From the February 26 edition of CNBC's Squawk Box:
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The Federal Communications Commission's Open Internet Order, which puts net neutrality principles in place for U.S. internet providers, is getting its day in court. Immediately after the FCC voted to approve the order in 2010, internet providers sued to have the order thrown out, arguing that the FCC overstepped its authority. After years of false starts, some suspect briefs, plaintiff changes, and sundry delays, oral arguments in the case begin today.
Before those arguments actually get going, it's important to nail down precisely what the Open Internet Order does and doesn't do, and what exactly is going on with all the legal wrangling. It's complicated stuff and easy to tune out, but it's an important case that will have far-reaching effects both on U.S. internet policy and the role of the FCC in regulating the broadband industry. Sen. Al Franken (D-MN) called net neutrality "the most important First Amendment issue of our time," and there are many people on both sides of the net neutrality debate who agree with that sentiment.
At its most basic, the idea behind net neutrality is that the person who decides what content you can access online is you. The companies that provide your internet access -- Verizon, Comcast, Time-Warner Cable, etc. -- have an interest in controlling how you use the internet in order to boost profits.
Let's take as a hypothetical example two popular streaming video services: Netflix and Hulu. Right now, you can access both competing services at the same speed. But let's say you get your internet through Comcast, which owns 32 percent of Hulu and provides 20-plus percent of residential broadband subscriptions nationwide. Comcast wants to boost Hulu's competitiveness, so it starts offering you "preferred access" to Hulu over other streaming video services (faster downloads, not counting Hulu's data against your monthly data allowance, etc). Netflix would flip its lid, and rightly so. Comcast would have leveraged its role as internet gatekeeper to tilt the competitive balance in favor of its own interests. You, as a Comcast subscriber, would be incentivized to patronize Hulu over Netflix not because Hulu offered better service, but because Comcast was rigging the market. (Scenarios like this happen in the real world, as I'll explain below.)
Net neutrality argues that Comcast must treat traffic from Hulu or Netflix or wherever equally, so as to not confer an artificial advantage on certain online entities over others. Its purpose, to borrow a popular phrase from conservatives, is to keep internet providers from picking winners and losers -- a very real concern given that many internet service providers also produce online content.
The FCC's Open Internet Order is the federal government's attempt to establish net neutrality principles for U.S. internet providers. The FCC commissioners approved the rules in December 2010 after a 3-2 vote that was split along partisan lines (three Democrats and two Republicans.) The order divides broadband internet into two categories -- fixed, for internet delivered via cables; and mobile, for internet delivered wirelessly -- and sets rules for ISPs for the provision of both.
For fixed broadband, the FCC says ISPs can not block subscribers from accessing legal online content, nor can they prohibit subscribers from accessing the internet on a "nonharmful device." ISPs are allowed to conduct "reasonable network management" -- slowing traffic to relieve network congestion or address security issues, for example -- but they have to publicly disclose whatever network management steps they take. The rules also prohibit ISPs from engaging in "unreasonable discrimination" when transmitting network traffic along fixed lines. Simply put, this means no ISP can prioritize or discriminate against lawful online content for financial reasons or political considerations (the provision that would prevent the Comcast/Hulu scenario described above).
For mobile broadband, the rules are less stringent. ISPs can't block subscribers from accessing legal websites on a mobile device, and they are not subject to the prohibition on "unreasonable discrimination."
The dream of wireless providers like Verizon and AT&T -- or any company, really -- is to be able to charge twice for providing the same service. In working towards that goal they're getting a big assist from ESPN and tearing down net neutrality in the process.
The Wall Street Journal reported last week that ESPN is in talks with "at least one" major U.S. wireless internet provider to "subsidize wireless connectivity on behalf of its users." This means that they're willing to pay a wireless carrier like AT&T a significant chunk of change to enable ESPN viewers to stream unlimited sports programming to their mobile devices without having to worry about exceeding the carrier's monthly data caps. So wireless subscribers would pay AT&T for access to the internet, and ESPN would pay AT&T for access to the customer. One service, two charges.
