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Speaking and Debating About Net Neutrality

November 13, 2014
Published in Newsletter

The Obama administration recently laid out a net neutrality plan that aims to prevent internet service providers from prioritizing certain types of internet traffic for a fee.  Highlights of the plan explained.

Ezra Mechaber, November 10, 2014 WhiteHouse.gov, “President Obama Urges FCC to Implement Stronger Net Neutrality Rules,” http://www.whitehouse.gov/blog/2014/11/10/president-obama-urges-fcc-implement-stronger-net-neutrality-rules DOA …

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22 Comments

  1. Stefan Bauschard   November 13, 2014 10:48 pm/ Reply

    Net neutrality stifles product innovation

    Jeffrey Dorfman, November 13, 2014, Forbes, “Net Neutrality is a Bad Idea Supported by Poor Analogies,” http://www.forbes.com/sites/jeffreydorfman/2014/11/13/net-neutrality-is-a-bad-idea-supported-by-poor-analogies/ DOA 11-13-14

    Net neutrality seems like a simple concept: the company that links your computer/tablet/smartphone to the internet should not be able to discriminate among users and providers in the level of connectivity service provided. That is, we should all be able to send and receive the same number of bits of data per second.
    This is a bad idea for the same reason that only having vanilla ice cream for sale is a bad idea: some people want, and are willing to pay for, something different. Forcing a one-size-fits-all solution on the Internet stifles innovation by blocking some companies from turning new ideas or business models into successful products.

    • Stefan Bauschard   November 13, 2014 10:55 pm/ Reply

      Net neutrality prevents large Internet companies from crowding out start-ups

      Net neutrality prevents large Internet companies from crowding out start-ups

      Robinson Meyer, November 12, 2014, “The Conservative Case for Net Neutrality,” The Atlantic, http://www.theatlantic.com/technology/archive/2014/11/the-conservative-case-for-net-neutrality/382650/ DOA: 11-13-14

      And in fact, there’s a considerable and straightforward conservative argument for regulating to protect net neutrality. Without net neutrality, Internet providers can charge a toll to companies or make them pay more to have access to an “Internet fast lane.” Giant tech firms, able to pay the toll, could then provide services that newer startups couldn’t, and giant companies would have a leg up on more nimble competitors. The competition that has made the American technology sector possible, in other words, would calcify.

      • Stefan Bauschard   November 17, 2014 8:55 pm/ Reply

        Major Internet companies have emerged without net neutrality

        Jeffrey Dorfman, November 13, 2014, Forbes, “Net Neutrality is a Bad Idea Supported by Poor Analogies,” http://www.forbes.com/sites/jeffreydorfman/2014/11/13/net-neutrality-is-a-bad-idea-supported-by-poor-analogies/ DOA 11-13-14

        As the former chief economist for the FCC, Thomas Hazlett, pointed out this week in Time, Facebook, Instagram, Twitter TWTR -5.88%, LinkedIn LNKD -0.59% (and many, many more success stories of innovation) all emerged without the benefit of net neutrality. In the time when the government might have been ensuring a level playing field for the Internet pipe into our homes, smartphones and mobile devices completely changed how most people connect to and use the Internet.

    • Stefan Bauschard   November 13, 2014 11:11 pm/ Reply

      All businesses should have an equal opportunity to reach consumers

      UT San Diego Editorial Board, November 13, 2014, In support of ‘net neutrality’ http://www.utsandiego.com/news/2014/nov/13/in-support-of-net-neutrality/ DOA 11-13-14

      It is too early in the Internet Age to determine who or what industry would benefit the most from a heavily regulated online world, but it is easy to see who would suffer the most: the consumer.

      For the Internet to be what it can become, all players from tiny startups to mighty online empires should have equal opportunity to reach viewers. Whatever compromise the FCC may reach should have that principle as its nexus.

    • Stefan Bauschard   November 15, 2014 9:02 am/ Reply

      Large and small companies want net neutrality

      Joe Nocera, November 14, 2014, New York Times, “Net Neutrality Rules,” http://www.nytimes.com/2014/11/15/opinion/joe-nocera-net-neutrality-rules.html DOA 11-15-14

      President Obama, of course, is in favor of net neutrality; indeed, he started this whole kerfuffle when the White House released a short video on Monday in which the president called on the Federal Communications Commission to “implement the strongest possible rules to protect net neutrality.” Tom Wheeler, the former cable industry lobbyist who is now the chairman of the F.C.C., also wants net neutrality.

