Dear Chairman of the FCC, it’s time to do your job and stand up for consumers

May 1, 2014
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Tom Wheeler, chairman of the Federal Communications Commission, is about to give Internet Service Providers the ability to charge content companies more for access that people should have already had faster access to subscribers. The proposal, scheduled for a vote by the FCC on May 15, is a homicide of net neutrality.

Wheeler’s proposal will make the Internet a new area for the rich and powerful to control with a tight-fist. Wheeler claims he’s not backing away from net neutrality at all, and that assertions to the contrary are the product of a “great deal of misinformation.”

Let’s get into that “misinformation” from the former telecommunications and cable lobbyist.

What is Net Neutrality?

Net Neutrality asserts that no bit of information should be prioritized over another. Therefore all messages transmitted must be transmitted in the order in which they were received and cannot be subject to discrimination. Net neutrality therefore states that ISP can’t discriminate among content providers trying to reach you online. Consequently, an ISP can’t block websites or services, or degrade their signal, slow their traffic or, conversely, provide a better traffic lane for some rather than others.

What we know about Wheeler’s proposal

In Wheeler’s proposal, ISP’s would be forbid to block any legal websites or services, but they would be allowed to favor some traffic under “commercially reasonable” arrangements, to be reviewed by the FCC on a case-by-case basis.

Wheeler contends that barring “commercially unreasonable” deals that “harm the Internet” or hurt consumers will be protection enough for the open Internet. Instead of a bright line establishing that any discrimination by ISPs is forbidden, Wheeler would substitute an endless series of laborious case-by-case investigations demanded, typically, by discrimination victims.

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What we don’t know about Wheeler’s proposal

However, there are many questions left to answer:

  • Will Wheeler actually close the loopholes?

Back in January, Wheeler claimed the FCC would take a wait and see approach to new proposals that included wireless companies into net neutrality rules and regulations. He also suggested that he didn’t largely see any problem at the moment.

A source tells Fierce Wireless that the new net neutrality rules being circulated at the FCC won’t apply to wireless networks. The current rules also largely excluded wireless networks, in large part because the rule’s framework was based on draft proposals submitted to the FCC by Google, AT&T and Verizon.

AT&T and other similar companies want to keep themselves outside of any net neutrality rules due to their love of opportunities like Sponsored Data programs. Sponsored Data is basically a way for the most financially backed companies to have a significant advantage over startups or smaller companies due to an unnecessary toll put in place by wireless companies wanting another revenue stream from the same service.

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With tech giants like ESPN, Facebook and Google getting to pay to have their services and content higher on the chain, why would anyone want to go head-to-head with them financially speaking? Sponsored data will allow fixed and mobile carriers to experiment with all levels of pricing layers, most of which will be to the detriment of those that can’t afford to pay to play.

By excluding wireless entirely, the FCC’s giving those ambitions a very bright green light.

  • Will he continue to ignore interconnection disputes?

According to the Wall Street Journal, it is clear that Wheeler doesn’t intend to get involved with the growing interconnection tensions between content companies and large ISPs. Wheeler and the general public need to understand that recent arguments about interconnection business between internet providers and content creators is vital to the future of how consumers pay for their internet.

AT&T, Verizon and Comcast have been intentionally letting their peering points with companies like Level3 and Cogent saturate to the point where Netflix streaming on AT&T, Verizon and Comcast began to tank horribly, then demanding money directly from Netflix if they want the problem to go away with a direct interconnection relationships. According to Netflix, these deals have a significant potential for abuse, and the company wants the FCC to keep an eye on them.

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AT&T keeps trying to tell people that companies like Netflix want a “free lunch” yet with I am not sure how any reasonable person could explain to me how anyone is getting this lunch for free. Consumers are paying for bandwidth and Netflix is paying for bandwidth. There is also a variety of middlemen for interconnection and transit that get paid. Everybody is paying record amounts and yet consumers bear the brunt of it.

  • Will he continue over-stating broadband competition?

One of my biggest issues with the proposal is the continued statements by Wheeler about how broadband competition is thriving in the United States. Recently, Wheeler used AT&T’s fiber-to-the-press release announcement as an example of the industry’s competitive fervor.

Except, as Karl Bode at Broadband Reports notes, AT&T isn’t deploying anything. AT&T’s announcement is designed specifically to combat public perception in the face of Google Fiber. AT&T is in fact deploying 1 Gbps to a handful of upscale developments and apartments yet the reality continues to be that AT&T is cutting fixed-line broadband investment year over year and continues hanging up on far more DSL-fed communities than they’re upgrading, which leaves cable with less competition than ever before.

Don’t believe me? Just ask AT&T who themselves have said that the expanded fiber build was not expected to impact AT&T’s capital investment plans for 2014….and I am sure we will hear that in 2015….and 2016.

If the FCC approves the Comcast-Time Warner Cable deal, Comcast will have less incentive than ever to bring its customers the fastest Internet connection at the most reasonable price. If the FCC approves Wheeler’s net neutrality proposal, Comcast will have more leeway than ever to squeeze content providers, and consequently the public, for more money for barely adequate service. And every other ISP in the nation will take advantage of the rules to the max.

