AT&T Warns FCC Of A Parade Of Horribles That Wouldn't Actually Happen If FCC Reclassifies Broadband

from the fud-fud-fud dept

As it appears that the FCC is (at least publicly) potentially warming to the idea of reclassifying broadband services under Title II of the Telecommunications Act, we warned that the big broadband providers would go absolutely apeshit. And, so it begins, with AT&T sending a ridiculous FUD-filled letter to the FCC warning it about a whole bunch of horrible things that it says will happen if the FCC does go with the Title II option. Of course, almost nothing it describes is actually true.

For example, AT&T pretends (based on absolutely nothing) that if the FCC reclassifies broadband providers as telco services, it will have to reclassify all sorts of other services, including various internet companies such as search and email providers:

Section 222 obligations would also kick in, imposing new obligations on a host of entities and causing wholesale disruption of current Internet business models. ISPs at both edges of the network, as well as transit providers, content delivery networks and others would appear to be statutorily required to take reasonable measures to prevent disclosure or use of information, such as IP addresses, websites visited, customer location information and other data, and they would be precluded from using this information without customer consent. Email providers and search engines, as telecommunications service providers in their own right, could likewise be subject to these requirements.


Moreover, it is foolish to think that the Commission could reclassify the provision of broadband Internet access to consumers as a telecommunications service without similarly reclassifying a broad array of other functionally analogous services in the Internet ecosystem. For example, there is no logical or legally sustainable basis to distinguish between ISPs serving consumer “eyeballs” and those serving content and other edge providers. Likewise, transit providers and content delivery networks (CDNs) would be telecommunications service providers subject to Title II, as would connected device customers. (The latter would be resellers of telecommunications services and thus telecommunications service providers in their own right.) Indeed, the logic behind reclassification would dictate that when a search engine connects an advertising network to a search request or effectuates a connection between a search user and an advertiser, it too would be providing a telecommunications service. And so too would an email provider that transmits an email or a social network that enables a messaging or chat session. The point is, once the Commission separates transmission from information processing, there is no way logically to limit that rationale to one segment of the Internet and not others. Every entity that provides an over-the-top communications capability, whether it’s voice, text, or video, becomes either a facilities-based provider or a reseller (or both) of a telecommunications service.

Except that’s not true. As Jon Brodkin at Ars Technica points out, this appears to ignore basically all of the past dozen years of FCC decisions, including those that defined broadband as information services in the first place. The FCC was able to narrowly tailor those decisions to specific types of broadband, without impacting other types of services, and there’s no reason why it can’t do so here with reclassification. As Free Press’s Matt Wood told Brodkin: “Nothing in Title II says that every last provision has to apply to any Title II service.”

AT&T also spends a lot of time quoting idiotic assessments from Wall Street about how reclassification would be viewed by investors. This is a total red herring and actually should work against AT&T’s point. After all, if Wall Street had its way, broadband providers wouldn’t invest in their networks at all, because that’s just wasted capital expenditure. The analysts that AT&T quotes are the same people who were hammering Verizon for years about its decision to invest in fiber to the home with its Fios service. That investment — which Verizon’s CEO Ivan Seidenberg did despite Wall Street freaking out — helped Verizon build a much better internet offering (though, the company basically stopped investing in it once Seidenberg left). Wall Street’s concerns are about the impact on the next three months. The FCC’s concern is supposed to be on making sure we have a fast and competitive communications infrastructure. Wall Street’s concerns about investment should actually be a clear signal to the FCC that it may be moving in the right direction, in setting up a system whereby the big broadband providers actually have incentives to improve their network.

In short, the Wall Street analysts fretting is really just them worried that AT&T (and others) might actually have to invest in building a better network. That’s a good thing.

Even more hilarious is that nearly all of the Wall Street analyst quotes that AT&T tosses out are from five years ago, and many are insisting that there’s no need for reclassification because of all that “competition” in the broadband space. But now we know that was bunk then, and it’s even more bunk today. Look at some of these quotes from the 2009/2010 time frame:

Craig Moffett of Bernstein Research observed, on the day the Commission proposed Title II reclassification, that: “Markets abhor uncertainty. Today we got uncertainty in spades.” He added that “it is unclear what, precisely, this means for [other] information service providers, including Google”; that he “expect[ed] a profoundly negative impact on capital investment”; and that the “third way” was “an unequivocal negative development[.]”

Jonathan Chaplin of Credit Suisse explained, also in the aftermath of the reclassification proposal, that “[t]he biggest disconnect between Washington and Wall Street is on how the competitiveness of the industry is viewed. . . . Competition is doing its job and regulations would make it very difficult for companies to get reasonable return on investment. . . . The threat of regulation could discourage investment and cost jobs[.]”

