Net Neutrality in the New Reality
By Mr. Thomas W. Wilson
It’s as if the Internet has gone into an instantaneous implosion in the policy world once the current Chairman Ajit Pai led FCC repealed Net Neutrality Rules established during the Obama Administration by former Chairman Tom Wheeler, where oversight of broadband service providers has returned to the Federal Trade Commission (FTC).
Questions surrounding the FCC’s latest action to repeal 2015 net neutrality regulations have swirled through countless social media threads, blog postings, and comment sections, but while a bevy of tech “experts” and Internet gurus have done their best to break down what happened just a few weeks ago and speculate upon what could potentially occur in the coming months and years, no one can truly say where the destiny of the Internet lies, given the impact that the FCC, as well as several other major market regulators have on other country markets. One thing is certain. The subject is far from closed: not by any stretch of the imagination.
In response to the recent FCC decision, the US Congress as well as the US Senate are both working on new legislation which would tighten governmental control of regulation of the Internet. The states themselves are taking action and or at least discussing it, where their State Attorney Generals are preparing lawsuits against the federal government. State of New York Attorney General Eric Schneiderman is leading a multi-state effort, along with Attorney General of Washington State, Bob Ferguson who has officially announced his intention to file a legal challenge to the FCC’s decision to roll back net neutrality.
Activists across the country are leading a charge against the FCC repeal of the 2015 Open Internet Order, which classified broadband as a Title II communication service and service providers such as Comcast as “common carriers”, as opposed to “information providers”. These measures were meant to keep large ISP’s from utilizing their expansive networks to stifle competition with application content service providers by favoring content or other products due to ownership, investment, or partnership in specific properties.
A doomsday mentality has formed with many of the pro Open Internet supporters, where assumption of the worst is the norm. Petitions are being signed nationwide in the US in support of either firing technocrats, impeaching politicians, overturning rules, terminating the FCC charter, etc. The outcry is massive, for the freemium environment created by the Internet (free use applications used often for communications and gaming) is supposedly being challenged by big business interests. It’s possible however, such outcry may be a bit over the top (pardon the pun) regarding real world application of the new rules.
At a glance, one does need to give thought to the Open Internet and how the repealed Net Neutrality rules sound akin to letting the fox in the chicken coup and assuming he won’t get hungry. The overtly strong regulation put in place by Title II (generally used for public utilities) indeed restricted by rule (not law), service providers in providing any and all users totally unfettered, non-prioritized, and unadulterated access to the Internet, while strapping onerous age old regulatory rules and guidance onto those that provided that access to the Internet. The application owners such as Google, Facebook, LinkedIn, Twitter and the whole lot all want an Open Internet that allows them to continue to build upon the “freemium” environment, while wanting the providers of the access to their applications to never add the word “premium” to the equation.
The potential throttling of Internet content, fast lanes, slow lanes, and the like have been at the center of discussion within a tech industry wanting little more than the high-speed Internet they’ve used and profited from for years and a citizenry hoping to sit down for a movie on Saturday night and not see the dreaded buffer wheel spinning in its always frustrating fashion. The situation is a true conundrum, for what you see is not necessarily what is really happening. How much exactly does one want the Internet to be open and to what extent should governance extend its steely arms out, which typically restricts growth and innovation, which in turns limits investment. The argument can be made for all sides of this long-term debate.
The issue facing those who profit monetarily from (Telcos or App Service Providers) and those who enjoy the entertainment it provides, is the fact that they will both likely lose the Internet they know and love no matter what side of the net neutrality debate prevails. The sad state of political affairs many citizens currently find themselves faced with, coupled with a sky high and rising stack of rules and regulations built over the years by corporate interest-minded bureaucrats will simply not allow a consumer focused, citizen minded Internet to prevail.
Background and History
Since as far back as FDR, the United States government has done relatively little to truly spur competition within the telecom industry. In fact, since the early 20th century, most laws passed regarding communications technologies have been specifically created to stifle competition and limit the growth of rival companies attempting to occupy space within a historically pseudo capitalist state and compete against telecom monoliths politically backed by the very same state. This has created the ISP monopoly we see today where over 70 percent of American zip codes reviewed in a recent study were offered either zero or just one 25 Mbps Internet option. While the MFJ (Multi final judgement of 1984) was monumental in breaking up the long-distance provider environment, it did little to sate the primary need of a true investor-based infrastructure market, which was last mile access.