And if AT&T does end up pairing with ESPN on this scheme, that wouldn't be surprising given that AT&T has been trying to work out ways to double-charge for their services for quite some time. Last February the Journal reported that the wireless carrier was scheming out a way to charge developers of data-intensive mobile apps for the traffic AT&T subscribers incurred while using their products, and on May 15 AT&T CEO Randall Stephenson told investors that he expects those plans to be in effect soon. They also tried to double-charge customers for the privilege of using Apple's FaceTime videochat app -- a potential violation of the almost-impossible-to-violate Open Internet rules. They eventually made FaceTime available to all subscribers except those who still have unlimited data plans grandfathered in from before AT&T switched over to tiered plans with data caps.
That should give you an idea how much wireless carriers love data caps and how central they are to their future business models. It's a lucrative proposition for them: set up the cap, charge customers who go over it, and charge companies who can afford to pay to get around it. And that's where the net neutrality concern comes in: wireless carriers who allow companies to circumvent their data limits are, in effect, prioritizing the content of those companies and disincentivizing subscribers from seeking out content from companies who haven't paid for the exemption. As Public Knowledge put it: "Imposing data caps on consumers and then allowing wealthy content holders to buy their way around them is a recipe for stagnation online."
The Washington Times editorial board is taking a stand for freedom, opposing newly enacted legislation that prevents broadcasters from airing TV ads that are excessively loud. "Nobody likes overly loud television commercials," the Times observed in a December 14 editorial, but the "government is taking a step too far into the nation's living rooms." According to the conservative newspaper, government action to ameliorate this minor irritant could set us down the slippery slope towards total government control of the internet.
What's most troubling is that Congress and the FCC are inviting future intrusion. A growing number of Americans have embraced online streaming video services such as Netflix, YouTube and Hulu, which are beyond Uncle Sam's regulatory grasp -- for now. A public accustomed to having the government tone down ads might not think twice about having the feds step in and start regulating the Internet.
The public "might not" care. Then again, they might. There's no explanation for how we get from "keep the TV volume reasonable" to "regulating the internet." But then, the whole point of a leap of logic is to avoid showing your work.
What's genuinely puzzling about this scenario is that, according to the Washington Times, the government already is regulating the internet. In a December 27, 2010, editorial headlined "Obama's regulatory power grab; FCC Internet ruling offers a taste of things to come," the Times issued dire warnings about the FCC's Open Internet Order, which establishes net neutrality principles for the United States. According to the Times: "Innovation has thrived online precisely because Uncle Sam has not yet stepped in with his usual mix of crushing taxation and arbitrary rules. That all changes with the FCC's latest action. [FCC chairmain Julius] Genachowski is asserting control over the Internet without any legal authority for his actions."
The truth is that the FCC rules are mainly prophylactic and are intended to keep companies from Verizon from doing crazy things like, for example, asserting editorial control over online content. They went into effect over a year ago and since then the internet has quite noticeably not been crushed under taxation or arbitrary rules, and innovation continues apace. In fact, the U.S. just recently led a successful international push to block a proposed treaty seeking to legitimize state controls over telephone and internet communications.
So the destruction of the internet through oppressive regulation didn't happen, even though the Washington Times said it would, but now it might happen again (or for the first time), all because the government is making broadcasters moderate the volume of TV ads. So goes the chaotic and confusing fight for freedom.
Writing for The Atlantic yesterday, Fred Campbell of the Competitive Enterprise Institute made perhaps the most nonsensical anti-net neutrality argument I've ever seen: that the passage of the FCC's Open Internet Rule set us down a slippery regulatory slope that led to the wildly unpopular Stop Online Piracy Act, or SOPA:
The unintended consequences of the FCC's new regulatory approach appeared swiftly. By signaling the end of the bipartisan agreement against Internet regulation, the FCC's order opened the floodgates for additional government interference. New legislative and regulatory initiatives to reign in the free market for Internet services began popping up everywhere.
