The Public Isn’t Neutral On Net Neutrality

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President Obama’s proposal to classify broadband Internet service as a Title II utility cheered advocates of net neutrality, but FCC Chairmam Tom Wheeler has his own ideas for how to handle the issue, which don’t quite square with the president’s:

The dissonance between Obama and Wheeler has the makings of a major policy fight affecting multibillion-dollar industries. The president wants clear rules to prevent Internet service providers from auctioning the fastest speeds to the highest bidders, a scenario that could favor rich Web firms over start-ups. Wheeler, a former lobbyist for the cable and telecommunications industry, has floated proposals that aim to limit the ability of service providers to charge Web companies, such as Netflix or Google, to reach their customers. But critics have argued that his approach would give the providers too much leeway to favor some services over others.

While Obama and Wheeler may disagree on how, chances are the FCC will get there one way or another, since the general principle of net neutrality is overwhelmingly popular:

In a new survey, the University of Delaware’s Center for Political Communication found that support for neutrality is strong and widespread — regardless of gender, age, race and level of education. About 81 percent of Americans oppose allowing Internet providers like Comcast and Verizon to charge Web sites and services more if they want to reach customers more quickly, that is, allowing what are often called “Internet fast lanes.” Most surprising of all, given comments by Republican lawmakers over the past couple of days, is that support for net neutrality is bipartisan. Indeed, Republicans were slightly more likely to support net neutrality than Democrats. Eighty-one percent of Democrats and 85 percent of Republicans in the survey said they opposed fast lanes. The poll’s margin of error was 3.2 percentage points.

Another survey, albeit by a pro-net neutrality outfit, finds similar levels of support among self-described “very conservative” voters. Jason Koebler, meanwhile, goes after Comcast, which claims to be totally on board with Obama’s proposal:

In a blog post titled “Surprise! We agree with the president’s principles on net neutrality: Reiterating our strong support for the open internet,” Comcast exec David Cohen notes that the company practices Obama’s proposed rules against blocking, throttling, paid prioritization, and that it supports increased telecom industry transparency. On the first three, he’s technically right, at the moment. On the last one, he’s dead wrong.

It’s true that Comcast practices those three principles of net neutrality— because it is legally obligated to under the terms of its last mega merger, the deal in which it acquired NBC.  … Meanwhile, before the NBC merger, Comcast actively lobbied against net neutrality. In the past, it violated [since overturned] FCC rules on net neutrality by throttling customers. It has helped put into place anti municipal broadband laws all throughout the country with the help of organizations like ALEC and the National Cable & Telecommunications Association. It has run fear mongering campaigns about municipal broadband competitors.

“It seems inevitable,” Katie Benner writes, “that at some point in the future we’ll decide that Internet access is as essential to civilized life as running water, electricity and phone calls.” Thus, she concludes, it’s equally inevitable that we’ll decide to treat it as a public utility:

Messaging and self-driving car apps and health records will reside on your phone, along with the videos of panda cubs wrestling with zoo keepers. And you won’t be able to live without any of it. When that realization hits, it should follow that the Internet service providers –companies such as Comcast and Time Warner Cable now, and likely a company like Google in the future — will be regulated like utilities. They should be held to a different standard if they provide services that are essential to daily life. Water prices, for example, stay within certain bounds so that wild market swings don’t force swaths of the population to live without the ability to bathe, drink and cook. Remember the debacle of the Enron energy traders and the California power crisis and unnecessary brownouts? Regulating services as utilities is designed, in part, to keep things like that from happening.

Bershidsky observes that for all the appeals to “innovation” among proponents and opponents of net neutrality alike, actual innovations in the Internet economy will likely be so disruptive as to upturn both sides’ premises:

[T]he combatants mean two different kinds of “innovation.” Providers are talking about their ability to upgrade networks so they can carry more traffic at faster speeds. Their opponents focus on new services for consumers that might require a lot of bandwidth. In both cases, the i-word is applicable, but it’s not the type of innovation that could change the face of the industry. Not the disruptive kind. …

If the government leaves the Internet alone — letting broadband and content providers hatch whatever devilish plots they feel are in their interest — some startup, or a few of them, will inevitably come up with the next idea that will be far outside the current debate. It might involve advances in compression technology, making all talk of fast and slow lanes irrelevant because they could suddenly allow the existing infrastructure to carry more traffic, or breakthroughs in mesh networking, which might allow people to get broadband connections without using much of that infrastructure. Whatever the game-changing innovation might be, both sides in the current dispute would be forced to deal with it, pitching in with incremental innovations.

Obama Revives The Net Neutrality Fight

Yesterday, the president threw his full support behind the principle of net neutrality, urging the FCC to reclassify broadband Internet services as a public utility:

Obama’s argument explicitly rejects proposed rules that FCC considered earlier this year to allow paid prioritization, a plan by which content providers can make deals with ISPs to get faster service to their websites. (Those rules are still under consideration and have not been finalized.) The White House proposal calls for no paid prioritization, no blocking of any content that is not illegal, and no throttling of Internet services, where some customers have their Internet speeds artificially slowed down. The proposal also asks that any new rules include mobile broadband, which is already the primary access point for many users.

