Open Access Won't Be What You Think It Is

by: Jason Rosenbaum

Sat Mar 29, 2008 at 18:29


(A good companion to Chris's latest. - promoted by Paul Rosenberg)

Want faster Internet? Want cheaper Internet? Want both cheaper and faster Internet - the kind people in Europe or Asia currently enjoy? Don't hold your breath.

The same two telecommunications companies that control vast swaths of America's wires have just won another auction, this time for the much-hyped "700 band" wireless spectrum:

When Congress authorized this auction, their stated intention was to pry open our cell phone and broadband markets to consumer choice and new competition. But having Verizon and AT&T control the most significant chunks of the spectrum -- including the so-called national C Block -- means more of the same for Internet users.

...

Verizon and AT&T are already among the most dominant providers of "wired" broadband access in the U.S. Their victories over the bulk of 700 MHz licenses leave slim prospects for genuine Internet competition via a wireless "third pipe."


But wait! What about that "open access" stuff Google was pushing for?
Jason Rosenbaum :: Open Access Won't Be What You Think It Is
While it's true Google seems to have won over the FCC with their request for winners of the 700 band auction to be forced to open their network to competing devices, open access isn't all it's cracked up to be. You see, the FCC has tried open access before and it hasn't worked.

When the Telecommunications Act of 1996 was passed, local phone companies (mostly controlled by the big Bells) were forced to open up their local wires to competitors. The new companies (called CLECS) could rent access to the local wires controlled by the Bells and sell us new, supposedly better and cheaper phone services. It was supposed to be a windfall for competition and consumer satisfaction.

What happened? Well, these companies quickly went bankrupt.

Now, some say the CLECS went bankrupt because their business model was poor. While there is merit to that argument, the providers from whom the CLECS were renting access - much as Google will have to rent access from Verizon or AT&T - fought open access regulations tooth and nail. Lawsuits and complaints to the FCC about the Bells' "anti-competitive practices" such as predatory pricing, misleading fees, inaccurate billing, and other shady business dealings were rampant. In short, the FCC failed to enforce their regulations, the monopoly phone companies failed to follow the law, and open access was often little more than a catchy phrase.

The same will undoubtedly happen to this new, "open," wireless spectrum. With Verizon and AT&T executives already calling open access, "something we would not be in favor of," these giant corporations will fight FCC regulations with everything they have. The endgame is predictable:

Typically, while incumbents [like Verizon and AT&T] drag their heals, they point to the difficulties that they themselves create as proof that the "open access" concept is "unworkable." "Look,"the incumbents will tell the FCC. "No one is making these wonderful devices they promised. Maintaining an 'open access' network is an expensive pain in the neck for us. It will be ever so much more efficient - and benefit consumers too! - if you get rid of this silly 'open access' requirement." And despite the fact that would be users of open access will be jumping up and down saying "if you'd just enforce the damn law we could actually provide some new devices and services!" the FCC will decide that enforcing the law is just too much of a bother and it is much easier to give the incumbents what they want.

If we want real broadband in America, net neutrality is the only option.

Contrary to the belief that net neutrality is technically unworkable, it actually spurs innovation and infrastructure. As net-neutral web use expands and begins to outpace the bandwidth available, telecom companies will be forced to expand their pipes to handle the increased load. Net neutrality gives telecom companies an incentive to expand America's broadband infrastructure, eventually giving us the kind of speeds and prices enjoyed in net-neutral Europe and Asia.

If, on the other hand, we forgo net neutrality, telecom companies have an incentive to devise clever ways to reduce each customer's bandwidth instead of building expensive new infrastructure. The result is the slow, expensive, and duopoly controlled Internet experience we have now.

Catch phrases like "open access" are great, but there is no substitute for true net neutrality.

(originally posted at The Seminal)


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Shocked! (0.00 / 0)
I'm shocked they didn't give the contract to the French...

We can walk and chew gum at the same time (0.00 / 0)
You're saying, effectively:

Because the Broadband Trust will work to undermine the "open access" provisions, and the FCC will let them do it, we should implement net neutrality.

