Wednesday, December 10
In a letter to Members of Congress and the FCC, 60 companies — including IBM, Cisco, Intel, and others — have warned that reclassifying broadband under Title II will reduce investment and threaten the very health of the thriving Internet ecosystem. An excerpt:
Reversing course now by shifting to Title II means that instead of billions of broadband investment driving other sectors of the economy forward, any reduction in this spending will stifle growth across the entire economy.
This is not idle speculation or fear mongering. And as some have already warned, Title II is going to lead to a slowdown, if not a hold, in broadband build out, because if you don’t know that you can recover on your investment, you won’t make it. One study estimates that capital investment by certain broadband providers could be between $28.1 and $45.4 billion lower than expected over the next five years if wireline broadband reclassification occurs. If even half of the ISPs decide to pull back investment to this degree, the impact on the tech equipment sector will be immediate and severe, and the impact would be even greater if wireless broadband is reclassified.
The investment shortfall would then flow downstream, landing first and squarely on technology companies like ours, and then working its way through the economy overall. Just a few years removed from the worst recession in memory, that’s a risk no policymaker should accept, let alone promote.
You can read the letter, submitted by the Telecommunications Industry Association, here.
Monday, December 08
As with most heated debates, the current net neutrality kerfuffle has been heavy on rhetoric and light on facts.
Sure, those of us who believe the Internet has thrived — and will continue to thrive — without the heavy mitts of regulation point to study after study after article (most recently from the Progressive Policy Institute, of all places) warning that Title II reclassification would do much more harm than good for the open Internet, but facts and research aren’t nearly as effective as facetious cries about a “two-tiered Internet!” and “They are coming for your Netflix!”
That being said, since I’m a glutton for punishment I’m going to highlight yet another article, this one penned by economist (and IIA friend) Bret Swanson for the Wall Street Journal.
Swanson’s piece has a blunt title — “The U.S. Leads the World in Broadband” — and rather than shouting about the Internet sky falling, he crunches some numbers to show that… well, just what the title says.
From his piece (which is behind a paywall):
Mr. Obama recently called on the FCC to impose “the strongest possible rules” on Internet service providers to make sure they don’t “limit your access to a website” or “decide which online stores you should shop at or which streaming services you can use.”
Neither of these rationales for regulatory intervention is true, however, and there’s a simple way to show it. An international comparison of Internet traffic can tell us about the quality of broadband networks and the vibrancy and openness of content markets. Traffic represents all the bits flowing over our networks—email, websites, texts, chats, photos, digital books and movies, video clips, social feeds, searches, transactions, cloud interactions, phone and video calls, interactive maps and apps, software downloads, and much more.
And just what did the numbers tell Swanson?
What I found was that at 18.6 exabytes (18.6 billion gigabytes) a month, the U.S. generates far more traffic per capita and per Internet user than any other major nation save South Korea, which is a vertical metropolis and thus easy to wire with fiber optics. U.S. traffic per capita is 2.1 times that of Japan and 2.7 times that of Western Europe. Several years ago, U.S. and Canadian traffic measures were similar, but today the U.S. has raced ahead by 25%.
The U.S. lead is similar in traffic per Internet user, which tends to reflect how intensely people use broadband and mobile connections. The U.S. outdoes its closest European rival, the U.K., by 57%. The U.S. outdoes all of Western Europe—the best comparison in terms of geography, population and economic development—by a factor of 2.5.
All due respect to my friends and colleagues on the other side of the Title II debate, but does that look like the U.S. broadband market is hurting? Is the Internet really in need of saving by the unelected officials at the FCC?
Perhaps the most exacerbating thing about the Title II argument is the fact that both sides want essentially the same thing — for the Internet to stay open and thriving. What we disagree on is which tool, if any, the FCC should use.
Given the very real threats of reduced private investment in, and increased prices for, broadband that Title II could usher in, the choice should be simple. As Swanson writes:
The U.S., with 4% of the world’s population, has 10% of its Internet users, 25% of its broadband investment and 32% of its consumer Internet traffic. The U.S. policy of Internet freedom has worked. Why does Washington want to intervene in a thriving market?
