Don’t Split This Baby - Multichannel

Don’t Split This Baby

The Case Against ‘Compromise’ Internet Neutrality Proposals
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Washington, D.C., is now buzzing with various “compromise” proposals to resolve the thorny issue of “net neutrality” and the Federal Communications Commission’s right to implement it.  But neutrality is a baby that won’t split.

In 1996, the Clinton administration and the Congress agreed that the complex, interconnected Internet was fundamentally different from the old Ma Bell phone system, which consisted of one collection of loops that only knew one trick.  So it deregulated the Internet while perpetuating regulation for the Bell System (in “Title II” of the Telecommunications Act of 1996), or at least for as long as the Bell System survived.

That vision has been proved correct. Deregulating the Internet allowed over $1 trillion to flow into its construction and improvement, and the U.S. now consistently ranks in the top 10 in the world for speed, despite its sprawling, high-cost geography.  And the link between the two is evident in Internet history.  When courts made clear that “Title II” did not apply to cable, cable investment took off; when they made clear it didn’t apply to mobile phones, mobile took off; and when they finally made certain that it didn’t apply to the Internet side of the phone companies, fiber systems sprouted up almost immediately.

But industry critics now want to bring back Title II and apply it to the entire Internet, giving the government the right to tell companies how to manage the Internet and how to price it.  Why?  Because, last year, a court ruled that the Internet had to fall under Title II if the FCC wanted to regulate it that way, specifically, if it wanted to impose “net neutrality,” the idea that everything on the Internet has to travel at the same speed.

In fact, things don’t travel at the same speed on the Internet already -- Google caches its content on server farms around the world to get closer to you; Netflix cuts deals to get a better route through the wormwood of networks.  That’s what the “neutrality” debate is really about.  It’s not about censorship or openness or any of the things consumers want the Internet to be.  In fact, “neutrality” is about the big websites maintaining their advantages on the Internet -- if Google’s or Netflix’s competitors can’t buy a faster connection, those giants’ ability to use their size to get an advantage on the Internet won’t be challenged.

And the “compromise” proposals all share one thing -- they would let those companies keep their privileged positions. For example, one proposal comes from Mozilla, which provides the search engine Firefox and which depends on Google for 90% of its revenue. You’d expect its proposal to favor Google with whatever it wants, and it doesn’t disappoint.  In essence, the Mozilla proposal would “limit” the application of Title II to the Internet “backbone,” that is, the trading of zeroes and ones among the labyrinth of interconnected networks, a market that has never been regulated in its entire existence.

Then what’s the compromise?  Well, Mozilla proposes, that in exchange for regulating the high-functioning, competitive backbone market, allowing Internet-service providerss to offer “fast lanes” on the “last mile” -- the local loop that ties you to the Internet universe. But the point of neutrality is to allow content that wants to buy a way to cut through this labyrinth -- that’s where the “fast lane” would be. In essence, they’re suggesting that the companies that want to challenge Google or Netflix be required to put their Ferrari in second gear until they get to your driveway, when they can really open it up.

Another approach to compromise comes from retiring Rep. Henry Waxman (D-Calif.) through an unfathomable “hybrid model.” Under this “compromise,” the FCC would attempt to implement the full slate of “non-discrimination” regulations that require Title II status, but under the Section 706 authority the Court recognized.  If that attempt didn’t withstand legal challenge, then the FCC would be granted “backup” Title II authority and would seek forbearance so it can pick and choose which parts of Title II apply.  But, just like a similar proposal from Rep. Anna Eshoo  (D-Calif.) that calls for strict Title II but with temporary forbearance, this proposal would open the door to paralyzing regulatory uncertainty in the market and invite judges to resolve the key issues facing the FCC, rather than the Congress or the Administration. To put it kindly, this is a head-scratcher. It’s like a disarmament treaty that forbids nuclear weapons except in cases where you want to use one.

These flailing attempts to split the baby look all the more pathetic because there’s a real compromise available, the outlines of which were first suggested than no less a proponent of Internet openness than the FCC’s current chairman, Tom Wheeler. It’s simply this -- let’s allow the ISPs to explore new business models that could actually benefit consumers by encouraging new services and offerings, and the added competition, that “neutrality” prohibits. Allowing some experiments in this area would let us to test the propositions that neutrality advocates have asserted. Is edge provider content being “slowed down” as they claim will happen? Are edge providers coerced into paying, and are those payments beyond any concept of reasonableness? Alternatively, the arguments made by neutrality opponents -- such as myself -- would get a close scrutiny as well. Most importantly, do consumer embrace the content brought to them on through transmission arrangements that may not exist today, but could if the FCC would get out of the way. Does it increase demand and consumer satisfaction?  Do new, two-sided business models lead to new product offerings?

That’s a real compromise, one that doesn’t lead to legal shenanigans or that regulates what’s never been regulated before in the name of less regulation. Instead of trying to split the baby, let’s focus on ways to raise the baby into a healthy and prosperous adulthood.

Ev Ehrlich is president of ESC Co., an economics-consulting firm, and former undersecretary of commerce in the Clinton administration.