On March 12, 2015, the FCC published its 300-page-plus Net Neutrality ruling, titled In the Matter of Protecting and Promoting the Open Internet: Report and Order on Remand, Declatory Ruling and Order.
As expected, Republicans in Congress immediately threatened to undermine it. US Representative Fred Upton (R-MI), Chair of the House Committee on Energy and Commerce and two Congressional colleagues announced their objections the same day.
Another US Representative, Marsha Blackburn (R-TN) exclaimed that “Trying to regulate or reclassify the Internet has as much support as transferring Guantanamo Bay detainees to the United States. Both proposals are net losers that need to be retired once and for all.” She is co-sponsor of an anti-Net Neutrality bill, HR4070, The Internet Freedom Act, which is currently before the 113th Congress.
Was the FCC strong-armed?
Republicans believe that President Obama inappropriately influenced FCC Chairman Tom Wheeler on Net Neutrality. So far, Republicans in Congress have scheduled five hearings into the matter:
- US House Oversight Committee, March 17
- US Senate Committee on Commerce, Science, and Transportation, March 18
- US House Energy & Commerce Committee, March 19
- US House Appropriations Committee, March 24
- US House Judiciary Committee, March 25
This week, The Washington Post reported that the FCC’s Inspector General, who is named by the FCC Chairman, has opened an internal investigation. On March 17, US House Communications and Technology Subcommittee chairman Greg Walden (R-OR) released a draft bill to reauthorize the FCC. One of its stipulations is to make this Inspector General independent of the agency.
While the Republicans are firm in their convictions, others believe that this situation simply repeats a tactic that they’ve used since the days of Ken Starr and Whitewater, and most recently after the killing of the US Ambassador in Benghazi Libya: conduct endless hearings to create the appearance of a criminal situation where none actually exists.
Perhaps a better tactic would be to do a little research about the legislators initiating these hearings, to see where their campaign donations come from.
The FCC goes to the movies
I’m reminded of two movie references, the obvious one being The Empire Strikes Back. Just before the the FCC’s vote, Republican FCC Commissioner Ajit Pai even quoted Emperor Palpatine, saying “Young fool… Only now, at the end, do you understand,” imagining that someday, people would look back wistfully upon the decision with regret that they didn’t stop it when they could.
But perhaps more aligned with America’s political climate, there’s also that charming character from the last scene of Pixar’s The Incredibles.
Today’s Net Neutrality declaration by the FCC is unquestionably the most important telecommunications policy decision thus far in the 21st century. In recent weeks, it had become increasingly clear that this would be the FCC’s direction.
There had been doubts, given FCC Chairman Tom Wheeler’s previous associations in the telecommunications industry. From 1976 to 1984, he was President of the NCTA and from 1992 to 2004, he was President & CEO of the CTIA, which lobby for the cable and cellular industries, respectively. Both groups oppose Net Neutrality today.
In addition to the Chairman, the FCC is governed by four other Commissioners. The FCC’s majority reflects the political party of the President, so therefore, Mr Wheeler and Commissioners Mignon Clyburn and Jessica Rosenworcel are Democrats. They voted ‘Aye.’ Commissioners Ajit Pai and Michael O’Rielly are Republicans, and voted ‘No.’
Chairman Wheeler summarized the ruling in his statement
“We asked the public to weigh in, and they responded like never before. We heard from startups and world-leading tech companies. We heard from ISPs, large and small. We heard from public-interest groups and public-policy think tanks. We heard from Members of Congress, and, yes, the President. Most important, we heard from nearly 4 million Americans who overwhelmingly spoke up in favor of preserving a free and open Internet.
“Building on (a) strong legal foundation, the Open Internet Order will:
- Ban Paid Prioritization: “Fast lanes” will not divide the Internet into “haves” and “have-nots.”
- Ban Blocking: Consumers must get what they pay for – unfettered access to any lawful content on the Internet.
- Ban Throttling: Degrading access to legal content and services can have the same effect as blocking and will not be permitted.
“These enforceable, bright-line rules assure the rights of Internet users to go where they want, when they want, and the rights of innovators to introduce new products without asking anyone’s permission.
