Back when Verizon sued to overturn the FCC's 2010 net neutrality rules, the telco argued that the FCC was aggressively and capriciously violating the company's First and Fifth Amendment rights. According to Verizon's argument at the time, broadband networks "are the modern-day microphone by which their owners engage in First Amendment speech." Verizon also tried to claim that neutrality rules were a sort of "permanent easement on private broadband networks for the use of others without just compensation," and thereby violated the Fifth Amendment.
Granted, any well-caffeinated lawyer in a nice pair of tap dancing shoes can effectively argue anything, though in this case you'd obviously have to operate in a vacuum and ignore the history, context and definition of net neutrality to fully do so. Regardless, Verizon did manage to have those original, flimsy rules thrown out, but it had nothing to do with the telco's Constitutional arguments. Verizon won because the FCC was trying to impose common carrier rules on ISPs without first declaring them as common carriers under Title II of the Communications Act, something the FCC tried to remedy with the latest rule incarnation.
"In a statement of issues that AT&T intends to raise when the case moves further into the court process, the company said last week that it plans on challenging whether the FCC’s net neutrality order "violates the terms of the Communications Act of 1934, as amended, and the First and Fifth Amendments to the US Constitution." The First and Fifth Amendment will be used to attack the FCC's decision to reclassify both fixed and mobile broadband as common carrier services, as well as the FCC's assertion of authority over how ISPs interconnect with other networks."
CenturyLink, wireless carriers (the CTIA) and major telcos (USTelecom) have stated they plan to argue the same point, though the precise legal approach obviously isn't being disclosed yet. Basically, AT&T and friends are throwing every legal claim they can possibly think of at the wall and hoping something sticks.
Leaning on the First Amendment when it's convenient has long been a telecom lawyer mainstay, logic be damned. Verizon tried to argue that its participation in the government's domestic surveillance efforts was protected by the First Amendment. Comcast has tried to argue that its right to bar competitors' TV channels from its lineup is similarly protected by the First Amendment. Charter Communications has hinted it believes its First Amendment rights mean it doesn't have to adhere to municipal franchise contracts. Of course, those of us here on planet Earth realize net neutrality is intended to protect the free speech rights of consumers and small business owners from the incumbent ISPs, and the only concept truly being explored here is irony.
from the selling-everything-that-isn't-nailed-down dept
The FCC this week informed broadband ISPs that the agency is no longer going to be napping at the wheel when it comes to broadband-related privacy enforcement. In a new enforcement advisory posted to the FCC website (pdf), the FCC said that with ISPs now classified as common carriers under the new Title II based net neutrality rules, the FCC's going to be taking a long hard look at improving broadband privacy protections. While the actual rulemaking process is still being worked on, the FCC will be leaning on Section 222 of the Communications Act, historically used to protect Customer Proprietary Network Information (CPNI) on phone networks.
ISPs have already started complaining the FCC's imposing draconian, ancient regulations on the modern Internet, and such rules will saddle them with all manner of new costs. Of course it should be noted that most of these privacy protections are fundamental common sense -- and in some cases things most ISPs are already doing. They range from from requiring that ISPs keep private consumer data encrypted when being stored on servers, to not sharing consumer data with third parties without the explicit consent of consumers. The FCC shockingly found that absent such protections, things don't work out well for consumers:
"The Commission has found that absent privacy protections, a broadband provider’s use of personal and proprietary information could be at odds with its customers’ interests and that if consumers have concerns about the protection of their privacy, their demand for broadband may decrease."
Of course ISPs have grown pretty comfortable with regulators that couldn't care less about (or lacked the authority to police) broadband privacy abuses. One case in point is Verizon's recent decision to manipulate wireless traffic to create new, undeletable super cookies. Despite the fact it took security researchers two years to find Verizon's zombie cookie and another six months for Verizon to even seriously acknowledge a problem, the telco has historically tried to argue greater privacy protections aren't needed for broadband and wireless because "public shame" will keep the company honest.
Many users also might recall how ISPs have long sold user clickstream data to third parties, but have historically denied that they collect any of this data whatsoever. Similarly, AT&T has been charging its gigabit fiber users a $44-$66 fee if they want to opt out of having their traffic snooped on via deep packet inspection. In both instances regulators simply couldn't have cared less. Obviously having regulators do absolutely anything at all to protect broadband user privacy is a pretty unsettling change for a industry awash in regulatory capture.
