Broadband Debacle: The FCC And The Political Economic Failure Of Trying To Please Everyone

Art Brodsky is right: the FCC lacks gumption simply to do its job regarding Net neutrality. It could, as he notes, follow the EPA’s model with climate change. Side-step entrenched corporate interests and a captured Congress all seeking deadlock. Just get on with a rulemaking. Even if in the EPA’s case it’s an an imperfect solution (substantively and bureaucratically).

At stake is the seemingly simple question: are data on the Internet to be treated equally? Or can corporate owners of pipes/spectrum licenses/transmitters charge different rates for partners, allies or the wealthy?

The FCC broadband quagmire has been more typical than not. The FCC is, however, moving closer to systemic failure by refusing to use its authority like the EPA did for climate change. Trying to placate all its political economic stakeholders is creating a car wreck.

Same Sumo, Different Match

Today’s Net neutrality sumo wrestle is actually an age old question, recast in different guise for today’s technologies and circumstances: are carriers commodities? Brodsky’s balanced criticism above is more insightful than the Usual Suspects’ breathless, clickbaiting blog headlines.

As long time readers know, we’ve represented most of the players at least at a VP or GC level, and in some cases, CEO. On the Hill and before the FCC. We’ve recalled here before when Art Brodsky was at Communications Daily before the 1996 Telecom Act, he’d call for quotes or information about ‘the game’ of the moment. Now so many years later, we remember our non-industry conversations easily but the rest is a deserved tedious blur. We’d debate the various science fiction shows then on TV. (He was a ‘Sliders’ fan).

Activist bloggers new to telecom/Internet regulatory matters are potentially dangerous ingenues. Not because of their conclusions. But because frequently they don’t understand political regulatory economics and history. They’re important for today and the future. Internecine warfare is par for the course. Whether the issue was the then-hot-topic of ‘video dial tone’ (TCP was thought to be a medical condition and ADSL was still science fiction), initial spectrum privatization, the infamous PCS spectrum auctions (especially C-block), local exchange access fees and the 1996 Telecom Act implementation, etc.

Back room alliances, coalitions, shakedowns by various Hill poobahs? Largely unchanged. Names change.

Back then when a Valley tech alliance met in a D.C. conference room, a meeting often waited for Netscape’s Peter H. to join via speaker phone telecon. He’d be on his crappy then-state-of-art AMPS analog cellphone driving in the Valley ostentatiously speaking over wind. Today, it’s now Google and they actually have a D.C. office. In each case, all sides warned X would be a ‘disaster for consumers and technology’ . (If you want to see real howling, go back and study Hundt’s political-economic decision to promote what were then called CLECs (competitive local exchange carriers) after the 1996 Telecom Act. Or the ‘modem tax’ rumor mill. We lived it).

Today’s situation is different for two reasons. First, a court this Spring limited the FCC’s jurisdiction over the Internet. Second, this particular FCC is addicted to political-economic stakeholder approval. The result is a broad band dance off the record and unstructured. Historically, most (but not all) comm/net warfare and posturing occurs within a regulatory docket established by a Notice of Proposed Rulemaking (NPRM) under the Administrative Procedures Act (APA). Today’s free form broadband merry go round makes many stakeholders and observers nervous. Rightly so.

What To Do?

FCC NPRMs are not for the squeamish. Before electronic filing they probably did hasten climate change by depopulating forests, converting trees into mounds of mostly unread paper. (The video dial tone wars between telcos and cable companies especially infamous). Hiding outcomes in obscure regulatory detail ensures only semi-transpaparency even to players. To the public, without an expensive interpretive shaman on retainer, almost always opaque. That’s true for all regulatory entities and their inevitable capture by stakeholders. Semi-transparent beats scompletely obscure and off the record any day.

The solution is, as Brodsky notes, for the FCC to purse its NPRM or issue a new one, clarify its claim of jurisdiction in light of recent precedent, and get on with it. Procedural formalism is completely disconnected with outcomes and good public policy. It does impose structure. Clarity and institutional action are not just a good in and of themselves. They preserve the perception that government functions and outcomes are legitimate. Post Goldman, AIG and TARP that’s no small thing.

