Verizon and the Cable Industry Could Destroy the Internet as You Know It

Verizon and the Cable Industry Could Destroy the Internet as You Know ItGuest blogger Art Brodsky, Communications Director of publicknowledge.org, writes:

When AT&T last year tried to take over T-Mobile, the threats to smartphone users were fairly obvious. The second-largest company in the country was trying to eliminate a competitor and consolidate its power. Lots of people saw the danger and got angry. The Justice Department, Capitol Hill and, remarkably, the Federal Communications Commission (FCC) saw the same threats to consumer welfare and to competition and scotched the deal.

But a funny thing happened while the AT&T-T-Mo fight was going on. No, not the solar flare of an issue with the Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA), as important and thrilling as it was. No, what happened is that on December 2nd, Verizon and the biggest cable companies made their own filing with the FCC which was, in its way, just as dangerous as that AT&T move, but much more subtle.

Verizon snuck under the radar for a while, but with the AT&T deal and SOPA/PIPA out of the way, the deal is now getting the spotlight it deserves. Here’s the deal. Verizon will pay $3.6 billion for spectrum that the largest cable companies, Comcast, Time Warner, and Bright House bought 10 years ago for $1 billion less. At the time, the cable companies said they wanted to get into the wireless business, but then decided not to. The spectrum Verizon will get from the cable companies will only pad its holdings as the biggest wireless company with the most spectrum. If this part of the deal goes through, the potential for more wireless competition from some big companies goes away.

At the same time, Verizon and the big cable companies worked out some side deals. The details are still confidential, but the outlines go like this: Verizon wireless will agree to sell cable high-speed Internet landline services, and the cable companies will sell Verizon’s wireless service. Also, all the companies will get together in something called a Joint Operating Entity (JOE) to develop new technology for a cable/wireless interface, and for other products or processes.

The basic outline is clear. Verizon and the cable industry (Cox later joined in the club) are dividing up the Internet access world. For the most part, cable gets the landline business. Verizon will still offer its fiber optic FiOS service, but stopped the build-out and is concentrating on selling to the customers it already passes. Verizon reported that five million subscribers are now getting the service. FiOS passes about 18 million homes — about half of Verizon’s landline service territory.

But if a consumer wanders into a Verizon wireless store — and there are many around the country — the push will be to buy the local cable company’s broadband product (not the normal Verizon landline if the store is within Verizon’s landline territory). In fact, Verizon is pulling back from the old Digital Subscriber Line (DSL) service, which goes over the normal copper network. The company just announced that anyone wanting to buy DSL will also have to buy regular phone service — no standalone DSL for you. That should serve to drive people away from both fairly quickly. When someone subscribes to cable, they will get the pitch for Verizon Wireless. Nice, huh?

Verizon has removed a potential wireless competitor — the cable companies — and will consolidate its hold on the business as the company with the most spectrum and biggest customer base. Verizon is trying all sorts of tricks to win regulatory approval, including offering to sell off some of its spectrum. Don’t be fooled. It’s all smoke and mirrors, in part because whenever AT&T or Verizon sell spectrum as part of a larger deal, it usually turns out that each buys the other’s leftovers, starving Sprint and the newly freed (from the clutches of AT&T) T-Mobile.

It wasn’t supposed to turn out this way. In 1996, Congress approved a far-reaching bill that set cable and telephone companies against each other. The hope at the time was that consumers would benefit from having two huge industries each competing for consumer dollars for phone, data, and video.

Over the years, however, industries have found it easier to collude than to compete. This deal, if approved, would create a new telecom cartel that would have consumers at its mercy. That’s why my group, Public Knowledge, along with Media Access Project, New America Foundation Open Technology Initiative, Benton Foundation, Access Humboldt, Center for Rural Strategies, Future of Music Coalition, National Consumer Law Center, on behalf of its low-income clients, and Writers Guild of America, West filed with the FCC to block the deal.

It’s known as Docket 12-4 at the FCC, if you’re keeping score at home.

This was the short story. But here’s a much longer explanation if you’re interested.

One analyst has said the Verizon/cable deal changes the telecom industry as we know it. He’s right. If this goes through, it would grant more power to the powerful, solidifying industry positions and putting consumers behind a big, giant eight ball. It’s time to tell the FCC and your members of Congress to make sure this doesn’t go through.

It’s a shame we have to go through this drill again. It wasn’t our choice to pick another fight. The only problem is that big industry never, ever quits in its quest for domination.

CC licensed Flickr photo by openfly

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