Results tagged “ISPs”

August 2, 2017 9:44 AM

Deconstructing the Internet Giant Myths On Net Neutrality

In the last post, we noted that the Internet giants' arguments, advocating for regulation of ISPs, best describe the only market power they know--their own.  According to the Internet giants, ISPs must be regulated even though the "harms" they identify are all things that Internet giants do with their market power.

On a daily basis, we now witness numerous examples of the Internet platform giants doing the exact thing that they consistently point to as "destroying the Internet" if performed by an ISP, e.g., blocking/throttling/discriminating against content.  When Twitter was recently admonished by members of Congress for openly blocking a link to AT&T's public policy website, it was hardly a "man bites dog" story.  

Previously, we looked at the "fast lane/slow lane" argument--and made clear that this has not, nor has ever been, a practice of ISPs, but is not only the underlying business model for Google and Facebook, it is also what allowed Google to dominate the search engine market. 
In this post, we're going to look at another common "hysterical doom" prophecy advanced by the tech giants' advocacy groups.  

"The Internet Will Become Like Cable TV & Squeeze Out New Content"

In this classic argument from the net neutrality crowd, they paint a scary future world where consumers pay for Internet access the same way that they select cable channel packages today.  They claim that, not only will consumers have to pay for existing free sites, but content from new entrants will not be easy to see unless the entrant also pays for placement.  Here's a common visual aid:
net neutrality cable2.jpg
 This alleged nightmare scenario requires the usual implicit convictions that: 1) ISPs are monopolies, and 2) "[t]hey're destined to screw up the internet."  This specific scenario, however, hinges on a contradictory, yet fundamental, belief unique to Silicon Valley: no one should pay for content, yet we can sell other people's content to advertisers at significant margins.

Other People's Content

The New York Times recently published an in-depth look at Yelp's 6 year fight against Google's search discrimination activities.  In addition to its claim that Google search put Yelp's competing local review service in the "slow lane" (often pushing Yelp off the customer's screen entirely), Yelp maintains that Google "scraped" (stole) its content to post at the top of the search results.   

Google's action against Yelp provides a sense of its dominant power in the market. Yelp, itself, is a huge Internet platform, the 33rd most visited web site in the U.S. and one of the top 200 in the world.  This demonstration of Google's Internet superiority, however, is not limited to large competitors  A recent article on Outline revealed the experience of CelebrityNetWorth.com, and how Google's practice of taking other people's content has far reaching consequences for smaller content creators. 

As the Outline article explains, CelebrityNetWorth.com was an advertiser on Google and paid the firm to be placed highly in response to search queries.  Despite this--and even denying Google permission to use its content in Google's Snippets program--Google, in 2016, started scraping the company's content to post above the search results.  Immediately, traffic to CelebrityNetWorth crashed by 65% and the site's owner had to fire half of his staff of 12. Google, though, isn't alone in the way that it parasitically preys on its own content suppliers.
 
Facebook, likewise, has profited handsomely from the content of others.  In 2015, the company launched its "Instant Articles" program, which was designed to keep readers on Facebook's site for longer.  According to the New York Times, many large publishers, by then dependent on Facebook for referrals to their sites, "agreed to the deal, despite concerns that their participation could eventually undermine their own businesses."

These concerns were not misplaced.  A year later, traffic to the news sites from Facebook had seen double digit declines of as much as 50%.  Recently, Inc. noted that Google and Facebook now have more ad revenue than every newspaper, magazine, and radio station combined.  In response to the rapid growth by these two Silicon Valley behemoths, news content creators recently banded together to seek an antitrust exemption in a last-ditch effort to fight the platform companies' predation with market power of their own. 

Could ISPs Make the Internet Like Cable TV?

It's worth noting that proponents of this dystopia never explain, step-by-step, how the ISP would be able to offer/sell such a service, much less--given the likely market responses--how this service could ever be profitable.  To better understand the likely consumer response, here is a quick review of virtual private network ("VPN") services.

A VPN service allows users to route their traffic, via a private, secure "tunnel" to a 3rd party server. The ISP does not know, nor can it control, the destination of a user's traffic after it is sent to a VPN.  Likewise, the user's destination point can only "see" the IP address of the VPN's server--which makes VPNs very popular among certain Internet users, such as those of Netflix
 
Although the best VPN services are used to protect user privacy, they are not usually free.   But, if you care more about avoiding the "net neutrality nightmares," than you do for your own privacy, Google's got your solution--because of course they always do.

