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.
Aereo, the Barry Diller startup that was delivering local over-the-air TV programming to online and mobile app users, has been deemed illegal by the United States Supreme Court. The Court’s majority opinion was that Aereo is similar to cable TV, and is therefore subject to the same copyright obligations. We should have seen it coming: Chief Justice John Roberts had earlier said that Aereo’s entire model was to circumvent copyright law.
- TV broadcast networks
- Local TV stations owned and operated by the TV broadcast networks
- Local independent broadcast stations
- Consumers, who now lose the option to access local programming online unless they subscribe to an operator, or receive programming over the air
- Aereo, which would have to pay retransmission fees and presumably pass the cost on to consumers, be shut down, or devise some other work-around that keeps it in service
Aereo rents dedicated over-the-air TV antennas to each end user, and converts the live TV signal from each antenna to IP video for unicast (which, Aereo argued, constitutes ‘private performance’ that is not subject to copyright rules). Aereo also hosts a cloud-DVR service that stores recorded programming for later unicast access by subscribers.
If Aereo had won this case, the power of content owner to charge retransmission fees would have diminished, reducing pressure on operators to raise prices to the consumer. Aereo would have continued its expansion toward national coverage. With this decision, retransmission fees are likely to increase, supplementing existing revenue streams from TV advertising.
Aereo’s loss also opens the door for Dyle.tv, a joint venture of NBC, Fox, Pearl Mobile DTV and Ion; which currently offers over-the-air receivers to mobile device owners. Dyle’s Web site states that the company intends to offer “…encrypted broadcasts … to authenticated MVPD (pay TV) subscribers through a variety of apps, possibly those developed by TV networks, stations or cable/satellite companies.”
Online TV certainly isn’t going away. Earlier this month, Leightman Research Group said that almost half of U.S. households already subscribe to an online premium video service, such as Hulu, Netflix or Amazon Prime. The TV networks simply want to boost revenue by participating in the same opportunity. Adding to what they already make from advertising.
Also, the range of available TV programming continues to expand on all the major streaming video device platforms. No question that the content world sees online video as a viable channel of distribution. It just has to be on its terms, and subject to copyright law (agree or not about the Aereo decision).
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.
On November 14, 2013, Steven Hawley conducted a Webinar about the Connected Car, for Multimedia Research Group (MRG), an SNL Kagan company. The Webinar goes with a comprehensive industry report written for MRG by Steven Hawley of Advanced Media Strategies during 2013. For further details and to view the Webinar, click here.
My thanks to the Editor, Jamie Beach. Nicely done!
On August 15, I released my analysis of Google TV. It’s available for sale via the Publications page on my Web site.
This week, Carol Wilson of Light Reading interviewed me and wrote a story about the report and my positions on Google TV – in general terms. I believe that Google TV will be fighting an uphill battle right from the get-go, and I have lots of advice for broadband operators, Telcos and ISPs that think Google TV is a shortcut to video services.
Thanks for the great write-up, Carol!
Nearly a decade ago, the telecommunications industry began watching as PCCW, the incumbent Telco in Hong Kong, started to deploy its Now TV IPTV service. From around the world, attention was focused on this operator as it attained a 30-plus percent pay TV market share in its local market.
In recent years, PCCW’s CTO, Paul Berriman, began to refer to the operator as a post-IPTV operator, in which TV was just one screen among many. Not only were they offering TV-over-broadband without a hitch, but also, were distributing it to mobile smartphones so English expats could watch Manchester vs Chelsea as they chatted over evening drinks.
PCCW also introduced a wireless tablet-like device called the Eye2. With the Eye2, users could PVR a cooking show and then take it to the kitchen and play-pause-play-pause the program while preparing the dish!
PCCW was gracious enough to host a tour of their facilities in December 2009, coinciding with the IPTV World Forum Asia event, where I was a panelist. Not only did the tour reveal a mature TV operation which serves a million subscribers over its fixed-line broadband network; it also runs two sports program studios that it operates in partnership with ESPN. Because HK is the hub of finance between the East and the West of Asia, PCCW also produces its own business programs.
So in retrospect, Friday’s announcement that PCCW has applied for a TV license, to begin operating a 24 hour free-to-air Cantonese-language channel is no big surprise. It’s only a matter of time before other major Telcos around the world begin to go beyond providing the enabling technologies of broadband video, into the world of programming itself.
Telcos must produce unique local programming if they are to continue to differentiate themselves from aggressive cable and Internet-video competitors. Differentiation is no longer a matter of providing an advanced user experience. PCCW is, again, as it was in the 2000s, ahead of the curve in this area.