Does JOE Threaten YouTube, Hulu, NetFlix Access?

By Wayne Rash  |  Posted 2012-05-17

Verizon-Cable Deal Poses Big Threat to Internet Access, Competition

Verizon and the group of cable companies from which it is planning to buy a chunk of AWS spectrum don't want you to know about a new Joint Operating Entity (JOE) that would control all aspects of how you get access to the Internet, what you can do online and how much it's going to cost.

Cloaked in a layer of secrecy behind a wall of redacted documents, filings to the Federal Communications Commission that can't be read and responses that are deliberately concealed, Verizon and its cable partners have agreed to stop competing directly with each other, to stop offering services that the others offer and to jointly develop technology that would control what you can do on their networks.

Sources familiar with Verizon's FCC filings said that the plan laid out by Verizon and its partners is "deeply troubling." Others familiar with the Verizon-Cable plan indicated that if it actually happens, it would effectively cancel the provisions of the Communications Act of 1996 that requires competition among carriers.

The JOE described in the material would effectively create an information cartel in which a currently secret board would decide how the various players in the Verizon-Cable deal would provide access and pricing.

This JOE is apparently already operating, and one of its first actions is for Verizon to stop offering stand-alone DSL service to consumers, according to claims in a letter from DirecTV to the FCC in an ex parte filing on May 16, and made available to eWEEK. The filing asserts that the parties in the Verizon-Cable deal include a series of Commercial Agreements that have started the ball rolling.

"Yet even in the short amount of time since the Commercial Agreements were finalized, Verizon's behavior offers direct evidence of ways in which the proposed transaction will alter the market to the detriment of competition and consumers," the DirecTV letter said.

Furthermore, the letter notes that Verizon had been working with DirecTV to develop a next-generation fixed wireless broadband product that would compete with cable companies, but abandoned the efforts immediately after entering into the Commercial Agreements.

Likewise, Verizon canceled a plan in which DirecTV had been selling stand-alone DSL to consumers. "Coming so soon after Verizon's subsidiary and the incumbent cable operators entered into the Commercial Agreements, this development cannot be explained other than in the context of those agreements," the letter said.

It is the Commercial Agreements between Verizon and the cable companies that created the JOE.

Does JOE Threaten YouTube, Hulu, NetFlix Access?


There's a lot to be worried about in those Commercial Agreements, according to Debbie Goldman, telecommunications policy director for the Communications Workers of America, which is the union representing Verizon's workers. "Our concerns with the deal focus on the Commercial Agreements," Goldman said. "We fought hard to get some redactions unredacted. Some people who are able to see them say they are seeing some very disturbing things.

"One of the concerns is an agreement that would lock competitors out of backhaul," Goldman explained, saying the agreement would require backhaul services to go to a cable company. "Where any cable company agrees to match the price. This raises huge red flags under antitrust law." Backhaul is the connection between wireless towers and the Public Switched Telephone Network, which are controlled by the big telephone companies such as Verizon and AT&T.

"Another thing [is] provisions that would make it more difficult for over-the-top video," Goldman said. She said this could effectively kill YouTube, Hulu and NetFlix, and similar video services, but that it goes far beyond that. Goldman said that even the makeup of the board that governs the JOE is a secret. Goldman noted that Verizon is keeping these secrets even from the FCC by redacting documents sent to the commission and providing electronic filings that cannot be opened.

Verizon didn't respond to eWEEK's May 17 request for comment on these concerns and the terms of the JOE before this article was published.

The industry concerns about the behavior of Verizon and the cable companies have caused a number of companies to create an organization called the Alliance for Broadband Competition. Members of the Alliance include Sprint and T-Mobile as well as public interest groups such as Public Knowledge. Art Brodsky, communications director for Public Knowledge, said this issue has been building since the deal was announced last year.

"This is profoundly anti-competitive and anti-consumer," Brodsky said. He noted that the chief of the FCC's Wireless Telecommunications Bureau is already asking some very pointed questions about Verizon's plans, including its plans for the deal with the cable operators. Brodsky said part of the deal is an agreement not to compete, which he said is the definition of antitrust.

"What's going to happen next is that the Commission and the [U.S. Department of Justice] anti-trust division are going to make a call on it. It's a very complicated deal, and it will reshape the communications industry. It will blow up the communications act of 1996." Public Knowledge has filed a petition with the FCC to remove the secrecy around JOE.

Verizon's actions have also prompted a letter from Sen. Herb Kohl, D-Wisc., to Verizon's General Counsel Randal Milch demanding an explanation for its discontinuation of DSL service immediately after the company promised to Kohl's committee that this wouldn't happen. Kohl is chairman of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights. In his letter, Kohl said that Verizon's action reduces choices for customers, contrary to what the company promised.

Currently, the government's investigation of Verizon's interaction with the cable companies is just starting to heat up. The DOJ has begun an investigation, as has the FCC. Dozens of companies have filed petitions with the FCC not to allow Verizon's spectrum buy. It appears that what Verizon hoped would be an under-the-radar transaction is instead going to gain a lot of scrutiny.

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