Half a loaf: the FCC's Weak Rule on Net Neutrality

Graphic from the Florida non-profit journalism site, Flaglerlive, on its September 12, 2010 post," Net Neutrality: The First Amenment Issue of Our Time."  The following is a draft my next piece commissioned by The Guardian.

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Net neutrality is the First Amendment issue of our time. Today, a blog can load as fast as the Wall Street Journal — and, if the blog is good, it can get more traffic than any media conglomerate.

But if bigger companies can pay for faster, priority Internet access, that blogger no longer has a shot. And these big companies know that when they pay for access, they win. They want preferred treatment on the Internet like the preferred treatment they get in the rest of their lives. --Al Franken on August 19, 2010

I wasn't surprised  December 21 to learn the Federal Communications Commission (FCC) had passed its rule governing net neutrality 3-2 along party lines.  The topic's been a source of partisan wrangling for years.  Advocates of net neutrality argue users should control content viewed and applications used--that a level playing field promotes democratic participation and free speech. Broadband providers and telephone companies want freedom to boost profits by deciding which content gets to whom first and fastest. Both sides argue theirs is the course encouraging economic innovation. 

My take: the new rule is another example of the Democrats' "half-a-loaf" thinking and falls short of pledges by President Obama and his administration to protect the Internet against phone and cable gatekeepers. The order's text wasn't available immediately, only FCC news releases and statements by its members--Chair Julius Genachowski, joined by Democrats Mignon Clyburn and Michael Copps, who voted to approve, and Republicans Meredith Attwell Baker and Robert McDowell, who voted nay.  Based on those, the rule

• leaves wireless networks unregulated, anointing Verizon, AT&T, et. al. as gatekeepers to the rapidly expanding world of mobile Internet access;
• fails to explicitly prohibit internet service providers from turning  the "information highway"  into a toll road favoring corporate partners, while  detouring the rest of us onto the cyber-equivalent of a pothole-ridden dirt road; and
  
• continues to ground its rationale in legal arguments rejected by the DC Federal Court of Appeals April 6, by defining the Internet as an information service, rather than reclassifying broadband and wireless as a public utility under the Communications Act.  As an information service, the court allowed broadband provider Comcast to block or slow specific sites and charge video sites like YouTube to deliver their content faster to users.  The suit came after Comcast attracted attention in 2008 for secretly using a program called Sandvine to hamper peer-to-peer file sharing applications.

Republicans hate the measure. Senate Minority Leader Mitch McConnell (KY) criticized the FCC for taking "what could be a first step in controlling how Americans use the Internet by establishing federal regulations on its use."  He promised to "push back against new rules and regulations” once Republicans take the majority in the House of Representatives in January.  Senator Kay Bailey Hutchison (TX), the Commerce Committee's ranking member, called the vote an “unprecedented power grab by the [FCC's] unelected members” and promised a resolution condemning the rule. She had offered an amendment to block the agency from using any omnibus budget funds to implement net neutrality. Last September, Republicans already had beaten back House Energy and Commerce Committee Chairman Henry Waxman (D-CA) net neutrality bill.

Public interest groups also are up in arms.  Free Press calls it a squandered opportunity. Public Knowledge says it falls short.  Media Access project finds it  riddled with loopholes.  Center for Media Justice  criticizes its minimal protections.
 
I expected a weak rule after Genachowski held closed-door meetings with industry lobbyists opposing net neutrality and with the industry's Open Internet Coalition, but locked out public-interest and consumer groups.  And, as Greg Sargeant noted in the Washington Post:
 

The problem is...that Dems...don't think they're capable of winning a protracted political standoff, even on an issue where the public is on their side, once Republicans start going on the attack....As a result, they tend to telegraph weakness at the outset...that they'll essentially give Republicans what they want as long as they can figure out a way to call it a compromise.

According to Bloomberg, AT&T, in its attempts to influence policy, met more frequently with the Commission in recent days than any other provider.  Verizon, on the other hand, wanted  the FCC out of the picture. Industry sources told The Hill that given Congressional gridlock, Verizon's call for  legislation suggests the company might not want any resolution at all.  These approaches seemed borne out when AT&T praised the FCC for ending its "hamstrung [status preventing] needed action on...real problems " while Verizon, called for "statutory underpinnings."

