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July 29, 2014 - Freedomain Radio - Stefan Molyneux

01:18:12

2760 The Truth About Net Neutrality

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	Hi everybody, my name is Stefan Molyneux.
	I'm the host of Freedomain Radio, the largest and most popular philosophy show in the world.
	And this, my friends, is the truth about net neutrality.
	What is this amorphous brain cloud called net neutrality?
	Well, it is the principle that internet service providers hereafter, referred to as ISPs, should enable access to all data on the internet without any discrimination or preference or interference.
	This means users, content, websites, applications, and modes of communication should all be treated equally.
	No fast lanes, no slow lanes.
	Federal Communications Commission, FCC Chairman Tom Wheeler, recently introduced rules that would permit ISPs like AT&T, Comcast, and Verizon to block or restrict internet traffic by creating fast lanes for those who can pay for preferential treatment, leaving the rest of the internet stuck in the slow lane in slow motion sickness.
	This proposal would violate the principle of net neutrality, which requires ISPs to treat all traffic equally.
	Public pressure, which you may have heard of, to adopt strong net neutrality policies has intensified since the federal court struck down the commission's previous rules in January.
	The court ruled the FCC could adopt net neutrality protections, but only if it reclassifies ISPs as common carriers, thus preventing them from discriminating or interfering with network traffic.
	So common carriers, which we'll get into in a bit, is a term that was created in the 1920s around phone lines that you couldn't say, Give better or faster phone service to people who paid more.
	It's sort of the same way that the post office works in that it costs the same to send a package two doors down as it does to send it from Florida to Alaska.
	And so the idea is a common carrier is not allowed to discriminate in terms of pricing.
	So, I have a background as a software entrepreneur, and so I'm pretty down with the tech stuff, but I'll try and give it to you in a way that makes sense, hopefully.
	So, when you're looking to find an ISP, you're looking probably at its bandwidth to cost ratio.
	How fast is your connection going to be and how much you're going to have to pay for it?
	But there are a few additional considerations which you kind of need to understand to get the net neutrality question.
	So bandwidth is the number of bits all computers run on binary, 1 or 0.
	So these bits are atomic data blocks that are either 1 or 0 that can be transferred over the ISP network.
	Now, I mean, sort of think of the matrix, right?
	Everything is a 1 or a 0, sort of scrolling around in that green text.
	The same kind of thing.
	Everything that I'm doing here, my visuals, my audio, the text on the screen is all based on a 1 or 0 that combines to numbers and audio and all that kind of stuff, to colors and so on.
	A 100 megabit download data plan would allow you to receive a maximum of 100 million bits per second, depending on where the data is coming from.
	So, let's say that you can max out your download speed to a particular content provider.
	Well, you're always going to get the speed you pay for.
	Well, no.
	There's lots of things that can test your internet speed, and it will usually rate a little bit lower.
	To maximize the efficiency of their network, ISPs oversell the amount of bandwidth they can provide.
	Is this cheating?
	Well, not exactly.
	Because if you imagine, like if every road had a dedicated lane for every driver who used them, I mean, obviously, if we were all the president of the United States, this would be inefficient and very expensive.
	Although network systems are much more complex, the principle is the same.
	You can't build...
	Maximum amount of potential data use for each customer because very few customers use the maximum.
	There's usually kind of an 80-20 rule that 80% of the bandwidth is used by 20% of the customers, although I think in the world of Internet service providers it's more extreme, like 95% of the data is used by 5% of the users.
	At least it used to be that case.
	Now there's stuff like Netflix and other data-intensive programs.
	It's changed a little bit.
	So ISPs usually do a statistical analysis of their networks to determine what contention ratio is appropriate for their user base.
	And that's the ratio between actual bandwidth and potential maximum demand.
	So if everybody, for instance, logs on to watch the Super Bowl over the data line for a particular Internet company at the same time, everybody will get dropped frames of dropped balls.
	And this is a traffic jam.
	And this is called network congestion.
	And it's sort of similar to airlines, right?
	We'll oversell seats because a bunch of people usually never show up for a variety of reasons.
	And so that's one of the ways that you keep costs low is to not max out building for everything.
	So, like real roads, where you've got on-ramps and off-ramps, networks are comprised of interlinked nodes.
	And so, if you imagine physically, if everyone in a city decided to go to the same shopping mall at the same time, all the roads leading to that mall will get jammed.
	Say, if I was doing a speech there.
	Well, that would, of course, happen.
	And if the entire user base of an ISP wants to reach a particular content provider, say free domain radio, the network will become congested and download speed will be incredibly slow.
	And this actually happened.
	So last year I was on a podcast with Joe Rogan And we went to number one on iTunes, and everyone was trying to get the podcast from my server in California, and this meant that the server got so congested, if it's people trying to get that particular show, that it took like four or five hours to download, and people were getting frustrated.
	So we since then have hosted all of the free domain radio philosophy podcasts on a variety of servers with a router that routes the demand to the least busy server, and that's all fixed there.
	So, you know, multiplicity is efficiency in the network world.
	So, ISPs often apply very complex algorithms to reroute connections in order to alleviate possible congestion, but There's only so much they can do, right?
	So if the carrying capacity of the network as a whole has exceeded.
	So when you want to go downtown, let's say you live in the suburbs, you want to drive downtown, then you will probably check the traffic using Google Maps or some sort of TomTom GPS system, which is going to tell you how congested the roads are and will offer you alternate routes.
	When the carrying capacity of an ISP's network is exceeded, the only solution is to expand the network infrastructure to create more of these series of tubes that the internet runs on, or to reroute through another ISP's network to borrow somebody else's capacity.
	Now there's this concept called peering, which describes competing ISPs connecting their networks for the purpose of sharing traffic between the users of each network.
	So if you send an email and you're on Yahoo, you want to send an email to someone who's on some other kind of system or other kind of network, They will share information, right?
	It's the same thing like if I go to Florida and I want to make a call on my cell phone, then I don't have a contract with a Florida cell phone provider, but they allow the network traffic to pass between my home carrier and the one in Florida.
	So this kind of sharing is important.
	And it's the only way it really works.
	Like if you want to create an entirely proprietary system, then it's not going to work that well because people don't know in advance the system of the person they want to send an email to.
	So this is typically a voluntary arrangement, this sharing of data between ISPs that provides ISPs with a number of benefits just beyond shared user access.
	They can achieve better performance.
	They can distribute larger amounts of traffic and even negotiate emergency aid.
	So DSL, boy, back in the day, I remember my first 300 board modem back in the 80s, I think it was.
	And we kind of topped out at 14.4 or the rare 28.8.
	But now you have DSL. They're built on top of telephone wires.
	But broadband internet traffic is generally carried over the cable television infrastructure.
	And...
	One of the things, sort of a preview of the challenges we're going to face when talking about government regulation, is the FCC spent years and years and years fighting cable television infrastructure.
	Because, you know, back in the day, kids, what used to happen was carrier pigeons would carry VCS tapes from one house to another.
	Actually, it would just go over the air, right?
	You have antennae, a rabbit ear antennae or something like that, which you'd...
	Generally get struck by lightning while attempting to adjust during a storm.
	So it used to go over the air.
	That used to be everybody's TV. And...
	Then it started switching over to cable, and the FCC fought the imposition of cable vigorously and vociferously, based, of course, because the people who were sending signals over the air didn't want the cable to come in because it was too competitive.
	And now I think only 7% of Americans get their signals over the air.
	The rest of them get through cable.
	So if the FCC had won, you'd have no broadband internet because there wouldn't be a cable television infrastructure with which to carry the data signals.
	Again, this is This stuff we'll be talking about in a bit later.
	So what are the major concerns with regards to net neutrality?
	Well, ISPs like AT&T, Comcast, and Verizon claim that large content delivery networks like Netflix are responsible for congestion on their networks, crippling bandwidth and incurring rerouting costs.
	Of course, if you're going to borrow someone else's network, you have to pay more for that than if you're using your own network.