As the president himself reminds us, the FCC does not answer to him, and does not have to listen to (or even consider) his suggestions. So there are no guarantees that any of these rules will even come to pass. However, an endorsement by the White House would be the strongest push yet toward an FCC that treats all Internet traffic as equal.

Phillip Bump calls this politically smart:

[S]iding with people against Comcast (which actually is subject to a higher standard on neutrality than other companies for now) and other cable providers is hardly a political misstep. (Do you love your cable company? Right. Thought so.)

It also helps repair relationships with the tech community that were splintered in the wake of the National Security Agency’s spying revelations.

When leaks from Edward Snowden revealed the extent to which the agency was infiltrating social networks, it put firms like Facebook and Google in an awkward commercial position. The administration reached out to the companies as it planned revisions. But an embrace of net neutrality —backed by big companies that don’t want to have to pay more to push out their content — is a big win for for tech. It could use one; its marquee midterm race went poorly.

Jason Koebler weighs the reaction from net neutrality proponents:

At first blush, it looks like  many of the most net neutrality supporters are happy with Obama’s announcement. Tim Karr, senior director of strategy at Free Press, who has organized many of the net neutrality protests called it “huge.” Tim Wu, who invented the idea of net neutrality, called it “100 percent on target.” The Electronic Frontier Foundation also backed Obama’s statement.

Of course, in the end, this is the FCC’s decision, and chairman Tom Wheeler has already proposed a  mostly maligned “hybrid” proposal that is apparently already being thrown out because of the backlash it received when its existence leaked more than a week ago. In that proposal, paid prioritization could occur between content providers and ISPs: Netflix, for instance, could pay to have its content delivered faster to consumers. In his statement, Obama said that’s no good.

David Dayen detects a message here about what kind of lame-duck president Obama plans to be:

As for the president, this maneuver signals that he’s not looking to be a caretaker in his final two years, at least on discrete issues. Net neutrality activists correctly reasoned that getting Obama involved would provide the surge of support they needed for reclassification, and they targeted him as much as the FCC over the past several months. Obama showed that he listened, and it should give some solace to other groups wanting him to use his executive authority. In other words, Obama’s action on net neutrality is very good news for those who want him to move on immigration.

Nick Gillespie remains staunchly opposed to what he calls a dumb policy:

The most likely outcome is that regulators will freeze in place today’s business models, thereby slowing innovation and change. That’s never a good idea, especially in an area where new ways of bundling and delivering content are constantly being tried. It’s a historical accident that cable companies, who back in the day benefited from monopoly contracts with local governments, have morphed into ISPs. That will not always be the case, as the rise of Verizon (originally a phone company) and Google’s rollout of its own fiber system, attest. Just a few years ago, the FCC frowned on the cell-phone company MetroPCS’s discount plan that allowed access to the World Wide Web but denied users multimedia streaming. The FCC and Net Neutrality proponents thought that was a bad thing. Customers on a budget had a different opinion.

James Pethokoukis also opposes Obama’s proposal:

Keep in mind that the Obama plan would give the FCC, according to R Street’s Steven Titich, “the widest range of alternatives for economic and technological regulation of broadband.” And, of course, make the agency an even more attractive target for the lobbying class. …

All this, then, just to lock in “net neutrality” – a situation that does not exist and never existed — despite the risk of limiting new investment and innovation, Obama wants the FCC to treat the internet like a public utility. But the Obama proposal is based on flawed model of how the internet operates. Half of the internet’s traffic comes from just 30 content providers such as Google and Facebook.  And they’ve already made special arrangements by plugging directly into the ISPs. “Fast lanes” already exist. Again, R Street’s Titch: “There’s nothing about network neutrality to “preserve.” A regulation that pretends there is would serve to remove an economic incentive needed to ensure that broadband infrastructure is sufficiently robust to support the demands contemporary applications have placed on it.”

But Adam Clark Estes argues that opponents are overstating the level and nature of regulation Obama is proposing here:

If the idea of using an 80-year-old law to regulate a super futuristic communications technology worries you, you’ll be very glad to know that the president’s got your back. In his statement, there is this brief but very important line: “I believe the FCC should reclassify consumer broadband service under Title II of the Telecommunications Act—while at the same time forbearing from rate regulation and other provisions less relevant to broadband services.” (Emphasis mine.)

So the first part of it is the big reveal. Obama wants the FCC to treat broadband companies as common carriers. Telephone companies are also a common carriers regulated under Title II of the Telecommunications Act. However, this does not mean that Obama wants the FCC to apply all of the same regulations for telephones to broadband internet.

Meanwhile, here’s Ted Cruz’s response:

Yglesias tries to translate:

What, if anything, that phrase means is difficult to say. But its political significance is easy to grasp. All true conservatives hate Obamacare, so if net neutrality is Obamacare for the internet, all true conservatives should rally against it.

The asinine analogy prompted Matthew “The Oatmeal” Inman to create this explainer cartoon.

