March 26, 2014 12:11 PM

Net Neutrality Rules: Do They Really Limit "Cattywampus" ISPs?

On Sunday, the Wall Street Journal reported that Apple was in talks with Comcast to provide a new type of streaming TV service.  The report was vague on the specific service except to note that: 1) the parties were "talking," 2) an Apple device-to-be-named-later was going to be used, 3) the service would involve a "managed" (or guaranteed bit-rate) transmission path over Comcast's ISP, and 4) would require a significant investment by Comcast.  

Predictably, the Twittosphere erupted with the swift condemnations due any speculative service that whiffs of net neutrality blasphemy.  If the speculation involves Comcast, then it wreaks of blasphemy.

The Meandering Meaning of Net Neutrality

But, what is the "dogma" of net neutrality?  Is it the FCC's 2005 Internet "Freedoms?"  Is it the Open Internet Rules that were vacated--no blocking and no unreasonable discrimination?  Public Knowledge just told the FCC that the two biggest "threats" to the Open Internet are ISP data caps and "peering"/interconnection disputes.  PK at pp. 6-10.   

If net neutrality can be said to have any consistent premise, it is best depicted metaphorically in this 14 second, Geico commercial.
 

The ISPs are like "Mr. Tickles."  The whole rest of the Internet stakeholders are represented as the man in the portrait holding Mr. Tickles.

Yet, firms like Cisco, who on Monday announced a 2 year and $1 billion commitment to cloud services, as well as competitive over the top companies like Amazon, Hulu, and yes, Apple TV, continue to want to invest in cloud services.  In other words the leading Internet infrastructure equipment maker fully expects that--even without rules--the ISP (Mr. Tickles) will continue to "hold still" and not "git all cattywampus" on them.

The Flimsy Factual Bases for "Concerns" About the Open Internet

First, let's acknowledge one point on which everyone should be able to agree.  The "open Internet" is valuable to every consumer, and every seller, that touches the Internet economy.  In fact, the rise of the Internet economy seems to be proof that the "open Internet" is so important that virtually every aspect of that "openness" is already guaranteed by existing contracts between the thousands and thousands of Internet stakeholders.  

But, those that think rules must be necessary to ensure the continued openness of the Internet must have some reasons, right?  Well, if we look closely, the concerns that have been advanced in past FCC proceedings have been largely based on theoretical predictions that haven't really materialized.

Peering Concerns

The first FCC concerns about "peering" (i.e., settlement-free Internet interconnection) vs. "transit" (i.e., "paid" interconnection) were expressed by Internet backbone competitor GTE in the MCI/WorldCom merger. See paras. 147-150.  The FCC adopted GTE's concern, which was that the combination of WorldCom's UUNet and MCI's backbone would have had no "peers."  Thus, because a combined WorldCom/MCI would have been able to require "paid peering" by any other ISP or backbone seeking to use its network, the post-merger firm could raise the costs of any new entrant.  

This disaster was averted when MCI agreed to divest its Internet backbone to Cable and Wireless.  In fact, the divestiture to C&W was considered a huge failure, and MCI's alleged bad faith failure to satisfy the concerns of the Department of Justice was a primary concern behind the DoJ's challenge to WorldCom's proposed acquisition of Sprint 2 years later.   In short, the remedy didn't work, but was apparently unwarranted, anyway. 

"Net Neutrality, Broadband Discrimination"

In 2003, Professor Tim Wu argued, in the above-titled paper, that "[c]ommunications regulators over the next decade will spend increasing time on conflicts between the private interests of broadband providers and the public's interest in a competitive innovation environment centered on the Internet."  With the exception of Comcast's protocol-specific BitTorrent throttling in 2007, these concerns have largely failed to materialize.  Notably, Prof. Wu never mentions the FCC's previous (and PK's current) concerns about peering as a cause for concern.

Broadband ISP "Incentives" to Discriminate, Circa 2010

In the Open Internet Order, the FCC largely parrots Prof. Wu's concerns that broadband ISPs have the incentive and the ability to discriminate against "over the top" providers offering services that compete with the voice and/or subscription video services sold by the ISPs.  The FCC first establishes, using the ISPs' own statements, that consumers view certain online applications as substitutes for voice and subscription TV service. Order, para 22.

Then, the FCC simply assumes from comments of groups advocating rules (and not ISPs or voice/video competitors) that, of course the ISP has incentives to discriminate against online alternatives.  Yet, the record contained no data supporting the FCC's conclusion (showing, e.g., higher profits in TV/voice than broadband Internet).  Order, paras 23-24.

Public Knowledge expressed no concerns about data caps and peering in the 2010 docket.

The Problem with Apple TV . . .

Supposedly, Apple wants Comcast to help it deliver some kind of super-cool IPTV that will actually make you want to buy video service from Comcast (vs. get it on the Internet).  As part of this service, Apple wants Comcast to offer Apple TV a guaranteed quality of Internet access, so that its video content would not be affected by general congestion issues that can otherwise cause videos to buffer.  And that higher quality access, even if not exclusive to Apple, is a problem . . .

Is The Problem With "Net Neutrality"

My fear is that "net neutrality" is no longer about just a reasonable set of minimal consumer expectations designed to keep the Internet creepy enough to hold the Interest of consumers and the NSA, while at the same time keeping it wholesome enough to prevent SkyNet from becoming self-aware by 1997 (or whatever similarly-fevered nightmares the rules protect us from). 

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Without a presumptive tolerance for commercially-reasonable service deviations, net neutrality becomes a fetish devoid of any utility.  If we can't limit proscribed conduct to only practices or agreements that unreasonably restrict Internet "output," then how do we know whether rules are serving consumers or requiring everyone to serve a concept that may have limited benefits?





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