2009-10-30

I've managed to slog through the 107-page "Notice of Proposed Rulemaking" (PDF) issued late last week by the Federal Communications Commission.

Let me save you the trouble of reading the 185 numbered paragraphs, 310 footnotes, and three appendices, including separate statements from each of the five commissioners: there's nothing to see here, folks.

First, let's be clear about what has not happened. No new law was passed. No new federal regulations were enacted. No decisions were made.

Instead, the FCC proposed draft rules to codify the six Net neutrality principles Chairman Julius Genachowski outlined in his speech on September 21. Now begins the process of gathering comments and other testimony. Later, the FCC will vote on whether to adopt the rules or to amend them, or just call the whole thing off.

The basic thrust of the proposed rules, as nearly everyone knows by now, is to keep broadband Internet access providers from managing last-mile network traffic in ways that discriminate, pro or con, based on content, applications, or devices. Access providers would be banned from restricting or throttling services that the provider doesn't like, for example, perhaps because they compete with more expensive alternatives the provider or one of its business partner offers. The proposed rules would apply to all broadband access, including wireless.

The comment process, which runs until March 2010, is open to anyone. The FCC is clearly expecting lots of comment. The document itself asks more than 100 questions, including whether the new rules are necessary, whether the commission should enforce them without detailed regulations but instead on a "case by case" basis, and even whether the commission has the legal authority to enact new rules in the first place.

1. We don't need no stinking jurisdiction
The last question hints at one of many ticking time bombs. Although the FCC has for years published policy statements regarding open networks, the commission's authority to enforce those policies is far from clear. Under the 1996 Telecommunications Act--the last major rewrite of federal communications law--only traditional phone services delivered by traditional phone companies are regulated as common carriers.

If the FCC has any authority to regulate broadband access, it comes from what Genachowski calls the agency's "ancillary jurisdiction." But Comcast has already challenged that jurisdiction, in a lawsuit pending in a federal court of appeals. If the FCC loses that case, the proposed rules may come to a quick demise.
The same FCC that now casts itself as savior of the open network has grown increasingly aggressive and prudish in policing content in its traditional job as regulator of over-the-air television.

In arguing against ancillary jurisdiction, Comcast has found a surprising ally: the Electronic Frontier Foundation. The advocacy group--strong supporters of the principles of neutrality--believes that the commission has no authority to issue these rules without sweeping new authority from Congress. Regulating neutrality under ancillary jurisdiction, the EFF worries, is a cure far worse than the disease; a "power grab that would leave the Internet subject to the regulatory whims of the FCC long after Chairman Genachowski leaves his post."

Exactly.

What's the risk? For one thing, "ancillary" jurisdiction could also be applied, as the EFF points out, to the creation of new Internet decency standards. (Congress has tried repeatedly to regulate Internet content since 1996, only to be overturned by the courts.) The same FCC that now casts itself as savior of the open network, after all, has grown increasingly aggressive and prudish in policing content in its traditional job as regulator of over-the-air television. A federal court, for example, recently threw out the $550,000 fine levied in the Janet Jackson wardrobe malfunction case from the 2004 Super Bowl.

Speaking of power grabs, recall that the FCC has tried repeatedly, at the strong urging of media lobbyists, to force electronics and software manufacturers to implement the so-called broadcast flag. Responding to a signal embedded in programming, TVs, DVRs, and computers would be forced to limit the ability of consumers to time-shift programming, a capability we've enjoyed since the invention of the VCR.

Another federal court stopped that madness. Mandating the design of electronics and operating systems, the judges sneered, was no more in the FCC's power than "regulating washing machines." That rebuke hasn't stopped the FCC from trying again and again.

Maybe that's why the EFF isn't the only surprising voice calling for caution. Microsoft and Yahoo, leading application providers, have both pulled out of a coalition formed to advance Net neutrality, with Microsoft issuing a statement last year that "Network neutrality is a policy avenue the company is no longer pursuing."

2. Swallowing the rules
Even if the FCC has the power to issue new rules, there are enough exceptions to render them toothless. All the rules are subject to "reasonable network management" by broadband providers, a sensible limitation that is mentioned (though not yet defined) 66 times in the document.
Even if the FCC has the power to issue new rules, there are enough exceptions to render them toothless.

As drafted, the new rules also allow access providers to prioritize performance-sensitive content, including voice and video, and to offer higher-price access options. This falls under the category of what the proposal calls "specialized" or "managed" services. That's nothing new. Harvard professor and open-network supporter Lawrence Lessig, who told the press that he was "thrilled" with the FCC proposal, has always believed that "broadband providers should be free...to price consumer access to the Internet differently--setting a higher price, for example, for faster or greater access."

The new rules, moreover, say nothing about discrimination by applications and Internet services. Even though access providers would not be permitted to block voice over Internet Protocol, or VoIP, telephone access from Skype and Vonage, in other words, the proposed rules would do nothing to stop Skype and Vonage from blocking calls to certain area codes, offering priority service to paying customers, or limiting the devices (e.g., cell phones) through which users can access their service.

There's no need to regulate applications, according to pro-neutrality groups like the Center for Democracy and Technology, because applications "do not suffer from the same bottleneck problem that the underlying broadband service inherently has." In other words, if Google searches prioritize Google content, and you don't value that kind of discrimination, you can use a different search engine. But today, in many parts of the United States, consumers effectively have only one or two choices for broadband access--their phone company and their cable company.

3. Avoiding the real problem
That, of course, is the real reason everyone, including me, worries about non-neutral behavior. In the absence of real competition, monopolies and duopolies have strong incentives to discriminate in ways that can severely burden some classes of users--whether consumers or service providers or both.
The risk of non-neutral behavior is significant, but the cost of regulation and the potential for unintended consequences may be higher.

Despite a few isolated incidents of clumsy interference, however, no one really believes that the lack of competition has created true market failures. At least not the kind of failure severe enough to justify the intensive federal regulation visited, with mixed results, on U.S. railroads a century ago or of the telephone monopoly from 1913 until 1982. Pro-regulation advocates, including Chairman Genachowski and Google Vice President Vint Cerf, speak in the conditional tense. The word "could" appears 55 times in the FCC proposal.

Regulating ahead of a market failure makes little sense when, as everyone acknowledges, the underlying technology for access is evolving rapidly and models for making money in Internet provisioning are still in the early stages of development. The risk of non-neutral behavior is significant, but the cost of regulation and the potential for unintended consequences may be higher. "Have we correctly identified the costs and benefits of the alternative approaches?" the commission asks. The answer is that it hasn't even begun to identify either, correctly or otherwise.

And if the real problem today is broadband bottlenecks, why is so little being done to encourage competition? Municipal wireless Internet projects have largely shut down, in large part because state governments and their lobbyist friends maintain that the law allows them to prohibit cities from competing with private-sector communications companies, a view supported by the FCC in 2001.

Offering broadband over power lines, another promising option, has been stymied, with the FCC receiving still more abuse from the federal courts in 2008, for their failure to adequately support the development of the technology.

Net neutrality advocates may be celebrating the start of a process they have argued for since 2005, but here, as with all technology regulation, it's wise to be careful what you wish for. For now, the proposed rules look to be dead on arrival--and of multiple causes.

That's one more reason to wonder why, if there is a problem to be solved sometime in the future, anyone thinks the FCC is the organization best-suited to solve it.
Larry Downes is a consultant and author, most recently of "The Laws of Disruption: Harnessing the New Forces that Govern Life and Business in the Digital Age." He is a nonresident fellow at the Stanford Law School Center for Internet & Society.

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