“It sure would be nice, but it doesn’t have much chance of happening because of market power, size, etc. I think it would be real hard to do. I don’t think the regulators would let that happen, in my judgment.” – Ed Whitacre on the possibility of taking over BellSouth, 2005.

The definition of a Southern Gentleman, it’s said, is someone so charming they can hand you your guts back on a plate – and you thank them.

If that’s the case, then AT&T CEO Ed Whitacre can have few peers in the charm sweeps. Whitacre has dispatched potential opposition to AT&T’s corporate expansion with the insouciance of a lion swatting a fly with its tail. Victory was complete shortly before the New Year, when the FCC agreed to Whitacre’s second mega-merger in the space of two years without hampering the emerging behemoth. The US regulator signed off on the AT&T-BellSouth merger that Whitacre himself had said he thought impossible, only 15 months earlier.

It’s been a masterpiece of misdirection. Whether by happy accident or design, Whitacre sent the opposition down a dead end, focusing its attention on a non-issue – or more accurately, an “issue” he himself created. The FCC applied the coup de grace with just one one sentence on December 29.

As the product of a series of mergers, AT&T now employs over 300,000 people and turns over $115bn in revenue – eleven Googles, or four Intels. The deal signed off by the FCC over the holidays also gives AT&T full control of Cingular, the United States’ second largest cellular network. Can there be anyone happier in the telecoms business tonight than Whitacre?

In a decade, American consumers have seen the number of Regional Bell Operating Companies (RBOCs), or Baby Bells, coalesce from six down to just three: the odd man out, Qwest, the RBOC which covers the sparsely populated Mountain states, is surely next on AT&T’s menu.

The extraordinary thing is that all this took place at a time in the wake of the fall out from the telecoms bubble. The Bells enjoyed little affection from the public in any case, long before Global Crossing and MCI. and with an unpopular Republican President, Democrats can have been expected to push a few populist buttons, and hear some bells.

What actually happened is that Whitacre got everything he wanted, but only thanks to the aid of The Democratic Party, most of whom aren’t aware how thoroughly they’ve been outwitted.

Now that’s style.

Let’s see how he did it.

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The most interesting thing to emerge from the so-called ‘Net Neutrality’ bid had nothing to do with telecomms technology or policy. It’s the startling and, at the same time, banal fact that paranoia has become the default flavour of politics on the net.

Phantoms fight phantoms, here. When the historian Richard Hofstadter wrote his famous 1964 essay for Harpers, “The Paranoid Style in American Politics”, he was inspired by the anti-Catholic fervour of the John Birch Society, and the anti-Communism of Senator McCarthy, which he saw embodied in Barry Goldwater’s presidential campaign. These were old trends which were merely a reoccurrence. Hofstadter observed -

“The paranoid is a double sufferer since he is afflicted not only by the real world, with the rest of us, but by his fantasies as well.”

The “Net Neutrality” campaign – which created little excitement except on the outer fringes of the web – suggests that the left is now just as capable of being haunted by paranoid fantasies as the right.

What the internet has achieved, with its twisty maze of echo chambers all alike, is a rapid acceleration of this paranoid discourse, which expels nuanced and complex reasoning. (more…)

So-called “network neutrality” legislation hampers innovation and harms business and the public, Verizon’s chief spokesperson said this week. Tom Tauke, Verizon’s executive VP of public affairs, said in a speech that efforts to legislate against discrimination would hamper the take up of multi-tier network applications such as VPNs.

“The hospital that wants to provide home health monitoring for a heart patient is not going to rely on the internet,” he said.

Net neutrality advocates fear that the Bell telephone company – now reborn in the shape of Verizon and AT&T – will restrict the services that can be run on the open internet, and charge internet companies more for their bandwidth as they seek to compete with cable. The old Bells say that in order to deliver new services such as TV and movies on demand, they need to be able to discriminate between packets. With fiber offering the potential of 10x to 20x connections that today’s broadband, they add, there’s plenty of bandwidth to go round. We’ll come on to quite how much in a moment.

Tauke rebuffed the idea that Verizon would punish internet companies, saying it made as much sense for the telcos to cripple the net as it did for coffee shops to replace their premium bestseller with a cheap and nasty brand. They’d go out of business if they pulled that stunt, he said.

It’s the oddest of odd debates. On the one side former deregulation enthusiasts have been rushing to write new laws and regulations. On the other side, the Bell Heads, so often mocked by the Net Heads for their reactionary disdain to new technology, can justifiably claim that they’re investing in innovation.

To the average Joe, innovation looks like video on demand – or a faster internet connection. To the Net Heads, innovation means Vonage and Skype. The VoIP services are something the telcos would dearly like eliminate, as they introduce a wildcard into the pricing, but they know they can’t, so they’ll settle for the next best thing, control.

