Multinational Monitor

SEP/OCT 2008
VOL 29 No. 2


Biotech Snake Oil: A Quack Cure for Hunger
by Bill Freese

Nuclear's Power Play: Give Us Subsidies or Give Us Death
by Tyson Slocum

Conservation Corp.: Enviros Ally with Big Grain Traders
by Christine MacDonald

The Concession Trap: Auto Worker Givebacks and Labor's Future
by Simone Landon

The Commercial Games: Selling Off the Olympic Ideal
by Jennifer Wedekind


Bad Samaritans: How Rich Country "Help" Hurts the Developing World
an interview with
Ha-Joon Chang

Unhealthy Solutions: Private Insurance, High Costs and the Denial of Care
an interview with
Steffie Woolhandler

Arts, Inc.: The Corporate Control of Culture
an interview with
Bill Ivey


Behind the Lines

The State of Corporate Welfare

The Front
Climate Changing Africa -- African Inequality

The Lawrence Summers Memorial Award

Greed At a Glance

Commercial Alert

Names In the News


The Front

Victory for Net Neutrality

In a major victory for the principle of Net Neutrality, the Federal Communications Commission (FCC) ruled in August that Comcast’s management of its broadband Internet networks contravenes federal policies that protect the vibrant and open nature of the Internet.

Ruling on a complaint by the public interest groups Free Press and Public Knowledge, the Commission concluded by a 3-2 vote that Comcast has unduly interfered with Internet users’ right to access lawful Internet content and to use the applications of their choice. The Commission ordered the company to cease the complained about practices.

Net Neutrality is the principle that Internet Service Providers should be neutral as to the content they transmit, not discriminating on terms of delivery of Internet content based on what information is being accessed or applications used.

In the August ruling, the FCC found that Comcast had deployed equipment throughout its network to monitor the content of its customers’ Internet connections and selectively block specific types of connections known as peer-to-peer connections.

“Would you be OK with the post office opening your mail,” asked FCC Chair Kevin Martin, “deciding they didn’t want to bother delivering it, and hiding that fact by sending it back to you stamped ‘address unknown — return to sender’? Or if they opened letters mailed to you, decided that because the mail truck is full sometimes, letters to you could wait, and then hid both that they read your letters and delayed them?”

“Unfortunately,” he said, “that is exactly what Comcast was doing with their subscribers’ Internet traffic.”

“We are disappointed in the Commission’s divided conclusion,” said Sena Fitzmaurice, Comcast senior director for corporate communications and government affairs, “because we believe that our network management choices were reasonable, wholly consistent with industry practices and that we did not block access to websites or online applications, including peer-to-peer services.”

The FCC’s decision followed an exhaustive examination of conduct that was first brought to light by Comcast subscribers who noticed that they had problems using peer-to-peer applications, such as BitTorrent, over their Comcast broadband connections.

When first confronted with press reports about these difficulties, the FCC said, Comcast disclaimed any responsibility for its customers’ problems.

However, after tests conducted by the Associated Press and Electronic Frontier Foundation suggested that Comcast was selectively interfering with attempts by customers to share files online using peer-to-peer applications, Comcast changed its story and admitted that it did target its subscribers’ peer-to-peer traffic for interference.

The company initially claimed that it did so only during periods of peak network congestion and of heavy network traffic.

Later, confronted with yet more evidence suggesting that interference was not limited in this manner, the FCC said Comcast recast its position yet again and admitted that it interferes with peer-to-peer traffic regardless of the level of overall network congestion at the time and regardless of the time of day.

The FCC concluded that Comcast’s network management practices discriminate among applications rather than treating all equally and are inconsistent with the concept of an open and accessible Internet.

The FCC noted that Comcast has an anticompetitive motive to interfere with customers’ use of peer-to-peer applications. Such applications, including those relying on BitTorrent, provide Internet users with the opportunity to view high quality video that they might otherwise watch — and pay for — on cable television. Such video distribution poses a potential competitive threat to Comcast’s video-on-demand service.

The FCC also concluded that Comcast’s practices are not minimally intrusive, as the company claims, but rather are invasive and have significant effects.

The FCC found that Comcast monitors its customers’ connections using deep packet inspection — a means to examine the applications used in a message — and then determines how it will route some connections based not on their destinations but on their contents. In essence, the Commission found, Comcast opens its customers’ mail because it wants to deliver mail not based on the address on the envelope but on the type of letter contained therein.