But net neutrality is more about content than access. I can already plug in any equipment I like to my cable line. Comcast only cares about what actually goes through the pipe, which is where net neutrality comes in.

The phrase "net neutrality" has been coopted to also include open access provisions, I believe wrongly, but using the umbrella term when you specifically mean "allowing any piece of equipment to be attached" is blatantly wrong.

We need the FCC to have real enforcement power. They need to enforce the open access rules, and we need -- separately and simultaneously -- to get net neutrality through Congress.

Terminology is not the issue. Focus is.


Sure, I agree (0.00 / 0)
Yes, there are two issues at stake here. But my ultimate goal is to get fast, cheap broadband like people have in Europe and Asia. To do that means better infrastructure. To do that you need net neutrality.

Often, these open access things are touted as being a substitute for net neutrality. Now, I'm not saying net neutrality is a substitute for open access, but net neutrality gets me where I want to go, and so I'm going to hit back when I see these false memes that open access is some kind of big win for competition and broadband in America. It's a step forward, but a pretty small one.


[ Parent ]
Jason is right about this... (0.00 / 0)
At first I was thinking the same as the commenter then I saw where he gave his reasoning.
[quote]As net-neutral web use expands and begins to outpace the bandwidth available, telecom companies will be forced to expand their pipes to handle the increased load. Net neutrality gives telecom companies an incentive to expand America's broadband infrastructure, eventually giving us the kind of speeds and prices enjoyed in net-neutral Europe and Asia.[/quote]

This reasoning is sound with my understanding of the issue. Net neutrality WOULD INDEED eventually lead to cheaper pipes and usage of them.

However I don't think that is a reason we shouldn't push for REAL open access AND net neutrality.

End this war. Stop John McCain. Cindy McCain is filthy rich.


[ Parent ]
Agreed (0.00 / 0)
As Matt and I were discussing below, real open access is still crucial.

[ Parent ]
Open access isn't what you think it is.... (0.00 / 0)
The "open access" requirement applies to devices... Right now, the cell phone companies can control what devices and applications they allow on the network.  The new rules are designed to make the wireless internet more like the wired internet, where all sorts of applications and devices are proliferate and grow the utility of the network!

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!


That sounds right to me (0.00 / 0)
My (very, very limited) understanding of open access is more along those lines. It will open wireless internet up to devices, not ensure competition. I hope that it isn't easily skirted by telephone companies, though I could see why that is a danger.

That doesn't really diminish the central point though, which is that to establish a national wireless broadband network that is cheap, fast and fair, we need a national broadband strategy that includes (as a necessary, but not sufficient component) net neutrality.

I support John McCain because children are too healthy anyway.


[ Parent ]
I believe this to be WRONG (0.00 / 0)
Its not about devices. Cell phone frequencies have ALWAYS been open to all sorts of devices. It is the actual requirement they allow usage of their FREQUENCIES.

This is my understanding, if I'm wrong, then that is just a stupid and pointless provision to begin with.

End this war. Stop John McCain. Cindy McCain is filthy rich.


[ Parent ]
This post raises good points but (0.00 / 0)
it seems to ignore the fact that the "foot-dragging" and "law-suiting" strategies the incumbents have taken in response to virtually all regulation they oppose will also be applied in spades to any NN regulations.  

I don't see any good reason to believe that NN rules won't be at least as susceptible to such strategies as previous regulatory schemes like "UNE-P" and the "open access" requirement suggested above.  I'm open to being convinced otherwise, but have yet to be.

Solutions like "structural separation" (of pipe-ownership and retail services) and "muni-broadband" strike me as more fundamental and manageable solutions, though the former would be very hard to achieve politically and the latter also faces strong resistance from incumbents and requires further evolution (and understanding) of muni-broadband business models and management skills.  It would also take a lot of time and money--maybe a year's worth of Iraq spending to wire up most of the whole country, plus several years for the actual construction.