	So, with the advent of data-intensive streaming services, and you can, of course, stream Netflix in high definition, which is just bandwidth monstrous, and if a whole bunch of people do that, you know, when Orange is the New Black comes out, or House of Cards, or some particular Netflix original series, everybody wants to see it right away, and you just get this massive congestion, which is a huge problem for the ISPs.
	The ISPs are proposing the idea of fast and slow lanes.
	So content providers like Google Video or Netflix or Amazon Video, basically it's mostly video.
	Audio is much less bandwidth intensive.
	These ISPs propose these fast and slow lanes.
	So content providers like Netflix will pay for access to the fast lanes while all other traffic will be carried through the slower lanes.
	Because they have to build more capacity, and to pay for that capacity, they either have to charge the consumers or they have to charge the providers.
	Now, as a guy with sort of 20 years of, more than that now, 25 years of entrepreneurial experience, If I was running a cable company, I would not want to go to the users and say, listen, if you want decent or fast Netflix access, you've got to pay us $15 more a month.
	Because they'd say, well, wait a minute, but I'm already getting it okay.
	Why am I being charged more?
	And it's like raising taxes.
	You know, with the Laffer curve, you raise taxes and people just change their behavior to reduce the paying of taxes.
	And so you can't just multiply 15 bucks a month by your existing subscriber base because other people will people will just leave.
	Right.
	And so you end up may end up with actually less money.
	But if you can charge Netflix for the building of the additional network infrastructure required to stream high definition video to 10 billion people, then the consumer gets a better experience and they don't see any increase in the price of their cable.
	They may see an increase in the long run, or maybe even the short run, in the price of Netflix, but that's something that the cable company doesn't have to worry about.
	So I doubt that the Netflix prices would go up, but it's something that's really important to understand.
	So what do these fast and slow lanes look like in practice?
	Well, whenever the ISP's network receives a data packet, it inspects it for an ID. If the ID corresponds to a content provider that's paying for the fast lane, then it will deliver the data through its optimal node path.
	Terrible name for a punk band.
	All other traffic would be diverted through the lower priority lanes, making the delivery speed slower.
	But you may not notice it if it's something as innocuous as a webpage, which, you know, is tiny amounts of data compared to even 30 seconds of a high-definition Netflix video.
	So...
	So the delivery speed will be slower, but the reality is it may be faster than if the fast and slow lanes are not developed.
	Because the fast lanes means that all the data-intensive stuff is rooted away from the network that handles things like even podcasts and web pages and email and stuff like that.
	But if they all have to share the same data path, everything will probably be slower.
	But if you can divert the traffic away, the more data-intensive traffic away from the slower lanes, the slower lanes may actually end up faster.
	Like, if a whole bunch of people decide to take helicopter rides to get to work, then it's going to be a lot less congestion on the highway, if that makes sense.
	So the ISPs say, well, if we can do fast and slow lanes, if we're not allowed to do fast and slow lanes, then we have to charge more for everyone, making customers pay more for the same speed.
	But if they get their way, if they're allowed to create these fast and slow lanes, then they will charge the content providers for the necessary hardware expansion of their infrastructure.
	So the people who like net neutrality claim that allowing ISPs to selectively block or throttle or restrict traffic We'll give them an unfair advantage over competing services.
	Large content providers who can afford to pay for fast lanes will also have an advantage over smaller competitors.
	And that seems hard.
	No, I doubt enormously that any ISP will simply block traffic because that would be censorship of a kind.
	That would be, I mean, soft censorship like market censorship.
	That would be market censorship that would be very unpopular with the user base.
	So, yeah, there will be advantages for sure.
	Now, net neutrality advocates argue that allowing ISPs to get their way will lead to a multi-layered internet, wherein those with money can monopolize content distribution while everyone else is forced to deal with a degraded service.
	After all, you can't run a bandwidth-hungry company like Netflix on dial-up speed.
	Now, I am a content provider, and I provide podcasts and videos, and I show up on TV from time to time.
	And I assume that YouTube would pay for faster access, so I would actually piggyback on YouTube's payment, and my content provision, even as a smaller provider, would not be harmed by that.
	But if you are running, say, a video streaming service from your house, that could be a problem.
	I'm not sure anyone's actually doing that.
	I guess webcam girls do.
	I don't have to check my phone bill.
	Anyway...
	Okay, so let's keep moving.
	Oh yeah, one other thing.
	A lot of the people who are for net neutrality happen to be the companies that would have to pay more if net neutrality were not allowed.
	In other words, if companies were allowed to create fast lanes, then companies like Netflix and so on would have to pay more.
	Coincidentally, Netflix is very much for net neutrality because that way they won't be charged more individually for the cost of the additional infrastructure that they're Video provision requires.
	So in the US, the ISP say, well, users are consuming more and more and more bandwidth, and this causes network congestion.
	But let's see, how does internet bandwidth compare to other countries?
	Let's have a look at Romania, which is the fastest internet connection in Europe and ranks third worldwide.
	The US ranks 30th in speed according to recent statistics, so not that great.
	Now, not only is Romanian internet the fastest in Europe, but it's also among the cheapest.
	So how is a former Eastern Bloc communist Soviet appendage surpassing the quality of internet services provided by an economic juggernaut and technology giant like the US? This is the country that invented the internet!
	Well, let's take a look at history.
	Ooh, the 1920s regulatory history!
	You know, if you're a pickup artist, you totally need to lead with this stuff.
	In the 1920s, acting under the presumption that competition resulted in duplication of investment in the telecom industry, the U.S. government started explicitly prohibiting or discouraging competition amongst telecom companies.
	So they wanted to get America wired as quickly as possible.
	Now, you had to, of course, run a wire to everyone's house back in the day to give them phone service.
	You mostly still do unless you're on satellite or cell phone technology.
	And so there was some challenge, right?
	The people who ran the wires didn't want some other guy showing up at the same time.
	They didn't want things duplicated.
	So, of course, whoever wanted to run the wires ran also to the government and said, listen, I'll run the wires.
	I'll totally run the wires.
	But...
	You have to bar anyone else from running wires in the same neighborhood.
	And the government was relatively happy to do.
	The idea was enshrined by President Franklin Roosevelt with the Communications Act of 1934.
	The chief focus of the Communications Act of 1934 was on the regulation of telecommunications, not necessarily its maximum development and promotion, states the 1988 Department of Commerce report.
	And of course, wherever the free market tends to allow for the most voluntary interaction between consumers and suppliers, you tend to get the greatest amount of innovation.
	And whenever the government gets in, you may get things faster, but they'll end up developing in the long run much more slowly.
	The 34 Communications Act created one of the biggest monopolies the world has ever seen, the American telephone and telegraph company, AT&T. Did you know that the last part was around telegraph?
	Ask your great-great-great grandparents.
	At one point, AT&T was worth more than the combined assets of Chrysler, Ford, General Electric, General Motors, and IBM, with a workforce of more than one million people.
	It was also the largest employer after the U.S. government.
	Now, this is back when those car companies were worth quite a bit.
	And the reality, though, was that the company, AT&T, was a quasi-government agency, since the FCC controlled most of its operations.
	And competitors were kept out of its market through regulation and monopoly pressure.
	So if I can use the F-bomb, fascism generally is private organizations, private profits, but public regulation and control.
	In other words, the privatization of profit and the socialization of cost.
	And these would be quasi-fascistic corporations.
	Now, there was a lot of work put out by free market economists in the 70s, and also with the advent of Reaganomics, there was a move towards deregulation.
	January 8, 1982, following a series of antitrust lawsuits, AT&T, colloquially known as Marbell, agreed to relinquish control of its regional subsidiaries, the Bell operating companies.
	January 1st, 1984, these subsidiaries were merged into seven independent regional bell operating companies, Arboks, or as we called them at the time, Baby Bells.
	Actually, just coincidentally, I did a lot of work with Bell in the 90s in Canada.
	It was a real challenge because Bell in Canada, as in most places, came out of the military and was a military supplier.
	And so you had a bunch of managers who were basically military guys trying to manage a bunch of young, twitchy, over-caffeinated software developers straight out of, I think, grade school.