Slate wrote an excellent article specifically calling out Wheeler for moves that create more by using Section 706 of the Communications Act:

“The FCC doesn’t have any power except the power granted by Congress in a collection of permission slips (called laws). Section 706 is one of those permission slips. The problem is: You can’t do network neutrality under Section 706. Back in January, the D.C. Circuit struck down the FCC’s last attempt at net neutrality, saying that Section 706 does not permit the commission to stop nondiscrimination. It pointed to another legal decision, concerning data roaming, in which the FCC adopted a 16-factor test like the one I explained above. Based on an earlier case, the FCC can probably ban one or two specific practices, such as blocking certain websites or applications. That’s about it. Essentially, the FCC chairman is acting like a developer saying, “I’m going to build you a skyscraper!” And then he shows you the building permit. It only lets him build a two-story hut. And a dangerous one.”

Wheeler claims he won’t hesitate to reclassify ISPs as common carriers, which would give the FCC authority to regulate bad ISP behavior. In his blog post, Wheeler outlines several general examples that could alert the FCC. Unfortunately, even after reading his examples, one is still left with the question of how the FCC would deal with the actual ways that ISP’s get away with bad behavior (usually through words like market innovation or security or network integrity efforts).

Again, are we to believe the FCC will be right in-step with the companies to regulate them? Historically, the FCC fighting ISP’s on anti-competitively has been an utter fantasy. In the last few years, did we see the FCC get involved with Verizon Wireless’s anti-competitive behavior on any number of issues or AT&T’s ability to block legitimate video services? Nope.

If Wheeler is ok with the current interconnection and peering fights occurring between Verizon, Comcast, AT&T and Netflix, and has stated that rules on this subject will be left out, are we to believe that the FCC will be interpreting what is reasonable in a pro-consumer manner?

  • What exactly will he do for municipal broadband state laws?

At the bidding of the cable lobby, more than 20 states have enacted or are considering laws hindering the rollout of public Internet systems. The laws simply protect cable operators who provide their U.S. customers with some of the worst and most expensive broadband access in the developed world.

Recently, FCC Chairman Tom Wheeler told the cable industry that he will “preempt state laws that ban competition from community broadband.” Previously, Wheeler has said that he believes the FCC can target “legal restrictions on the ability of cities and towns to offer broadband services to consumers in their communities.”

However, the state laws limiting municipal broadband are not strict bans. Instead, they make it difficult for municipalities to build their own networks by enacting various limits and regulations the municipalities have to follow. Therefore, it is still not clear whether he believes the FCC can actually overturn laws in all of those 20 states.

  • What exactly is going to happen if Wheeler’s proposal moves forward?

Again, I am going to quote from the Slate article cited above:

“The FCC will propose an incredibly vague and complicated multifactor test, one that takes into account the market conditions, technology, alternatives available to each side, competitive dynamics. This is the kind of stuff that requires very expensive expert witnesses in very expensive legal proceedings. There may be up to 16 factors listed, plus a catch-all for “other factors.” So, according to the FCC, when Verizon discriminates against a startup, we shouldn’t be alarmed, because (while being discriminated against), this startup can hire a lot of expensive lawyers and expert witnesses and meet Verizon (a company worth more than $100 billion) at the FCC and litigate this issue out, with no certainty as to the rule. The startup will almost certainly lose either at the FCC or on appeal to a higher court, after bleeding money on lawyers.”

To summarize with an example, Comcast is telling Netflix and YouTube that since Comcast is one of the biggest players in the Internet world, YouTube and Netflix can not make a fortune off of videos played on their infrastructure unless Netflix and YouTube pay an additional amount of money. Money that only companies like Netflix and YouTube can afford while every small company/startup can not.

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Based on the history of the phone companies and cell phone companies, it is not hard to conclude that the law is only as good as its enforced. People need to realize that the Internet system in this country is one that operates under the notion of a free enterprise system all the while nothing could be further from the truth.

We are already falling behind

We have three gigantic companies (Verizon, Comcast, and AT&T) that have more or less divvied up the market for Internet service. These companies have been set up by getting government monopoly licenses/franchises to do telephone and cable TV services.

Therefore, Americans are paying significantly more for cell phone service and wireline service compared to many countries all the while receiving much lower service. In 1999 or 2000, the United States was years ahead of most places in the world in terms of the quality of Internet service and the percent of the population that was online. Now, we have fallen (depending on the ranking) compared to what you pay, the speed, the quality of the service:

  • Akamai says the United States is in ninth place now in terms of the percentage of users (34%) who have “high broadband,” or broadband capable of providing at least 10 Mbps. That said, roughly two-thirds of United States broadband users still surf the web at 10 Mbps or slower, many of whom can’t get or can’t afford anything faster since a lack of competition keeps prices high. - Akamai’s State of the Internet Report
  • According to the latest Speedtest.net data from Ookla, the United States has fallen to 31 in mean downstream broadband speed, behind such countries as Uruguay, Estonia, and Latvia.
  • According to a report by the Federal Communications Commission who merges OECD data and FCC-collected and analyzed broadband data on service plans and pricing in 38 countries, the United States ranked ninth out of 29 countries when it comes to mobile broadband adoption on a per capita basis, and 12th out of 33 countries when it comes to the percentage of households with fixed broadband.

This is what happened when very powerful corporations own the government and can buy off the regulators to do whatever they want.

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