Scott Cleland has an unusually even-keeled post today (Where are the bullets and bolding, Scott?!) about how Google undermines its own policy arguments on net neutrality regulation by promoting more sources of broadband – in this case, satellite.
What has always mattered, of course, is getting more broadband platforms up and running. The debate over net neutrality regulation is a sideshow, and probably a detriment to communications progress as it casts a cloud of regulatory uncertainty over the industry. Higher costs, slower rollouts, and lower profits from uncertain regulations probably chills investment in any potential new broadband platform.
But I’m here to tell you, Scott, that even if Google helps put a couple more broadband platforms in place, the goalposts will move.
Today, I came across a letter sent by Senate Antitrust Subcommittee Chairman Herb Kohl (D-WI) asking the four major wireless providers why the price of text messaging has gone up. He says that the price has gone from 10 cents per message sent or received in 2005 to 20 cents on all four carriers.
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Writing at Slate, Tim Wu tries to make Obama out to be the real Big Government candidate on media policy, who will deliver “if not a chicken in every pot, a fiber-optic cable in every home.” By contrast, Wu implies that McCain is just another pro-big business lackey who doesn’t understand “that the media and information industries are special—that like the transportation, energy, or financial industries, they are deeply entwined with the public interest.” Wu goes on to say:
Ultimately, most of the difference in Obama’s and McCain’s media policies boils down to questions about whether the media is special and a dispute over how much to trust the private sector. Camp McCain would tend to leave the private sector alone, with faith that it will deliver to most Americans what they want and deserve. The Obama camp would probably administer a more frequent kick in the pants, in the belief that good behavior just isn’t always natural.
First, as a factual matter, Wu is just wrong about McCain being some sort of a radical hands-off, pro-market liberalizer on media policy issues. Oh, if only that were true! But for those of us who have been in DC covering telecom and media policy for many years, it is widely understood there is no nailing down John McCain on any tech, telecom or media policy issue. He’s been all over the board. While he has sponsored or supported
some deregulatory initiatives on the telecom front in the past, he’s also been a supporter of other regulatory causes. His battles with broadcasters and cable, for example, are well-known. Most recently, McCain has been leading the effort to impose a la carte mandates on cable and satellite operators.
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Communications Daily (subscription) reported today on the avalanche of lawsuits being filed challenging the FCC’s Comcast “net neutrality” order. Four were filed this week in four different U.S. appeals circuits — the lucky court that will actually decide the case will be decided by lottery.
The story quotes Ben Scott of Free Press, the energizer rabbit of pro-regulation media groups, decrying Comcast’s appeal. “The Internet is too important to let Comcast tie it up in legal limbo,’ he says. “Congress should act now to pass Net Neutrality laws that clear up any uncertainty once and for all.”
Huh? On what planet, exactly, is Free Press based? Put aside for the moment the question of whether
Comcast is responsible for the legal chaos that has ensued from the FCC’s decision to regulate the way it manages Internet traffic. Strangely enough, when Free Press petitioned the Commission to get involved, I didn’t hear them decrying the “legal limbo” it would cause.
But even more jaw-dropping is the idea that Congress could “clear up any uncertainty” by adopting its own Internet regulations. The mind boggles. The last major congressional foray into communications policy was the Telecommunications Act of 1996, which spawned over half a decade of litigation. There are still children of telecom lawyers going to college off the fees generated by that one.
And
that legislation was a relative piece of chocolate cake compared to the torte of net neutrality. Proponents of mandated neutrality — which Commissioner Robert McDowell has likened to a regulatory Rorschach test — can’t even agree on what it is. Lord know how long it would take the courts to sort it out — if ever they are able to.
Free Press is right, of course, to worry about the endless litigation which will — and already is — being caused by FCC Internet regulation. Rather than even more rules from Congress, however, the solution is for the FCC to reverse course on the regulation it unwisely imposed last month.
After a little bit of suspense, Comcast today filed suit in federal court challenging the FCC’s authority to sanction it for “unreasonable network practices.” I say suspense because there was speculation that Comcast might have decided to look the other way and live with a decision that didn’t really force it to do much that the market hadn’t already made it do. I’m happy to see that they’re not standing for Kevin Martin’s blatant overreach. As I’ve said many times before, the FCC has no authority to punish a company for behaving “unreasonably” when it has never established a criteria for what is reasonable.
I don’t know to what statement specifically Saul Hansell is referring, but in his New York Times post breaking the news, he wrote:
Kevin Martin, the commission’s chairman, has argued that making rules in advance is not a good method to regulate fast-moving markets like Internet service. Under his stewardship, the commission has published broad principles and has taken action only when it found that objectionable practices have occurred.
I love that. Making laws before we apply them isn’t really efficient.