      So do the big Internet companies like Netflix and Google, the ones that might have to pay Internet service providers, or I.S.P.s, to get on a fast lane if such a thing existed. (That’s called “paid prioritization.”) Net neutrality is favored by lots of small Internet companies — the kind that might not have the means to pay for prioritization — and dozens of public interest groups, too. When the F.C.C. asked for comments on net neutrality, it received an astonishing 3.7 million replies, a vast majority urging the commission to embrace it.

  2. Stefan Bauschard   November 13, 2014 10:49 pm/ Reply

    Net neutrality blocks the development of certain business models

    Jeffrey Dorfman, November 13, 2014, Forbes, “Net Neutrality is a Bad Idea Supported by Poor Analogies,” http://www.forbes.com/sites/jeffreydorfman/2014/11/13/net-neutrality-is-a-bad-idea-supported-by-poor-analogies/ DOA 11-13-14

    The last thing we should want is President Obama or a government agency picking winners and losers on the Internet. And enforcing net neutrality is picking winners and losers even if it looks like it is just “leveling the playing field.” He may think it is not, but it completely blocks certain business models and stops any possible innovation that might emerge if given the option of seeking differential access to bandwidth.

  3. Stefan Bauschard   November 13, 2014 10:49 pm/ Reply

    Net neutrality prevents the market from picking winners and losers

    Jeffrey Dorfman, November 13, 2014, Forbes, “Net Neutrality is a Bad Idea Supported by Poor Analogies,” http://www.forbes.com/sites/jeffreydorfman/2014/11/13/net-neutrality-is-a-bad-idea-supported-by-poor-analogies/ DOA 11-13-14

    The key point that President Obama has missed along with all the rabid supporters of net neutrality is that ISPs and the companies that control the Internet backbone infrastructure that knits everything together do not have the power to pick winners and losers either. Consumers decide what products and services are successful because we adopt them. If an ISP blocks Netflix NFLX -1.16% because of the bandwidth it requires, consumers who want Netflix will take their business elsewhere. If enough people do so, the ISP will have to change policies or go out of business.

    • Stefan Bauschard   November 13, 2014 10:54 pm/ Reply

      Net neutrality necessary to prevent isps from favoring their own content businesses

      Robert M. Cooper, November 13, 2014, is a partner at Boies, Schiller & Flexner LLP in Washington, D.C, and an expert in telecommunications litigation. His client relationships include advising Cogent Communications Group, a multinational Internet service provider, on regulatory and policy issues, Obama gets it right on net neutrality, http://www.msnbc.com/msnbc/obama-gets-it-right-net-neutrality DOA 11-13-14

      Second, the largest ISPs are vertically integrated communications and entertainment conglomerates. As a result, these firms have strong incentives to favor content or services that they own or with which they have economic affiliations at the expense of unaffiliated content or services. This is particularly true when online competitors, like streaming video services, provide a direct competitive substitute for elements of the lucrative “bundles” that the ISPs sell to consumers.

      These incentives, coupled with the ability of ISPs to interfere with consumers’ ability to access certain types of Internet content, underscore the need for an effective and enforceable net neutrality regulatory regime. Indeed, even in overturning the Federal Communications Commission’s last attempt to implement such rules, the United States Court of Appeals for the District of Columbia Circuit recognized these risks and the threat they pose to a truly open Internet. At the same time, the court told the FCC that it had to go back to the drawing board to articulate a different legal rationale for promulgating such rules.

      That process is well underway, and has drawn the attention of millions of concerned Americans. The president understands that, and in his statement today laid out the core principles that must form the foundation of a new net neutrality framework—no blocking, no throttling, increased transparency, and no paid prioritization. The last of these is especially critical. As the president said, “No service should be stuck in a ‘slow lane’ because it does not pay a fee. That kind of gatekeeping would undermine the level playing field essential to the Internet’s growth.”