Monday, December 01
As the FCC continues to mull its path toward ensuring net neutrality, none other than the Progressive Policy Institute has published new research highlighting just how much damage Title II reclassification could mean for consumers. An excerpt:
Self-styled consumer advocates are pressuring federal regulators to “reclassify” access to the Internet as a public utility. If they get their way, U.S. consumers will have to dig deeper into their pockets to pay for both residential fixed and wireless broadband services.
How deep? We have calculated that the average annual increase in state and local fees levied on U.S. wireline and wireless broadband subscribers will be $67 and $72, respectively. And the annual increase in federal fees per household will be roughly $17. When you add it all up, reclassification could add a whopping $17 billion in new user fees on top of the planned $1.5 billion extra to fund the E-Rate program. The higher fees would come on top of the adverse impact on consumers of less investment and slower innovation that would result from reclassification.
We can all agree that the Internet must continue to be open, but as the Title II debate shows, not everyone seems to understand just what reclassifying Internet service would mean. Hopefully, research from the likes of the Progressive Policy Institute will help bring everyone up to speed. You can check out their full report here.
Wednesday, November 19
“The Impact of Title II Regulation of Internet Providers On Their Capital Investments” is a 22-page study penned by economists Kevin A. Hassett and Robert J. Shapiro. It was submitted to the FCC as part of an ex part by the US Telecom Association. If you care about the future of the Internet, you need to add it to your reading list.
For the study, Hassett and Shapiro approached the question of Title II reclassification armed with numbers. Specifically, an alarming drop in projected private investment should the FCC choose to reclassify. As the economists write:
If the status quo continues, with data services unencumbered by Title II regulation, the several ISPs in our sample are expected to spend approximately $218.8 billion in new capital investments over the next five years in their wirelines and wireless networks. In contrast, under Title II regulation of all wireline data services, these ISPs’ wirelines and wireless capital investments over the next five years would drop an estimated range of $173.4 billion to $190.7 billion. Title II regulation of ISPs thus reduces these companies’ total investments by $28.1 billion to $45.4 billion (between 12.8 percent and 20.8 percent) over the next five years. Wireline investment by these firms would be 17.8 percent to 31.7 percent lower than expected.
That’s a lot of numbers with the word billion attached, but the main focus should really be on the percentages. You don’t have to be an economist to realize that a reduction of total investment dollars of 12.8 percent to 20.8 percent (and wireline investment dollars of 17.8 percent to 31.7 percent) would have a profound effect on America’s communications infrastructure. And by profound, I mean decidedly negative — not just for network expansion and upgrades, but for innovation across the Internet board.
The blow to innovation, Hassett and Shapiro argue, would be particularly hard on wireless networks. Again, from the study:
[T]he network managements practices which Title II regulation would potentially bar enable wireless investment and innovation, because wireless networks face serious capacity constraints. Thus, regulations that discourage or bar those practices raise the risk of introducing new products and applications: Without those practices, carriers would be less able to manage unpredictable changes in network demand associated with their introduction, and so maintain the quality of network services for all of its users.
In other words, the next big app or service could cripple wireless networks, and under Title II, providers would be hamstrung by regulations to solve the problem in a timely manner. Want to launch an innovative new streaming video app? Good luck gaining users when your app meets a road block of network congestion.
Too often the debate surrounding net neutrality is one of extremes, and I freely admit the above scenario falls within that category. But also too often, the economic realities of building, upgrading, and maintaining networks are either ignored or downplayed. Net neutrality doesn’t have to be an emotional issue; we all benefit from the Internet continuing to be open. The question is, how best do we ensure that happens while at the same time encouraging the investment necessary to keep networks growing. As Hassett and Shapiro’s study makes clear, the numbers show Title II would do more damage than good.
