FCC Broadband Map Shenanigans Shows How Crony Capitalism Really Works

We are living through the golden era of conspiracy theories. Previously it took considerable effort to feed fantasies surrounding faked Moon landings or the murder of JFK. People had to buy and read actual books expounding conspiracy theories when there was no Amazon to deliver them to your door. The words in those books could not be changed to retrofit theory to suit current fashions. Conspiracy nuts had to travel long distances to meet and swap theories with each other, and thus measure through interpersonal interaction which forms of make-believe were most believed. They could easily be ignored by the rest of us. Now any clown can use the web to bolster their delusions with a few conveniently selective facts, then repackage them for social media audiences who only want their biases confirmed. Success is instantly measured through retweets, likes and views, helping the conspiracy theorists to refine their product. There is blame on all sides but an equal refusal to accept blame; nobody stole the US Presidential election and Russian disinformation did not influence it either. Grand conspiracies are attractive because the truth is both mundane and depressing: bad things typically happen because many people are lazy, selfish and inept, not because an evil mastermind devised and implemented some absurdly intricate secret scheme.

Many people are now worried about crony capitalism; the semblance of a competitive private sector that has been undermined by government favoritism. This also spawns conspiracy theories about connections between individuals who have wealth and power. However, one of the most common forms of corruption follows a simple four-step pattern.

  1. A government promises to make things better by spending lots of money
  2. The government money is given to people who argue that they deserve it
  3. No government expenditure is applied to checking the information submitted by the claimants
  4. The government concludes their goals were accomplished by selectively choosing the data that suits them

If you disagree with this four-step recipe for the most banal and pervasive form of corruption then please stop reading now. And go away forever. There are a million websites where you can read about elaborate conspiracies that you may find entertaining. Some of those websites are maintained by mainstream media companies. There are plenty of outlets that cater to idiots, and I have no desire to compete with them. I write for people who want to deal with grim realities, and the four steps outlined above are sufficient to explain why the new map of US broadband coverage created by the Federal Communications Commission (FCC) was always likely to be flawed.

Corruption Begins with Exaggerated Promises

The following words were used by FCC Chairwoman Jessica Rosenworcel to describe the success of delivering the FCC’s new broadband coverage maps.

Broadband consumers are empowered like never before

…the FCC has integrated the information from broadband providers with hundreds of location-specific data sources, giving us a far more detailed and accurate picture of fixed broadband availability

These improved maps will mean direct benefits for consumers

This greater transparency will create market pressures on internet providers to improve their coverage. The new maps will also help policymakers more accurately target investments to expand broadband to unserved and underserved areas and close the digital divide.

Some partisans might prefer to observe that Rosenworcel also said that these much improved maps will also need to keep getting better… because there are obviously going to be many inaccuracies with these new maps. But this is the routine political nonsense of wanting-your-cake-and-eating-it-too. Either the maps are accurate enough to make good decisions or they first need to improve. Politicians will want to say they are good enough and they must get better, which is a contradiction. They do this because nobody likes a government function that admits it delivered something which they knew to be flawed.

Corruption Is Fueled by Money

The US Congress has approved a USD42.45bn program that will issue grants to improve broadband equity, access and deployment. The National Telecommunications and Information Administration (NTIA) will use the FCC’s new broadband coverage map to decide where the money will be spent.

The Easy Path to Corruption

A story published by Ars Technica in February illustrates how and why corruption occurs in practice.

Grewell, founder and general manager of Smart Way Communications, had heard from some of his customers that the Federal Communications Commission’s new broadband map falsely claimed fiber Internet service was available at their homes from another company called Jefferson County Cable. Those customer reports spurred Grewell to submit a number of challenges to the FCC in an attempt to correct errors in Smart Way’s service area.

“You challenged that we do not have service at your residence and indeed we don’t today,” Loveridge wrote in a January 9 email that Grewell shared with Ars. “With our huge investment in upgrading our service to provide xgpon we reported to the BDC [Broadband Data Collection] that we have service at your residence so that they would not allocate addition [sic] broadband expansion money over [the] top of our private investment in our plant.”