	It was quite an interesting clash of cultures.
	So following the divestiture, I mean, the splitting up of the company, the U.S. government introduced two broad categories for classifying telecommunication companies, also known as carriers, carriers of data.
	AT&T, after the breakup, was now classified as a long-distance or inter-exchange carrier.
	And these were companies that were responsible for bridging different regions of the United States.
	The baby bells were considered local exchange carriers and serviced just their respective regional networks.
	So you can sort of think of it like you've got two towns, and within each town there are these baby bells just managing the infrastructure within the town, and then you've got the stuff so that the towns can call each other, stuff going between the towns, which would be managed by the parent.
	To further distinguish between the baby bells and their potential competition, Any LEC that wasn't a part of the Bell system was considered a competitive local exchange carrier.
	So, in order to make sure that, like the silver squid guy in Terminator 2, AT&T did not reassemble itself back into its Borg, long-distance and local exchange carriers were prohibited from entering each other's markets.
	In a weird way, this amount of hyper-control is called deregulation, when it really is not deregulation.
	It's like shooting a blob which then grows into more blobs.
	The telecommunications industry was effectively divided into two distinct entities that had to cooperate in order to stay in business.
	IXCs delivered nationwide traffic, LECs distributed that traffic to the end users.
	Due to the size and complexity of these urban networks, I mean, wiring up a whole town is quite a complicated spiderweb, the CLECs found it hard to challenge the baby bells.
	AT&T, however, started losing its market to large competitors like MCI and WorldCom.
	Now, while the baby bells remained unchallenged in the local telephone market, the advent of the Internet gave rise to a number of ISPs that started building their own infrastructure to deliver Internet traffic to potential users.
	The limitations of the phone technology at the time, as I said, was very slow.
	I mean, they used to say all the productivity gains of the World Wide Web have been nullified by the amount of time it takes a page to load.
	During the early 1990s, the ISP market began to grow very rapidly as personal computers became more affordable.
	And I remember back in the day of Taladon and so on, you had very enclosed markets, like you couldn't go outside of them in closed network systems.
	So the dominant ISPs in 1995 were UUNet, Scinet, and Netcom, who boasted nearly half a million subscribers.
	So there were large national and international ISPs, regional providers also were entering the market daily, and there were thousands and thousands of regional providers.
	By the end of 1995, the Baby Bells and large long-distance carriers like AT&T, MCI, and WorldCom were also expressing interest in offering Internet services.
	On February 8th, 1996, President Bill Clinton signed the Telecommunications Act of 1996.
	If you see the video, it's kind of interesting.
	He looks kind of glazed-eyed, and there's a weird knocking sound coming from the desk.
	Thus amending or repealing sections of the previous 1934 Communications Act.
	So, the stated objective was to transition away from monopoly provisions, government fencing which allowed monopoly provision of services, and creating a more competitive telecommunications market through deregulation.
	This is not really what happened.
	It's sort of like free trade.
	I mean, free trade between Canada and the U.S. is like a 2,500-page document of tiny type, and Mexico.
	And...
	Free trade is actually pretty simple.
	Just get rid of your rules and regulations, let people negotiate on their own, and you actually need zero documents.
	But anyway...
	Now, as is the case, I'm going to give a very brief segue into what's called regulatory capture, which is not a giant steel trap descending on the heads of bureaucrats.
	Tempting, though, that thought is.
	A regulatory capture is the government says to an industry, we're going to regulate you.
	And the industry says, great, we've got some wonderful guys who are really experienced in the industry.
	We're going to...
	I encourage you to let them be our regulators, and then we're going to go back and forth in this revolving door between the industry and the regulators so that we get to write our own rules to, quote, regulate us.
	And since the biggest companies have the most political clout and power, the biggest companies write the rules that regulate themselves, and they do this to increase their profits, keep out competitors, and generally shaft the consumer in the long run.
	So in this case, the Telecommunications Act of 96, 13 of the 15 FCC commissioners who drafted the act became lobbyists afterwards.
	Out of the remaining two, one was a former telecom lobbyist and the other was a lawmaker who received significant campaign contributions from the telecom industry.
	Oh, we're going to regulate this industry.
	That means that this industry is now going to start buying politicians and basically it's like me pretending to debate with a hand puppet.
	The larger and most powerful long-distance carrier lobby strongly influenced, if not downright, wrote the act's draft.
	And tired of legal battles with the baby valves over peering rates, IXEs simply changed the law to get their way.
	So you have to look at who writes these laws.
	It's not a bunch of congressmen.
	What do congressmen know about the telecommunications market?
	The laws are written generally by the largest corporations that they pretend to regulate.
	So long-distance carriers were now allowed to enter local markets as a result of this law.
	The Baby Bells could in turn enter the long-distance market provided there was enough competition in their respective regions.
	The Telecom Act forced the Baby Bells to start peering with the CLECs at price rates determined by the FCC. Again, that's what's called deregulation.
	The FCC is determining the price rates.
	It's called price fixing.
	It's illegal in the private sector, but it's standard policy in the public sector.
	This was supposed to prevent RBOCs from abusing their market monopoly by restricting or denying user access to their competitors.
	The baby bells were also required to lease parts of their network at fixed wholesale rates so retailers can make a profit.
	This rule was supposed to create a massive upsurge of bandwidth resellers, or as FCC Chairman Reed Hunt called them, Raiders of the Local Hoop.
	Man can certainly turn a phrase.
	To further stimulate competition, and you know, again, this is kind of weird, to stimulate competition, just stop telling people what to buy and sell and what they can buy and sell, let people decide for themselves.
	But to further quote stimulate competition, the act also established a telecommunications development fund whose purpose was providing loans and investments to startups and small businesses.
	So the 96 bill created two new categories.
	Telecommunication services or common carrier services, such as traditional phone service, which the FCC can broadly regulate.
	It's an important phrase.
	Common carrier means that you're sort of providing things like phone services and you can't say, well, we're going to provide better phone service over here and worse phone service over here.
	It's not allowed.
	So you can regulate common carriers a lot.
	Information services, any services that involve the storage processing and publishing of information online, The FCC has little authority to regulate them.
	And this is one of the challenges for people who want to impose net neutrality, is that the FCC, if the ISPs are called information services, has very little ability to do that.
	Within a year of the 1996 Telecom Act being signed into law, the number of ISPs in the US nearly doubled.
	By the end of the 20th century, which is just a couple of years later, more than half of the approximately 10,000 ISPs worldwide were located.
	In the US. And about 19% of internet traffic was ISPs attempting to get you to switch to there.
	Actually, just making that up, but that was a lot.
	Bandwidth resellers enjoyed massive increases in revenue.
	Between 95 and 2000, Winstock Communications revenue increased 165 times.
	So promises of great profits in the telecom market attracted countless entrepreneurs and investors.
	Late 90s, tech boom.
	Was there a crash?
	Actually, fortunately, I sold my company a couple of months before the tech crash, really by accident more than anything else.
	Now that long-distance carriers were allowed to enter the local market, they started acquiring these large CLECs who had their own network infrastructure.
	WorldCom immediately merged with UUNet's parent company.
	Their combined infrastructure established the first end-to-end network since the breakup of AT&T. In other words, they could bundle both local and long-distance services they could do within the town and between the towns.
	AT&T later followed WorldCom's example by acquiring a company called TCI, a cable company whose network infrastructure became the foundation for AT&T broadband and internet services, allowing the telecom to bypass the Baby Bell monopoly.
	Now, this is part of this myth of deregulation, right?
	So people talk about deregulation, they pass a bunch of bills with the word deregulation or open market or free market in them, and then everyone assumes that deregulation has occurred, and then when there are disasters, people blame it on deregulation.
	The same thing happened with the 07-08 financial crash, which people blamed on deregulation, despite the fact that under George Bush II, regulation of the financial industry actually increased.
	So despite the Telecoms Act promises of deregulation, the FCC's budget increased by 37%.