There are already a small number of successful models for financially-sustainable publicly-owned fiber-to-the-home networks, which offer virtually unlimited capacity.  That, to me, represents the gold standard for transforming the telecom/media oligopolies we've known since the 1930s, and could be overlayed with an open and neutral "wireless cloud" to support mobility.  Assuming the FCC opens up the broadcast "white space" spectrum (which Google, MSFT and others are pushing for), it is very well suited for this purpose, and there's plenty of it.    


time to wire up? (0.00 / 0)
mitchipd writes that it will take time to create wireless infrastructure.  I think that's what he meant.  If so, I tend not to agree.

The administration decided through their FCC lackeys, that every American needs  to be able to watch digital tv.  Between December of 2007, and February of 2009, the entire nation shifts to digital transmissions with nifty little digital/analog boxes.  A "make sure every American can watch digital tv national policy", if-you-will.

Of course, they could have decided there should be a "make sure every American can have free local broadband infrastructure national policy".  The boxes needed for this kind of wireless infrastructure is actually smaller than the digital tv converter boxes.  The price is lower than the digital tv converter boxes.  Users in every community would have local digital tv, digital radio, text, data, graphics all flowing freely within the community.  Every community then connects to the next community, and our nation's "last mile solution" makes it a level playing field to coerce reasonable wholesale Internet pricing from the used-to-be monopolists.

You might want to ask your local and state officials why they won't do this.  Open-mesh.com and others stand ready to provide all the boxes anyone wants for $50 or less.


[ Parent ]
Sorry I was unclear. (0.00 / 0)
I meant that a muni-fiber buildout would take a fair amount of time and money.  As you note, wireless will take less of both and is worth doing, but it can't match the capacity of fiber.  I think both are ultimately what we need.

[ Parent ]
Yes on structural separation (0.00 / 0)
Structural separation is pretty much the holy grail here.

[ Parent ]
Structural Separation Is Irrelevant (0.00 / 0)
It would have made sense five or six years ago, but you really need to look at the backbone.

When it comes to high-speed access, there's a duopoly between the phone companies and the cable companies. It's entrenched, but even if it gets rolled back then you run smack into a far more important duopoly, which is Verizon and AT&T's ownership of the telecom backbone.

After the fiberoptic operators went backrupt, Verizon and AT&T essentially bought everything up. This will ensure that dark fiber stays dark, and that switching and routing are managed in such a way that the technically unlimited capacity of fiberoptic transmission turns out to be very limited indeed.

Something else to say about structural separation is that, at some point in the not too terribly distant future, I think you'll be seeing the phone companies (who are also the cellular providers) shutting down residential wireline access. It'll be sort of tough to pursue structural separation when there's nothing to separate.  


[ Parent ]
I think we're talking about 2 different things (0.00 / 0)
Structural separation, or delamination as I understand it, means ISP cannot be content providers. It means Comcast and Verizon and everyone else are only in the business of providing service, not selling content, which removes a lot of conflicts on interest inherent in the telecom industry today. See the link in my discussion with Matt below for more detail.

[ Parent ]
What Structural Separation Is (0.00 / 0)
It means that the operator of the physical network cannot also sell services on it.

If, say, Verizon landlines were structurally separated, you'd have a corporation operating the facilities that would be completely separate from any corporation selling service on those facilities.

In such a framework, you might still buy local phone service from Verizon, but Verizon would contract with "Phone Network Corp." to use its facilities. It would do so on an equal basis with any other entity that contracted with "Phone Network Corp."

Structural separation was never implemented, and it never will be implemented.


[ Parent ]
this post is backwards (0.00 / 0)
We always knew the 700 auction was going to go to the incumbents, the key principle is open access.  And the rules the FCC set weren't genuine open access, it was device-based open access which of course they will fight.  

Net neutrality is simply a poor substitute for open access, which means open competition over the commons.  


Can you clarify? (4.00 / 1)
Perhaps there is some mistaken terminology here.