While the FCC hasn't yet solidified the rules for modern broadband networks, it is telling ISPs that it can reach out to the FCC if they have any questions about how the FCC intends to interpret the rules in the snoopvertising age moving forward:
"Although no broadband provider is in any way required to consult with the Enforcement Bureau, the existence of such a request for guidance will tend to show that the broadband provider is acting in good faith. The application of Section 222 offers an opportunity for broadband customers to increase their demand for broadband by knowing that their privacy is well-protected. In that goal, the Enforcement Bureau believes its interests and those of the great majority of broadband providers are firmly aligned."
While I know there's an amazing amount of cognitive dissonance (my own head included) forged by the idea that a government so horrible on surveillance issues could possibly do anything good on the privacy front, the FCC's recent track record of actually giving a damn about consumer issues is encouraging. It's as if the FCC has awoken form a long, deep slumber, and after fifteen years of being an empty-headed bobble head doll, has suddenly started caring about issues like broadband competition, massive, billion-dollar telecom industry scams and state protectionist telecom laws.
None of this is to suggest FCC over-reach on privacy is impossible, but based on Wheeler's behaviors of late it seems likely the FCC's just looking to impose some common sense ground rules. Still, there will certainly be no limit of handwringing among ISPs how some basic broadband privacy protections will destroy the Internet. You know, just like the net neutrality rules are obviously doing.
The FCC's net neutrality rules don't even go into effect until June 12, but they're already benefiting consumers. You'll recall that the last year or so has been filled with ugly squabbling over interconnection issues, with Level 3 accusing ISPs like Verizon of letting peering points congest to kill settlement-free peering and drive Netflix toward paying for direct interconnection. But with Level 3 and Cogent hinting they'd be using the FCC's new complaint process to file grievances about anti-competitive behavior, magically Verizon has now quickly struck deals with Level 3 and Cogent that everybody on board appears to be happy with.
That players in the transit and ISP space are suddenly getting along so wonderfully when ISPs insisted net neutrality rules would result in the destruction of the Internet is nothing short of miraculous. It's almost as if the FCC's new net neutrality rules are already benefiting consumers, companies and a healthy internet alike!
"Until now, a variety of voluntarily negotiated, individualized arrangements have been used to exchange traffic between networks. But, under the Order, these arrangements are now part of the “telecommunications service” that broadband Internet access providers offer their retail customers, and thus broadband providers—but not their interconnecting counter-parties—are subject to the requirements of Title II. Yet again, however, the FCC did not explain what that means or how broadband providers must act."
While the FCC's rules on interconnection are a bit vague, the agency has made it clear they'll be looking at complaints on a "case by case basis" to ensure deals are "just and reasonable." Since this is new territory, the FCC thought this would be wiser than penning draconian rules that either overreach or contain too many loopholes. This ambiguity obviously has ISPs erring on the side of caution when it comes to bad behavior, which is likely precisely what the FCC intended. Still, companies with a generation of history at being bullies complain this ambiguity lets others...bully them:
"Providers are thus left to negotiate contracts subject to sweeping statutory mandates without knowing what decisions could lead to enforcement action. Already, providers face demands for significant changes to interconnection agreements. The parties making those demands are threatening to file enforcement actions if their demands are not met. This distortion in what had been a well-functioning private negotiation process is irreparable harm."
And by "well functioning private negotiation process," the ISPs clearly mean one in which they were able to hold their massive customer bases hostage in order to strong arm companies like Netflix into paying direct interconnection fees. One in which regulators were seen but not heard, while giant monopolies and duopolies abused the lack of last mile competition. Yes, the FCC's actions have been so brutish and aggressive, they've resulted in a cease fire across the interconnection front to the benefit of video customers and internet users everywhere. Will the nightmare ever end?
While there's been no limit of hand-wringing over the new net neutrality rules, much of this has been either hyberbole by giant ISPs that don't like having their anti-competitive pipe dreams quashed, or by folks who don't actually understand what the rules actually do. There are a number of smaller ISPs, partisans and tech execs that exist in the second camp, assuming in kneejerk fashion that the FCC's new rules saddle them with all manner of burdensome regulations. In reality, as we've noted several times, not much changes under the new rules -- provided you don't intend to engage in anti-competitive behavior.
