Nationalize the Networks

Nationalize the Networks

FCC Chairman Ajit Pai speaking in June

Today, Trump’s Federal Communications Commission (FCC) voted along party lines to repeal net neutrality. In a uniquely divided political landscape, the move accomplished something remarkable: it brought people together.

On its deathbed, net neutrality enjoyed support from majorities across demographics, including voters on both sides of the aisle, baby boomers as well as millennials. Public figures ranging from John Oliver to the U.S. Conference of Catholic Bishops took to their pulpits in defense of the principle that internet service providers (ISPs) like Comcast and Verizon should treat all traffic equally. Nearly 99 percent of 1.8 million unique comments received by the FCC spoke in favor of the Obama-era protections, and hundreds of protesters attended last-minute rallies across the country. Katrina vanden Heuvel, editor and publisher of The Nation, referred to the outcry as “the free speech fight of our generation.”

But it wasn’t enough. America’s net neutrality rules have been wiped from the books, opening the gates to a wide range of opportunities for corporate collusion. If Comcast decides to promote their streaming service by slowing Netflix, they’re now free to do so. Likewise for AT&T if they cut a backroom deal with Amazon Prime. Even more troubling is the possibility that ISPs will censor the content allowed on basic data plans, replicating the noxious model of Facebook’s Free Basics program and selling tiered access to web services à la carte.

The death of net neutrality benefits ISPs at our expense, but their freedom to throttle bandwidth is only the logical extension of a deeper problem: that private providers lack a profit incentive to deliver equal access to an open internet. This also drives a practice known as “digital redlining,” where ISPs fail to invest in cable infrastructure in poorer areas due to reduced capital returns. As a result, two in five fixed connections in the United States fail to meet the federal definition of broadband, a disparity that disproportionately impacts black, Latino, working-class, and rural Americans39 percent of whom lack access to broadband at all, according to the FCC. Many of these people are forced to pay exorbitant rates for second-class service: two years ago, the Center for Public Integrity found that Americans paid about 3.5 times as much for internet access as the French, and U.S. rates are easily among the highest in the OECD.

According to the American Customer Satisfaction Index, internet service and television service (often provided by the same companies) are tied as the most-detested industries in the country. It’s clear that our model for rationing internet access is fundamentally broken—and that people are hungry for alternatives.


Making a Monopoly

Net neutrality’s opponents hold that, absent formal regulations, market forces will prevent ISPs from behaving badly. If Charter blocks your favorite payment app, a free-market evangelist might suggest that you buy service from one of their competitors. There’s only one problem: in much of the country, ISPs operate as unchecked monopolies. Less than half of the populated census blocks in the country are served by more than one broadband provider, and a prominent telecom analyst recently estimated that Comcast faces fiber competition in no more than a third of its footprint. To the extent that providers do compete, it is largely over the geography of service areas rather than within them.

At the federal level, the ascendant approach to this problem has been an attempt to increase the level of competition in broadband markets, guided by a one-word philosophy: deregulation. A few weeks before the vote to repeal net neutrality, FCC Chairman Ajit Pai argued in the Wall Street Journal that removing net neutrality protections would generate increased broadband investment, “create jobs, increase competition, and lead to better, faster, and cheaper internet access.”

This isn’t just a pipe dream. It’s totally disingenuous. Pai’s claims are largely based on a single, widely refuted report by a telecom lobbying group, which fails to acknowledge that broadband investment was already in decline in the years leading up to the change. Asked about the impact of net neutrality at a conference in December 2016, Charter CEO Tom Rutledge said, “it didn’t really hurt us; it hasn’t hurt us.” Indeed, it was a good year for Rutledge. With a paycheck of $98.5 million, he was the highest-paid CEO of 2016 by a factor of two.

Low broadband investment isn’t driving down competition. It’s the other way around. Like other network infrastructure such as roads, sewage systems, and subways, broadband networks are natural monopolies. They are prohibitively capital-intensive to build, and lots of hoops stand between would-be competitors and new markets. New providers need to obtain a large number of inputs that only governments can provide—such as access to utility poles, public land, and eminent domain—as well as the cooperation of existing providers in the area. This gives entrenched monopolists room to drag their feet and exercise leverage over would-be competitors. Even the spectacularly well-funded Google Fiber has found it nearly impossible to break into local markets.

The Trump administration’s decision to block a proposed merger between AT&T and Time Warner aligns with a strategy to encourage broadband competition, but history shows that the cable industry tends towards natural consolidation. When the Reagan administration broke AT&T’s Bell System into regional holding companies in 1984, they failed to rule out a re-merger. Sure enough, in the ensuring years, AT&T regained control of four of seven “Baby Bells,” with Verizon scooping up two others. Today, the four largest broadband providers—Comcast, Charter, AT&T, and Verizon—account for three-quarters of the national market.