Copps, a strong consumer advocate, issued a statement prior to voting, saying he’d battled  since his 2001 appointment "to make sure the Internet doesn't travel down the same road of special-interest consolidation and gatekeeper control that other media and telecommunications industries—radio, television, film and cable—have traveled."  While not the proposal he would have crafted, the rule “could represent an important milestone…[i]f vigilantly and vigorously implemented by the Commission—and if upheld by the courts.”

Those, Mr. Copps, are pretty big ifs.

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Uranium Mining in Virginia draws closer, despite opposition

Cartoon from the November 3, 2007 Roanoke Times by Chris OBrion (email, website, RT archive), used with permission from Mr. OBrion, who cartoons regularly for the paper, in addition to doing artwork for other clients from his home in Richmond, VA.

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In November 2007, I wrote about Coles Hill in Chatham, Virginia in Pittsylvania County, which has been in Walter Coles's family since 1785. Cole's ancestral home sits on one of the largest uranium deposits in the United States. There is also uranium in Orange County, which raised questions  when a shale company prosed a quarry there.

Rising uranium prices and the resurgence of the nuclear power industry after federal underwriting in the 2005 energy bill,  led Cole , along with friends, family and Canadian investors in Virginia Uranium, Inc. to lobby the Virginia Assembly to study lifting the moratorium on uranium mining in Virginia.

If the politically connected Coles has his way, the uranium that lies there will be mined, to his great profit, despite earlier decisions to abandon such mining, according to the Southern Environmental Law Center (SELC), due to serious questions raised in the 80s and never answered about

where the uranium would be processed, how the mine waste or “tailings” would be disposed of, what safeguards would be in place to protect the environment and public health, how would the facility be secured from earthquakes and floods.

The mining moved one step closer December 8, when the General Assembly's Virginia Coal and Energy Commission’s Uranium Mining Subcommittee met and  unanimously selected Chmura Economics &Analytics of Richmond from among five other consulting groups that made presentations to prepare a $200,000 socio-economic study commissioned by the state, as required by the Assemby. The company's past experience has been in the study of the economic impact of highway investments and airports.  Phillip Lovelace, a Pittsylvania County farmer opposing proposed uranium mining at Coles Hill, said  that he was disappointed that a public comment period wasn’t on the agenda for the meeting in Richmond on Wednesday.

In addition, the National Academy of Sciences committee will spend three days in Danville as part of its study to assess the potential statewide consequences of uranium mining in Virginia. The panel convenes today to hear from representatives from theSELC and the Dan River Basin Association. Monday night, residents will have their say at a session described as a town hall meeting.The study is "sponsored"  by the Virginia Polytechnic Institute and State University, but the funding comes from Virginia Uranium, Inc., the company which is "bringing the energy benefits of uranium to our nation and the economic benefits of uranium development to Southside Virginia."

[It's] affiliate company, Virginia Uranium Ltd., merged with Santoy Resources Ltd on July 21, 2009. The newly merged company, Virginia Energy Resources Inc., holds 22.2% indirect ownership interest in the Coles Hill project. Virginia Energy Resources is trading on the Toronto Venture Stock Exchange.

December 7, More than 30 people attended a meeting at the Henry County Administration Building that was advertised as “Community Meeting to Stop Cancer Causing Practice in Southside.” The event was co-hosted by the Virginia Sierra Club, Martinsville-Henry County Voters League and Virginia Interfaith Power & Light.

The mining issue is being raised in the special election to fill the Virginia 19th District Senate seat vacated by Robert Hurt's defeat of Tom Perriello to represent the area in the U.S. Congress.

I've had contact with Cale Jaffe, SELC's  the assigned attorney before--he's been involved in fighting coal plants in Virginia--he's based out of Charlottesville.  I'll see if he's available for an interview.

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The foreclosure crisis won't go away easily

Photo of Mike Hudson, author of The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America – and Spawned a Global Crisis. This piece was commissioned the Guardian, which published it today as, "Let's not foreclose on financial reform:  The modest Dodd-Frank Act is under threat, yet the foreclosure crisis shows the dire risks of an unfettered mortgage industry."  I've only made minor changes and kept the British spelling.


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This past week saw much coverage of the 1 December loan disclosures from the Federal Reserve, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The act--so named because it was sponsored by Representative Barney Frank (Democrat, Massachusetts) and shepherded by Senator Chris Dodd (Democrat, Connecticut)--was signed into law on 21 July by President Obama, as a legislative response to the last two years' economic meltdown engendered by the sub-prime mortgage debacle.

Less reported was the 1 December hearing Dodd held on mortgage servicing – the latest place where fraud has surfaced. Servicers, now regulated under the Dodd-Frank Act, calculate principal and interest, collect payments from the mortgagor, act as an escrow agent and foreclose in the event of default.

