Network Neutrality Rules Can't Be Bad. Can They?

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There’s a new sheriff in town. Has he already decided who the “bad guys” are?

On Monday, FCC chairman Julius Genachowski likened the agency to “a smart cop on the beat” in proposing to establish rules “preserving a free and open Internet” (see FCC to Formalize Network-Neutrality Rules).

As my colleague John Eggerton has been prodigiously documenting, reaction to Genachowski’s proposal came swiftly from service providers, interest groups and legislators — see Industry Questions Need for Open-Access Cop, Republicans Move To Block FCC’s Network Neutrality Initiative, Genachowski Praised For Net Neutrality Proposal, and FCC Republicans Have Problems with Genachowksi Proposal.

On the face of it, the chairman’s suggestion that the FCC have formal rules to enforce network neutrality concepts looks like a politician pledging to be “tough on crime” — after all, who doesn’t want an “open” Internet? How could you be against the idea of protecting a vital communications resource from abuse by private interests?

Genachowski, in brief, believes consumers and Web businesses need the FCC to ensure that ISPs do not discriminate against specific applications or content, and that the Internet will benefit from a “transparency” rule that requires disclosure of network-management practices.

But it’s not the general principle of network neutrality that has Internet service providers concerned. It’s how that is put into practice. Even if you agree that Genachowki’s fears about the threats to the Internet’s continued openness are well-founded — and not everyone does — good intentions can have negative consequences.

Do you need proof of good policy intentions leading to millions of dollars flushed down a hole? Take a look at CableCards.

The FCC several years ago required cable to open their video services to third-party devices. The MSOs did that with CableCard in 2003. Then the agency, responding to CEA pressure, decided that wasn’t enough — that cable operators would also have to use CableCards in their own set-top boxes, with the theory that the technology would work better as a result (that’s the so-called “integrated set-top ban”).

And the result of the integrated set-top ban? Hundreds of millions of dollars spent by the cable operators in complying with the rule, shipping more than 14 million CableCard-enabled boxes to date, according to the NCTA. But it didn’t make a difference. CableCard still failed to achieve the CEA’s wishes — apparently the group is not willing to concede the possibility that consumers by and large don’t want to buy TVs with integrated cable access. And now it has asked the FCC to consider whether some additional regulations are needed (see CEA Asks FCC To Review CableCard Rule).

Meanwhile, apart from the possibility that the cure will be worse than the disease, there’s a question of whether there’s any disease in the first place. Is Genachowski’s network-neutrality push trying to fix what ain’t broke?

“The Internet in America has been a phenomenal success that has spawned technological and business innovation unmatched anywhere in the world,” wrote Comcast EVP David Cohen in a blog. “So it’s still fair to ask whether increased regulation of the Internet is a solution in search of a problem.”

The FCC chairman, in his speech Monday, recalled Comcast’s throttling of P2P traffic, which led the agency to order the MSO to change its practices (improperly, in Comcast’s view). But it’s not clear how new FCC rules would have resulted in a different outcome in this case, given that Comcast responded to public pressure to modify the way it deals with congestion on its broadband network.

Others say Genachowski — with his cop metaphor, and the warning that “broadband providers’ rational bottom-line interests may diverge” from consumers’ interest in accessing competing Internet video and phone services — has already concluded that ISPs are the enemy.

VideoNuze’s Will Richmond, for one, says we should be concerned about the FCC’s fairness under his leadership.

“Mr. Genachowski has picked up where his predecessor, Kevin Martin, left off: pre-emptively tagging the nation’s cable and telco broadband ISPs as untrustworthy conspirators plotting to wall-off the Internet to all but their own favored services,” Richmond wrote in a blog post this week.

He continued: “Though professing to ‘ensure that the [FCC’s] rulemaking process will be fair, transparent, fact-based and data-driven,’ by first proposing the rules be adopted, before evidence of their very need has been established, the chairman has only ensured that the rule-making process will be anything but what he says he wants it to be.”

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