THE BLOG
03/25/2013 06:18 pm ET Updated May 25, 2013

Regulatory Capture of the FCC -- Time to Clean House

AT&T, with the help of Verizon and the cable companies have 'captured' the FCC -- and have been able to get the federal agency to create and shape a working group designed specifically to remove all regulations and obligations, close down the Public Switched Telephone Networks (PSTN) and create new digital dead zones.

Think of this as -- Imagine taking a company to court and you find out that the judge, most of the jury, and even your lawyer has a direct financial tie to the company you are suing... Think you'll win?

Moreover, AT&T's FCC play is part of a massive, well choreographed, multi-year state and federal campaign being orchestrated with ALEC, the American Legislative Exchange Council, to remove all regulations and obligations and harm America's communications users -- i.e., you, dear reader...

With the Wall Street Journal reporting a changing of the guard at the FCC, with FCC Chairman Julius Genachowski and the Republican Commissioner Robert McDowell leaving in the next few months, we need new people who are going to fix, expose and stand up to the corporations, not kowtow to them.
Regulatory Capture & Financial Conflicts of Interest vs Open Government.

In August 2012, New Networks filed a petition with the FCC outlining how the Technical Advisory Council, (TAC) created a group to 'sunset the PSTN' -- meaning shut down America's telecom networks of any regulations or obligations -- and that the majority of the TAC members had major, financial conflicts of interest with AT&T and/or Verizon (and Centurylink, formerly Qwest) - the caretakers of America's networks. In fact, AT&T and Verizon are on this Council. Worse, the TAC is using manipulated data supplied by AT&T and the other telcos to bias anyone to their point of view.

This chart gives the TAC members and their financial ties to AT&T or Verizon.

"Regulatory Capture" is the takeover of a federal agency by the corporations it is regulating and it is not new to the FCC. At a conference in 2010 called Reforming the FCC,, its website states that "Former Chair Reed Hundt, (1993-1997) for example, suggested that the acronym 'FCC' stands for 'Firmly Captured by Corporations' while former FCC Chief Economist Tom Hazlett counters that 'FCC' stands for 'Forever Captured by Corporations'."

Regulatory capture is insidious as the agenda is set by the companies and then uses people and data to support the agenda -- regardless of how it will harm those it claims to be helping.

And it is as much about things not discussed, not focused on, not investigated as it is about a proactive corporate position. For example, the TAC could have, as some have advocated, set up a group to create a transition path for moving to a 21st century utility that is open to all competitors, based on IP-enabled services and everyone is upgraded. Or the TAC could have given customers choices -- like being able to at least pick a competitive broadband and Internet provider which offers services over the wires coming into the customer's home or office; The Telecom Act of 1996 stated this as a goal. Yet, through capture over the last decade, these same networks are now closed to competition. Instead, this group decided to run with AT&T's-ALEC's plan to close, 'sunset', the PSTN.

What is the PSTN or why you should care?

Before we examine all of the players and their financial ties to the incumbents, AT&T and Verizon, let's go through the timeline of events.

  • In 2009, AT&T files comments as part of the National Broadband Plan, claiming that there are two networks -- the aging copper networks that supply Plain Old Telephone Service (POTs) and the new shiny broadband network.
  • This is, of course, pure manipulation as AT&T's broadband service U-Verse is a PSTN-based-copper-to-the-home service; thus the entire network is still based on the POTs-based network.

    And let me be clear-- as of December 2012, AT&T only had 4.7 million U-Verse Video customers out of 75 million 'locations' -- do the math. Thus, AT&T's discussion about the PSTN has been devised to get rid of regulations and obligations over areas that they don't want to do anything with, like upgrade or even provide service.

  • Next, in 2009, AT&T gets the FCC to have the Technical Advisory Council (TAC) start a new group dedicated to 'sunsetting' the PSTN.

