Service Unavailable: The Failure of Competition - Community Broadband Bits Podcast 196

If you are paying close attention to discussions about broadband policy, you may have come across Fred Pilot's reminders that competition is not a cure-all for our Internet access woes across the United States. The blogger and author joins us for episode 196 of Community Broadband Bits. Fred Pilot's new book, Service Unavailable: America's Telecommunications Infrastructure Crisis, discusses some of the history behind our current challenges and proposes a solution centered around federal funding and cooperatives. 

We discuss the switch from telecommunications as a regulated utility, to which everyone was guaranteed access, to a system relying on competition, in which some people have many choices but others have no options. We also discuss the merits of a national solution vs encouraging more local approaches with federal financial assistance. Fred's blog is Eldo Telecom and you can follow him on Twitter

This show is 30 minutes long and can be played on this page or via Apple Podcasts or the tool of your choice using this feed

Transcript below. 

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Listen to other episodes here or view all episodes in our index. See other podcasts from the Institute for Local Self-Reliance here.

Thanks to Kathleen Martin for the music, licensed using Creative Commons. The song is "Player vs. Player."


Fred Pilot: Here we are 20 years later with this huge amount of access disparities, poor value. The market's not going to fix this, the government has to step in and do this.

Lisa Gonzalez: Welcome to Episode 196 of the Community Broadband Bits Podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. For decades, we have relied on the private market to build, expand and upgrade Internet infrastructure across the US. As a result, there are locations, especially in rural America, that are unserved or grossly underserved. Fred Pilot, the author of "Service Unavailable: America's Telecommunications Infrastructure Crisis", visits with us this week. He's been studying the problem for years and he talks with Chris about his plan for government investment on a large scale. The plan is to get US household connectivity back up to speed. You can purchase Fred's e-book at, but also be sure to check out his blog at He reports on telecommunications infrastructure issues and offers news, analysis, and information on policy developments. Now here are Chris and Fred Pilot, author and blogger, talking about telecommunications infrastructure in the US and Fred's ideas to use a different model toward ubiquitous connectivity.

Chris Mitchell: Welcome to another addition of the Community Broadband Bits Podcast. I'm Chris Mitchell and today I'm speaking with Fred Pilot, author and blogger. Just published a book, "Service Unavailable." Welcome to the show.

Fred Pilot: Thanks for having me, Chris. It's "Service Unavailable: America's Telecommunications Infrastructure Crisis."

Chris Mitchell: Thank you. I didn't include the full title in my notes, so I'm glad you were able to plug it entirely, and we'll remind people later when we tell them where they can find it, but let's start off with you. How did you come to be someone interested in this in writing about it?

Fred Pilot: Well I had been writing about this issue for 10 years almost when I started writing the book last year. I started my blog, in 2006, I believe, early 2006. I originally started writing about this issue with a very local concern because the availability of Internet-based telecommunications was very poor in my area, and I had tried to order through multiple means and couldn't order service. I thought well maybe this is a local problem. This is something unique to my county, and so I started blogging about it, and the more I researched and wrote about this issue, the more I found that no, it wasn't a local issue. It wasn't anything unique to my county. It was occurring all over the United States and actually other parts of the world. We didn't have a telecommunications infrastructure that evolved to this new medium of the Internet.

Chris Mitchell: Tell me where are you.

Fred Pilot: I'm in El Dorado County, California, which is midway between Sacramento and Lake Tahoe in the Sierra Nevada foothills.

Chris Mitchell: That's a pretty rural area.

Fred Pilot: It's quasi-rural. Parts of the county are very rural. I'm in what I consider a quasi-rural area. Population density is about 400 people per square mile.

Chris Mitchell: When you describe the United States as having not upgraded the infrastructure, tell me a little bit more about what you mean specifically about that.

Fred Pilot: Yeah. What I mean is we knew a generation ago that telecommunications was going to go Internet IP-based telecommunications. What we didn't do is upgrade our infrastructure to support that and the logical upgrade was fiber to the premise. In fact, some of the telcos were actually planning to do that, to do fiber to the premise. SBC was one of them. I think a couple of others were also looking at doing that, but we didn't do that. We didn't do the upgrade and the modernization of the infrastructure to fiber to the premise. We left in place a legacy metal wire-based system that's supported voice telephone service for the telcos and cable TV service for the cable companies. What we need is a fiber to the premise infrastructure to deliver Internet service both now and also that has the capacity to support new services that are Internet-based that are coming on in the future.