In addition to the world's dominant search engine, the world's dominant mobile operating system, and the world's dominant online translation service, Google also has a dominant position in the web browser market--with its Chrome browser having a desktop share more than 4x higher than its closest competitor (Mozilla).   
chrome_browser4.png 

If you need verification of Google's dominance, go ahead and ask one of your kids what web browser their school computer must use.And, it just so happens that Google offers, as a Chrome browser extension, a "free" VPN service to Chrome users.    

What does that mean?  Well, any attempt by an ISP to adopt the "Internet access as cable TV strategy" would only succeed in making its Internet access even less profitable than its real cable TV service.  Keep in mind that while a D.C. Circuit decision makes clear an ISPs ability to offer a "curated" service under Title II regulation, no ISP has yet to offer such a service. 

*    *    *

While the Internet giants continue to actively promote an outdated myth, they know the truth;  consumers' should actually fear should the tech giants given that they have already turned the Internet into something a lot more like cable than cable.  While, the average cable customer watches just 17 channels; of the top 50 U.S. websites, almost none offer content and an advertising platform not already owned by an existing Silicon Valley Internet platform giant.  

These Internet platform owners are also some of the very richest people on the planet (#2 (but #1 last week) Jeff Bezos of Amazon, #5 Mark Zuckerberg of Facebook, and #'s 11/12 Larry Page and Sergey Brin of Google).  In terms of financial clout (market capitalization), the 4 largest tech giants are more than 3x larger than the 4 largest ISPs.

ISPs v Tech Giants Mkt Cap.jpg 
This dominant economic power over Internet media has spillover effects in traditional media.  Last week, the media bias watchdog group FAIR reported that its "review of 190 articles from the New York Times, Wall Street Journal and the Bezos-owned Washington Post over the past year paints a picture of almost uniformly uncritical-ofttimes boosterish-coverage." The same article notes that none of the largest papers has written any critical, investigative pieces on Amazon/Bezos in almost 2 years.

Thankfully, though this general lack of scrutiny--by journalists employed by papers dependent on the biggest platforms--is not complete, even at the organizations criticized by FAIR.  Just this past weekend, the Post ran an excellent piece, asking if Amazon was not becoming "too big?"  Likewise, the editorial page of the Wall Street Journal--a publication not known for its skepticism toward big business--recently asked if it was not too late to control Google, Facebook, and Amazon?     

The evolution of the Internet and the ubiquity of VPN service have rendered the "Internet will be like cable" nightmare as about as scary as "the call is coming from inside the house" line sounds to anyone who came of age after 2000.  No, the scary story is not the one the Internet platform giants are shoving down your throat; it's the one they are hiding from the Internet consuming public.    

March 17, 2016 4:48 PM

FCC Chairman Wheeler's Privacy Shell Game

In the past week, Chairman Wheeler has become the pied piper of the tech press.  He's been fawningly referred to as "the Dragonslayer," and, "the broadband industry's worst nightmare" (an encomium previously reserved for Comcast).  

Starting with a Huffington Post editorial entitled, "It's Your Data: Empowering Consumers to Protect Online Privacy," the Chairman has spawned copy that would draw an immediate FTC fine if it were attached to a product instead of a policy.  For example, NPR's headline, says the Chairman's proposed Internet privacy rules are going to "Let Consumers Set the Cost of Internet Privacy." New York Magazine's headline went further, saying  "The FCC Wants to Let Us Choose How Much the Internet Knows About Us."  

Unfortunately for Internet users, the reality is that--on the Internet--privacy is binary; you either have it, or you don't.  Moreover, as the Erin Andrews case demonstrates, on the Internet, when your information is lost to one person, it's available to everyone.  What is most concerning is not that the Chairman's proposed ISP privacy rules can't deliver on these fantastic promises, but that in the Chairman's Set Top Box NPRM, consumers are actually losing privacy that they used to have.   

Your Information Is Already on the Internet

It's no secret that, "your information is the commodity that drives the internet economy."  Nor is it any secret that this is the price the largest "free" websites/services charge for their services--such as those provided by Apple, Google, Facebook, and Microsoft.  

Likewise, Google is the leading online advertiser because it knows the most about you--and, according to the NY Times it is only getting better at gathering your information.  If you're interested, and have a Google account, here's an article with some links that allow you to see how much Google knows about you, based on your self-identified use of its apps.  But, these links don't tell you how much "pretty close to personal" data Google has collected on you, or what it has acquired through your use of its Android mobile operating system and mobile apps--which now account for 60% of mobile devices in the U.S.

The firms mentioned above are just the ones that you know have your information.  There is a whole industry comprised of firms, the names of which most people wouldn't recognize, called "data brokers."  These data brokers also track your Internet usage--and combine that information with other, personal information that they buy from your online merchants--to form a pretty accurate personal profile of all your online activity, which they make available to anyone willing to pay. 

