Neutrality: Don’t Take a Stand, Just Stand

The media is all agog over the decision by the President to endorse a path to neutrality that would include reclassifying ISP services as Title II, meaning making the ISPs common carriers in terms of the Telecom Act.  I’ve read that it means the ISPs would become public utilities, or that they’d then have to share all their infrastructure.  I’ve also read comments that say that ISPs have to be regulated, that their natural behavior would be the end of the Internet.  I’ve read that the President is opposed to the kind of settlement that Netflix made with ISPs and that’s why he did it.  I’ve read he was playing politics, and that Republicans who oppose his view are playing politics.  I’ve read almost nothing that actually conveys anything realistic about the situation or our choices going forward.

As I’ve blogged in the past, the current state of Net Neutrality is that there isn’t any, in a formal sense.  The FCC has always said it had the authority to stop ISPs from blocking lawful content.  The issues arose with the last FCC (when Genachowski was the Chairman) because they wanted to take “neutrality” further, and specifically prevent any form of settlement among ISPs for priority handling, or provider-pays prioritization.  These steps were overturned by the DC Court of Appeals, who ruled that the FCC didn’t have the authority to take the steps it proposed.  Why?  Because those actions were appropriate for regulating common carriers (regulated under Title II) and the FCC had previously said that ISPs were not common carriers.

The legal back-and-forth here comes about because telecom policy was set out in the Telecommunications Act of 1996.  You have to go back to that time to understand why we’re where we are.  Then, the goal was to finalize the breakup of the Bell System by letting the RBOCs into long-distance and at the same time requiring them to share the infrastructure they’d developed while a protected utility.  The Internet wasn’t even mentioned in the Act, and this is why we have to dance around subtleties to get anything to happen.

The only real effort made by the Act to protect what we’d now call “the Internet” or “broadband” was the now-infamous Section 706.  Section 706 charged that “The Commission and each State commission with regulatory jurisdiction over telecommunications services shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans (including, in particular, elementary and secondary schools and classrooms) by utilizing, in a manner consistent with the public interest, convenience, and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.”  That’s been seen as giving the FCC broad authority to tweak regulations, but look at the text carefully and you’ll see the problems.

First, what does “encourage deployment on a reasonable and timely basis” mean?  The FCC has reported the state of Internet availability many times, and you’d have to say that generally people can get on the Internet, but is that reasonable deployment?  Is it “timely?”

Second, what are “advanced telecommunications capabilities?”  The presumption is that they’re broadband, but we don’t have a solid definition of what “broadband” is.  The historical meaning was greater than 64kbps, which is certainly available.

As far as remedies go, what does “a manner consistent with the public interest, convenience, and necessity…” mean?  And if the goal is to remove barriers to infrastructure investment, couldn’t you argue that the best way to do that is to allow things like settlement, paid prioritization, and so forth?  If the FCC calls on Section 706 as authority to do something specific with neutrality, they’ll have to establish a credible position grounding their action and authority in this one sentence, or they risk being back to where the DC Court of Appeals left them before—with no authority to act.

One of our options at this point is to proceed this way, and that’s what the President and others (Rep. Waxman proposed the same thing a month ago) have suggested.  The beauty of that approach is that it doesn’t require Congress to do anything, and that’s good because doing nothing is pretty much all we can expect from Congress these days.

What’s bad about the approach is that it has something everyone hates, which many would say is the sign of a fair start.  The telcos and cable companies in particular hate Title II regulation because unbridled Title II would give the FCC broad authority to do all manner of things, including force unbundling of infrastructure under some conditions.  Many neutrality advocates love Title II but hate the notion of Section 706 forbearance, because they believe that the FCC will simply exempt the operators from all the rules that they could/should apply.  Objective people are just concerned that whatever is done it will end up in endless litigation.  It took almost 8 years to hammer out an FCC interpretation of the Telecom Act, during which many believe broadband investment suffered because of the uncertainty.

The fear that the operators, the ISPs, will then have is that the declaration of Title II regulation would stand (it’s a separate issue but a prerequisite) and the application of Section 706 would be struck down.  That would leave the ISPs fully regulated as common carriers.  Does the FCC then say “I had my fingers crossed when I declared these guys common carriers?”  While it is true that the FCC is not bound by its own precedent (a nice way of saying it can change its mind), waffling on this is not going to improve the FCC’s credibility in the market or with Federal courts through which an FCC order would be appealed.

The other alternative is legislative change.  Congress could eliminate all the uncertainty by legislating a clear position, which both the FCC and the courts could then enforce.  The challenge is that legislating anything these days is difficult, as I’ve noted, and telecom regulation is really a battle of lobbyists.  One Congressman, after the Act was passed in 1996, said “We brought one side in and gave them everything they wanted, then we brought the other side in and gave them everything they wanted.”  Does this sound like a bulletproof process to you?

But legislation, presuming we could get it, have the advantage of actually creating rules that address the problem.  As I said, we’re backing into neutrality policy based on a legal framework that was never really intended to address that issue at all.  Enlightened legislation is obviously the best solution, but again I have to ask how anyone could believe, given the last couple years, that enlightenment was even possible.

And legislation would likely take a year or more, and that won’t be the end of the story.  Whatever is decided here by Congress or the FCC will end up in court.  Any FCC order will be appealed, as the last one was.  Any Congressional bill will mandate that the FCC publish rules to enforce it, which is what the Telecom Act did.  That’s how we spent the years between 1996 and 2004, finding rules that the courts would uphold.  We could easily waste the whole remainder of this decade and have nothing to show for it as 2020 dawns.  Most people would agree that the period after the Telecom act was the desert of broadband investment, in part at least because of regulatory uncertainty.  We could go there again with our neutrality efforts if we’re not careful.

And there is no right answer anymore.

We could debate the “best” policy here, but I have to say that it’s a waste of time because we probably could never get it passed and upheld in time.  The industry fears uncertainty more than policy, which is logical given that telecom investment is made on a 5-15-year capital cycle.  Until we have some promise of stability, we’ll suppress investment.  That’s why Cisco came out against Title II, but the same argument can unfortunately be applied to any path we take at this point.

Except perhaps one, which is the one we are on.  The FCC expressed confidence that it had the authority to stop operators from blocking lawful traffic.  Even if that’s not true, I think that publicity regarding a true blocking incident would be a disaster for the ISP who did it.  The fact is that this is about as far as realistic neutrality rules should go, not because it represents the optimum long-term policy we could set, but because it’s the least harmful option available to us now.  We have forces to balance, vast financial empires in the ISP and OTT worlds, and we have absolutely no idea what steps would be ideal, or even survivable.  When in doubt, let the market decide.

The industry needs ISPs at least as much as they need OTTs.  There’s no utility to an open Internet that you can’t get to.  We have to balance the consumer’s goal of getting everything for nothing with the supplier’s mandate to make a profit on what it invests.  That’s what regulators are supposed to do, but when they can’t do it effectively the best approach may be to get out of the way and let the market sort out everything but egregious abuses.  If Netflix doesn’t want to pay for transport of video, let them refuse and see what happens.  Let Comcast or Verizon let Netflix quality deteriorate and see if they can hold onto their customers.  Let other competitors decide if they’ll provide guarantees to Netflix for nothing, just to get some of those customers.  What is profitable for all is best sorted out by the marketplace.  That’s how we buy cars, after all.  And no matter what the government says, you’re not going to get BMW to lease you a high-end model for twenty bucks a month.  You’re not getting high-end Internet for that either.