April 25, 2014

US 'Net Neutrality' Goes Viral and Venal


OMG!  

One would think that all of the commotion set off by the disclosure/leak on April 23 by the Wall Street Journal about U.S. Federal Communications Commission (FCC)  head Tom Wheeler’s decision to put out a Notice of Proposed Rulemaking today (April 24) was a sign of the Apocalypse. Before Chairman Wheeler had a chance to present his proposal, comments from those in favor of what they thought would be included and those against went viral. 

Depending on one’s perspective a revised Open Internet regime (aka “Net Neutrality) from the FCC— in the wake of the U.S. Supreme Court overturning the current regulatory structure in Verizon v. FCC—is the end of the world as we know it, or the dawn of better days ahead. Interestingly, it could be both.

Just as a quick explanation, the “venal” reference in the headline speaks to the rush to publish comments that characterized Wheeler’s proposal as “Payola.” There were even postings that spoke this as a “pay-to-play” regime and that Wheeler was returning to his roots as a Cable and Cellular industry lobbyist. Implied is that this falls into the category of the classic definition of venal as being capable of being bought or obtained for money or other valuable consideration and typically refers to acts of corruption, especially bribery. This is grossly unfair, but certainly made for eye-catching copy.

Net neutrality as regulators around the world have found in struggling with the issue is extremely complicated. It gets to a myriad of fundamental issues concerning free speech, commercial interests (whose ox may or may not get gored and who will prosper) and the universal availability to state-of-the-art digital communications in an increasingly connected world. And, that is just the proverbial tip of the iceberg.

In fact, rather than review here the pros and cons, I cannot recommend enough the special guest posting by Daniel Dimov, who is a legal consultant to the InfoSec Institute, titled, “The Net Neutrality Debate: What You Need to Know.”

As Dimov correctly concludes, Net Neutrality is a delicate balancing act. It is one where regulators have yet to find an equilibrium point, and here in the U.S. a combination of past FCC transgressions and now the court have only made things that much more complicated.  As he explains the conundrum, “Any major involvement of the ISPs in the way their customers lawfully use the Internet leads to a wave of social protests and initiates political discussions. In turn, any proposal for a mandatory network neutrality raises fears about excessive government intervention in the market of Internet services and unintended consequences on the players of that market.”

This is very serious and very tough stuff, and regardless of what policies do or do not get adopted when the dust settles, the probability that this will end up back in the lap of the Supreme Court is high. It is also likely that this will become a political hot potato. The reason is that in an election year, the temptation to collect for so many deep-pocketed interests is simply irresistible.

And now a few words from Chairman Wheeler

All of the above is cited as context for everyone to follow along as the drama that is Net Neutrality continues to unfold.  Indeed, as a level-set, there is an additional posting that deserves to be read in its entirety. It is a posting from FCC Chairman Tom Wheeler in AM on the FCC’s official blog called, Setting the Record Straight on the FCC’s Open Internet Rules. Rather than paraphrase the Chairman’s observations about the hornet’s nest he is creating, below is the full text:

There has been a great deal of misinformation that has recently surfaced regarding the draft Open Internet Notice of Proposed Rulemaking that we will today circulate to the Commission.

 The Notice proposes the reinstatement of the Open Internet concepts adopted by the Commission in 2010 and subsequently remanded by the D.C. Circuit. The Notice does not change the underlying goals of transparency, no blocking of lawful content, and no unreasonable discrimination among users established by the 2010 Rule. The Notice does follow the roadmap established by the Court as to how to enforce rules of the road that protect an Open Internet and asks for further comments on the approach.

  It is my intention to conclude this proceeding and have enforceable rules by the end of the year.

 To be very direct, the proposal would establish that behavior harmful to consumers or competition by limiting the openness of the Internet will not be permitted.

 Incorrect accounts have reported that the earlier policies of the Commission have been abandoned. Two points are relevant here:

  1. The Court of Appeals made it clear that the FCC could stop harmful conduct if it were found to not be “commercially reasonable.” Acting within the constraints of the Court’s decision, the Notice will propose rules that establish a high bar for what is “commercially reasonable.” In addition, the Notice will seek ideas on other approaches to achieve this important goal consistent with the Court’s decision. The Notice will also observe that the Commission believes it has the authority under Supreme Court precedent to identify behavior that is flatly illegal.
  2. It should be noted that even Title II regulation (which many have sought and which remains a clear alternative) only bans “unjust and unreasonable discrimination.”

