Dec 6, 2013
The FCC, Net Neutrality and the Future Enrons of the Internet
Posted on Feb 24, 2011
The sponsor of H.AMDT.80, Rep. Walden, might need a refresher on that point. In a release cited by The Washington Post, he said, “We all want an open and thriving Internet. That Internet exists today. Consumers can access anything they want with the click of a mouse thanks to our historical hands-off approach. ...”
Republicans and libertarians may claim that the Internet evolved in a perfect free market, but that is wrong at best, and a lie at worst, when one is considering the ISP backbone. Indeed, the U.S. ISP system has more in common with traditional monopolistic utility companies than a free market.
The facts are clear. A very small number of companies control the critical hubs and cross-country lines within the United States. Most U.S. consumers have only one to four choices of broadband providers for their homes or businesses. And the ISP system itself grew out of government-sponsored university and military projects, and it has always been governed by quasi-governmental organizations such as ICANN.
Moreover, huge multinational conglomerates have successfully lobbied to restrict many consumer freedoms on the Internet. The music, film and software industries have spent countless millions to ensure that consumers, content providers and even ISPs must follow complex and extremely restrictive copyright and trademark laws.
So, what should be done?
The debate, assuming there is still room for one, should start with a look at the incentives built into the system. How can society incentivize private companies to provide fast, reliable Internet service to consumers and businesses? That seems like a simple enough proposition.
One possibility is a 21st century version of the Glass-Steagall Act. Under such a system, ISPs would be allowed to have only “one” customer: a client who would connect directly to them for Internet access. The ISP would be allowed to charge any reasonable price for this network connection, with the price being based on the speed of the connection or the amount of data transferred. But the ISP would be blocked from owning any media companies. And the ISP would also be blocked from imposing any surcharges based on individual usage preferences (e.g. which website or video the user was viewing). In other words, the ISP would be forced to function like the telephone companies of the 20th century. They would supply the line. The customer would “fill” it. How could this possibly be fair? Well, again, the ISPs are effectively monopolies, and perhaps should be treated as such. Let them do one thing, and one thing well.
Another possibility is to set up different rules for average Internet consumers and large companies such as Google. Under this vision, consumers would be protected by the FCC or some other government regulator. Large companies, such as Verizon and Google, would be free to enter into whatever complex private agreements they choose. Ideally, such a system would include some sort of regulator that could ensure that markets were marginally competitive, much as the TV networks were regulated in the 20th century. The danger of this system is that it would resemble the banking system right before the collapse of the economy in 2008, but it might be a more stable model when applied to the Internet than to money.
A final possibility is that the Democrat-backed FCC rules might not be so bad after all, at least as a starting point.
According to a Washington Post story, the FCC has said its rules are designed to protect consumers, and may not apply to the largest Internet pipelines, which are already governed by secret, private “peering” contracts. (Data traveling across the Internet almost always passes through several “peered” networks before terminating in the homes and businesses of consumers.)
Congressional Democrats have also offered reasonable defenses of the FCC rules, with Rep. Edward Markey issuing the following statement: “The [FCC] rules make three simple promises. One, to consumers: that we can visit any website we want using any service we want on any device we want. Two, for innovators: that they can create tools without getting permission from the government or the company that the consumers use to get online. Three: that we put a cop on beat, to make sure that both sides are doing what they’re supposed to and to be a neutral arbitrator. That’s all they do.” I think Rep. Markey is oversimplifying it a bit, but the rules could be massaged until they were that good.
In any case, as of this week, the Republican-led House of Representatives has voted against any government regulation of the Internet backbone. This is a mistake, and it is a position driven by dirty money, blind ideology, or both. For his part, Walden has said that his next action will be pushing for a joint resolution permanently blocking the FCC’s Internet rules. (The Congressional Review Act of 1996 allows Congress to overturn rules and regulations issued by the executive branch.)
On the other hand, it would be foolish to give the FCC unlimited authority to muck up the freedom of the Internet. I think—I hope—we are smart enough to find a compromise solution.
Derek Lazzaro is an attorney and university administrator in Los Angeles. He studies and writes about free speech issues, U.S. national security, the 2008 financial crisis, real estate, and technology.
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