Reigniting The Net Neutrality Debate


Timothy B. Lee explains the net neutrality proposal, announced yesterday, that the FCC is asking for public comment on:

When Chairman [Tom] Wheeler leaked a first draft of his network neutrality proposal to the press, it didn’t get a positive reception from network neutrality supporters. Wheeler’s rule would have allowed internet service providers to create “fast lanes” on the internet, provided that doing so was “commercially reasonable.”

Net neutrality supporters have been pressuring the agency to take a more aggressive approach, called reclassification. That means the FCC would declare broadband internet service a common-carrier telecommunications service, which would give the agency broader powers to regulate it. That could create some legal and political headaches, but it would likely put network neutrality regulations on a firmer legal footing in the long run.

The [notice of proposed rulemaking] leaves both options open, and asks the public for advice about which approach is better.

David Dayen notes that Wheeler’s preferred course of action isn’t as strong a safeguard of net neutrality as he claims:

Just listening to Wheeler today, you’d have thought he was the biggest Internet freedom activist in the country. “If telecoms try to divide haves and have-nots, we’ll use every power to stop it,” he said at the meeting. “Privileging some network users in a manner that squeezes out smaller voices is unacceptable.” Unfortunately, according to Craig Aaron of Free Press, Wheeler’s “rhetoric doesn’t match the reality of what’s in the rules.” They believe that Wheeler’s plan, which he says would prevent blocking or slowing of websites and prohibit “commercially unreasonable” fast-lane deals on a case-by-case basis, is impractical and legally dubious. “The only way to achieve his goals would be to reclassify broadband under Title II,” said Aaron.

Judis also spots a loophole:

Internet providers can violate net neutrality by setting up their own fast lane and charging content providers who want to use it, or they can charge content providers who want to connect directly with the internet provider without going through intermediate networks. That’s called “peering.” Comcast now charges Netflix an extra fee for connecting directly to its network. In exchange, Netflix gets faster and more dependable streaming on its videos. Wheeler’s proposals conspicuously ignore peering. It is, he said, “a different matter that is better addressed separately.” …

As a sop to the Democrats on the commission, and to Free Press, the Consumers’ Union, and other proponents of net neutrality, Wheeler included in his proposals the question of whether reclassifying the internet would provide “the most effective means of keeping the internet open.” He didn’t propose the FCC reclassify the internet, only that it consider doing that as one among several options. And it’s not going to happen.

Larry Downes opposes classifying the Internet as a public utility:

Internet access speeds and the range of useful applications have both improved by orders of magnitude over the last decade and a half, precisely because there were no federal or state agencies micromanaging their evolution, resulting in over a trillion dollars in private infrastructure investment. During that time, to pick a close comparison, the closely regulated public utility telephone network has fallen into decay and disuse. It will soon be absorbed into better and cheaper Internet-based alternatives.

Those who think that we should turn management of the Internet’s infrastructure over to the government had better dig out their 2400 baud modems. Not long ago, that was the “Internet as we know it.” Thank goodness it was allowed to evolve.

Suderman is on the same page:

Back in 1998, under President Bill Clinton, the agency submitted a report to Congress concluding that, for multiple reasons, Internet access was “appropriately classed” as an information service under Title I. One of the points the report made was that the Internet is more than just a dumb-pipe for carrying information. Yes, it involves data transport, “but the provision of Internet access service crucially involves information-processing elements as well; it offers end users information-service capabilities inextricably intertwined with data transport.” In other words, it simply doesn’t make sense to classify Internet access as a utility because the service involves than mindlessly moving packets of information from one place to another. And reclassification, the report warns, would result in “negative policy consequences”—specifically, it could have “significant consequences for the global development of the Internet.”

Over the last 16 years, that approach has given us the rapidly growing, innovative Internet we have today.

But Marvin Ammori argues that the FCC’s oversight facilitated innovation:

The past decade of tech innovation may not have been possible in an environment where the carriers could discriminate technically and could set and charge exorbitant and discriminatory prices for running internet applications. Without the FCC, established tech players could have paid for preferences, sharing their revenues with carriers in order to receive better service (or exclusive deals) and to crush new competitors and disruptive innovators. Venture investors would have moved their money elsewhere, away from tech startups who would be unable to compete with incumbents. Would-be entrepreneurs would have taken jobs at established companies or started companies in other nations. The FCC played an important role. The Chairman and this FCC shouldn’t break that.

Timothy B. Lee also addresses some of the arguments against reclassification, including that it would stifle investment:

Network neutrality supporters say this concern is overblown because of forbearance. That’s a legal procedure that allows the FCC to choose not to enforce provisions of the law that are deemed overly burdensome or counterproductive. But [legal scholar Gus] Hurwitz argues that the FCC has never tried to use forbearance on the scale that would be required to apply telecommunications regulations to the modern internet. It could become a legal quagmire and at a minimum it could become a distraction for FCC decision makers.

Reclassification opponents say broadband providers will be less willing to open their wallets when there’s a lot of uncertainty about when and how they’ll be allowed to profit from their networks. Of course, as Vox’s Matt Yglesias has noted, the [National Cable & Telecommunications Association’s] own statistics suggest that cable companies are investing less in their networks today than they did in the early 2000s, a time when there was a lot of uncertainty about the legal status of broadband networks.

