Neutral Tubes, Regulated Tubes, Free Tubes, Paying Tubes

net neutrality

John Carey at BusinessWeek:

To Julius Genachowski, the Internet is one of humanity’s great inventions. “I can’t imagine what life would be like without the Internet,” the chairman of the Federal Communications Commission said in a Sept. 21 speech at the Brookings Institution. “It has unleashed the creative genius of countless entrepreneurs.” And, Genachowski is convinced, it can help solve problems in areas ranging from health care and education to energy.

One of the keys to the Internet’s success, Genachowski argues, is that it is an open system, allowing anyone to use it and develop new applications. Now, he says, “few goals are more essential than preserving a robust and open Internet.” That’s why Genachowski proposed new net neutrality rules for the Internet in his Brookings speech.

The central idea, as Genachowski explains, is that network carriers such as AT&T (T), Verizon (VZ), and Comcast (CMCSA) would be prohibited from discriminating against users or applications. The providers could not favor, say, the transmission of their own videos over those of others. They wouldn’t be able to punish competitors by transmitting their content at slower speeds. And they wouldn’t be able to limit access to lawful content or new applications. “The fewer the obstacles, the greater the opportunity,” Genachowski said. The proposed new rules, he argued, will make sure that “in the 21st century, the garage, the basement, and the dorm room will be places where people can innovate and bring dreams to life.”

David L. Cohen, Executive Vice-President of Comcast:

Today, the Chairman of the FCC, Julius Genachowski, announced that he will ask the FCC to adopt new regulations on the way that companies like Comcast, AT&T, Verizon, Sprint, T-Mobile, Hughes Satellite, and thousands of others provide Internet services to consumers.

There’s been a debate in Washington for the last six years over whether rules like these are necessary to promote an “open Internet” and an innovation economy. And before that, there was a debate that began more than a decade ago over whether Internet Service Providers should be required to let others resell their services.

We welcome the dialogue suggested by the Chairman in his comments, and we completely agree that any consideration of new “rules of the road” begin with notice and an open, public rulemaking proceeding – this is both fair and appropriate.

But before we rush into a new regulatory environment for the Internet, let’s remember there can be no doubt that the Internet has enjoyed immense growth even as these debates have gone on.

The Internet in America has been a phenomenal success that has spawned technological and business innovation unmatched anywhere in the world. So it’s still fair to ask whether increased regulation of the Internet is a solution in search of a problem.

The FCC has had a “policy statement” in place since 2005 that sets expectations for “openness” on the Internet. We support and honor those policies.

When it was alleged in 2007 that one of Comcast’s network management practices regarding uploads of P2P files violated those policies, we defended our actions as a reasonable form of network management. However, the public scrutiny also led us to discuss our network management practices openly with the Internet community. And these discussions convinced us to move to a different network management practice.

We have implemented consumer-friendly disclosures regarding our network management practices, on the theory that, as the Chairman pointed out today, consumer transparency in this context is extremely important.

We went to court to challenge the way the FCC acted on that 2007 complaint against us, but for a relatively narrow reason — because the former FCC leadership simply handled the matter improperly, as even some who disapproved of our earlier network management system have conceded.

We will wait to see the specifics of the proposals that Chairman Genachowski brings before the FCC. But we welcome his proposal to have an open rulemaking process to discuss and analyze these important issues.

Daniel Indiviglio in The Atlantic:

In modern American culture, discrimination has a terribly negative connotation. When you think of discrimination, you think of racism, sexism, ageism, and lost of other -isms that sophisticated people just shouldn’t tolerate. The only thing that the tolerant can’t tolerate is intolerance.

In reality, however, individuals and businesses discriminate every day — just in more socially acceptable ways. When you choose to have a turkey wrap for lunch instead of a Burger King cheeseburger, you might be discriminating against unhealthy food. When a business hires a Wharton finance major over a University of Iowa English major, it might be discriminating against liberal arts and a lesser-ranked school. Neither of these decisions generally involves scorn from sophisticated individuals.