“The Order also includes a general conduct rule that can be used to stop new and novel threats to the Internet.”
What the opposing Commissioners had to say
Those who watched the FCC proceedings online, as I did, were given a real treat. After Mr Wheeler’s opening statement, the Commissioners took turns to make statements of their own. Given today’s antagonistic political environment, the primary role of the two opposing Commissioners was to misrepresent the outcome and use scare tactic positioning as they expressed their disagreement with the decision. I must admit that they are very good at what they do.
For example, Commissioner Pai made several points in his statement:
- (Paraphrasing) “The Internet will be taxed.” And he went on to talk about the Universal Service fee *** on your phone bill, and how a new line item will show up on phone bills for the Internet. In reality, “the Order DOES NOT require broadband providers to contribute to the Universal Service Fund under Section 254. The Order will not impose, suggest or authorize any new taxes or fees – there will be no automatic Universal Service fees applied and the congressional moratorium on Internet taxation applies to broadband.”
- “The Internet will be slower and prices will be higher.” Large carriers attempt to justify their claim about slower speeds by saying that Net Neutrality would be a disincentive for them to invest in their networks. So AT&T or Verizon would actually give Comcast or a future DISH Network wireless broadband service an opening to take market share away from them?
- “Nothing in this order will promote competition… If you liked Ma Bell monopoly in the 20th century, you’ll love this in the 21st.” Actually, today’s ruling is very clear (see above) that there will be no preferential treatment for access or interconnection. Creating a level playing field that anyone can enter; a sound foundation for competition.
*** It should be noted that the Universal Service fee helped give telephony to rural areas in the 1930s, and in a very real sense, helped incubate IPTV among rural operators a decade ago.
Commissioner Pai used words like “takeover,” “sham proposal,” and “special interests” to position the Net Neutrality decision exactly inside-out from what it really is. He also claimed that the government didn’t create the Internet, hoping that listeners may have forgotten that the Internet was ‘invented’ by DARPA (the Advanced Research Projects Agency within the US Department of Defense, a government agency), and a community of government-funded academic institutions.
The other opposing Commissioner, Mr. O’Reilly, also pulled no punches, calling the Net Neutrality decision an “unlawful power grab.” Then Mr O’Reilly went on about how Title II is all about price regulation and taxation. So the truth comes out: taxation is bad. Net Neutrality should be opposed because it is a new tax, and that “this is back door rate setting authority.” Despite explicit statements in the ruling that it is not.
But read the FCC’s order, read the statements of each of the FCC Commissioners, and then decide for yourself.
Fear ruled the weeks leading to this decision
These comments by the minority Commissioners simply reflected the meme that had been running unchecked in the wild.
In the days and weeks leading up to this FCC decision, the opposition played on anti-Obama sentiments with ridiculous propositions like “Barack Obama is shutting down the Internet,” and insulting statements that Tom Wheeler is “simply Obamas’s (colorful language for the word ‘tool’) on this.” US Senator Ted Cruz (R-Texas) insisted “Net Neutrality is Obamacare for the Internet.”
One commenter went so far as to say that (I’m paraphrasing and can’t remember the source) ‘..only four million people submitted comments to the FCC, out of more than 300 million Americans,’ implying that the 4 million were meaningless.
What the Net Neutrality decision really means
Today’s ruling put an end to the notion that “open access” to the Internet was to be a function of lesser or greater means. It’s that simple.
I have no doubt that some of my friends and colleagues stand as opposed to Net Neutrality as I stand in favor. Everyone is entitled to their opinion. But as opposing parties begin to notice that Net Neutrality has opened market opportunities to them that otherwise would not have been available, they will thank the FCC.
The other FCC decision on this day
The Net Neutrality discussion overshadowed another important ruling that was announced the same day: that the FCC granted petitions from two community broadband providers in North Carolina and Tennessee, to expand broadband services into neighboring unserved and underserved communities. The opposition was from incumbent service providers.