The FCC also found that Comcast’s conduct affected Internet users on a widespread basis. Comcast may have interfered with up to three quarters of all peer-to-peer connections in certain communities.

The FCC concluded that the end result of Comcast’s conduct was the blocking of Internet traffic, which had the effect of substantially impeding consumers’ ability to access the content and to use the applications of their choice.

The FCC noted that the record contained substantial evidence that customers, among other things, were unable to share music, watch video or download software due to Comcast’s misconduct.

The FCC rejected Comcast’s defense that its practice constitutes reasonable network management.

While Comcast claimed that it was motivated by a desire to combat network congestion, the FCC concluded that the company’s practices are ill-tailored to serve that goal for many reasons: they affect customers who are using little bandwidth simply because they are using a disfavored application; they are not employed only during times of the day when congestion is prevalent; and the company’s equipment does not target only those neighborhoods suffering from congestion.

FCC Chair Martin said that the rules emanating from the Comcast case are that, “if legal content is arbitrarily degraded or blocked, and the defense is ‘network management,’ the broadband operator must show that its network management practice is reasonable. We will look at whether it furthers an important interest and is carefully tailored to serve that interest. Also, the practice should be disclosed to consumers so that they can make informed decisions when purchasing broadband service.”

Applying these principles in the Comcast case, Martin says, “it was unreasonable for Comcast to discriminate against particular Internet applications, including BitTorrent.”

FCC Commissioner Michael Copps said that the Comcast ruling shows the FCC takes seriously the Internet Policy Statement it adopted in 2005. Confronted with the Comcast case, Copps said, “The FCC was suddenly at a crossroads. Down one path was a Commission committed to preserve and honor the openness of the Internet by breathing life into our Internet Policy Statement. Down the other road was a Commission that, while celebrating the Internet, refused to apply its principles and sat idly by while broadband providers amassed the power and technical ability to dictate where we can go and what we can do on the Internet. Today we choose the open road.”

Internet advocacy groups applauded the decision as a vital defense of Internet openness. “The FCC’s bipartisan decision to punish Comcast is a major victory,” said Josh Silver, executive director of Free Press. “Defying every ounce of conventional wisdom in Washington, everyday people have taken on a major corporation and won an historic precedent for an open Internet.”

“Today’s order,” Silver said, “makes it clear that there is nothing reasonable about restricting access to online content or technologies. Moving forward, this bellwether case will send a strong signal to cable and phone companies that such violations will not be tolerated.”

But advocacy groups said the decision is not a sufficient guarantee of Net Neutrality. “It’s important to recognize that this is just the beginning, not the end, of the fight,” commented Fred Von Lohmann of the Electronic Frontier Foundation. “The Commission made it clear that it intends to police this frontier of Net Neutrality on a case-by-case basis, responding to specific consumer complaints.” Indeed, FCC Chair Martin noted that he continues to oppose any legislation or formal rule codifying Net Neutrality.

Silver added that market concentration among Internet Service Providers ensures that there will be a continuing danger of the ISPs trying to extend their market power and undermine Net Neutrality.

“The fight is far from over,” he says. “A duopoly market — where phone and cable companies control nearly 99 percent of high-speed connections — will not discipline itself. We look forward to working with the FCC and Congress to ensure proactive measures keep the Internet open and free of discrimination, and accessible to all Americans.”

The IMF-TB Connection

Tuberculosis, a treatable disease, kills 1.7 million people a year worldwide.

TB incidence, according to the World Health Organization (WHO), seems to be correlated to broad social factors, like access to clean water and sanitation, HIV incidence and national health expenditures.

A July study in the journal PLoS (Public Library of Science) Medicine investigates the role of different possible explanatory factor: the International Monetary Fund (IMF). The researchers’ study focuses on the period from 1991 to 2003 for the former Soviet Union and Eastern Europe, a region for which there is robust data.

The researchers concluded that “IMF economic reform programs are strongly associated with rises in tuberculosis mortality rates in post-communist Eastern European and FSU [former Soviet Union] countries, even after correcting for potential selection bias, tuberculosis surveillance infrastructure, levels of economic development, urbanization and HIV/AIDS.”

“We estimated an increase in tuberculosis mortality rates when countries participate in an IMF program, which was much greater than the reduction that would have been expected had the countries not participated in an IMF program. On the other hand, we estimated a decrease in tuberculosis mortality rates associated with exiting an IMF program.”

In other words: When countries entered IMF programs, TB rates went up. When the programs ended and countries escaped from IMF influence, TB rates went down.

