How FCC Regulation Would Change the Internet

The FCC’s claims that their proposed net neutrality regulations would just “preserve” the open Internet are simply not true. The facts are clear that the FCC’s proposed regulations would:

• Be a big change in FCC Internet policy;
• Implement big Internet policy changes without Congressional authorization; and
• Change the Internet in big ways.
  • (The one-page PDF version of this post is here.)

The FCC’s proposed net neutrality regs are a big change in FCC Internet policy; they would:

• Replace the FCC’s voluntary net neutrality guidelines with mandated net neutrality regulations;
• Selectively apply net neutrality regulations to only broadband and not to applications/content providers like the current principles do;
•  Add two completely new net neutrality principles that are not found in law or congressional policy;
  •  Mandate the strictest non-discrimination requirement in the last 75 years;
  •  Mandate public disclosure of detailed proprietary network management techniques for the first time;
•  Expand application of net neutrality to wireless and satellite broadband for the very first time;
• Expand consumers access to content entitlement by adding entitlement to send/distribute content as well;
• Redefine entitlement to competition in the current fourth principle, to favor resale competition over facilities-based competition;
• Subject broadband companies to a new “Mother-may-I” FCC approval process for offering new managed services and for experimenting with new business models; and
• Subordinate private standard-setting bodies, like the IETF, to new FCC omni-technical oversight/approval.

The FCC’s proposed Internet policy changes, unauthorized by Congress, would effectively:

• Ignore a decade of overwhelming bipartisan consensus to not tax or regulate the Internet;
• Declare for all practical purposes that, ISPs are a bigger free speech threat than Government, despite the First Amendment;
•  Abandon existing Congressional Internet policy, which is “to preserve the… competitive free-market… Internet… unfettered by Federal or State regulation;”
• Undermine the purpose of the 1996 Telecommunications Act: “to promote competition and reduce regulation” by promoting regulation that would reduce facilities-based competition;
• Redefine the well-understood notion of an “open” market that means competition-driven to now mean government-driven:
• Replace the current technology-neutral policy with a new industrial policy that openly favors Google, eBay, and Amazon, over boradband competitors;
•  Implement the introduced, but never-passed, Markey-Eshoo bill (HR 3458); and
• Subordinate current consensus universal broadband policy to new and controversial net neutrality policy.

The FCC’s proposed Internet regulations would likely change the Internet by:

 

• Transforming it from user-driven/centric/governed to more FCC-driven/centric/governed;
•  Morphing the current privately-run Internet into a government-run Internet;
• Revolutionize the current voluntary bottom-up Internet into a coerced top-down Internet;
• Introducing new business, investment, operational Internet uncertainty where little existed;
• Supplanting the Internet’s inherent efficiency with the Government’s inherent inefficiency;
• Setting a new international example of government Net interference rather than restraint;
• Barring broadband companies from entering and competing in the cloud computing business;
• Forcing one-way convergence, where apps can converge into conduit, but no conduit can converge into apps;
• Discouraging investment by everyone to favor investment by Google, eBay, and Amazon.

 

Wireless investment already is “unleashed!”– FCC net neutrality regs would only leash it

The WSJ op-ed, “Net Neutrality: Spur to Entrepreneurship, an open network will unleash investment” is a dystopian and nonsensical assertion that it is Government that “unleashes” investment, when everyone’s common sense knows that Government regulation is all about putting leashes on businesses and investment!

Competition and market forces have already unleashed $300 billion in cumulative U.S. wireless investment per CTIA!

• Only net-neutrality-at-all-cost-proponents would argue that a big new government leash and spiked-choke-collar — of banning wireless business and technical practices that have always been legal and necessary to operate wireless networks efficiently and meet demand — would somehow “unleash investment!”
• How are new, never-before-imposed FCC “leashes” — on standard wireless business models/practices, everyday network operations, and network design/engineering — going to “unleash” investment?
• How would creating new massive uncertainty about how wireless business, operations, and engineering can legally be done — encourage more wireless investment and not less?
• How would bringing the notorious inefficiency of government red tape and the FCC to wireless, somehow spur more efficiency in the wireless market and accelerate more net investment than the free market does today?  

