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The FCC, Net Neutrality and the Future Enrons of the Internet
Posted on Feb 24, 2011
America’s largest Internet service providers, which own most of the network backbone, have decided that Internet content providers such as YouTube are using too much bandwidth, and becoming too rich, and now the ISPs are demanding a bigger piece of the pie. Amid surprisingly little public debate, the ISPs have engaged in a focused campaign to lobby Congress and win court cases with the goal of stripping the government of any meaningful authority to regulate their price structures or data-routing policies.
The question that remains is whether the government will have the authority, or even the will, to regulate the ISPs and the future of the Internet. If Republicans in the House of Representatives have their way, the battle will be over before it ever really begins, with the ISPs emerging as undisputed victors.
The House voted early Saturday morning to pass H.R. 1, the federal budget bill for 2011. The bill included an amendment, H.AMDT.80, sponsored by Oregon Republican Greg Walden, which defunds any attempt by the Federal Communications Commission to regulate ISPs. The amendment was approved by a vote of 244 to 181, along party lines.
The vote on Rep. Walden’s amendment is the latest in a string of skirmishes over the regulation of the Internet. In December 2010, the FCC passed a set of rules giving itself limited authority to regulate Internet service providers. The FCC rules were an attempt at compromise, and they specifically deregulated wireless Internet providers, which are increasingly important. Some consumer groups said they were toothless, and several ISPs even cautiously supported the rules.
But Rep. Walden’s amendment will block the implementation of those rules if the budget passes the Senate and is signed into law by President Barack Obama.
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Enron, the disgraced and defunct energy trading firm, lobbied for the deregulation of the U.S. energy market, and argued that the company should be allowed to enter into private agreements to sell energy and create complex derivatives based on speculative investment positions.
Similarly, Wall Street firms demanded and were granted unlimited freedom to create unregulated private contracts which evolved into “toxic assets,” including collateralized debt obligations and credit default swaps, which nearly destroyed the global economy in 2008.
Now, the ISPs are demanding the right to enter into private agreements with anyone who connects to the Internet, from any location in the world, on any pipeline. These private agreements would not only apply to the direct customers of the ISPs, but would include any parties identified by the ISPs as special users. The agreements could also allow ISPs to slow or block data traffic that the providers deemed to be burdensome or unacceptable.
For years, the largest owners of the Internet’s infrastructure, including Verizon and Comcast, have lobbied strenuously against almost all regulations, saying that private companies must be free to set prices and route Internet data traffic based on market conditions.
Both companies have also turned to the courts, suing to strip the FCC of the authority to regulate the Internet. They have also argued that they should have the right to slow or even block data that interferes with their priority traffic. Some ISPs, including Comcast and Level 3 Communications, have engaged in semipublic battles over the flow of data traffic. And some ISPs have considered the possibility of a “metered” Internet, where consumers would be charged based on their daily usage.
More extreme possibilities have been explored, including surcharges for individual Web pages, higher prices for video streams, on-demand payments for various features, and the “deep inspection” of customer data streams to prioritize traffic.
Consumer advocacy groups, some media companies and the FCC have pushed for various forms of regulation, saying that consumers must be protected from price gouging and the quasi-monopolistic telecommunications market, in which most consumers have only a handful of choices for Internet access.
Both sides of the debate have laid claim to the phase network neutrality. Internet service providers have said neutrality is defined by the ability of private companies to structure their services according to market conditions. Consumer groups have defined network neutrality in terms akin to the “common carrier” concept applied to telephone companies since 1934, saying that consumers should be able to pay for an open pipeline, without worrying about surcharges or interruptions based on disputes between pipeline providers.
In truth, this issue is not simple, and both sides have some valid points.
Three primary arguments are made by the champions of the free market and deregulation. First, they say, it is expensive to run a large Internet backbone, and new technologies such as YouTube are dramatically increasing pipeline requirements. Second, some data traffic is more important or time-sensitive, and ISPs, not government regulators, are best positioned to assign priorities to data traffic. Third, the government cannot be trusted to regulate the Internet, and any government regulation could lead down a slippery slope of government censorship and control.
Certainly, these arguments should not be dismissed too quickly. Internet backbones are very expensive. Some network applications, such as video games and videoconferencing, do need special priority to function properly. And recent headlines from China to Egypt have proved that governments will manipulate the Internet to the detriment of their own peoples.
On the other hand, it’s important for the debate to be grounded in reality, and the U.S. Internet system, as it exists today, is anything but a free market.
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