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New FCC Internet Regulations Will Strengthen Monopoly Control

Why a cartel of private monopolies control the Internet? How do we put the public interest first?

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore.

The net neutrality debate has broken out again, as the FCC is going to establish new rules as a result of a court decision which undid its old rules on net neutrality. There was some fear in the activist community, media reform community, that these new rules will now in fact eliminate what is known as net neutrality–that is, everyone gets the same service, the same speed from their internet provider, and big companies don’t get any faster or more privileged service than anyone else, and that there’s no ability of internet providers to discriminate against any kind of content. No one knows exactly what is in these new regulations. They come up in a few weeks when it will be public, but there’s already a lot of controversy.

Now joining us to talk about all of this from Urbana, Illinois, is Robert McChesney. He’s the author ofDigital Disconnect: How Capitalism Is Turning the Internet against Democracy. He’s a professor of communications at the University of Illinois at Urbana-Champaign.

Thanks for joining us again.


JAY: So let me quickly tell you how I see this fight, and tell me if you agree and what you make of it. There’s an intercorporate battle going on. Comcast is saying to Netflix and YouTube–and some others, but mostly those two–we’ve spent tons of money–and, of course, it’s not just Comcast; all the internet providers, but Comcast is the biggest–they’re saying, we spend all this money on infrastructure and high speed and fiber and so on and so on, and you, YouTube and Netflix, are making a fortune with your videos on our framework, and we want you to pay more for being there, and if you do, we will give you better and faster service.

Then there’s a separate contradiction or fight between the internet providers and the community at large, if you want to say, the public interest, which says, you can’t use an information highway that everyone depends on to privilege a few big companies.

So is that more or less the fight? And what’s at stake? But start with the first one, because the intercorporate fight isn’t necessarily the same fight as the fight in terms of the public interest.

MCCHESNEY: No, absolutely not, because the corporations are simply out to maximize profit, and free speech, democracy, access to information, those are just rhetorical flourishes. I mean, they’re there to maximize profit, and that’s what this is all about.

What’s driving this whole thing, this need to get rid of net neutrality, is that the cartel that dominates internet service provision in the United States–AT&T and Verizon on the smart phone side, and then Comcast on the wireline broadband, and that’s who’s really pushing this, I think. There’s a lot of money to be made if you can get rid of net neutrality. There’s a lot of money to be made if you can sort of open up new revenue streams, both at the website side–the users, the services, the Netflix side or the Amazon side–and also to user side, so people have to pay more to get higher-quality service. And that’s what’s driving this. It’s profit. It’s commercial needs altogether.

JAY: It’s the same thing driving Netflix and YouTube. It’s nothing but profit driving them.

MCCHESNEY: Yes, on both sides. And, in fact, this is a really interesting development that’s taken place. Back in 2005 to 2008, when net neutrality first became an issue and Free Press started organizing around it and Larry Lessig and people like myself were writing about it, we won a lot of temporary victories. Usually in all the merger deals at that time, we got neutrality provisions put into the merger deals to prevent these conglomerates and these huge companies from effectively trying to privatize the internet with their monopoly power. And in those fights we were successful to no small extent because companies like Google and Amazon and Apple didn’t want to be shaken down by Comcast to have to give them a kind of the action. And to be fair to Google and Amazon, they’re paying a lot to be on these networks already. They’re not getting freebies. They just didn’t want to be shaken down additionally by the Comcasts, AT&Ts, and Verizon s of the world.

One of the things that might be going on now–and this is, I would say, somewhat speculative–is that the internet crystallized where there’s a handful of really dominant monopolies that control almost all the action online–you know, Apple, Amazon, Microsoft, Facebook, Twitter, Netflix–that these companies are not as antagonistic towards maybe getting rid of net neutrality as they would’ve been five or ten years ago, because they know that it could lock in their monopoly power. Comcast needs them as much as they need Comcast.

JAY: Which is why Netflix recently signed a deal with Comcast to get this privileged service.

MCCHESNEY: Precisely. So it’s really a sort of–here you see basically the class alliance, that they both can clean up and the losers will be any small businesses that now is cut out altogether. And, of course, the consumers of America are getting royally screwed.