Tuesday, November 18
Speaking of op-eds, our Co-Chairman Larry Irving — who served on the Clinton Administration’s technology teams — also had a piece published today. In it, he argues heavy-handed regulations could stifle the next big thing in broadband — gigabit networks:
This week, President Obama asked the FCC to reclassify consumer-based Internet service as a Title II service under the 1934 Communications Act, essentially equating to heavy regulation of broadband. As the Federal Communications Commission weighs options during its Open Internet proceeding, the question remains whether today’s policy makers will be successful in maintaining a regulatory and investment climate that will promote continued investment in and innovation of new broadband networks.
My hope is that the public officials in charge of this stage of Internet growth approach their roles with as much regulatory humility as we did, aiming to steer, not row, and remembering what Secretary Brown understood: Innovation is not inevitable. The regulatory choices they make will propel or forestall innovation.
Read Irving’s full op-ed over at MarketWatch.
Our Honorary Chairman Rick Boucher has an op-ed in The Hill on how outdated regulations are limiting competition when it comes to broadband. An excerpt:
Consumers are fleeing the old network in droves. Only 5 percent use it exclusively, and another 28 percent use it in combination with a wireless service. Two-thirds of communications users have left the old network entirely. Every dollar telcos are required to spend on a network consumers are abandoning is a dollar not spent on deploying the modern networks that consumers prefer. Viewed in this light, the USTA plea for relief is entirely understandable — and it’s entirely justified.
FCC Chairman Tom Wheeler has said he wants more “meaningful competition” in high-speed broadband, particularly between telecom companies and cable providers. As Wheeler put it, these new broadband entrants are “well-positioned to give cable a run for its money, offering consumers greater choice.” This is exactly how it should work.
Check out Boucher’s full op-ed over at The Hill.
Thursday, November 13
Over at Bloomberg Law, our Co-Chairman Larry Irving and Honorary Chairman Rick Boucher have penned an op-ed on why the FCC should focus on Section 706 rather than Title II when it comes to net neutrality. An excerpt:
Everyone agrees that broadband providers should not become content gatekeepers. That’s been clear since 2010 when the FCC initiated its inquiry into how best to maintain an open Internet. Moreover, the facts make clear that the underlying success of the Internet in the two decades since its commercialization has been based on light-touch federal regulation and private sector, commercially-negotiated arrangements among service providers that have led to very few real complaints about supposed “gatekeepers.”
Under section 706, the FCC could prohibit so-called “paid prioritization” anytime such a practice has the effect of slowing down content or degrading the quality of service that any broadband customer receives, and which represent the alleged potential harms that lie at the core of the concerns expressed by activists urging Title II reclassification.
This fall’s intense debate is not about whether to preserve an open Internet. It’s about which of two available approaches the FCC could use is best.
Check out the full op-ed over at Bloomberg Law.
Wednesday, November 12
In an op-ed for the San Jose Mercury News, our Co-Chairman Larry Irving argues that when protecting net neutrality, the first job of the FCC is to ensure they do no harm. An excerpt:
The Title II path presents several potential harms. First, and most dangerous, is the harm to innovation. A light-touch regulatory environment has advanced ideas birthed in the valley. Introducing outmoded regulations on entrepreneurial business models in the tech sector could hurt the pace at which we’re seeing new start-ups, technologies, and products emerge.
A system of having to ask “Mother, may I?” of government would naturally introduce a chilling effect, as companies of all sizes would start wondering whether they or their product would be regulated. Would their products have to change to comply with regulation? Or would it be better to not introduce products to avoid regulation?
Check out Irving’s full op-ed over the San Jose Mercury News.
Monday, November 10
The President got this one wrong. Since the dawn of commercial Internet access during the Clinton Administration, light-touch regulation has guided its development and explosive growth. It has helped encourage continuous innovation, spur massive investment, and provide consumers with new services and applications in a competitive digital marketplace. The choice is clear: we can stay the course and promote 21st century technologies or turn back the clock and return to a 20th century, Title II-regulated utility model at the expense of the American consumer.