	And depending on how you measure it, its regulatory activity nearly tripled.
	This, in the Orwellian world of the government, is called deregulation.
	A 1997 Cato Institute analysis concludes that, in truth, the Telecommunications Act was simply a regulation reform.
	Instead of directly controlling the communications market, the Commission was now micromanaging it instead.
	Now, the Baby Bells weren't going to hand control of their networks over to the government.
	On September 17, 1997, they filed a lawsuit against the FCC, arguing that they should be able to set their own peering and lease rates.
	This was the first of many legal battles they were about to fight.
	We'll talk about this in a second.
	It's really important to understand.
	When you get the government involved in an industry, the government looks very different to a large corporation than it does, say, you and I. If our tax rates are increased, we generally just say, well, dang it, I'm going to pay them, right?
	Or if some rule changes, we just generally have to comply.
	But if you're a large corporation who can fund political campaigns and who has a massive legal department, you can take on the government.
	You can say, no way we're going to sue you.
	And this creates a very unequal playing field between the average person and the corporations.
	So in 2000, three years, pretty good for government courts, they finally got their way after a U.S. court struck down the FCC's pricing rules.
	Remember, the FCC said you have to leave this stuff out and here's how much you have to charge for it.
	For the first time since 1996, the RBOCs were allowed to set their own rates.
	So the government had artificially set these rates low, which is why the baby bells were fighting to have those rates increase.
	And this created a vacuum which drew all of these ISPs in, right?
	So thousands and thousands of ISPs came swarming in because you could make so much money because the rates were artificially low.
	And then a couple of years later, they are allowed to sell the bandwidth at the price that they want.
	Now, remember, if there's been a whole bunch of depressed prices for a long time, when you get to resell, then you get pretty hard up.
	You've been hard up for cash.
	You've had to undersell things for a long time.
	So then you have to raise prices that much higher to make up for your couple of years of losses when the government set the price artificially low.
	So what happened was sort of like interest rates in 07-08 that triggered the housing crash.
	Suddenly, rates which had been artificially depressed bounced up.
	And business models that were designed for low rates don't work with the higher rates.
	And the bandwidth reseller market started imploding dramatically.
	dragging small independent carriers and ISPs along with it.
	As regulatory reporter Edward Feingold noted, quote, when the wholesale rates changed, many of their business model went toes up.
	The chain of bankruptcies eventually led to the 2001 telecom crash, which naturally was blamed on the free market, the scapegoat for government interference.
	Large retailers like Covad, Focal Communications, McLeod, and Winstar went bankrupt in one of the first signs of the upcoming crash.
	The telecom bubble finally burst when Rhythms, Net Connections, and Northpoint Communications, the second and third largest CLECs providing DSL services, filed for bankruptcy in 2001.
	Shortly afterwards, the world comm giant collapsed as well.
	And the ramifications of this were just enormous.
	I was, of course, still involved in the software industry peripherally at this point.
	It was brutal.
	In total, telecoms had managed to run up debts of about a trillion dollars.
	It was later revealed that they also used fraudulent accounting tricks to hide their losses and degraded services.
	So the Baby Bell's fixed network carrying capacity, combined with an increased demand for bandwidth from the CLECs, should have resulted in increased lease and peering rates.
	In other words, they couldn't immediately double their infrastructure, but the demand had gone up enormously, which meant that the price should have risen in order to slow down the expansion.
	And this would have deterred potential competitors from entering an oversaturated market.
	So the FCC imposed fixed rates for leasing out the Baby Bell's network gave entrepreneurs misleading signals that ultimately created the telecom bubble.
	Perhaps the largest bubble in history and about 10 times bigger than the more well-known dot-com bubble.
	So again, here we see government regulation creating huge problems in the economy, which then, of course, gets blamed back on the free market.
	Alright, so let's talk about the crash.
	Since the FCC oversaw the use of the Telecommunications Development Fund, the fund for giving money to startups, much of the money went to politically well-connected companies as opposed to skilled competitors.
	And you just have to look at the green money doled out under Obama and other presidents to see where this stuff goes.
	It's not coincidental that the telecom bubble overlapped with the dot-com bubble.
	The rapid artificial growth in ISPs and subsequent internet-based services misled Wall Street investors and speculators in particular about the actual state of the market.
	So the malinvestments that resulted became the foundation of the dot-com bubble.
	And it's not just money, it's people.
	People train for these skills.
	They say, wow, there's this huge boom in network operators and network managers.
	I'm going to train for that.
	And they spend years and hundreds of thousands of dollars training for this stuff or tens of thousands of dollars.
	And then when the collapse happens, it's the human capital that is also misallocated and destroyed, which is not just economically terrible, but personally tragic as well.
	So as the carriers started filing for bankruptcies, ISPs depended on them also went out of business because they couldn't provide their clients with the promised bandwidth, right?
	We say, oh, we're going to give you, you know, X amount of throughput, and now X amount of throughput costs five times as much as we thought, so we can't provide it anymore.
	The collapse was thus propagated to most Internet-based services at the time.
	In less than a decade after the 1996 Telecom Act was enacted, the number of U.S. ISPs shrunk by 74%.
	Almost three-quarters of the ISPs went bye-bye.
	This is after this Telecom Act was signed to promote competition and shake up the marketplace.
	It was, of course, achieved the opposite of its stated goal.
	So there was, of course, an America Online Time Warner merger in 2000, which was just four years after the 1996 Telecom Act was signed into law.
	The U.S. ISP market was effectively monopolized by a single company.
	AOL Time Warner's merger cost $183 billion, making it the largest corporate merger in the U.S. history.
	And the new company became the fourth largest in the world.
	So, again, we just sort of want to point out that a government act specifically designed to promote competition and all these kinds of good things in the marketplace killed off three-quarters of the ISPs, promoted basically a giant monopoly.
	Because when governments start getting their hooks, claws, guns, and knives into a particular industry, the industry in turn begins to get their money and political pressure and influence into the government.
	And you really don't end up with an objective third party like refereeing a chess match.
	You end up with someone who can change the rules at will.
	And where you generally have rulers and corporations, you have no rules other than the law of the jungle and bribery and political influence and so on.
	In March 2014, five ISPs from the US and one from Europe have been accused of downgrading the quality of their networks to extract money from content providers and other companies.
	So, if you want to get Netflix to pay a bunch of money for fast service, you can turn down the speed of Netflix provision.
	Customers call Netflix and complain, or they call their ISPs and they say, well, there's a lot of bandwidth and so on, we're trying to get Netflix to pay for upgrades and so on.
	It's a way of pressuring Netflix to upgrade.
	Now, these are very serious, sorry, pressuring Netflix to pay for the upgrade of the hardware.
	There are serious accusations that come from Level 3, one of the biggest telecommunications companies in the world, provides Internet services to medium and large ISPs in North America, Latin America, Europe, and selected cities in Asia.
	Level 3 refers to these ISPs as, quote, large broadband consumer networks with a dominant or exclusive market share in the local market, but doesn't specify any names.
	So a level 3 rep says, quote, they are deliberately harming the service they deliver to their paying customers.
	They are not allowing us to fulfill the requests their customers make for content.
	He went on to add that in countries or markets where consumers have multiple broadband choices, like the UK, there are no congested peers, right?
	So if you want to downgrade the quality of what you provide to your customers in order to strong arm a provider into giving you money, it doesn't really work when there's two or three other or more Companies offering the same service who are basically going to send emails and letters out to people saying, hey, our stuff doesn't degrade at all and switching over will cost you less and we'll give you introductory six-month cheap rates and all that kind of stuff.
	In a blog post, Level 3 also stated, quote, to honor the promises they make consumers, these ISPs must then connect their networks to the other networks that can supply any internet content the ISPs cannot provide themselves, which is in fact most of it.
	It also means that as overall Internet content gets bigger, as we talked about HD movies versus emails, all providers must augment their networks, making them bigger to accommodate the exponential growth due to the Internet's success.
	Some ISPs, however, have refused to augment their networks, unless the content providers they connect to agree to pay them to do so.
