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.