Tag: net neutrality

Technology: Debating the Pace of Progress

Last night, thanks to Craigslist and a Web-enabled cell phone, I unloaded two extra tickets to tonight’s World Cup qualifying game between the U.S. and Costa Rica in under an hour. (8:00, ESPN2 “USA! USA! USA!”)

Wanting to avoid the hassle of selling the tickets at RFK, I placed an ad on Craigslist offering them at cost, figuring I might find a taker and arrange to hand them off downtown today or at the stadium tonight. Checking email as I walked to the gym, I found an inquiry about the tickets and phoned the guy, who happened to live 100 feet from where I was walking. A few minutes later, he had the tickets and I had the cash.

This quaint story is a single data point in a trend line—the high-tech version of It’s Getting Better All the Time. Everyone living a connected life enjoys hundreds, or even thousands, of conveniences every day because of information technology. Through billions of transactions across the society, technology improves our lives in ways unimaginable two decades ago.

Before 1995, nobody ever traded spare soccer tickets in under an hour, on a Tuesday night, without even changing his evening routine. If soccer tickets are too trivial (you must not understand the game), the same dynamics deliver incremental, but massive improvements in material wealth, awareness, education, and social and political empowerment to everyone—even those who don’t live “online.”

Sometimes debates about technology regulation are cast in doom and gloom terms like the Malthusian arguments about material wealth. But the benefits we already enjoy thanks to technology are not going away, and they will continue to accrue. We are arguing about the pace of progress, not its existence.

This is no reason to let up in our quest to give technologists and investors the freedom to produce more innovations that enhance everyone’s well-being even more. But it does counsel us to be optimistic and to teach this optimism to our ideological opponents, many of whom seem to look ahead and see only calamity.

From the Oxymoron File: The Neutral Subsidy

Peter Van Doren points me to some revealing passages in a new article in the Journal of Economic Perspectives. In “Subsidizing Creativity through Network Design: Zero-Pricing and Net Neutrality,” Robin S. Lee and Tim Wu caution against tiered pricing for Internet access services, writing:

[U]nless sufficient bandwidth and quality of service can be guaranteed for the “free” Internet, there is a risk that … tiering will serve to sidestep de facto prohibition on termination fees… . [A] priced-priority system could simply become a de facto fee charged for all content providers if the “free” Internet was of sufficiently poor quality and consumers shifted their usage behavior accordingly… . [T]his might dampen the introduction of new content and services and eliminate the subsidy for content innovation currently provided by net neutrality.

Locking in net neutrality by regulation would lock in a subsidy to content providers. Lee and Wu prefer it, and many of us may like the results, but it’s hard to call a subsidy regime “neutral.”

Is This Intervention Necessary?

So asks the Washington Post in a cogent editorial about FCC Chairman Jules Genachowski’s speech proposing to regulate the terms on which broadband service is provided. (More from TLJ, Julian Sanchez, and me.) The WaPo piece nicely dismantles the few incidents and arguments that underlie Genachowski’s call for regulation.

As the debate about “ ‘net neutrality” regulation continues, I imagine it will move from principled arguments, such as whether the government should control communications infrastructure, to practical ones: Will limitations on ISPs’ ability to manage their networks cause Internet brown-outs and failures? (This is what Comcast was trying to avoid when it ham-handedly degraded the use of the BitTorrent protocol on its network.) Will regulation bar ISPs from shifting costs to heavy users, cause individual consumers to pay more, and hasten a move from all-you-can-eat to metered Internet service? We’ll have much to discuss.

TLJ on Genachowski’s ‘Net Neutrality’ Speech

TechLawJournal is a consistently high-quality subscription service that provides news, records, and analysis of legislation, litigation, and regulation affecting the computer, Internet, communications and information technology sectors. It reported this morning on FCC chairman Julius Genachowski’s speech proposing to regulate the provision of Internet service. The TLJ piece includes background that I think might benefit Cato@Liberty readers wishing to understand the issues better, so I asked for and received permission to republish it here.