The Stop Online Piracy Act (SOPA), introduced in late 2011, is one of these new initiatives and the reason Issa became so engaged in Internet policy. Ironically, the same progressives that advocated for net neutrality rules were among the most vociferous opponents of SOPA, but this time, they weren't alone. Conservatives and centrists joined hands with progressives to oppose SOPA in a redux of the earlier bipartisan agreement opposing Internet regulation. This bipartisan opposition gave the anti-SOPA movement the kind of mainstream momentum that net neutrality always lacked, which made it appear that, once again, we could unite in our opposition to government interference in the Internet.
Let's pick this apart piece-by-piece, shall we?
Breitbart.com contributor Seton Motley is one of the right's loudest critics of net neutrality -- or, at least, what he thinks is net neutrality. He wrote a piece yesterday excoriating various and sundry "leftists" (the word "leftist" is used 16 times throughout) who want to use net neutrality to "make it as difficult as possible for continued private Internet investment" and "leave government as the nation's sole Internet provider."
That certainly sounds terrible. It also bears zero resemblance to the regulatory structure put in place by the FCC's Open Internet order, which established net neutrality policies for internet service providers. The regulations prevent ISPs from acting as gatekeepers, restricting consumer access to legal online content. They grant the government none of the draconian powers Motley envisions.
Instead of grappling with the actual regulatory policy, Motley's warnings of the net neutrality apocalypse are based on this 2009 quote from Free Press co-founder Robert McChesney:
At the moment, the battle over network neutrality is not to completely eliminate the telephone and cable companies. We are not at that point yet. But the ultimate goal is to get rid of the media capitalists in the phone and cable companies and to divest them from control.
Shadowboxing with a single three-years-stale quote from an academic is far, far easier than delving into complicated policy -- which is probably why Motley has made a habit of doing it. This quote from McChesney has served a long, distinguished career as Motley's net neutrality bop bag.
AT&T may be on the brink of achieving the improbable. The mobile carrier is reportedly considering charging subscribers extra to use Apple's FaceTime video chat app on their mobile phones. Were they to actually do so, they'd likely be in violation of the FCC's net neutrality rules for mobile broadband -- a remarkable feat, given how wildly permissive those rules are.
With regard to net neutrality, the FCC divides broadband into two categories: fixed and mobile. The rules for fixed broadband are meant to prevent internet providers from blocking or favoring certain types of traffic on their networks, but ISPs are already exploiting loopholes in the regulations to favor their own content. But when it came to mobile broadband, the FCC took a more laissez-faire approach, arguing that it needs to "better understand how the mobile broadband market is developing before determining whether adjustments to this framework are necessary."
However, one thing the FCC did prohibit is the blocking of video chat and voice-over-IP apps that compete with mobile carriers' telephone service:
A person engaged in the provision of mobile broadband Internet access service, insofar as such person is so engaged, shall not block consumers from accessing lawful websites, subject to reasonable network management; nor shall such person block applications that compete with the provider's voice or video telephony services, subject to reasonable network management.
According to TechCrunch, AT&T CEO Randall Stephenson isn't denying rumors -- first reported by the Apple-watchers at 9toMac -- that they're considering charging to use FaceTime, saying only that "it's too early to talk about pricing." Preventing subscribers from using Apple's FaceTime (unless they pay AT&T) would certainly seem to run counter to the net neutrality rules, and consumer advocacy groups like Public Knowledge are letting AT&T know as much. "If AT&T intends to charge users an extra fee to use FaceTime over cellular networks, this would be a clear violation of the FCC's open Internet rules," says PK's Harold Feld.
So why would AT&T stumble into one of the vanishingly few violations of the net neutrality rule? The allure of the double-dip.
There is nothing mobile carriers would love more than the freedom to charge twice for the same data. When you sign up with AT&T, you're allotted a fixed amount of data per month. Even if you don't use it, you've already paid for it. If AT&T starts charging to use FaceTime, it will have succeeded in getting you to pay to use the data you've already paid for. The flip side to this scheme is AT&T's other scheme -- verified to be in the works -- to charge app developers for the data their subscribers use, thus charging content providers for access to consumers and vice-versa. That's a more promising avenue for AT&T, as there doesn't seem to be anything in the net neutrality rules to prevent it.