Meanwhile, net neutrality remains popular with the public, as the chart seen above illustrates. Steven A. Vaughan-Nichols points out that major Internet companies also support it:

You might think that today’s dominant Internet companies would favor this move [to allow “fast lanes”] as well. After all, while they’d end up paying more, this move would make sure they wouldn’t have competition in the future. Guess what? The top cloud company, Amazon; the top Web company, Google; and the top Internet video company, Netflix, all oppose this change. They, under the umbrella of the Ammori Group, a Washington DC-based public policy law-firm, all want the old-style net neutrality where companies can compete fairly with each other.

Heck, even the Internet providers, such as Level 3, which provides Internet service to the last mile ISPs want good, old net neutrality and not this new abomination. When the only ones supporting the FCC’s new position are the handful of companies that will directly benefit from it, is that really a fair position? I don’t think so.

Why Net Neutrality Matters

Alexis Madrigal and Adrienne Lafrance explain why advocates of net neutrality approach the issue with such great passion:

This idea of net neutrality—this cherished idea, even, among Internet entrepreneurs and activists—has a long history, roughly as long as the commercial world wide web. It is, Harvard law professor Lawrence Lessig has argued, what makes the Internet special. He used to call the principle e2e, for end to end: “e2e. Not b2b, or b2c, or c2b, or b2g, or g2b, but e2e. End to end. The core of the Internet, the core value that defined its power, the core truth that made innovation around it possible, is this e2e,” Lessig said in a 1999 talk. “The fact – a fact – that the network could not discriminate in the way that AT&T could.”

Comcast couldn’t privilege its own content over Netflix’s or PBS’ or Disney’s or your blog’s. He explained: “The network was stupid; it processed packets blindly,” he said. “It could no more decide what packets were ‘competitors’ than the post office can determine which letters criticize it.”

This was not just a nice thing, it was the very nature of the Internet. Without it, the Internet will become, as Tim Wu put it, “just like everything else in American society: unequal in a way that deeply threatens our long-term prosperity.”

But Jimmy Wales, the founder of Wikipedia, tells Jemima Khan that he’s not that worried about it:

I differ from many of my colleagues, in that I don’t think net neutrality is super-important. The fear is that companies which control the “last mile” to the consumer will leverage that choke point to stifle innovation (unless they get paid extra for it happening). And that’s not an entirely crazy thing to fear, particularly because much last-mile infrastructure remains under inappropriate, government-granted monopoly privileges—or derived from those privileges in the first place years ago.

But if we are worried about a handful of companies getting control of a choke point and using it to squeeze out competitors and make massive profits, we don’t need to look at the layer of network infrastructure and network neutrality. We just need to look at the Apple App Store (and similar), where everything that runs on your iPhone or iPad has to be approved by Apple, with them taking a huge cut of the revenue at every step, with no real competition in sight. Consumers should be very worried about that.

Can you imagine the outcry if 20 years ago Microsoft had decreed that no third-party software could run on Windows without being approved by them, and bought through their proprietary stores? Yet today we accept this model on mobile devices (and soon, I fear, on our computers) without blinking.

Barbara van Schewick discusses some of the dangers she sees in imposing access fees for Internet content:

Why should we care if start-ups or other innovators without significant outside funding cannot pay these fees and therefore lose the ability to innovate? Throughout the history of the Internet, innovators with little or no outside funding have developed many important innovations (including E-Bay, Facebook, Yahoo, Google, Apache Web Server, the World Wide Web, Flickr and Blogger), and there is no reason to believe this would change in the future. Thus, removing (or at least impeding) the ability of this important subgroup of innovators to develop new applications will significantly reduce the overall amount and quality of application innovation.

Finally, access fees may impose serious collateral damage on values like free speech or a more participatory culture by making it more difficult for individuals or non-profits to be heard or to find an audience for their creative works.

And Timothy B. Lee blames Congress for tying the FCC’s hands on net neutrality, noting that the relevant law predates the concept:

The 1996 Telecommunications Act prohibits the FCC from imposing common carrier regulations on “information services,” which (according to the FCC) includes broadband internet access. The law says that information services can’t be subject to common carrier regulations. In its January ruling, the court said that the FCC’s 2010 net neutrality rules constituted common carrier regulation and was therefore illegal. But the court signaled that it would accept a revised set of rules that only prohibited discrimination if it was “commercially unreasonable.”

Is that the result Congress intended? No one really knows. The term “network neutrality” hadn’t been coined yet in 1996. Cable modems and fiber optic services like FiOS were still in the future. Unsurprisingly, Congress wasn’t clear about how to handle concepts and technologies that didn’t exist yet, so the courts have had to make up the rules as they went along.

Has The FCC Given Up On Net Neutrality?