In other words, a business lied about delivering broadband service to an address just to stop any other business from receiving a grant to deliver broadband to that address. This is not the only time that Ars Technica has run a story about businesses trying to block broadband grants by exaggerating coverage. An article Ars Technica published in November discussed a cable company plotting to do exactly the same thing.

…the East Carroll Parish grant — $4 million to serve over 2,500 households in an area that has been called one of the least connected in the state — is in limbo because of an eleventh-hour challenge from Cable One, a cable provider that offers services under its SparkLight brand name. Cable One plans to make similar challenges in other states; in fact, blocking government grants to other ISPs is one of Cable One’s top priorities, according to the accidental email received by Chambers.

The cable company “implied in its protest that it is able to provide broadband speeds exceeding the statutory threshold of 25:3 [25Mbps download and 3Mbps upload] to 2,856 locations within the area that Conexon has applied for funding,” the decision said. However, “Sparklight has offered no data or evidence with regard to specific speeds actually delivered and received by its customers or at locations within the area.”

How the Corruption Was Identified

This blatant manipulation of coverage maps, and hence the attempt to affect decisions concerning the spending of public money, was not discovered by some systematic audit or formal investigation. They came to light because the guilty parties in both instances stated they made misleading submissions in emails they mistakenly sent to their competitors. These are not conspiracy masterminds. These are corrupt businesses which are so used to getting away with dishonesty that they lack the discipline to lie consistently.

The End Result

Corruption does not require billionaire lizard illuminati to hold regular meetings at Galt’s Gulch. It is sufficient that businesses have no fear of retribution when their wrongdoing is discovered. These maps are being compiled using a process that places too much emphasis on businesses submitting information, challenging the information that was submitted by other businesses, and appealing those challenges. It concentrates on all the expensive and time-consuming activities that lawyers love but which rational agents would loathe. This then leads to demands for more time to correct the inaccuracies in the broadband map from politicians on the left and on the right.

Failing to independently and consistently check the accuracy of information and failing to punish deliberate dishonesty gives businesses an incentive to game the system by exploring how much they can gain from dishonesty. They gain by enriching themselves using public money, and by preventing other firms from obtaining public money, and they do it by submitting information which they know to be false. What would happen if it suited several businesses to conspire by choosing not to challenge each other’s lies because there is a way for them to carve up funding in ways that help them all? Then their wrongdoing would never come to light. But there is no need to assume conspiracies will corrupt the allocation of funds because it can be corrupted without any conspiracy.

This article could have been included in one of three different categories for Commsrisk’s content. It could have been included in ‘data and analytics’ because it is about the collection of data that is supposed to be useful and important but which actually is bad. It could have been treated as a fraud story because it involves businesses consciously supplying bad data in order to boost profits. But it has been categorized as an assurance story because this is a reminder that governments in general, and the US government in particular, keeps wasting money because it neglects to perform sensible, systematic and cost-effective assurance of how taxpayers’ money is spent.

The truth should suit the worldview of anti-capitalist, pro-government readers in some respects. Many businesses in the electronic communications sector make money by cheating and lying, and this problem will not be solved without government intervention. On the other hand, it may annoy anti-capitalist, pro-government readers to acknowledge businesses are incentivized to behave like this by incompetent, lazy, wasteful governments. There are too many government cronies — both inside businesses and outside them — who praise governments when they rig markets in ways that are supposed to benefit ordinary people but who have nothing to say when governments botch the job by rewarding cheats and liars.

The worst form of corruption that flows from flawed government subsidy schemes is the harm to those businesses that remain honest. They lose at the expense of rivals. If they exit the market then the remainder will be comprised of a higher concentration of businesses that ‘play the game’ in a way that suits government too, by not challenging the flaws and mistakes which should be evident to all. So we end up with crony capitalism because both the government and the surviving businesses understand how to profitably coordinate their activities although neither is focused on delivering a good service or good value for money. This is pure and simple corruption, but without any conscious conspiracy.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.