Disconnected and Disempowered, Part Three: Money in Politics & Why Rural America Can’t Have Nice Things.
Telecom companies spend money on lobbying to save money on upgrading service. That's the business model.
If the market is such a problem and can’t be the source of the solution, as I argued in parts one and two of this series, what are we supposed to do instead?
First, we need to accept that the Invisible Hand of the market is often tremendously inequitable. In this case, as with electricity in the 1930s, the Invisible Hand of the market has decided that connecting rural America isn’t a problem to be solved; it’s a money-hole to be avoided unless there are huge tax incentives.
Second, we need to look at what has already worked for places. And then we need to scale those solutions.
One solution is government-owned networks; this part shows where that works (spoiler: Tennessee & North Carolina) and why it’s not more prevalent.
What would a government-owned network look like?
It would look like cities in West Virginia establishing a public utility service to lay fiber or cable line, and then running it as a publicly owned utility.
That’s how Tennessee’s fourth largest city made international news in 2014, with the BBC reporting:
‘The south-eastern Tennessee town of Chattanooga has some of the fastest internet connection speeds in the world, thanks to a fibre-optic network installed by the government-owned electric company, EPB.
The town, with a 2012 population of just more than 171,000, has used its internet speeds of over 1 gigabit per second to attract new businesses, including five venture capital funds with 2014 investment capital of more than $50m, according to the Guardian.”
In West Virginia its different because our electricity is provided through private electric companies. But I am certain that we could set up a public utility for broadband if the FCC were to throw $362,066,660 our way and provide federal technical support where needed.
The city of Chattanooga managed to create one of the fastest internet networks in the world with less than $60 million. The FCC just awarded six times that amount to private companies just to try to solve our problem.
I firmly that believe that West Virginia can deploy the same know-how as Chattanooga, Tennessee, if our politicians really wanted to solve this problem and if the FCC were to provide West Virginia’s governments the funding instead of private for-profit companies.
Private for-profit companies are mainly concerned with profit, and for high yields for investors. Customer satisfaction is an afterthought, especially when customers are captive, as I covered in Part Two of this series.
The bottom line has been that government-owned networks deliver competitive service at competitive prices, and the public owns the network whether one customer fails to pay or not.
“Well,” you may ask, “if Chattanooga’s internet is so good, why isn’t it all over Tennessee and the rest of the country?”
Great question! The answer is because monopolists lobby to keep rural America from having nice things.
Private for-profit ISP companies earmark tens of millions of dollars every year just to hire lobbyists to make these solutions impossible, because private ISPs have a pretty good racket going.
Jason Koebler reported for Vice on how bad the lobbying situation was in 2017 in Tennessee.
The summary is absurd enough,
“Chattanooga, Tennessee has the fastest, most affordable internet in the United States. Many of the rural areas surrounding it have dial up, satellite, or no internet at all. Chattanooga wants to expand its network so these rural areas can have the same Gbps and 10 Gpbs connections the city has. Rather than allow that to happen, Tennessee's legislature just voted to give Comcast and AT&T a $45 million taxpayer handout.”
But the details of what happened are both amazing and infuriating.
“A Tennessee law that was lobbied for by the telecom industry makes it illegal for [Chattanooga’s electric & broadband utility] EPB to expand out into surrounding areas, which are unserved or underserved by current broadband providers. For the last several years, EPB has been fighting to repeal that state law, and even petitioned the Federal Communications Commission to try to get the law overturned.
[In 2017], the Tennessee state legislature was finally considering a bill that would have let EPB expand its coverage (without providing it any special tax breaks or grants; EPB is profitable and doesn't rely on taxpayer money). Rather than pass that bill, Tennessee has just passed the "Broadband Accessibility Act of 2017," which gives private telecom companies—in this case, probably AT&T and Comcast—$45 million of taxpayer money over the next three years to build internet infrastructure to rural areas.”
This can only be defined as a racket where taxpayers are the duped marks:
“To be clear: EPB wanted to build out its gigabit fiber network to many of these same communities using money it has on hand or private loans at no cost to taxpayers. It would then charge individual residents for internet service. Instead, Tennessee taxpayers will give $45 million in tax breaks and grants to giant companies just to get basic infrastructure built. They will then get the opportunity to pay these companies more money for worse internet than they would have gotten under EPB's proposal.”
So, Tennessee has a solution, had the opportunity to scale it, and instead decided to throw money at the private sector in exchange for worse service. (It is the same story in Wilson, North Carolina. Wilson had to turn off their fiber connection to a nearby town because they lost a lawsuit.)
Why? Once again, because the logic of private sector markets has decided that the most profitable and efficient outcome is to ignore these areas unless those companies can rake in taxpayer money to buildout the bare minimum of infrastructure.
So, they block any public or non-profit competition by ‘reinvesting’ some of their revenue to lobby lawmakers.
Deregulation increased profitability for these companies because they were able consolidate and cut costs (as I wrote about in Part Two). But at some point, those tactics stop producing the same returns; at that point the only way to increase profitability is to lobby aggressively for lower tax rates, even less oversight, and to block competitors from entering their consolidated markets.