Derek Mead outlines the FCC’s new proposed Internet regulations:

While the exact framework has yet to be announced, it’s expected that ISPs will be able to charge content providers extra for higher speeds. It would likely be voluntary, which is a key legal distinction; if Netflix doesn’t want to pay Comcast for bandwidth, it won’t have to. And if Time Warner Cable wants to negotiate different rates for special treatment with Google, NBC, and Netflix, it’ll be open to do so. But regardless, it will mean that those that have money can cruise in the internet fast lane, and those that can’t will be stuck with what’s left.

It represents a fundamental shift away from net neutrality, which assures that end users can pay for faster speeds but all content is treated the same. Net neutrality proponents argue that such equality is crucial for the vibrancy of the web. If Netflix has to pay more for faster streaming speeds, it will probably just pass those costs on to users; if a startup can’t afford to leverage a better delivery deal, it’s going to find it even harder to compete with the web giants.

Tim Wu is dismayed:

The new rule gives broadband providers what they’ve wanted for about a decade now: the right to speed up some traffic and degrade others. (With broadband, there is no such thing as accelerating some traffic without degrading other traffic.)

We take it for granted that bloggers, start-ups, or nonprofits on an open Internet reach their audiences roughly the same way as everyone else. Now they won’t. They’ll be behind in the queue, watching as companies that can pay tolls to the cable companies speed ahead. The motivation is not complicated. The broadband carriers want to make more money for doing what they already do. Never mind that American carriers already charge some of the world’s highest prices, around sixty dollars or more per month for broadband, a service that costs less than five dollars to provide. To put it mildly, the cable and telephone companies don’t need more money.

T.C. Sottek accuses the commission of cowardice and complicity with the ISP industry:

The government is too afraid to say it, but the internet is a utility. The data that flows to your home is just like water and electricity: it’s not a luxury or an option in 2014. The FCC’s original Open Internet rules failed precisely because it was too timid to say that out loud, and instead erected rules on a sketchy legal sinkhole that was destined to fail. As the WSJ reports, the FCC has once again decided against reclassifying broadband as a public utility. To declare the internet a public utility would go against the wishes of companies like Comcast and AT&T, which don’t want to be “dumb pipes.” There’s too much money to be made by charging everyone who uses the internet far more than what it actually costs to provide service.

Peter Weber offers more nuanced criticisms:

There are legitimate concerns that this rule, if enacted as envisioned, will turn the internet into a reflection of how the world works, with the rich and powerful using their clout and dollars to maintain their advantages and keep the smaller, newer players in the second tier or lower. But as long as no ISP can throttle or discriminate against traffic of any legal content, as promised, the biggest short-term impact to consumers will probably be higher fees for services that pay for the fast lane.

Net neutrality proponents are understandably skeptical of [FCC Chairman Tom] Wheeler, a former top lobbyist for the cable and telecom industries. But this weak-tea neutrality is neither fully his fault — the U.S. Court of Appeals, D.C. circuit, bears most of the blame — nor is it necessarily the death knell for an open internet. It’s just the beginning of a slightly stratified one.

Previous Dish on net neutrality here, here, here, and here.

Paying For A Faster Stream?


As Comcast and Apple consider teaming up for a new streaming video service, Gautham Nagesh reports that any potential deal “would likely draw close regulatory scrutiny and spark a new debate over whether [a cable company] can carve out a part of its pipe for content providers.” Matthew C. Klein absorbs the news:

According to the Wall Street Journal, Apple is trying to persuade Comcast Corp. to separate its data “from public Internet traffic” by treating it like Comcast’s own video-on-demand service. Consumers would be guaranteed superior picture quality and none of the buffering hiccups found in many streaming services. If the two sides can work out terms, it would be fundamentally different from the recent agreement between Comcast and Netflix Inc. and also different from what Apple had been discussing with Time Warner Cable Inc. before Comcast agreed to acquire the second-biggest cable company. Technically, Apple isn’t asking to have its traffic actively prioritized over that of rival video services, although that is probably what would occur in practice. That means the arrangement may be able to slip past rules meant to prevent residential broadband companies from giving preference to one service over another.

He doesn’t see much of value in the deal for Comcast, noting that they would be drawing a regulatory target on their back and don’t seem to need what Apple could offer them. Derek Thompson is also skeptical:

It’s fairly clear why this deal would be great for Apple – it would officially transform its TV “hobby” into a TV business. People once thought that Apple would build an actual TV, but actual TVs are a terrible, zero-profit product with a high-turnover rate. Others thought it would partner with media companies to offer a fresh take on the cable bundle, but media companies don’t want to partner with the folks who destroyed the record industry by selling songs for $0.99. Therefore Apple’s TV strategy must revolve around its hockey puck. Horace Dediu estimates that Apple has sold about 25 million of these guys. A deal with Comcast/TWC could easily double that figure.

But what exactly is in this for Comcast?

The cable company would have to invest in new network equipment to make this partnership work. It would tempt net-neutrality restrictions by giving Apple preferential treatment along its pipes just as its Time Warner Cable acquisition faces accusations of a law-breaking monopoly. Plus, Comcast would have to give Apple a share of its pay-TV profits in exchange for popularizing a device that’s partially seen as a replacement for pay-TV. Henry Blodget says there is no way this deal is going down. I say he’s right.

