Keeping the Net neutral

The rule proposed by the Coalition of Broadband Users and Innovators, which the group submitted to the FCC on July 17, is, at first blush, rather simple. It's just two paragraphs long. The first paragraph, labeled a "preamble," says that the rules people have come to expect in the dial-up world should prevail in the broadband world -- customers should have "unfettered" access to Internet content, and they shouldn't be prevented from connecting "their choice of nonharmful devices to the network."

The proposal allows cable firms to charge customers extra for the bandwidth they use, but only if the cable company does that in a "nondiscriminatory" manner -- which presumably means that a cable firm can't charge you $1 for every gigabyte you download from a rival video-on-demand service if it charges you nothing to use its own video service. And one of the best features of the rule, according to its fans, is that it's limited: the rule is only in effect "until the market for the delivery of broadband services to consumers is deemed competitive." (You can see the rule on Page 12 of this lengthy PDF document.)

But it's precisely the brevity of the rule that gets the cable companies agitated. The proposal might seem simple, Howard Symons says, but words like "discriminatory" and "unfettered" are the sort of artful terms that, in a determined attorney's hands, could be expanded to mean just about anything. What if Comcast starts bundling its service with Microsoft's X-Box Live game system -- is that discriminatory? What if Time Warner Cable wants to give you free access to Time Warner media content when you sign up for its broadband service -- is that OK? "The specific rule that they're proposing suffers from the problem of vagueness," Symons says, "but I doubt that you could write a rule that isn't going to be subject to mischief."

It's more than vagueness, though, that cable companies object to. Symons says that the cable firms would protest any rule -- even one that he feels is not especially vague -- that prevents them from operating freely, because there's just no sign, he says, that cable companies' actions have caused any harm. The cable firms say that regulations will add "uncertainty" to their businesses, and uncertainty would reduce investment in broadband services, and that would slow down the deployment and adoption of fast Internet connections.

"You don't know who's going to come out of the woodwork and challenge an arrangement," Symons says. "The leading edge of creativity will be stifled. That's where you want the drive to be, you want people to be looking for the next killer app -- but if every move has to be vetted by teams of lawyers, that's not going to happen."

If you talk to both sides in this fight, it becomes clear that they have fundamentally divergent ideas of the purpose of telecommunications regulations. Cable companies say that it's not the government's place to impose prophylactic rules -- rules meant to prevent wrongdoing, rather than to punish it. The government should stand by and watch while the free market does its work, and it should only step in when it's needed. The Coalition of Broadband Users and Innovators rejects that view. The FCC, it insists, shapes telecom policy for the future, and should therefore try to prevent bad things. "You don't need evidence that they've done something wrong," says Andrew Jay Schwartzman, president of the Media Access Project, a public-interest telecommunications law firm. "The argument they make -- 'We're not doing it so don't prohibit it' -- misses the point. All you need to show is they have motive and capacity to do it."

Nobody argues that the cable firms don't have the technical means to block certain sites and services -- everyone agrees they do. The matter for debate is whether they have any incentive to pick and choose what their customers can access. To Schwartzman, it's obvious that they do.

"They are trying to apply the cable television business model to the Internet," says Schwartzman. "The cable television business model is where you give away the basic service and make money from the premium services. So, for example, they want to make money selling access to multi-user games or from video-on-demand movies. Now, if they have their own video-on-demand service, under their theory they own the cable head-end and can do whatever they want with it. So they could just not transport Movielink [the video service backed by Hollywood studios] through the pipe," a situation that would leave the cable company with a video-on-demand monopoly on its service.

Asked about such a possibility, Symons called it "fevered speculation." "Are there additional services that cable operators might want to offer?" Symons asked. "Sure, and they're looking at creative ways to do that. I think that there are a lot of smart people looking at services to exploit broadband speeds -- but in a way that is completely consistent with the Internet."

If cable companies do not live up to the free principles of the Internet, customers will notice, says Cato's Thierer. "If at the end of the day they're playing a lot of games with my broadband service, I'd be hoping for an alternative," he says. "If an operator starts to engage in these shenanigans that's all the more incentive for another operator to crack that market -- and with the wireless option that becomes much easier, and it might be something we drive consumers to."

That may be so; the market may, indeed, kick in to correct problems that emerge. At the moment though, there isn't a whole lot of competition in broadband. In a letter to the FCC, Gerry Waldron pointed out a JP Morgan study that determined that only a third of American households had access to both DSL and cable modem services. About 38 percent had access only to cable, 10 percent had access only to DSL, and another 20 percent had no access to broadband services at all. When it comes to broadband, in other words, Americans seem completely at the mercy of their cable and their phone companies. Where's the freedom in that market? (At least for now, phone companies are prohibited from engaging in the sort of content examination on DSL that people fear cable firms will do with cable modems; but the phone companies say that those regulations are unfair, and they're trying to have them overturned.)

Under Michael Powell, the FCC has been loath to impose new regulations on telecom firms, so the coalition certainly faces an uphill battle in this fight. In a speech on June 27, W. Kenneth Ferree, whom Powell appointed as the FCC's media bureau chief, sarcastically pooh-poohed the idea of "net neutrality." "What a lovely notion," he said, according to a copy of his prepared speech. "Net Neutrality. Who could possibly object to that? The Swiss are neutral. Everybody loves the Swiss, right? This is real motherhood and apple pie stuff."

Ferree, who made clear that his remarks reflected his own views and not those of the FCC, came down squarely on the side of the cable companies. Net neutrality, he said, "is, in substance, surrendering to regulation as a substitute for competition. The theory of this model, if you will, is that there is not, nor will there soon be, sufficient competition at the distribution level -- ergo government must regulate access on the currently existing platforms. It's very much common-carrier thinking -- it's very much 19th century thinking."

But in recent months leading members of the coalition have been trekking to Washington in an effort to change the FCC's thinking. Craig Mundie, a senior vice president at Microsoft, has been there, as has Jeff Bezos of Amazon. Waldron characterizes these visits as something new for members of the FCC. "The FCC typically hears a lot from the pipe owners," he says. "They're not used to seeing Jeff Bezos. So frankly, this is a new message for them."

Will the appeal work? What happens when the biggest tech firms line up against the biggest cable companies? The fight, with deep-pocketed players on each side, is destined to become brutal. And the worst part is that it's not at all clear which side has the consumer's best interests at heart; both the cable companies and the content companies see huge gains in having the FCC go their way, and all the while the public stands on the sidelines, waiting to see which side gets to shape the future of the Internet.

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