The Federal Communications Commission conducted a public hearing this week on network management before a group of law students – as opposed to, say, engineering students who are the ones who study network management – where lead witness Rep. Ed Markey (D-MA) declared
[T]he Internet is as much mine and yours as it is Verizon’s, AT&T’s or Comcast’s. Please keep front and center in your examination the needs and wishes of the community of users rather than a small coterie of carriers.
As a matter of law, Markey would have flunked if that were an exam question. But of course the government has a right to try to control whatever it wishes one way or another.
The interesting and relevant question is whether and to what degree it’s possible to proscribe network management practices which most reasonable people would consider inappropriate without unintentionally preventing network providers from trying to improve their services while earning a competitive return on their investment.
“[C]learly, complicated network architectures, Internet viruses, and capacity limitations raise real-world, complex and valid questions, conceded FCC Commissioner Michael J. Copps. “Our job is to figure out when and where you draw the line between discrimination and reasonable network management.”
Copps wants to impose a common carrier obligation on broadband providers so they’ll treat everyone’s communications equally, which is mostly what they do now on a voluntary basis.
Copps says he would also empower the FCC sit back and conduct a “systematic, expeditious, case-by-case approach for adjudicating claims of discrimination.”
That way, over time, we would develop a body of case law that would provide clear rules of the road for those who operate on the edge of the network, namely consumers and entrepreneurs, and those who operate the networks. It’s an approach that echoes easily off the walls of the nation’s oldest law school—because it’s in the ancient tradition of the English common law, the tree that grows from the roots up.
This is essentially what the FCC already does, although Copps may have in mind clarifying and/or augmenting the existing procedures.
Copps seems to either question whether the FCC’s current policy statement on broadband Internet access is enforceable without question or doubt, whether it’s too vague, or both.
He appears to want a system where the nondiscrimination rule is so broad that broadband providers would have to secure the votes of 3 of 5 FCC Commissioners in advance to create specific exceptions on a case-by-case basis allowing them to experiment with a particular innovation. It’s a variation on the guilty-until-proven-innocent concept. And anytime a broadband provider thinks of a way to “build a better mousetrap,” it would have to file a petition with the FCC providing notice not only to the public but also it’s competitors. Then the broadband provider would have to wait for the bureaucrats to figure out what to propose to the politicians and how to cover their ass.
This sort of arrangement isn’t necessary to protect consumers, only the aspirations of “me too” competitors. The competitors would be asked by the FCC staff what they think (and what is the price for their acquiescence)? They would respond that in order to capture a “reasonable” (read: handsome) profit from the broadband provider’s innovation, the competitors would need the right to buy it at an arbitrary discount and resell it at a price that undercuts the broadband provider’s cost plus a reasonable profit.
The problem with this approach would be years of heightened uncertainty (if not the likelihood of outright confiscation) just when the U.S. needs broadband providers to invest at least another $100 billion in additional capacity.
But Commissioner Jonathan Adelstein and others fret that the broadband market presently resembles a duopoly which justifies regulation even though he seems to understand this situation is unlikely to persist:
We all have high hopes for the development of alternative technologies like wireless to promote greater competition in the broadband access market. Right now, though, we see a broadband market in which, according to FCC statistics, telephone and cable operators control over 93 percent of the residential market. For many consumers, there is no meaningful choice of providers.
Setting aside the fact that the unmistakable emergence of a viable and compelling category of competitors (wireless) completely demolishes the duopoly theory, in the broadband market as it is there are none of the dangers commonly associated with a duopolistic market (rising prices, deteriorating service, etc.).
It isn’t like Coke and Pepsi, who compete primarily on the basis of their marketing efforts. Broadband providers are investing billions of dollars to improve their services, something they wouldn’t have to do in a noncompetitive market. The most recent evidence is Comcast’s announcement that it will deploy a new technology to boost speed and bandwidth:
Stung by the success of phone companies in selling packages of TV and high-speed Internet services, the cable industry is getting close to launching a counteroffensive — an inexpensive new technology that dramatically boosts Internet connection speeds.
Called Docsis 3.0, the technology will allow the cable industry to compete on a more even footing with telecom giant Verizon Communications Inc., which is aggressively marketing a high-performance fiber-optic network called FiOS that offers much faster Internet connection speeds than cable modems can currently deliver. Whether the cable industry can roll out the new technology fast enough to minimize the damage from FiOS remains to be seen.
There are many markets dominated by two competitors. And the rivalrous broadband market demonstrates how they can be good for consumers.