ISP Privacy Rules Won't Give You "More" Privacy

Not surprisingly, according to experts, your ISP doesn't have any information about you that isn't already available from multiple other sources.  In fact, Professor Peter Swire of Georgia Tech says that, due to consumers' increased use of encryption, multiple connected devices, and proxy services, like VPNs, your ISP may actually know less about your Internet behavior than the websites you visit.

Of course, every expert doesn't agree completely with Prof. Swire's conclusions. In a thorough article presenting the opposing side, Computerworld reports that some experts disagree with Prof. Swire about how much of a consumer's Internet traffic ISPs can see--because encryption isn't always as effective as consumers might think, and even VPNs/DNS proxy services can be configured poorly.   Thus, Computerworld counsels readers to assume the worst, and that, "[m]uch like Google, your ISP knows everything about you."


                Now you all know everything about me . . .

Said differently, "the Internet" will not know one less fact about me if my ISP stops being the nth company to tell advertisers that I'm the leading YouTube viewer of "Lancelot Link: Secret Chimp" videos.  Rather, as Roslyn Layton explains, the effect of the proposed rules will be confined mostly to the ISPs, who must rely on consumers to pay an even larger share of the network costs, and the online advertising market--which needs more competition, not less. But, as for me, I get no "more" privacy than I have now.

Set Top Boxes Aren't Cheaper If You Pay with Your Privacy

Almost 30 years ago, during the politically polarized Senate confirmation hearings on President Reagan's Supreme Court nominee--Judge Robert Bork--some of the Judge's opponents were able to obtain his video rental history from his video store.  His opponents didn't find anything embarrassing, but they sparked a bi-partisan public outcry for laws to protect citizens from this type of repulsive invasion of privacy. Here's a contemporary article from the Chicago Tribune.   

Congress, though, was in front of the public this time, and Judge Bork's enemies could not have obtained his TV viewing records (if he was even a cable subscriber at the time), because in 1984 Congress had passed the Cable Communications Policy Act, protecting video subscribers' privacy. 47 U.S.C. 631   Since then, the FCC has had rules in place preventing the disclosure of personally-identifiable viewer information to third parties. 

In its Set Top Box NPRM, the Commission asserts that it will not totally ignore the requirements of the law, but the proposed rules would require the regulated entity (your cable or satellite MVPD) to send your personally-identifiable information to an unregulated third party providing a video navigation service.  The Commission suggests just asking Google and the data brokers to "self-certify" that they are complying with the legal obligations that apply to cable/satellite companies. See, NPRM at paras 73-74, 78.

Putting aside the dubious legality of the FCC's proposal, the Commission is exhibiting an almost-willful disregard for the purpose of the statute--or even worse, the importance of television as a shared medium.  The very nature of specific, viewer-tracked, ad delivery--of the kind Google proposes--is invasive.  Unless everyone gets the ad for [insert embarrassing product], then only the consumer gets embarrassed--when his friends watching March Madness ask, "why do I only see this ad at your house?"  

The Commission is expected to initiate an NPRM at its March 31st Open Meeting, for the purpose of ensuring that "consumers know what they are agreeing to when they sign up for Internet service."  There is nothing wrong with this goal.  In fact, it sounds a lot like the 32 year old law requiring TV providers to tell consumers the "nature of personally identifiable information collected or to be collected with respect to the subscriber and the nature of the use of such information."  Let's hope the data brokers are OK with that . . .

March 15, 2016 10:07 AM

What's Good for Google . . . Is Good for the FCC

More than a year before the Chairman's "unlock the box" initiative, the Chairman had a different idea:  if the FCC made it easier to become an over-the-top ("OTT") multi-channel video programming distributor ("MVPD"), then more companies would enter the market, and this competition would benefit all subscription video consumers.  You might think this would appeal to a new entrant with TV ambitions, like Google.

After all, the subscription TV market is devilishly hard to penetrate even if you can get the capital to build a distribution system.  A year ago, Google had 20,000 customers in Kansas City--after 5 years of trying.  But, Google wasn't in love with the Chairman's idea.  Why not?

The Market Is Internet Advertising . . . on TV Screens

Google is the dominant company in Internet advertising because it sells information about you--that it learns from your use of its applications, and devices--to advertisers.   If you're using the Internet, whether on a computer, mobile phone, or tablet, then there's a 70-85% likelihood that you're looking at Google ads (according this WSJ article re: the FTC Bureau of Competition 2012 staff recommendation on Google's abuse of its market power in online advertising). 