A big takeaway here is that this op-ed is part of a much broader PR and advocacy campaign by the FCC and Google, to justify a new “Open Internet” industrial policy that specifically favors only Silicon Valley California venture capital and company investment over most all other forms and sources of investment around the country.

• This discriminatory and unbalanced investment thesis requires an elephantine-pirouette on the head-of-a-pin to not fall down in embarassment.
• This government-is-the-font-of-all-investment thesis requires selective one-sided analysis where one inflates and glorifies the investment generated by the very narrow Silicon Valley California segment, while also totally ignoring and demonizing those currently investing heavily in wireless.
  • For those seeking external confirmation of this one-sided, tunnel-vision investment thesis, look no further than the FCC’s draft Berkman study by broadband public utility advocate Yochai Benkler and the other study the FCC has commissioned from Columbia, to examine telecom investment.
• A big part of the FCC’s justification of net neutrality and a bigger government role in broadband overall is making the case that the private sector and private investment has failed the Nation and consumers and that Government intervention is needed in order to make it all right.

Finally, it is interesting to note that in advocating for an FCC proceeding which seeks to advance more transparency, the authors of the WSJ op-ed today were not transparent in disclosing their extremely close financial ties to Google, the company that would be the single biggest beneficiary of the FCC’s proposed open Internet regs.

• Many may not know that the IRS has been investigating the tax exempt status of Mozilla, to determine whether the Mozilla Foundation behind the popular Firefox browser, can legitimately claim tax exempt status when 88% of the Foundation’s revenues come from Google in payments for being the default search engine for Firefox downloads.
• These Mozilla “entrepreneurs” were not very “open” about Mozilla effectively being on the Google dole…

Google Voice’s Plea for Special FCC Treatment

Google responded to the FCC’s questions that effectively address whether or not Google Voice should be subject to the FCC’s proposed net neutrality regulations.

In a nutshell, Google basically asserted that it is acceptable for a benevolent provider of free services like Google Claus to discriminate and block calls as an information service voice provider, but it is unaccceptable for profit-seeking broadband voice and information service providers to discriminate or block calls.

• Moreover, Google’s justification for not being subject to the FCC’s NPRM is that Google discriminates for good economic reasons like cost-control, and employs an “invitation only” process, so they are still technically “neutral” and not “exclusive,” unlike broadband ISPs who might discriminate for bad economic reasons like revenue-generation and must serve the whole public.
• Furthermore, Google justifies their discrimination and call blocking as acceptable because their service is “free” to the public and because there must be limits to Google’s beneficence. If a few callers run up more long distance costs than the monopoly-search-advertiser is willing to cross-subsidize, those long distance call hogs should be blocked and discriminated against because they are using more than their fair share of bandwidth, and only Google is allowed to use lots more Internet bandwidth than it pays for.
  • In other words, if you have an advertising-based model, it is OK to give away services and discriminate to control costs and punish usage hogs, but if one charges a fee for one’s service, one must be banned from discriminating to control costs or generate revenues.
• Google wants the FCC to understand that there is a need for a “bright-line” distinction, that indiscriminate leveraging of Google’s largest virtual network of assets in the world is inherently good, but any leveraging of physical network assets by even the smallest of broadband ISPs is inherently bad.

Google also gave the FCC enough mind-numbing detail that no reporter could ever decipher if Google Voice was discriminating in the “good” part of the grey area of convergence or the “bad” part of the grey area of convergence.

In a fit of hypocrisy, Google again redacted portions of its response to the FCC, just like it did in non-transparently responding to the FCC concerning Apple’s rejection of Google’s Voice App.

• Apparently, Google also expects to get special treatment from the FCC on the transparency requirements for information service providers in the FCC’s proposed net neutrality regulations.
  • Obviously it never occurred to Google that as the single biggest corporate voice lobbying for the Federal Government to be transparent and for Google’s cloud-computing broadband competitors to be transparent, that Google should at least try to be transparent when everyone is watching.