[TLJ Report after the jump]

Federal Communications Commission (FCC) Chairman Julius Genachowski gave a speech [8 pages in PDF] in which he proposed that the FCC promulgate rules that contain network neutrality mandates.

The other two Democratic Commissioners promptly issued releases expressing their support. Thus, a majority of the Commissioners have announced their support.

Genachowski said that his policy goal is “preserving and maintaining an open and robust Internet”. He asserted that without FCC regulation “We could see the Internet’s doors shut to entrepreneurs, the spirit of innovation stifled, a full and free flow of information compromised”.

He stated in vague terms that the FCC should adopt rules the [sic] include the four principles of the policy statement [3 pages in PDF] adopted by the FCC in August of 2005, plus new principles of non-discrimination and transparency.

He announced that “I will soon circulate to my fellow Commissioners proposed rules prepared by Commission staff embodying the principles I’ve discussed, and I will ask for their support in issuing a notice of proposed rulemaking.”

He boasted that “we will be focused on formulating policies that will maximize innovation and investment, consumer choice, and greater competition”.

Genachowski gave a policy speech. The prepared text of his speech says nothing about where the FCC would derive statutory authority to promulgate the rules which he proposes. Nor did he address what would be the FCC’s strategy for evading and surviving judicial review of any new rules.

He argued that “the free and open Internet faces emerging and substantial challenges. We’ve already seen some clear examples of deviations from the Internet’s historic openness”.

He cited three events. First, he said that “We have witnessed certain broadband providers unilaterally block access to VoIP applications (phone calls delivered over data networks)”.

This is a reference to the FCC’s dealings with a small company named Madison River Communications. The FCC’s Enforcement Bureau was able to stop the VOIP blocking by consent decree [PDF] without resort to any network neutrality rules. The practice of VOIP blocking has not recurred. See also, story titled “FCC Stops Broadband Provider From Blocking VOIP Traffic” in TLJ Daily E-Mail Alert No. 1,089, March 7, 2005. That decree is DA 05-543 in File No. EB-05-IH-0110.

Second, he said that broadband providers have and implemented “technical measures that degrade the performance of peer-to-peer software distributing lawful content.”

This is a reference to the FCC’s August 2008 order [67 pages in PDF] pertaining to Comcast’s management of certain peer to peer traffic. That order is the subject of a petition for review now pending before the U.S. Court of Appeals (DCCir). See, story titled “FCC Asserts Authority to Regulate Network Management Practices” in TLJ Daily E-Mail Alert No. 1,805, August 4, 2008. That order is FCC 08-183 in Docket No. 07-52.

Third, he said that “We have even seen at least one service provider deny users access to political content.”

This is likely a reference to a brief dispute in 2007 between Verizon and the National Abortion Rights Action League (NARAL) regarding short code based services sent from and received by mobile phones. See, story titled “Verizon Wireless and Net Neutrality Advocates Clash Over Text Messaging” in TLJ Daily E-Mail Alert No. 1,647, September 27, 2007. See also, letter from Verizon Wireless to NARAL dated September 27, 2007, and NARAL’s web page titled “NARAL Pro-Choice America Wins Fight over Corporate Censorship”. See also, story titled “Public Knowledge Asks FCC to Declare that Blocking and Refusing to Carry Text Messages Violates Title II” in TLJ Daily E-Mail Alert No. 1,686, December 11, 2007. This proceeding is WT Docket No. 08-7.

In addition to these three events, Genachowski argued that there are three general reasons to be “concerned about the future of openness”.

First, he said that there is “limited competition among service providers”.

Second, he said that broadband service providers “rely upon revenue from selling phone service, cable TV subscriptions, or both. These services increasingly compete with voice and video products provided over the Internet. The net result is that broadband providers’ rational bottom-line interests may diverge from the broad interests of consumers in competition and choice.”

The third reason for concern, said Genachowski, “involves the explosion of traffic”.