  4. Stefan Bauschard   November 13, 2014 10:50 pm/ Reply

    Net neutrality could undermine zero-data apps

    Nancy Scola, November 13, 2014, Washington Post, “What Obama’s Net Neutrality Plan Could Mean for Your Mobile Phone,” http://www.washingtonpost.com/blogs/the-switch/wp/2014/11/13/what-obamas-net-neutrality-plan-could-mean-for-your-mobile-phone/ DOA 11-13-14
    Get ready to hear a lot about the future of Music Freedom.

    T-Mobile’s free music streaming service could soon find itself in the middle of a high-stakes battle over whether Internet service providers should be able to give Web companies preferential treatment on their networks. Music Freedom is a so-called zero-rated app that offers data-free access to services like Rhapsody, Pandora and iTunes radio. (With zero-rated apps, either the network operator or the content provider picks up the cost of the data that users consume.)

    Zero-rated apps are particularly popular in parts of the world where it is very expensive to download data to watch a movie or browse the Web. For example, Facebook Zero and Wikipedia Zero, are both available in scores of countries around the globe. Content companies in the United States, from Slate.com to eBay, are also experimenting with subsidized data. In Slate’s case, according to the Wall Street Journal, waiving data fees increased podcast downloads more than 60 percent.

    But whether or not those apps would be allowed in the United States under a far-reaching net neutrality plan proposed by President Obama earlier this week isn’t yet clear. Obama called on the Federal Communications Commission to adopt strict rules that would forbid Internet service providers from charging content companies (like Netflix) to get priority access to consumers. Most of the debate around the rules has centered on broadband service to homes, but Obama advocated for applying them to mobile Internet providers, as well.

    That means zero-rated apps in which the content company covers users data costs could violate a strict interpretation of the principle of net neutrality, some industry observers say.

  5. Stefan Bauschard   November 13, 2014 10:51 pm/ Reply

    Net neutrality discriminates because only ISPs can’t discriminate in content – Google, Facebook, and operating systems can

    Roslyn Layton, November 13, 2014, is a PhD Fellow at the Center for Communication, Media and Information Studies at Aalborg University in Copenhagen and a Visiting Fellow at the American Enterprise Institute. Her report the EU Broadband Challenge is available from AEI, US News & World Report, Obama Plays Internet Favorites, http://www.usnews.com/opinion/economic-intelligence/2014/11/13/obamas-net-neutrality-plan-plays-internet-favorites DOA 11-13-14

    Indeed, we should not want any company to be a gatekeeper. That’s why it’s curious that the president didn’t take the opportunity to hold all players in the Internet value chain accountable. To be sure, people connect to the Internet by a service provider. They also spend the better part of their Internet experience on a single search engine, one or two social networks, and with a single device with a predefined operating system. All of these entities are part of the Internet, but under the president’s plan, only ISPs would be subjected to the openness standards.

  6. Stefan Bauschard   November 13, 2014 10:51 pm/ Reply

    Net neutrality via Title II undermines investment in Internet infrastructure

    Marcus Wohlsen, 11-13, 14, “Comcast to Obama: We’ll Play Nice with Net Neutrality…Honestly,” http://www.wired.com/2014/11/comcast-wants-president-know-net-neutrality-just-fine/ DOA 11-13-14

    Netflix may disagree, but no one is doubting that a reclassification under Title II would represent a fundamental change in how the government oversees Comcast’s business. And the problem with that change, in Roberts’ view, is that it could curtail the steady expansion of internet infrastructure into which companies like his are investing billions of dollars. “We want to have those open internet rules. We want them to be enforceable. But we don’t want to discourage investing,” Roberts said. “We can’t find anything that Title II does to encourage investing.”

    • Stefan Bauschard   November 13, 2014 11:30 pm/ Reply

      This is a sham claim by AT & T

      Karl Bode, November 12, 2014, Tech Dirt, “AT & T Freezes Mostly Bogus ‘Fiber to the Press Release’ Deployments in Net Neutrality Bluff,” https://www.techdirt.com/blog/netneutrality/articles/20141112/07323529118/att-pouts-freezes-mostly-bogus-fiber-to-press-release-deployments-net-neutrality-bluff.shtml DOA 11-13-14

      Oh, AT&T. For a good thirty years the telco has used a halt in “network investment” as a bogeyman to scare government away from any and all consumer protection policies. Do something we don’t like, AT&T will usually argue, and we won’t invest in the technologies of tomorrow, leaving you all stuck in the stone age and regretting the day you tried to challenge us. Usually said network expansion is a phantom; the company will simply manipulate numbers to actually create artificial broadband gaps, then promise to fill those gaps each and every time they want a regulatory favor.

