President Obama

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The FCC Rules on Net Neutrality
| published March 5, 2015 |

By R. Alan Clanton
Thursday Review editor

In one of the most-watched high-stakes votes ever conducted by the agency, the Federal Communications Commission voted last week to embrace the concept of net neutrality. Its vote means that the FCC—using the provisions found under Title II of the Telecommunications Act—classifies providers of internet access and digital bandwidth in the same category as public utilities such as power companies and water suppliers.

But the decision is far from the final statement on the internet.

As most media analysts and technology experts have been quick to point out, the lawsuits will surely follow, because companies like Verizon and Comcast—providers of those increasingly crowded traffic lanes—argue that the FCC has no such power to interfere in commerce. The internet, they argue, is a commercial enterprise, not a public utility.

Indeed, the two dissenting votes on the five-member board came from Republicans who say that the FCC is attempting to mitigate a problem which 1) does not exist, and 2) would be best left to market forces to correct, if in fact the notion of non-neutrality ever becomes a genuine threat to Americans.

At the heart of the matter is the “neutrality” of the internet, or the lack thereof. Net Neutrality means simply that providers of internet access—Comcast, Verizon, AT&T, Time Warner, Charter, Sprint (to name a few)—make those digital lanes available without regard to content or context. It also mandates that companies like Comcast and Verizon refrain from allowing big vendors—such as Netflix, You Tube or Google—to purchase wider, faster lanes of access, leaving smaller companies or services left creeping along in the slow lanes.

The FCC vote, which was 3-to-2, was immediately controversial, not just for its predictably split decision, but also for what some in the GOP suggest is presumptuousness by FCC members. Ajut Pai and Michael O’Reilly, FCC members who voted against the Open Internet Order, say that the FCC does not have the regulatory authority to meddle in commerce in a manner tantamount to governmental price-fixing.

But supporters of net neutrality argue that the ruling establishes precisely the opposite effect: a general guarantee that internet providers cannot fix prices for access or speed by charging the largest technologies and services a fatter fee for better speeds and space, while relegating all other users and technologies to slower speeds or constricted access. Supporters of neutrality worry also that a tiered-access structure will, in reality, hamper and inhibit the development of new technologies and online start-ups, while enabling the big players to consolidate their own control of bandwidth and entertainment.

Despite the sometimes shrill conversation (on both sides of the internet divide) neither side is completely wrong, nor are the most vocal members of either movement minions of evil. Comcast, Verizon, & AT&T have already made the reasonable argument that the digital superhighway is—after all—a road they spent billions of capital cash constructing. What possible objection could anyone have if they find it fiscally sensible to charge the biggest users of that electronic highway more money? More importantly, they argue, no customer will experience a deliberate “slowdown” in order to compel others to pay more; some—like Netflix—will simply pay more for the use of that all that extra bandwidth. Defenders of a tiered-internet say that it is a non-issue—a straw man to be torn down in dramatic fashion.

But consumer groups and scores of groups allied on the same side of the issue say that those “slowdowns” are not only real, but have in fact already happened—many times. They point to Verizon and AT&T, and the recent lawsuits those companies faced when it was proven that the wireless companies were not, in fact, delivering the access and speeds promised to customers. And in some cases, those companies had engaged in throttling access, sometimes based on content, sometimes (though neither company admitted as much) as a means of encouraging customers to pay for more expensive plans. And critics of the tiered-system say that big cable providers like Comcast and Time-Warner already engage in mediating speeds and access based specifically on various pricing models.

Some industry observers say the most important factor in a pay-for-speed system will be the damage such a model will cause to innovation and technological development. Famously, much of what we now understand to be the internet and its hundreds of tools, gadgets and apps were the result of small companies and individual developers and entrepreneurs, many of whom operated with little or no start-up cash. Their inventions and developments often made it to market anyway, and defenders of net neutrality say that in a system whereby the big players can afford to buy premium access, the smaller players will be pushed aside, or crushed. Many new technologies and applications may never see the light of day if Verizon, Comcast, Time Warner and AT&T are allowed to give premium access to the largest users of the internet, while relegating all others to slower lanes.