He then announced that he would propose new rules, and described the content of those rules. He said, “I propose that the FCC adopt the existing principles as Commission rules, along with two additional principles that reflect the evolution of the Internet and that are essential to ensuring its continued openness.”

The four principles in the 2005 policy statement (with footnotes omitted) are as follows:

“To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to access the lawful Internet content of their choice.”

“To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to run applications and use services of their choice, subject to the needs of law enforcement.”

“To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to connect their choice of legal devices that do not harm the network.”

“To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to competition among network providers, application and service providers, and content providers.”

Genachowski said that his fifth principle is “non-discrimination – stating that broadband providers cannot discriminate against particular Internet content or applications.”

He elaborated that this means that “they cannot block or degrade lawful traffic over their networks, or pick winners by favoring some content or applications over others in the connection to subscribers’ homes. Nor can they disfavor an Internet service just because it competes with a similar service offered by that broadband provider.”

However, he added that there should be exceptions, such as “reasonably managing their networks”, for example, during “periods of network congestion”. He also cited “efforts to ensure a safe, secure, and spam-free Internet experience, or to enforce the law”.

He added that “open Internet principles apply only to lawful content, services and applications – not to activities like unlawful distribution of copyrighted works”. He said that “The enforcement of copyright and other laws and the obligations of network openness can and must co-exist.”

He also stated that the FCC should “evaluate alleged violations of the non-discrimination principle as they arise, on a case-by-case basis”.

Genachowski said that his sixth principle is “transparency”. By this he means that broadband service providers “must be transparent about their network management practices”. And, he noted that in the Comcast proceeding, referenced above, that Comcast initially acted “with no notice to subscribers or the public”.

FCC Commissioner Mignon Clyburn released a statement in which she said that “I fully support Chairman Genachowski’s intention to take affirmative measures to preserve the openness of the Internet.”

FCC Commissioner Michael Copps released a statement in which he said that “Chairman Genachowski’s bold announcement today is a significant further investment in safeguarding Internet Freedom. I salute him for it.” He praised each of the six items in Genachowski’s proposal. However, he did not endorse adopting rules according to Genachowski’s proposal. It is possible that he may seek further regulation of broadband service providers, or further changes to the FCC’s rules and declaratory rulings.

Preemptive Regulation of the Internet

Julian Sanchez has already done a fine job of assessing FCC Chairman Julius Genachowski’s speech announcing his plan for federal regulation of the Internet. There was nothing really new in it. No substantial problems justifying regulation have emerged, and—Genachowski’s claims to modest aims aside—any ‘net neutrality regulation is likely to be a substantive morass. Says Julian:

[I]t absolutely reeks of the sort of ad hoc ‘I know it when I see it’ standard that leaves telecoms wondering whether some innovative practice will bring down the Wrath of Comms only after resources have been sunk into rolling it out.”

If the FCC goes ahead with regulating the Internet, the public will get a good look at what closed systems are really like. The FCC’s retrograde “Electronic Comment Filing System” doesn’t even allow full-text searches of submissions. This is but one failing the Internet’s engineers all over the country—and not just in big telcos—will run into dealing with the FCC.  It’s laughable that this outdated telecommunications bureaucracy is trying to take over the Internet.

A complex array of network protocols and business processes make up “the Internet.” The Internet’s end-to-end architecture is good engineering because it is naturally open, flexible, and conducive to communications freedom. The Internet empowers consumers to fend for themselves, such as in their dealings with Internet Service Providers. When Comcast degraded the Bitorrent protocol, it took just weeks for consumer pushback to end the practice. The FCC opened an inquiry long after the matter was settled.

But some politicians and the FCC’s lawyers think their slow-moving, technologically unsophisticated bureaucracy knows better than consumers and technologists how to run the Internet. The FCC’s “net neutrality” plans are nothing more than public utility regulation for broadband. With federal regulation, your online experience will be a little more like dealing with the water company or the electric company and a little less like … well, the Internet!