In closing, the essence of Google’s defense of why they should be able to discriminate indiscriminately as an information service provider, and broadband information service providers should not — is that the FCC simply can trust Google to not abuse any special treatment by the FCC because they are only discriminating against about a hundred entities and they are only discriminating for good economic reasons…

“How did the commission come to acquire this power?”

“How did the commission come to acquire this power?” was the core question that Ronald H. Coase asked in a seminal paper he wrote about the FCC in 1959.

• Kudos to Jeff Eisenach and Adam Theirer for an outstanding must-read article in The American, “Coase vs. the Neo-Progressives” that celebrates Mr. Coase’s brilliant, ahead-of-his-time insights, and his exceptional clarity-of-thought in asking that profound question fifty years ago — that couldn’t be more appropriate to ask the FCC today.

How did the FCC acquire the power to regulate the “open Internet?

The FCC did not “acquire this power,” the FCC is proposing to simply assume and assert this power by tech elite acclamation.

The term “net neutrality” slogan was first coined by Columbia Professor Tim Wu in 2002, and Google rebranded it as the “open Internet” in 2007 when Google bankrolled the creation of the Open Internet Coalition. Net neutrality was further sloganized as “the First Amendment of the Internet,” as tech elites have self-deemed that an “open Internet” is an American’s “right.”

Obviously the FCC has not acquired “the power” to mandate net neutrality and an Open Internet.

• Think about it. Logically, if net neutrality proponents believed that congressional legislation/authority was urgently needed in 2006, 2007, 2008, and 2009, in order to bestow on the FCC the requisite net neutrality authority they needed to implement it, how can they now claim that the FCC has somehow found the authority they did not have before?
  • Either net neutrality proponents misled Congress for four years, or they are misleading everyone now.
• Additional evidence that the FCC does not have the power/authority to implement its Open Internet NPRM, is the FCC’s own thin and indirect legal justification of its statutory authority in the NPRM (see paras 83-87).

The most important takeaway here is that the FCC appears to have forgotten that its power and authority come from Congress and the law, and that Congress’ power and authority comes from the U.S. Constitution.

Interestingly, at FCC Chairman Genachowski’s September 21st “Open Internet” speech, former FCC Chairman Reed Hundt (Chairman Genachowski’s mentor) loudly congratulated Professor Lawrence Lessig who was also in attendance, that Chairman Genachowski’s Open Internet speech was the regulatory culmination of Professor Lessig’s ideas in his 1999 book “Code and other laws of Cyberspace.“

• Why is Mr. Hundt’s credit to Professor Lessig for the FCC’s Open Internet regime important and how does this relate to the FCC’s legal authority?
• As Professor Lessig explains on the jacket of his update of his book “Code 2.0,” an update of his 1999 work:
  • “We can — we must — choose what kind of cyberspace we want and what freedoms it will guarantee.” These choices are all about architecture, what kind of code will govern cyberspace, and who will control it. In this realm, code is the most significant form of law and it is up to lawyers, policymakers, and especially average citizens to decide what values that code embodies.”

In closing, just because the FCC apparently agrees with Professor Lessig datatopian assertion that “code is the most significant form of law” on the Internet, the FCC still is governed by the rule of law, Congress, and the U.S. Constitution.

Unfortunately, for net neutrality proponents, the Courts are highly likely to block any FCC attempt to implement a datatopian Internet “code” by acclamation that does not fully abide by the “U.S. Code” of laws.

Read Richard Epstein’s Great Op-ed on Net Neutrality

I admire clarity of thought, and Richard Epstein’s Op-ed in the Financial Times, “Net Neutrality at the Crossroads,” represents some of the clearest thinking I have found on net neutrality. Please read it.

Mr. Epstein does a great job of exposing the folly beneath the vacuous sloganeering of net neutrality proponents.