The allegation that it will result in anti-competitive price increases for consumers is also unfounded. That is exactly what the “commercially unreasonable” test will protect against: harm to competition and consumers stemming from abusive market activity.

To be clear, this is what the Notice will propose:

  1. That all ISPs must transparently disclose to their subscribers and users all relevant information as to the policies that govern their network;
  2. That no legal content may be blocked; and
  3. That ISPs may not act in a commercially unreasonable manner to harm the Internet, including favoring the traffic from an affiliated entity.

Commercially unreasonable?

While I understand Wheeler’s looking to the Verizon v. FCC decision for guidance, and I was with him certainly on the need for transparency and the resolve to not allow blocking of legal content, there is something that does not sit well when it comes to the term “Commercially Unreasonable”.  Hence, I am a bit conflicted as to how I feel about where we are.

I happen to be a bit old-school in the beliefs that cost-causers should be cost bearers. Thus, if Netflix and Google who are bandwidth hogs, the cost of which ultimately is reflected in our ISP rates, want to provide better quality experiences, I think ISPs should have the ability to make them pay for it. 

Here in the U.S. in many major cities like Orlando, FL and Houston, TX, there are now toll roads that parallel existing “freeways” which during rush hour will save lots of time if you are willing to pay for the privilege. Communications networks may not be totally there yet, but creating the toll portion of the superhighway for those who want me to have a better experience, seems both logical and inevitable. It is not hard to imagine a day when users have a choice of Netflix classic and Netflix premium, for example. It is called choice.

I chose Netflix as an example because as a fan of the hugely popular “House of Cards” I will continue to subscribe despite the fact that Netflix just this week announced it is raising prices on its streaming service. In other words, whether there is Net Neutrality or not I am going to be paying more. The question that Net Neutrality is deciding is whether I just pay Netflix more directly or I pay more to my ISP because I can get Netflix. History says, I will actually pay them both more. What I can hope is that if ISPs can introduce tiered pricing to content providers, particularly road hogs looking to improve their deliverables, is that the revenues realized are used to upgrade the network for all of us and not just the big guys. 

I also happen to be very old school and agree with the foundational tenets of competition as articulated in historic FCC attempts to assure equal access and open interconnection. If ISP XYZ decides to offer a competing service to an OTT or other content providers, that service should be under the same terms and conditions that apply to competitors.  Indeed, the entry by ISPs into such markets with their own offerings are one way to assure prices charged for premium access and transport are commercially reasonable. And, while I feel for “innovators” without deep pockets who might not be able to afford to compete because of the cost of premium ISP services, that is a business decision that has to be factored into their plans and at least they would know what the costs of doing business were up front. This might be a damper on innovation, but to categorically say it will seems problematic at best.

Where the commercially unreasonable test as administered by the FCC on an ad hoc basis becomes a problem is that this hardly seems like an area the Commission needs to pursue. It only begs for the creation of a new annuity stream for the Federal Communications Bar Association. The FCC does not need to be in the business of managing markets. 

At the risk of seeming neutral on Net Neutrality, my problem is the same as policy makers in that I see convincing arguments in support of those in favor and those against it.  Like Dimov, there is no escaping that this is a complicated and delicate balancing act that needs to be dynamic rather than static, reflecting the realities of the accelerating pace of change that has engulfed every aspect of ICT around the world. One can only hope for a Solomon-like version of rough justice that leaves the Internet, which will be the only “public network of the future” sooner rather than later, open for business and for everyone.

The Wheeler proposal will be open for formal comments. If nothing else they should be appreciated for the entertainment value since hyperbole is always the order of the day in such comments because of the interests that at involved and the money at stake.

Back in January I wrote a column with my predictions on tech trends for 2014.  I accurately predicted that Verizon’s position on Net Neutrality would be upheld with major consequences. It is only April and it has already been a big year for those consequences to manifest themselves. Fasten your seat belts because it is going to get a lot bumpier.    




Edited by Maurice Nagle



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