Sunday, December 3, 2017

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Actually, my colleague Clifford Anderson addressed net neutrality on this blog here. The issue has been getting so much attention recently because of an upcoming Federal Communications Commission vote, which will likely reverse the Commission’s June 2015 reclassification of internet service providers as Title II (of the 1934 Communications Act) telecommunication common carriers.

In internet-speak, “edge providers” (like FAMGA -- Facebook, Apple, Microsoft, Google, Amazon) are contract carriers. They, like a typical market service, provide their content and apps subject to mutual agreement (either with us or, more usually, advertisers). From the beginning of the commercial internet until 2015, this was true of internet service providers, too. Their reclassification as common carriers, however, made ISPs subject to FCC regulation, like telecommunications companies and other public utilities are. The primary stated aim of this reclassification was to ensure access neutrality for online content. 

If the December 14th Commission vote goes the way most people expect it to go, ISPs will basically return to the status quo ex ante. Title II will no longer apply to them. Instead, ISPs will again be under the jurisdiction of the Federal Trade Commission, which will again be responsible for pursuing cases to protect consumer privacy and data security, including cases involving fraudulent, deceptive or otherwise unfair and anti-competitive business practices.

Notice, then, that this isn’t a move from public utility-style regulation to no regulation. Rather, the effect will be a shift in the regulatory modus operandi: from a set of prescriptive rules under the FCC, to a framework based on case-by-case enforcement by the FTC to ensure ISP transparency, including transparency about how ISPs handle customers under various service plans.

Which of these regulatory regimes best ensures that internet access is broadly available, and not subject to unreasonable restrictions or abuse of ISP market power in certain areas, is an empirical question. Unfortunately, it’s become a source of ideological hand-wringing, often giving rise to speculations about a dystopian internet future.

One consideration in examining the empirical question is the history of the development of the internet in the period from the 90s to the 2015 reclassification. The most significant tech policy for the early internet was the 1996 congressional update to Title 47 telecom law in Section 230, which carved out significant legal space for an environment of permissionless online innovation.

The early 90s internet was basically just a few big newspapers and a bit of porn (with pics like this taking upwards of 45 frustrating seconds to load). You might check your email or maybe buy a few books (just books!) on Amazon, too, but you’d shortly free up your telephone line and turn on whatever Must See TV (literally must, since streaming options didn’t exist) happened to be programmed viewing at that precise moment. But in this deregulated environment, in the span of only about 20 years, we now have access to an amazingly creative, entertaining, dynamic and connected virtual world that now even extends into meatspace (with Uber, AirBnB, etc., and driverless cars just around the corner). All this happened, of course, without FCC-enforced net neutrality regulations.

Actually, the early 90s internet is a strikingly accurate picture of the worst dystopian fears of net neutrality advocates who want public utility regulation for ISPs. Then, we purchased access to the internet by purchasing access to content centers, like CompuServe or AOL. These ISPs only provided access to their associated content, forum sites and users. The rest of the WWW was blocked. Over time though, and pretty quickly, ISPs have come round to the current model where they provide genuine access, and FAMGA, et al. provide content, apps, and other services.

Again, this happened without public utilities-style FCC prescriptive regulations. Are there reasons to think the pre-2015 environment was a bad basis for internet innovation and access to continue apace?

One worry I have already alluded to concerns limited ISP competition. Most customers have at least two wireline competitors, but some still only have one. ISPs will, if they can, abuse situations where they have market power. They have it, of course, largely because we’re still living with the structure leftover from when local telephone and cable networks were public monopolies.

But this is why we have an FTC -- to address complaints about anti-competitive practices (and, by the way, the FTC doesn’t have legal enforcement authority over Title II public utilities). I think more should be done to promote ISP competition, but in addition to wireline services, there is also competitive pressure from cellular and satellite providers. As long as barriers to market entry are sufficiently low, I would expect this pressure to provide consumers with the internet they want.

Even if these worries are more serious than I’ve credited them, are there reasons to think FCC regulations would address them in ways better than FTC oversight? Would the FCC be a better guarantor of openness and access neutrality? I’m doubtful. After all, one of the FCC’s primary functions is to be a media regulator concerned with content and I’d rather not have the FCC anywhere near internet content. More, it turns out that the open internet rules the FCC devised based on its Title II authority expressly permit ISPs to block, filter and curate content. Finally, if the regulatory structure administered by the FCC is more costly for ISPs than what it takes to satisfy the FTC, then it’s possible companies will have less revenue to devote to infrastructure investments in areas currently underserved.