If you want every gory detail about why the FCC’s order should fall, I heartily recommend to you Barbara Esbin’s recent paper [PDF] on the matter. Esbin is a fourteen-year veteran of the FCC and, among other things, in her paper she explodes an argument that I’ve been hearing lately, namely that the FCC has “ancillary jurisdiction” to regulate broadband network management practices. She writes:
As Commissioner Adelstein stated: “[T]he Order sets out the Commission’s legal authority under Title I of the Act, explaining that preventing unreasonable network discrimination directly furthers the goal of making broadband Internet access both “rapid” and “efficient.” This appears to be a paraphrase of Section 1 of the Act, which recites the Act’s purposes and the reason for creation of the FCC, including “regulating interstate and foreign commerce in communication by wire and radio so as to make available . . . a rapid, efficient, Nation-wide and world-wide wire and radio communication service with adequate facilities at reasonable charges…” But because Title I is also considered the source of “ancillary jurisdiction,” that is akin to saying that the FCC can regulate if its actions are ancillary to its ancillary jurisdiction, and that is one ancillary too many.
Amen.
So, if Tim Wu’s thesis is correct that the broadband marketplace is “a cartel,” should we be reading headlines in today’s Wall Street Journal and CNET News.com like this: “Price War Erupts For High-Speed Internet Service” and “Broadband Price War Brews“? From the WSJ story:
The battle between cable and phone companies to sign up new customers for high-speed Internet service is heating up, creating fresh opportunities for consumers to cut their bills. […] While the most generous offers are coming from the phone companies, some analysts expect cable companies will also become more aggressive in their own promotions as they compete to retain customers.
Geez, if that’s a cartel, give me more of them!
I contributed the Cato institute’s side in this debate at Opposing Viewpoints. I took the “no” position to the question “Should the Government Regulate Net Neutrality?” Arguing opposite are the Save the Internet coalition, the Open Internet Coalition, and Public Knowledge.
I wrote my points before seeing the other peoples’ contributions, but my take on the debate is best summarized by this comment which should be appearing on the site in the near future:
What’s striking about the arguments of all three pro-regulation contributors is that while they adopt the rhetoric of urgency, none of them has offered a specific explanation of what will happen if Congress does not enact new regulations. It may very well be true that the major incumbents would like to transform the Internet into a proprietary network, but thus far, there are precious few examples of them actually attempting to do so. Indeed, the only example of any significance that they’ve been able to cite is Comcast’s interference with BitTorrent. And that example certainly doesn’t support their argument.
Comcast interfered in a relatively minor way with one of the dozens of applications on the Internet. For its trouble, the company got a bunch of negative publicity, a customer backlash, and (thanks to header encryption technology) no real control over the use of BitTorrent on its network. By March, Comcast was in full-scale retreat, signing an agreement with BitTorrent, Inc, and pledging to stop blocking BitTorrent traffic by the end of the year.
By the time the FCC ruled on the issue in July, its involvement had been rendered completely superfluous by the progress of events. Comcast wasn’t posing a looming threat to network neutrality that the FCC had beaten back. Comcast had already surrendered months ago, and the FCC showed up long after the battle was over to claim credit for the victory.
The other examples network neutrality activists like to cite are even weaker. For example, Verizon briefly refused to give an SMS short code to a pro-choice group. Not only did this incident have nothing to do with the Internet, but Verizon voluntarily reversed itself just a few days later. Once again, any regulatory response would have been far too late to make a difference.
In short, there’s no “precipice” here. Network owners don’t have a magic wand that will transform the Internet into a proprietary network. The filtering and blocking tools network providers do have are clumsy and easily circumvented. There are plenty of people monitoring broadband providers’ behavior, and they will ensure that any network neutrality violations get widely publicized. Network owners saw what happened to Comcast, and they learned that interfering with network neutrality is a bad business strategy: it’s more likely to produce angry customers than larger profits.
The advocates of new regulation have been predicting the imminent death of network neutrality for three years now. Yet network neutrality is no more endangered today than it was at the height of the Congressional debate over network neutrality in 2006. If we do start to see real evidence that technological and market forces are inadequate to protect the neutral Internet, there will be plenty of time to debate and pass appropriate regulations at that point. But it would be a mistake to pass new regulations now based on purely speculative concerns.
My favorite thing about Ars Technica (aside from the fact that I get to write for them) is their in-depth features on technical issues. Out today is the best discussion I’ve seen of transit and peering for the lay reader. One key section:
I once heard the following anecdote at a RIPE meeting.
