The Federal Communications Commission took its Open Internet proceeding on the road this week, holding a roundtable at Texas A&M University in College Station, Texas, on its proposal to reclassify Internet service providers as telecommunications carriers under Title II of the Telecom Act.
Despite their fervent cries that greater regulation is needed to preserve free and open ’Net access, the two panelists who supported reclassification could not make a convincing argument for overhauling the current regulatory regime and treating the nation’s cable, telephone and wireless providers as if they were a depression-era AT&T.
Edward Henigin, chief technology officer at Data Foundry, Austin, Tex., repeatedly returned to the cable/telco monopoly/duopoly argument, a common refrain among Title II proponents. Henigin ignored both wireless and satellite as legitimate competitors. Henigin, in fact, went beyond support for Title II reclassification, and advocated a wholesale/retail model under which he envisions dozens of retail ISPs reselling capacity owned by existing cable and phone companies, which presumably would be barred from the retail market themselves.
This idea was floated back in the 1990s, but never took hold because it would have required the government, in essence, to dictate what private companies could do with their own property. The FCC’s UNE-P unbundling order derived from this policy, requiring local phone companies to lease infrastructure elements to competitors at artificially low prices. It didn’t work. Competitors grew dependent on the subsidies and never built the alternative facilities they once planned. Telcos slowed investment because regulations would have prevented full RoI. Ultimately, The FCC scrapped the policy after a series of court decisions against it.
Henigin’s “natural monopoly” argument doesn’t fly. Even though he thinks there is no need for redundant infrastructure, the fact that companies are investing in competitive facilities belies the proposition. The majority of U.S. markets are served by at least two wireline and two wireless carriers. Wireless broadband has become a legitimate alternative to wireline. Moreover, it has, on its own, without regulation, spawned the type of wholesale/retail model Henigin admires: witness resellers like Virgin Mobile and Cricket. While there may be rural areas that are served by just one carrier, even if an abusive situation exists, it does not warrant overhauling two decades of effective “light-handed” regulation just to address an outlier.
It fell to Stewart Youngblood a venture capitalist and entrepreneur with the Dallas Entrepreneur Center to reiterate the precautionary principle—namely that without more regulation, especially prohibition of paid prioritization, future start-ups seeking to exploit broadband will be strangled in the crib. We have been hearing this argument for ten years. In that period Facebook and Netflix have used broadband to become powerhouses. Amazon and Google continue to grow and innovate. Start-ups such as Uber, Lyft, AirBnB have grown so large, so fast, that they are presenting major headaches for more legacy competitors. ISPs have been operating under the current net neutrality guidelines for years and there is no sign that innovation and entrepreneurship is being thwarted.
And, as others have noted throughout the Title II debate, several panelists pointed out that Title II will not prohibit paid prioritization. Robert Hunt, vice president of Guadalupe Valley Telephone Cooperative, New Braunfels, Texas, said all an ISP would have to do is file a tariff.
Discussion over prioritization, whether paid or not, reached the same impasse as it has at other Title II and net neutrality forums (recall the debate at the Internet Governance Forum in September). How a ban on prioritization would work, especially with today’s wireless networks, remains the elephant in the room. Prioritization is “a fact of life” that has to be dealt with, said Joe Portman, president and founder, Alamo Broadband Inc., a wireless ISP in Elmendorf, Texas. Voice over IP requires it, he added. Alamo also uses prioritization to mitigate the effects of regular denial of service attacks. Portman said it will continue to be required as long as content suppliers like Netflix want to deliver bandwidth-intensive, error-sensitive video over limited radio spectrum.
Neither of the pro-neutrality speakers addressed the prioritization dilemma, other than to say regulations should allow “reasonable” network management (wording contained in the current guidelines). But the definition of “reasonable” remains elusive. Netflix, for example, believes it should not have to pay any part of the cost of last mile delivery, and treats any ISP demand for compensation as if it were extortion. At least Netflix acknowledges there is a cost associated with its service. What regulatory proponents need to offer is a convincing argument as to why these costs—inherent to Netflix’s own business–should be spread across all ISP customers.
Bottom line this is what Title II reclassification will do—transfer the costs of delivering content and applications from the content provider to the broadband ISP—which would be regarded as a utility. I can understand why content providers would favor this, but they have yet to make a convincing argument as to the greater social benefits of such as drastic regulatory shift.
It’s not as if they didn’t have a chance. Toward the end of the forum an audience member asked the panel to list the consumer benefits that would result from Title II reclassification. “None,” Alamo Wireless’s Portman immediately shot back. Henigin and Youngblood, as the principle spokesmen for Title II reclassification, aside from restating the generalities discussed above, had no specific answer.