Meanwhile, Jordan Weissmann argues that Apple shouldn’t have to negotiate with Comcast to provide better service:

In an ideal world, where the US had a respectably fast broadband infrastructure, these discussions wouldn’t have to happen at all. As you may recall, Netflix announced its own deal with Comcast last month to improve delivery of its streaming video – after which Netflix CEO Reed Hastings published a screed about the need for stronger net neutrality protections. But every time you see one of these agreements, keep in mind that the fundamental issue isn’t so much net neutrality – the idea that Internet service providers should treat all data equally, no matter where it originates—as it is the crippling lack of broadband competition in this country. Americans pay some of the highest prices for Internet access in the developed world; in return, they get some of the most mediocre service. That’s largely because consumers only have two or three providers in their geographic area, which doesn’t give Comcast or its peers a great deal of incentive to beef up their networks (or to lower prices).

(Chart from the BBC)

Net Neutrality 2.0

Federal Communications Commission chair Tom Wheeler announced yesterday that the commission would propose a new regulatory framework to preserve the open Internet after a January court ruling invalidated its net neutrality rules. Fran Berkman outlines Wheeler’s ideas:

Aside for the non-discrimination rules, Wheeler said he will also push for a couple of other new rules to buttress net neutrality. One is a transparency rule that would compel companies to disclose, in detail, how their networks operate. This would ensure that ISPs aren’t violating these standards. The other is a rule to reestablish the Open Internet Order’s “no-blocking goal.” This means ISPs can’t simply block whatever websites they want, for instance, those run by competing companies. The no-blocking goal, which the D.C. appeals court also ruled against, protects any and all websites that operate within the law.

Suderman reminds readers that the FCC’s authority is pretty broad:

Even though the most [recent court] ruling struck down the FCC’s specific net neutrality requirements, it also gave the agency a lot more power over the Internet, saying that under Section 706 of the Telecommunications Act, the agency does have the power to promote and regulate broadband competition and deployment. We’ll have to wait and see how the agency ends up using its new powers, but they are potentially far-reaching. In a dissenting opinion, Judge Laurence Silberman wrote that the majority ruling “grant[s] the FCC virtually unlimited power to regulate the Internet” by giving it the authority to put in place “any regulation that, in the FCC’s judgment might arguably make the Internet ‘better.’”

Brian Fung digs deeper:

As it considers rewriting the net neutrality rules to more explicitly rely on Section 706, the FCC will simultaneously keep open the possibility of “reclassifying” broadband providers. Such a step would allow the FCC to regulate ISPs just like it does phone companies, and policy watchers say reclassification would grant the FCC unambiguous authority to regulate broadband providers with a blanket ban on traffic discrimination. Keeping reclassification on the table effectively gives the FCC a nuclear option to use as a deterrent against companies that want to prioritize Internet traffic.

Benen notes that the change is not so much in the content of the rules but rather the source of the FCC’s authority to enforce them:

How will this be any different from the FCC’s neutrality policy, 1.0? For the most part, it’s not different at all. The FCC appears to have come to the conclusion that the federal appeals court struck down the previous rules because the agency didn’t have the proper legal authority to regulate the major telecoms. So in the new policy, as the New York Times reported, the FCC “will cite another section of the law for its authority.”

Peter Weber warns Republicans that they’re not making any friends by standing against net neutrality:

Their main complaint is that this is government interference in the free market. And in a narrow sense it is, as is all government regulation. But when the government steps in to make sure that private companies can’t bilk consumers by exploiting their dominant slice of a market or through legalese, that tends to be pretty popular. Is anyone really upset that George W. Bush’s FCC mandated that cellphone customers can bring their phone numbers with them when they switch carriers?

More Dish on the net neutrality ruling here and here.

Comwarnercablecast, Ctd


Looking at Comcast’s move to take over Time Warner Cable, Felix Salmon worries more about monopolizing broadband than cable:

[T]he US has something approaching a national broadband crisis on its hands. In comparison with the rest of the developed world, the US has slower broadband speeds and higher broadband prices than just about anybody. When you do find exceptions, they always turn out to be cases of a very clear monopoly: Carlos Slim more or less owns broadband in Mexico, for instance, while a company called Southern Cross controls all of the bandwidth into New Zealand.

Drum agrees that broadband is the real story:

What’s more, as Michael Hiltzik points out, broadband is a direct competitor to cable in the streaming video market, and having a single company with a monopoly position in both is just begging for trouble. Comcast will almost certainly be willing to make promises of net neutrality in order to win approval for its merger with Time-Warner, but those promises will be short-lived. The truth is that if this deal were allowed to go through under any circumstances, it would probably deal a serious blow to our ability to use the internet the way we want, not the way Comcast wants us to.

Meanwhile, John Cassidy asks, “Does Comcast own Washington?”

