[opendtv] Re: The Atlantic article on court ruling
- From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
- To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
- Date: Fri, 17 Jan 2014 08:41:10 -0500
> On Jan 16, 2014, at 9:00 PM, "Manfredi, Albert E"
> <albert.e.manfredi@xxxxxxxxxx> wrote:
>
> This seems more balanced. Perhaps this is a repeat of Craig's UPenn article I
> couldn't seem to get. The author is in fact a professor at the Wharton School.
Yes, same professor and similar content. The Wharton piece was in Q&A format.
Regards
Craig
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Quote
A federal appeals court Tuesday sided with broadband access providers like
Verizon and Comcast in striking down Federal Communications Commission (FCC)
regulations on these providers pertaining to network neutrality – the idea that
telecommunications companies should be required to treat all Internet traffic,
whether a bandwidth-hogging video or a brief email message, the same.
But the decision has been described as only a partial victory for Verizon,
which brought the suit, in that the ruling affirmed the FCC’s overall right to
regulate broadband.
Who wins and who loses as a result of this ruling? What are the longer-term
implications for the Internet, and does the FCC have other options for ensuring
fair treatment for all parties concerned? Knowledge@Wharton interviewed Wharton
legal studies and business ethics professor Kevin Werbach, who formerly worked
at the FCC and, in 2008-2009, advised the Obama administration transition team
on telecommunications issues.
Knowledge@Wharton: Can you briefly explain the decision by the three-judge
panel of the U.S. Court of Appeals for the District of Columbia Circuit?
Kevin Werbach: The FCC, the federal agency that oversees telecommunications and
media, adopted a set of rules in 2010 on network neutrality in which it
prohibited broadband access providers – like Verizon, Comcast and AT&T – from
blocking or discriminating against traffic on their broadband networks. Verizon
challenged this rule in court.
The court decision yesterday overturned the FCC rules, saying the FCC had
enough legal authority to act, but that the specific rules they adopted
violated the restrictions of the Communications Act.
Knowledge@Wharton: Is this regulation going to be bad news for consumers?
Werbach: It’s largely bad news for consumers, although not quite as bad as most
of the consumer advocates are suggesting. Network neutrality is designed to
promote and protect the openness of the Internet. A big reason why it has been
such a catalyst for innovation is that the Internet is open to anyone and any
company, and is not controlled by a small number of gatekeepers, like other
traditional communications platforms. If the outcome from this court decision
overturning the FCC rules is that the Internet increasingly looks less like an
open innovative marketplace and more like a controlled walled garden where a
few large companies decide what happens, that would be a huge loss for
consumers and for the rest of the U.S. economy.
Knowledge@Wharton: Can you give us some examples of how this might happen?
It’s largely bad news for consumers, although not quite as bad as most of the
consumer advocates are suggesting.
Werbach: The FCC dealt with two kinds of behaviors. One is blocking. So the
concern is that Comcast, for example — which might be your Internet Service
Provider (ISP) but is also a cable company – is unhappy that you are watching
your movies over the Internet connection on Netflix as opposed to paying
Comcast for its cable service. Comcast might have an incentive to not allow you
to go to that service over the Internet. Comcast hasn’t done that and has said
it won’t, but the argument is that they could.
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That’s one concern. The second is discrimination. The FCC rules said that
broadband providers couldn’t unreasonably discriminate against certain content.
The concern there is that those providers will have a fast lane and a slow
lane. Only the companies that are their partners or are willing to pay them
will have effective access to customers, while everyone else will be stuck in a
slow lane that will make their services not as valuable.
Knowledge@Wharton: What about the ISPs? Is this good or bad for them?
Werbach: The surprising thing about this decision is that I actually think it’s
not great for the ISP industry. First, what Verizon was really in this fight to
win was the argument that the FCC doesn’t have the authority to regulate
broadband. And they lost on that. Before this court decision, it had never been
clear legally whether the FCC could adopt any rules of this type. The court
clearly said they could; they just couldn’t impose the rules they chose. This
hardly makes the issue go away. The court provided a number of other legal
avenues the FCC might pursue instead. The court said the FCC couldn’t regulate
broadband ISPs as common carriers, but it could impose rules as long as those
companies still have some degree of flexibility to cut individual deals on a
commercial basis.
So one thing the FCC could do is adopt a more limited set of rules, which would
have continuing oversight over behavior. The second thing the FCC could do is
adopt similar policies on a case by case process. So if the broadband companies
are free to do as they please, but the FCC retains the right to bring a
complaint when there are abuses, that probably would survive this court
decision.
And finally, the whole legal challenge is based on the fact that the FCC, going
back to the period between 2002 and 2005, decided broadband is not a regulated
common carrier service. But the court said the FCC didn’t have to reach that
result. So the FCC could go back and reclassify broadband. It could say that
the pure transportation part of broadband is just like telephone service, and
we can regulate that without regulating all the services and content that go
across.
