Obama’s FCC inadvertently gave telecoms companies another shot at making a pay-per-view-style Internet.
A couple of years ago, the major telecoms companies — Verizon, AT&T and Comcast — sought to redefine the Internet. The internet service providers attempted to differentiate access to the Internet — charging different prices for different rates and types of downloads, restricting or even blocking certain types of traffic, offering preferential treatment to preferred partners and limiting access to unlicensed media.
In 2005, AT&T’s then-CEO Edward Whitacre commented on the nature of the free Internet and content providers such as Google, Vonage and Yahoo!. “How do you think they’re going to get to customers? Through a broadband pipe,” Whitacre said. “Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes?”
“The Internet can’t be free in that sense, because we and the cable companies have made an investment,” he continued, “and for a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!”
Since Whitacre made this comment, Google has expanded and is now an internet service provider via its Google Fiber service.
Last Monday, Verizon took another shot at controlling its subscribers’ access to the Internet. The United States Courts of Appeals for the D.C. Circuit heard arguments from the company that the Federal Communications Commission exceeded its authority in the establishment of the 2010 Open Internet Order, which blocked broadband providers from discriminating against Internet content. Verizon sued in 2011, stating that the order amounts to a common carrier regulation for high-speed Internet providers.
Without the Open Internet Order, broadband providers would have free reign to deliver content to the end-user as they feel. As it stands now, broadband providers must deliver and send data without considering the nature of the content. As an increasing number of broadband providers are, in reality, vertical distribution channels, the ability to discriminate with deliverable traffic poses a true threat to free speech and free access.
For example, Comcast own NBC Universal, a major television and motion pictures conglomerate that includes NBC, Universal Pictures, Focus Features, USA Networks, Syfy, PictureBox Movies, Bravo, Style, Telemundo, the Weather Channel and 32 percent of Hulu. Theoretically, Comcast could block access to services that illegally distribute their content — such as YouTube and BitTorrent sites — charge a higher access fee for competitors’ services, charge a licensing fee to “outside” websites for transmission over its network and license the establishment of new websites on the Comcast network. This would amount to a system in which content-access is purchased and the right to freely post and share on the Internet is forever lost, similar to the current radio and television models.
This represents not a hypothetical consideration, but a real, tangible threat. In March, Comcast announced that use of its Xfinity TV service — a video-over-Internet service — on the Xbox 360 will not count against the user’s monthly download quota of 250 gigabytes. While Comcast argues that it is transmitting its own services over its own network, constituting no special advantage in regards to “outside traffic,” competitors, such as Netflix, argue that this constitutes unfair play.
“If all you’re stuck with is Comcast, you can’t even go with someone else,” said Parul Desai, telecommunications and broadband policy counsel at Consumers Union, in an interview with the New York Times. “You’re going to be stuck with one provider who can control essentially what services you use by limiting the caps and only allowing their services to be exempt from the caps.”
“If I watch last night’s ‘S.N.L.’ episode on my Xbox through the Hulu app, it eats up about one gigabyte of my cap, but if I watch that same episode through the Xfinity Xbox app, it doesn’t use up my cap at all,” wrote Reed Hastings, head of Netflix, on his Facebook page. “In what way is this neutral?”
A common carrier is a private company that offers basic infrastructure. These companies, due to the fact that the infrastructure they offer makes them difficult or impossible to compete with, are prone to monopolization and could impose an unfair burden on its customers. To avoid this and to ensure indiscriminate treatment to all customers, common carrier regulations were introduced.
In the early days of the World Wide Web, AT&T controlled the nation’s telecommunications infrastructure. Afraid that AT&T could position itself to corner the market on online services, Washington differentiated the basic telecommunications infrastructure’s common carriers as “telecommunications services” — which were heavily regulated under the FCC — and granted the online services, such as Google, the moniker “information services” — which were mostly exempt from FCC control. This allowed, theoretically, for the online services to flourish and compete free of the limiting presence of the “gatekeepers” controlling customer access. This was codified in the 1996 Telecommunications Act.
Things went wrong when, under deregulation — which allowed cable companies to offer telephone and Internet services, and vice versa — the “telecommunications services” started to offer “online services.” This blurring of the line allowed the telecoms companies to convince the FCC that they were now openly competing against each other, making moot the fear of monopolization that the law was drafted to address. So under the Bush administration’s FCC, the broadband services were named “information services.”
