To See the Future of the Internet, Look to the Past

Yesterday’s ruling by the FCC regarding “Net Neutrality” allows those of us whose livelihood depends on the Internet to breath a very limited sigh of relief. The Good: the FCC upheld the concept of Net Neutrality for broadband connections; the Bad: they didn’t for wireless connections and they may not have the legal basis to enforce their policy over wireline providers.

Background

To understand the concept of Net Neutrality, we have to look deep into history – England in the 1400’s.

England’s medieval royalty were often busy with other things – fighting France, fighting the Vatican, fighting crusades – and left road building and operating ferries to private entrepreneurs. Imagine you lived on an island with only one ferry shipping supplies from the mainland. That operator could, if he wanted, deny transportation to one business while allowing others to pass. The free marketeer would argue that is a bad business – why refuse transport when you have a paying customer?

To sort this out, let’s do a little role-playing.

Assume two island businesses: Mike’s Tavern and Pat’s Pub. The Pub was for many years the only watering hole on the island. But recently locals have complained of watered down beer and lousy food. The upstart Tavern is hoping to benefit from the discontent with the quality at Pat’s Pub. But rather than compete, Pat’s Pub decides to starve Mike’s Tavern of supplies. Pat made a deal with the ferryman, paying him to deny shipment of any of Mike’s supplies. Afterall, Pat has the bankroll to lose money for a little while in order to ensure his advantage in the long term.

In the long term, it would make sense for the ferryman to accept business from both Mike and Pat and let them compete for the limited space on the ferry, thus raising the price of transport. But not every business can optimize for the long-term – some because they have no long-term vision, others simply need money in the short-term. Regardless, the ferryman refused to ship Mike’s beer and his Tavern was soon out of business. Pat, again the only bar on the island, was free to water down the beer without risk of customers going elsewhere. In addition, Pat’s Inn (lumpy beds) and Pat’s Stable (lousy oats) now benefit from the fact they are next door to Pat’s Pub and Pat’s Empire continues to grow.

Common carriage was a common law concept designed to prevent this: carriers can not discriminate against anyone requesting service and willing to pay a reasonable price. In exchange, common carriers are allowed the use of public right-of-ways, limited liability regarding the contents being carried and occasionally protection from competition and the power of eminent domain. The ferryman could not be held liable for unknowingly transporting illegal materials and would be allowed to use the government dock at both ends of the route.

In the end, the public’s interest is best served by requiring the ferry to operate as a common carrier – competition and business can flourish on the island. And Pat has to stop watering down his beer, an unquestionable win for the public.

Comcast and the Common Carrier

Telecommunications have long been considered a common carrier in the United States. Phone companies are protected from legal action regarding what is transmitted over their lines, allowed access to public rights-of-way and given some protection from competition. In exchange they cannot deny phone service or charge differing rates for the same service.  The Communications Act of 1934, which established the FCC to oversee the industry, provides a common carrier designation in Title II and traditional phone companies have long been regulated by it.

The Communication Act, later amended by the 1996 Telecommunication Act, defines a couple terms relevant to this discussion. A telecommunication service is

...the offering of [the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received] for a fee directly to the public ... regardless of the facilities used.

Whereas an information service is

... the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications... but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service.

The FCC shot itself in the foot in 2002 when it designated cable modem services as an information service rather than a telecommunication service, thus placing it under Title I of the Communications Act and removing it from common carrier requirements. The FCC argued that since cable Internet companies offered “e-mail, newsgroups, and the ability to create a web page that is accessible by other Internet users” as well as DNS service, they were offering an information service.

First of all, DNS services – which translate friendly names such as MikeKeran.com or Google.com into more geeky IP addresses (69.4.229.193 and 74.125.155.105, respectively) that pinpoint these servers on the Internet – clearly falls into the “management, control, or operation of a telecommunication system.”

Secondly, the FCC makes the assumption that if a telecommunication service offers any information service features, it keeps the least regulated of the two designations. This sets a bad precedent: my phone company offers voicemail, conference calling and caller ID – the vocal equivalents of email, Web pages, newsgroups  and DNS service. So why is Qwest regulated under Title II? By the FCC’s logic, any common carrier need only offer a few information-service-type features to escape common carrier designation. This is wrong.

This ruling allows Comcast to act like Pat’s Pub – it can refuse or degrade delivery of competitor's content or charge differing rates based on what its being transmitted. Comcast wants the public to use their cable TV offerings. They are now free to slow YouTube, Amazon or Netflix streaming videos in an effort to urge users fork over another $40/month for basic cable.

If the FCC is not willing to reverse it’s lowest-common-regulation approach to broadband, then Congress needs to step in and enforce a division between content providers and the services that transmit that content. My personal preference would be the former as a divide means that plenty of features the public has enjoyed as part of their Internet connection – a few email accounts and a small amount of Web space – will be lost.

A clear line to help the FCC decide between telecommunication or information service would be if a company owns the wires or airwaves that their content travels on. Owning the delivery mechanism makes it a telecommunication company. Think of it as the Internet’s Glass-Stegall wall.

And look what happened when we removed that division…