Mike McCormack of J.P. Morgan agreed that investors were “extremely nervous about what’s coming” out of this proceeding, and added that “[b]roadband is a very competitive place so there’s no point [in] fixing it[.]”

There may be a “disconnect” between Washington and Wall Street, but there’s also a big disconnect on the actual state of broadband in the US. It’s not competitive and it sucks compared to much of the world. It’s a disgrace, but Wall Street analysts don’t care, because all they want is to make sure that broadband providers aren’t doing capital expenditures on actually building a better network. Their short-term, narrow concern is on the next quarterly numbers from AT&T, Verizon and Comcast — not the overall impact of good broadband infrastructure on basically the entire economy (including, by the way, those big broadband providers). It’s an incredibly short-sighted stance. Ivan Seidenberg didn’t fall prey to idiot Wall Street analysts for years — and yet AT&T insists their word is gospel.

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Comments on “AT&T Warns FCC Of A Parade Of Horribles That Wouldn't Actually Happen If FCC Reclassifies Broadband”

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That Anonymous Coward (profile) says:

“The threat of regulation could discourage investment”

Why would they bother to invest in a company that doesn’t add anything new?
Stagnant businesses don’t generate very good returns, and they tend to “create” them by cutting services & jobs… which in turn weaken the business further. Eventually you reach a point where there is nothing left to cut, the business is failing because they cut maintenance of the existing infrastructure and require someone to come and bail them out to keep them afloat.

AT&T should examine that scenario and invest heavily in the future growth of the company to strength themselves to avoid these Wall Street Vultures who are only trying to turn them into a corpse to be picked up for pennies on the dollar.

Anonymous Coward says:

Re: Re:

You can still get a good decade or two of fairly good returns doing that, particularly when the company has a partial monopoly like AT&T and Verizon do. Then after years directing profits towards good dividends instead of expanding, improving, and maintaining infrastructure; when things start to become shaky, the investors sell their shares before things start to bottom out, and leave someone else to try and bail out the sinking ship. Which to continue the analogy, will likely be bought and scrapped in the end anyways.

That Anonymous Coward (profile) says:

Re: Re: Re:

and they are reaching that end point.
They bought laws to allow them to walk away from POTS, while selling the POTS lines to a ‘subsidiary’ at a song.
It lets them keep the monopoly and walk off with the billions they took from all of us that were meant to actually improve the network.
Their big push now is to get people on their ‘fiber network’ of Uverse… which is still delivered into homes on copper.

Perhaps we should ask where the billions we gave them went, and then work on getting it back as they have managed to violate that agreement. With all of the money they collected, we should all have fiber in the major cities and plans for it to be run wider… they can’t even keep the copper working.

Anonymous Coward says:

Re: Re:

oh man are you ever anti wealth… just think how many will suffer because the hedge funds cannot give their wealthy clients a check at the end of the month. How will they pay their illegal immigrant workers the $100 dollars they owe them for their slavish dehumanizing work? Who cares about the future prospects of the business? I need the money now!

Zonker says:

Re: Re:

Investors (Wall Street) almost never have the best interests of the business in mind, they are only concerned with maximum profit over minimum time. Release the same thing you released last year but newer before it’s ready because we need our money now. Lay off your most valuable (expensive) employees because they are cutting into our quarterly profits. Use cheaper parts and make your product less durable to increase our profits. Sell the smoldering remains of the company we plundered to the highest bidder so we can reap the profits again and run.

Happens time after time to small businesses that get large enough to go public or be bought by a publicly traded company.

JarHead (profile) says:

…to be statutorily required to take reasonable measures to prevent disclosure or use of information, such as IP addresses, websites visited, customer location information and other data, and they would be precluded from using this information without customer consent.

Am I the only one thinking that this is actually a good thing, or am I reading it wrong? Is AT&T really pushing for no privacy over the net, and/or really supporting/arguing for what the alphabet soup are doing?

Killer_Tofu (profile) says:

Re: Re:

I was thinking much the same thing myself. Would it really be so bad if all carriers and large internet entities were forced into respecting privacy? I know that the state of California has at least debated a bill that would move us in the next step towards internet privacy. It more closely followed what people would like of privacy and the rules in place over in Europe. I didn’t hear much of it though after that. Wouldn’t be surprised to find out that the feds came in and squashed it. We all know how much they and the large telcos hate having to respect the public.

Alien Rebel (profile) says:

Re: Re: Re:2 Yeah, That's the Ticket

I do have some recollection of the 1st movie actually, and grew up watching the TV series.

Tom Arnold movie: Ha! Looks like I’m the one providing horrific new information. Word of advice- don’t see it; you’ll become a fan of copyright term extensions just to make sure it never falls into the public domain.

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