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Europeans Are Eating Our Lunch; Our Broadband Plan Is Toast

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For a couple of hours yesterday (May 7), there appeared a glimmer of hope that maybe, just maybe, someone in the U.S. Senate was serious about a broadband policy. Everyone seems to agree that we need one. President Obama campaigned on one. The idea that the Internet is a necessity more than a luxury is rapidly taking hold. Yesterday at a discussion here in Washington, I heard a story about a man in rural Vermont who fixes engines. He needs a broadband Internet connection to order parts, to view diagrams and to download manuals - the kind of tasks you can't do on dial-up and which don't have materials available in print.

That glimmer was that the Senate Commerce Committee announced a confirmation hearing for May 12 for Julius Genachowski, the pick to be the chairman of the Federal Communications Commission (FCC).

But the glimmer, much like a buffer copy, was only transitory. A couple of hours later, the hearing was postponed until after Memorial Day. Why? The Republicans now have to pick not one, but possibly two nominees for the FCC, and haven't decided on a package. It would be horrible, just horrible, for the Senate at least to proceed on the Democratic nominees, Genachowski and perhaps Mignon Clyburn, daughter of House Majority Whip James Clyburn (D-SC) to fill out the Commission while the Republicans hash it out. Or not. It would be nice if all parties grew up and let the Commission get a chairman already. Not happening.

The result is that the agency continues to drift while the Senate Republicans are trying to work the angles on Texas politics for Sen. Kay Bailey Hutchison, (R-TX), and Republican Leader Mitch McConnell (R-KY) ponders. It's not even clear whether the Republicans need one nominee, to replace FCC Commissioner Jonathan Adelstein, or two, if current Republican Commissioner Rob McDowell is to be jettisoned when his term expired in June. Hutchison, the senior Republican on the committee who is running for governor, has reportedly selected Meredith Atwell Baker, former administrator of the National Telecommunications and Information Administration (NTIA), who is also by happenstance the daughter-in-law of Texas Republican major domo James Baker.

That's a view of the short term. The pessimistic view of the longer term is - who cares? The Europeans and the rest of the world are going to continue to eat our lunch on broadband anyway, so it really doesn't matter whether it's another six weeks or whenever for the FCC to get fully kitted out with commissioners.

What the Europeans Are Doing

Earlier this week, the European Parliament came within a few votes of passing another major broadband/telecommunications policy. Only the continuing greed of Hollywood kept the matter from passing. The Parliamentarians, to their credit, voted that a judicial order is needed before someone's Internet service can be taken away. French President Nicolas Sarkozy was backing his "three strikes" law to allow Internet Service Providers to kick a customer off of the Internet if there are three accusations of copyright infringement.

(Note to the Freedom Fries crowd: Did you know that le baseball was such a French passion that they adopted "three strikes"? Who knew? Pas moi.)

Instead, the Parliament voted overwhelmingly, 407-57 for an amendment which provided: "that no restriction may be imposed on the fundamental rights and freedoms of end-users, without a prior ruling by the judicial authorities." The result of the popular rebellion is that approval of the European plan will be pushed back until next year.

Here on our side of the pond, the FCC is due to come up with a broadband plan by February and submit it to Congress. The Notice of Inquiry the FCC issued April 8 is 59 pages of question about what policy should be put in place to help bring back America's broadband penetration.

Meanwhile, the Europeans were ready to pass a 12-point program. Here are some highlights from the European Commission summary:

"Functional separation as a means to overcome competition problems: National telecoms regulators will gain the additional tool of being able to oblige telecoms operators to separate communication networks from their service branches, as a last-resort remedy. This new remedy was advocated in 2007 by the 27 national regulators in a unanimous opinion. Functional separation can rapidly improve competition in markets while maintaining incentives for investment in new networks. Functional separation has already been implemented in the UK since January 2006 where it triggered a surge in broadband connections (from 100.000 unbundled lines in December 2005 to 5.5 million 3 years later). The new EU rules on functional separation will also add legal certainty for countries currently moving towards different forms of separation, such as Sweden, Poland and Italy, while ensuring overall consistency for the benefit of the single market."

"Encouraging competition and investment in next generation access networks: The new rules bring legal certainty for investment in next generation access (NGA) networks. NGA networks, based on new optical fiber and wireless network technologies, are the way forward, replacing inefficient traditional copper-wire networks. The new regulations will reaffirm the importance of competition in this new sector while at the same time preserving incentives to invest by taking into account the risks involved in allowing access to NGA networks and allowing for various cooperative arrangements between investors and access-seeking operators. In this way, the new rules will also ensure telecoms operators receive a fair return on their investments.