Chris Mitchell: I was struck by your description. In an early part of the book, you write for nearly every American who's been alive since the end of World War II, the availability of telephone service at a home or business premise is taken for granted. Need a phone line or several lines? Contact the phone company, order them, and they'll get hooked up. That's not what we see anymore. I mean, that's actually not even true for telephone service in many states anymore. How did we get here?

Fred Pilot: Well we've lost the principle of universal service. That was a great principle. I think the FCC is trying to go back to it last year with its open Internet rule making in 2015, classifying Internet service as a common carrier telecommunications utility. However, we don't have that in reality and we probably should have had that policy in place 20 years ago, but we didn't. Here we have it in 2015 with some period in the 2000s where it wasn't even considered a telecommunications service. It was considered an information service. We've lost sight of the view of telecommunications as an essential utility that should be available to every American, no matter where they make their home and their business.

Chris Mitchell: This is where I think I see you most often on Twitter and your blog posts. I suspect you had identified the problem where we've lost our way was when we began to think that competition would solve all of our problems.

Fred Pilot: Well that was, yeah. We had this delusional thinking I'd like to refer to that well, this is the Internet is such a cool new thing that it'll just technologically like magic we'll all have these cool wonderful Internet services, and we'll just let the market figure out how to deliver those. Well it was very sloppy thinking because in order to deliver those services, there has to be an infrastructure to do that. Well the planning wasn't there. We just kind of thought that, well, we'll just let the market provide the solution. Well it can't because it's the cost of the infrastructure is so great that a technological market-based approach isn't going to address that. It has to actually be built, lots of money has to be involved, and we haven't done that.

Chris Mitchell: That's true. I think one of the things that I might press you on is that I think the people who were designing and ultimately passed the 1996 Telecommunications Act, they didn't just think competition would happen. I mean, they perhaps overforecast the availability of rivals. I think they also expected that the telephone companies certainly and depending on who you ask, the cable company as well, that they would be the medium for a lot of competition because you would have multiple carriers sharing that infrastructure. What I would say is that they did not anticipate the power of the telephone and cable companies to change that by lobbying, by filing court cases, by the revolving door at the FCC. I mean, all of these things that I think you probably know better than me. Am I missing something in thinking of it in those terms?

Fred Pilot: You mean the power of the incumbents in terms of controlling that infrastructure? Yeah, definitely. It's a monopoly infrastructure. They're going to do everything they can to defend that from interlopers as they see them. They don't want anybody on their pipes as what was the AT&T CEO that referred to them, Edward forget his last name but he said they're going to have to pay to get on our pipes. He didn't want them on there.

Chris Mitchell: Yes, and I can't remember his name, either, but he's in tap to help GM.

Fred Pilot: Yeah, exactly.

Chris Mitchell: Whitaker. Whitaker, I believe.

Fred Pilot: That's right. Whitaker.

Chris Mitchell: Yes. Well I guess when I look at ... I want to come back to this to where we are, but I want to, I think your solution ultimately is a fiber to every home with multiple ISPs operating on it. I think that's what what the people who embrace competition envisioned, but they did not recognize the power of the incumbents to prevail and to preserve their monopoly on the wires that already existed. I could be missing something in that argument.

Fred Pilot: No, I don't think you're missing it. That's exactly what's happened. They've defended that monopolized infrastructure that they have and it's an unnatural monopoly. It's one that comes about through just the high cost of having to build it and maintain it and they figure well we're bearing those costs, we don't want to allow others to benefit from that. Plus, we have a vertically integrated model and that's what's really key here that's been missed is we've relied on a vertically integrated model whereby the incumbents that own the infrastructure also deliver the services over there. Allowing another provider to deliver services over that infrastructure puts that provider in direct competition with the infrastructure owner, which is, it's a policymaking flaw. It wasn't really thought through very well. I mean, if the intent was to have open access, it would have had to been a lot more aggressive than what was in the '96 act with the unbundling.

Chris Mitchell: We are in the year 2016 now, 20 years after. Your approach, I think, had some very interesting features to it. I think there are some people who say, "Let's just have the federal government do it." I think you're a bit more nuanced in terms of how we should do it and so can you describe for people how you think we should build this infrastructure today?