      AT&T has been doing it again lately with the DirecTV deal — promising to shore up broadband gaps that should have filled years ago (thanks to billions in government subsidies) if it’s allowed to gobble up a pay TV competitor. Basically, I’ve watched for ten years as AT&T just shaves off a few million users from their existing or already-planned network build projections, then pretends these users will be new upgrades — but only if AT&T gets deregulated, faces fewer price controls, gets some new subsidies, or is allowed to buy BellSouth, DirecTV, or T-Mobile.

      This week, “the good time, down home AT&T network investment bogeyman stage show” came to town in the form of a pouting response to the President’s clear support for Title II reclassification. AT&T CEO Randall Stephenson has breathlessly proclaimed that the telco is going to freeze fiber expansion because they’re concerned about Title II network neutrality protections:

      “We can’t go out and invest that kind of money deploying fiber to 100 cities not knowing under what rules those investments will be governed,” CEO Randall Stephenson said…”We think it is prudent to just pause and make sure we have line of sight and understanding as to what those rules would look like,” he added.”

      In other words, do what we want or we’ll make sure the United States remains a broadband backwater. The problem? It’s a childish, transparent bluff, as AT&T gave up on meaningful fixed-line fiber investment years ago.

    • Stefan Bauschard   November 14, 2014 9:14 am/ Reply

      Googlel still investing in infrastructure

      Matt Hamblen, November 14, 2014, “Who wins the net neutrality debate? Google , of course,” CIO, http://www.cio.com.au/article/559678/who-wins-net-neutrality-debate-google-course/ DOA 11-14-14

      Google, unlike AT&T, this week said it plans to continue its Google Fiber rollouts. That includes an ongoing effort in Kansas City, Kans., and Kansas City, Mo., where it just began service to small businesses in some neighborhoods in addition to service for families and individuals.

      It also has rollouts in the works in Provo, Utah, and Austin, Tex., with potential others in 34 cities in nine metropolitan areas: Portland, Ore., San Jose, Calif., Salt Lake City, Phoenix, San Antonio, Texas, Nashville, Charlotte, the Raleigh-Durhamarea and Atlanta.

      Google plans to announce which cities get Google Fiber by the end of the year.

    • Stefan Bauschard   November 14, 2014 9:17 am/ Reply

      AT & T still investing, it's a bluff

      Matt Hamblen, November 14, 2014, “Who wins the net neutrality debate? Google , of course,” CIO, http://www.cio.com.au/article/559678/who-wins-net-neutrality-debate-google-course/ DOA 11-14-14

      In contrast, AT&T CEO Randall Stephenson said his company would “pause” its deployment of fiber in 100 cities to get a better understanding of what the FCC’s rules will look like.

      Some AT&T critics said Stephenson is bluffing or never had those cities lined up for rollouts. Indeed, shortly after his remarks, AT&T’s North Carolina President, Venessa Harrison, said the company will continue working on a Next Generation Network there. AT&T has signed contracts with several North Carolina municipalities, including Raleigh, Cary, Durham, Chapel Hill, Carrboro and Winston-Salem.

  7. Stefan Bauschard   November 13, 2014 10:52 pm/ Reply

    The executive branch should not regulate agencies

    Roslyn Layton, November 13, 2014, is a PhD Fellow at the Center for Communication, Media and Information Studies at Aalborg University in Copenhagen and a Visiting Fellow at the American Enterprise Institute. Her report the EU Broadband Challenge is available from AEI, US News & World Report, Obama Plays Internet Favorites, http://www.usnews.com/opinion/economic-intelligence/2014/11/13/obamas-net-neutrality-plan-plays-internet-favorites DOA 11-13-14

    Additionally, it is expressly against the spirit of good government for the executive branch to dictate the decisions of federal agencies. Regulators need to have independence to have credibility, and therefore FCC Chairman Tom Wheeler issued a statement in response to the president reminding him of the due diligence process for rulemaking.