	Viewed in the light most favorable to these ISPs, they want content suppliers to pay not only for their own increased costs of supplying more robust This is not only any reasonable on its face, but it's entirely inconsistent with published reports indicating that returns on invested capital for ISPs are excellent and are expected to improve even further, driving considerable additional growth in economic profits.
	More cynically, these ISPs simply view these arbitrary tolls as new sources of revenue for their last-mile bottleneck monopolies.
	Or as a way to unfairly discriminate against content that competes with the content the ISPs themselves supply.
	So if you are an ISP that supplies movies and you are also streaming Netflix, if you degrade Netflix, then you can create an increased demand for your own movie provision.
	This, of course, assumes that you have a virtual monopoly.
	Otherwise, you really can't pull this kind of crap off.
	So anything which has diminished competition has increased this kind of problem, and as we've seen, the 96 Telecom Act did just that.
	So this confirms widespread suspicions that many U.S. ISPs are grossly overselling their services, and since they can't sell more bandwidth, they have to look elsewhere for financial resources.
	Now, new players are coming in, of course.
	Google Fiber is one of them.
	Why are these ISPs so desperate to find additional sources of revenue?
	I mean, they generally have a monopoly over Internet services in their local markets.
	Well, as it turns out, with the rise of on-demand media streaming services like Netflix and Hulu, as well as Google's high-speed Internet project, Google Fiber, the old telecoms are starting to feel intimidated.
	Comcast Executive VP David Cohen released a letter in which he expresses his view that the cable industry has become a lot more competitive since Google Fiber and Web TV services entered the market.
	Cohen states, quote, in today's market with national telephone and satellite competitors growing substantially, with Google having launched its one gigabyte Google Fiber offering in a number of markets across the country and consumers having more choice of pay TV providers than ever before, Comcast believes that there can be no justification with Google having launched its one gigabyte Google Fiber offering in a number of markets across the country and consumers having more choice of
	And now, when you are a big company with historic links and ties to regulators and politicians and governments and so on, when you get new competitors, the most business efficient...
	I'm not talking about the ethics of the system, but the most business-efficient thing you can do is get the regulators to bar the competitors.
	This is so fundamental to understand.
	You know that old thing, don't hate the player, hate the game?
	If you are a business executive, if you are a CEO... You have a fiduciary responsibility to provide a maximum return to your shareholders, to create maximum profits.
	If you fail to fulfill this responsibility, you can't actually go to jail.
	So you have a legal and financial responsibility to provide the maximum rates of return that you can to your shareholders and so on, your stakeholders.
	Now, Getting government to bar competition is by far the most cost-effective way of maintaining your profits.
	Competition is tricky and messy, right?
	I mean, I could win Wimbledon if I can get the government to keep any players better than me out of the game, which is, well, frankly, quite a few, right?
	So, sadly, because the government has this power, if you are the executive of a large organization with political ties, which is pretty much any large organization, you must, you must Use the government in this way.
	You can say it's wrong.
	I believe that it's wrong.
	But the reality is that it's legal.
	And companies don't have that choice.
	You can say, well, that's really bad.
	They should encourage competition and so on.
	No, no, no.
	That's not the reality of being a chief executive.
	Having been one, I can tell you this directly.
	Having sat on boards, I can tell you this directly.
	They may not want to go to the government but they have a fiduciary responsibility to go to the government because the return on investment for increased infrastructure and battling competitors is far lower than the return on investment you get from buying a politician and getting favorable regulation your way.
	So I really want to point that out.
	It doesn't justify it but it is important to understand that when you set the system up like this there's only one way it ever, ever, ever will play out.
	So how is the scaling up going to be funded?
	The scaling up of the network infrastructure?
	Well, the date of Cohen's letter is February 13, 2014, and a Comcast-Netflix deal was revealed 10 days later.
	Netflix had to pay for the privilege of having fast and reliable access to Comcast subscribers, an unprecedented deal in the history of the Internet.
	So Comcast is essentially charging users for access to web content, and then turning around and asking content providers to pay for having access to their user base, a double-dipping money scheme.
	A day after the Comcast deal was announced, Verizon CEO Lowell McAdam expressed his confidence that he'll be able to cut a similar deal.
	And two months later, Netflix agreed to pay for peer interconnection with Verizon as well.
	AT&T representatives have also confirmed ongoing paid peer negotiations with the media streaming company.
	Now, the fact that the governments have created all these monopolies allows this kind of stuff to happen.
	But again, if we take that out of the equation, we may not like it, but it is all still voluntary.
	Netflix CEO Reed Hastings publicly expressed his feelings about those deals, referring to residential Internet as a natural monopoly, in that users don't have much of a choice when it comes to their Internet service providers.
	Well, natural monopolies don't usually come with hundreds of thousands of pages of government regulations.
	Hastings says, we have no power.
	We had to take the deal.
	He went on to add, someone has to stand up for what's important.
	We're raising the question.
	Comcast will have 40% of residential internet.
	What does it mean when one company has that kind of control?
	Comcast market dominance gives the company great negotiation leverage.
	Comcast says, pay 30% of the costs, and we say, we should get 30% of your revenue.
	Comcast replied with, no way.
	So Comcast is saying to Netflix, pay 30% of us, have an upgrade our hardware.
	And they say, sure, we'll get 30% of your revenue, and they say no.
	Google got behind Netflix in the battle against Comcast, Verizon, and AT&T, refusing to throttle Netflix traffic and even allowing streaming media providers to install their own network hardware in Google Fiber's facilities.
	Google Fiber Director of Network Engineering Jeffrey Bergen stated, quote, We give companies like Netflix and Akamai free access to space and power in our facilities, and they provide their own content servers.
	We don't make money from peering or co-location.
	Since people usually only stream one video at a time, video traffic doesn't bog down or change the way we manage our network in any meaningful way.
	So why not help enable it?
	Right?
	So...
	This is not quite the opposite, because by allowing people to come in and install their own hardware, they are still charging them, in a sense, for access to the network.
	They're just not charging them plus overhead.
	So in one example, the ISP says, you pay us and we'll upgrade our hardware.
	And Google says, we'll open up our network facilities.
	You can buy and install your own hardware, but we're not going to charge you additional.
	So it's cheaper, but it's still basically the same interaction.
	So Google director Jeffrey Bergen also says, but we also don't charge because it's really a win-win-win situation.
	It's good for content providers because they can deliver really high-quality streaming video to their customers.
	But most importantly, we do this because it gives Fiber users the fastest, most direct route to their content.
	That way, you can access your favorite shows faster.
	All in all, these arrangements help you experience the best access to content on the Internet, which is the whole point of getting Fiber to begin with.
	Now, the friction between Netflix and US ISPs intensified to the ongoing net neutrality debate.
	Netflix's CEO says, if you have a monopoly structure, you need some protections.
	That's why we've been talking about creating an internet with no slow lane.
	However, he seems to ignore the fact that he's seeking protection from the very government agency that exacerbated the problem in the first place.
	Ultimately, this isn't an issue of preferential bandwidth treatment.
	But an ISP monopoly market that leaves customers with no alternatives.
	A monopolization that the FCC was tasked to prevent.
	Companies cannot fight against the effects of government policies, so they attempt to protect their interests by hacking of the leaves and not the root of the problem.
	In other words, everybody's battling over the ring of power and nobody's heading with Gollum to Mount Doom.
	Let's have a look at the event timeline.
	October 1st, 2002.
	FCC Chairman Michael Powell.
	Powell?
	Colin Powell's kid?
	I believe that's the case.
	Michael Powell issues a ruling to classify cable modem services as information services, exempting them from common carrier regulations that apply to the traditional phone network.
	DSL Internet Access is still considered a telecommunications service, so it falls under FCC's regulatory umbrella.
	Now, let me just sort of mention that the phone companies wanted to be classified as common carriers and therefore be under FCC regulations, not because they love FCC regulations, although they are in bed with the FCC and therefore get to limit or restrict competition, but because the government gave them a lot of subsidies in order to build that infrastructure.