  • Starting before 2010, AT&T, Centurylink (formerly Qwest), Verizon -- and the cable companies, as members of the American Legislative Exchange Council, ALEC, create a plan to remove regulations -- based on "VOIP" and "Internet Freedom".
  • It is evil genius; an effective verbal jujitsu Their claim is that "VOIP" is the next generation. Phone service based on the Voice-over-the-Internet (Protocol) is not a telecommunications service -- but an 'information service' and the difference in definitions means that VOIP is not regulated the same way. Their goal then is to make everything VOIP, removing all obligations and regulation. Thus "IP-based service" is "Internet freedom". Don't you want Internet freedom and innovation? Meanwhile, AT&T's U-Verse phone service, which is VOIP, uses the old copper wiring -- so the old networks can support these Internet services today.

  • By 2012, as documented by a report by the NRRI, the cabal pulled off a coup and were able to get (as of 2013) 23 states so far to remove basic telecommunications regulations, though it varies by state. AT&T-ALEC et al use 'model' legislation they create and then hand it off to the state ALEC politician members to pass. According to numerous sources, ALEC-based bills will be presented in almost every state again and again until they change the laws.
  • For an example of the ALEC-state based machinations, we detailed the ALEC-AT&T attack in Wisconsin where AT&T, ALEC and the ALEC member politicians attempted to pass legislation in 2007

  • By 2012, a different ALEC-based piece of 'model legislation' has been able to pass in 19 states, this one designed to close down the rights of municipalities to offer broadband services, even though the phone and cable companies have neglected or refused to do upgraded.
  • According to Business Week, this ALEC-based bill started almost a decade ago and ALEC's influence is in many other industries as well.

  • In August 2012, AT&T laid out the ALEC-state-based principles for the Federal plan in a letter to FCC Commissioner Ajit Pai, who has been banging the drum to close down the networks. Pai is a former associate general counsel for Verizon, then went to work for a law firm that handles the telcos' business.
  • In August 2012, New Networks filed a petition outlining how the majority of the Technical Advisory Council members have financial conflicts of interest and the FCC is using manipulated data supplied by the companies. It was ignored.
  • In November 2012, AT&T files a petition to start the transition to close down the networks and ties it to an extortion plan -- if the FCC passes the petition AT&T will spend $14 billion. As we demonstrated, AT&T always uses the promise of broadband deployment to get deregulation then never comes through. In this case, AT&T's numbers are even suspect; probably less than $6 billion will be spent, at best, spread over 3 years.
  • In December 2012, the Technical Advisory Council presents their recommendations, which were, of course, to let AT&T et al do what they want.
  • In December 2012, the FCC forms a 'Technology Transition Task Force" to close the deal, which is an extension of the work of the TAC.
  • In 2012, Commissioner Pai starts banging the drum at conservative, corporate-friendly think tanks, such as the speech given at the Communications Liberty and Innovation Project (CLIP) of Competitive Enterprise Institute, to start the transition.
  • In December 2012, Republican Congressmen Greg Walden, whose top 10 campaign contributors include Comcast, AT&T and Verizon and is the Chairman of the House Sub-committee on Telecommunications & Technology, congratulates Pai on the Task Force.
  • Expect hearings and a move toward this ALEC-based legislation in 2013, which will be called for by multiple voices -- almost all of whom will be heavily backed by the phone and cable companies.
  • The most disconcerting part, however, is the length and breadth of this massive plan as companies, from AT&T and Verizon's wireless divisions, as well as the three incumbents -- AT&T, Verizon and Centurylink -- and many of the large cable companies including Comcast -- all ALEC members -- as well as thousands of state and federal politicians -- democrats and republicans -- are all working with the same messaging, the same massive budgets. And, as we pointed out, this also includes corporate funded think tanks, non-profits, including minorities, lobbying groups, astroturf groups and a skunkworks coordination team.

The Capture by AT&T et al of the FCC

The Technical Advisory Council is the epitome of a stacked jury where the verdict is already in -- against you -- before the trial even starts.

To start, AT&T and Verizon are on the Council -- the two incumbents who control the majority of the U.S. telecommunications networks -- wireline and wireless. In this way they don't have to go far to keep their eyes on the progress.