For some relative newbie bloggers we castigated earlier, we’ll just point out that we personally and the tech industry generally spent years (and the latter possibly a billion) to keep the Internet out of the FCC’s jurisdiction. Telcos were and are where good ideas go to die – this having represented most of the telecom players whether IXC, RBOC, CLEC or LEC in various fora. For example, asking the FCC ‘to take control’ of the Internet ‘to prevent [insert bad guy here] doing X’ is purely situational outcome determinative thinking. Much of America’s commanding Internet lead is a result of a little heralded decision by the Reagan-era Mark Fowler FCC to classify such activity as outside ‘telecommunications services.’ Saving the Internet from traditional telecom regulation over the ensuing years is as important as ARPA’s initial promotion of TCP/IP to where the Net is today.

All the more reason for the FCC to fish or cut bait – and clarify its role after recent court decisions. It can’t propitiate all its stakeholders with off-the-record meetings. Get on with the rulemaking or promulgate a new NPRM. Dare to be resisted by some. Just get on with it.

Comments

  1. DrLeoStrauss says

    Court crushed FCC’s weak and timid Net Neutrality rule. As we all discussed here back in 2010. Granted, the DC Circuit is not the court it used to be, tainted with ideologically driven jurisprudential activism of the Roberts/Scalia/what’s his face.

    http://gigaom.com/2014/01/14/what-you-need-to-know-about-the-court-decision-that-just-struck-down-net-neutrality/

    At least they didn’t declare in dicta (the non-binding 90% of a court decision most people think is legally binding) that a spam bot is a person and entitled to vote.

    This outcome was completely avoidable if the FCC/its former Chair had the will and spine to assert their jurisdiction, rather than try and please everyone. It was possible to write a FCC Order that stood on legitimate statutory FCC authority and regulatory precedent.

    Current FCC Chair is a long time industry lobbyist and has uttered previously hostile views on Net Neutrality or simply rambled without apparent grasp of the subject. So there’s that. And Commission staff are so demoralized and ‘gun shy’ about going near Net Neutrality the notion of assertion from within the ranks is darkly humorous.

    At least those kids over at Reddit are on the case.

  2. DrLeoStrauss says

    FCC spitting into the wind and tugging on Superman’s cape with their so-called net neutrality rules, previewed today. Here’s a good summary.

    http://arstechnica.com/tech-policy/news/2010/12/throttle-away.ars

    For any following some of the spatting between Level 3 and Comcast over Level 3’s agreement to stream Netflix, that’s not really a question of net neutrality, although many blogs and twit heads manipulate people into thinking so. It’s a question of a contractual peer agreement – .i.e., both Level 3 and Comcast have networks. One (Level 3) is a major backbone. Comcast controls more local networks. Each party has a contract that they will exchange data at essentially equal costs.

    Netflix used to to an agreement with another company, called Akamai and paid for it. Akamai in turn paid Comcast a fee. Netflix switched to Level 3. Comcast isn’t getting paid anymore, even though the ratio of traffic flow from Level 3 to Comcast is now, because of Netflix, 5-1 in what Level 3 dumps into Comcast’s pipes. So one can see this isn’t about ‘freedom’ but a need to revise a peer contract between Comcast and Level 3 that was premised on more or less equal data flows.

    Just a head’s up because we’ll be subjected to alot of corporate business model spin in the name of ‘neutrality’ even as Congress remains firmly in the old telco death grip, meaning the FCC’s rules will be either overturned there or in the courts. Here’s an example from Motley Fool:

    http://www.fool.com/investing/general/2010/12/01/1-more-reason-to-hate-comcast.aspx

  3. says

    Hey, we didn’t aver that Google is now a carrier-humping Net neutrality surrender monkey. That was those wacky kidz at Wired who offer a take focusing on the sudden success of Android and Google’s potentially almost $5 billion volte face regarding open equal wireless.