The attempt to address the liberalization of last mile access was again visited by Congress in the Telecommunications Act of 1996, which unfortunately did little to truly address the need for multi carrier competition locally, at least on the fixed telco side of things. One big cable provider and one big fixed line provider does little to truly provide the competitive environment that generates services consumers deserve.
The foundation of a free market is choice. If I don’t like a product or service, the free market allows me to choose from a different vendor who happens to offer the product or service I desire. Multiply this scenario several times over and the vendor left behind is subject to either improving or going out of business. This beautiful set of events is what America supposedly hangs its hat on, however, whether through regulation or the highly acclaimed “de-regulation”, the telecom industry has been able to largely avoid this economic happening throughout the years.
From the 1934 Communications Act came a gambit of heavy handed government regulations spearheaded by the creation of the FCC, along with the solidification of a what would become one of the most powerful monopolies of recent history in the American Telephone and Telegraph Company; better known as AT&T. This would set the stage for decades of single player domination within the industry and with an essentially nationalized telephone system, America wouldn’t see a shining light of competitive hope until the late 1970’s when a series of lawsuits would create drastic changes within the communications market.
Following the AT&T (aka Ma Bell) break up in 1984, competition within the long-distance carrier realm skyrocketed with both Sprint and MCI doing serious market share damage to the only purely telecom-based entity AT&T had left after relinquishing its control of the Bell Operating Companies. Local fixed line companies, however, failed to develop true competition, as the well-developed infrastructure of the “Baby Bells” left behind in the aftermath of the breakup of AT&T, into seven regional bell operating companies, RBOCs, was never truly given a challenge to compete in a real-world situation, where investment would be catalyzed to build new truly competitive access to the home (copper, coaxial cable, fiber, RF, etc.). Long distance was indeed changed forever, as it is now just a throw in for local access lines or broadband installation. However, the companies themselves, with the aforementioned established infrastructure could go on without a true competitive environment.
The nineties brought the Telecommunication Act of 1996, which made it so the Baby Bells were forced to allow access to their networks to CLEC’s. This being just another example of government interference gone wrong, it was much too little too late as the local telephone markets were in far too deep of a monopolized oligarchic abyss. The margins given to the CLEC’s could not be sustained and the metamorphosis has taken the shape of a metastasized urban versus rural displacement of properties, where Verizon, ATT and Century Link own metropolitan local line networks and have sold off their rural properties to the aspiring ILECS who chose to stay in business and grow, rather than cut bait and bail. The US situation as far as Internet access speeds is truly deplorable given the GDP of the country and advanced stage of technology deployed, yet millions still seek decent bandwidth speeds, if at all. Public private partnerships are being tried, even in the states, with the grants and loans being offered by the US Government, to those willing to build in rural markets, where the major operators both fixed and mobile have left consumers high and dry. Investment requires return on investment and as such, the quandary exists on how to pay for deployment of the Internet. That being said, Net Neutrality does leave question as to how operators pay investors back for the investment in the billions, to build high speed broadband internet networks, allowing for equal access, yet also allowing for capacity building regarding advanced services and products.
Increased investment on the part of Mobile and Fixed Operators
Obama era net neutrality regulations were said to have reduced the rate of investment in broadband networks and reduced the rate of improvement in speed. Studies reflect different sides of this argument. What has been established is the manufacturers continued drive to develop high cost new evolutionary means which drive to an end, the ability to stay in business, driving investment worldwide in the telco space, multiple hundreds of billions (USD) annually into infrastructure and service set improvements. The 3GPP and other working groups recently announced nascent stage standards for the implementation of 5G. The rush of standardized and interop based 5G to standards may make the manufacturers see new revenue streams, yet the Internet in its purest form is left to the auspices of users worldwide, rather than to the manufacturers who are step in step with the operators (larger). What is noticeably missing, is the lack of IP V6 implementation worldwide, which could have far greater impact on the Internet than 5G, when LTE advanced (ITU Standard 2000) 4G (not 4G plus as some like to advertise), unless they add massive MIMO and other attributes, which alter the speeds of the Internet positively for consumers and content delivery alike.