	And so they wanted to be classified as common carriers to get government subsidies and then they wanted to be classified as information services in order to be able to get out from under FCC regulations Fall 03, in a paper called Network Neutrality, Broadband Discrimination, Columbia Law School Professor Tim Wu introduces the term net neutrality.
	February 8th, 04, FCC Chairman Michael Powell introduces his four freedoms which are about to become the base of net neutrality arguments.
	These freedoms were freedom to access content, freedom to use applications, freedom to attach personal devices, freedom to obtain service plan information.
	June 27, 2005, the Supreme Court rules in favor of cable companies in the National Cable and Telecommunications Association versus Brand X Internet Services case, making it possible for cable companies to block rivals who offer high-speed Internet over their systems.
	considering a similar rule for DSL traffic, which is carried over telephone lines, which is supposed to be common carrier.
	FCC rules have traditionally forced telephone companies to share their networks for the purposes of DSL internet connection.
	And in fact, many years ago, I did have a DSL line, not from Bell, but from another carrier who was allowed to use Bell lines because of government regulations.
	FCC Chairman Kevin Martin said, quote, as I have advocated in the past, we should treat DSL provided by telephone companies the same as we treat similar cable modem services provided by cable.
	Thank you.
	Martin's statement raised concerns over major telecoms, cutting rivals out of their networks.
	So, DSL, if they're classified as information services, then they don't have to carry other people's signals.
	If they're classified as common carriers, they do.
	So, if DSL gets switched over, Then they can block other people, and then that reduces competition.
	August 5th, 2005.
	The Kevin Martin-led FCC adopts the so-called Internet principles, largely embraces Michael Powell's four freedoms, a footnote allowing for reasonable network management by operators ultimately tempers with the commitment to Powell's principles.
	Martin claims that such policy statements, quote, do not establish rules, nor are they enforceable documents.
	Right!
	So, thanks for taking our money to do that.
	The ruling is issued the same day that the FCC changes the DSL classification to "information service", thus announcing its intentions to deregulate DSL services much like it did for cable services.
	Phone companies are now on the same regulatory footing as cable companies, which means they're both exempt from having to offer network access to competing internet services.
	This was an expected move following Martin's statement earlier in June, right?
	So...
	They get a whole bunch of money from the government to create their infrastructure.
	The government says, but you have to allow other people to use the infrastructure.
	And then once the infrastructure is built, they don't need the subsidies anymore.
	They say, oh well, we're going to reclassify ourselves so that we don't have to offer any competitors access to our network.
	So...
	May 18, 2006, net neutrality officially goes mainstream after musician Moby expresses his support for it during a Capitol Hill press conference.
	June 28, 2006, Senator Ted Stevens makes it his...
	He makes his Internet is a series of tubes speech during a Senate hearing, and while attempting to decry net neutrality, he delivers a performance that later makes him part of YouTube's Hall of Fame.
	Stevens, alongside other Republicans on the subcommittee, approves the Senate's version of the telecom reform bill, but the bill never makes it to the floor for a full Senate vote.
	December 29, 06, FCC approves AT&T merger with Bell South.
	As part of the merger concessions, AT&T agrees to adhere to the FCC's 2005 net neutrality principles for 30 months.
	Did some business with Bell South back in the day.
	The programmers referred to them as Bell Sith because they found them quite challenging to work with.
	A few days later, in a move that sparked much controversy, Kevin Martin and FCC Commissioner Deborah Tate allow AT&T to violate their merger concessions.
	The commissioner said, thus to the extent that AT&T has, as a business matter, determined to take certain actions, they are allowed to do so, said the commissions.
	So, bait and switch.
	At least that never happens with campaign promises from politicians, right?
	August 5th, 2007, during a live webcast of a Pearl Jam concert, AT&T mutes singer Eddie Vedder as he sings lyrics criticizing President Bush.
	AT&T later admits to have done this before, but promises that it's taking steps to ensure such censorship doesn't happen again.
	In an open letter, the band railed against media and ISP consolidation and called for people to support network neutrality.
	November 28th, 2007, the Electronic Frontier Foundation, F baby, helps uncover Comcast's BitTorrent packet forging policy, essentially blocking BitTorrent upload traffic.
	And following a series of complaints, the FCC opened an investigation into the issue in January 2008.
	If you do BitTorrent, you can get my shows through BitTorrent as well.
	You can see that at freedomainradio.com.
	August, seven months later, Comcast was found guilty of violating FCC's 2005 net neutrality principle and was ordered to disclose its practices and end BitTorrent traffic discrimination.
	The company also admitted to have hired people off the street to pack the audience during one of FCC's hearing events, in part to keep critics out of the public hearing.
	Oh, what a tangled web we weave when first we practice politics.
	And, um...
	In September 4th, 2008, Comcast challenges FCC's web traffic blocking decisions in the D.C. Court of Appeals.
	Two months later, pledging net neutrality laws as part of his campaign, Barack Obama wins the 2008 presidential election.
	Okay.
	Brief break just here.
	So...
	As consumers, we want different tiers of service, right?
	If you just do web browsing and email, you just need a slow internet and you don't need a lot of bandwidth and so on, just like in your cell phone data plan, right?
	I mean, I do a lot because I use a lot, but lots of people barely even use any data over their cell phone.
	So we want different levels of speed and different bandwidth caps.
	I use a huge amount of bandwidth for uploading these shows and so on.
	My neighbors just browse an email.
	So as consumers, we want different levels of speed and different levels of bandwidth caps.
	And if it was disallowed, if the law was passed across the land that said, Internet service providers...
	Must provide only one speed and one bandwidth.
	Sorry, one bandwidth and one data cap.
	Well, it would be great for the people who were just doing web browsing and email because they'd go a lot faster.
	It'd be really bad for the people who wanted more and were willing to pay for more.
	This sort of one-size-fits-all is we would rail against that on the consumer side, right?
	And so the idea that it's somehow absolutely essential and positive and good for the consumer side, but really bad and negative and horrible for the distributor side is something that defies moral logic.
	October 27, 2009, the Julius Danichowski-led FCC issues a notice of proposed rulemaking, initiating net neutrality proceedings.
	August 6, 2010, the D.C. Court of Appeals backed compost over FCC on the net neutrality issue.
	May 6, 2010, FCC Chairman Genachowski announces the third way, a proposed approach to reclassify the transmission component of broadband service as a telecommunications service, giving the FCC authority to implement net neutrality rules.
	I mean, that's a huge change.
	So taking it from information services to a common carrier of telecommunications gives FCC massive amounts of authority.
	And remember, the FCC spent about 10 years fighting with the cable companies over Janet Jackson's nipple-gate reveal at some dance show.
	And these are people, really, we think are going to be competent to regulate the internet.
	August 9, 2010, reversing its position as a net neutrality advocate, Google announces an agreement with Verizon that would exclude larger parts of the Internet from protection.
	The agreement was not adopted.
	December 21, 2010, after an extensive debate, the FCC decides against Internet service reclassification and finds other authority to issue the Open Internet Order, which is a set of regulations that allows the Commission to implement a net neutrality policy.
	This order effectively bans ISPs from blocking and throttling traffic.
	On their networks.
	Verizon Challenge, sorry, September 30th, same year, Verizon challenges the open internet order in the D.C. Court of Appeals, arguing that the FCC has no authority to implement it because their information service is Verizon.
	September 18th, AT&T starts blocking FaceTime for mobile users who haven't signed up for the company's mobile share data plan.
	Appealing to net neutrality principles, public interest groups like the free press and public knowledge threaten to file a formal open internet complaint against AT&T. Four months later, after facing constant pressure from public interest groups, AT&T agrees to stop blocking FaceTime.
	September 9th, 2013, during oral arguments before the DC Court of Appeals, Verizon concedes.
	That the only thing preventing it from charging content providers from reaching Verizon subscribers is the FCC's open internet order.
	January 14, 2014, the DC Court of Appeals overturns the open internet rules, reaffirming the FCC's authority to facilitate the growth of the internet.
