Genachowski Widens the Net Neutrality Loophole

by on December 2, 2009 · 7 comments

FCC Chairman Julius Genachowski linked spectrum management, universal service and network neutrality in a speech yesterday at the Innovation Economy Conference in Washington, and in the process may have signaled some comprehension of the negative consequences network neutrality regulation may have.

His most significant statement was a concession that network management will be required to keep wireless networks and services economically sustainable. The FCC’s Notice of Proposed Rulemaking on network neutrality seeks to apply a “non-discrimination” principle to wireless—that is, to prohibit service providers such AT&T, Sprint, T-Mobile and Verizon Wireless from using network intelligence from grooming, partitioning or prioritizing data to ensure quality performance of voice, data, gaming or video applications.

Yet yesterday, as reported by Wireless Week, Genachowski acknowledged that the explosion of data use was placing “unsustainable strains” on operators’ wireless networks.

“[There] are real congestion and network management issues that operators must address, particularly around wireless networks, and we must allow reasonable network management…,” he said, emphasizing the importance of developing policies that “encourage investment and the development of successful business models.”

While the NPRM does allow for “reasonable network management,” it never really defines what that may be. In light of this, Genachowski’s injection of “investment” and “business models” into his side of the debate is both startling and welcome.

For one, it acknowledges the rising chorus of critics (examples here and here), who, independent of ideology, have questioned the economic wisdom of barring carriers from recouping their investment in intelligent network technology from large applications providers who generate these necessary costs. A recent conference on Capitol Hill, sponsored by the American Consumer Institute (full disclosure: I was a participant), featured comments a number of economists who said mandated non-discrimination was a recipe for higher consumer prices, lower quality and ultimately, declining investment in broadband infrastructure. Much of the Q&A discussion focused on whether numerous wireless data services and applications that have arisen out of innovations such as the iPhone, because of the continual network management they require, would be possible under a network neutrality regime.

Genachowski also deserves credit for tying the network neutrality issue in with spectrum management and universal service. Previous commissions have tended to pursue these issues separately, as if the policies addressing one had no effect on the others. Contemporary telecom policy must be holistic, understanding how spectrum allocation affects wireless network management, and how allowing the industry greater freedom to formulate the business models and partnerships can yield the investment needed to deliver universal service.

  • http://drewt333.blogspot.com/ drewt333

    Sounds like a step forward.

  • http://necropolis.blogsite.org jinkhet

    I'd really like to see the Feds decouple regional lock-in for ISPs. For example, Verizon has been trying to bring FIOS to Seattle for a while, but are blocked by an exclusivity agreement [ http://bit.ly/6wRNFT ] even though FIOS wouldn't have to use the lines Comcast installed.

    If we consumers had real choice in a functioning market, net neutrality would be largely unnecessary and government would be needed primarily as a watchdog for collusion, bundling, etc.

  • mwendy

    “Computer II” used the FCC's “ancillary” jurisdiction to impose non-discriminatory access requirements on ILECs for those seeking to provide enhanced services (now called information services in the '96 Act) – pursuant to tariffs under common carrier regulation (Title II). So, at least there was some compensation for their (ILEC) facilities (in then, a monopoly environment).

    The present NPRM does none of this – in an environment that is competitive, legally and in fact. It says that, subject to reasonable network management and other limited special arrangements, content, app and service providers shall not see discrimination (i.e., be charged more) for their offerings. In other words, they get to free-ride off of the value of that last mile where their offerings get terminated. The end-user must pick up the charge. According to the NPRM, this value can't be “tariffed” to the content providers by the facilities-based (last mile) provider. No compensation – other than through subscription fees – allowed in this otherwise two-sided market.

    If the Chairman is leaving open the possibility that two-sided (or other) business models may be desirable, especially in light of network congestion (if not core innovation), then that certainly represents positive movement.

  • Robin

    Just think about how much faster the internet would be if there were no Flash animated ads, I mean who is really using that bandwidth?

    It is the same as cable though, pay for cable and they still send commercials down the wire.

    Some day users will be able to control the bandwidth they use, after all that is why we use the internet and not watch TV.

  • Robin

    Just think about how much faster the internet would be if there were no Flash animated ads, I mean who is really using that bandwidth?

    It is the same as cable though, pay for cable and they still send commercials down the wire.

    Some day users will be able to control the bandwidth they use, after all that is why we use the internet and not watch TV.

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