    But since we’re pretty sure someone clamored for more carrier-humping surrender monkeys, here’s the link:

    http://www.wired.com/epicenter/2010/08/why-google-became-a-carrier-humping-net-neutrality-surrender-monkey/all/1

    OK, so that was really just more about having fun linking to the title. Regardless if one elects to analyze matters through the newly empowered incumbent handset perspective, Google’s ‘compromise’ sure marks a big change in a short time from its earlier posture and maneuvering as ‘open wireless Internet champion.’
    Dr Leo Strauss recently posted..Walking Down Corridors Of The Past Paying Tribute By Remembering

  4. anxiousmodernman says

    Still appreciating this conversation. I do not want to be doomed to backwater internet 1.0. Not enough money. Help!

  5. Dr Leo Strauss says

    @Alex
    Thanks Alex, am very familiar with the difference between peering (say at Metropolitan Area Exchange (MAE) East or other contexts) and today’s P2P and have been for decades.

    My points about carriers seeking to impose price discrimination on a commoditized environment (CDNs also facing that problem) remains. And the political economic reasons for the desire to shift capital investment into a completely unregulated ‘new business opportunities’ Internet II.

    Re wireless, its exclusion is significant because its growth vector for net data usage. The wireless ecosystem is not as you suggest merely packets (time sliced, frequency hopping, CDMA, pick the mode, etc.) in isolation, but what bands are engaged, which networks used, what happens to the data on the backhaul from the tower, and finally the end user device itself. To propose (declare?) the fastest growing and most vibrant sector of Net use is outside Net neutrality (as yet defined) is astonishing.

    Essentially Google and Verizon propose a largely undefined but hands free Internet II for ‘new business opportunities’. Wireless also would be outside any Net neutrality. The current Internet? Possibly left to possibly languish if not degenerate. In worst case it becomes modern form of USE(LESS)NET, largely abandoned as tech industry and telco CAPEX and innovation seek more immediate monetized recoupment elsewhere. Market incumbents naturally also see this regulatory proposal as a sanctioned barrier to entry for new innovative ideas and technologies. Another tool for entrenched incumbents to ‘manage’ disruptive technologies and maintain market position and customer capture. Meanwhile, marketing from all sides will induce consumers to add more subscription tiers which represent additional cost shifting onto them for the newly created tiered pricing/prioritized traffic.

    If one chooses to have a different take, no problem. That’s what discussion is all about. It’d be nice to be wrong about it all. And it is still early on. But we’ve known the players from tech to telcos for decades. We’ve written their filings. Their testimony. Their PR campaigns. Worked Congress. And we know the disparity between what their business units say and plan inside the tent and what is shoveled to the public.

  6. says

    @Dr Leo Strauss

    With respect, P2P technologies and Internet peering are very different things. Peering = settlement-free interconnect, to use a telcoism. P2P = one of various network protocols like BitTorrent, Skype etc. Also, Internet transit is highly competitive. What is debated is transit of the access segment.

    (Also, how exactly does one go about prioritising traffic on a cellular air interface? That’s the gating factor. It’s radio – it’s probabilistic. You can’t make the electromagnetic spectrum more likely to forward YouTube packets. Even if you could, expensively and complicatedly, increase the tx power, you’d contend with both prioritised and nonprioritised traffic for other terminals.)
    Alex recently posted..scraping the barrel

  7. says

    @Aldershot

    They ruled that, if they want to do anything tending to reverse the Bush era FCC decision that broadband isn’t a telecoms service, and therefore isn’t subject to common carrier, they need to explicitly reclassify it into Title II (Telecommunications Services). At which point both common carrier and special access (i.e. the right to run your own access fibre over RBOC layer-zero infrastructure like trenches, ducts, and poles) come into effect.