When you watch TV, however, the ads you see are not targeted at you personally, because they haven't been placed by Google.  This is something Google has been trying to fix since shortly after it first announced plans to build a fiber network.  Google, through its Google TV, and then Android TV, project makes "smart TVs" (with Google software built into the TV) and "buddy boxes" (set top boxes that work with a cable box/cable remote) available to consumers.  But none of these efforts have been particularly successful--leading industry observers to conclude that Google needed "another path to the TV screen."  

Then, a year ago, Google decided to try an "experiment" in Kansas City in which it combined its TV customers' content, and viewing history, with its advertising algorithms in order to sell targeted ads on the customers' TV screens.  Most likely, Google discovered that the content itself was the secret ingredient that would allow it to integrate the TV screen into its advertising universe.  

So why not become an OTT MVPD in the proceeding that Chairman Wheeler had initiated in December of 2014?  One obvious problem with this strategy is that MVPDs have long been subject to extremely strict FCC rules about disclosing customers' personally-identifiable information--rules that don't apply to edge providers like Google. The other problem with this approach is that the subscription TV market is devilishly hard to penetrate--just to get access to the customer's video content. Thus, shortly after Google announced its Kansas City TV experiment, it (along with several of its Google TV partners, trade associations, and pressure groups) formed the Consumer Video Choice Coalition ("CVCC") and began lobbying the Commission on a new set of issues.

The FCC Unbundles Video to Create "Device Market" Competition?

On February 18th, after 6 months of intensive lobbying by the CVCC, the FCC voted to require multichannel video programming distributors (hereinafter "MVPDs") to, effectively, "unbundle" the video stream going to and from the customer's television.  See, "Set Top Box NPRM".   The Commission explains that its proposed rules requiring video stream unbundling are necessary "because MVPDs offer products that directly compete with navigation devices and therefore have an incentive to withhold permission or constrain innovation, which would frustrate Section 629's goal of assuring a commercial market for navigation devices." Set Top Box NPRM at para 12. 

The FCC seems to believe that if it can imply that the MVPDs were responsible for the failure of the Commission's CableCARD rules, and that the MVPDs would likely frustrate any future rules to facilitate device interoperability, then it will be justified in implementing full-scale video stream unbundling.  So, on the thinnest of grounds--a couple of anecdotes, and a facially absurd theory--the FCC asserts that that MVPDs "offered poor support" for the CableCARD rules, and have the ability and incentive to frustrate the manufacture/sale of navigation devices by third parties. Set Top Box NPRM at paras 7, 12, and 28. The actual answer to the Commission's question was already available--but it wasn't the right answer.

The Commission's theory regarding MVPD's "incentive and ability" to foreclose third party sales of navigation devices has been litigated through trial in two separate consumer class action antitrust cases, and this theory has never been found to be supported by any evidence.  See, Jarrett v. Insight Communications Co., (W.D. Ky. July 14, 2014)  
 and Healy v. Cox Enterprises (W.D. Ok. Dec. 15, 2015).  If you bother to read either of these cases, you may also be surprised to learn that the device manufacturing market is very competitive--with at least 5 major vendors competing for each cable system.

So, as was the case with the Commission's reclassification of broadband Internet access, a very small number of privileged entities (Google, its partners and pressure groups) benefit from rules designed to address conduct that is not even hypothetically rational--much less, likely.   Still, you might think, who cares if the TV providers now have to compete with Google to sell ads to viewers?  But, Google won't be competing with your TV provider.

Don't Expect Much New Competition in the Device, or Online Advertising, Markets

One of the issues from the Commission's Net Neutrality Order (currently on appeal) is whether the FCC could, as part of reclassifying broadband Internet access as a "telecommunications service," classify all of an Internet user's formerly non-confidential information (the kind Google sells to advertisers) as "Customer Proprietary Network Information" ("CPNI") under Section 222 of the Act.  The statutory definition of CPNI is fairly broad, and includes information "made available to the carrier by the customer solely by virtue of the carrier-customer relationship." 47 USC 222(f)(1).  

If the DC Circuit agrees with the FCC that previously non-confidential customer data is now CPNI, as the result of the Commission's change in service definitions, then the FCC could limit the ability of ISPs to provide customer usage information to advertisers.  This was exactly the position that was being urged on the Commission by the Eric Schmidt/Google-funded pressure group New America, only a week before Chairman Wheeler put his "unlock the box" editorial on Recode.   

Last Wednesday, in a Senate Judiciary Committee Oversight Hearing, FTC chair, Edith Ramirez, was grilled on why the FTC overrode the recommendations of its Bureau of Competition and closed an investigation into Google's abuse of its market dominance in the online advertising market.  Not un-ironically, two days later, the FCC released a "fact sheet,"   describing its proposed rules to prevent ISPs from competing in that market by providing the same kind of ads that Google does--over your computer, mobile, and now, TV screens.  

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?