How the U.S. Became an Inferior Communication Nation

On October 27, the Federal Communications Commission (FCC) met to address a number of goals of the Trump Administration. These included:

• Blocking efforts to reestablish net neutrality
• Privatizing public utility networks
• Blocking cities and states from dealing with wireless issues
• Providing $9 billion to private telecoms for rural 5G upgrades

The Commission is composed of five members, three Republicans and two Democrats. 

During the meeting, FCC commissioners voted 3-2, along party lines, to conclude that there was no basis to alter the agency’s stand against net neutrality. Strong opposition to the majority vote came from the two Democratic members.   

As Trump’s presidency draws to an end, the Republican-controlled FCC has moved not only to remove all regulations but also to allow private companies to take over state utility wired networks.

Commissioner Jessica Rosenworcel argued that “FCC data show that our broadband markets are not competitive. Most households in this country have no choice of broadband provider.” She called for broadband services to be regulated similarly to utilities, such as water and electricity.  

Commissioner Geoffrey Starks was particularly concerned about the impact of the COVID-19 pandemic on telecom services. He noted that “30 percent of Black, Latinx, and other non-white households earning less than $50,000 a year have missed at least one payment on their Internet bill since the pandemic.”

The meeting vividly demonstrated how Trump-appointed bureaucrats systematically sidestep critical issues in order to legitimize corporate interests. It’s worth watching.

Sascha Meinrath, PhD, Palmer Chair in Telecommunications, Penn State University, was even more critical of the meeting’s outcome. He insists, “Tuesday’s party-line vote is a shameful example of exactly why former telecom lobbyists and lawyers should be barred from running agencies in charge of reining in corporate malfeasance.”

He argued, “despite the overwhelming evidence that broadband connectivity in the U.S., it is increasingly sub-standard vis-a-vis other highly industrialized nations—and that consumers are increasingly agitated by the poor speeds and high prices we pay—Chairman [Ajit] Pai has endeavored at every turn to gut oversight and accountability of telecommunications providers.”  

Alexander Graham Bell is credited with inventing the telephone in 1876 and forming the Bell Telephone Company the  following year. In 1885, the American Telephone & Telegraph Company (AT&T) was incorporated as a subsidiary of Bell to build and operate the first long-distance telephone network. In 1899, AT&T bought Bell’s assets and became the parent company of the entire Bell system. 

AT&T operated as a monopoly until 1984 when, following the settlement of a Justice Department civil antitrust suit, it was split into seven regional operating companies, dubbed “Baby Bells.” AT&T kept Bell Labs, telephone equipment manufacturer Western Electric and long-distance service; the regionals got the Yellow Pages and local service.  In 1995, it formally restructured. 

In 1996, President Bill Clinton signed the Telecommunications Act, arguing it would promote “competition as the key to opening new markets and new opportunities.” He insisted, “it will protect consumers by regulating the remaining monopolies for a time and by providing a roadmap for deregulation in the future.” 

Now, nearly a quarter-century later, telecommunications consolidation is once again reaching monopolistic proportions. How did this happen?

Over the last decade, a series of major mergers and acquisitions reconfigured national telecommunications and,increasingly, entertainment industries. Today, the telecom industry is dominated by a handful of huge conglomerates. In 2019, the top three telecom providers in the United States had total revenues of nearly $400 billion. Together, these conglomerates forged the “telecom trust.”

The telecom trust controls not only the “pipes”—the wired and the wireless networks—that link the nation’s homes, businesses, schools, and people, but it increasingly controls the “media” content creation companies as well. The combined influence of the telecom/media trust on American society has reached the level of the great oil, banking, and railroad trusts of the Gilded Age more than a century ago. 

The consolidation of the telecom trust has had disastrous consequences for U.S. communication services.

The Organization for Economic Co-operation and Development (OECD) ranks the U.S. twenty-fourth out of the thirty-four OECD countries in terms of internet access. In terms of mobile service speeds, the United States didn’t make the top twenty-five countries assessed.

And Americans pay more for their inferior services. Fees for a gigabyte of data range from $0.26 in India to $6.66 in the United Kingdom and $6.96 in Germany. Costs in North America were the highest, averaging $12.02 in Canada and $12.38 in the United States.

The services Americans have are inferior to other advanced nations—a situation made worse by the pandemic. In addition to a lack of connectivity, many poorer families with children tend to be dependent on smartphones—as distinguished from Internet-enabled devices like a desktop or laptop PC or tablet—to get online. Now the provider-established data caps on broadband services are forcing low-income subscribers to ration their online access.  

In addition, an increasing number of hospitals and medical centers are relying on telemedicine to safely screen and treat patients (especially those with COVID-19), and the lack of Internet connectivity will restrict access to these remote services as well.  

The career paths of recent FCC chairpersons from both parties show how the telecom industry has captured the regulatory process:

Current chair Ajit Pai, a Republican appointed by President Trump, previously served as Verizon’s associate general counsel from 2001 to 2003.  

Thomas Wheeler, a Democrat appointed by President Obama, was chair from 2013 to 2017. He was a longtime Obama fundraiser who previously served as CEO of the wireless industry group CTIA.

Michael Powell, General Colin Powell’s son, was appointed by President Clinton and was chair from 2001 to 2005. He now heads the cable industry trade association, NCTA.

More revealingly, the current U.S. Attorney General, William Barr, a Republican, served as general counsel for GTE and its successor, Verizon (1994-2008); from 2009-2018, he served on Time Warner’s board of directors.  Forbes reported that he made $50 million as a Verizon executive and director. 

The FCC has privatized communications services in the United States. This development has had two critical consequences that led to the country’s inferior communications services. 

First, in 2000, the FCC “froze” cost-accounting rules and permitted states to no longer publish their telecom data, thus allowing the telecom companies to engage in bookkeeping sleight-of-hand practices that cost telecom users, states, and taxpayers across the country dearly. 

Second, in 2007, the FCC declared that wireless broadband Internet service was an “information service” like cable modem service thus removing it from much of the regulatory oversight that applies to traditional landline telephone service. 

These developments culminated in the effort to adopt “5G”—i.e., “Fifth Generation”—wireless technology. It is being promoted as cheaper to install and a more profitable substitute for fiber-to-the-home. However, to be deployed, the system requires the installation of a greater number of cellular transmitters and receivers that are located closer to the ground and to customers’ homes.  

As Trump’s presidency draws to an end, the Republican-controlled FCC has moved not only to remove all regulations but also to allow private companies to take over state utility wired networks. The consequences of these efforts are simple and profound: The U.S. telecom trust will provide Americans with inferior communications services at higher fee for generations to come.