FCC Action on Net Neutrality - A Franco Perspective from 2017

The Net Neutrality hype has started up again.  I find that many of my friends are propagating a lot of poorly-informed fear, uncertainty, and doubt about the changes.  They compare it to cable offerings and packages with exclusives.  They claim that throttling will make certain services unusable like HOT-lanes that you can only use based on the type of car that you buy.  

It's easy to latch onto fear and to make great claims about censorship and access.

The Argument From Property Rights

There is a bitter irony involved with discussion of Net Neutrality.  

These entities, Internet Service Providers, have made great investments into something.  They developed it and found new ways to deliver it with greater speed and less cost year over year.  And it has become so important they cannot be trusted to do as they please with it.  By virtue of creating something valuable, ISPs like medical care providers, must submit to heavy government regulations under Title II.  

People who are used to a conservative viewpoint will note that there is a violation of property rights occurring with Net Neutrality.  The networks which comprise the internet are private, run on equipment owned by a non-public entity.  Under a system of laissez-faire capitalism, the government shouldn't properly interfere with the way property is used unless it is used to violate someone else's life or property.

The Rational Counter-Argument: Telecom's History Of Government Entanglement

On the other hand, the powers that be in Internet and Mobile data services has always been subject to government franchises and licensing.  They are not capitalist entities forged in a free market.  The system that exists today didn't arise from natural selection given open competition.  AT&T was forged into a monopoly by a comple of government-policies.

In 1918 the federal government nationalized the entire telecommunications industry, with national security as the stated intent.

One of the hardest things to do well is to grow a competitive environment after the government has worked to systematically destroy competition for a long time.  So it's understandable to want to maintain government control since the entities which exist after deregulation are unnaturally large and wield large amounts of anti-competitive power.  

It's also understandable that people who might be competitors would be wary of entering a field where they might face stifling resistance from government regulators with unclear limits on their powers.  

Competition will ensure good practices, the free-marketeers argue, but we are prevented from strong competition by the history of the situation and innate resource limits so we have to regulate.

Net Neutrality and Title II are Not The Same Thing

I see the arguments on both sides.  And I disagree with using Title II common carrier status for ISPs.  Thus I am in favor of the current action by the FCC to roll back the 2015 changes.

I am a network engineer by trade and a proponent of individual-rights.  So I can see the arguments of property rights AND the complexities of transitioning from government-enforced monopolies toward a free market.  

I believe open competition is the best protection against corporate bad actors.  And, thus, a low regulatory bar to allow for new competition should be pursued by government policy.

I am a proponent of Net Neutrality by voluntary agreement.  This is something that should be decided in the IETF.  Not by government edict.  Yes, the internet is a medium that works best when anyone can access anything.  But I don't trust a government given broad powers under an act of Congress created in 1934 to deregulate a monopoly that they created.

Net Neutrality Without Hysteria

I present to you a survey of articles I read this morning.   Some of them are about preferential treatment of traffic.  Others focus on privacy.  It's a really complex field of issues and I encourage you to take it in without reacting right away.

Some of these are from 2014/2015.  Others are more recent.  And all will present a perspective that the more fearful among us are not sharing.

Ways that Title II has been harmful over the past century: http://dailycaller.com/2014/07/07/the-top-10-failures-of-fcc-title-ii-utility-regulation/

A survey of the issue of privacy and Title II: http://www.businessinsider.com/trump-fcc-privacy-rules-repeal-explained-2017-4/

A whitepaper from 2014 by Brookings coming out against Title II.  Has a good description of the origin of Title II and, somewhat hysterically, warns against a slippery slope for tech companies: https://www.brookings.edu/wp-content/uploads/2016/06/regulating_internet_access_public_utility_litan.pdf

"Title II was included in the original Telecommunications Act of 1934 to address potential problems created by having one company, the “old” AT&T, being the monopoly provider of “telecommunications services” which at
the time and for much of the rest of the century meant services provided by the “public switched telephone network.” 
Title II authorized the FCC to regulate the price of telephone services provided across state lines, or long-distance calls (while individual states regulated prices of “local” calls within states). Later, after the old AT&T was split up following years of antitrust litigation, and as some competition developed in telephone services, the FCC used Title II, as amended by the Telecommunications Act of 1996, to prohibit the pieces of the old AT&T (the regional “Bell Operating Companies” or “RBOCs”) from discriminating against companies wanting access to the network, while overseeing the systems that were developed for payment of traf c origination and termination."

A blog post laden with legal and telecom jargon on ways Net Neutrality can be achieved without Title II (both of which became conflated in 2014/2015): https://haljsinger.wordpress.com/2015/09/28/what-if-we-want-net-neutrality-but-reject-title-ii/

"Following the guidance of Cellco, the court signaled it would tolerate a case-by-case regime that grants room for “individualized bargaining” by the parties to a paid priority arrangement. (Alas, the FCC rejected this approach in its 2015 Open Internet Order.)
Such deals, if done in a discriminatory manner, could be challenged ex post by third parties or by the FCC, but—and this is key—the burden of proof would fall on the challenger. In particular, the paid priority arrangement would be presumed not to violate the non-discrimination standard, and the challenger would have to overcome that presumption.
What the court rejected was the opposite presumption."

