When Telecom and Media Companies Behave Badly, Everyone Suffers
When Telecom and Media Companies Behave Badly, Everyone Suffers
When Telecom and Media Companies Behave Badly, Everyone Suffers

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    It has only been a couple of months back that AT&T
    gave up on its attempt to take over T-Mobile, in what would have been
    quite a coup for the second-largest wireless carrier to take over the
    fourth largest. It took all of the gumption of the Justice
    Department and the Federal Communications Commission to stop that
    deal in what should have been an easy call.

    And yet, the idea of big companies
    continuing to control their markets, and control the behavior of
    consumers, continues to march on as if that other deal hadn’t
    happened. Even now, two major deals are proceeding apace, one in
    telecom and one in the entertainment world. Each of those has what
    you might call a sidekick action – not a big blockbuster deal, but
    just another way that companies and industries in the telecom space
    and the entertainment world try to impose their will on consumers
    while government acquiesces.

    The Making Of A Cartel

    In one, Verizon and the biggest cable
    companies have decided that a broadband cartel is more efficient than
    actual competition. There are two parts to this deal. In one,
    Verizon is buying $3.6 billion worth of spectrum from the cable
    companies. At one point, the biggest cable companies bought the
    spectrum thinking they might provide wireless service to compete with
    the likes of AT&T and Verizon and fill out their product lineup.

    That never happened, and there were
    some reports that the biggest cable company, Comcast, really didn’t
    look too hard to find away to use it. So in the end they made a $1
    billion or so profit by warehousing the spectrum.

    The second part of the deal is more
    opaque – literally. In addition to Verizon buying spectrum,
    Verizon Wireless will sell the broadband products of the cable
    companies – in theory competing against the products of Verizon the
    mother ship. This competition may not extend to the few areas in
    which Verizon offers its fiber optic product, FiOS, which supports a
    fine video service, but may extend to areas in which Verizon only has
    a copper-based service which is vastly inferior to cable and to FiOS
    for watching TV.

    However, Verizon and the big cable
    companies are doing their level best to keep the nasty details of
    that deal secret. They submitted their information on the
    cross-selling under an privacy order, and much of the information
    submitted so that the public can’t look at it is blacked out. The
    FCC hasn’t decided whether to make that information public, but it
    should, so the public can see exactly how two big industries describe

    One of the problematic parts of this
    arrangement is that Verizon Wireless and Comcast have already started
    their joint marketing, even without FCC permission. The companies
    don’t think they need permission to do so. Others, including PK,
    disagree, and want the deal blocked. If the FCC doesn’t stop the joint marketing soon, you
    can bet that Verizon Wireless, Comcast and the rest will simply march
    on into the FCC and say that, “if you let it go this long, you
    can’t stop it now.” Its time for that forceful FCC to reappear.

    AT&T’s Parade Of Insults To Consumers

     AT&T may have botched the takeover
    and cuts its executives pay, but it is the subscribers who are
    bearing the brunt of the misbegotten adventure. Claiming that their
    network is all jammed up from data-hogging smartphones and tablets,
    AT&T has gone on a binge throttling their customers’ usage.

    Kevin Fitchard asked the eminently
    reasonable question the other day: “If 2 GB is excessive, why
    is AT&T selling 3-GB mobile data plans?” It’s almost
    unbelievable that AT&T couldn’t anticipate that early adopters
    with data-intensive devices like iPhones and iPads wouldn’t then use
    those gadgets to great effect. And yet, the company keeps whining
    about how its network is getting unmanageable. The key to managing
    the network, it seems, is simple — get customers to move to a
    higher-priced plan
    and things miraculously clear up.  AT&T’s customers are not happy, but who cares?

    AT&T says that in order to be
    eligible for throttling, “you have to use an extraordinary
    of data in a single billing period.” Yet that amount
    seems less than extraordinary when it would cover only a movie or
    two.  The practice, however, seems pointless, according to a new study of data usage.  Those with caps used the same as those without, yet one group gets throttled and the others don’t.

    Public Knowledge has twice asked the
    FCC to look into throttling and caps on both landline and wireless networks.
    The silence is deafening.

    That’s not all AT&T is doing. At
    a conference call with Wall Street analysts, AT&T CEO Randall
    Stephenson basically blew off the idea of bringing landline
    high-speed Internet service to rural areas. He told the analysts
    that apart from wireless, “now we’re looking at rural America and asking, what’s the
    broadband solution? We don’t have one right now.”