“The plain truth is that today’s access and backbone networks simply do not have the capacity to deliver all that customers expect,” Tauke said. “Building out America’s internet and broadband infrastructure will require billions more in private capital investment.”

In that, he’s correct, of course. The passion behind “network neutrality” is largely based on a fear of price gouging, which given the Baby Bells track record, is entirely justifiable. AT&T boss Whitacre sees Google as freeloading on his network and has hinted he wants to charge the internet companies more.
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Under heavy pressure from the French government, the country’s parliament has voted against introducing the world’s first blanket licence for sharing digital media. A section that would have permitted internet users to freely exchange copyrighted material, effectively legitimizing file sharing, and hastening the demise of digital rights management (DRM) software, had passed an earlier reading in a vote last December.

The measure proposed a levy of between €8 and €12 for a compensation pool, had won cross-party support – with strong backing from the left, the Greens, and the centre right UDF inside parliament- as well as the backing of consumer groups. MPs walked out in protest after the blanket license proposal was struck down, AFP reports, leaving the government to carry the day.

Although a similar model of compensation has been historically adopted for the public performance of recordings (such as in pubs), for radio, and most recently for satellite TV and webcasting, the consequences of the French vote would have been dramatic and far-reaching.

With a billion songs exchanged illegally each month on the P2P networks, the most immediate answer is that artists continue to lose out: it’s taken Apple three years to sell a billion songs.

But the implications for technology companies would have been fairly immediate.

The need for digital rights management software would have vanished, replaced by an even more urgent need for the kind of counting technology being devised by Snocap. Snocap intends digital services companies that use its software – such as Mashboxx – to be able to identify the songs being traded on the illegal networks and turn them into legitimate transactions. Today’s digital music services, which offer a limited choice, encumbered with digital restrictions, all for a much higher subscription “fee”, would have had to drastically alter their business models. They’d find themselves in the business of collecting “finder’s fees”, earned good editorial judgement and fulfulling music lover’s needs – rather than services based on artificial scarcity, and technological restrictions.

Direct compensation through a broadband fee works out much cheaper to the citizen than a commercial for-profit service. In his book Promises To Keep published last year, Professor Terry Fisher of the Berkman Center at Harvard Law School estimates that a $6 per month fee for broadband users would compensate both the recording and movie companies for 20 per cent of their revenue – more than they’ve ever claimed they lost through digital piracy.

But the strongest opposition came from the record labels at the top of the physical distribution chain – with the most vociferous opposition coming from the biggest- Universal Music Group.

Speaking at the Digital Music Forum in New York a fortnight ago, flat fee advocate and former Geffen executive Jim Griffin said he could see why UMG opposed a blanket license.

“I agree with Larry Kenswil [UMG's digital supremo] – this would be bad for Universal. When you’ve reached 30 per cent market share, when you’ve pulled off the last big merger, when you’ve built up the barriers, there’s not a lot of benefit from equalizing access. But what’s good for UMG isn’t good for everyone else.”

For now the prosecutions, the DRM, and the illegal file sharing which leaves artists with no reward – all look set to continue. However, France’s long debate is sure to embolden campaigners, as it makes the once unthinkable suddenly seem very practical. And next to the value proposition of a flat license – wider choice at a lower cost – even the best of today’s digital subscription services look pretty shabby.

A study of 100,000 pupils in 31 countries around the world has concluded that using computers makes kids dumb. Avoiding PCs in the classroom and at home improved the literacy and numeracy of the children studied. The UK’s Royal Economic Society finds no ground for the correlation that politicans make between IT use and education.

The authors, Thomas Fuchs and Ludger Woessmann of Munich University, used the PISAtests to measure the skills of 100,000 15 year-olds. When social factors were taken into account, PC literacy was no more valuable than ability to use a telephone or the internet, the study discovered.

“Holding other family characteristics constant, students perform significantly worse if they have computers at home,” the authors conclude. By contrast, children with access to 500 books in their homes performed better. The negative correlation, the researchers explain, is because children with computers neglect their homework more.
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“The Internet is becoming more and more widespread and will increasingly represent a scientific random sample of the population,” claims ICANN’s newest board member, Joi Ito. Quite what scientific experiments he will wish to perform, once the desired sample size has been reached, remains a mystery. But like many people who spend too long in front of their computers, he’s talking about a Platonic ideal rather than the real world.

A survey by the US Department of Commerce’s National Telecommunications and Information Administration shows that the internet has entrenched the divide between rich and poor, and the races. Statistics reveal an internet that’s overwhelmingly white, wealthy and urban. And the net’s best days may even be behind it. The pace of internet adoption has tapered off to a trickle, with a substantial part of the population not interested in the internet at any price.
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