This effectively deregulated the Internet service market, striking any regulations on free access to the Internet for the consumer, or net neutrality. In the 2005 U.S. Supreme Court case National Cable & Telecommunications Association v. Brand X Internet Service, Justice Antonin Scalia, writing for the dissent, argued the telecoms’ argument — that because delivering content is their primary function, the importance of their role in the control of the delivering infrastructure is minimal — was laughable.
If, for example, I call up a pizzeria and ask whether they offer delivery, both common sense and common “usage” … would prevent them from answering: ‘No, we do not offer delivery – but if you order a pizza from us, we’ll bake it for you and then bring it to your house.’ The logical response to this would be something on the order of, ‘so, you do offer delivery.’ But our pizza-man may continue to deny the obvious and explain, paraphrasing the FCC and the Court: ‘No, even though we bring the pizza to your house, we are not actually ‘offering’ you delivery, because the delivery that we provide to our end users is ‘part and parcel’ of our pizzeria-pizza-at-home service and is ‘integral to its other capabilities.’ … Any reasonable customer would conclude at that point that his interlocutor was either crazy or following some too-clever-by-half legal advice.
Lack of will
Verizon’s challenge is an indictment of the Obama administration’s “half in, half out” approach to net neutrality. On the campaign trail in 2008, then-candidate Barack Obama promised to take a hard stance to protect net neutrality, and the courts gave him a clear path to do exactly that. The courts have made it perfectly clear that the FCC had the right to reclassify broadband providers “telecommunications services,” taking traffic discrimination off the table legally, easily and permanently.
However, 48 members of Congress moved in 2010 to block the FCC from reclassifying broadband service, arguing that doing so would lead to court fights and ultimately would discourage investment in broadband infrastructure. So the FCC drafted a workaround — the broadband industry would keep its Bush-era classification while the agency would impose common carrier-like rules to limit traffic discrimination. Many have decried this as heavy-handed and enabling the FCC to create extra-legal control precedents, or “ancillary jurisdiction.”
“If ‘ancillary jurisdiction’ is enough for net neutrality regulations (something we might like) today, it could just as easily be invoked tomorrow for any other Internet regulation that the FCC dreams up (including things we won’t like),” wrote Corynne McSherry for the Electronic Frontier Foundation. “For example, it doesn’t take much imagination to envision a future FCC ‘Internet Decency Statement.’ After all, outgoing FCC Chairman Martin was a crusader against “indecency” on the airwaves and it was the FCC that punished Pacifica radio for playing George Carlin’s ‘seven dirty words’ monologue, something you can easily find on the Internet.”
In this situation, based on the arguments of the case, Verizon seems to be right. The FCC has broken the rules of the game and has sought to correct an apparent wrong with an actual wrong. This does not change, however, the fact that what Verizon seeks to gain from will radically redefine the individual’s free access to the Internet.
There are two elephants in the room right now. First, the telecoms cannot be expected to maintain free access to the Internet if they are not compelled to do so. The nature of business suggests that — despite statements of altruism — they will monetize their resources to the greatest degree they can manage. Second, while the FCC is free speech-friendly now, it hasn’t always been, and the attitude of the FCC changes from administration to administration.
“In the long term you have no real certainty as to how you’re going to be regulated and which aspects of common carriage the FCC can impose on you,” said Berin Szoka, head of the free-market group TechFreedom. He supports the FCC’s current classification of broadband because it legally limits the extent of influence the FCC can exert.
However, a solution to all of this can be found with how the FCC treats cell phones. Cell phone service are considered common carriers and have a “telecommunications services” classification. However, the FCC has ruled it will not actively interfere with the cell phone industry unless it has a reason to do so. This allows the cell phone industry to freely market its business, while ensuring that customer discrimination cannot happen.
The D.C. Circuit Court’s decision is due later this year or early next year. Depending on whether the court refers it or not, a final resolution may be years away and Congress, currently deadlocked, cannot be counted on to resolve the situation.
Beyond that, right now the FCC has the ability to make network neutrality permanent. It just requires the will to actually do it.