Net Neutrality, Part I: Did the FCC Miss the Mark?

4889490203_328cee595f_mThe FCC finally has control over broadband Internet Service Providers (ISPs) such as Comcast, Verizon, and Sprint. On February 26, 2015, the agency decided to employ Title II of the Communications Act of 1934, empowering itself to implement net neutrality rules.

The dramatic rise of Internet video, occupying a rapidly growing share of our aggregate bandwidth, fueled this raging debate over the rules of the road. The discourse devolved into a conflated cacophony of political and technical jargon, all under the guise of net neutrality.

Just about everyone favors an open Internet. But by picking this particular path, did the FCC undermine another critically important objective for our nation’s broadband future: a more competitive market, leading to much higher Internet speeds at lower prices? To understand how this occurred, and what it means, a brief chronology is in order.

  • In 2002, the FCC classified broadband cable modem access as a lightly regulated “information service,” citing national priorities of capital investment and innovation.
  • In 2005, the Supreme Court affirmed the FCC classification in a 6–3 decision (the “Brand X” case), and DSL-based Internet access was included the next month.
  • In 2010, the FCC issued its Open Internet Order governing traffic policies of broadband ISPs. These net neutrality rules dictated “no blocking” of legal content, services, and apps; “no unreasonable discrimination”; and “transparency” with respect to business policies and network management.
  • In 2014, the US Court of Appeals for the DC Circuit voided the FCC’s preexisting net neutrality rules (in Verizon v. FCC), finding the “no blocking” and “no unreasonable discrimination” rules beyond the agency’s authority.
  • On February 26, 2015, the FCC voted 3–2 to regulate broadband ISPs under Title II of the Communications Act of 1934. Two weeks later, the FCC issued the specific rules in a new Open Internet Order. It’s a lengthy document, mandating “no blocking” and “no throttling” (no degradation) of legal content, in both cases, subject to “reasonable network management,” and “no paid prioritization” (i.e., ISPs can’t accept money in exchange for establishing “fast lanes”).

In this far-reaching decision, the FCC apparently concluded that its best recourse was to invoke portions of an 80-year-old law designed for monopoly public utilities. The rules sound reasonable on the surface, but the implications are less clear. For example, there is a fine line between reasonable network management and traffic interference, a fuzzy distinction for which the FCC will be the arbiter on a case-by-case basis.

There may have been more modern methods for ensuring that broadband ISPs would not misbehave, such as using the Telecommunications Act of 1996, or even pursuing a new law. And it remains to be seen whether Title II will legally hold water with respect to banning paid prioritization (express lanes). But given the current dysfunction in DC, it is no wonder that the FCC jumped on the Title II bandwagon.

Does the FCC’s Title II remedy match the situation, or is it a solution chasing a problem? Similarly, are the new rules mostly preventative, or are they based on a pattern of specific and substantial transgressions by broadband ISPs? Finally, what will be the long-term effects on the US market and broadband infrastructure?

Clearly, the Internet has become a fundamental and essential resource for the general population. But that does not mean that Title II is the optimal approach for achieving our country’s future Internet.

Our primary goals going forward should be:

  1. Sustaining an open Internet
  2. Encouraging more competition and innovation, and
  3. Creating an environment conducive to massive new infrastructure investment, especially with respect to bandwidth expansion and maximal reach.

Title II was certainly one way to achieve the first goal, an open Internet. But did the FCC just hit a simple nail with a crude sledgehammer, potentially undermining the second and third goals?

Stay tuned for Part II.

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Comments

  1. In any scenario, paid throttling of internet is avoidable. Generally, throttling won’t come for FREE or lesser than normal FEE and hence, it creates an aura of equality among customers of all classes. Title II may not be the best available solution, but it’s the only available one and the only one that looks like a solution. It can be further amended any time and be more refined but the first step towards an Open Internet does not look too bad at the moment. A regulations always looks threatening but the industry always wins. That’s how it has grown all these years. The growth story is not stopping but yes, the overtly ambitious cable providers might find it harder. Net Neutrality will also inspire some innovation, cheaper internet (FCC has asked ISPs to disclose original amount in bills & the hidden fees as well) and better bandwidth availability to the average viewer.

    At Muvi Studio, we stand by the FCC regulation and hope it is further fine tuned for the viewers, rather than the Cable.

  2. Marc, congratulations on the publication of your book, “Televisionaries.” I love the title – here’s wishing you much success. As for your take on Net Neutrality and the FCC’s Title II decision, it was like reading the editorial pages of the Wall Street Journal – the only thing you didn’t do is use their pejorative term, ObamaNet!”

    FCC Chairman Wheeler, who used to head the CTIA, did have a pretty decent hybrid net neutrality proposal that never saw light of day. I had blogged about its leaked details back in November, when I had written:

    “This hybrid solution seems to be a fair compromise between the interests of both sides, as it balances demand and supply issues in a practical way, instead of treating “the entire Internet ecosystem as a single universe, the hybrid proposal would establish a divide between ‘wholesale’ and ‘retail’ transactions,” per the NYT report. “It would apply utilitylike regulation to the wholesale portion, the exchange of data from the content provider to the Internet service provider” and “The retail portion, the transaction that sends data through the Internet service provider to the consumer and which allows the consumer to access any legal content on the Internet, would receive a lighter regulatory touch.”

    In any event, I think the proof of the Title II pudding is in the markets. They have barely registered as much disapproval so far as the WSJ and the traditional cable and telecom carrier companies have? Nonetheless, I’d like to see what you have to say in Part II because you have posed a lot of questions here without really answering them?

    1. Thank you Jack. I agree with you that the hybrid solution seemed to offer a nice balance of interests, although perhaps with its own set of complications. I certainly don’t know all the answers; in fact I don’t think anyone does. But even though maintaining an open Internet is of critical importance, my sense is that Title II was not necessary at this time. I didn’t like the way the whole debate became so politicized, with one side conflating Title II with an open Internet, and the other side calling Title II Obamacare for the Internet. In both cases, the people making those statements either: (a) didn’t really understand the issues or; (b) were intentionally using those catchy phrases to score political points, not necessarily in the best interests of the consumer. The proof of Title II will indeed be in the pudding, but not necessarily in the current markets. I don’t think the markets are 100% efficient, and it depends on the FCC and many other factors. Personally, I believe Tom Wheeler (current FCC chair) will be good to his word of using forbearance (restraint) in using Title II and therefore not scare off the tens of billions of private investment dollars we need to bring broadband to the next level. But we don’t know about future FCCs. No matter what, we’re sure living in interesting times!

  3. Hi Marc

    I’m delighted to hear that you have launched your book – and I have already ordered it. My wife and I will be in lJ tomorrow so there’s a chance we can stop by your library event.

    The net neutrality issue is clearly not as simple as some suggest. I agree that it was best for the FCC to use Title II then try to fix the unintended consequences, rather than try to get new legislation passed.

    Michael

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