Application content service providers are driving the data usage on operator networks. It goes without saying, if left to voice revenues, with a scant amount of message traffic, the operators would be null and void. However, without the service providers, the application content providers would also be null and void, as for every Facebook out there, there are countless thousands of applications and developers failing just as MySpace and Friendster to name a few, failed in competing with Mr. Zuckerman’s Facebook. Someone has to pay for the magic of the Internet and as such, there are costs and margins in the use of the Internet. As a vehicle of societal development, nothing comes close to challenging the benefits of the Internet, however still, investment must be generated. Broadband is not a privilege, it’s a right and as such, all industry stakeholders must work together. One side cannot have it all to them. Operators are heavily regulated on multiple layers, have to pay for spectrum at outrageously high costs, in addition to infrastructure development on what seems to be a never ending upward slope. All while the application content service providers are not paying these charges or fees, or having to truly foot the bill of the regulation and policy management that goes along with compliance with these many arduous business practices the operators face.
The Internet is too important of an issue for a policy shift every four years
The Federal Communications Commission has five commissioners. They are aligned typically by political party, where in Obama’s terms, there were three democrats and two republicans. In the current administration, there are three republicans and two democrats, which through its Chairman, Ajit Pai saw to it to overturn and repeal the Net Neutrality rules set out by former FCC Chairman Tom Wheeler’s party line vote. People opposed to Tom Wheeler’s vote were quick to state, “Wait until the republicans get back in office”. Now it’s a sing song on the same terms, by the democratic and liberals, where they chant, “Wait until we get back in office”. The Internet deserves far better.
The issue in this case is not what rulings are made, but how the Internet is governed in the US. The one thing the Open Internet needs is and must have, is STABILITY. How can stability be offered when elections happen every four years and terms and political bents can change along popular opinion? The governance of the Internet should be set by law, not by rulings made by the FCC, given the scale, the scope and overall effect the Internet has on society, not just in the US but globally. Ideally, a practical look has to be given to the governance of the Internet, how it is built and managed and who has the real say in how it is governed, not only in the US but globally. Internationally, the ITU should be part and parcel involved, however its tenure would be manifest dangerous if allowed to be operated by current designs, where votes are traded by political favor and economic benefit. There needs to be a permanent Internet Council of xyz number of politically stable members.
Reform at the highest levels must be instituted, where the Internet is not caught in temporal times, but rather, in a pragmatic and practical means, where it remains open, fully available to all and not captive to political whim at the moment, locally or internationally.
Pay to Play Fast Lanes
There is very little reason to believe pay to play fast lanes will become an issue following the repeal of the former Obama FCC rulings on Net Neutrality, primarily based on market competition. The operators have enough issues, rather than create additional animosity toward the one thing that is driving new revenues to their balance sheets, application usage by consumers. The release from regulation under the auspices of Title II was largely the major wish of the operators and in light of the general axiom of less regulation means greater innovation, not just in the telecom sector but in most business sectors.
Lest people think the Internet is left alone to be managed on its own, the FCC and the FTC of the US have come to agreement on how they would work together to “regulate” the operation of the Internet as per service providers and consumer’s activities. Fast lanes that are given preference to “owned” or “partnered” applications (websites, content, gaming, etc.) with specific telco operators would be ill advised and would most surely lead to consumers complaining, but also would illicit a sucking sound seen and heard from coast to coast of users switching carriers and the loss of revenue.
Contrary to a popular argument meant to shine light on the need for net neutrality regulations, Comcast did not throttle or manipulate the traffic of Netflix but rather, Netflix maxed out its bandwidth due to Comcast being unprepared at the time to handle such large amounts of video streaming. Had Comcast hurried to provide Netflix with additional ports, it would have been in clear violation of net neutrality rules, as that would be an example of an ISP catering to a specific content provider. Netflix and Google can at times occupy up to eighty percent of Internet usage during evening hours and this has a large impact on broadband carrier networks, from the core to the edge. The access edge if you will, can have a seemingly one to one relationship, however, they don’t. Mobile networks along with other broadband networks are not designed on a one to one basis and as such, the onslaught of video usage (the Internet was not built for video per say, for video is a continuous signal, where the product can be greatly affected by the limitations of best effort network design, as is the Internet) and also, ISP core networks have to be sized appropriately to handle this amount of traffic.