And would we even want competitive broadband markets? Overlapping network infrastructure introduces a large amount of redundancy and costly inefficiency. The very form of a cable network is antagonistic to competition within markets, and regional monopoly is likely unavoidable.


The Failure of Regulation

Many other natural monopolies, such as electric utilities and transit systems, are run by the public sector. But when it comes to cable, liberals insist on tolerating private monopolies as long as they’re regulated in the public interest. The Obama administration approved AT&T’s acquisition of DirecTV, but at least paid lip service to tougher regulation.

It would be generous to say that these efforts have met with mixed results. Obama’s FCC may have voted to preempt the pro-corporate laws that currently limit the expansion of public networks in Tennessee and North Carolina, but the states aggressively complied with lobbying interests. AT&T lawyers represented Tennessee before a federal court that ultimately blocked the decision. Even net neutrality protections were clumsy, arguably unenforceable, and riddled with loopholes that allowed leeway to discriminate against certain content in the name of “network management.”

Patchy, incremental reforms are also untenably vulnerable in the face of changing administrations. The net neutrality repeal is only the latest skip of a broken record: in March the Senate voted to allow ISPs to sell their users’ information without consent, and Ajit Pai recently announced a plan to cut the federal definition of broadband back to 40 percent of the current standard.

The Trump administration’s whirlwind of regulatory rollback should make it clear that tepid and easily undone reforms are no match for the telecom giants. But the Democrats’ gentle touch should come as no great surprise, as the ISPs’ political ties are thoroughly bipartisan. In the 2016 election cycle, the telecom industry banked especially heavily on Democrats, contributing a record $16.1 million to their campaigns (compared to $9.2 million for Republicans). Contributions to the Clinton campaign outpaced those to Trump by ten to one. The past year has been a godsend for the monopolists, but with enemies like the Democrats, the ISPs hardly need Trump in office to get their way.

This bipartisan tradition of concessions and handouts might explain why internet service remains one of the most absurdly unregulated industries in the country. And many of the laws, regulations, and bureaucratic loopholes that do pertain to ISPs benefit the monopolists rather than their customers. For example, twenty-one states currently enforce laws that prevent or discourage the construction of public broadband networks, and rules governing the use of utility poles further empower legacy providers. (Roadside poles still carry most U.S. electricity, and fixed internet connections along with it.) When Louisville tried to relax their deployment requirements, Charter and AT&T each sued the city for violating their First Amendment right to “speak” as cable providers. And in Tennessee, private providers are partially insulated from Chattanooga’s highly successful municipal network by a state law that mandates a price floor for public providers.

Cable monopolies don’t just exercise a great deal of power over their customers, but also over the public organs that were designed to regulate them—a kind of government failure that scholars call “regulatory capture.” If Katrina vanden Heuvel was right to call the struggle over net neutrality the “free speech fight of our generation,” the Citizens United definition of “speech” appears to be winning.


The Public Case

The internet was once imagined as a great leveling force, with the power to make information universal—even to unshackle opportunity from material conditions. That vision became complicated for a number of reasons, not least of which is that the internet can only be as equalizing as it is equally accessible. The ISPs—the owners of the internet’s physical access points—continue to frustrate any hopes of an open and equitable internet. Two approaches have competed to guide them away from antisocial behavior. Both identify the task as one of confronting regional monopolies: one seeks to break them up, the other to tame them. Both have failed.

The problem with our broadband providers is not one of monopoly, but of privatization. If we are interested in honoring the United Nations resolution that open access to the internet constitutes a basic human right, we shouldn’t fight against inevitable network consolidation or the reality that private monopolies are nearly impossible to regulate in the public’s interest. Instead, we should push for direct control.

Luckily, a number of small-scale projects have already charted a path. The most prominent example is the municipal broadband network in Chattanooga, Tennessee, which customers rated as the most popular provider in the country in 2016—probably because it offers the fastest and most affordable connections around. Municipal fiber networks are also blowing the competition out of the water in smaller cities like Wilson, North Carolina and Concord, Massachusetts. Elsewhere, rural electric cooperatives are building out fiber networks through subsidiaries such as Co-Mo Connect in Missouri and Douglas Fast Net in rural Oregon, which serve customers in sparsely populated areas where private providers lack a profit incentive to invest in expensive cable infrastructure.