Former Verizon regulatory lawyer turned FCC Commissioner Ajit Pai voted down the rules, and has been waging a bizarre, facts-optional assault on neutrality supporters like Netflix ever since. Last week Pai managed to drum up a little extra hysteria on this front by proclaiming that the new rules were crushing small ISPs with all manner of new costs. Pai trots out several small ISPs that, in filings to the FCC, take a page out of the AT&T pouting playbook and say they're freezing investment in broadband because the rules are just too damn onerous:
"KWISP President Kenneth Hohhof told Ars that his two-person company makes revenue of $250,000 to $300,000 per year, and he estimates that he’ll have to pay $20,000 in legal costs because he intends to hire a lawyer to review his business practices. Hohhof admits that he “pulled that [number] out of the air,” but given the hourly rates charged by telecom lawyers, he expects the bill to be substantial for such a small company.
...Another wireless ISP Pai described is SCS Broadband in rural Virginia, which serves 800 customers and “has already stopped investing in new rural areas because of the FCC’s decision, and it won’t resume until it can ‘determine if the additional cost in legal fees warrant such investments,’” Pai said. “And investors have already told SCS Broadband that ‘projects that were viable investments under the regime that existed before the Order will no longer provide the necessary returns to justify the investment.’"
Yes, like with any regulations, investors will need to do due diligence, and businesses need to occasionally consult attorneys to understand the market landscape in which they operate. Also, shockingly, lawyers do indeed tend to take extra advantage of people who can't be bothered to understand when their services are or aren't needed. And while it's clear the FCC could do a better job communicating the rules' impact, these problems aren't the fault of the rules themselves.
Rather amusingly, Ars Technica then proceeds to dissect most of these concerns point by point, suggesting that most of the small ISPs engaged in hysterics over the rules appear to not understand them in the slightest. As Ars notes, most of the onerous portions of Title II (rate regulation, local loop unbundling) aren't included in the rules, and most smaller ISPs are exempted from new transparency requirements. Indeed, most of the non-blocking, non-throttling, and "reasonable network management" requirements are the same, relatively-generous ones these ISPs lived under with the original net neutrality rules, which they didn't need lawyers to understand and comply with.
The bottom line: a lot of confusion and fear on the part of hysterical anti-Title II folks could be eliminated by actually reading the rules (pdf), instead of listening to incumbent ISP lawyers, former incumbent ISP lawyers like Ajit Pai, or execs like Mark Cuban. Again, many folks who actually run ISPs for a living (like Sonic.net CEO Dane Jasper) note it's only ISPs that engage in anti-competitive behavior that should worry. That's not hard to realize if you've paid attention to the FCC's recent, totally out of character, shift toward notably more consumer and competition-friendly telecom policies that are already benefiting consumers and companies alike.
Even the major ISPs that hate the idea of having their anti-competitive shenanigans policed have repeatedly and quietly admitted the rules don't impact their day-to-day business operations much. While their lawyers and lobbyists have been busy predicting business Armageddon, dozens of ISP execs have gone on record in recent months to admit the rules don't change much of anything for them operationally. And indeed, small ISPs that have bothered to pay attention to this bizarre new about-face at the FCC (like Joshua Montgomery of Wicked Broadband in Kansas) appear to understand this:
"If you're behaving in your customers' best interests and operating above the board, I don't think you have anything to be concerned about,” he said. “If you're advertising a $19 rate and then jacking people's bills up to $125 with fees and other things after six months and claiming some kind of long-term deal, yeah you're probably going to have trouble. [The FCC] made it very clear that their goal is to encourage competition, and I don't think they have their eyes on small players."
At the heart of the net neutrality opposition are very wealthy companies immeasurably angry that somebody is finally trying to stop them from aggressively cashing in on the lack of competition over the broadband last mile. At the periphery are many satellite opponents who just oppose the new rules because (certainly not without some valid historic justification) they believe all regulation is always bad, and you don't need to have an intelligent, nuanced debate on the merits of individual proposals because the fact that regulation is always, automatically bad is always true and la la la I can't hear you. The former have a pretty easy time riling up the latter, but you can go a long way toward avoiding this kind of confusion by actually reading and understanding the regulations you're busy claiming will destroy the business universe as we know it.
