My colleague Barbara Esbin, a Senior Fellow and Director of the Center for Communications and Competition Policy at The Progress & Freedom Foundation, was asked to pen a short history of the net neutrality wars in the U.S. for a French publication, La Lettre de l’Autorité. Her essay provides an excellent, concise overview of where we’ve come from and where we might be heading on this front. I’ve pasted the entire essay down below, or you can download the PDF here.
Net Neutrality Regulation in the United States
by Barbara Esbin
PFF
Progress Snapshot
Release 4.21 October 2008
The United States moved closer to “Net Neutrality” regulation this year when the Federal Communications Commission found that Comcast, a cable broadband Internet service provider, violated a set of Internet policy principles the FCC adopted in 2005 by limiting peer-to-peer (P2P) traffic. The ruling was the culmination of a ten-year effort that began as a call for wholesale “open access” to the cable platform for third-party Internet service providers. Requests for open access first emerged in 1998 when the FCC considered AT&T’s acquisition of cable operator TCI. The FCC rejected open access, but the issue quickly re-emerged in a subsequent proceeding to determine the appropriate regulatory classification of cable Internet service. Depending on how the FCC categorized cable Internet service, it would either be subject to telecommunications “common carrier” requirements, “cable service” requirements, or treated as a then-unregulated “information service.”
In 2002, the FCC classified cable Internet service as an “information service.” This meant that the telecommunications common carrier requirements — that service be provided upon request, without unreasonable discrimination as to rates, terms and conditions of service — would not apply to cable Internet services. The FCC’s decision was upheld by the U.S. Supreme Court in
NCTA v. Brand X. Afterwards, advocates of open access re-directed their efforts away from advocating wholesale access for third-party ISPs, and towards rules aimed at consumer rights to a “neutral network” or “net neutrality.”
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http://penny-arcade.com/comic/2008/9/26/
Speaking of snakes, I am just returned from a camping trip along the Appalachian trail in the Michaux Forest, quite out of wireless reception range. Several days’ heavy rain had washed the forest clean, left the moss glowing green and the mushrooms, salamanders, crayfish, and frogs quite content. There one combats the same problems confronted by earlier settlers–mice (and the snakes they attract), staying dry and tolerably warm, the production of decent meals, and keeping small children from wandering off into the woods. Why do some people enjoy briefly returning to this world? Despite being one of those people, I can’t say. Now I am back and my day is easy and comfortable (comparatively), with time to spare contemplating the meta-structures of finance, property, and capital. Let’s all hope these structures are not nearly as fragile as our confidence in them, which, judging from the tone of remarks at last week’s ITIF conference on innovation, has fallen quite low. Continue reading →
In late June, the Federal Communications Commission (FCC) opened a Notice of Inquiry and Notice of Proposed Rulemaking regarding “Sponsorship Identification Rules and Embedded Advertising” (MB Docket No. 08-90). Basically, it’s an inquiry into the product placement and embedded advertising practices on television. Some at the FCC want such practices regulated.
PFF filed comments in the matter today. Ken Ferree and I argue that that FCC regulation of such advertising practices would be unnecessary and unwise. “If the Notice demonstrates anything,” we argue, “it is that a majority of the current Commissioners live in a world wholly alien and unfamiliar to most Americans; indeed, a world long forgotten if it ever existed.” We continue:
The Notice alludes menacingly to new, “subtle and sophisticated means” of commercial messaging, to “sneaky commercials” (quoting a senescent order topped with nearly fifty-years of dust) and to “vindicat[ing]” the policy goals of the Communications Act – as if the FCC must exact vengeance on those who would try – horror of horrors – to sell goods and services to the American public. The melodramatic tone of the Notice is intended, of course, to set the stage for the Commission’s latest effort to micromanage the free marketplace of ideas, i.e., the media. Only by portraying “embedded” advertising as something new and nefarious can the Commission hope to justify a new portfolio of intrusive and burdensome speech regulations in the name of preserving the “public’s right to know who is paying to air commercials or other program matter on broadcast television and radio and cable.”
And, as we make clear in the filing, we don’t buy the argument that the public are nothing more than mindless sheep:
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Just FYI, the latest update of my booklet on “Parental Controls and Online Child Protection: A Survey of Tools & Methods” is now live. The new version, Version 3.1, provides minor updates to all sections of the book and a new appendix of relevant research in the field. I issue major updates early each year and 1 or 2 tweaks during the course of the year to reflect the evolution of the parental control and online child safety market and debate. 
For those not familiar with the report, it explores the market for parental control tools, rating schemes, education efforts, and initiatives aimed at promoting online child safety. I believe that the parental controls and content management tools cataloged in the report represent a better, less restrictive alternative to government regulation. As I conclude after evaluating that state of the market: “There has never been a time in our nation’s history when parents have had more tools and methods at their disposal to help them decide what constitutes acceptable media content in their homes and in the lives of their children.”