Thursday, November 06
Our new white paper, “Bringing the FCC’s Lifeline Program into the 21st Century,” calls for fundamental reform of the Federal Communications Commission’s existing Lifeline Program to provide access and enhanced consumer choice to 21st Century broadband services for the nation’s low-income consumers.
“The FCC’s Lifeline Program is a 20th Century government program aimed at spreading a 19th Century technology, voice service. It’s time to start a new conversation in Washington on how best to provide America’s low-income communities with greater access to 21st Century broadband communications services.”
— former Congressman, and Honorary Chairman of IIA, Rick Boucher
In our report, we highlight how this antiquated, cumbersome and complex program currently perpetuates a market imbalance that obligates only wireline telephone providers to participate and maintain the administrative systems and processes required to operate the program.
We recommend streamlining the program to provide the flexibility necessary to broaden participation among various communications providers to help bring the benefits of competition to low-income consumers — more innovation, better service, lower prices—while also lowering administrative costs. One step toward attaining this goal is to transition the current program toward a voucher model, by providing eligible consumers with a “Lifeline Benefit Card” that empowers them to purchase a range of communications services, including broadband, wireline or wireless voice services.
Today, service providers determine the eligibility of consumers for the Lifeline subsidy. The white paper recommends that, given the economic incentives that service providers have to increase enrollment, eligibility determinations for Lifeline benefits and core program administration oversight should be performed by a governmental agency rather than by communications service providers.
Our report offers the following recommendations on how best to modernize and transition the Lifeline program so that it can help ensure next-generation broadband access for low-income consumers:
1. Bring the Lifeline Program into the 21st Century by making broadband a key part of the program’s rubric;
2. Empower consumers by providing the subsidy directly to eligible people instead of companies;
3. Level the playing field between service providers to broaden consumer choice and stimulate competition for their purchasing power;
4. Safeguard and simplify the program by taking administration away from companies that are not accountable to the American public, instead vesting that governmental responsibility with an appropriate government agency.
“Only five percent of U.S. consumers still rely solely on the antiquated, circuit-switched telephone network for their communications needs. This trend is reflected in the FCC’s Lifeline Program, with 80 percent of its dollars currently going to wireless carriers.
As consumers abandon their wireline telephones for modern broadband services, the Lifeline Program — adopted during the 1980s — should be modernized and upgraded to reflect the realities of the current IP-based world. Expanding the program to focus on broadband, and simplifying its administration to welcome participation by more service providers, will help millions more Americans access modern communications services.”
— former Congressman, and Honorary Chairman of IIA, Rick Boucher
Download “Bringing the FCC’s Lifeline Program into the 21st Century” (PDF)
Tuesday, October 28
As the net neutrality debate continues to percolate, AT&T has submitted an innovative idea. As Julian Hattem of The Hill reports:
Company officials last week met with Federal Communications Commission (FCC) lawyers to argue that the agency should not ban Internet “fast lanes” that individual users want placed on their service.
For instance, a business might want to give workers faster access to certain websites over others when traffic gets clogged, to incentivize employees to stay on task rather than surf the web, AT&T argued.
“To preemptively and categorically block consumers from making these types of choices over their own Internet access connection before anyone even knows what the service might look like would needlessly stifle innovation and deny consumers the ability to tailor their own Internet service to their own needs,” AT&T said in an FCC filing summarizing its meeting.
Letting users control which, if any, traffic gets priority (for instance, Netflix) has the potential to quiet the fears that mammoth companies, rather than consumers, will dictate the future of the Internet.
Wednesday, October 22
At an event yesterday in College Station, Texas, FCC Commissioner Ajit Pai called for the Commission to be more transparent when it comes to the thorny issue of net neutrality. Via The Hill‘s Julian Hattem:
“I was disappointed when the FCC decided to hold each one of its recent net neutrality roundtable discussions at our Washington headquarters,” he said at the start of the forum hosted by the George Bush School of Government and Public Service. “And that’s why I wish that my colleagues were here with me today.”
“On this issue and other critical issues, the FCC shouldn’t be hiding in our nation’s capital,” he added.