Fred Pilot: Well I think we need to create basically a whole new federal entity, and I propose this as a 501(c)(1) nonprofit that would build and operate the infrastructure as public works, just like we do roads and highways. I think that's the only way we're going to get this universal because there is no interest on the part of the legacy providers to provide universal service. They use a retail cost minimalized model where they really cherry pick and restrict their deployments of infrastructure. That's not going to change in the current scheme. Our subsidy programs are failures because back when we had effective subsidies, it was just telephone service only. Now they can the telephone companies can go into a wireless service, which is more profitable, so there's not as much incentive for them to take subsidies for premise wire line connections, land line connections. The cable companies aren't interested in participating in subsidies. We don't have, see this is what we've done historically is if you have these high-cost infrastructure issues, you level the cost out with a subsidy, but we don't have an effective subsidy mechanism, so I see this basically as we're at the point now where we've let so much time go by with some of the caused by some of the poor decisions we made starting 20-25 years ago, that we've now reached a crisis point and we need to take more aggressive action. That's why I propose basically a federally run program and the federal government would basically put it out to bid for operators or builders to build the infrastructure and also to provide network services and maintenance over that infrastructure on a contract basis with the federal government, basically. I think the problem we're having now is we're relying too much on just the individual private players to do the job and I think experience is showing that they can't. They're just basically trying to fill in wherever it's profitable for them. If somebody comes in with an alternative solution like a municipal fiber project, they'll try to sandbag and delay that as much as they can, as we've seen with some of these challenges, for example, on the getting access to the polls. It was in Louisville recently and I think here in California we've had a problem with Google trying to get on the polls in California. There's just they can go back in under all the old legacy rules and sandbag them and fight them and litigate it, and it just isn't, we're just not going to get anywhere like that. We're just going to have this battle of attrition and diminishment and we're not going to advance, and we really need to move forward. We're woefully behind where we should be and this problem is not going to get any better as time goes on.

Chris Mitchell: Well we are strong fans of cooperatives, although I would say that from my perspective, one of the dangers of a national co-op is that I don't think it would be as effective in both Minnesota, rural Minnesota, rural California, rural Arizona, rural New England, Appalachia.

Fred Pilot: True, true, that's true, and that's a good point, and my plan that I have at the last part of my book, I talk about a regional approach to this because there are differences in different areas of the country but with the federal government basically controlling the overall program, but yes, you got to have some regional distinctions there, because you're right, not every part of the country is going to have the same infrastructure challenges.

Chris Mitchell: Right. I think what you're proposing is the rural electrification administration, which I think goes down as one of the most successful programs in the history of government.

Fred Pilot: Well yeah. We could have. We have to do something, Chris, that's my point. We don't have a plan. We don't have something to move forward with. We just have this constant war of words and propagandizing, and it's getting disgusting, frankly. I've been following it for years now and it's just not moving us forward. We are better than that. We can do better than that. This problem, as I said, is just not going to get better. It's going to get worse as time goes on. We're 20 years behind where we should be. This really goes back to the Clinton Administration. Al Gore may have claimed to have invented the Internet, whether he did or not is another question, but they had the vision to see this coming back then, certainly the Clinton Administration, but they didn't put in place the policy to move this forward, and here we are 20 years later with this huge amount of access disparities, poor value. The market's not going to fix this, the government has to step in and do this.

Chris Mitchell: I certainly agree that the Clinton Administration I think and the FCC in the second part of his administration bears a fair amount of blame for how things worked out. I like to remind people that Al Gore did not actually say that it was. It was an error in reporting, actually, that attached that to him, unfortunately, and there's a lot of people who recognize that he had a very important role to play in terms of getting the Internet to where it is. One of the things that I think I believe right now is that currently Google has been very important for demonstrating why the legacy cable and telephone companies are not good enough. I know that you and I share your concern, the Google approach, the market-led approach is not what we need ultimately to get service to everyone. I'd like you to tell us a little bit about why.

Fred Pilot: Well because they’re using the ,as you mentioned, a market-based approach, demand-based approach and that's not going to get service to everyone. It's not. It doesn't have that as a goal. It's an investment-held company, it's got the same investor return needs that the legacy cable company and telephone companies have. Their technology is obviously superior but the flaw is the business model and that's a market-based demand-based model that won't achieve universal service. That's the major problem with it.

Chris Mitchell: What if they say they will? It's just that it's going to take us a long time. Right? It's just going to go to people who can afford to pay first.

Fred Pilot: Well then I'll qualify that by saying it would take an unacceptably long period of time because we're already behind, well behind where we should be now. Google can't do a crash program, they don't have the resources. Nobody has the resources to do a crash program other than the federal government. That's what I believe we need now because we are so far behind and we keep seeing day after day this problem just getting worse and worse with not having the infrastructure to deliver adequate Internet-based telecommunications services to Americans.