In 2014, Jon Brodkin at Ars Technica reported on AT&Ts efforts to have the FCC shut down municipal broadband networks or “government-owned networks.” They complained that government-owned networks shouldn’t be allowed to operate in places where “where the private sector already is providing broadband or can be expected to do so in a reasonable timeframe,”
So, AT&T welcomes competition, but they don’t welcome it from the public sector in places where there already is a private ISP, or where a private ISP might eventually exist.
Basically, they don’t think government-owned networks should exist anywhere.
Why? Because, according to AT&T, government-owned networks, like Chattanooga’s, are 1) shoddy and also 2) too good to compete with.
“Although many GONs have failed, or at least failed to live up to expectations, GONs can nonetheless discourage private sector investment because of understandable concerns by private sector entities of a non-level playing field. And any policy that risks diminishing private sector investment would be short-sighted and unwise.”
AT&T also declared that community broadband networks “should not receive any preferential tax treatment.”
Then, presumably because they did not want to kill the golden goose, AT&T’s filing to the FCC insisted that “indeed, any tax incentives or exemptions should be provided, if at all, to private sector firms to induce them to expand broadband deployment to unserved areas.”
The gist of AT&Ts letter is: tax breaks for me, but not for thee. Anything else, according to AT&T would result in “a non-level playing field.”
Over the last 12 years, telecom companies have only increased the amount that they spend on lobbying to make sure that underserved communities only receive service when the private sector deems it ready. In short, they’ve spent hundreds of millions of dollars to tell underserved communities, “patience, child, we will lay high-speed lines as soon as your government pays the ransom.”
Sue Marek reported in March 2020 that
“In 2019, eight of the top US telecom companies spent a total of $67.36 million on lobbying, according to numbers from the nonprofit research group the Center for Responsive Politics using data gathered from the Senate Office of Public Records as of January 23, 2020.
[…]
So what was all that money for? Although these companies often compete against each other, many share the same regulatory goals, stretching from net neutrality to robocalling.For example, Comcast, AT&T, Verizon, CenturyLink and Charter all paid lobbyists to help defeat the Save the Internet Act. This bill reclassified Internet access as a telecom service subject to common carrier regulation, reinstating the net neutrality rules that were eliminated by [Trump-appointed] FCC Chairman Ajit Pai.”
The private sector is perfectly happy with the present arrangement. They withhold service until governments shovel enough money at them to make it worth their while. And then they get to keep the infrastructure and the customers must accept whatever service is provided.
While Frontier was buying up rural networks all over the country, and while they were neglecting all of that infrastructure, they also quadrupled the amount they spent on lobbying, according to watchdog OpenSecrets.
Because the private sector is happy with the present arrangement, there is no amount money that we could shovel at the private sector to bring rural America into the 21st century. Their incentive is to design the infrastructure so that it will need to be upgraded and so they can rake in more taxpayer money in another 10 years.
Real public intervention messes all that up. The public sector forces the hand of private companies, which is exactly what happened in Chattanooga.
As Brodkin reported,
“the community-owned electric utility created a fiber network—after fending off a lawsuit from Comcast, which tried to prevent it from being built. Finally, after the network was serving customers, Comcast and AT&T started upgrading their services, the Chattanooga officials said.”
Instead of just meeting customer demands and upgrading their service to begin with, Comcast calculated that it would be more profitable to sue the public competitor out of existence. When Comcast lost its lawsuit and Chattanooga was clearly moving forward, AT&T and Comcast begrudgingly gave in to customer demand to upgrade their service.
And then Comcast and AT&T still got $45 million in taxpayer money to upgrade the infrastructure that they refused to upgrade to begin with!
AT&T, Comcast & Frontier want us to believe that there are saving rural America from all the problems with government-owned networks:
they don’t work,
they’re too expensive for customers,
they kill private sector competition.
All are false.
The reality is that public broadband options have been proven in Appalachia, and
they provide faster speeds than the private sector,
the public owns the infrastructure so there is no overhead in the form of shareholder dividends or CEO bonuses, so it lowers costs, and,
public options encourage competition and innovation from the private sector.
That is why every two years these companies spend over $100 million to lobby our government. Because they don’t want competition. Competition cuts into profits. They don’t want to improve service. Upgrades cut into profits. They don’t want to satisfy customers. Customer demands cut into profits.
And, as the right wing often points out, the main goal of private for-profit corporations is to deliver profits to shareholders.
So, the companies lobby for laws that protect those profits, and auctions that funnel taxpayer dollars their way.
And that’s what we have.
Anyone who tells you that we can fully address the crisis of rural broadband by throwing money at the private sector is lying.
To paraphrase Ronald Reagan: the private sector isn’t the solution. The private sector is the problem.
And the biggest hurdle to bringing broadband to unserved and underserved communities is private sector money in our politics.
In the next part will look at another public intervention that has worked even in some of the least populated places in America.