Kudos to Commissioner Pai for bringing this discussion out of the Beltway himself. Regardless of which side of the net neutrality debate you fall on, we can all agree that more transparency and openness from the FCC would benefit everyone.
Wednesday, October 08
In an op-ed for Roll Call, Bret Swanson — President of Entropy Economics and one of our Broadband Ambassadors — argues that even the so-called Title II ‘Lite’ could have disastrous results. An excerpt:
In a new legal analysis, in fact, the Phoenix Center says “Title II Lite” is an impossibility. Any imposition of Title II on broadband, Phoenix argues, will bring tariffing and thus price controls to the entire net. It will convert all edge providers, by definition, into customers of the broadband service providers. And the FCC will not, contra the “lite” advocates’ assertions, be able to forbear from the numerous and weighty rules of Title II.
Law allows for forbearance — itself a long and convoluted process — if there is competition. The FCC, however, has defined the BSPs as “terminating monopolies” — Comcast, in other words, has a monopoly on Comcast customers. Competition is thus impossible and therefore, argues Phoenix, is forbearance. Because of the complex, interconnected nature of the net, where software and content firms are also network firms, and vice versa, where consumers are also content providers, the inability to forbear would mean Title II spreading across every node and layer of the net and likely affecting the entire ecosystem.
Thursday, October 02
There are several commonly disseminated myths aimed at perpetuating confusion and misinformation during the pendency of the Federal Communications Commission’s (FCC) Open Internet proceeding. Facts, however, cut through the clutter and allow for a discussion rooted in reality rather than rhetoric.
Title II reclassification of broadband is not necessary to preserve an Open Internet.
Here’s why the FCC can and should move forward with Open Internet rules designed under its Section 706 authority rather than reclassifying broadband services under Title II of the Communications Act:
TITLE II AND SECTION 706: Myths vs. Facts
Myth: Title II regulations helped bring about the Internet boom of the early 2000s.
Fact: Although an initial investment spike occurred immediately after the passage of the 1996 Act, that investment was short-lived. That initial spate of investment was primarily directed at technologies and business models that were quickly outstripped by more modern technologies. In fact, the majority of the investment in our country’s broadband infrastructure occurred after the FCC’s 2003-05 decisions to decrease regulations on the broadband industry. This surge in investment laid the groundwork for high-speed Internet to become a leading driver of our nation’s economic growth and to spur the incredible innovation consumers enjoy today.
Myth: Title II-like regulations helped Europe leapfrog the U.S. on broadband deployment.
Fact: Europe gave up its leadership position when it began its path toward heavy-handed regulation that deterred broadband investment and deployment.
According to an independent study, today nearly 82% of U.S. consumers enjoy access to next-generation, high-speed broadband networks (over 25Mbps) while only 54% of Europeans have comparable access. In rural areas, the U.S. again leads in access, 48% to 12%. Next-generation wireless broadband (LTE) is available to 86% of Americans but only 27% of Europeans.
European broadband policies are built on extensive, public utility-style regulation that has depressed broadband investment. In contrast, the U.S. light-touch regulation model has enabled U.S. broadband network operators to invest more than double per household than Europe does: $562 versus $244 in Europe.
Myth: Applying Title II regulations to broadband networks and providers will prevent companies from creating Internet “fast lanes”.
Fact: The FCC has stated that no ISP has ever engaged in paid prioritization schemes. No evidence exists that ISPs have ever or are likely to create fast lanes and slow lanes.
Reclassifying broadband under Title II would not prevent such. In fact, under Title II, public utilities have always been allowed to offer prioritized services. Telephone companies routinely offer installation and repair priority along with service level guarantees to those willing to pay extra money.
According to FCC Chairman Wheeler, the 2010 net neutrality rules were never intended to cover these privately-negotiated business deals, only the last mile of the Internet.
Myth: Wireless networks and wireline networks are virtually interchangeable these days and should have the same net neutrality rules.