	However, the court tells the commission that if it wants to treat internet access like a telecommunications service, it cannot classify it as an information service, as we've talked about.
	February 19th, 2014, in wake of the DC Court of Appeals decision, the FCC announces that it's exploring its authority to create network neutrality rules by reclassifying ISPs as common carriers, thus placing them under the Commission's jurisdiction.
	Massive change.
	And again, When you are talking about reclassifying an entire industry as basically non-regulated to highly regulated, you will cause a huge market crash because all of the business models are developed under a particular set of assumptions.
	When those assumptions change, It's like halfway through the game, it's replacing, like, changing all the pawns into queens and queens into pawns, or, I don't know, when somebody is doing gymnastics, dialing gravity up and down rapidly, it's not going to end up in a wonderful show of anything other than bones sticking out from under the skin.
	May 15, 2014, amid heated protests, Tom Wheeler-led FCC begins the process of formally setting new net neutrality rules that would allow ISPs to charge companies for fast lane access.
	Meanwhile, FCC Commissioner Mignon Clyburn and Jessica Rosenwerkel spoke out in support of restricting ISPs' ability to block or throttle Internet traffic.
	And it's weird.
	I mean...
	People are generally not educated in any rational or ethical principles.
	So they don't understand.
	They see, well, we've got throttling or blocking access to certain websites or things will be faster and there'll be a slow lane for everyone else.
	And we've got this weird egalitarianism that comes out of the left, which is kind of weird because we want all those personal choices.
	It's like saying all houses must cost the same.
	All cars must cost the same.
	We like having gradations of service.
	It's like whenever I fly, I sort of stride down and look at all the people sprawled out in first class and say, wow, that would be really nice.
	I've never actually flown first class in my life.
	But...
	I look at my ticket and say, well, my ticket would be like 20% more if there was no first class.
	So allowing for divisions in service levels is something we all accept and understand as good.
	We all want the highest service level without recognizing that to some degree the highest service level subsidizes whatever middle or lowest service level we want.
	So it's just kind of weird.
	So people hear this and they immediately think of censorship.
	And this is not the case.
	I'm not censored from first class.
	I'm making a choice that my money is worth more than my comfort.
	And other people make a different choice.
	July 15, 2014, the FCC decides to extend the deadline for public feedback after receiving more than 647,000 comments.
	After this extended period is over, commissioners will reconvene to decide on the future of net neutrality.
	So, FCC. The FCC will be in charge of the Internet, to some degree, if this goes forward.
	Michael Powell was an FCC chairman from 2001 to 2005.
	After he handed in his resignation, he became a senior advisor of Providence Equity Partners, a private equity firm with a focus on media and telecom deals.
	In politics, access is key, right?
	If you can get the person on the phone, if you can get the meeting, that's the key.
	And it's what George Bush Jr.
	said about, he said, look, in Washington, access is key, and my dad's the president, so I always get his ear.
	And this is one of the reasons.
	So Michael Powell has access.
	He knows all these people.
	They'll take his call.
	They'll take his meetings.
	They'll meet for lunch.
	And access is key, which is why he got this job.
	March 22, 2007, Cisco Systems, a corporation specializing in networking and communications technology, appointed Powell to its board of directors.
	He knows how the system works.
	He gets access.
	In 2009, the former FCC chairman joined America Online's board of directors.
	Powell's history with AOL is rather interesting.
	During the AOL time-worn merger in 2000, Powell was one of the two FCC commissioners who strongly opposed the conditions placed on the deal.
	His father, General Colin Powell, was on the AOL board of directors at the time, but ethics officials at the FCC claimed his relationship to his father did not pose a regulatory problem.
	I guess Colin Powell had an army too, so that helps.
	In 2011, Powell was appointed President and Chief Executive Officer of the National Cable and Telecommunications Association, which is the principal trade association and lobbying arm for the U.S. cable, television, and internet industry.
	This is the rotating door.
	Regulator, Board of Directors, Regulator, Board of Directors.
	Let's look at Kevin Martin.
	FCC Chairman from 2005 to 2009 became known as the commissioner who issued more fines than any other chairman in the history of the FCC, $150 million in total.
	Most of these fines targeted the cable industry and became known as the chairman who hates cable.
	In a famous 07 speech, the cable officials called the I don't hate cable speech.
	Martin stated, I would like to set the record straight.
	I do not dislike cable.
	It's a pretty short speech.
	He went on to claim that his policies are designed to bring about competition instead of hurting the cable industry.
	Yeah, because there's nothing more that big companies like is competition.
	Remember how much the dinosaurs love the mammals?
	Beautiful.
	In 2005, Martin reportedly spent his birthday in the company of telecom executives, who sang him Happy Birthday.
	Shortly afterwards, he backed a proposal to impose taxes on Internet voice-over IP services like Skype.
	In 2006, Martin endorsed major telecom's push for a tiered Internet.
	This plan would open the door for AT&T, Bell South, Verizon, and other telecom companies to limit bandwidth to popular websites, such as Google, unless those sites paid significantly higher rates.
	One of the most controversial moves in his career as a commissioner was gutting the AT&T Bell South merger concessions, allowing those companies to violate the net neutrality rules they had agreed to enact.
	However, when it came to Comcast, a cable company, interfering with BitTorrent traffic, Martin got firmly behind net neutrality and claimed that the FCC decision to penalize Comcast will send a message to the industry that bad actors...
	We'll be punished.
	Now, bad actress is government speak or regulatory speak for people who aren't bribing us or bribing politicians.
	And by that, I don't mean direct bribes.
	I just mean supporting in whatever campaign contributions, donations, or offering me a good job after I leave.
	After his resignation, Martin joined the board of directors of Xterra Communications, a company specializing in network infrastructure.
	Isn't that amazing?
	I wonder how many interviews they had for that job.
	In 2009, Martin State started lobbying against the Comcast-NBC Universal merger.
	In 2012, he started lobbying for Light Squared, yet another telecom.
	I will just call this person Julius.
	In 09, Obama appointed his law school buddy, Julius, as chairman of the FCC. During his time in the commission, Julius became known for his flip-flopping on important issues such as bandwidth capping.
	He was also accused of disingenuously slipping internet price regulation clauses in his third-way proposal.
	Julius seemingly followed through on Obama's net neutrality campaign promise, but he allowed wireless operators to evade those rules.
	His 2013 resignation was blasted by activist outrage.
	Quote, instead of acting as the people's champion, he's catered to corporate interests.
	Duh!
	His tenure has been marked by wavering and caving rather than the strong leadership so needed at this crucial agency, says the free press.
	Julius's work in the FCC was praised by President Obama and telecom companies.
	There's an endorsement for the free market.
	Facts of his friends' actions claimed that Julius had a clear focus on spurring innovation, helping our businesses compete in a global economy, and helping our country attract the industries and jobs of tomorrow.
	Because of his leadership, we have expanded high-speed Internet access, fueled growth in the mobile sector, and continued to protect the open Internet as a platform for entrepreneurship and frees me.
	I'm back!
	AT&T, Verizon, and T-Mobile also express their gratitude to Julius.
	Michael Powell?
	Yes, that same guy says the entire cable industry is grateful to Chairman Julius for his exceptional leadership.
	He's done a great job, Brownie.
	In 2014, Julius joined the powerful Carlisle Group, which is an asset management firm with significant interest in media and telecommunications.
	Ah, Meredith.
	She was appointed FCC commissioner in 2009.
	The move was controversial because she had had a long career as a telecom lobbyist.
	Before becoming a commissioner, she had supported Comcast in its fight against the FCC of a bit torrent blocking.
	2011, Baker cut her four-year term short to become Comcast Senior Vice President of Government Affairs.
	What a sleazy affair it is, too.
	Just four months earlier, she had approved the Comcast-NBC Universal merger as a commissioner.
	Four other former FCC employees followed her path to Comcast, right?
	So she approves a merger, then she gets a job at the company for, I assume, a ridiculously high salary.