The FCC's proposal wasn't open access, though that's what they call it. According to http://www.wetmachine.com/tots... it seems like the FCC's proposal is a step forward, but a really small, insignificant one. To me, net neutrality would help this issue.

However, the real solution seems to be delamination as explained at http://www.hyperorg.com/misc/d...

Perhaps that means the same thing as the true open access you're talking about.


[ Parent ]
slightly different (0.00 / 0)
The FCC polluted the term open access with this auction, which was Martin's strategy.  Full open access obviates the need for net neutrality completely.

[ Parent ]
I think you are wrong... (0.00 / 0)
that this provision only applies to devices. I think the poster is correct in his assertion that it is a LOT like the "open access" the hard-line phone companies were forced to deal with. I.E. Earthlink being able to sell DSL service over AT&Ts pipes.

Maybe I'm mistaken, but I don't think so. Since when has ANY type of wire, be it cable, telephone, or even wi-fi, ever been restricted to only work on certain types of devices?

I think people get a lot of confusion about this because of the way our cell-phone companies sell "locked phones," which is a COMPLETLEY different problem that we pretty much uniquely have to deal with in this country. No other consumer markets I know of would be satisfied buying "locked" hardware (especially ones as versatile as cell phones.) The recent advent of the iPhone is probably making this misunderstanding even more common.

End this war. Stop John McCain. Cindy McCain is filthy rich.


[ Parent ]
Nice post. A bit pessimistic. (0.00 / 0)
Great post, though I think you are being a bit pessimistic about the outlook. For one thing, Google isn't Earthlink, and they aren't going to go bankrupt. Nor are they just gonna rollover and let the telecoms do whatever they want with the frequency.

[quote]If, on the other hand, we forgo net neutrality, telecom companies have an incentive to devise clever ways to reduce each customer's bandwidth instead of building expensive new infrastructure. The result is the slow, expensive, and duopoly controlled Internet experience we have now.[/quote]

You mean like Comcast vs. Bittorrent? Well it actually looks like they are about to make a deal, and bittorrent will no longer be blocked. From my reading of the story it seems like Comcast was more upset with the bandwidth it was "costing" them than they were with the "illegal" data being transmitted.

Overall, great post. I agree with most of what you say. But I do think we should continue to fight for Open Access, Net Neutrality, and any other provision that would help consumers (including getting rid of these STUPID locked phones).

End this war. Stop John McCain. Cindy McCain is filthy rich.


The Action Is In the Backbone (0.00 / 0)
As a former telecom analyst, I alternate between amusement and irritation when I read analyses of Internet issues. No one understood them very well back then, and I don't see that much has changed. In the late '90s, the action was in access, i.e., the "last mile." Or that's where the buzzwords were. In fact, the action was in Initial Public Offerings for companies that could provide a simulation of a business plan for entering the access business.

Most of these plans were not just flawed, but downright fraudulent. Without launching into a long soliloquy about the technology, suffice to say that I studied the living hell out of the various access technologies back then, and most of them flatly didn't work. And most of the companies knew they didn't work, and so did most of the financiers. It was never about actually doing it, but rather it was about publishing a prospectus that could make it through the S.E.C. Why else would so many of them tout "Cisco-powered networks," when those thing quite literally didn't work?

But I digress. The access "opportunity" ended in 2002 when the F.C.C., which little notice or comment, gutted the Telecom Act and turned the U.S. into a duopoly. That's why broadband costs $50 a month here, and $15 a month in Asia. That's not going to change, because even if the F.C.C. were to reverse course under the Democratic administration (fat chance), the action has moved to the backbone, which is pretty much a duopoly split by AT&T (the old SBC, which hired Mayor Daley's brother ...) and Verizon.

You could have all the cheap access in the world, and very soon it's not going to matter. Why? Well, let's start by remembering that a duopoly is just a monopoly with two owners. And a monopoly is built on restricting quantity and raising price. So-called "Net Neutrality," currently the holy grail for people who really don't know a whole lot, pales by significance to the joint-monopolization of fiberoptic transmission and switching capacity in the telecommunications backbone.

