Net Neutrality

Sen. Byron Dorgan
Senator Byron Dorgan (D-ND) reintroduced last year’s unsuccessful net neutrality bill, the Internet Freedom Preservation Act. The new bill is numbered S. 215 and it was introduced on Jan. 9th. The list of cosponsors reads like a who’s who of potential Democratic presidential candidates: Obama, Clinton, Kerry … Oh yeah, it includes a single Republican, too.
Sen. Dorgan, an MBA by training, observed we wouldn’t need net neutrality regulation if the broadband market was competitive,

Now perhaps if we had a competitive broadband market we would not need to be concerned about the discriminatory intentions of some providers. In a market with many competitors, there is a reasonable chance that market forces would discipline bad behavior.
But this is not the case today: FCC statistics on broadband show that the local cable and telephone companies have a 98 percent share of the national broadband residential access market.
For those that say, the market will take care of competition, and ensure that those that own the broadband networks won’t discriminate, that cannot be so when at best consumers have a choice of two providers.

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Bill Gates Engadget has a fascinating interview with Bill Gates, including this insightful discussion of net neutrality regulation: It’s really unfortunate that some of these networks in Europe are not being built because of these regulations and I think a lot of people want to know that Microsoft is on the same side as the consumer and they want to enable networks to be built that are not regulated by net neutrality laws. Right! But you’re either a network company who don’t want any restrictions, or a content company who doesn’t understand the disincentive to building out the networks. There were tons of things proposed that would have made the US just like Europe. These are complex issues. What the Read More ›

Jonathan S. Adelstein
AT&T’s opponents may not get everything they thought they had from the FCC’s review of the AT&T/BellSouth merger. The process was a disgrace, as I discussed here and elsewhere leading up to the final decision. No federal or state regulator identified any competitive or public interest harms, yet Commissioner Jonathan S. Adelstein and Commissioner Michael J. Copps leveraged the process to deliver cash to state and local officials, unwarranted discounts to AT&T’s competitors and 3,000 previously outsourced positions to the labor unions.
AT&T also volunteered to maintain “a neutral network and neutral routing in its wireline broadband Internet access service,” subject to certain limitations. I argue that a nondiscrimination principle applied to the Internet would outlaw the partnership, bundling and pricing strategies that are the basis for all advertising efforts (see, e.g., this and this).

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The FCC finally approved a long-overdue reform of anticompetitive video franchise rules by a vote of 3-2 after nearly a year of study. An Order will be issued sometime within six months. Grasping local officials won’t be able to drag out negotiations over franchise agreements with video service providers until the exhausted applicants capitulate to legal blackmail, a process which sometimes takes a year or two. Now, the negotiations will have to be completed within 90 days.
The deregulatory milestone is a victory for consumers, who will benefit from more rapid investment in competitive video offerings by AT&T and Verizon. It will also further reduce the possibility that broader telecom reform legislation will move through the next Congress, meaning fewer options to enact net neutrality regulation or pump up the current unsustainable universal service regime (which could lead to taxation of Internet traffic).

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The Wall Street Journal reports that cable rate increases are going to be the “most moderate in years.” The main reason: Verizon and AT&T are getting into video despite the opposition of politicians who want to raise taxes or fees and impose new layers of regulation. … cable companies that are facing the early waves of phone-company competition are showing the most restraint in raising prices. Cablevision, for example, which is facing threats from Verizon in much of its turf, has some of the lowest price increases in the business. Cablevision believes that its strategy of low price increases is responsible for a “surge” in revenue. This isn’t very surprising. As the price of anything falls, demand rises. However, there Read More ›

CNET reports that Google has been contacted by cell phone carriers who don’t want their customers accessing Google Maps from their cell phones. One Google executive claims: “we’ve been getting notes from some of the telco carriers who are saying ‘look, you need to stop our customers from downloading this thing’.” If the report is true, it says a lot about whether or not we need heavy-handed government regulation to protect basic Internet freedoms. Google Maps one of the best cell phone features I have ever used and I would be angry if my cell phone carrier tried to take it away. They could, of course. They’re under no network neutrality-type obligations. Any cell phone carrier could block access to Read More ›

If you thought “net neutrality” is primarily about preventing telephone and cable companies from blocking access to particular web sites or degrading someone else’s services and applications, you would be wrong. AT&T and BellSouth, who are seeking approval from the Federal Communications Commission to complete their merger, will voluntarily commit not to do those things. Consumer groups, however, want the FCC to impose an “additional fifth principle of non-discrimination” on AT&T and BellSouth as a condition of their merger.
If you’re keeping track, here are the four principles that are no longer subject to debate:

(1) consumers are entitled to access the lawful Internet content of their choice;
(2) consumers are entitled to run applications and services of their choice, subject to the needs of law enforcement;
(3) consumers are entitled to connect their choice of legal devices that do not harm the network; and
(4) consumers are entitled to competition among network providers, application and service providers, and content providers.

If the FCC falls for this suggestion, to impose a non-discrimination requirement on network providers, it would outlaw the partnership, bundling and pricing strategies that are the basis for all advertising efforts. That would harm consumers, who benefit the most from advertising.

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Congress seems prepared to outlaw blocking or degrading Internet sites, services and applications, yet supporters of net neutrality regulation aren’t satisfied. Oregon Senator Ron Wyden, for example, promises to block legislation that would benefit consumers with higher bandwidth and lower prices for video services unless it provides for stronger net neutrality regulation. My theory is the real objective of net neutrality regulation is to protect Google, Yahoo, MSN and the other Internet content providers from having to share online advertising revenue with companies like AT&T and Verizon who deliver their content. Online advertising generated $12.5 billion last year, and the content providers captured all of it. That’s not usually how it works when it comes to newspapers, broadcasters and other Read More ›

A report by S. Derek Turner for Free Press, the Consumers Union and the Consumer Federation claims that,

Other countries’ broadband success can be largely attributed to their successful implementation and use of non-discriminatory, open access policy.

Scott Wallsten at AEI has already looked into this and concluded that, “Most economists and most studies conclude that unbundling in the U.S. reduced incentives to invest in high-speed Internet infrastructure.” He points out that Korea became the world leader in broadband connections per capita before it required local loop unbundling in 2002, and that broadband penetration in Korea has “barely changed over the last few years.” Wallsten concludes that population density is the most important determinant, and that some regulations appear to be beneficial while and others are harmful. For example, if regulators price something below cost, the incumbents will have little incentive to upgrade it when they have to sell it at a loss to competitors. Wallsten also compares the benefits and harms of particular regulations. It’s interesting, but the problem is few regulations are perfectly calibrated. Most lead to unintended consequences, and create new constituencies who constantly clamor for more.

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Nearly 20 percent of Internet telephone test calls experienced unacceptable call quality over the last 18 months, according to Brix Networks. The company provides a free voice quality testing portal (TestYourVoIP.com) for measuring the quality of broadband Internet phone connections. Wall Street Journal columnist Lee Gomes interviewed Brix Chief Technology Officer Kaynam Hedayat about the findings: Why the decline? With the emergence of sites like YouTube, and music downloads and emails with large attachments, there is just more traffic on the Internet. Why are phone calls so susceptible to Internet traffic increases? Voice calls are very real-time-sensitive. If the other person’s voice drops off, you can’t carry on the conversation. It becomes like the old days when you called international Read More ›