The PLoS study found that participating in an IMF program correlated with increases in tuberculosis incidence of 13.9 percent and an increase in TB mortality rates of 16.6 percent. Sanjay Basu of Yale University, one of the study authors, says that, if the study results are valid, they suggest “we would have averted tens of thousands of deaths and hundreds of thousands of new cases” if countries in the region had never entered IMF programs.

The IMF aggressively rejected the PLoS findings. “Severe methodological shortcomings limit the scope of these results and prevent any causal interpretation,” asserts an IMF response. “The fundamental problem is that this study does not take properly into account that countries implement IMF-supported reforms in times of economic distress.”

Says the IMF response: “The authors do not take into account that the economic and social instability following the collapse of Soviet Union may have had a direct impact on TB incidence in the 21 transition economies considered in the study.”

The authors did take the economic and social instability into account, however. The PLoS article is replete with statistical regressions that aim to isolate and identify only the correlation with the IMF programs. The researchers say the correlation they found was extremely robust, and holds even controlling for economic shrinkage, rising crime, rising incarceration rates and rising HIV rates.

Explains Basu: “First of all, not all of these countries in this region were dependent on the former Soviet Union. Many of them actually had an increase in GDP after the fall of the former Soviet Union. Several were not part of the trading bloc. And in some of the key countries where TB rates rose, we actually saw an increase in economic growth. So economic downturns could not explain, as the WHO itself has stated, the trends of tuberculosis in that region. Something else was going on.”

“The reason we use such heavy statistics is precisely to factor in these other issues — incarceration, HIV, changes to the economy, changes to the healthcare infrastructure,” he says. “We found a statistically independent effect of the IMF. That’s not to say that the IMF was the only cause of TB in this region. The economy, incarceration, HIV — these are all very important, but those factors could not fully explain TB in the region.”

The IMF response says that “the authors’ finding that the only consistent factor impacting TB incidence is the presence of IMF-supported programs is in contrast with previous epidemiological studies on the incidence of TB.” But the study does not make this claim.

The theory of the study authors is that IMF programs drive down healthcare spending, and this reduced investment in healthcare explains the rise in TB incidence and death. Basu emphasizes that the issue is not so much the IMF directing countries to spend less on health. Rather, the inferred causation is that the IMF imposes a set of policy constraints — including overall limits on government spending, and needlessly low inflation targets — that inevitably result in countries spending less on health.

The IMF response denies that its programs are associated with lower public health expenditures. “The average increase in health spending as a share of GDP is larger for countries with Fund-supported programs than in countries without such programs,” the Fund claims.

“To our knowledge, there is no evidence to support this claim,” responds study co-author David Woodward of Cambridge University. “No one wants to say that health spending is not a priority. But true commitment can only be judged by the decision to spend money. The IMF puts aggressive anti-inflation targets before all other policy goals. In practice this results in cuts to government spending, and doctors have warned that this leads to reduced health spending. Until we see hard evidence that IMF programs have secured or improved health or health spending, there is no support for the IMF’s claim.”

— Robert Weissman

The Lawrence Summers Memorial Award

To Burger King Vice President Stephen Grover, for using his daughter’s online names to trash the Coalition of Immokalee Workers (CIW), a workers rights organization that has campaigned against the fast-food giant.

In one post from “surfaholic36,” Grover wrote, “The CIW is an attack organization lining the leaders pockets.  They make up issues and collect money from dupes that believe their story. To [sic] bad the people protesting don’t have a clue regarding the facts. A bunch of fools!

In May, Burger King flip-flopped, and agreed to CIW’s demands that it pay a penny-a-pound more for tomatoes, so that tomato pickers could be given a wage increase [see Behind the Lines, in this issue].

Source: Amy Bennett Williams, “Burger King Exec Uses Daughter’s Online ID to Chide Immokalee Coalition.” (Florida), April 28, 2008.

*In a 1991 internal memorandum, then-World Bank economist Lawrence Summers argued for the transfer of waste and dirty industries from industrialized to developing countries. “Just between you and me, shouldn’t the World Bank be encouraging more migration of the dirty industries to the LDCs (lesser developed countries)?” wrote Summers, who went on to serve as Treasury Secretary during the Clinton administration and is the outgoing president of Harvard University. “I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that. ... I’ve always thought that underpopulated countries in Africa are vastly under polluted; their air quality is vastly inefficiently low [sic] compared to Los Angeles or Mexico City.” Summers later said the memo was meant to be ironic.

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