra level of fees so that consumers don’t have to pay higher prices. They need this extra money to fund the build out of networks to needy Americans.

Former Labor Secretary Robert Reich recently called this idea "ridiculous." "They're already making lots of money off consumers connected to the Internet," he said. "They just figure they can make more money charging the big content providers for the best service."

The monopolists at telco headquarters are now declaring poverty. (Verizon, BellSouth and AT&T have a cumulative market cap of more than $250 billion; their gross annual profits exceed $85 billion).

The truth is that they will build out their high-speed networks whether there are Network Neutrality rules or not.

The cable companies have largely built out their networks already. And it’s more cost efficient for telephone companies to upgrade their copper wires to compete with cable.

The only reason that they are claiming a need to get rid of Net Neutrality is because they see an opportunity to extract monopoly rents from new sources. They want to pass a law that awards them with gatekeeper control of Internet content -- locking in a new stream of revenue and wider profit margins at the expense of everyone but themselves.

But they won't tell Washington that.

Back at CNet, Cooper goes one further to illustrate how these powerful corporations operate behind the scenes in Washington to get anything they want. His conclusion: “ …the public's interest would be better served if we all paid greater attention. The problem is that we usually find out something's amiss after it's too late."

It’s not too late to stop the legislative juggernaut against Net Neutrality. Take action to stop the telcos today.

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