I’m skeptical the FCC could actually do that, or would do that, but it is an
option. Frankly, it’s the worst option from the perspective of the broadband
providers. That’s what they were so violently fighting against. By limiting the
FCC’s flexibility with other legal approaches in this case, the broadband
providers might actually get the approach they feared all along.
Knowledge@Wharton: Are Verizon and similar broadband carriers “information
services” or “common-carriers,” and why does the distinction matter?
Werbach: The Communications Act has a set of rules that apply to
telecommunications services – i.e., common-carriers — and does not specify any
obligations for information service providers. It’s confusing, but what it
means is that the set of rules that are enumerated for common carriers apply
only to them and not to other companies. Essentially, the FCC’s argument was
that broadband is an information service, but it should still be subject to
some of the kinds of rules that traditionally applied to common carriers.
Network neutrality, implemented appropriately, does not mean no one can
differentiate anything. That’s not the way things work on the Internet.
Knowledge@Wharton: Shouldn’t service providers be allowed to charge
differentially for the bandwidth used – as long as it’s content blind and
doesn’t discriminate on the type of data being carried?
Werbach: They should and they are. Network neutrality, implemented
appropriately, does not mean no one can differentiate anything. That’s not the
way things work on the Internet. What it says is that companies can’t
unreasonably discriminate. If you pay more for your broadband connection
because you use more bandwidth, that’s reasonable and economically justified.
The issue is if companies act in anti-competitive ways or in ways that suck the
life and vitality out of the innovative ecosystem on top of the Internet.
Knowledge@Wharton: Which raises the question: Will this ruling stifle
innovation in any way?
Werbach: Again, it depends on what happens now. There are two concerns. One is
that the broadband operators will, in fact, engage in the sorts of practices
people are concerned about. The other is that the Internet industry will be
afraid they are going to, and will be more reluctant to invest and innovate
because it doesn’t think it will be able to capture the benefits in light of
the power of the network operators. So there is the potential for a chilling
effect. We saw this in the wireless industry, before the growth of smart
phones. Venture capitalists were very reluctant to invest in wireless data
services because everyone had to go get permission from the wireless carriers
to put anything on a phone. So it stifled innovation in the marketplace. Once
that opened up on wireless devices, there was a tremendous flowering of
investment in that marketplace.
Knowledge@Wharton: Will the FCC appeal this decision?
Werbach: There is a reasonable likelihood they will appeal. There are arguments
on both sides. The decision gives the FCC more running room than would have
been expected. This is a legal battle that has been going on for four to five
years, and as an overall battle for more than a decade. From the FCC’s
perspective, they may just want to move forward, because if this is going to go
up to the U.S. Supreme Court, even if the FCC wins and has to go back and start
implementing these rules, we are almost getting to the end of the Obama
administration. So that will be part of the consideration. Does the FCC want to
allow this to keep dragging on in the courts?
Knowledge@Wharton: Are you optimistic or pessimistic about the eventual outcome?
By limiting the FCC’s flexibility with other legal approaches, the broadband
providers might actually get the approach they feared all along.
Werbach: I have mixed feelings because this depends on a number of factors,
largely involving how the FCC acts. I think this whole process has been such a
mess and so confused and dragged on for so long that it is hard to imagine it
coming to a clean resolution any time soon. But I think I’m more optimistic
than not, because after all this time, the notion that companies would engage
in broad scale blocking and discrimination across the board seems harder for me
to imagine, given all the attention that gets paid to this and the degree of
consumer mobilization. It doesn’t mean it’s not going to happen. There are a
number of gray areas, but I think that companies like Comcast, Verizon and AT&T
have to have this on their minds even if they may be legally justified. They
are going to have to worry about the response to certain business practices.
One more thing: The big picture of this is that ultimately, the only answer is
more broadband competition because network neutrality is kind of a second best
solution to market forces. If we all have five or 10 good choices for our
broadband providers, there would be much less reason to worry if one happened
to block certain content, because people would have choice. We do have some
choice but not at the same level as other countries. That is really the big
question. The outcome of this net neutrality ruling doesn’t affect that except
to the extent that it pushes the FCC and Congress to remove barriers to
competition.
Knowledge@Wharton: In what way do you see this competition coming?
Werbach: It’s hard to have multiple competing platforms across the U.S. But to
have significantly more competition, especially for high speed broadband, is
certainly possible in lots of the country. This could come from entrants like
Google, from cities themselves, which in many cases are blocked by state laws
from doing municipal broadband, or from upgraded operators. The other piece,
which is not a complete substitute, is wireless technology, which is getting
better all the time, especially wifi technology. So that can become a
competitive force as well.
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