JAY: Now, from the point of view of public interest, I personally don’t see why if the information highway, if the analogy is a highway, then we have public highways now, and right now if you drive a tractor trailer with freight and you’ve got way stations that even measure how much you’re carrying, you’ve got to pay extra fees for using the public highway. Now, you don’t get your own lane, you don’t get to go faster, but on highways we get to say, well, you’re using them more than just the normal either small business or person just driving and you’ll have to pay more. Now, if Comcast says that to Netflix, in other words, they don’t get to go any faster, but they do have to pay more ’cause they’re using so much more of the bandwidth, why do we care?

MCCHESNEY: Yeah. Well, you know, I think the reason why we should care is not–unless we’re shareholders of those companies, the fight–we don’t have a dog in that fight, so to speak. But what we care about is: why do we even have internet service [incompr.] dominated by one company? Why is Comcast, this Standard Oil type monopoly that controls wireline broadband–in basically most parts of America, you Uhave one company you have your choice with, which is the cable company, and that’s increasingly Comcast (when they merge with Time Warner, it’ll be overwhelmingly Comcast), that has monopoly power over what you get. And that’s the assumption that’s built into these debates that needs to be unpacked.

JAY: Okay. That’s where we get into the bigger public interest picture. But that’s what I would call part A of our conversation, and let’s get to that, which is part B. So part A of the conversation is, within this current capitalist framework where you do have private ownership and we’re making demands, we the public are making demands on the FCC, why do we care whether Comcast gets to charge Netflix or YouTube more as long as they can’t go any faster? That’s the problem, isn’t it, is that if you start privileging them for extra money, that’s where you start to discriminate against others.

MCCHESNEY: I think we care because as soon as the law makes any sort of loophole for charging more, even if they–you know, there’s sort of the law [incompr.] the policy that Tom Wheeler and the FCC have come up with, it’s got all sorts of find language protecting consumers and not allowing egregious offenses to be done. But what we know from regulatory history and from the history of the phone companies and the cell phone companies is that the law is only as good as its enforced. And what happens is that once the policy is put into play, if there’s an enormous amount of money to be made doing something, these companies will do it, and they’ll have enough lobbying power that they’ll get away with it regardless of the words on the page. So if you open up a crack, they’re going to drive a Mack truck through it. And we all know that. They know that, which is why they’re perfectly happy to allow fine words to be written on a page prohibiting this or that. They know they can get away with murder once they get the change.

JAY: Right, and also once you change the FCC. So if you’ve already created, essentially, a two-tier, then someday you will have that second-tier privilege, whenever they say now.

MCCHESNEY: That’s right. And I think only naive people don’t think that or people who are trying to make the best of a bad situation for the Democrats and the Obama administration.

JAY: Okay. So let’s get to the bigger picture, which is: why is such a highway privately owned in the first place?

MCCHESNEY: Americans assume that the type of internet system we have is the logical, rational one, that companies compete and there’s a free enterprise system. Nothing could be further from the truth about internet service provision in the United States today. We have what Harold Feld has called a “cartel”. We basically have three enormous companies–Verizon, Comcast, and AT&T–and a few other quasi-enormous companies that have more or less divvied up the market for internet service provision–wireline broadband, like Comcast has with cable, and also smart phone access, like Verizon and AT&T have by dominating the cell phone market. And as a result of having this cartel that these companies have set up, which–you know, these are companies that are not free-market companies; these are companies that were built up entirely by getting government monopoly licenses, government monopoly franchises to do telephone and cable TV services.

By setting up this cartel, what we have in America today is Americans pay much more to get cell phone service, much more to get wireline broadband than people do in most other countries, and we get a much lower service. It’s one of the cruel ironies that here we are in the United States, the country that invented the internet, the country that in 1999 or 2000 was light years ahead of most places in the world. We were at the top of the list in the quality of internet service and the percent of the population that was online. And we’ve fallen now, so that depending on the ranking, we rank between 15 and 30, sometimes 35 or 40, on rankings from what you pay, the speed, the quality of the service.