Update 11 Feb 2015: The majority of FCC’s five commissioners are always of the party of the sitting President. So when FCC Commissioner Ajit Pai exclaimed: “I have studied the 332-page plan in detail, and it is worse than I had imagined,” it was no surprise, as Mr Pai is one of the two Commissioners in the Republican minority.
The wait is nearly over: FCC Chairman Tom Wheeler posted an article with Wired that previews the FCC’s decision on Net Neutrality. At risk of alienating some old friends and making some new ones, my opinion is that the FCC’s pending regulation under Title II of the Communications Act of 1934 is exactly the right thing to do. Operators with their own network facilities have challenged NN and will continue to do so, but their bark is worse than the bite.
Why? Because the FCC holds the keys:
- The FCC set the precedent for N.N. in 1934 by mandating a responsibility to put phone calls through (common carrier), and reinforced it in 1996 by adding transparent handoff between wireline and wireless.
- What happens when any of these network providers starts producing its own content (As owner of NBC Universal, Comcast comes to mind), and gets throttled by another network provider? The FCC is the arbiter.
- If any of these operators actually did go ahead and not play by the FCC’s rules, the FCC can issue warnings, followed by fines, followed by revoking their licenses to operate.
Besides, do you honestly think that your favorite cable, telco or wireless operator would actually walk away from business (e.g. stop investing in their networks, as AT&T and Verizon have each threatened to do) if the FCC put NN in place? Really? Would you like to buy a bridge?
In my opinion, N.N will result in exactly the opposite. Readers of my blog know about my trevails with Centurylink, which currently has no incentive to give me more than 3.2mbps down and .9mbps up. I am out of mobile range, and no cable operator serves my neighborhood. If Centurylink were suddenly to have competition, I would expect them to protect their share, not abandon it.
In other words, I believe that NN will spur a race to the top, not the bottom.
I hadn’t been active with my blog in a while, but I was so incensed at my poorly coordinated broadband activation by CenturyLink that I posted six articles in rapid succession, ending yesterday with my thoughts about competition.
So, from my own personal perspective, the announcement that Comcast would acquire Time Warner Cable struck me as ironic. Some of the early reports seemed to position this acquisition as a fait accompli, which it is not. Most news outlets, ranging from The Wall Street Journal and Bloomberg to The PBS News Hour and National Public Radio, emphasized that the deal would take time, and face regulatory scrutiny. As a point of reference, Comcast’s acquisition of NBC Universal took two years to close.
One of my morning calls today (2/14) was with an industry friend in the UK, who asked “What do you think?” From a services perspective, Comcast and TWC serve mutually-exclusive territories, so competition among TV, voice, and broadband providers in any given locality is not likely to change significantly. And although this acqusition would make Comcast more powerful overall, a successful acquisition isn’t likely to reduce the number of voices in the American marketplace of ideas because Time Warner content is not part of the deal. The acquisition is likely to be approved, but I hope that certain conditions are applied.
The greatest potential for risk comes with broadband market share. A merged Comcast-TWC would serve nearly 30% of American households. With that kind of market presence, the results can be both good and bad. On the good side, a larger Comcast could conceivably negotiate lower costs from its programming suppliers because the new entity would be reaching the new and higher aggregate number of subscribers (although whether or not such a negotiation would be successful, and whether or not such a savings would then be reflected in the consumer’s bill are both open questions. I do know that my Comcast broadband-only bill was nearly $80/month before I moved out of their service territory this past month, which included ambiguously-defined surcharges).
On the other side of the coin, many fear that the company could quietly compromise the quality of over-the-top video services like Netflix with impunity, and ignore or rationalize their way past any challenges to such a practice. Comcast and others have been accused of this practice. (the corollary of that being that, maybe, Hulu would remain at full quality, since Comcast’s NBC Universal is a co-owner in Hulu). But that is an ill-informed point of view (** See below).