If "Net Neutrality" becomes policy, in short order you'll see packet traffic slow to a crawl. Not because of any real lack of capacity, but because a shared monopoly is restricting quantity. And no one will have a ghost of a clue that this is all being orchestrated. Instead, we'll see the declaration of a "crisis" by whoever's in power, and the result will be some sort of "constructive compromise" that will be touted as necessary by those whose campaign accounts need refilling. And who are just as likely to be Democrats as Republicans.

Remember all of those "clean" high-tech companies from the '90s who were telling everyone that the Internet is free? You know, the same ones who, in this decade, were selling packet sniffers to the Chinese government so it could track down dissidents and execute them? They were instrumental in killing the Telecom Act in 2002, when the big phone companies made their lobbying help a pre-requisite of equipment purchases. Come 2009, those same companies are going to be helping the backbone duopoly restrict quantity and raise price. Just wait.


Or... (0.00 / 0)
An administration with some backbone would force newly net neutral providers to build out infrastructure instead of slowing traffic to a crawl...

(wishful thinking, perhaps)


[ Parent ]
Very Wishful (0.00 / 0)
For one thing, there's enough fiber strung to last until the 28th Century. It's a little bit like railroad tracks, which are in surplus not shortage. From time to time, there'll be a new spur here or there, but generally speaking the action has been in removing RR tracks not building them.

A fiber strand's capacity is functionally unlimited. I won't go into the boring tech-talk on that one, but it's true. When I left the telecom analyst biz six years ago, the price of transport on fibers had fallen to a practical level of zero. To put it differently, transport prices were dropping 90% every six months.

But that was when there were a whole bunch of competitors out there: not just providers of transport but users. Since '02 when I left the biz, Verizon and AT&T have bought the vast majority of the backbone out of bankruptcy, and most of the users ("CLECs" -- don't make me laugh) are also dead.

As a result, you've got a backbone duopoly, i.e., a shared monopoly, that is very much able to do what monopolies do, which is to restrict quantity and raise price. This is straight out of microeconomic theory, which is arguably the only honest branch of economics. There is nothing particularly complicated about what's happened.

What's disappointing is that the general media are so ignorant, and the specialty media are still trapped in the the "Wow this is soooooooooo cool!" geektitude. The "Wired" magazines of the world didn't get it then, and they don't get it now.

As a result, it's almost impossible for even interested and intelligent members of the public to get a handle on what's really happening. Which is quite a shame, because if anyone really DID spend time with it, we'd have long since been videoconferencing (remember "distance learning?") for $15 a month.

Oh well. I guess we'll have to wait for the Koreans to do it. Then everyone will look around and go, "What the hell?" Like I say, I alternate between amusement and irritation, maybe with a pinch of disgust when I get really agitated.


[ Parent ]
The bigger problem is access (0.00 / 0)
While you're right that AT&T/SBC and VZ bought up a lot of backbone facilities (mainly AT&T and MCI) and there was some other consolidation--and the Bells will do what they can to raise prices and maximize profits--but I think you overstate the concentration in that sector.  There a still at least a few other players in that market (e.g., Level 3, Qwest).  And, while backbone prices have firmed up and the Bells will no doubt try to tighten their control, I don't think the concentration and lack of price competition is or will be as bad as in the access duopoly.

I also don't agree that the RBOCs will be shutting down their wireline networks anytime soon.  Both VZ and AT&T are upgrading roughly half of their networks with fiber (all fiber for VZ and not-much-fiber for AT&T).  And I don't see their wireless businesses totally displacing wireline in the foreseeable future.

I do agree that structural separation is a very long shot politically, but there could be some push in that direction if the Dems get stronger control in DC, the incumbents push too hard and progressives fight back.  My preferred solution is muni-broadband, which faces challenges but can be viable, especially in markets in which the Bells aren't planning to do fiber upgrades.


[ Parent ]
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