The fall of net neutrality: Cable's plot to destroy the internet

Higher costs and worse service loom on the horizon

The fall of net neutrality: Cable's plot to destroy the internet
City Pages

Like any bloodless coup, this one takes place within the palace, beyond the purview of prying eyes. It's an inside job spearheaded by the ultimate in inside players, FCC Chairman Tom Wheeler. He's a former Obama fundraiser, cable lobbyist, and head of the cable trade association, chosen by the president to chaperon the very industry he once served.

Wheeler's loyalties were evident in May, when he proposed segregating the internet between the haves and have-nots. Under the plan, cable operators could charge large companies like Netflix extra to move their wares over a high-speed expressway. Anyone who couldn't pay the toll would be relegated to frontage roads.

Critics — who include most everyone but cable companies — believe Wheeler's plan will shaft consumers and squelch innovation. Present rules dictate that all traffic moves at the same speed, part of a long-standing principle known as "net neutrality." It puts a basement blog on the same footing as the Huffington Post, and enables smarter companies to eclipse market leaders in the way Facebook conquered MySpace.

With colleagues slathered in money, Al Franken is among the few to make a fuss
With colleagues slathered in money, Al Franken is among the few to make a fuss

Yet Wheeler's proposal would not only hand a windfall to his former masters. It would allow cable operators to slow customers' content, regardless of promised connection speed. And it would ensure that dominant tech companies could swat away smaller competitors that couldn't afford to pay the new tolls. Even venture capitalists oppose the idea, saying they're less likely to invest in start-ups placed at such a disadvantage.

In essence, Wheeler is about to place the most dynamic, growing sector of our economy into the hands of an industry legendary for its abysmal customer service.

U.S. Sen. Al Franken's assessment of the plot: "I'm sorry, you just made me sad."

The monopolies are coming

For years the internet has been governed by rules similar to those regulating phone companies. These laws were designed to prevent discrimination or denial of service under the premise that the phone's a basic necessity. Water and power companies operate under similar dictates. Many feel broadband should be treated the same way, given its increasing importance in every aspect of our lives.

It's even more critical considering the limited competition among internet service providers (ISPs) offering high-speed broadband.

While the phone companies' slower copper line service initially competed with cable, the proliferation of video has exposed the technology's native inferiority. So they ceded high-speed broadband to cable companies, most of whom enjoy monopolies in the cities they serve.

Cable broadband already serves nearly three-fifths of the country, and has added 85 percent of all new broadband subscribers in the past two years.

"If net neutrality is about anything, it's the recognition that we're probably not going to have a lot of extra competition quickly in the ISP business," says Dr. Gerald Faulhaber of the University of Pennsylvania. "In essence, network neutrality is a way to keep monopoly or duopoly cable/teleco ISPs from abusing their market position."

But instead of regulating broadband for the greater good, Wheeler's handing America's most hated industry control of our future.

First in our pockets, last in our hearts

To trust cable with the nation's communications backbone requires a fanciful leap of faith. The industry has a tattered history of price gouging, litigiousness, poor customer service, faltering investment, and legislative manipulation. Now the industry's largest company is attempting to swallow its closest competitor, further constricting consumer choice.

In February, the No. 1 pay-TV provider, Comcast, announced the proposed purchase of No. 2 Time Warner Cable. Comcast has promised to sell enough television markets to limit the new company to 30 percent of the pay-TV market nationally. (The plan includes spinning off markets such as Minneapolis-St. Paul into a third company in which Comcast would have a minority stake.)

The divestiture is voluntary, meant to mollify the FCC. But tellingly, Comcast has offered no such concessions on its more profitable broadband business. The merged companies would provide service to more than 40 percent of the country, including half of all high-speed connections.

Not only would the merger give one company unprecedented market share, but it promises to forge a new standard in bad customer service.

Even within the most despised American industries — cable and internet — Comcast and Time Warner are annual bottom-dwellers when it comes to consumer ratings, according to the American Customer Satisfaction Index. (Neither of the companies responded to repeated interview requests.)

But thanks to Comcast's monopoly position, there's little incentive to please its clientele. In 2012, Comcast's average revenue per subscriber was $143 a month — up 140 percent in the past decade.

The entire industry has raised prices two and a half times faster than inflation since 1998. Meanwhile, its investment in broadband infrastructure is flat — and more than 15 percent off its 2001 peak.

Most businesses see failure to invest as a recipe for wreckage. Not cable. Once the pipe is laid, each new subscriber to broadband is almost pure profit.

Unfortunately, that lack of investment also causes internet congestion. Which cable, rather disingenuously, is now using as an excuse to charge high-traffic companies like Netflix greater fees.

"They're not making a commensurate investment to get us to where we need to be or where consumers want us to be, because their investment plan's based on managing that scarcity," says Mike Wassenaar, a former program director at KFAI radio who now works for the Alliance of Community Media.

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