We've long argued that one way to help improve broadband competition is to stop letting incumbent ISPs write protectionist state telecom law. For decades now, these laws have been rushed through campaign-contribution-soaked state legislatures. With ALEC's help, these laws usually encode restrictions that prevent towns and cities from improving their own broadband infrastructure, even if nobody in the private sector wants to (aka market failure). It's the epitome of protectionist drivel; in some cases even preventing towns and cities from striking public/private partnerships to improve telecom and municipal services.
So it was refreshing (and a little bit shocking) when the FCC earlier this year woke up from a fifteen-year slumber on this issue. The agency declared it would be using its authority under Section 706 of the Telecommunications Act to pre-empt the more idiotic portions of these laws. Responding to complaints from municipal broadband operators and utilities trying to get into the broadband business, the FCC initially took aim at just two of the worst states: North Carolina and Tennessee, where companies like AT&T have been literally writing laws ensuring their duopoly power remains unchallenged indefinitely.
It's hoped the success of the FCC's work in these two states will slowly expand to the eighteen other states that have passed similar mega-ISP-friendly laws.
Not too surprisingly, politicians loyal to incumbent ISPs cried foul, and immediately started working on drumming up partisan division. It's not working: most municipal broadband networks see broad, bi-partisan community support -- and most municipal networks have been built with Conservative approval in more Conservative-leaning cities and states (whether that's Lafayette, Louisiana, or Chattanooga, Tennessee). ISP-loyal politicians like Tennessee's Martha Blackburn have expressed outrage that the FCC would dare to trample local rights -- something that is, apparently, the sole responsibility of companies like AT&T, CenturyLink, Time Warner Cable and Comcast.
The pretense behind the opposition to municipal broadband has always been that these laws are necessary to protect taxpayers from themselves, since sometimes (like any business model) municipal broadband doesn't work out. Of course some projects have worked well and others haven't, but the decision to travel this path is something that should be left up to the towns and cities themselves, not AT&T lawyers. However, North Carolina has joined Tennessee in suing the FCC over its latest push, claiming the state has been "aggrieved" by the FCC's attempt to remove state barriers to broadband expansion:
"North Carolina Attorney General Roy Cooper has filed a lawsuit in federal court against the Federal Communications Commission seeking to overturn the FCC's decision to allow the City of Wilson to expand its community broadband network service known as Greenlight. The state has been "aggrieved," according to Cooper. But a broadband group labeled the suit a "waste" of taxpayer money. Cooper stated in the suit that the FCC "unlawfully inserted itself" between the state and "political subdivisions" such as communities."
The problem is the FCC is Congressionally mandated to ensure the "timely and reasonable" deployment of broadband services, and it's pretty hard to argue you're helping that goal by letting AT&T lawyers and lobbyists write state law that does the exact opposite. It's not like this influence resides in shadow, ALEC's draft legislation sits on the outfit's website for anyone to read. The irony of using taxpayer money under the pretense of protecting taxpayer money didn't escape municipal broadband groups commenting on the case:
"Attorney General Cooper must not realize the irony of using state taxpayer dollars to ensure less money is invested in rural broadband, but we certainly do," says Christopher Mitchell with the Institute for Local Self-Reliance. "State leaders should stand up for their citizens' interests and demand good broadband for them, rather than fighting alongside paid lobbyists to take away those opportunities."
It's worth reiterating that these towns and cities wouldn't be getting into the broadband business if they were happy with the service provided by regional monopolies and duopolies. The real absurdity of it is this: municipalities, companies and consumers alike benefit immeasurably from expanded broadband in a state, regardless of how it's provided. That Tennessee and North Carolina are willing to throw all of this potential growth away just to protect the campaign cash contributions of big telecom operators speaks volumes about the quality of Tennessee and North Carolina state legislators, and the stranglehold companies like AT&T, CenturyLink and Comcast have over the state legislative process.