An article about how non-profit municipal ISPs are in favor of the Title II rollback: http://www.multichannel.com/news/fcc/muni-broadband-providers-back-fcc-s-title-ii-reversal/412812 

"By returning to light-touch regulation of broadband service, the Commission will give Muni ISPs incentives to invest in enhancing our networks and our deployment of innovative services at affordable prices while still ensuring consumers have unfettered access to the Internet," they wrote.

And finally, an article from AEI which vaguely hints that the 2015 change made practices such as zero-rating (ignoring normally imposed bandwidth constraints for certain partners) illegal: http://www.aei.org/publication/repealing-title-ii-will-benefit-consumers-economy/

The substantive issues in net neutrality have to do with what services broadband internet providers are allowed to offer customers. There are legitimate concerns that these companies might give their own content fast-lane priority over rivals’ content, allow free delivery (also known as zero-rating, the practice of not counting certain types of content
toward data usage limits) only for favored content providers, and block consumers from accessing legitimate websites.
But in many instances, fast lanes, zero-rating, and the like benefit customers. In separate research, both former FCC Chief Economist Michael Katz (with Ben Hermalin) and I (with Janice Hauge) showed that fast lanes benefit small content providers in their attempts to compete with established industry leaders. AEI scholar Roslyn Layton has shown that elderly and low-income consumers benefit from zero-rating services.
By adopting Title II regulations, the previous FCC outlawed all such activities.


#TitleII is Not The Solution to #NetNeutrality (Or Anyone's Problems)

I’ve seen a lot of discussion recently promoting the idea that reclassifying broadband internet under Title II is the solution under some kind of idea that regulation is what we need to keep the internet free. Here’s what I think I know about regulation.

Regulation means less competition and innovation.

Even when it doesn’t prevent people from going into business (as Insurance commisions do), it stifles small businesses through increased compliance costs and entrenches large ones. And since no business operates at a loss, who pays for the extra onerous paperwork the ISPs will have to do? We all will. It is guaranteed to raise the cost of bandwidth.

The entrenchment of large businesses creates what I call the “slum lord effect” by ensuring that you, the consumer, don’t have any place to go when you want to “vote with your feet” and go to a competitor. You can pretty much infer that service will take longer to deliver and repair. Just like the ones that run NYC hovels, the slum lords of the business world do not worry about losing business to competitors because they know you, the consumer, no longer have viable options.

Federal Regulation is not responsive, and certainly not to a broad consensus.

I think people trust politicians less than they ever have in history. And I think they are right to do so. With this in mind, I really have to wonder what leap of logic a person has to make in order to go from not trusting politicians to trusting a board regulators who was appointed by the President and confirmed by the Senate.

The President and the Senate are our LEAST accountable policitians. Ever try to ask any of them for anything? Ever try to vote them out of office when you disagree? You can’t make them feel any amount of fear that your wrath as a voter means doodly-squat to their re-election. Only PR disasters move their worlds.

Also, the “Title II” which some people seem to argue is THE SOLUTION to net neutrality is, in fact, Title II of the Communications Act of 1934. I’m sure it has been amended but let’s be clear. It’s old and… NO ONE HAS READ THE 682 PAGES OF TITLE II.

Some people argue that the fact that the FCC have the discretion to not enforce parts of the Act means that it will be less onerous. To me, it just means they have the right to be arbitrary. Consider this question: are they likely to act in a way that favors the consumer or in a way that favors the big company being regulated? If you believe in the revolving doors between regulated companies and regulating authorities then you have no reason whatsoever to trust that a regulatory agency permitted to be arbitrary will be in your best interests.

Fundamentally, I ask you to consider this: Do we really know what we are asking for? Or is Title II a deal with the devil?

The Fundamental Problem is Regulation

“Regulation makes it hard to innovate,” said Kevin Lo from the Google Fiber project. And he’s right.

The fundamental problem with broadband innovation and competition is that it is too difficult to work with local municipalities to get into the Broadband business. I argue that the net neutrality problem is fundamentally caused by regulation. And you can’t fix regulation with more regulation.

Here’s Kevin Lo from the same article:

“Governments across the country control access to the rights-of-way that private companies need in order to lay fiber. And government regulation of these rights-of-way often results in unreasonable fees, anti-investment terms and conditions, and long and unpredictable build-out timeframes. The expense and complexity of obtaining access to public rights-of-way in many jurisdictions increase the cost and slow the pace of broadband network investment and deployment.”

My solution: Reduce regulation

Marc Andreeson, in a recent tweet storm laid out his thoughts on disruptive innovation.. He described disruptive innovation as pro-consumer and world-improving, especially for those of low-income. To put these into my own words: The best protection we can have is the one that allows for disruptive innovation when it legitimately improves the lot of all.

And to do improve the chance for disruptive innovation in Broadband, we have to find a way to reduce regulation. We had considerably less disruptive innovation before the Telecom Act of 1996 deregulated telecom toward a model that allowed for more disruptive innovation.

The question we have to answer is: Is there some way can make it easier for new businesses to bring online disruptive broadband services? Is there a way to reduce the friction for “voting with our feet”?

If we can, then we have a better lever than onerous and unpredictable outcomes of Faustian bargains such as Title II. I don’t have a specific long term solution to propose but I suggest that we tread carefully with begging for the internet to be regulated.