In the past fifteen years, since it became the biggest cable company in the country, Comcast has invested a lot of time and effort in currying influence with the right people. Brian Roberts, Comcast’s chief executive, is a member of the President’s Council on Jobs and Competitiveness, which was set up in 2011, and, according to the New York Times, he played golf with the President on Martha’s Vineyard. In 2000, Roberts served on the host committee for the Republican National Convention, in Philadelphia, but he and Comcast have been big givers to the Democrats since Obama took office. Roberts was even one of the donors to President Obama’s 2013 inauguration.

Meghan Neal has more on the cable giant’s lobbying operation:

Last year, the company spent more than $18 million to lobby Congress on issues like cable laws and net neutrality, and donated $1.7 million to the reelection campaigns of key lawmakers, according to data from Open Secrets. That includes Rep. Greg Walden, chairman of the subcommittee on communications and technology, which has jurisdiction over the FCC. In 2012 Comcast gave $854,000 to members of that subcommittee alone, according to figures dug up by Maplight.

(Chart from the BBC)



Daniel Gross explains the news of Comcast trying to buy Time Warner Cable for $45.2 billion as “a defensive move—on the part of both companies”:

[T]he big cable companies have been losing customers and market share for years. According to the National Cable Television Association, there were 56.4 million cable subscribers in 2012, down from 66.9 million in 2001. Time Warner, which is concentrated in savvy, wealthy markets like Los Angeles and New York, has been hit particularly hard.  As I noted It’s cable business is eroding like a New Jersey beach. In each of the last seven quarters, Time Warner Cable has lost a significant number of residential video subscribers—a total of 1.27 million subscribers, or nearly 10 percent. That’s pretty stunning.

Now, rapid growth in the other components of the triple play—high-speed internet and voice service—has helped mask the decline of Time Warner Cable’s core business. But those services cost less than cable. And in the most recent quarter, it looks as if those numbers barely budged.

Susan Crawford doesn’t like the deal:

The reason this deal is scary is that for the vast majority of businesses in 19 of the 20 largest metropolitan areas in the country, their only choice for a high-capacity wired connection will be Comcast. Comcast, in turn, has its own built-in conflicts of interest:

It will be serving the interests of its shareholders by keeping investments in its network as low as possible — in particular, making no move to provide the world-class fiber-optic connections that are now standard and cheap in other countries — and extracting as much rent as it can, in all kinds of ways. Comcast, for purposes of today’s public , is calling itself a “cable company.” It no longer is. Comcast sells infrastructure subject to neither competition nor a cop on the beat.

Judis is on the same page:

Monopolies make it more difficult for new entrants to compete. As a result, they allow the larger companies to raise prices without fearing a loss of market share. Since deregulation in 1996, cable prices have risen at about three times the rate of inflation. According to a study from the Free Press, prices for expanded cable service (what most consumers purchase) went up five percent from 2008 top 2013 –almost four times the rate of inflation. Monopolies also allow companies to neglect service to consumers. The American Customer Satisfaction Index rated Comcast and Time-Warner the two worst cable and broadband companies.

Monopolies can also have a corrosive effect on related industries. The big cable companies have been able to squeeze cable content providers—even to cut off access to customers, as Time-Warner did with CBS last fall.  If they also own content providers, as Comcast does, they can harm rival content providers—as Comcast seems to be doing to Netflix.

John Cassidy dismisses the “old and tired argument” that Netflix and Apple are threatening the cable business:

I’ve been writing about the cable industry since the late nineteen-eighties, and something has always been about to destroy it. For a time, the threat was satellite television; then it was the Web; now it’s Netflix or YouTube. But it never materializes. With their quasi-monopoly franchises, and the ability to charge their customers for everything from voice mail to remote controls—look closely at your cable bill—the cable companies get bigger and more profitable every year. No wonder Comcast’s stock price has quintupled since 2009. (Time Warner Cable’s stock has gone up even more.)

What we need is a new competition policy that puts the interests of consumers first, seeks to replicate what other countries have done, and treats with extreme skepticism the arguments of monopoly incumbents such as Comcast and Time Warner Cable. But will we get it?

Morrissey wonders if the government will allow the deal to go through:

Then there is the question of Comcast’s connections to content producers. Comcast owns NBC, for instance, a deal that raised a few eyebrows but still managed to gain regulatory approval. Its size would make them much more competitive on pricing over Charter and Cox, and that plus their hold on NBC’s assets might be just a little too much for the White House to ignore, even for the politically-connected Comcast. This has anti-trust written all over it, especially for Democrats who have played the populist-progressive card more and more.

But Matthew Klein claims the merger will be good for consumers:

The networks consistently raise prices about 10 percent a year on average, irrespective of the state of the economy. By contrast, the typical cable bill only goes up by about 5 percent a year. Cable companies have eaten the difference by lowering their margins and cutting costs elsewhere, but there are limits to both processes. … Merging the two biggest cable operators might give them more bargaining power with the networks, especially if it encourages DIRECTV and Dish Network Corp. to consolidate the satellite business. Saving money on content would allow the enlarged Comcast to improve Internet access and speed — areas in which the U.S. lags behind other rich nations.