In one sense, one can look at the Netflix deal with Comcast, AT&T, Verizon and others and see it was designed to help deliver content at maximum rate without throughput disruptions or as best as feasibly possible. It is easy to take potshots at the network providers, yet when given the challenge to build new networks, external interest appears limited, given the environment existing today, yet the line of application developers is lengthy, for risk and investment is far less. Try building a network today, where shareholders are wanting appropriate return on investment, while industry stakeholders want an as close to free Internet as possible, while also being limited on how you serve the product you offer to your customers.
Due to the law’s ambiguity, SCOTUS (US Supreme Court) has already ruled that the FCC has the ability to classify broadband based Internet service under either Title I or Title II.
The question is why those advocating a free and open Internet aren’t taking into account, the overwhelming amount of censorship and overt violations of citizen privacy currently taking place across the world at the hands of powerful governmental bodies. While ISP’s have historically done very little to threaten the existence of an open and free Internet for all, governments across the world have continued to double down on Internet restrictions and control, while censoring any websites that may go against any ideas or objectives of the state. Regional oversight can be cultural however, and oversight and or management of content over the Internet may be justified in specific situations.
In reality, offering customers access to a completely free and open Internet is the bread and butter of most every ISP across the world, thus deeming any type of overreaching control or restriction on the part of the ISP, counterproductive to its central objective of making money. If consumers are not able to gain the fast, easy and quick access to the content they desire, they will simply look for other means to access that content. Freedom of choice is paramount in delivering the equalizing moment of truth on judgement, “do I stay with my current broadband provider or not”. On the other hand, in addition to a long track record of inefficiency and lack of innovation, governmental bodies have continued to reveal their lust for ever increasing control and regulation, often in order to rid society of the latest bogeyman and thus, further justifying the existence and continuing need for an all-powerful nanny state-styled government.
Essentially, consumers, governments don’t trust the Service Providers
The ISPs, largely the former telecommunications monopolies have a real problem and it was not created overnight. The telecommunications service providers since the beginning have been viewed skeptically by consumers. Telecom services are non-tangible and the only time operators effaced with customers was during customer service reparations or jousts with errant billing systems. Service providers have charged fees based on market demand, rather than on cost for many years. For example, the high costs for SMS textual messages was truly exorbitant, based on the costs associated with providing the services. Thus, the entry of application based messaging, which addressed the cost side of the equation for users quietly and quickly. Market based solutions again, rectifying a situation, where regulation could not.
The same can be said for long distance voice; especially international voice even today. Overall, Telco’s, service providers, operators and ISPs have not done well with branding and image establishment. Additionally, telecommunications service providers are legends among legends for having some of the poorest customer service for large institutions of any industry.
Broadband providers lack not only branding advantage, but also competence credibility and trust with their customers. Most operators keep their clients for some extrinsic purpose or means, rather than true intrinsic reason of value. Consumers, governments and activists alike, have a hard time buying the operator’s message of needing fairness, support from the community and trust that they will do well by the Internet and they would not block their users from accessing certain sites or arbitrarily speeding up owned or partnered content delivery to various access customers, while slowing down non-owned or partnered content. It is hard to believe the service providers will do the right thing by their own customers. This is a reputation well-earned that now, if provisioning of factual empirical evidence is given, it will take much time to change. One reaps what one sows!
Government roles in setting boundaries for the Internet
Several outspoken critics of the recent FCC action have included mega conglomerate Internet companies such as Facebook and Google who conveniently own and maintain their own global networks, thus giving them notable control over the delivery of their content. These companies will be largely unaffected by the recent measures, but there’s still good reason for them to join in on the trending activism parade for net neutrality. While Google and friends have the means to operate their own proprietary networks, under net neutrality laws, smaller Internet companies working with less resources will have to navigate through an ocean of rules and regulations, thus granting the current Internet monoliths, even more of an edge over their potential competitors.
A large problem exists in the fact that a significant portion of the US population continues to look to the government as a superhero or bodyguard of sorts, diligently working to protect the common man from the evils of capitalistic greed. This idea, however, lies entirely contradictory to the current state of reality. Corporate interests are, unfortunately, an undeniable factor within US politics. Giving more power to the government is therefore, especially in the case of something as crucial to modern day freedom as the Internet, a potentially reckless mistake.