    Re the Google/Verizon thing, as far as I can see it’s basically a big CDN contract. What Akamai’s been doing for the last 15 years. And it certainly doesn’t stop Level(3), Sprintlink or whoever selling you straight IP transit (or VZ Biz/ex UUNet/MCI doing the same regardless of what corporate says). Anyway, as the top 10 traffic ASs are increasingly either platforms like Google, CDNs like Akamai, or eyeball networks, arguing about the transit world is out of date – everyone’s heavily into direct peering.
    Alex recently posted..scraping the barrel

    • Dr Leo Strauss says

      The FCC Chairman’s existing Third Way *proposed* rule, Alex, is an attempt to do what you suggest, bring the Internet under common carrier Title II jurisdiction, with the *promise* that the FCC would not then use all its regulatory powers to impose other things on the Internet other than the Net neutrality outcome and perhaps some universal service buildout obligations to rural and other areas without broadband. As Brodsky and others (including yours truly) recount, the FCC’s record of enforcing telco promises or even imposing fines is almost non-existent. This so called Third Way with its ‘light touch’ regulatory promise has yet to make it into an actual rule.

      The Google Verizon proposal is far more than just a Content Delivery Network (CDN). A CDN is now largely a commodity service. It uses servers strategically placed around the Net and backbone overlays to ensure that its customers data are smart routed and appear to arrive faster and with less latency. Akamai, as Alex noted, has been doing this for a long time, caching webpages of many famous popular websites at different servers, reducing the number of server hops a user’s click has to go through before response. The increase in perceived speed can be up to 25%. All of this works well under the existing Internet architecture except CDNs too dislike discovering their once cutting edge technology is just another commodity.

      Not surprisingly, AT&T, Verizon, Comcast, etc. are desperate to avoid being commodities. They want to enforce tiered pricing for their pipes. For example, earlier Verizon wanted to ‘reserve’ 80% of its network capacity for itself (it has IPTV fantasies for a while) and partners. Leaving the ‘rest of us’ with the remaining 20%. (Much of the IPTV talk reminds us of the ‘interactive TV’ delusions of the mid 1990s). The peer-to-peer (P2P) arrangements do work – where one party contracts directly with other over their traffic handling. They and hybrid CDN/P2P entities are all devoted to create and sustain pricing differentiation with the commodity of ‘bandwidth’. And the figuring out a way to charge (a) the consumer; or (b) create a barrier to entry for new market entrants (read start ups and competitors).

      Arguing about transit is in fact very much the point, as is discriminatory treatment/pricing. The ultimate political-economic strategic goal here is to enforce incumbent market power not only for pricing but for introduction of technological change. This is not abstract but very concrete: the iPhone when introduced was a disaster for the wireless industry because the end user device dictated the use, demands, features and rate of innovation change on networks. Previously, phone companies decided what phones to carry, told Nokia or Sony Ericsson what features they would permit on a phone, etc. Carriers became dumb pipes. AT&T may never recover brand-wise.

      By essentially dumping the current Internet into a faux Net neutral world underserved with capital investment and innovation going forward (faster network upgrades and innovation going to the new unregulated Internet II) the telcos essentially will create a tragedy of the commons, all while benefitting from charging customers for Internet I access and then for the working, technologically more innovative ‘new services’ as premium add ons. Again underscoring that Google and Verizon explicitly say wireless should be exempt from neutrality at all.

      Alex’s point actually makes this point. If Akamai and others have been using CDN/P2P technology successfully with the current Internet, why do Verizon et al. need to be ‘liberated’ to a corporatist new Internet II? Pricing power. To turn a commodity into a perceived scarcity.

      But Shakespeare was wrong, all the world is not a stage, merely a brand.

  8. Comment says

    Google-Verizon seems to be using Newt’s strategy for killing Medicare – ie let the neutral net wither on the vine.

  9. Dr Leo Strauss says

    The Google-Verizon proposal is on its face an incredibly cynical ploy. The holes in it are a mile wide. The inducement that the current Internet will be ‘neutral’ meaningless (wireless noticeably exempt) if undefined new business models are essentially a parallel Net. The current Internet will naturally suffer from future capital investment and innovation — the incentives and resources are skewed to migrating customers towards the wide open ‘new business models’ and the hoi polloi left in an inevitably soon to blossom digital ghetto/LITE trial version destiny.

    More to come.