Allegedly, a big American software company was refused peering by one of the incumbent telco networks in the north of Europe. The American firm reacted by finding the most expensive transit route for that telco and then routing its own traffic to Europe over that link. Within a couple of months, the European CFO was asking why the company was paying out so much for transit. Soon afterward, there was a peering arrangement between the two networks…
Tier 1 networks are those networks that don’t pay any other network for transit yet still can reach all networks connected to the internet. There are about seven such networks in the world. Being a Tier 1 is considered very “cool,” but it is an unenviable position. A Tier 1 is constantly faced with customers trying to bypass it, and this is a threat to its business. On top of the threat from customers, a Tier 1 also faces the danger of being de-peered by other Tier 1s. This de-peering happens when one Tier 1 network thinks that the other Tier 1 is not sufficiently important to be considered an equal. The bigger Tier 1 will then try to get a transit deal or paid peering deal with the smaller Tier 1, and if the smaller one accepts, then it is acknowledging that it is not really a Tier 1. But if the smaller Tier 1 calls the bigger Tier 1’s bluff and actually does get de-peered, some of the customers of either network can’t reach each other.
When I first learned about the Internet’s basic peering model, it seemed like there was a real danger of a natural monopoly developing if too many tier 1 providers merge or collude. But what this misses is that larger networks are facing a constant threat of having their customers bypass them and peer directly with other customers. As a result, even if there were only one tier 1 provider, that provider wouldn’t have that much monopoly power, because any time it raised its prices it would see its largest customers start building out infrastructure to bypass its network.
In effect, the BGP protocol that controls the interactions of the various network creates a highly liquid market for interconnection. Because a network has the technical ability to change its local topology in a matter of hours, it’s always in a reasonably strong bargaining position, even when dealing with a larger network.
Things are trickier in the “last mile” broadband market, but at least if we’re talking about the Internet backbone, this is a fiercely competitive market and seems likely to remain that way for the foreseeable future.
On Wednesday, the FCC released the decision (PDF, text) it adopted back on August 1 holding that Comcast had violated the FCC’s 2005 net neutrality principles (PDF, text) by “blocking” peer-to-peer file-sharing traffic on its network using the popular program BitTorrent. Paragraphs 3-11 lay out the FCC’s (still-disputed) finding of facts.
Commissioner McDowell‘s Scaliaesquely scathing dissent (PDF pp 61-67) provides an accessible summary of the order and should be required reading for everyone on all sides of the issue. Despite having been provided with the final version of the order only the night before its release, McDowell distills the order into six key points, rejecting the Commission’s reasoning on all but one point (jurisdiction):
- Was a complaint properly brought against Comcast under FCC rules? No, FCC rules allow the kind of complaint brought against Comcast to be brought only against common carriers, which cable modem operators are not.
- Does the FCC have jurisdiction over
Internet network management
? Yes, under the Supreme Court’s 2005 Brand X decision.
- Does the FCC have rules governing
Internet network management to enforce? No, “the Commission did not intend for the [2005] Internet Policy Statement to serve as enforceable rules but, rather, as a statement of general policy guidelines,” nor can the Commission “adjudicate this matter solely pursuant to ancillary authority.”
- What standard of review should apply? No, even assuming this case had been properly brought under enforceable rules, the Commission applied what amounts to a “strict scrutiny” standard–something unprecedented for reviewing private, rather than governmental, action.
- Was the evidence sufficient to justify the Commission’s decision? No, the “FCC does not know what Comcast did or did not do” and should have “conduct[ed] its own factual investigation” rather than relying on “apparently unsigned declarations of three individuals representing the complainant’s view, some press reports, and the conflicting declaration of a Comcast employee.” The evidence did not suggest any discriminatory motive behind Comcast’s network management techniques
- Is the decision in the public interest? No. “By depriving engineers of the freedom to manage these surges of information flow by having to treat all traffic equally as the result of today’s order, the Information Superhighway could quickly become the Information Parking Lot.” Comcast had already resolved its dispute with BitTorrent through outside arbitration. The FCC should “allow the longstanding and time-tested collaborative Internet governance groups [already working to establish processes for resolving such disputes] to continue to produce the fine work they have successfully put forth for years.”
One of the frustrating things about telecom debates is participants’ tendency to play fast and loose with the numbers. This tendency exists on both sides, but I think it’s more pronounced for the pro-regulatory side. Consider, for example, Susan Crawford’s post from last week on John McCain’s tech agenda:
First, here’s the fact: We don’t have a functioning “free market” in online access. John McCain thinks we do. That kind of magical thinking takes real practice.
Instead, we’ve got four or so enormous companies that control most of the country’s access, and they’re probably delighted that McCain is promising not to regulate them.
I can’t think of any plausible way of defining the broadband market that gives you four as the number of major firms. We have three major telephone companies and (depending on where you draw the line) somewhere between four and eight major cable companies. And that, of course, is focusing exclusively on high-speed residential service. T-Mobile and Sprint provide lower-speed wireless Internet access, and there are a number of companies that provide access to business customers.
Maybe that’s just nitpicking about the numbers, but her qualitative view of the marketplace is just as distorted:
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The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.