Chris Mitchell: One of the things that you touch on that I think other people haven't hit on, as well, is why it's so essential to get this out, this Internet service out to everyone. I want to read another quote from your book. You have this quote, I believe comes from the National Information Infrastructure Initiative. I always confuse what NII means. It says because information means empowerment that government has a duty to ensure that all Americans have access to the resources of the information age. I think that's really powerful. I mean this isn't just about property values, it's not about economic development, it's about something more important, and tell us why it's so important to have this information available at your house.

Fred Pilot: Well because the Internet, unlike plain telephone service, can deliver a hugely more rich amount of information in communications, and it can do it on a global basis, and it's becoming a global standard of telecommunications. I think we were seeing that and I think the Clinton Administration had the vision of that back in the early '90s. We just unfortunately didn't have the policies in place to bring that about. Everything as we see is all going to the Internet. The Internet is being called the greatest disrupter to established institutions and the economy that's ever come along, and that demonstrates the power of it. It's changing entire industries, it's changing education, it's changing healthcare, it's changing I wrote another book called Last Rush Hour where I'm predicting in that book that it will obsolete the rush hour, the idea of having to commute to an office building in order to do your job is now obsolete because everything you need to do your job, you can do pretty much through an Internet connection.

Chris Mitchell: I'm really curious to what extent before you wrote this book, you put a lot effort into organizing a co-op and trying to solve this problem locally. What from your experiences there really led you to have perhaps different even opinions than you would have realized you were going to have?

Fred Pilot: Well my first inclination was to work on a local level. Think globally, act locally, so I formed the co-op. What I found was, though, people tend to view this and I think it's because they've been trained to by the telephone and cable companies as a consumer service, not something that a community can get together and actually provide for itself like it may be water or power or something like that. They view this as a monthly service like you might subscribe to a newspaper or a cable TV channel or whatever. It's more of a retail mindset. I think it was very hard to get people to shift out of the role of being on a passive consumer posture and actually working to provide the service that was needed because the market wasn't doing it for them. I think that it was very, very hard I think to get people to realize that the market was failing them and that they had to come up, we had to come up collectively with a solution, an alternative to address that. I just think it was a very tough sell and also people had a short-term view of this issue. It's like well I can work on this maybe for six months and if I don't have service at my doorstep by then, then I lose interest. It's hard to keep people interested in a problem that's so big and so difficult to solve. It takes a long time. It was a lot of work, actually.

Chris Mitchell: One of the things that I think I would, I might disagree with you on, and I'm very curious to hear how you respond, is that I think the federal government should have had a program available. In fact, there is a program that is theoretically available, although it would take you most of your life to deal with the paper as a single individual, the rural utilities service through the US Department of Agriculture, which is actually the descendant of the Rural Electrification Administration. Fundamentally, what it comes down to is that I would probably be proposing that we make it easier for locally organized co-ops to apply and just say for people who live in areas that are not interested in forming their own co-ops, well then they can wait until they are or until someone wants to serve them or something like that. I think it'll come across as hardhearted but why would it be preferable to make sure that we solve everyone's problem at once in a way that I think you're learning more toward?

Fred Pilot: Well because as I mentioned earlier, I think we've reached a crisis point where we're just, these deficiencies have really gotten enormous and we need a very quick, aggressive approach to dealing with them. I think the co-op through the RUS would just be too incremental, be too slow. It wouldn't provide a solution within an acceptable period of time that would provide universal fiber to the premise. I just don't see that happening through that model.

Chris Mitchell: Fair, yeah. I readily concede that my approach would take much longer. I think that is unfortunate. I really wish that more people were organizing previously and I wish that when people like you took the time and effort to organize, that you didn't find so many doors slammed shut.

Fred Pilot: I was surprised how much opposition or lack of support that was there. I mean, it was just amazing and there was no support from the federal government, there was no support from the state government, and it was just a lot of nos and bureaucracy. It was like okay, there's no policy here to help local people help themselves, so how are we going to do it this way? Ultimately, Chris, the real problem is just this is going to cost a lot of money. I was sitting at a conference about a year ago on telehouse and I was drifting off in thought and suddenly, I started channeling Everett Dirksen. You might remember him. He was a senator from Illinois back in the '60s who famously said a billion here and a billion there, and pretty soon we're talking about real money. That popped into my head and I thought he's talking about telecommunications infrastructure, and at the same time, that popped into my head the idea that telecommunications as interstate infrastructure, which is what the telephone network was, fundamentally describes telecommunications. It's interstate, it's not local, it needs to be interstate. It needs to connect states, it needs to connect United States to the rest of the world. It's that important in terms of the communication medium. I don't think we can solve this basically one neighborhood, one municipality, one state at a time. This really needs a federal approach.