The report is available free-of-charge on the PFF website, and the previous editions of the report are housed there too in case you want to see how it has evolved over the past two years. For those interested in taking a quick look at the report, I have embedded it down below the fold as a Scribd file. Finally, as is always the case, I encourage readers to send me updates and suggestions for how to improve the report and I will incorporate them into future versions.
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I posted an essay last month about some possible non-regulatory solutions to the problem of porn on planes that I predicted might develop once airlines started rolling out in-flight Internet access. Some respondants to that essay argued this was likely a non-problem because few people would actually view porn in public. Unfortunately, a few incidents have apparently already created controversy.
Frankly, I am shocked that legislation hasn’t already been floated on this issue, but I am sure that someone in Congress will be firing off something soon. Again, like I said in that previous essay, before things get ugly and bills start flying up on the Hill, the airlines need to think about crafting some constructive solutions to this problem. We don’t want the FCC to become the censors of the sky, as some lawmakers will no doubt propose eventually.
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.
When the definitive history of Kevin Martin’s regulatory reign of terror against the cable industry is finally written, I have a feeling that Ted Hearn of Multichannel News will be the man who pens it. There is no one who has been reporting on these issues longer or with more investigative vigor than Ted. In an absolutely scathing piece today about a former Martin staffer, Ted does a nice job summarizing the major elements of Martin’s war on cable. It reads like the list of grievances against King George found in the Declaration. (Think: “He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.”) Anyway, I just thought I’d throw Ted’s list up here for those keeping score at home:
— He secretly rewrote an FCC study issued in November 2004 that had concluded that cable a la carte was a bad idea.
— He walked away from a handshake agreement with NCTA, Comcast and Time Warner that the rollout of family programming packages would end his a la carte jihad.
— He stripped cable’s control over critical wiring in apartment buildings, affirming the identical policy that a court had previously struck down.
— He voided exclusive contracts between cable operators and apartment building owners just a few years after the FCC gave the green light to such deals.
— He required cable operators to carry must carry TV stations in analog and digital for three years after voting against such a policy in February 2005.
— He extended program access rules for five years, a gift to DirecTV and Dish Network even though the two satellite providers are larger than every cable company in the U.S. except Comcast and Time Warner.
— He imposed expensive set-top box equipment mandates on cable, making it vastly more costly for Comcast and Time Warner to reach the goal of all-digital platforms.
— He capped cable ownership at 30% of pay-TV subscribers nationally—the same limit that a federal court kicked back to the FCC as unlawful—while letting AT&T and Verizon basically divide the country’s phone market.
— He slashed cable leased access rates to zero in an act of bureaucratic malice that a federal appeals court has now blocked and that the Office of Management and Budget has rejected as a violation of the Paperwork Reduction Act.
— He decided to brand Comcast an Internet outlaw when all the company did was occasionally frustrate a tiny minority of customers whose massive consumption of Web porn and pirated Hollywood films was destroying the service for others.
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.”
Several of us here have outlined our reservations about the proposal to allocate a block of the Advanced Wireless Services (AWS) spectrum for a free, nationwide wireless service. (Here’s a filing I signed on to that critiques the portion of the plan that requires censorship of the entire band once allocated).
But, strictly from an economic perspective, this is the best overview and critique of the plan I have seen so far: “The Static and Dynamic Inefficiency of Abandoning Unrestricted Auctions for Spectrum,” by Bob Hahn, Allan Ingraham, Greg Sidak, and Hal Singer. It’s a response to a paper favoring the M2Z plan that was penned by Simon Wilkie of USC, who also formerly served as the Chief Economist of the FCC. (Wilkie’s work on behalf of M2Z can be found on the M2Z site here). It’s a good debate and I encourage you to look at both papers if you are interested in this issue.
My ongoing media DE-consolidation series represents an effort to set the record straight regarding one of the leading myths about the media marketplace today: the notion that rampant consolidation is taking place and that operators are only growing larger and devouring more and more companies.
Nothing could be further from the truth. Over the past 3 to 5 years, traditional media operators and sectors have been coming apart at the seams in the face of unprecedented innovation and competition. The volume of divestiture activity has been quite intense, and most traditional media operators have been getting smaller, not bigger. “Traditional media’s numbers are shrinking,” argued FCC Commissioner Robert McDowell in a recent speech. “The ironic truth is,” McDowell continued, that “in many cases, media consolidation has actually become media divestiture. Companies… have been shedding properties to raise capital for new ventures.”
And so that trend continues today with the announcement from Cox Enterprises that it will be selling almost all its newspapers. According to the The Atlanta Journal-Constitution:
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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.