Fact: In the 2010 rules, to which all carriers committed, the FCC stated that special characteristics of mobile broadband infrastructure make it essential to give mobile providers additional flexibility in how they manage the traffic on their networks. Due to resource constraints, such as the limited amount of spectrum available for consumer use, mobile networks operate differently than wireline networks. A stringent regulatory environment established under Title II, and intended primarily for a monopoly-era copper wireline world, would be onerous.
The FCC still imposed two conditions on wireless networks in 2010. First, wireless networks cannot block access to legal websites, with exclusions for reasonable network management. Second, wireless network providers were required to disclose their network management practices, performance and terms and conditions of their broadband services.
The current approach acknowledges how wireless networks are different from fixed networks but still protects consumers and enables investment and innovation in the intensely competitive wireless marketplace.
Myth: ISPs harm the open Internet through discriminatory practices. The only way to keep the Internet open is to reclassify Internet services as telecommunications services.
Fact: The Internet, without Title II regulations, is and has been open since its first public use. It continues to thrive in the current regulatory environment. In contrast, Title II regulation would stifle investment and hinder innovation. Innovative new services and business models would have to be vetted and approved by the FCC, slowing the Internet’s vitality and growth.
Ensuring a fair and open Internet through authority granted by Section 706 is a better path. Section 706 permits the FCC to prevent paid prioritization while encouraging innovation and investment from ISPs and other Internet companies.
Myth: Title II can be easily adapted to today’s modern communications systems.
Fact: The past 20 years have seen stunning technological advancements in the communication industry. Americans can now access a wealth of information in myriad new ways. The transformation of the communications industry has caused companies to no longer fit neatly into legal categories envisioned by the 1996 Telecommunications Act or, even more obviously, the Title II rules written in 1934. That’s why companies not normally thought of as “broadband providers” could find themselves categorized and regulated as telecommunications carriers because their service overlaps with the services provided by ISPs if Title II regulations are placed on broadband services. For example, when Google connects you to a business you searched, should it be considered subject to Title II? Or if a provider of email enables a video messaging session, would it open itself up to Title II regulation on the grounds that it is a facilities-based provider or reseller? Could be. And that’s the fear.
Myth: The FCC could apply Title II to broadband, but exercise its forbearance authority when dealing with innovative companies and services.
Fact: Reclassifying broadband services as telecommunication services under Title II would burden 1/6 of the nation’s economy with stringent, investment-inhibiting government regulation. The government would have expansive power over all broadband services, likely including all edge providers and consumer broadband applications and services. The process necessary to analyze and identify which areas of the nation’s broadband economy the FCC would spare from heavy government intrusion would be both lengthy and costly. Additional time and resources would probably be squandered in the litigation that will inevitably follow.
Myth: Unlike Title II, the FCC does not have the power to promote an open Internet under the limited provisions of Section 706.
Fact: Relying on Section 706 to protect consumers and ensure an Open Internet is a superior choice to the overbroad, utility-style Title II regulatory framework of the 1934 Communications Act.
The FCC’s Section 706-like approach in 2010, created rules that found the right balance between regulations necessary to advance consumer protection goals and the need to attract new investment to broadband to ensure future deployments of modern high-speed networks. Under those rules, access to capital grew and we saw massive growth in the digital app economy, video over broadband, VoIP, the advent of tablet computing, and the rise of mobile e-commerce.
Moreover, a Federal Appeals court has given Section 706 its seal of approval and the FCC can assert this authority with confidence. In fact, the courts have said that the FCC is empowered to create rules “governing broadband providers’ treatment of Internet traffic…that they will preserve and facilitate the “virtuous circle” of innovation that has driven the explosive growth of the Internet.”
The facts are clear: Reclassification of broadband under Title II is unnecessary to ensure continued Internet openness and would backfire with harmful consequences for innovation and investment. The FCC should instead make use of its powers under Section 706 to protect consumers, promote innovation and encourage nationwide deployment of next-generation broadband.