For years, we've noted how regulators have paid empty lip service toward the problems with broadband usage caps, historically buying into the ISP narrative that they're just "creative pricing exploration." There are two problems with that: one, they can be (and have been) used to hurt internet video competitors and protect legacy TV revenues. Two, nobody is checking to ensure that meters are accurate, meaning there have been numerous instances where users are overcharged, or hit with usage overage fees when the power was out or their modems were off, with absolutely no repercussion.
"An operator the size of Comcast absolutely will draw scrutiny,” said our source. “If Comcast decides to impose its currently tested market trial plans on Comcast customers nationwide, the FCC will take a closer look. Under Title II, the agency is empowered to watch for attempts to circumvent Net Neutrality policies. Usage caps and charging additional fees to customers looking for an alternative to the cable television package will qualify, especially if Comcast continues to try to exempt itself."
Right now, Comcast only imposes usage caps in a key number of less competitive Southern markets, but has shown every indication it would like to expand caps and overages nationally. As more and more users drop cable TV for internet video, and drop internet voice service for wireless only, ISPs will inevitably look to extract their pound of flesh through broadband rate hikes. Those rate hikes are easier to impose when you claim they're necessary due to "fairness" or congestion (even though the cable industry itself admitted this was a bogus excuse back in 2013).
Of course, this is a nightmare scenario for ISPs, and they'll be quick to suggest the agency is scrambling down the slippery slope of rate regulation, despite repeatedly stating it wouldn't be using Title II in that capacity. Of course, preventing ISPs from using bogus congestion as a revenue generator is a key part of the agency's net neutrality policies, and the agency has already been warning wireless carriers about using throttling and network management to drive unlimited users to more expensive plans. The FCC can correctly argue that caps are more about competition and net neutrality than rate regulation, and it would be right.
Having an FCC that actually cares about these kinds of issues is entirely new territory, since the agency has turned a blind eye to competition problems (and all of the residual symptoms of that disease) for the better part of fifteen years. Of course, an anonymous source promising to "take a closer look" doesn't automatically equate to action, and even this new, more consumer-friendly FCC has remained largely mute on most pricing issues. Millions of DSL and cable customers currently face usage caps, per gigabyte overages and unreliable meters (not to mention obnoxious below-the-line stealth fees) every day thanks to no competition.
You can eliminate these symptoms by curing the disease that is a lack of competition, but with entrenched duopolies and regulatory capture making that a multi-decade effort, it might be nice if somebody, somewhere could protect broadband consumers from getting screwed in the interim.
Back when AT&T stopped offering unlimited wireless data, it grandfathered many of the unlimited users it had at the time. Unfortunately for those users, AT&T immediately started waging a quiet war on these customers as part of a concerted effort to drive them like cattle to more expensive plans. That included at one point blocking Facetime from working at all unless users switched to metered plans (but net neutrality is a "solution in search of a problem," am I right?) and throttling these "unlimited" LTE users after they'd consumed as little as three gigabytes of data.
Then, just about a year ago, the FCC (like it has on a number of consumer telecom issues like telco accounting fraud or municipal broadband) miraculously awoke from a deep, fifteen-year slumber and decided to do something about this kind of behavior. FCC boss Tom Wheeler started warning telcos that they can't use congestion as a bogeyman to justify cash grabs, and that network management should be used to actually manage network congestion -- not as a weapon to herd users to more expensive options. The FTC also filed suit against AT&T for false advertising over its "unlimited" claims.
"As a result of the AT&T network management process, customers on a 3G or 4G smartphone with an unlimited data plan who have exceeded 3 gigabytes of data in a billing period may experience reduced speeds when using data services at times and in areas that are experiencing network congestion. Customers on a 4G LTE smartphone will experience reduced speeds once their usage in a billing cycle exceeds 5 gigabytes of data. All such customers can still use unlimited data without incurring overage charges, and their speeds will be restored with the start of the next billing cycle."
As of this week, the policy now looks like this:
"As a result of AT&T’s network management process, customers on a 3G or 4G smartphone or on a 4G LTE smartphone with an unlimited data plan who have exceeded 3 gigabytes (3G/4G) or 5 gigabytes (4G LTE) of data in a billing period may experience reduced speeds when using data services at times and in areas that are experiencing network congestion. All such customers can still use unlimited data without incurring overage charges, and their speeds will be restored with the start of the next billing cycle."
