The Telecom Scam: 5 Behemoths That Strangle Innovation and Ensure You Pay Too Much for Bad Service
America’s communications system is in crisis and the longterm consequences will be profound. Most distressing, this issue is not on the political agenda for the 2012 electoral campaign.
The nation’s historic strength is embodied in the ongoing development of its communications infrastruture: the telegraph helped launch 19th-century modernity; the telephone fashionend the 20th-century business and consumer society; and broadband communications is shaping the 21st-century global marketplace.
Unfortunately, where the U.S. was once a world leader in communications, it is now devolving into a secondrate telecom nation. In a December 2010 report, Europe’s Organization for Economic Co-operation and Development (OECD) ranked the U.S. 15th in “broadband” subscribers.
Making matters worse, Akamai, a leading technology service-provider company, ranks the U.S. 15th globally in average connection data rate speed, averaging only 5.3 megabytes per second (Mbps) in Q-1 2011. In comparison, Korea’s average data rate was nearly three times faster (14.4 Mbps), Hong Kong's nearly twice as fast (9.2 Mbps) and even Romania had an average rate of 6.6 Mbps.
Americans are getting inferior services at higher rates -- yet we are told (and believe!) that our communications system is the best in the world. Advances in smartphone operating systems and applications, most evident in Apple’s iPhone and Google’s Droid, dazzle the eye but hide the sins of the communications system’s underlying weaknesses.
Most disappointing, the U.S. Congress, the Federal Communications Commission (FCC) and state public utility commissions (PUCs) have been collaborating in this process. At the root of this crisis is the shared commitment, if not complicity, of government and regulatory agencies to protect existing corporate interests, restict meaningful competition and further industry consolidation.
An assessment of five key corporate players in the communications sector – a) two telecom companies (AT&T and Verizon), b) two cable companies (Comcast and Time Warner) and c) one Internet “applications” company (Google) – lays out the underlying control exercised by the trust over telecom services and the future of American progress.
The Phone Companies: One Big Duopoly
When AT&T was broken up in 1984, it was America’s largest corporation. It was divided up into seven “Baby Bells,” including Bell Atlantic and Southwestern Bell; they were suppose to compete with independent phone companies like GTE and SNET. AT&T and MCI retained control over long-distance service.
The Telecom Act of 1996 was suppose to open the telephone networks to competition. However, starting in 1996, first Southwestern Bell (renamed SBC) and then Bell Atlantic started to gobble up other Bells. The Act ended the ability of AT&T and MCI to offer local services, leading SBC to buy AT&T and Verizon to buy MCI, thus closing down the Bells’ two largest competitors. By 2005, competition was over.
Today, two mega companies, AT&T and Verizon, have operational control over America’s telecommunictions network of wireline and wireless services. (Qwest, formerly US West, controls the northwestern states, such as Idaho and Montana.)
With each merger, AT&T and Verizon “guaranteed” that each would compete for wireline, broadband, Internet and cable television. Competition has been replaced by a “gentleman’s agreement” that simply splits up America into fiefdoms.
AT&T is ranked seventh on the “Fortune 500” list. Its 2010 revenues topped $123 billion; if its current effort to acquire T-Mobile is approved, it will add an additional $21 billion to its bottom line.
AT&T is one company with two faces, one wireline, the other wireless. It exercies essentially monopolistic control of wireline telecom in 22 states, offering a host of services, including wireline (local and long distance), Internet Service Provider (ISP) Internet access, broadband and cable programming. As a wireless service, AT&T has 95 million wireless customers.