Wednesday, October 01
Over at The Hill, Julian Hattem breaks down how the FCC is looking to improve mobile broadband:
The commission on Friday announced that, at its meeting next month, it will take up a series of proposals to explore ways for companies to use more of the nation’s airwaves and build new antenna systems. The FCC will also look at an item to help broadcast companies share the same channel, which would incentivize them to give up their current spectrum licenses for wireless companies to bid on in next year’s auction.
“Seizing the opportunities of mobile innovation is one of the FCC’s highest priorities,” Chairman Tom Wheeler wrote in a blog post.
So far, wireless companies are onboard with the proposal, and rightly so. Everyone benefits from better use of the airwaves.
Wednesday, September 17
Speaking of net neutrality, over at USA Today, Jeff Pulver makes the case that the government can look out for consumers with onerous new rules:
The heavy hand of the early 20th Century rules is not necessary to protect an open Internet, and the benefit of the more modern “information services” classification approach is that it doesn’t kill off the investment needed to continue modernizing our Internet infrastructure. As FCC Chairman Tom Wheeler and the courts have suggested, other provisions in the act provide ample authority for the FCC to protect consumers from potential anti-competitive conduct.
We should do everything to protect the open Internet – no one argues that. But we are doing the American public a disservice if we insist that the only path to that end is a Title II regulatory approach. If we go down that dead-end road and turn the Internet into a regulated public utility, we will ignore the lessons learned a decade ago in the process that led to the “Pulver Order” and choke off a new wave of innovation and investment that will support the next generation of entrepreneurs.
Among the tidal wave of comments the FCC has received over the open Internet/Title II issue, Fred Campbell of the Center for Boundless Innovation in Technology finds something interesting. As he writes:
A stunning revelation is buried in a lengthy Netflix filing at the Federal Communications Commission (FCC): Netflix used its subscribers as pawns in a Machiavellian game of regulatory chess designed to win favorable Internet regulations.
The filing reveals that Netflix knowingly slowed down its video streaming service with the intention of blaming Internet service providers (ISPs). Specifically, Netflix used its relationships with Internet ‘backbone’ providers (e.g., Level 3, Cogent) to deliberately congest their peering links with ISPs, and at the same time, started publishing ‘ISP speed rankings’ to make it appear that ISPs were causing the congestion. It appears that Netflix cynically held its subscribers hostage to reduced service quality in order to pressure the FCC into adopting favorable Internet regulations that would permanently lower Netflix’s costs of doing business.
Netflix’s plan to frame ISPs for sabotaging its service has been surprisingly successful so far. Some subscribers have blamed their ISPs for the service disruptions Netflix itself caused, which prompted the FCC to open an investigation of the Internet backbone market. Now all Netflix needs is for the FCC to adopt new regulations.
At the very least, Campbell’s post should serve as a reminder that in the current version of the seemingly never-ending “net neutrality debate,” it’s not really little guys vs. big guys, but one big tangled mess of special interests and corporations. All the more reason for the FCC to move forward without extreme caution.
Monday, September 15
This morning, IIA filed Reply Comments with the FCC urging the Commission to embrace its 706 Authority instead of Title II reclassification in order to preserve an open Internet. In our comments we warned that reclassification would reverser decades of Commission precedent and potentially hurt the Internet ecosystem’s continued success and future of innovation.
Section 706 has worked well to protect the open Internet that everyone wants to preserve, while minimizing harm to investment and innovation. Section 706 remains viable and effective. By contrast, Title II is an antiquated regulatory framework designed for the era of monopoly telephone service that would undermine today’s competitive broadband marketplace and disserve consumers, dissuade entrepreneurs and inject unnecessary regulatory uncertainty threatening future dynamism in the broadband ecosystem.
— IIA Co-Chairman Bruce Mehlman
Reliance on Section 706, we argue, enables proper balance between necessary regulation to advance such goals as consumer protection and the imperative of attracting new investment to broadband to ensure further deployments of ever-fast systems that will support the applications of tomorrow. It is also the only way to ensure the innovation and continued explosive growth necessary to meet the ambitious goals of the National Broadband Plan.
