On Net Neutrality

Did the FCC Miss the Mark?
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The following two-part series on the topic of network neutrality by cable and telecom industry vet Marc Tayer is being republished here with permission.

Network Neutrality, Part I: Did The FCC Miss The Mark?

The 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?

Net Neutrality, Part II: The Road Ahead

Net Neutrality, Part I discussed the FCC’s selection of a Title II regulatory framework. In February 2015, broadband Internet service was reclassified as a heavily regulated “telecommunications service,” superseding its thirteen-year-old status as a lightly regulated “information service.”

This change occurred after a loud clarion call emanated from Silicon Valley and consumer advocacy groups, culminating with nearly four million comments submitted to the FCC. The debate was cleverly framed in such a way as to equate Title II with an open Internet, deceptively branding those opposed to Title II as being against net neutrality.

The FCC decision was more preventative than punitive. Comcast and AT&T, representing 40 percent of US broadband subscribers, had already committed to net neutrality. If other broadband ISPs transgressed, they likely would have been stopped in their tracks.

The biggest risk is the law of unintended consequences. Assuming Title II survives its legal challenges, however, the doomsday scenario depicted by its staunchest critics will not materialize. There is simply too much at stake.

At least for now, it will be business as usual. Netflix and YouTube will continue growing, bursting through the Internet’s seams while demanding prodigious amounts of bandwidth. Broadband ISPs, operating mostly with limited competition, will continue to collect lucrative subscriber fees. Telecom lawyers will have a field day challenging and defending Title II.

It also just became more likely that the US government will approve Comcast’s $45 billion acquisition of Time Warner Cable and AT&T’s $48 billion purchase of DirecTV. And now Charter, the eighth largest domestic multichannel video provider—backed by media titan John Malone—intends to acquire the tenth largest, Bright House, for $10 billion.

A host of new Internet TV services is launching this year—HBO Now, CBS All Access, Sony PlayStation Vue, Dish Network’s Sling TV, Showtime, and Apple—on the heels of Netflix, Hulu, and Amazon. They face substantial technical hurdles, however, in providing high-quality Internet TV, especially with regard to all simultaneously obtaining sufficient bandwidth.

The FCC banned “paid prioritization” in its new net neutrality rules. But it left open a big gray area, allowing exemptions for “managed or specialized services.” Such a zone of privileged toll roads would present a paradox. While the express lanes would facilitate the viability of these over-the-top services, they would contravene a fundamental tenet of net neutrality. Perhaps the ultimate litmus test will be Ultra HD, a new video format providing four times the resolution of today’s HDTV pictures, but requiring two–to–five times the bandwidth.

More than ever, we need cable, telco, and wireless operators to invest tens of billions of dollars upgrading their Internet bandwidth capacities. Critics of Title II claim the regulations will put the brakes on our broadband infrastructure, just when Internet video is becoming front and center in our homes. But acceleration is more likely. A broadband ISP scaling back its capital investment plans would be shooting itself in the foot, ceding market share to others.

FCC Chairman Tom Wheeler promises to use “forbearance” (restraint) in applying Title II to the broadband Internet. Let’s take him at his word, especially given the lessons learned from the “CableCard” fiasco of the last decade. (In this case, the FCC required separation of the set-top’s encryption/security element from the rest of the box, in an attempt to facilitate retail distribution of cable boxes. The unintended result was higher consumer prices, diverted R&D resources, and a lower level of security. And the intended result—a vibrant retail market for set-tops—was not achieved.)

Our broadband priorities should now pivot toward promoting competition and increased investment. Most US homes have a choice of only one or two high-speed Internet providers. Yet help is on the way. Google and AT&T are building 1 Gbps fiber pipes in certain areas, providing up to 100 times the speed of a typical household. Comcast is planning to one-up both of them with a 2 Gbps service available to a significant portion of its national footprint, but likely at a high price. Cable operators (including Comcast) are planning to keep pace by launching Gigasphere, the next-generation DOCSIS 3.1 cable modem technology. Telcos will deploy G.fast, a speedy next-generation DSL technology. Satellite-based Internet is becoming more competitive, and 5G wireless will someday arrive. Even some municipalities are getting in on the action with local high-speed fiber.

The biggest challenge facing our future Internet is the creation of much more bandwidth (per home) at a competitive price. The FCC recently redefined broadband speed to be at least 25 Mbps (versus 4 Mbps). Achieving this ambitious goal nationwide in the next five to ten years will require FCC forbearance on Title II, massive capital investment, aggressive deployment of new technologies, and more competition. Title II may have been overkill, but it will not prevent us from reaching our broadband destiny.

About the author:Marc Tayer, author of the recently released book Televisionaries: Inside The Chaos and Innovation of The Digital Evolution, is a 30-year veteran of the media and communications technology business. Tayer led the team at General Instrument that developed the first digital TV system and submitted the first digital HDTV system to the FCC in 1990, and, during his career, has served in leadership roles at Motorola, Voom (Cablevision’s pioneering HDTV service), Aerocast, and Imagine Communications, among others.

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