The White House has weighed-in on the issue, and even has a page on its website devoted to the question. It says that neutrality will continue to ensure technological growth and innovation.

“Most internet providers have treated internet traffic equally. That’s a principle known as net neutrality—and it says that an entrepreneur’s fledgling company should have the same chance to succeed as established corporations, and that access to a high school student’s blog shouldn’t be unfairly slowed down to make way for advertisers with more money.”

Comcast, Verizon, Time Warner, AT&T and the other biggest players don’t see it that way, and argue that just as some people pay extra for the overnight delivery of a package or letter through the Postal Service or FedEx, so too should those heaviest users of internet bandwidth and speeds pay more for their service—for which, typically, those users like Netflix and You Tube make their own money anyway (either from individual users, advertisers, or some combination of both).

The issue is certain to end up in court, sooner, not later. When the FCC crafted a similar but somewhat more awkwardly-worded version of the ruling back in 2010—in which the FCC said in effect that internet providers could not impose limits on users and could not block access to websites—Verizon wasted little time. The cell phone giant filed a lawsuit in Federal court insisting that the FCC has no such regulatory or administrative powers. Verizon used all its lobbying and litigating muscle to push the case forward, but three years later a Federal Appeals Court rejected the FCC’s 2010 internet neutrality provisions. Other big internet providers, like Comcast and Time Warner, watched this case closely. After the Appeals Court decision early last year, bandwidth-hungry services like Netflix were more-or-less forced to negotiate; after an undisclosed agreement with cable giant Comcast, Netflix now pays for premium access to Comcast customers nationwide. Verizon, AT&T and other all followed suit, instigating negotiations with their biggest customers to likewise establish pay-lanes for faster upload, download, and streaming services.

The FCC’s new ruling has been crafted more carefully, and with the unvarnished support of the White House. But don’t expect that to tilt the scales in favor of the Neutralist Movement. Lawsuits similar to Verizon’s 2011 challenge are sure to follow.

In the meantime, the fighting over control of that bandwidth may be a battle for control of the proverbial burning house. The biggest giants of online activity—Google, Apple, Microsoft, Facebook, Twitter, Skype—all seek newer, more elegant pathways to reach people worldwide. If one thinks of the fight between the FCC and the big ISPs as the front lines, think of the strategic maneuvering of the Silicon Valley forces as the distant flanking wars. All have expressed open commitments to providing internet access and content to billions of people isolated from traditional, expensive hardwired forms of web access, and to finding a way to reach more customers, more openly, than what it now available using the copper or fiber optic networks of Comcast, Verizon and AT&T.

For all of these companies (Google, Apple, Facebook, Microsoft, etc) that means access to outer space. All have set aside hundreds of millions—even billions—to invest in technologies to make the internet and streaming content accessible using geostationary satellites and simple, low cost applications on the ground. Companies like Elon Musk’s Space-X and Greg Wyler’s OB3 will be putting scores of internet-platform satellites into medium-Earth-orbit. (OB3 has already placed a dozen such satellites into orbit, and plans to place dozens more this year and next.)

But the battle to retain customers who might switch to using space-based internet is a fight Comcast and others will face soon enough. Without the crucial revenue from the fast-lane users like Netflix, ISPs like Comcast and Verizon won’t have the capital needed to develop their own internet alternatives to the cable wire. But with the source of revenue, thanks to a tiered internet, those companies live to fight another day on another battlefield.

Related Thursday Review articles:

President Weighs-In on Net Neutrality; R. Alan Clanton; Thursday Review; November 14, 2014.

Net Neutrality: Is Some Web Access More Neutral Than Others?; Thursday Review; July 11, 2014.