Man, the FCC has sure been on a roll the past few months, hasn’t it? Slapping Comcast with a fine for violating consumer-friendly agreements made, dogging Google for the Street View fiasco, and now, barring Verizon from blocking tethering apps. The FCC is sure showing big business who’s boss, huh?
It definitely is. Unfortunately, the boss isn’t the FCC — it’s the businesses that dare to violate consumer rights and pre-standing agreements.
All the deterrence of a 50-cent parking ticket
“Today’s action demonstrates that compliance with FCC obligations is not optional,” agency Chairman Julius Genachowski said in the wake of the Verizon ruling. Actually, it did the exact opposite.
Let’s take a brief journey back in time: In 2008, Verizon won an auction for a coveted section of wireless spectrum called the C Block from the FCC. The C Block covers a wide swath of the nation and is home to Verizon’s 4G LTE network. Before the bidding even started, the FCC declared that the winner could not artificially restrict its users’ choice of compatible devices or apps on any networks built using the spectrum. Verizon agreed to the terms.
It was a giant metaphorical middle finger pointed directly at consumers and the FCC.
The penalty for this disrespect and Verizon’s bold violation of the agreement? After a year and a half of raking in exorbitant tethering fees in defiance of the rules, Verizon has to pay a $1.25 million fine and must allow third-party tethering apps. That’s not even a whisper on the wrist, much less a slap on the wrist.
A million dollar fine would cripple you or me, but it’s chump change to Verizon — the equivalent of around $1.25 per customer, going by the latest numbers. The company made dozens of billions of dollars last quarter with record margins.
Even the free tethering portion of the ruling isn’t all it’s cracked up to be. Verizon’s new Share Everything plans — the only option available for new subscribers — include wireless hotspot capabilities as part of your monthly charge. Basically, in a year or two, everyone will be paying for tethering anyway, just in a lump sum instead of a separate fee, conveniently circumventing the FCC agreement. (The new plans are a trap, too, in case you were wondering.)
The FCC allowed the app-blocking to continue unabated when it mattered the most, and only barred the practice when its significance started to fade.
Weak enforcement encourages anti-consumer shenanigans
Verizon’s whisper on the wrist isn’t a onetime occurrence, either. When Comcast violated an agreement to offer low-cost broadband after its merger with NBC Universal, it received an $800,000 fine. Google’s Safari privacy scandal will likely result in a negotiated $22.5 million fine — with no admittance of wrongdoing. Perhaps most egregious, Google was only fined $25,000 for willfully blocking the FCC’s investigation of Google’s privacy-invading Street View data collection. (What ever happened to Do No Evil, by the way?)
These companies make more than that in a day. Heck, Google’s Street View fine didn’t even amount to an hour’s worth of revenue for the company. Why would a profit-focused company hesitate to step on consumer toes or violate standing agreements if the penalties add up to the equivalent of pocket change?
It isn’t entirely the FCC’s fault. Julius Genachowski and company are doing the best they can. In fact, today’s FCC is much more engaged in protecting consumers than it has been in the past — but laws and limits on the books prevent the agency from really throwing the book at misbehaving organizations. The $25,000 Street View penalty was actually the maximum amount the FCC is allowed to fine a company for tampering with an agency investigation, which is utterly ludicrous.
The FCC is suffering from the same problem as the patent system; it’s saddled with paperwork-imposed limitations that just aren’t effective in today’s day and age.
Bigger problems call for a bigger hammer
We don’t necessarily need new laws. We just need to enforce the existing ones with enough ferocity to scare off executives that look at the line between profits and proper actions with a thoughtful look on their faces. If a company breaks the rules, it needs to bleed. (Bleed cash, that is.)
Verizon’s accountants probably write $1.25 million checks in their sleep, but I’m guessing a $125 million fine — or a $1.25 billion fine — would be a different matter entirely.
Moving to massive fines won’t even be unprecedented; companies fear the European Union’s wrath much, much more than the FCC’s, in a large part because the EU isn’t afraid to toss out whopping $1 billion-plus dollar fines when it’s appropriate.
In the EU, the European Commission can fine a company up to 10 percent of its yearly turnover. Income-based fines can hurt major companies that can otherwise shrug off the relatively minor penalties imposed by the FCC.
If we want companies to follow the rules, we have to be able to effectively punish companies when they break them. Why stay on the straight and narrow when it’s so financially worthwhile to shrug off the laws and shake the pennies out of your pocket as a penalty?
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