In other words, gone are the references to throttling unlimited LTE users just because they hit a totally arbitrary threshold, and the company is now using network management to manage the damn network, not to make an extra buck. AT&T will of course find other, clever ways to annoy these users until they switch to more expensive plans, but it's at least good to see that the network congestion bogeyman (fear the exaflood!) isn't quite as effective as it used to be when it comes to justifying high rates, misleading consumers or conning regulators.
Comcast's earnings this week indicate that the cable giant everybody loves to hate spent $99 million on trying to get its $45 billion merger with Time Warner Cable approved last quarter. All told, Comcast spent $336 million on trying to sell the deal before it was ultimately squashed by regulators for being just too big and ugly. And that's likely not including all of the costs of the deal, like the money thrown at minority and other groups to create the illusion of diversity of support for the deal. That's money that could have been spent on Comcast's historically abysmal customer service, which contributed to the negative public sentiment surrounding the deal.
Neither the failed merger nor the FCC's new net neutrality rules appear to have stopped the company from its plan to deploy still-unpriced, 2 gigabit service to 18 million homes by the end of the year (including to some cities it had previously sued, threatened, and otherwise manhandled to try and stop precisely these kinds of services from being deployed). Speaking to investors and analysts, Comcast cable CEO Neil Smit proclaimed that the FCC's reclassification of ISPs as common carriers hasn't impacted the way Comcast does business in the slightest:
"On Title II, it really hasn't affected the way we have been doing our business or will do our business. We believe on Open Internet and while we don't necessarily agree with the Title II implementation, we conduct our business the same we always have, transparency and nonpaid peering and things like that. I think how it will emerge remains to be seen. We have been flexible in our packaging with HSD. We have invested significantly in our capacity and will continue to do so and that includes both the -- we launched a 2 gigabit speed, 2 gigabit symmetrical speed recently. We are rolling that out across 18 million homes by the end of the year..."
Which, again, is odd given the fact that Comcast's participating in a lawsuit where the primary argument is the FCC's new rules are so "arbitrary and capricious," they'll demolish sector investment. If you're playing along at home, Smit's only the latest broadband industry executive to admit that the FCC's rules really won't hurt the sector. Frontier, Cablevision, Sprint, Sonic and even Verizon executives have all said, at one point or another, that the FCC's new neutrality rules aren't going to even dent sector investment.
And while some of these executives have claimed their comments have been taken out of context. They keep making the same statements. Time Warner Cable CEO Rob Marcus this week also proclaimed that nothing really changes under Title II:
"At this point in time no changes to our overall philosophy. Obviously, we're going to be watching closely how things unfold on the Title II front. We have said [in] the past that [our] normal business practices comply entirely with the notion of the open Internet. No blocking, no discrimination, no throttling, and transparency are fundamental parts of the way we do business. So to the extent that's the full scope of what gets implemented under Title II, I think you won't see a change in the way we do business. To the extent that something more comes from this, as we would describe it, excessively broad granted authority, then we will have to revisit the way we are approaching investment and pricing.
Charter CEO Tom Rutdledge offered a similar sentiment:
"Well, look on the regulatory side, I mean I think every situation is different. Title II was a -- it's actually a longstanding issue. The issue of net neutrality has been around for a long time and companies have been agitating. It's been part of the President's agenda all along, and he campaigned on it initially. So it's not surprising that the forces that prevailed there did. Although I wish it were structured differently and I thought that the outcome was less than ideal, I don't think that is particularly related to being friendly or not friendly to cable in general."
And here again we have Comcast not only saying that Title II doesn't hurt them, but proving as much by continuing with an 18 million home fiber deployment that wasn't supposed to be possible under the "innovation chilling" new neutrality regime. So yeah, perhaps cable executives can sit down with their lawyers currently suing the government and compare notes. Because the network investment bogeyman just isn't scary when you consistently admit he's just not real.