Too large to fail but maybe too large for other reasons
Back in the days of the financial crisis, banks were a hot topic. There were many hotly debated discussions on how to handle the banks and why they were being saved, when they were the reason (major) for the collapse of financial markets via credit default swaps falling in value due to an overall bubble burst of the real estate market, along with banks operating on much too leverage (not enough cash on hand to weather cash drains). Some said the banks were too large to fail. Maybe they were, maybe they weren’t as we will never know, for the US Government and governments worldwide helped keep banks afloat. Perhaps telecommunications falls under the same pretext.
Google is now a term, not just for a company called Alphabet, but rather, to search an item or more, on the Internet online. Google’s YouTube dominates the Internet in the evenings, where in some markets and or countries, the usage can be sixty percent of the operators Internet bandwidth from the hours of 6pm to midnight. The numbers vary worldwide; however, they are large and there is no end in sight.
Looking at the money that Microsoft put into BING, let’s put the numbers in perspective. As per Statista, in 2017, Yahoo has declined slightly over the years, to about 11.4% in 2017, Ask Network and AOL Inc. at negligible levels, while Google sits around 63.4% of traffic, Microsoft sites, largely BING, has reached a 22.8% level as of April of 2017. Google in the mobile market in fact has over 93% of the market.
How can anyone truly expect an entrepreneur with new ideas to enter a market and compete realistically with Google and its major competitors, where Microsoft has an overall sales and marketing budget of $15.54 Billion and its search efforts reached profitability for the first time at one Billion in search ad revenue (one year after its Yahoo acquisition). In 2016 Microsoft actually spent $7.8 million in Google search ads during 2016 (the irony of it all). Google spent nearly $350 million in advertising of its products and services in 2016, as per Kantor Media. Microsoft spent a total of $746 million in 2016 in advertising. All this spending and purchasing of Yahoo and other apps for search revenues and Microsoft still cannot get over seven percent of the mobile market for search and a total less than 23% for overall search, versus Google and a gaggle of others.
This essentially is stating that Google is ubiquitous for search. People don’t say, let me “Bing” for something. The term of ubiquitous can be used for Facebook for textual friending of friends, Google Maps for Maps, etc. Once a certain scale is reached, its near impossible for smaller rivals to ascertain greater market share in these societally important application verticals and should be the same, for other sectors. Yes, the Internet does allow for the small guy to get their message out just as quickly as the big guys, however opportunity for scale and scope clearly dissipate once market leader’s attain certain size and market share. Net Neutrality can be largely effaced with the opportunity for all to access the Internet at the choice of speed and connection of their own. However, if Google and Netflix for example, demand clearly greater than 60 to 80 plus percent of the Internet usage before and after dinner time in homes worldwide, given that the Internet was built on best effort and not on video transmission, what harm is it if an operator such as Comcast works out an arrangement with Netflix, where Netflix is able to deliver its content faster and quicker to its access customers without any abatement or obstruction by the ISP (operator, service provider, carrier, mobile or fixed network provider).
The oxymoron of regulation has twisted the needs of consumers to where protection has been given to big business rather than to consumers. The current lack of local competition is the fault of misguided governmental regulation, not the lack of regulation. True market competition needs to be allowed to fulfill the needs of the consumer based decision maker, which will make or break service providers who do not allow an open Internet.
Net Neutrality as a measurement of equal access is an absolute must and it truly resonates with the service providers, that anything challenging a complete and open Internet would only be temporary abstinence from regulation (overt) for those propagating such abhorrent treatment of the Internet. Let those think they can get away with closing the Internet, for that will mean someone else will gain an awful lot of new customers and revenue.
The Internet is larger than any political party or group. The Internet must remain Open to all. Too much regulation is no benefit to anyone, let alone the Internet. The Internet must be allowed to grow and improve through market advancements, while allowing all market opportunists to flourish and build equity through the greatest societal benefit humans have brought to this earth, since ink was put to papyrus tens of centuries ago. A true partisan discussion must be kept alive and all stakeholders must have a seat at the table. The issue is far too important to treat it any less than that.