Chris Mitchell: I think a lot of people tend to assume that this is something that's going to be very expensive, and your Dirksen quote is appropriate. I think if you looked at the cost, it's probably, it's less than $50 billion, it's more than $20 billion probably to do the sorts of things you're talking about. That's the range of credible estimates of building the wall that Donald Trump is advocating for our southern border, and that is taken very seriously. I don't think that's going to improve our economy one bit. Whereas this sort of approach that you're taking. To some extent, money in DC is about priorities, it's not just about the size of the check. I think it's about priorities.

Fred Pilot: Certainly. That's the elected officials do. They decide what is prioritized for appropriations. I think that this one definitely needs to be priority. Whether it's 50 or 200 billion, as I propose, it's going to take serious money. We can't throw 2 billion a year for the next five years like the FCC just did for the USF conversion to Internet. I don't think that's going to be enough money. It's going to be too incremental, too slow. We just need a much more aggressive, intentional approach to this because it's I think part of the problem is we happen too timid and doing so, we've just made it worse.

Chris Mitchell: One of the ironies I think is that if we were able to push for the solution that you're describing, I think that the people most opposed to it would be representatives from the most rural areas. When you look at the people who are railing against more government involvement in this sector or more broadly, I think they're being elected by those people. Now I certainly seen a sense that people who are electing people like Marsha Blackburn, they seem to be wanting better Internet access so maybe I'm wrong. I suspect that our biggest challenge in getting your approach through would be people representing rural districts.

Fred Pilot: Well I don't know if it'd be rural districts that would be the challenge, but your point about incumbent political influence is implied in that and it's very well taken because they have had a huge amount of influence in terms of delaying. I think that's been their main strategy is to postpone the future on this because they're under resource to bring us the future they don't want someone else doing either because it's their monopolistic asset. They're going to defend it and throw up roadblocks and delay it, and that's exactly what they're doing. I think though politically, Chris, we're approaching a political tipping point where this problem is getting so bad that the incumbent influence is going to start to be devalued. They built up a huge reservoir of public disdain and ill will and the public's elected officials are beginning to see that, and it's going to get to the point where anybody who is, I think we're at a tipping point or just about it where any of these elected officials or people running for office are supported by these incumbents that are basically postponing the nation's telecommunications future are going to pay a political price for doing so, and selling out their constituents, which is a lot of them have done that. We just saw that happen I think last week in Tennessee, where there was a vote on a bill that would allow municipalities to expand their service areas and the incumbents fought it tooth and nail and prevailed. You got people outside of those existing service areas saying well what about me? Am I chopped liver? Well yeah, they are now, but at some point that political dynamic I think is going to shift and I think we're getting there and I think the current political environment that we're in we see candidates like Donald Trump and Bernie Sanders getting a lot of support reflects a lot of disdain towards establishment politics and I think that's really what we're seeing at work here with these incumbents can basically buy off legislators to delay the future in their own interest.

Chris Mitchell: Well I think it's a fascinating formulation to delay the future. That's exactly what they've done. I don't think people often describe it that way but that is a very good way of saying it. Can you tell people where they can read your book?

Fred Pilot: It's on a site called They can just go there. That's the publisher and there's a multiple number of links to various retail outlets. It's available at most any electronic outlet like, it's a Kindle or an electronic book, I should say, PDF, it's not available in print. It's in Kindle format, it's on Apple iBooks, and it's on a number of other book retailers and online format to download to a tablet. I wrote it intentionally for tablets and I wrote a small book, too. It's only about 100 pages, so it won't take people long to read it. I did that intentionally because what I've been reading is that people prefer shorter books nowadays because there's just so much to read out there that people want a book they can read in one or two sittings, and that's exactly what I was targeting that towards.

Chris Mitchell: Great. Well thank you so much for coming on this show.

Fred Pilot: All right. Well thanks for having me, Chris.

Lisa Gonzalez: That was Chris and Fred Pilot, blogger and author of "Service Unavailable: America's Telecommunications Infrastructure Crisis." Check out Fred's blog at and download his e-book at Send us your ideas for the show. E-mail us at Follow Chris on Twitter. His handle is @communitynets. You can also follow stories on Twitter, where the handle is @muninetworks. Thank you, Kathleen Martin, for the song Player Versus Player, licensed through Creative Commons. Thank you for listening to Episode 196 of the Community Broadband Bits Podcast.