Will Net Neutrality Compromise Net Profits?
Earlier today, Julius Genachowski, Chairman of the Federal Communications Commission (FCC), telegraphed the Commission’s plans to open a formal rule-making process on the issue of “net neutrality.” It’s likely the specifics regarding hearings and a timetable for any proposed rulemaking procedures will be on the agenda for the FCC's October meeting.
While many of the major carriers – including wireless carriers who have typically been out of the fray when it comes to the Web – have argued against both the need and the wisdom of competitive regulation amongst carriers, open Internet advocates, many of whom were ardent campaign contributors and supporters of President Obama, have been aggressively pushing for regulation. Companies such as Amazon.com and Google, have long argued for rules that would prohibit carriers from denying their right to give consumers complete freedom of choice when it comes to both the content they receive and the devices they use to receive it. While not necessarily quibbling with what appears, on its face, to be a reasonable and market driven approach, opponents point out that the government stay away from intervening in yet another major marketplace – this time one, they argue, that isn’t broken. Further, and perhaps more significantly, companies such as ATT and Verizon, now joined by ATT Wireless, Verizon Wireless, Sprint (Sprint Nextel) and T-Mobile (Deutsche Telekom) argue that forcing carriers to open up their networks without corresponding economic counterbalances in place will force them to either raise consumer prices to keep up with virtually unrestricted broadband demand, but may require them to limit availability and accessibility for capacity and technological reasons. Wireless carriers may have special reasons to be concerned given current pricing models and the technological limits of current bandwidth capacity. That said, the major cable television, fiber optic and DSL-based Internet providers have long had to cope with government regulation and requirements.
Back in the days following the breakup of AT&T’s telephone monopoly (anyone remember Judge Green and his landmark 1983 rulings?), the regional and local companies spawned by carving up the nations’ previously regulated monopoly – the so-called ‘Baby Bells’ - worried about long-distance carriers (including the remaining long distance carrier, AT&T) making deals for preferential treatment over interconnections. Thus the principle of equal (“neutral”) treatment for interconnectivity arose. When cable companies started offering Internet service – previously the domain of phone-line intensive telephone companies (remember dial-up?) – they tried to convince everyone that neutrality didn’t apply to them. They carried information, and weren’t, after all, common carriers.
OK. Fast forward to the market response. Phone companies decided to get into the content business! Cable companies are offering Internet and VOIP services, telephone companies are offering entertainment, programming and information services, wireless phone services stream video content and provide messaging of news, sports scores and applications galore (oh, they do still carry voice traffic when you need to make a call).
So back to 2009 and the future. According to Commissioner Genachowski: "This is not about government regulation of the Internet," adding that "We will do as much as we need to do, and no more, to ensure that the Internet remains an unfettered platform for competition, creativity, and entrepreneurial activity." That said, his proposal would add a fifth principle to the FCC’s existing four that relate to the Internet. To wit, that carriers will not be permitted to be selective about the content they carry (subject, of course, to their continued ability to block illegal content) and will be required to be transparent about how they are managing the carriage of content across their networks. Violations and allegations of discriminatory practices would still be reviewed by the FCC as and when the facts of each specific case arise. You can read or download the complete statement of Commissioner Genachowski’s prepared statement today, entitled “Preserving a Free and Open Internet: A Platform for Innovation, Opportunity, and Prosperity,” right here.
Clearly if you are a small Internet application provider or software developer that has traditionally had to pay for access through a carrier, open, non-discriminatory access would prove a major boon. Then again, Internet carriers – wired and wireless - have invested huge amounts of capital in building their own proprietary networks. Since there is no evidence that there is a lack of competition, why should the government tell any of them what they should or should not carry on their networks? Indeed, since the early 1990s, when the Web evolved from a glimmer in the eye of Tim Berners-Lee, to a reality, there have been so few real complaints (and so few complaints from consumers, even as competitors bash each other about), why fix something that doesn’t appear to be or have been broken for almost two decades?
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