  10. Comment says

    So far we have not heard Newt make the sweeter demagogic connection – that some of the people supporting the GROUND ZERO MOSQUE! (peaceful Moslems, pls refudiate) are ones that probably opposed maintaining the steal beam cross that emerged from the rubble of the twin towers – So far we have not heard anyone make that link – Obviously, there is no logical connection, but it’s a classic demagogic move – because you just know it would generate material for direct mail.

  11. Aldershot says

    “First, a court this Spring limited the FCC’s jurisdiction over the Internet.”

    Why is this?

    • Dr Leo Strauss says

      Aldershot, the FCC asserted ‘ancillary jurisdiction’ to intervene on Comcast’s initial decision to interfere with BitTorrent traffic on its network – ancillary because as mentioned in the post the FCC never assumed or was granted by Congress authority to regulate the Internet.

      This item from EFF sets forth the details and the dilemma we described above – situational outcome determinative thinking. If the current FCC reclassifies the Internet as simple common carrier traffic, *potentially* subject to full FCC regulation, then what happens when future or current commissioners decide to do something that Net neutrality advocates don’t like?

      http://www.eff.org/deeplinks/2010/04/court-rejects-fcc-authority-over-internet

      That’s why we agree with Art Brodsky – in the face of entrenched corporate agendas and a deliberately deadlocked Congress, the FCC simply should go forward with its rulemaking or promulgate a new NPRM and dare to be unpopular given this jurisdictional situation.

  12. anxiousmodernman says

    Forgot where I read this, but it seemed right. The fact is that the average (and that’s what makes it so amazing) American household now spends more on phone/data than other utilities (water, gas, electricity) combined. Off the mark? Again, can’t remember where I read that.

    But you can see why the carriers want to push for the tiered-service model. The business models of the web are on shaky ground, and this would be a guaranteed way to push up fees for service.

    I already submit to this. I pay the 4G surcharge to Sprint for my EVO. $120 extra a year on top of the other thousand bucks to the carrier. For the modern knowledge worker (broadly conceived), access to the fat data pipelines are not really optional.

  13. anxiousmodernman says

    She hosts a lot of discussions. I remember the particularly boring National Governors Association meeting. 50 people trying to get their 30 seconds in. Useless. She wins, though.

  14. Dr Leo Strauss says

    Imagine this CNBC-hosted panel from the 1990s: Bill Joy of Sun, Kevin Kelly of Wired, Nicholas Negroponte from MIT talking to the Money Honey ™ about tech’s glowing future. What year? 1996? 1998? 1999?

    Nope. 2010 baybee. Except Negroponte had the grace to give the Money Honey a sound bite for her branding efforts, declaring the print book to die in 5 years.

    http://techcrunch.com/2010/08/06/physical-book-dead/

  15. Dr Leo Strauss says

    Btw, implicit in the above is a general dissatisfaction with the current Chairman’s existing efforts in a docket to discuss his compromise Blair-esque ‘Third Way’ compromise – pull the Internet into the morass of common carrier regulation but promise to be gentle and use the so called ‘light touch approach.’ But even there, better to get on with it.

  16. Dr Leo Strauss says

    Thanks MM – those links’ Time Machine ride is a weird trip.

    [ flashback init]

    When Tower Records was new and hip. WiReD a truly subversive magazine. And the world was 99% analog.

    When former Common Carrier Bureau mandarins descended amakudari style (http://en.wikipedia.org/wiki/Amakudari) to industry jobs – the grandeur of it all was beyond just rotating doors.

    When everything was by fax, overnight or courier. AOL mail didn’t talk to MCI which didn’t talk to CompuServe or Genie. When only a furtive few had an actual dial up and shell ISP account for direct backbone access. 9600 baud was CRAZY fast. When people looked forward to getting the AOL 3.0 CD floppy disk in the mailbox.

    Perhaps as coincidence, we saw Tom Wolfe’s The Electric Kool Aid Acid Test re-released at a store earlier tonite.
    http://en.wikipedia.org/wiki/The_Electric_Kool-Aid_Acid_Test

    [ /flashback]

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