And it would screw over consumers, as would the rumored FaceTime double-dip, which seems increasingly to be the point.
Cable television companies want you to watch cable television. More to the point, they don't want you to cancel your cable subscription and give that money to online purveyors of televised entertainment -- Netflix, Hulu, etc. But that's business, right? Companies compete with each other, and consumers make their choices based on quality of service.
Cable companies like Comcast and Time Warner are also internet service providers. They control the pipes, as such they have the means and the incentive to encourage you to consume cable TV, and discourage you from seeking out online streaming video. Are they engaging in such wildly anticompetitive activities? The Justice Department aims to find out.
The Wall Street Journal reported late Tuesday that DOJ "is conducting a wide-ranging antitrust investigation into whether cable companies are acting improperly to quash nascent competition from online video." What's at issue? Data caps, and the abuse thereof.
During the fight over the much-maligned Stop Online Piracy Act, the implacably irreverent denizens of Reddit took a moment to contemplate their future should the controversial bill become law. Under the headline "If SOPA passes..." one Redditor whipped up an image macro of Will Ferrell (as Ron Burgundy) screaming: "We'll make our own internet and you won't be invited!"
SOPA did not pass, of course, so the creation of a new internet was not needed. But a similar sentiment actually caught on with internet service providers after the Federal Communications Commission passed net neutrality rules in December 2010. With their behavior on fixed broadband now hemmed in by regulations, the ISPs are, in effect, creating a secondary sort of internet that allows them more freedom to influence their customers' media consumption. Among insiders it is known as "the Schminternet."
Seriously. The Schminternet. Blogger Jeff Jarvis coined the term in August 2010 after Google and Verizon announced that they had arrived at a joint framework for net neutrality regulations that, as Jarvis put it, "makes two huge carve-outs to neutrality and regulation of the internet: mobile and anything new." Those carve-outs ended up in the framework adopted by the FCC, and broadband providers are using those loopholes to create the Schminternet, which operates outside the regulations placed on regular broadband.
When the FCC passed the Open Internet Order in December 2010, which put in place regulatory strictures for network neutrality, a number of public interest groups raised the alarm over potential loopholes internet service providers could exploit to get around the spirit of the rules. Andrew Jay Schwartzman of the Media Access Project said the rules "foreshadow years of uncertainty and regulatory confusion, which those carriers will use to their advantage." Craig Aaron of Free Press said they "don't do enough to stop the phone and cable companies from dividing the Internet into fast and slow lanes, and they fail to protect wireless users from discrimination."
It's looking like they were prescient on this one. In the last month, two internet service providers have proposed new plans that, while they appear to technically comport with the FCC's Open Internet Order, nonetheless threaten the principles undergirding net neutrality.
Outside The Xbox
On March 23, Comcast quietly announced that usage of their soon-to-be-released XFINITY streaming video service for Microsoft's Xbox 360 console will not count against the 250 gigabyte cap the ISP puts on monthly data usage for residential customers.
Per Comcast's FAQ page on XFINITY TV:
Q: Will XFINITY On Demand content a customer views via the Xbox 360 go against their bandwidth cap?
A: No, since the content is being delivered over our private IP network and not the public Internet, it does not count against a customer's bandwidth cap. XFINITYTV.com and the XFINITY TV app stream content over the public Internet and count toward the customer's bandwidth cap.
What Comcast is doing by offering this streaming video all-you-can-eat buffet through their private network is prioritizing their own content. Think of it this way: if you're a Comcast subscriber and you want to watch a movie online but are worried about bumping up against the monthly data cap, you're incentivized to watch that movie via XFINITY on your Xbox, rather than through "public internet" providers like Netflix. It has less to do with consumer choice than it does with which services Comcast favors.
