Morgan Freeman's Internet Issues

Art Brodsky
December 11, 2006

Art Brodsky is communications director for Public Knowledge, a public interest group working at the intersection of information and technology policy.

Although we think of the Internet as an infinite network, we can pinpoint a representative beginning and a representative end. In order for the United States to have a truly workable policy to make sure the benefits of sophisticated Internet connections are available to everyone, the beginning, and the end, need to be addressed.

The continuum of the Internet was on display a couple of weeks ago at two business meetings 650 miles apart on the ground, light-years apart in concept. In Phoenix, about 200 people attended a meeting of the Western Telecommunications Association. This group manages small, rural telephone companies which, for our purposes, are almost at the farthest reaches of the Net. Their world is a traditional, regulated telecom world. It is built around the subsidies known as the Universal Service Fund (USF), the system by which telephone companies with lower costs, generally in urban areas, help to cover the costs for companies in rural areas with higher costs to serve customers.

The Association perceives a threat to its USF support, and has started a campaign called “Keep America Connected,” to persuade lawmakers and the Federal Communications Commission not only of the value of their service, but to keep the support flowing. They are afraid that the universal service “reforms” talked about in Congress and the FCC will hurt, rather than help them. They are acutely aware that some rural Republicans, like Rep. Joe Barton, R-Texas, and Sen. Jim DeMint, R-S.C., are their worst enemies on USF issues.

Meanwhile, a day or so later, up in San Francisco, the Web 2.0 Summit conference brought together 1,000 CEOs, Web developers, evangelists (more than one company has that title) and others to hear speakers ranging from Google CEO Eric Schmidt to New York Times Chairman Arthur Sulzberger. Those 1,000—and the additional 5,000 who wanted to get into the conference but were turned away—represent the ones who in large part originate the content and services on the Web. The attendance shows that although we don’t often see it, the Web is much more than Google, Yahoo and Amazon and a few other big companies. There are all the little ones that have niche products and services and which want to become the next Google or Yahoo. Their ideas and energy are one way of representing the other end of the Net from the rural telephone companies.

The small telephone companies consider telephone service the central reason for its existence. The Web developers consider telephone service just another application that runs over a high-speed Internet network, no different from watching a video or checking email. It’s the disparity between the world of the rural companies and the world of the high-tech entrepreneurs which makes a comprehensive telecommunications policy so difficult.

At some point, the debate over high-speed Internet (a.k.a. “broadband") policy can move into the MEGO (My Eyes Glaze Over) realm. But as a couple of Washington Post stories recently demonstrated, the issue is as close as your TV set or computer. The actor Morgan Freeman is helping to start a movie download service called ClickStar. That service will compete with a batch of existing services, MovieLink and Cinema Now, with other download services in the works, including reportedly one from Wal-Mart. We also read that two Maryland counties in the Washington suburbs, Montgomery and Prince George’s, have approved Verizon’s application to offer fiber-based cable service. These items are all related, not only to each other, but to the web developers and the rural telephone companies as well. Let’s look at the connections, step-by-step.

Step one: Verizon brings high-speed Internet service to your neighborhood. Getting into the cable-TV business is the reason Verizon and AT&T want to be in the broadband business. That’s where the money is. For Verizon, one service it's offering is the Digital Subscriber Line (DSL) offered over basic, normal copper lines that’s relatively slow. The other strategy is to set up new fiber-optic lines (cutting the existing copper ones) in neighborhoods where the company thinks there’s money to be made. But the same lines that bring in cable TV also are used for those high-speed Internet connections and telephone service offered through the Internet, as opposed to the normal telephone service.

Step two: Verizon has those new lines to itself. Thanks to decisions from the FCC, it doesn’t have to lease space on them to competitors, as it does with other types of services. Here’s where Morgan Freeman comes in. Let us suppose that Verizon wants to offer the capability of making some movie services download faster than others. BellSouth tested a service like that called TurboZone. If it wanted to, Verizon could make an exclusive, lucrative deal with MovieLink so that service would be the only one to offer the speeded-up service. MovieLink customers would have a new benefit, Mr. Freeman and the other services will be left to the slower, less-desirable service. This preference for one service over another is what makes those hot-shot Web developers at the San Francisco conference anxious. They want to reach customers with the best services they can offer, but worry they won’t be able to afford it if telephone customers play favorites.

Step three: Many of us in the Washington area are lucky in that we have some choice of Internet companies, even if that choice is really only between cable and telephone. In many parts of the country, consumers don’t have that choice. This is where those rural telephone companies and their subscribers come in. It’s obvious that broadband will bring all types of new services and opportunities, perhaps even displacing normal telephone service as it enables lots of video applications and opportunities for economic development.

Step four: What’s needed to tie all of these elements together is a national broadband policy that benefits all consumers—not just those who are graced with advanced services today, but to make sure that everyone will have them to some degree. In broad terms, there are a few of the elements that need to be put in place.

First, net neutrality. Net neutrality—an unfortunate term that has only its alliterative qualities to recommend it—is nothing more than carrying over the concept of non-discrimination from the telecom regulations the FCC threw out last year. Net neutrality basically means that Verizon or AT&T can’t cut a special deal to make one movie service work faster than another. If it offers that capability to one, it has to offer to all. It means that if AT&T offers an Internet telephony service, it can’t favor its own over that of a competitor. There’s nothing terribly complicated about that.

Second, a forward-looking universal service policy. If broadband is to be the base for communications services in the future, then everyone should have access to it. The small and rural companies now depend on subsidies from other telephone companies in order to keep down the prices of their services. Those companies are the key to bringing service to rural areas. Debates over universal service in the telecom policy world are the most arcane ones ever. Points of discussion revolve around how many hundredths of a cent a company should get for originating or terminating a call. Much of that will be irrelevant in a broadband era. An adjustment to the existing formulas, or more likely, a new approach is needed. Those small companies need access to bigger telephone company networks and, similarly, shouldn’t be discriminated against.

Third, a pro-competition policy. The United States ranks 12th in the world in the spread of broadband services, behind most European countries and Canada, according to the Organisation for Economic Co-Operation and Development. It’s shocking, but Americans pay more for fewer telecom services than do many countries around the world. We think it’s great to get three megabits per second service for $50 per month. In London, a company called Be offers 24 megabits per second for about the same price as the slower service here. The European Union created that competition to established telephone companies by using some of the regulatory techniques we threw out. We in the U.S. are, if we’re lucky, at the mercy of a duopoly. Other technologies may develop later, but they haven’t come along yet.

New, faster broadband services promise to be lots of fun for everyone, and hold promise for economic development and education as well. But until we make sure that these Internet services work to the benefit of everyone, from the Web developers to the rural companies and their subscribers, that promise will never be fulfilled.