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The Federal Court of Appeals ruling last week vacating the FCC’s Open Internet Rules is yet another example of the telecommunications business becoming more oligopolistic. As a consequence of the 2002 FCC ruling that exempted broadband providers from the common carriage rules that governed the traditional telephone market, the Court ruled that the FCC could not then revert to regulating them as such. The shackles of regulation that assured that the large ISP’s would provide the public an “open” Internet have been again loosened, leading to the predictable wailing and gnashing of teeth among those who believe the Internet should be a place for free expression of all types. The Court did leave open the possibility that the FCC might simply re-classify the ISP’s as common carriers and thus subject them to more stringent regulation. Legalities and possible FCC’s reaction aside, the Court’s ruling was not a victory for the consumer.

Of course, what we hear from the Verizon-Comcast-AT&T-Time Warner bund is that being exempt from the public utility-like rules will allow for “free market innovation.” Connecting the terms “free” and “market” has always seemed oxymoronic to me; it is especially not an appropriate description when applied to an industry that has, as a result of consolidation and conglomeration, a scant handful of dominant players. The behavior of these behemoths resembles nothing if not a cartel.

Wireless Internet access is a prime example. The carriers were able to persuade the FCC in 2010, when the agency promulgated the Open Internet Rules, that wireless was a completely different animal and should not be regulated the same as wired Internet access. Unlimited wireless data plans mostly disappeared, replaced by tiered pricing schemes that were much more costly. (I reported on my personal experiences with this back in December, 2012. See “The Fat Get Fatter” in this blog.)

The carriers then doubled down, in effect dividing up the market in much the same way as organized crime syndicates divide up territories among themselves. As Susan Crawford pointed out in a Bloomberg View post, wireless giants Verizon and AT&T essentially said to the cable industry (Comcast and Time Warner), “You take wired, we’ll take wireless.” As a result of this “cooperation”, Verizon halted the expansion of its fiber-optic FIOS network, effectively leaving the markets in which it had not yet deployed FIOS to the cable companies and removing the threat of competition. In further keeping with the “you-scratch-my-back-I’ll-scratch-yours” spirit of a cartel, Comcast and Time Warner agreed to sell Verizon Wireless services.

The ramifications of these maneuvers are as might be expected: The carriers have no incentive to improve infrastructure; their efforts are concentrated on harvesting as much profit from their existing networks as possible. We hear often that we pay among the highest prices in the world for Internet access and rank as low as 35^th in the world in Internet speed. Meanwhile, the carriers reassure the public by asserting their commitment to a “free and open Internet”. (In its public reaction to the Court’s ruling, Verizon stated it “has been and remains committed to the open Internet, which provides consumers with competitive choices and unblocked access to lawful websites and content when, where and how they want. This will not change in light of the court’s decision.”) Sounds good, but the fact remains that the path is now open for tiered-pricing schemes by wireline Internet providers, not to mention preferential treatment for their own content and services such a VoIP.

The FCC could move, or course, to re-classify and it would seem to have the authority under current law. That action risks running afoul of a Congress that is a captive of the industry. There is the potential for budgetary and staff reductions as a means of hampering FCC enforcement. More pertinent, the House is re-visiting the Telecommunications Act of 1996 with the idea of re-writing it. At the initial hearing on revamping the law last week before the Communications and Technology Subcommittee, Michael Powell, ex-FCC chairman (who presided when the 2002 ruling was promulgated) and now head of the cable industry’s lobbying group, advocated for less restrictive regulation. (I assume no one in Washington is surprised that a former regulator is now a lobbyist for the industry he once regulated.)

Another avenue is municipal broadband, the installation and maintenance of fiber networks by local governments. In effect, this is putting the concept of broadband as public utility into practice. It has, thus far, been attempted in a very small number of localities. Pushback from the industry giants has been intense to the point that several states enacted laws prohibiting local governments from providing broadband.

In the final analysis, we may need to look at all this in light of Tim Wu’s observations in his excellent history of the American communications industry, “The Master Switch”: The industry tendency is towards dominance by large players who see regulation only as a means to bar competitors. The situation only changes when a new idea, a new technology, enters the market and disrupts the grip the big providers have under the existing rules.

One can hope, I suppose.