"Towards a more open and more "neutral" net for the consumer: The new telecoms rules will ensure that European consumers have an ever greater choice of competing broadband service providers available to them. Internet service providers have powerful tools at their disposal that allow them to differentiate between the various data transmissions on the internet, such as voice or 'peer-to-peer' communication. Even though traffic management can allow premium high-quality services (such as IPTV) to develop and can help ensure secure communications, the same techniques may also be used to degrade the quality of other services to unacceptably low levels. That is why, under the new EU rules, national telecoms authorities will have the powers to set minimum quality levels for network transmission services so as to promote "net neutrality" and "net freedoms" for European citizens.
In addition, thanks to the new transparency requirements, consumers will be informed - even before signing a contract - about the nature of the service to which they are subscribing, including traffic management techniques and their impact on service quality, as well as any other limitations (such as bandwidth caps or available connection speed)."

Here is the summary of the rest:

1. A right of European consumers to change, in 1 working day, fixed or mobile operator while keeping their old phone number.
2. A new European Telecoms Authority that will help ensure fair competition and more consistency of regulation on the telecoms markets. It will be called "BEREC" ("Body of European Regulators for Electronic Communications).
3. The new EU Telecoms Rules will give the European Commission the power to oversee remedies proposed by national regulators to avoid inconsistent regulation that distorts competition in the single telecoms market.
4. National telecoms regulators will gain greater independence: The new telecoms rules reinforce national telecoms regulators' independence by eliminating political interference in their day-to-day duties and by adding protection against arbitrary dismissal for the heads of national regulators.
5. Better management of radio spectrum for unleashing the digital dividend and providing broadband access for all.
6. A boost to 3G (third-generation, high-speed) mobile services.
7. Encouraging competition and investment in next generation access networks.
8. Recognition of the right to internet access: The new telecoms rules recognize explicitly that internet access is part of fundamental rights such as the freedom of expression and the freedom to access information. The new rules also clarify that the final word on this important matter of internet access must be with a judicial authority.

A Plan Like That Here?

That's quite a comprehensive list, one that should be approved and put into place next year. Our broadband plan will be submitted in February, and then Congress will have at it, possibly.

Is there anyone who thinks that Congress could produce something like this, with its emphasis on competition? Is there anyone who thinks Congress could produce anything in the way of a meaningful broadband plan that will make a real difference and raise our broadband ranking in the world?

How's an open network plan working out abroad? British Telecom (BT) was forced to split its wholesale and retail operations. BT Chairman Sir Michael Rake told Cecilia Kang of the Washington Post: "It was painful at the time but has been better for the country and consumers in the long run." In an interview, Rake said "There needs to be a level playing field and the simple thing to do to achieve that is to open access...It's the only way to create competition and thereby create investment and jobs."

So far, there's no evidence of such a plan even getting serious consideration. There is not one Republican on the House Energy and Commerce Committee who would vote for giving competitors access to the telecom networks of big telephone and cable companies. There are too many Democrats who pledge fealty to the dictates of Verizon and AT&T to bring back meaningful competition for the great body of consumers in their districts through the return of wholesale and line-sharing along with a regulatory package that could make the networks a fertile field for competition. Even now, the network operators are trying to soften the modest non-discrimination rules in the stimulus package. They will marshal all of their resources to stop any legislation that remotely resembles what the Europeans have produced - all the lobbyists, economists and front groups that money can buy.

So go ahead, FCC, do a broadband plan, and hope that what's produced isn't so sufficiently bland that it will be worthless. Congress will water it down some more, and it's not a far stretch to believe that at the end of the day we won't be that much better off.

It would take a major commitment from the Obama administration to fight for the structural and regulatory changes that would do any more than work around the edges of our failed broadband policy. Even then, it's likely that enough Democrats in the House and Senate would vote for big business over the reemergence of innovation and the welfare of consumers.

Thanks to Hollywood, we have a little breathing room to come up with something while the Europeans grind through their processes to approve their policies. But it's not enough to remedy the situation. Our broadband policy will continue to lag behind.

Update: After this was posted, Viviane Reding, the European Commissioner responsible for telecom, spoke on May 11 to the Future of the Internet conference in Prague. It was a strong speech in favor of the principles we have abandoned, or are unable to implement. Among her points: "Net Neutrality is essential," and the Internet must "preserve openness."