As Julian said, Tim Lee’s is the definitive paper. The Internet is far more durable than regulators and advocates imagine. And regulators are far less capable of neutrally arbitrating what’s in the public interests than they imagine either.

Monday Links

  • The true cost of financial regulation: “A detailed anatomy of the bubble shows that many of the policies and regulations meant to reduce financial risk actually increased it.”
  • Government: “Hey, let’s start meddling in the Internet business.” A better idea: Preserve net neutrality without regulation. Here’s how.

Eye of Neutrality, Toe of Frog

FCC Chairman Julius GenachowskiI won’t go on at too much length about FCC Chairman Julius Genachowski’s speech at Brookings announcing his intention to codify the principle of “net neutrality” in agency rules—not because I don’t have thoughts, but because I expect it would be hard to improve on my colleague Tim Lee’s definitive paper, and because there’s actually not a whole lot of novel substance in the speech.

The digest version is that the open Internet is awesome (true!) and so the FCC is going to impose a “nondiscrimination” obligation on telecom providers—though Genachowski makes sure to stress this won’t be an obstacle to letting the copyright cops sniff through your packets for potentially “unauthorized” music, or otherwise interfere with “reasonable” network management practices.

And what exactly does that mean?

Well, they’ll do their best to flesh out the definition of “reasonable,” but in general they’ll “evaluate alleged violations…on a case-by-case basis.” Insofar as any more rigid rule would probably be obsolete before the ink dried, I guess that’s somewhat reassuring, but it absolutely reeks of the sort of ad hoc “I know it when I see it” standard that leaves telecoms wondering whether some innovative practice will bring down the Wrath of Comms only after resources have been sunk into rolling it out. Apropos of which, this is the line from the talk that really jumped out at me:

This is not about protecting the Internet against imaginary dangers. We’re seeing the breaks and cracks emerge, and they threaten to change the Internet’s fundamental architecture of openness. [….] This is about preserving and maintaining something profoundly successful and ensuring that it’s not distorted or undermined. If we wait too long to preserve a free and open Internet, it will be too late.

To which I respond: Whaaaa? What we’ve actually seen are some scattered and mostly misguided  attempts by certain ISPs to choke off certain kinds of traffic, thus far largely nipped in the bud by a combination of consumer backlash and FCC brandishing of existing powers. To the extent that packet “discrimination” involves digging into the content of user communications, it may well run up against existing privacy regulations that require explicit, affirmative user consent for such monitoring. In any event, I’m prepared to believe the situation could worsen. But pace Genachowski, it’s really pretty mysterious to me why you couldn’t start talking about the wisdom—and precise character—of some further regulatory response if and when it began to look like a free and open Internet were in serious danger.

If anything, it seems to me that the reverse is true: If you foreclose in advance the possibility of cross-subsidies between content and network providers, you probably never get to see the innovations you’ve prevented, while discriminatory routing can generally be detected, and if necessary addressed, if and when it occurs.  And the worst possible time to start throwing up barriers to a range of business models, it seems to me, is exactly when we’re finally seeing the roll-out of the next-generation wireless networks that might undermine the broadband duopoly that underpins the rationale for net neutrality in the first place. In a really competitive broadband market, after all, we can expect deviations from neutrality that benefit consumers to be adopted while those that don’t are punished by the market. I’d much rather see the FCC looking at ways to increase competition than adopt regulations that amount to resigning themselves to a broadband duopoly.

Instead of giving wireline incumbents a new regulatory stick to whack new entrants with, the FCC could focus on facilitating exploitation of “white spaces” in the broadcast spectrum or experimenting with spectral commons to enable user-owned mesh networks. The most perverse consequence I can imagine here is that you end up pushing spectrum owners to cordon off bandwidth for application-specific private networks—think data and cable TV flowing over the same wires—instead of allocating capacity to the public Internet, where they can’t prioritize their own content streams.  It just seems crazy to be taking this up now rather than waiting to see how these burgeoning markets shake out.

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