Dispatch from CES – Day 3 (Net Neutrality Panel)

I have come to the conclusion that the Net neutrality issue has become for tech policy what Angelina Jolie is to the world of Hollywood celebrity: big crowds; a caravan of reporters and photographers; swarms of groupies and gawkers… all these things follow wherever they go. That was the case again today in Las Vegas when a panel discussion took place at CES about Net neutrality.

Before a jam-packed room (many of whom were Washington lobbyists, reporters and analysts), Paul Misener, VP of Public Policy for Amazon, Tom Tauke Executive VP of Public Affairs for Verizon, and Deborah Platt Majoras the Chairman of the Federal Trade Commission debated the future of Net neutrality (NN) regulation. Mike Feazel of Communications Daily moderated.

Feazel began by asking if there will be a Telecom Act in the new Congress and whether NN will be a part of it. Amazon’s Misener said that we will get a Telecom Act in this Congress and NN will be front and center. And it will pass. But Verizon’s Tauke disagreed saying that it is very unlikely we will see passage of a bill this session because “we don’t have the dynamics to pass a Telecom Act.” There is no major issue or compelling reason for action, Tauke said. Moreover, energy and environmental issues will trump telecom policy issues in the relevant committees of Congress now that the Democrats are in charge. And the franchising issue has largely been resolved with the FCC’s latest franchise reform order, he said. Plus, don’t forget about the Iraq debate, he noted. But Paul Misener said that Senators Dorgan and Snowe have already reintroduced their non-partisan NN bill this week and that legislation is expected shortly in the House.

The FTC’s Majoras told the crowd that the agency will host a major public workshop on NN issues Feb 13-14 (it will be webcast) to help the agency prepare in case they will need to act in some way. The agency will likely produce a report with some general findings, but it’s unlikely the FTC will recommend any further action at this time. Case-by-case enforcement is more likely if and when problems develop. In response to a question about the effectiveness of such enforcement, she noted that it is true that after-the-fact antitrust enforcement takes time, but that’s always the case. Moreover, most cases never go to the litigation stage and decisions are usually fairly timely, she said. Companies usually negotiate a settlement first and then change their behavior accordingly. The same could work in for NN complaints, she seemed to be suggesting.

There was some debate about how to best structure NN rules. Majoras said that it is not possible to write perfect regulatory rules for a fast-changing market. Tauke went further and argued that NN regulations cannot keep pace with the technology at work in this marketplace. By imposing regs in anticipation of a problem, you end up outlawing the evolution of new business models, Tauke said. And this could discourage an adequate high-speed infrastructure for the future.

But Amazon’s Misener argued that non-discrimination rules are not that difficult to construct and enforce and that agencies have done so in many other cases. “There is not a truly competitive market” at work here, he said, and government needs to regulate to stop the current operators from “extending their market dominance.”

In response to this accusation, Tom Tauke noted that “Technologies are developing rapidly,” and are “moving in to fill the gap.” He cites the rise of wireless alternatives, including the EVDO wireless broadband system that his own company has deployed. Regardless, he argued, even without those other alternatives in place, a duopoly is quite different than a monopoly; a market can be very competitive with just two major competitors. So, he concluded, “there is no problem today for consumers” and hypothetical fears should not lead to new regulatory regimes.

A representative from a small cable operator who was in the crowd said he feared that NN regs could negatively impact his ability to deal with network congestion and overuse. He noted that 80% of the traffic on his network is generated by a small minority of very heavy users. (Note: My research on this subject found similar results for many carriers, small and large alike.) Paul Misener said that he was not against all proprietary deals to handle traffic management issues. In fact, he noted that many companies (including Amazon itself) have cut deals with bit-management companies like Akamai and Limelight Networks. But, he argued, there is a difference between deals like that and policies that would discriminate against other types of typical Internet activity.

Asked about the impact of the recent concessions AT&T made on Net neutrality to get their merger with Bell South approved, Tauke said it will likely have “negative repercussions for the development of new and interesting services for consumers” in the territories they serve. But those concessions should not impact Verizon or other broadband operators, he said. And it’s not clear what role it will play in the coming policy debate this year, he noted, but it will likely play some role.

Ted Hearn of Multichannel News asked the Majoras what lessons we can learn from the old AOL-Time Warner merger conditions. The FTC, you will recall, imposed a variety of regulatory concessions on that deal before it could be consummated in 2000. But now, Hearn noted, the market has decimated the company’s value and neutralized any market power it might have had. Majoras again commented about this being an example of how fast these markets evolve.

There was an interesting discussion about whether or not NN rules would apply to mobile networks as well as landline. Tom Tauke argued that the nature of the wireless marketplace makes Net neutrality regulation much more complicated and potentially destructive because of spectrum interference problems and other issues that operators must deal with. Paul Misener agreed that it would be more difficult to apply Net neutrality to mobile wireless networks but said that “the burden should be on those who say [NN] should not apply” to wireless networks as well.

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