The FCC says companies like Comcast that provide "broadband Internet access service" shouldn't use that service to prioritize their own content (or enter into financial arrangements with outside content developers to favor their content) because it's wildly anti-competitive. What's at issue, though, is how the FCC defines "broadband Internet access service."
A couple of weeks ago, AT&T was informed that they would have to allow shareholders to vote on whether the wireless carrier should commit to operating its mobile broadband network according to net neutrality principles. This week we learned just how much AT&T opposes internet freedom for mobile broadband.
The Wall Street Journal reported yesterday that AT&T is "considering a way to let the providers of mobile services pay for the cost of the data traffic associated with things like streaming movies and smartphone applications." Right now, AT&T offers tiered data plans for smartphones: you pay up front for a certain amount of data per month, and get hit with fees if you go over. AT&T is proposing that makers of data-intensive apps pay AT&T a fee which would allow AT&T consumers to use those apps without it counting towards their data limit. AT&T's John Donovan told the Journal that it's "the equivalent of 800 numbers that would say, if you take this app, this app will come without any network usage."
At first glance it seems like a big win for consumers. But the policy threatens to undermine the openness of the mobile internet and restrict subscribers' access to online media -- a significant concern, given mobile broadband's rapid growth and emergence as a key vehicle for media consumption.
The Beastie Boys may have finished what the FCC started. One Beastie Boy, anyway. And Phil Kerpen of Americans For Prosperity is not happy about it.
First, the backstory. On February 10, the Securities and Exchange Commission informed AT&T that they would not be allowed to block shareholders from voting on a proposal requesting that the telecom giant commit to operating its wireless data network in accordance with net neutrality principles. That proposal was put forth by an asset management firm representing Michael Diamond, a.k.a. Mike D of the Beastie Boys, and other AT&T investors.
The SEC's ruling was significant because the net neutrality order passed by the FCC in December 2010 contained a huge carve-out for wireless broadband. Wireless providers were exempted from the "unreasonable discrimination" rule which prevents fixed broadband providers from discriminating against or favoring certain forms of content based on political or financial considerations. The FCC argued they needed to "better understand how the mobile broadband market is developing before determining whether adjustments to this framework are necessary."
In the past the SEC has allowed wireless carriers to block shareholder votes on net neutrality, agreeing with the companies that it was a matter of "day-to-day" business and thus outside shareholder oversight. In the February 10 letter, the SEC argued that net neutrality had become AT&T's "most significant public policy issue," owing to the many legislative and regulatory battles it has sparked over the past year, and is thus "appropriate for shareholder consideration."
From the January 9 edition of Current's The Young Turks with Cenk Uygur:
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Under the headline "UN Internet agenda tied to George Soros," the Daily Caller's Josh Peterson writes this morning that he's discovered connections between the billionaire philanthropist and the campaign to promote internet freedom:
Frank La Rue, the U.N. Special Rapporteur on freedom of expression who made summer headlines when he proclaimed Internet access as a basic human right, conducted his research and delivered his conclusions with the support of organizations funded by liberal financier George Soros, The Daily Caller has learned.
La Rue's statements on Internet freedom caused alarm among conservatives who believe "net neutrality" is a vehicle for a government takeover of the Internet.
How did they Daily Caller learn of these links between Soros and La Rue? Simple: both La Rue and the Soros-linked organizations involved have been completely open and transparent about their relationship. Peterson writes:
At a speech in April 2011 at the Soros-funded Central European University (CEU) in Hungary, La Rue talked at length about global fact-finding missions -- sponsored by Soros's OSI and the Swedish government -- on which he had embarked during 2010 to assess how unrestricted Internet access could meet citizens' human rights needs.
He links to a YouTube video of La Rue's speech, in which La Rue says outright that the Open Society Institute supported the "series of regional consultations" on which he embarked. The description of the YouTube video says: "La Rue's talk was sponsored by CEU's Center for Media and Communications Studies and the Open Society Archive." You can see the Open Society Archives logo plastered on the podium from which La Rue speaks. So... news?