Other cities have tried to improve their internet service through public-private partnerships, but this model’s track record is less than inspiring. In 2008, New York City granted Verizon a citywide cable franchise under the condition that the provider “pass all households” with its FiOS fiber-optic network within six years. Today, the city is suing Verizon for failing to connect nearly a third of its 3.1 million households. Similarly, Kansas City was the first city to embrace Google Fiber in 2012—but five years later, many residents still don’t have service, and Google seems to have all but given up on extending it to them. A stunning 70 percent of children in the Kansas City Missouri School District still lack internet access at home, and the future of the project’s expansion is unclear.

If local governments are serious about securing affordable, high-quality internet access for their constituents, public electric utilities are better suited to the task than private companies. If a fiber network is built out across an entire electrical grid, it is sure to connect with every home and business in a given service area. And the Chattanooga example demonstrates that this can even benefit residents who don’t buy internet service. Owned managed by the Electric Power Board (EPB), a public electric utility, Chattanooga’s fiber network doubles as the backbone of a “smart grid,” providing the EPB with a constant stream of data on their electric system. This eliminates the need to deploy technicians to read meters, and allows them to reroute power almost instantaneously in the event of an outage. The EPB estimates that the “smart grid” has eliminated total downtime by about half, saving the city some $50 million a year.

More importantly, democratic control of broadband infrastructure can become a platform for addressing digital inequity in more fundamental ways, such as offering subsidized data plans, hardware for accessing the internet, and digital literacy programs. Such projects are far more likely to take hold once we’ve crossed the conceptual barrier of thinking of the internet as a collective good—and access as a basic right. The fastest way to accomplish this is by turning broadband into a matter of public policy.


Toward Digital Democracy

Given the current political climate, a push for public broadband is most likely to succeed if it starts small and focuses on local projects with their eyes fixed upwards. The first step would be to petition city councilors and rural electric cooperatives to investigate and then implement public fiber-optic networks on the backs of preexisting electrical grids. The next would be to point to the growing list of success stories in pressuring state legislators to repeal the laws that limit the construction of municipal networks in twenty-one states. If national public opinion turned against the ISPs with enough strength, the federal government could even come into play, issuing stimulus grants for public networks. Finally, if public fiber were ever to truly become ubiquitous enough to threaten the profit margins of the private ISPs, they might be looking to sell their cable infrastructure. And at that point, our government might be in a position to buy.

This is a distant horizon, but its seeds have already been planted. After all, support for public fiber is surging: the Institute for Local Self-Reliance counts over 500 community networks across the country, including 110 communities in twenty-four states with publicly owned networks offering 1 gigabit-per-second service. In October, San Francisco became the first major U.S. city to pledge to supply every home and business with a fiber-optic connection. Trade magazine Broadband Communities recently reported a record 21 percent increase in the number of municipal broadband projects from the previous year.

Popular outrage over the loss of net neutrality doesn’t just provide an opening for a leftist vision of socialized internet service. It necessitates one. In its twilight, net neutrality was backed by a broad coalition including those on the left as well as libertarians and centrists who were simply interested in defending open competition on the internet. The loss of even this modest protection shows that their proposals for managing the ISPs have failed—but broad support for net neutrality, coupled with an explosion in municipal fiber projects, illustrates plenty of room to win people over to the logical way of carrying forward its spirit. Calls to “nationalize the net” have already begun to resonate amidst the backlash to Ajit Pai’s FCC. If service providers were accountable to the public rather than to shareholders, there would be no need to worry about backroom deals to throttle data in the name of capital accumulation. Some will inevitably worry about similar forms of government censorship—indeed, the United States was known to have engaged in postal censorship during the Second World War—but one would hope that the First Amendment is a stronger protection than Title II of the Communications Act of 1934.

Public broadband often finds bipartisan support when implemented: in Chattanooga, even local Republicans are clamoring to praise the local municipal network. When people experience the benefits of a public network in their immediate lives, they see it more as an issue of common sense than one of partisan politics—making public networks far more resistant to changes in administrations than liberal-minded regulations. Yet we should remain explicit about the broader potential of socialized internet access, and clear about our enemies: the private ISPs, whose interests go far beyond individual markets. Local campaigns for democratic networks are more likely to succeed if they are understood as part of a larger political project, which will require the language of power and collective ownership.

Rather than outfitting toothless bureaucrats with a new set of regulatory dentures, the left should seize on loss of net neutrality with a call to socialize internet access. If we were junior partners in the coalition to defend #NetNeutrality, we could lead the charge in an equally broad push for #PublicBroadband. Luckily, such a movement is most likely to succeed on the left’s favored terrain: from the grassroots up.


Evan Malmgren is a writer and researcher based in Brooklyn.