	Free Press, Public Citizen, and Credo circulated a petition asking for a congressional investigation of Baker, successfully gathering over 100,000 electronic signatures.
	Even The Daily Show had a segment mocking Baker's move to Comcast.
	In 2014, Baker left Comcast to join the CTIA, Wireless Industries Lobby Group.
	Another former lobbyist joined the FCC.
	In 2013, President Obama appointed the cable and wireless lobbyist Tom Wheeler as a chairman of the FCC.
	According to campaign data, Wheeler raised more than half a million dollars for Obama's re-election efforts.
	So, good job.
	According to reports, AT&T and Comcast were ecstatic about the new chairman.
	That's not particularly surprising, considering that Wheeler is a former president of the NCTA and CEO of the CTIA, the communications industry's most powerful lobby groups.
	So, let's run through a few conclusions.
	Thank you for your patience, of course.
	Okay, so government regulations set the ground for regulatory capture of the FCC. This idea that you can just impose rules on a group without any blowback or attempt to control the rules from that group is a fantasy.
	Interference with how businesses run their affairs is an invitation for corruption, market anomalies, booms, busts, crashes, and so on.
	So large ISPs use their preferential treatment that they get out of the FCC to secure a monopoly in their local markets and drive out competition.
	Companies like AT&T, Comcast, and Verizon can no longer ignore the threat of Google Fiber and other competitive services.
	Google is large enough to not fold when faced with lobbying pressure, so ISPs have to actually offer competitive services.
	Capitalizing on their monopoly markets, they can lobby the US government to pass a law that would allow them to downgrade the quality of their services at the expense of the consumer.
	By having the law on their side, they can avoid all potential class action lawsuits that follow such a move.
	We're not going to deliver the service that we're contractually obligated to provide and you can't sue us because we're legally allowed to do so.
	So if you make a bunch of promises to consumers you don't fulfill, you can get a class action lawsuit.
	But if you get the governments to reclassify you or give you exemptions, then you can do all of that stuff without fear of consequences, which is another way that large companies use the government to escape market blowback.
	ISPs are selectively degrading traffic on their networks to interfere with competing services.
	And...
	Is this right?
	Is this wrong?
	Well, it's all voluntary.
	Nobody's pulling guns out on anyone except through the regulators who impose fines and prison terms.
	So...
	I personally would like to have an ISP that doesn't throttle bandwidth.
	I just think it's easier.
	I think it's more fair.
	I think it's more equitable.
	And I use such a variety of services that I don't just use Netflix or anything that it makes sense to me.
	If there's a monopoly, then...
	I mean, they just do what they do, right?
	I mean, I can protest, I can write, but I don't have the protest of my voluntary dollar.
	That's the protest that limits corruption in large organizations.
	The voluntary dollar which can leave is what limits corruption.
	In the absence of that voluntary dollar, whether it's a diminishment of competition, you end up with politics and messes and electronic signatures and so on.
	Due to their secured monopoly over the ISP market, These companies hold both consumers and content providers hostage.
	Rising public tension is a result of people being put in an impossible situation.
	I don't like what's there.
	I don't have an alternative, so I must turn to politics, which is why I don't have an alternative to begin with.
	And people have this magical belief in the FCC, well, the government's going to regulate it, Obama's going to be in charge, and everything's going to be better.
	This is a fantasy.
	This is not how the real world works.
	Where is the consumer choice?
	Because of the government, ISP monopolies aren't accountable to the consumer.
	They use the government to restrict competition, to control their access to the consumer, and to artificially inflate their profits through preferential regulation and legislation.
	So the way that you combat, as I mentioned, the way that you combat corruption is through the voluntary dollar.
	When the dollar is held hostage, then quality is not a requirement.
	ISP regulations create the threat of governments shutting down ISPs on the grounds of violating net neutrality.
	And violating net neutrality, I mean, how on earth are you going to prove that?
	I mean, there's massive complexity in running any kind of internet network.
	So there's always going to be some speed up or some slow down or some problem or some server goes down or some algorithm is incorrect or didn't predict some particular thing.
	So there's always going to be people who say, well, that's artificially slow.
	Aha!
	They're violating net neutrality and there's lots of busybodies with time on their hands who are going to start running to the government and complaining.
	It's like complaining about, well, I wasn't hired because he doesn't like bald guys or whatever, right?
	I mean, how can you possibly prove these things?
	It's really virtually impossible to prove these things.
	And what it means then is the government is going to go in and around and have to look at all the source code and is going to divert a huge amount of resources from what's left of serving the customer.
	And it is just creating more control is going to create more monopolies.
	So governments are going to have to have access to these ISPs to monitor compliance with net neutrality.
	And governments are then going to be able to see all the data that's running through these networks.
	How comfortable are you with that?
	And let's look at some of the regulations and legislations that are attempting to secure government control.
	So there's SOPA, Stop Online Piracy Act, PIPA, Protect IP Act, NDAA, National Defense Authorization Act, ACTA, Anti-Counterfeiting Trade Agreement, CISPA, Cyber Intelligence Sharing and Protection Act, TPP, Trans-Pacific Partnership, FISA, Foreign Intelligence Surveillance Act.
	I don't really think that we want the government going into ISPs and monitoring everything that's going on.
	I don't think we really want that if we think it through.
	And even if you could, Somehow get rid of regulatory capture, which you can't, or government misconduct, or generalized corruption.
	How can the blunt instruments of the state...
	I mean, the state has one thing.
	The state only has one thing going for it, which is that it has guns and jails.
	That is how the state has its power.
	If the government sends you a letter saying you underpaid your taxes, you owe us $1,000, you pay them because otherwise...
	You will go to jail.
	Or you will lose even more money if they garnish you, basically take money from your paycheck at source or whatever.
	So they're either going to steal from you or they're going to throw you in jail.
	And so you have a giant club called the government.
	Now, using a club may be appropriate in certain situations of self-defense, guy running it with a chainsaw or something.
	But in terms of handling how complex algorithms divert network traffic over an infinitely complex series of tubes...
	Well, a gun and a jail ain't going to work with that kind of stuff.
	It's just going to get messier and messier and more complicated.
	Now, because the ISPs and most large corporations reach for the guns of the government, consumers feel, okay, well, I want some of that.
	Give me the power.
	Give me the ring.
	I want some of that government power, too.
	And so they start running to the government to protect themselves, and it really doesn't...
	It doesn't work.
	What we want to do, of course, is not do the short-term fix of trying to get the government to impose net neutrality.
	What we want is to get the government out of regulating these kinds of businesses so that these businesses have no further desire to control government, right?
	When the government controls a business, the business ends up controlling the government.
	That's natural.
	It's inevitable.
	It's a fiduciary responsibility for the CFO, the CTO, the CEO in particular.
	That's what they're going to do.
	There's no way to stop it and no way to bypass it.
	So if we get the government out of regulating all of this stuff, providing subsidies, telling them what to do, what to carry, what to show, what to say, then as soon as the lion is captured, you don't worry about the lion anymore, right?
	So as soon as the government gets out of the way of these businesses, these businesses will have no further interest.
	In fact, it would be unnecessary overhead to lobby the government.
	So the separation of state and economics is as essential and as necessary as the separation of church and state.
	And for the same reasons, it's that the mutual corruption is too horrendous.
	Large companies, like the largest internet service providers, have legal departments that run between $75 million and $100 million a year.
	I don't know about you, a little bit more than my legal budget is in any particular year.
	So who's going to win?
	The government's going to win.
	It gets more power.
	The ISPs are going to win.
	Because they get more monopolies.
	You, as the consumer, will always lose.
	Once you unleash this demon, the only people who will control it are those with an affinity for its immorality.
	And that's not going to be you, and it's not going to be me.
	Deep pockets and empty hearts rule the world.
	We unleash them at our peril.
	Thank you so much for watching.
	If you'd like to see more...
	You can go to freedomainradio.com for podcasts.
	You can go to youtube.com slash freedomainradio, which I think is still fast at the moment.
	And you can, of course, help out the show, fdrurail.com slash donate.
	I really, really appreciate your time.

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