Some Thoughts On Net Neutrality

Net neutrality is a hot topic since the FCC passed rules in December that gave some force to the principle.  The political reaction has been swift, if somewhat predictable.  The meme on the left is that the Commission didn't go far enough.  On the right imposing regulations means more unnecessary government regulation, an attempt to stifle free speech by regulating content, and something that will kill innovation and jobs.  Representative Marsha Blackburn has introduced legislation (H.R. 96), if passed, that would definitively remove any FCC authority to regulate the Internet under any circumstances.  The bill has some 60 co-sponsors.    

Senator Al Franken vigorously slammed the new rules as inadequate and flawed.  Many on the left share his view to various degrees.  Senators Maria Cantwell and Franken are drafting legislation that would write into law stronger regulation than that passed by the Commission.  It will require a broadband Internet provider not to discriminate against content; degrade quality of service because of user choice of legally attached network devices; charge competitors or offer priorized servivces for a fee;  and can't connect devices or use management methods that undermine the law.  The telecoms are sure to oppose this.

Blackburn's bill has a chance to pass the House in this Congress. Similar bills failed in a democratic-controlled House.  Its future in the Senate is uncertain.  Saying that, however, doesn't mean it can't pass.  There were reports of democrats in the House and Senate joining with republicans in signing letters to the FCC opposing Internet regulation.  The most recent CRS report suggests a consensus hasn't fully formed on the issue, though that was five months before the last election.  The bipartisan opposition shows that the major Internet providers have some significant reach with legislative levers of power.  I think with the current political climate that the Cantwell/Franken bill will not get the votes.  I'll mention in passing that President Obama referenced the Internet several times as an economic engine during the recent State of the Union speech. He did not mention or address net neutrality though he's known to be in favor of it.  

The rules at issue are pretty straightforward, even if the adoption process was not.  The Commissioners didn't actually see the final text of the rules until very late in the evening the day before the vote took place.  There were other procedural quirks identified in Commissioner McDowell's statement.  The rules weren't even released to the public until two days after they were adopted.  Not exactly government in the sunshine.  As stated in the Order:

i. Transparency. Fixed and mobile broadband providers must disclose the network management practices, performance characteristics, and terms and conditions of their broadband services;

ii. No blocking. Fixed broadband providers may not block lawful content, applications, services, or non-harmful devices; mobile broadband providers may not block lawful websites, or block applications that compete with their voice or video telephony services; and

iii. No unreasonable discrimination. Fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic.
The complete text of the Report and Order is here.

Some of the political machinations over the rules may be unnecessary because Verizon is challenging them in court - the same court that ruled early in 2010 that the FCC had no authority under law to regulate or fine Comcast for blocking peer to peer traffic.  Many, and I'm one of them, predict that this court proceeding will have a similar result.  The irony, of course, is that the rules are consistent with the compromise plan submitted by Google and Verizon.  They suggested light regulation with exemptions for wireless access, and that's what they got.  Note that aside from the court action, the telecoms have mostly been muted in their reaction to the rules.  There's a quiet happiness that the Commission didn't take the reclassification route to bring Internet access under its direct control.  

I think the hyperbole on the need for or against net neutrality is overblown.  The Commission's action is neither a government takeover of the Internet or an attempt to regulate content from a First Amendment perspective.  Far from it.  Legal content can't be blocked or held ransom.  At the same time the rules aren't a complete sell-out to the broadband industry.  They curb what would be the most egregious practices that could materialize while preserving the industry's ability to manage and market services.  

For those who say things like "I don't want YouTube to become the next HBO," meaning the end user needing to pay extra to get some content, it's likely not going to happen.  It's true that there is a duopoloy in the wireline Internet market between DSL and cable.  Even with that limited amount of competition I can imagine that the market might prevent, say, AT&T from making the move.  Competitors can easily market themselves by having YouTube free on their networks.  Choose us instead.  Honestly, I don't believe it would get that far.  The FTC and and the DOJ have plenty of authority to investigate collusive or other illegal market practices should the telecoms/cable ISPs act uncompetitively under existing law.

The rules barely touch the wireless industry though content blocking rules apply.  Wireless access has more viable providers who can compete effectively against wired broadband access and each other.  Market forces can work here.  The trend on smart phone plans, for example, is for data caps with additional fees when  more data is consumed beyond the plan's limits.  There are press articles suggesting Verizon will offer an unlimited data plan for iPhone subscribers on its network.  AT&T is mulling reinstating unlimited data plans for customers who had them previously.  There may be a need for future rules on wireless Internet access if there's industry abuse, but I don't believe more comprehensive rules are justified for circumstances that might happen.  Comcast type cases doesn't typically appear on the Commission's enforcement docket.

For those who oppose net neutrality suggesting that innovation and progress are hindered by these rules, that's hardly the case as well.  The rules don't actually challenge existing market and technical practices as much as define their outer boundaries.  There's plenty of room for innovation within those limits.  The early days of the Internet were a time when some people were idignant that it would be sullied with crass commerce.  The Internet has come a long way since those days with commerce now a force driving web trends and standards.  There's plenty of useful technology that came into being from the need to improve web marketing.  Not all of this is bad.   

Finally, for those who think Congress should grant the authority to the FCC to prevent content blocking, consider that Congress loves content blocking.  It tried to pass laws on more than one occassion that limited a child's access to adult-oriented web sites.   The courts struck those down because of Congress' ham-fisted approach to web censorship under the First Amendment.  Congress later passed a law that required adult content filters for Internet accessible computers in libraries receiving public funds.  That law passed court muster.  I don't believe this track record will predict passing a law that limits a access provider from discriminating against content.  

I think the net neutrality rules as promulgated strike a balance between consumers and providers, especially in today's charged political climate.  The Commission acted as best it could to implement some form of regulation at all given the reality of their questionable authority.  Their best hope is to survive the Verizon court action.  If not, Congress is highly unlikely to intervene on behalf of the Commission.  [MG]