And it’s not an accident. This is what happened when very powerful corporations own the government, when they basically have the regulators in their pocket. They merge, they get smaller, they don’t compete with each other. What we’ve seen with the cartel is, in effect, for the last two or three years, AT&T and Verizon are no longer aggressively trying to do wireline broadband. They’re not competing with Comcast on that. Basically they’re saying to the cable guys, you guys get wireline ISP access to the internet; we’ll do the cell phones. Comcast is not going to compete on cell phones. It’s not going to compete there. They’ve divvied up the market. And as a result, they’re spectacularly profitable companies. They’re companies that have lobbying power in Washington that’s almost unimaginable. But the quality of the service for Americans is horrible.

And is a result of having this sort of lobby, you see the issue of net neutrality. This is something that wouldn’t even be considered an issue in the 1990s. We took it for granted that everyone would have access to the internet equally, that it wouldn’t be privatized. But now that you’ve got these few companies that dominated, they’re looking around for ways to make–more ways to make money.

JAY: Now, didn’t the Obama–when Obama ran originally, and I think even when he reran, didn’t he promise to support net neutrality? We’re not seeing that.

MCCHESNEY: He absolutely did. In fact, you know, one of the great stories of the Obama administration–or the Obama campaign in 2008 is that, you know, everyone knows that one of the ways that Barack Obama distinguished himself from Hillary Clinton in the Democratic primaries in 2007, 2008 was that he’d given a speech that was against the invasion of Iraq a few months before the invasion, whereas Hillary Clinton had voted for the invasion of Iraq as a senator from New York. And Obama used this skillfully, brilliantly, in fact, to get much of the liberal and progressive and antiwar sentiment in the voting base of the Democratic Party, which was significant, to see him as the more rational, better choice.

Well, at the same time, the second issue that I think Obama really sees smartly was the internet. He was much more advanced on internet policy than Hillary Clinton was and the other candidates in 2007. He was using it. And he went out of his way to say he would take a back seat to no one when it came to protecting network neutrality and the internet. Net neutrality, he said, was going to be his cause. He mentioned it numerous times in speeches. He had an ideal policy. It was a policy–basically, it could of been written by Free Press, it was so strong. So he ran on that. And the tech community, I think, rallied to support him on those grounds, that here’s a guy who gets it, here’s a guy who’s not going to be bullied around the AT&T, Verizon, and Comcast.

Unfortunately, though, when President Obama–when candidate Obama became President Obama, he got in the back seat. He might have gotten, even, in the trunk. Suddenly his concern with network neutrality pretty much disappeared, except as a rhetorical flourish. And there was a real easy way to measure this–and this is the great story about network neutrality. The FCC has it within its power to implement full throttle network neutrality, and it could do it right now, instantly, legally, by what the Supreme Court and the federal courts have said.

What happened is this. In 2002, the Bush FCC, the George W. Bush FCC, with a majority of Republicans, voted along party lines to convert broadband ISP from what’s called a telecommunications service to what’s called an information service. And this was absolutely foundational to where we are today, because prior to that switch, internet access was considered a telecommunications service like having cable TV or like, better yet, telephone service, and that meant that the government had a right to regulate it in the public interest to guarantee everyone had access to it. And everyone agrees that if broadband ISP service was regarded as a telecommunications service like it had been, then the government could easily implement, constitutionally, network neutrality and there’d be no debate about it whatsoever. But by switching it to an information service, that means that it’s no longer regulated like it’s–as a serious public interest. It’s more like a private business. And that’s created all the problems.

Now what the FCC tries to do neutrality policy like it did a couple of years ago, the courts say, you’re violating the constitutional rights to regulate an information service that doesn’t–you can’t regulate it like a telecommunications service. And this is the crux of the problem. So if the Obama administration was serious about doing net neutrality, it was very simple: it simply said, let’s reclassify broadband internet access as a telecommunications service like it should be. If it had done that and it won on party line votes, it could then implement a full net neutrality policy, case closed. But it didn’t do that. It decided not to do that. I think the reason is that it didn’t really want to tangle with the cartel, it didn’t really want to get in the ring with AT&T, Verizon, and Comcast.

JAY: Okay. In a few weeks we’re going to knowing exactly what the new FCC policy is, and we’ll come back to then.

MCCHESNEY: Okay, great. Thank you, Paul.

JAY: Alright. Thanks very much for joining us, Bob, and thank you for joining us on The Real News Network.

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