Look, I’m just a philosopher, not a tech analyst or economist. Some of this might be off (but I’m happy to have a go defending it). I more hope to have convinced you that this is one of those policy debates that’s not about ends, but means. Whatever side of this you’re on, it’s quite probable that the people you’re demonizing want the same things you want.

Kyle Swan
Department of Philosophy
Sacramento State


  1. Kyle, thanks a lot for this.

    I'm pretty sure every member of FAMGA at least publicly opposes the repeal of net neutrality, whereas the corporations that appear to be most in favor of it are content providers like Verizon, ATT and Comcast. I'd be interested in knowing how you understand this. It seems to me to fit better with the popular assessment. I especially don't see why the latter group is so anxious to repeal it if it predicts a more competitive environment. Are they just dum-dums?

    1. Good question, Randy. I'm not sure. It could be regulatory uncertainty, or worries ISPs might have about how the FCC will formulate and/or enforce rules in the future. It's difficult for a business to plan and engage in long-term investments in the face of such uncertainty.

      Another idea: I've heard that the best employees at FAMGA are engineers, but the best employees at Verizon, ATT, Comcast are lawyers (or lobbyists). Maybe they're thinking that they can succeed in limiting competition.

    2. Kyle, this last thought seems plausible. All of the future FTC attempts to prevent anti-competitive practices will be specific actions that can be lobbied for and against. But NN is just law and it limits their influence considerable. Wouldn't this count as a strong, if not decisive, reason in support of NN from your perspective?

    3. Well, the first thought is plausible, too.

      "But NN is just law and it limits their influence considerably." This, on the other hand, doesn't strike me as plausible.

  2. For anyone familiar with the problems of government-owned internet (NSFnet, ASN, etc.), it's clear that commercial development has been central to expanding and improving the efficiency of the internet. As much as consumers may miss low-cost unlimited data usage plans, many would not want the painfully slow internet that would come with it. Net neutrality regulations enforced by the FCC only exacerbate this data usage problem further.

    However, there is something to be said for how monopolistic ISPs have become. Many smaller ISPs would have been able to provide more innovative and cheaper internet service plans to rural populations a long time ago if larger ISPs did not charge them exorbitant fees for connections or block wholesale access. Companies such as Comcast and AT&T are part of the problem by stagnating growth and innovation in fear of competition, even in areas that they don't service. This is a problem for the FTC to solve. Perhaps requiring large ISPs to grant connections for smaller ISPs or regulating prices for connections as a part of merger approvals would be one way of combatting this monopoly.

  3. Kyle, this is a nice write up and invites us to think about something that affects us all, but about which most of us haven’t given much thought to up to this point.

    My main worry is with ISP competition and it sounds like that the FTC would be able (or even better able without the common carrier designation) to address complaints and initiate its own investigations on matters of anti-trust or other unfair business practices.

    Unlike you, I’m also worried about content. But I suspect that the usual channels would be open to allow for some regulation or litigation to address the sorts of things that I’m worried about, e.g., child pornography and certain uses of social media by terrorist organizations (i.e., activity that constitutes a crime).

    But, in theory, I suspect that you would favor deregulation generally, rather than just deregulation of the internet. In other words, I suspect that you would be perfectly happy with eliminating the FCC entirely or almost entirely. Under the Communications Act of 1934, the FCC regulates interstate commerce in communication and companies, including telephone and cable companies, are “common carriers” regulated under the Act. I suspect that you would favor the deregulation of these companies also.
    The reason why I bring this up is, setting aside the merits of any particular provision of the Act, the term ‘common carrier’… “means any person engaged as a common carrier for hire, in interstate or foreign communication by wire or radio or interstate or foreign radio transmission of energy, except where reference is made to common carriers not subject to this chapter…” (47 USC § 153, subd. 11).

    If the question is, are ISPs common carriers? It seems that they unquestionably are. Are they so different from other communications carriers that they should be under a different regulatory scheme? I don’t know (I haven’t read the Act), but probably. The law is often two steps behind. When science and technology gives us round pegs, we force them into our existing square holes…and we wonder why things don’t quite fit. At some point, we’ll probably have a new law, the Internet and Public Protection Act of 2025, that will create the IPP Commission, and a new set of regulations—your dream come true!

  4. The Act provides an unhelpfully circular definition of a common carrier.

    Adjudication made the distinction in terms of function: is it a "dumb pipe" (a passive transmitter of information), or a broadcaster? The former gets saddled with common carrier obligations. But this is way too neat. Telecoms, cable TV, satellite TV, broadcast TV and ISPs all do things you can attribute to both contract carriage and common carriage. There isn't some external, independent standard for answering your question.

    The better question is one of comparative institutional analysis: what regulatory structure will deliver the goods.