Drum quibbles with Klein’s argument:

I’d normally take Klein’s side of this except for one thing: would a bigger Comcast really have more negotiating clout than they do now? I guess that’s possible, but they have a helluva lot of clout already. No network can afford to be shut out of Comcast’s market for long. So it’s not clear to me that a bigger Comcast would really do much for the rest of us.

Brian Fung puts the merger in context:

All of this is taking place against the backdrop of the recent net neutrality court decision that made it legal for Internet providers to block or throttle Web traffic. While there’s no concrete evidence yet that this is occurring, the ruling inherently gives ISPs such as Comcast greater control over how consumers experience the Internet. As a result of the merger, Comcast will be taking on 8 million TWC subscribers, all of whom will be newly subject to Comcast’s bandwidth policies.

That the cable industry is consolidating isn’t really a surprise. But a merger of this magnitude is going to have major downstream effects.

It could also lead to new, cumbersome regulations:

There’s a danger that Comcast will be able to use its growing power over broadband to undermine competitive threats such as Netflix. We don’t know exactly how large Comcast needs to be before it will be able to do this. But the larger it gets, the greater the cause for concern. And it’s much easier to block a merger before it happens than to seek the breakup of a company after it has merged.

Lastly, Sargent weighs the options for better telecom regulation:

There are two basic solutions to this problem: either run telecoms as a regulated monopoly, like how land lines used to work, or break up the telecom trusts within individual markets to force them to compete with each other. Both have upsides and downsides, but the point is that government action will be required either way. This is another reason to keep prevent pointless mergers — to level the power imbalance between regulators and colossal corporate conglomerates.

This will be a tough lift, but I think it’s still possible to do. Telecom capacity is relatively cheap, by infrastructure standards — and for Pete’s sake, Romania somehow manages to have the third-fastest internet in the world. It’s easily within reach, if we can get our act together. It should be a key goal of progressive lawmakers.

A Death Blow To Net Neutrality, Ctd

Readers push back on Matthew C. Klein’s claim that net neutrality amounts to “one-size pricing” and “an effective subsidy” for high-bandwidth users:

I have worked for a web-hosting company for over a decade, and customers are absolutely charged for how much bandwidth they use. I’m certain that The Dish pays for how much bandwidth it uses. Klein can’t even hide behind the wiggle words “same rates” because larger customers get a volume discount and pay a lower rate per megabit than smaller customers, so in reality the all-text websites “subsidize” the video-streaming sites. For example The Dish pays more for its bandwidth than Netflix on a per-megabit basis.

The real issue here is that the ISPs are accustomed to selling more bandwidth than they are able to provide. When service ultimately degrades, they are forced to build out infrastructure to support what they have sold. Yes, this is expensive, but it’s a matter of customers getting what they paid for. One way to avoid the cost of building out infrastructure is to prioritize packets for your largest customers so they never feel the effects, while the little guy gets screwed. Even better if you charge a fee for this “service.”

Another adds:

The telco/cable duopoly is trying to confuse the issue. What they don’t like to pay for is Internet backbone capacity. If the traffic is on their network (local to the Verizon or Comcast network), the ISP does not pay for this traffic. They only pay for traffic that hits the “real” internet. There are many ways to reduce the internet backbone bill. Verizon/Comcast could install proxy servers that cache popular content. They could set up peering so that the Verizon network can talk directly to Amazon or Youtube. To me, this is just another cash grab, and it shows how incredibly corrupt our political system has become. The death of net neutrality will cost each of us a lot more than we think.


I used to sympathize with the argument that the ISPs paid for the infrastructure to support the Internet, and should not be forced to subsidize content providers. I see the moral and logical appeal of that point.

However, that argument assumes that Internet infrastructure is a normal commodity that can be sold or created by others to increase competition. For example, say a downtown area contains only one parking garage that only accepts Ford cars or charges $50/day. Someone else will likely build another parking garage that accepts all cars to take advantage of the irrational discrimination against non-Ford cars. Or someone will build a new garage and charge less than $50. If there are not enough cars to fill both garages, the first garage will have to lower its rate, benefiting consumers and allowing the market to work.

Internet infrastructure, like power lines or telephone wires, does not work that way. It is extremely onerous to build. So much so that only one of the most cash-flush and influential companies in the world (Google) has seriously attempted to challenge the incumbents by building new infrastructure, as it did in Kansas City. The incumbents’ infrastructure also just piggybacks on preexisting phone and cable TV networks. I concede they have to maintain the infrastructure, but it’s not like they paid billions upon billions of present dollars to build new infrastructure, the way a new entrant into the industry would. ISPs are more like utilities than a typical business in the current setup. If they want the monopoly, perhaps they should be regulated like utilities. I bet they’d love that.

Another raises a free-speech concern:

If someone can pay for faster, ‘premium’ delivery of information, why can’t they also pay to slow, or even block the service of their competitor?

For all these reasons, and having studied this some more, I’m emphatically for net neutrality – for reasons of democratic equality in online speech in an economically unequal age. Can we not have one oasis in which one argument is always just as accessible as any other. This, after all, is the great thrill of the democratic web. Every page is like every other page; that principle of a core check on power.