After a fifteen-year slumber, regulators have apparently decided it might be a good idea to start cracking down on rampant fraud in the telecom market. Not long ago, we noted how AT&T was finally fined for abusing the IP Relay network for the hearing impaired, intentionally turning a blind eye to scammers on the network just to haul in the $1.50 per minute subsidies tied to the network. AT&T strung regulators along for years, implementing "solutions" that it knew wouldn't work but technically met flimsy FCC requirements. As a result, simply stopping AT&T from profiting off of defrauding the deaf (it's estimated that 95% of AT&T's IP Relay traffic at one point was credit card or other scammers) only took regulators the better part of two decades.
Last year, regulators finally cracked down on AT&T for helping scammers of a different sort: crammers. Crammers had been gouging AT&T customers for most of the last decade, charging them $10 a month for garbage "premium" text messaging, horoscopes and other un-asked-for detritus. There again, AT&T intentionally turned a blind eye to the criminal behavior, in large part because the company was netting around 35% of the proceeds from the scams. Worse perhaps, regulators found AT&T was actively making its bills harder to understand so the fraud would be more difficult to detect.
This month, the FCC has announced that it has struck a settlement with AT&T and former subsidiary SNET, over charges the companies were collecting undeserved subsidies under the agency's "Lifeline" program, a low-income community subsidy effort created by the Reagan administration in 1985 and expanded by Bush in 2005. According to the FCC's findings, AT&T apparently "forgot" to audit its Lifeline subscriber rolls and purge them of non-existent or no-longer-eligible customers, allowing it to continue taking taxpayer money from a fund intended to aid the poor:
"AT&T and SNET’s failure to remove ineligible Lifeline customers from their rolls was discovered in 2013 during an FCC audit of two AT&T Lifeline affiliates. The audit found that a number of Lifeline subscribers who no longer qualified for the program had not been de-enrolled following the annual recertification process for 2012 and 2013, a process in which consumers are required to certify their continued eligibility for Lifeline. These subscribers were given one extra month of Lifeline support, and AT&T improperly claimed reimbursement from the government for this extra month. Additionally, the Enforcement Bureau found other de-enrollment and recordkeeping violations."
The FCC announcement goes well out of its way to avoid calling this fraud, but unless you believe AT&T honestly forgot to purge its rolls (pretty difficult to do in full context of AT&T's historical behavior), it's hard to call it anything but. The FCC doesn't specify how great the discrepancy was, but given the speed at which AT&T has been backing away from unwanted DSL and phone markets, the revised differences likely aren't modest. This latest fine comes as AT&T is busy trying to convince the government that there's an endless parade of amazing benefits to be had by letting AT&T acquire DirecTV, effectively eliminating a competitor from the pay TV space.
Historically, telecom regulators love slam dunk cases against small scammers, but were willfully oblivious or too timid to acknowledge the larger players' culpability. With regulators no longer napping in regards to obvious fraud by bigger telecom players like AT&T, companies have unsurprisingly started grumbling that Travis LeBlanc, Chief of the FCC’s Enforcement Bureau, is being too hard on industry and therefore not actually curbing bad behavior:
"Two telecom-industry advocates complained that LeBlanc has been successful at grabbing headlines, but less effective at actually curbing bad behavior. By not being lenient on companies that self-report violations, he is discouraging future companies from coming forward, they said. "The FCC's new approach will discourage cooperation and self-disclosure, and it's going to force regulatees to beef up on litigation instead of compliance with the rules," one industry lobbyist said. "Ultimately, that's a poor use of resources for taxpayers, and it will lead to a worse result for consumers."
Yes, doing the bare minimum to prevent AT&T from ripping off taxpayers and consumers is just an atrocious affront to taxpayers and consumers.
While overreach is certainly possible, most of the stuff LeBlanc is cracking down on is either outright fraud, or the kind of enforcement that's hard to seriously cry foul about (like fining companies for failing to report 911 outages or airing porn during prime time). By and large, LeBlanc appears to be following the lead of FCC boss Tom Wheeler, breaking FCC tradition and actually standing up to large telecom companies. If there's a place LeBlanc (former aide to California AG Kamala Harris) may overreach, it's as the FCC begins using newfound Title II authority to re-examine broadband privacy rules.
For the moment, however, it's just interesting to see the FCC no longer turning a blind eye to scams and fraud when the country's biggest telecom campaign contributors are involved, even if the fines being levied are likely a small fraction of the total money AT&T has made off of a decade of very shady behavior.