Businesses also discriminate to earn the highest profit. An airline may cancel a route where there are not enough travelers, because running the route just isn’t profitable enough. Genachowski’s fifth principle would prevent such discrimination for internet providers.

For example, imagine if there were certain types of file sharing programs used by college students to share music files that drained an extraordinary amount of bandwidth. Since the internet provider, say Verizon, charges based on a flat fee, instead of usage, it’s highly unprofitable to allow that application to operate through its servers. But Verizon has no choice if the FCC upholds the fifth principle.

This presents an interesting sort of disparity between how internet providers behave compared to most other businesses. Usually, companies want consumers to use as much of their product or service as possible. Then they’ll buy more and those companies will profit more. But the more bandwidth consumers use, the more it costs internet providers, without a corresponding increase in revenue; thus, more usage lowers their profits and provides less money to invest on new infrastructure.

That’s why I worry that the all-you-can-surf model for internet access is not sustainable. It’s akin to all restaurants being all-you-can-eat. Clearly, for light eaters it’s not a very good deal. But for heavy eaters, it’s great. Now imagine if those restaurants had no choice about whether or not they serve caviar and foie gras. Then it would be an even worse deal for light eaters who don’t have expensive tastes. In order to accommodate the FCC’s desire that internet providers not discriminate among content or applications, before long usage-based fees will probably be necessary.

Richard Koman at ZDNet:

A day after FCC chairman Julius Genachowski proposed rules to ensure application and protocol net neutrality on Internet and wireless networks, six Republicans rushed to the battle, hoping to swat away anything with the stink of “regulation.”

The group, led by Sen. Kay Hutchison (R-TX), signed on to an amendment to an appropriations bill that would prohibit the FCC from spending money to create new “regulatory mandates.” From the statement:

“I am deeply concerned by the direction the FCC appears to be heading. Even during a severe downturn, America has experienced robust investment and innovation in network performance and online content and applications. For that innovation to continue, we must tread lightly when it comes to new regulations. Where there have been a handful of questionable actions in the past on the part of a few companies, the Commission and the marketplace have responded swiftly. The case has simply not been made for what amounts to a significant regulatory intervention into a vibrant marketplace. These new regulatory mandates and restrictions could stifle investment incentives.”

Right. The U.S. wireless industry is the very definition of innovation and openness. The amendment is a blatantly unconstitutional attempt to assert Congressional control of an executive function. They try to get around this by controlling “expenditures,” and I certainly don’t know the Supreme Court holdings on such approaches, but it seems to me that controlling purse strings is tantamount to controlling rulemaking.

In other words, it’s a bunch of hot air, which may or may not cause Genachowski to troop on down to Capitol Hill and make his case, but in any case, the FCC rulemaking will move forward, the three Democrats will approve the new rules and AT&T and Comcast and Verizon will just have to live a playing field that actually encourages innovation.

Tony Bradley at PC World:

The response seems over the top and really brings into question what the true political motivations are. Congress didn’t seem to object to the FCC witch hunt and waste of budgetary dollars pursuing CBS for the infamous Janet Jackson ‘wardrobe malfunction’.

The FCC is charged with responsibility for managing the airwaves, bandwidth, and communication in this country. Genachowski is simply working to address emerging technologies and the changing landscape of communications to adapt and evolve in a manner that is fair to both providers and customers.

Genachowski has said that nothing has been determined yet. He called for an open and public discussion of the pros and cons of net neutrality that is “fair, transparent, fact-based, and data-driven.” If there are real concerns about incentive to invest and innovate, opponents should show up, present the case, and let a decision be made. What are they afraid of?

Tim Lee of Cato’s paper on net neutrality

Two posts from Julian Sanchez, one at Cato and one here. Sanchez:

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.

Darren Murph at Engadget

Reihan Salam at NRO

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