Just last month, we were reminded of this issue when D.C. Circuit Court of Appeals invalidated the Federal Communications Commission’s 2010 Open Internet Order, which Verizon Communications and others had challenged. A group of US Senators quickly sent a letter to FCC Chairman Tom Wheeler, who is evaluating that situation; urging him to “quickly adopt enforceable rules to prevent the blocking and discrimination of Internet traffic… (and) withstand judicial scrutiny.” Mr. Wheeler says that he will try. US Senator Ed Markey (D-Massachusetts) introduced a bill to keep Net Neutrality in effect until this evaluation is complete.
Internet advocates have differing opinions as to whether or not Net Neutrality will stand. The Electronic Frontier Foundation is pessimistic, while Freepress thinks the FCC can preserve it. I personally believe that Net Neutrality is as basic as universal telephone service or the availability of electricity, or law enforcement, or fire prevention: available to all, without bias.
One of the FCC’s conditions in the Comcast NBC Universal acquisition was for Comcast to maintain a practice not to discriminate against online video programmers, and to add ten independently-owned programming channels to its cable lineup over the 8 years following the acquistion. But what happens after 2018, when the non-discrimination period expires? Will Internet access speeds be intentionally limited for streams of IP video programming that originate outside of a Comcast headend? Will independent programmers find themselves shut out? Comcast has many friends in the US Congress, and contributed more than $853,000 to members of the Subcommittee on Communications and Technology in the US House of Representatives between 2001 and 2012.
If only just to quell the fears of the paranoid, I would propose that FCC Chairman Wheeler take two steps: first, make the non-discrimination clauses of the FCC’s conditions to Comcast from the NBC Universal acquisition permanent as a condition of a Comcast – Time Warner acquisition. Second, extend those conditions to all service providers. The FCC could reclassify broadband as a Common Carrier service, obligating Comcast and all other operators to carry any traffic on their networks or face legal action.
As remote as the FCC may seem to average mortals, anyone can submit comments to the FCC about this issue (and select “09-191 Preserving the Open Internet” from the drop-down menu). On the other hand, it’s best to keep emotions at a minimum: fear that the sky is falling is probably misplaced.
The above-linked Wall Street Journal article on the acquisition provides a detailed timeline of consolidation in the cable industry, and the Columbia Journalism Review maintains Who Owns What, to track the holdings of major media companies.
** Edited February 25: Netflix will in fact be paying Comcast to guarantee QoS/QoE over Comcast’s network. If the intent were to collude in order to raise prices to the consumer, it would be a terrible precedent and probably found to be illegal. But that fear is not grounded in realities of OTT delivery, because paying Comcast or any other access provider for transport on their networks is a common practice, and is more likely reduce the content providers’ transport costs, not raise them. Pay TV operators with broadband services have always positioned OTT video providers as freeloaders on their networks, but that positioning is disingenuous because paid transport at a wholesale level is a common practice and a revenue stream.
See Dan Rayburn’s recent posts for the best characterization that I’ve seen to date.
New Net Neutrality rules go into effect on November 20, 2011. It’s a good opportunity to get beyond the politics of the matter, and into some substance.
My own belief is that open networks are critical in the cloud world (which is the position taken by Google, the FCC and others). Consider this parallel everyday example: a friend of mine uses Verizon Wireless and is therefore defaulted to Bing for search. To him, an annoying inconvenience – but what would happen if suddenly VZ blocked access to Google altogether? Interestingly, it appears that Verizon may challenge the new Net Neutrality rules once they go into effect.
Of course network owners want to monetize their networks. And they can (and why not!), by charging content providers for transport, and by taking revenue splits from advertisers. But please, not by charging the consumer, or enacting bandwidth consumption caps, or by otherwise penalizing the consumer in some way. As is their wont, consumers will find a way around it and have no qualms about bypassing or changing service providers.
A service provider’s networks are a sunk cost that it already bears. It can sell transport services and consumer access to content providers at prices equal to or below what a data-center-based third party CDN provider charges – an incentive for content providers that want to save money. At the same time, the service provider stands to make incremental revenue that likely wasn’t planned for when these networks were designed and budgeted.
Prediction: the average budget-minded consumer will be enraged if they couldn’t access content in the cloud that they had already paid for, and they wouldn’t stand for some service provider talking in code about capex and opex.