Having written about the FCC for most of my adult life, I've grown cynically accustomed to an agency that pays empty lip service to things like consumer welfare and the painful lack of broadband competition. It doesn't matter which party is in power; the FCC has, by and large, spent the lion's share of an entire generation ignoring last mile competitive problems and the resulting symptoms of that greater disease. When the agency could be bothered to actually address these issues, the policies were so tainted by the fear of upsetting campaign contributors (read: regulatory capture) they were often worse than doing nothing at all (see our $300 million broadband map that hallucinates speeds and ignores prices or 2010's loophole-filled net neutrality rules co-crafted by Verizon and Google).
Whether it was former FCC boss turned cable lobbyist Michael Powell's claims that massively deregulating the sector would magically result in telecom Utopia (tip: that didn't happen) or Julius Genachowski being utterly terrified of taking any meaningful stand whatsoever, the broadband industry has spent decades governed by an agency that, at its best, is too timid to do its job, and, at its worst, is an obvious revolving-door lap dog to an industry it's supposed to regulate.
So in 2013 when it was announced that a former lobbyist for both the wireless and cable industries would be the next FCC boss, the collective, audible sighs of disgust unsurprisingly rattled the Internet. I, like many others, believed we were bearing witness to a twisted culmination of decades of regulatory capture, a giant, living, breathing middle finger to a public hungry for a more consumer and innovator-friendly FCC. John Oliver even put Wheeler's name in lights when he infamously compared hiring the former cable lobbyist to employing a dingo as a babysitter:
Most people (with a few notable industry exceptions) believed Wheeler was the final nail in a grotesque, campaign-cash stuffed telecom coffin long under construction. We were painfully, ridiculously wrong.
In fact, if you read profiles on Wheeler, he's turned out to be a complete 180 from the thinking of a traditional revolving-door regulator, basing his decisions on all available information -- even if that data conflicts with previously-held beliefs (a unique alien indeed in 2015). And while it's true that massive grass roots advocacy helped shift Wheeler's thinking on issues like Title II, his embrace of issues like municipal broadband required little to no shoving, since the lion's share of the public had no idea the issue existed. One of the biggest reasons Wheeler's willing to stand up to the broadband industry? He's 69, and no longer biting his tongue and biding his time for the next cushy lobbyist or think tank gig. Perhaps we should make a rule that all future FCC bosses must be on the brink of retirement to avoid what we'll henceforth call Michael Powell syndrome.
Still, watching Wheeler fills me with cognitive dissonance, as if my frequently-disappointed brain isn't quite sure what to do with an FCC Commissioner capable of objective thought free of AT&T, Comcast and Verizon lobbyist detritus. As a sure sign of the looming apocalypse, last week I watched an FCC Commissioner issue a statement about protecting competition -- and actually mean it:
"Comcast and Time Warner Cable’s decision to end Comcast’s proposed acquisition of Time Warner Cable is in the best interests of consumers. The proposed transaction would have created a company with the most broadband and video subscribers in the nation alongside the ownership of significant programming interests. Today, an online video market is emerging that offers new business models and greater consumer choice. The proposed merger would have posed an unacceptable risk to competition and innovation especially given the growing importance of high-speed broadband to online video and innovative new services."
Though his tenure's unfinished, it may not be a stretch to say that a man most of us believed would be the epitome of revolving door dysfunction has proven to be one of the most consumer- and startup-friendly FCC Commissioners in the agency's history. Granted that may not be saying much; caring more about consumers than Martin, Powell and Genachowski is like getting an award for beating a handful of lobotomized ducklings at a hundred yard dash. And none of this is to classify Wheeler as a saint -- the agency's net neutrality rules have some very concerning loopholes and the FCC still refuses to talk much about pricing, whether that's the problems inherent in usage caps, unreliable meters, or sneaky below the line fees.
Still, it's a lesson learned in letting your mind run on cynicism autopilot, and it's a reminder that even our very broken, campaign-cashed soaked government can still occasionally manage to give birth to consumer-friendly policies. So in short, the tl;dr version is this: I apologize to you, Tom Wheeler, for believing you were a mindless cable shill. I was wrong.