The FCC already has enough authority under Section 706 to keep the Internet open with high-speed access for consumers and flexibility for entrepreneurs to innovate. Reclassifying broadband as a utility is like using a sledgehammer when a screwdriver will suffice. Title II is a blunt instrument that might break the Internet’s record of innovation and investment, while Section 706 is a better tool for fixing any problems that arise.
— IIA Co-Chairman Jamal Simmons
Title II, we also note, was not the primary catalyst behind the massive investment that occurred following the enactment of the 1996 Telecommunications Act, and that if regulators wanted an example of the chilling effect Title II could have on broadband, Europe offers a good example.
European policies built on extensive, public utility-style regulation and wholesale network unbundling have depressed broadband investment and access to next-generation networks overseas, as fully 82% of U.S. consumers enjoy access to high-speed broadband networks compared to only 54% of European consumers. Section 706 fortunately offers us an alternative path that will enable the private investment necessary to deploy modern broadband networks—wireline, wireless, and cable—and continue the virtuous circle fueled by light-touch regulation of the Internet ecosystem.
— IIA Honorary Chairman Rick Boucher
To read our Reply Comments in full, visit here.
Friday, September 12
The Progressive Policy Institute has released its annual list of “Investment Heroes,” and at the top of the list are AT&T and Verizon, with estimated capital expenditures of more than $20 billion and $15 billion, respectively. That’s a lot of investment dollars, but as Hal Singer warns in Forbes, current regulations being considered by the FCC could severely hurt that investment going forward:
This week, PPI released its third annual report on “U.S. Investment Heroes,” authored by Diana Carew and Michael Mandel, which analyzes publicly available information to rank non-financial companies by their capital spending in the United States. Once again, AT&T and Verizon ranked first and second, respectively, with $21 and $15 billion in domestic investment in 2013. Comcast, Google, and Time Warner also made PPI’s top 25 list, each investing over $3 billion. The authors credit investment in the core of the network with sparking the rise of the “data-driven economy.”
In light of the results from prior experiments in rate regulation, the FCC should eschew calls to regulate ISPs under Title II. The incremental benefits (potentially barring fast lanes) are dubious, but the incremental costs (less investment at the core of the network) would be economically significant. Given its size and contribution to the U.S. economy in terms of jobs and productivity, even a small decline in core investment in response to rate regulation would impose social costs beyond the immediate harm to broadband consumers from an atrophying network.
Tuesday, September 09
That’s the amount of investment broadband providers have made in networks since 1996, according to a new report from the US Telecom association. Obviously, that’s a lot of investment, and as the paper shows, all those dollars have made a huge difference when it comes broadband access and speeds. Some highlights:
• Over 95% of Americans can access fixed broadband, with 88% having at least two providers to choose from.
• 99% of Americans have broadband at speeds 10 mbps or more available to them.
• 99% also have mobile broadband available, with 97% able to choose from at least three providers.
• Broadband investment jumped to 10% — from $69 billion in 2012 to $75 billion in 2013.
While those are some impressive numbers across the board, It’s not all rosy news from US Telecom. As the association notes in its press release:
Ongoing investment in all broadband networks, wireline and wireless, will be essential to accommodate the expected data traffic growth and enable the continued adoption of more powerful information and communications technologies and applications. Economically efficient investment in U.S. broadband infrastructure will pay off in the form of consumer welfare, business productivity, and global competitiveness. As noted in USTelecom’s blog on investment, a move to stricter Title II regulation could inject unnecessary uncertainty and negative pressures into the broadband investment equation. This poses risks to broadband investment, and also to the so-called “virtuous cycle” of innovation among broadband and related information technology industries.
Investment in broadband matters, which makes any move away from the “light regulatory touch” in place since 1996 all the more problematic. Can the FCC keep the Internet open without putting all this investment at risk? The Progressive Policy Institute thinks so. According to their recent paper, “The Best Path Forward on Net Neutrality,” they’re confident the FCC can achieve its goals by leaning on its Section 706 authority.