'Friends' of AT&T and Verizon
There is a core group of companies (see the chart which provides not only links to the companies' ties to AT&T or Verizon but also gives the revenues for 2011.) The list of TAC members includes:

  • Hardware and software vendors including Apple, Motorola, Intel, Cisco and Microsoft all of whom have multiple financial deals with AT&T and Verizon including wireless phones, tablets and technology.
  • The cable companies, Comcast, Time Warner and Brighthouse not only sold spectrum to Verizon, but Verizon has a marketing deal with some of them to sell their cable products with Verizon's wireless services.
  • Other hardware and consulting companies, from Accenture, Qualcomm, Alcatel-Lucent or Harris all have deals with either Verizon or AT&T or both.

In fact, the core 16 companies represent about $800 billion dollars in revenues in 2011.

There are a number of other members with conflicts of interest:

.

There's also the Von Coalition, which has been lobbying for years to put through ALEC--state-based VOIP legislation. The VON Coalition originally started to when VOIP service was designed to bypass the phone companies, but it and the Coalition has been co-opted and is now funded by AT&T, Google and Microsoft among others. In fact, the Von Coalition has been in California, Colorado, New Hampshire, and Wyoming among other states to do on the state level what the TAC is doing on the Federal level.

Oh, but it gets worse. The head of the Council, Tom Wheeler, worked for the wireless and cable companies as former head of the cable association and the former head of the wireless association.

"On the 20th anniversary of the cable television industry (1995), Tom was selected as one of the 20 most influential individuals in the industry's history and on the 25th anniversary of the cellular telecommunications industry (2008); he was named one of the top 10 innovators in the wireless industry. Tom was President of the National Cable Television Association (NCTA) from 1979 to 1984. After several years as CEO ... he was asked to lead the Cellular Telecommunications & Internet Association (CTIA), where he was CEO until 2004."

More recently, Wheeler works for Core Capital with his focus being wireless. He appears to not care about the telco wires, as told by his own writing. "The PSTN is a casualty of the digital world." His writings are called "Mobile Musings." And he is part of the Open Mobile Video Coalition which is working on "TV Everywhere", which was announced by Comcast and Time Warner.

Wheeler is also currently being cited by some as a potential chairman of the FCC when the current chair leaves.

The Other Side? The Mathematics of Regulatory Capture Made Simple.

There is no serious 'other side'. We could identify only 5-7 companies and groups out of about 50, that are pro-wire' and pro PSTN. This includes wireline competitors XO, EarthLink and Level 3, but when added together their revenues are about 1 percent of the core group. This is important as they don't have the financial resources or skunkworks networks that the AT&T-ALEC cabal has.

Missing -- Your voice or representation: Ironically, this is a 'technology' council yet the closing down of the networks and the creating of new digital dead zones is a political issue and a customer issue. Those who might actually discuss these points -- such as advocates for consumers and customers were not invited to be part of this to give the council 'balance'.

Conclusion: Stop All Proceedings to Close Down the PSTN; Investigate Regulatory Capture and Clean House.

In short, it appears that the Council was set up by AT&T and the telephone and cable companies to close down regulations and obligations and they created a group that was pro wireless and pro VOIP -- or more to the point anti-regulation and anti-PSTN.

The FCC will say that they are 'transparent', data driven and all of those other terms that are political speak but meaningless. The FCC never explored other options like opening the networks or why the utility networks were never properly upgraded or anything that would show that they considered other alternatives to creating new digital dead zones.

Where is the FCC working group for 'structural separation' -- i.e.; separating the companies' controls over the utility wires or opening the phone or cable companies' networks to competition? Or separating the wireline and wireless divisions so that they actually compete?

Personal Coda. In 2003, we were a member of the FCC Consumer Advisory Committee. We filed a complaint against the FCC and the Committee in 2005 as we found that the majority of members were either part of the industry -- Verizon has been and continues to be on the Committee since its inception -- or that the majority of consumer and astroturf groups were also funded by the industry. This is the reason why your phone bills are unreadable, prices continue to rise and many have few, if any, choices for fast broadband in America.

Maybe the new chairman and commissioner should be required to actually care about the public, economic growth and innovation -- and clean house -- instead of having sections of the FCC captured by the very industry they are supposed to be monitoring and regulating.