This makes servicers pertinent, as the US finds itself in the middle of a  foreclosure crisis that isn't going away. According to an interview with law professor Kurt Eggert, who testified at the hearing, the problem is that:

No one agency has been given the job of regulating servicers, and so any oversight has been piecemeal and haphazard. And the regulators often have been worried more about the soundness of banks than the protection of borrowers.

This has resulted in folks losing their homes, because, consumer advocates say, it's more profitable to foreclose than to make the mortgage adjustments once promised by Obama.

Many initial loans, however, were fraudulent. For instance, just recently, on 3 December, SunTrust's Alexandro Aquinta pled guilty to:

transactions in which straw buyers and unqualified buyers obtained over $4m in … loan proceeds … [from] applications [which] contained materially false, fraudulent and misleading information … regarding applicants' employment, income and assets.

But worse, to my mind, are the falsified documents filed by attorneys in so-called "rocket-docket" courts. The resulting foreclosures severely stress families who lose their homes, as well as neighbours who see their property values decline.

To understand how we got to this state, I interviewed Mike Hudson, one of the first investigative journalists to link predatory lending to the economic meltdown and author of The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America – and Spawned a Global Crisis.

According to Hudson, fraud in the banking and mortgage industries dates back to the 1980s. The sub-prime crisis was long in the making and was facilitated by government through bad policy and lax enforcement. Its origins lay in

[A] philosophy of trusting financial players to police themselves. A lack of cops on the street, as it were, allowed fraud to flourish [with] faked paperwork and other ugly practices [in] the origination of loans – and, now, similarly dicey practices in the foreclosure process.

This lack of regulation was a bipartisan business:

The philosophy started getting traction in the Carter administration, gained even more steam in the Reagan years, continue apace under Clinton and saw its full flowering during the Bush Administration. One influential figure who was there through the Reagan-Bush I-Clinton-Bush II years was Alan Greenspan. Remember he was considered to be 'the maestro', a guy who could see around corners and could guide us to unprecedented prosperity.

The meltdown will continue as long as the bad policy and lax enforcement do. The growing foreclosure crisis is just the latest chapter:

The business model for loan servicers ensures that questionable foreclosures will continue to flood the system. With Republicans' Congressional victories, [Dodd-Frank's] financial reform is in danger. If you think the legislative battle was tough, wait until you see the bareknuckled lobbying and backroom armtwisting that are going to emerge as the new Consumer Financial Protection Bureau gets under way.

As far as the Dodd-Frank Act goes, Hudson says that the best hope lies in Elizabeth Warren's push to simplify mortgage paperwork, as a measure that could command bipartisan support. But I have my doubts about whether Warren will succeed.  Republican Senate leader Mitch McConnell's continued stated primary goal is to block all of Obama's initiatives to render him a one-term president. There's already efforts afoot to weaken the law. And the  financial industry and banking industries and their water-carriers in Congress opposed Warren's appointment to head Dodd-Frank's Consumer Financial Protection Bureau; Obama tapped her only as a special adviser to set up the Bureau. And there are other troubling developments including the Fed's recent move to strip a key protection for homeowners under the guise of reform.

The 1 December hearing was the last Dodd will chair for the Senate committee on banking, housing and urban affairs. He decided not to run for re-election after disclosures about his own sweetheart mortgage deal with the predatory Countrywide. In line for the chairmanship is Tim Johnson (Democrat, South Dakota), who has a record of supporting small predatory loan companies (pay-day lending) and fighting credit card reform. 

Some argue that the financial trauma brought on by sub-prime mortgages was an unavoidable market accident: Federal Reserve chairman Alan Greenspan called it a "once-in-a-century credit tsunami". Some hold that borrowers were to blame – folks took out variable rate mortgages for homes they couldn't afford, betting already-inflated prices would continue to rise, so increasing their equity faster than their ballooning payments.

Others disparage government, either for its lack of regulation or for overselling the dream of home ownership. They argue that the buyers should beware, that corporations and politicians will always be complicit. 

I disagree.  I join Hudson in hoping that an informed public can stimulate reform:

The foreclosure crisis is a serious issue; it's more than a series of paperwork snafus. The powers that be in Washington failed to get the facts and act the first time around – when lenders were engaged in a feeding frenzy of predatory lending. The foreclosure scandal is a second chance for leaders and regulators to prove that they can dig out the truth and take action.

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