    That may be all right for Wall Street,
    but its not helping rural Main Street one bit. What could help rural
    areas is for localities to have the ability to build their own
    networks, but the telecom industry is squashing those efforts through
    paid-for state legislatures. As prominent industry analyst Craig
    Settles put it, telco lobbying aims to make their states “broadband
    .” If the big companies don’t want to put in advanced
    networks, no one else will either.

    The Making Of Another Cartel

    Not to be outdone, the entertainment
    world is doing its own consolidation with Universal Music Group
    (UMG), the largest record company, looking to buy the recorded-music
    division of EMI, a smaller rival, for $1.9 billion. Like the telecom
    industry, there are very few companies at the top of the record
    industry – only four. UMG, owned by Vivendi, is the largest, with
    a market share of about 32 percent, followed by Sony, Warner Music
    Group and EMI. Those four take up 90 percent of the music sales.
    The UMG/EMI combination would be by far the largest, with a catalog
    ranging from the Beatles to Justin Bieber and Lady Gaga and would be
    twice as big as Warners.

    Separately, EMI’s publishing business
    will be sold to Sony for $2.2 billion. Looking at Billboard’s top
    100, it’s easy to see that the combination would hold publishing
    rights for more than 60 percent of the hot hits.

    As with AT&T’s takeover of
    T-Mobile, the ranks at the top would thin, from four to three, if UMG
    succeeds. And as in the AT&T attempt, smaller record companies down the line
    are protesting that they will get squashed. Warners has made its
    objections known in the U.S. and in Europe and organizations of
    independent record labels are also warning about the anti-competitive
    aspects of the deal because the new combo’s share of the market
    would approach 50 percent.

    Universal has argued that it holds very
    little leverage in a day in which iTunes and Walmart rule the
    music-buying world, but it’s still hard to ignore a company which
    will have the power of this new colossus. Such a big company could
    shift the balance of power, even taking on iTunes, industry analysts
    contend. And the threats to future innovation would be grave, as any
    new music distributors would have to contend with a future powerhouse
    that could dictate its own terms. 

    ‘Mere Inconvenience’ Of Owning DVDs

    If it were simply a question of
    entertainment consolidation, with three big record companies to go
    along with TV networks that also own movie studios (in some cases
    also owned by a huge cable company that also has programming) in
    another rarified atmosphere of exclusivity, that would be bad enough.

    But the industry has a history of
    dumping on every proposed innovation consumers want to make their
    lives easier. The history of video recording is well known – how
    the industry opposed it all the way through the U.S. Supreme Court
    and then made billions from it. Even now, the industry attempts to
    squash all in its path.

    Public Knowledge asked the U.S.
    Copyright Office, as part of that organization’s triennial
    evaluation of the Digital Millennium Copyright Act, to allow
    s to transfer DVDs they own to any devices they own. There
    should be no legal penalty for “space shifting” – converting a
    DVD into a format that can be used on a new device which doesn’t
    have a disk drive – as most new devices don’t.

    Well, the entertainment industry didn’t
    like that. Consumers have no “space shifting” rights. It’s
    only a “mere inconvenience” that we can’t watch a movie we own
    on any device we own, the big content companies said. If you want to
    watch a movie on something else, then buy it in another format.
    Again and again, if necessary. After all, the industry has provided
    any number of other products you can buy if you want to watch a movie
    you already own.  The industry never lets up. Even its home Oscar ‘party’ invite is a propaganda piece.

    Each of the items on the list here by
    itself might not be worth much, depending on who’s looking and who’s
    keeping score. Taken together, they present a dispiriting picture of
    an arrogance that the industry continually demonstrates.

    It’s unfortunate
    that attitude of economic superiority prevails, and that it is rarely
    challenged as part of a continuing national discussion by
    politicians. We hear some pop up occasionally, as when Verizon
    wanted to impose the $2 fee for paying your bill, or when SOPA and
    PIPA hit the public radar or when AT&T wants to take over T-Mobile.

    Those were the exceptions. On general
    principle, the advantages companies try to take every day are not
    part of the political discourse although they should well be.
    Members of Congress should speak up. Regulatory agencies whose duty
    it is to protect the public should speak up and no White House,
    Democratic or Republican, should allow this to go unnoticed.