The second-worst piece of legislation* introduced recently in my former home state of Kansas is Senate Bill No. 304, the “municipal communications network and private telecommunications investment safeguards act.” According to the sponsor of the legislation … oops, it turns out that the bill does not list any sponsors; it was submitted for consideration by lobbyists for the cable TV industry. According to the lobbyists, Senate Bill No. 304 is intended to:
Sounds great. Except that the bill then proceeds to revoke the ability of cities and towns in Kansas to offer video, telecommunications or broadband services to its citizens, or to partner with companies like Google to offer those services, except in “un-served areas.”
What is an unserved area? According to the bill, it’s any place in Kansas “where at least nine out of 10 households lack access to facilities-based, terrestrial broadband service, either fixed or mobile, or satellite broadband service, at the minimum broadband transmission speed as defined by the Federal Communications Commission.”
Hmm. Let’s see. What areas in Kansas are deep enough underground that 91 percent of residents cannot get satellite TV or mobile phone service?
Right. So unless giant swarms of flying monkeys suddenly appear to blot out satellite service, Kansas has no un-served areas.
Therefore, Senate Bill No. 304 would preserve the existing monopolies of current cable TV companies, and prohibit competition that might threaten those monopolies. Municipalities would not be able to provide low-cost wireless Internet to local citizens or businesses, for example, or even to partner with Google to bring high-speed Internet to local schools. The existing cable and telco monopolies would be able to set rates and services without fear of competition, and – thanks to a federal court ruling last month – to be the gatekeeper who decides what types of content are delivered to consumers.
But, you say, that’s Kansas. What does this have to do with the real world?
And that brings us to Comcast, Netflix, and the concept of net neutrality.
Last month, a federal appeals court in Washington, D.C., held that the Federal Communications Commission has no authority to prevent Internet service providers like Comcast, Time Warner Cable, Verizon, and others from discriminating against certain content providers, like Netflix.
About the same time, Comcast subscribers began noticing that the speed and quality of their Netflix videos began to deteriorate. Movies froze, stuttered, and took forever (well, 27 percent longer) to download and stream. Meanwhile, the very same movies delivered by Comcast’s own Xfinity streaming service zipped right along without delays or image degradation.
Comcast argued that Netflix traffic was growing rapidly (example: 2 percent of all American households binge-watched the entire Season Two of the Nexflix original series House of Cards on its opening weekend), and that if Netflix wanted faster service it would have to pay Comcast more money.
So, according to GigaOm and The Wall Street Journal, Comcast went all mafia on Netflix (and sent a message to any other companies wishing to deliver content over Comcast’s pipes): Pay us more, or we throttle your service to the point that your customers hate you. And, naturally, Netflix had no choice but to pay up.
And, naturally, Netflix will have to pass along at least some of that cost to you and me.
Hardball? Of course. Comcast is the Goldman Sachs of the cable business; it does not care if people hate it, as long as they keep paying more for service. The market for new cable subscribers is pretty much tapped out, so the game now is to squeeze more money out of subscribers and content providers.
And, because Comcast has a virtual monopoly in many municipalities, it has no incentive to offer better deals to customers, whether those customers are residential or commercial or educational.
But in this case, it wasn’t really a net neutrality issue. Let’s be fair: Comcast and other broadband providers should be able to charge higher fees to certain content providers if those content providers – like Netflix — use a disproportionate share of the network’s capacity. And if Netflix traffic grows 25 percent next year, shouldn’t Comcast be able to raise Netflix’s rates by 25 percent?
In this case, Netflix knew it was hogging the pipes, yet for a long while it resisted paying for more robust connections to the Comcast network. Comcast punished Netflix, and Netflix capitulated. The underlying issues were technical rather than political; they largely sidestepped the net neutrality issue, for now.
But that doesn’t mean the net neutrality issues are resolved. An emboldened Comcast knows, thanks to the court ruling and a pliable Congress, that they are no longer legally bound to treat all content providers equitably.
Comcast is awaiting approval for its $30 billion merger with NBC Universal, for example, which would give Comcast ownership of one of the major networks along with its troves of TV and movie rights. NBC competes with many other video and movie networks. Can Comcast throttle NBC’s competitors, or charge them more for carrying the same amount or types of data?
For more than a century, the courts ruled that telephone companies could not discriminate against one customer over another, or charge different fees for similar services. Telephone service was classified as a public utility, and subject to federal, state and local regulation.
But in 2002 the courts ruled that Internet service providers were not subject to the same fairness rules that applied to communications services, even though all the major cable companies now offer telephone services. Where telephone providers were regulated public utilities, Internet service providers were deemed to be private information services unencumbered, as the court ruled last month, by F.C.C. regulations.
Now Comcast and Time Warner Cable are proposing to merge, which means there will be even less competition. The combined $26 million that Comcast and TWC spent on lobbying in 2013 presumably will get the attention of Congress and state legislatures in this election year, leading to more outrageous, anti-competitive legislation like Kansas Senate Bill No. 304.
The Internet service industry needs more competition, not less. Consumers need better service and lower prices. Communities need to build new economic models for the 21st century, and for many towns, that means better education and more information skills. It has become obvious since the Telecommunications Act of 1996 that deregulation of the cable TV industry has not led to more competition or lower prices for consumers.
It all comes down to this question: Whom does the government serve, its citizens or its corporations and lobbyists? Legislators in Kansas appear to have made their decision. Let’s hope other states are not as brainless, heartless and cowardly.
* Senate Bill No. 304 is the second-worst piece of legislation introduced in the Kansas Legislature in 2014. The worst, by far, is Kansas House Bill No. 2453, the “religious freedoms with respect to marriage” act, which would legalize all forms of discrimination against same-sex couples. The bill passed by a vote of 72 to 49 and was sent to the Kansas Senate, where it now languishes. A faction of the Kansas Tea Party is now pressing the state senate to pass the bill and send it to the governor.