  8. Stefan Bauschard   November 13, 2014 10:52 pm/ Reply

    Utility-style regulation of ISPs has failed in Europe

    Roslyn Layton, November 13, 2014, is a PhD Fellow at the Center for Communication, Media and Information Studies at Aalborg University in Copenhagen and a Visiting Fellow at the American Enterprise Institute. Her report the EU Broadband Challenge is available from AEI, US News & World Report, Obama Plays Internet Favorites, http://www.usnews.com/opinion/economic-intelligence/2014/11/13/obamas-net-neutrality-plan-plays-internet-favorites DOA 11-13-14

    One only needs to look across the Atlantic to find other examples of an Internet in decline on account of utility-style regulation. University of Pennsylvania Professor Christopher Yoo has found that 82 percent of households in the U S. have access to Next Generation Networks, which provide speeds of 25 megabits per second or higher, compared to just 54 percent of households across Europe. And from 2000-2009 telecom employment in nine leading EU markets fell by 26 percent.

    The new EU leadership has recognized the failure of their Title II-like policies that have produced slower networks, less investment, less innovation and fewer jobs. They want to be more like the U.S., and take the approach that has worked to date, driving investment and innovation. But not the shift that Obama suggests.

  9. Stefan Bauschard   November 13, 2014 11:01 pm/ Reply

    Net neutrality leads to pricing regulation

    Senator Ted Cruz, November 13, 2014, http://www.wcbm.com/includes/news_items/1/news_items_more.php?section_id=1&id=443981 DOA 11-13-14

    And one of the biggest regulatory threats to the Internet is net neutrality.

    In short, net neutrality is Obamacare for the Internet. It would put the government in charge of determining Internet pricing, terms of service and what types of products and services can be delivered, leading to fewer choices, fewer opportunities and higher prices.

    • Stefan Bauschard   November 13, 2014 11:02 pm/ Reply

      The pricing regulation claim is false

      Lauren Carroll, November 13, 2014, “Ted Cruz: Net Neutrality Regulations Put government in Charge of Interne Prices,” http://www.politifact.com/truth-o-meter/statements/2014/nov/13/ted-cruz/cruz-net-neutrality-regulations-put-government-cha/ DOA 11-13-14

      In theory, Title II would give the FCC some say over Internet service providers’ prices. However, Obama urged the FCC to also adopt a forbearance against price regulation. A forbearance is a legal way of choosing not to enforce part of the law that is unnecessary or irrelevant.

      “I believe the FCC should reclassify consumer broadband service under Title II of the Telecommunications Act — while at the same time forbearing from rate regulation and other provisions less relevant to broadband services,” Obama said.

      But let’s talk about what would happen if the FCC reclassified Internet service providers under Title II without that forbearance, just for kicks.

      Under Title II, the FCC is authorized to “determine and prescribe” charges. However, this does not mean that the agency would decide what prices should be and force companies to abide by them. What would happen is that Internet service providers would set their own prices, and the FCC would intervene if it thinks those prices are “unjust or unreasonable.” The idea is that if a service provider is the only operator in an area, it should not be able to hike up consumer costs unreasonably, knowing the consumers don’t have access to a cheaper option.

      Even this limited level of price regulation likely wouldn’t be sustainable, said Harold Feld, senior vice president of Public Knowledge, an open Internet advocacy group. The FCC doesn’t enforce price regulations for other Title II services, like mobile phones and land lines, and has had trouble defending price caps in court.

      “As a practical matter, that’s totally not going to happen,” Feld said.

      Brent Skorup, a telecommunications research fellow at George Mason University’s Mercatus Center and an opponent of net neutrality regulations, said he thinks Cruz’s statement is fair, because of the authority Title II gives the FCC. But he agreed that any price regulation would likely be “short lived” because of Obama’s call for a forbearance and precedent concerning other Title II services.

  10. Stefan Bauschard   November 13, 2014 11:24 pm/ Reply

    Title II outdated and its application would amount to a large fee/tax increase on the Internet

    Erik Telford, November 13, 2014, “Obama Couldn’t Be More Wrong On Title II,” http://watchdog.org/183078/obama-couldnt-wrong-title-ii/ DOA 11-13-14

    Unfortunately, his position as outlined in his statement neglects a few critical details. Reclassifying the Internet under Title II would impose stifling new regulations and tax burdens that ultimately would have negative effects for both companies and consumers.

    Title II of the Communications Act is an outdated law written for the purpose of regulating rapidly expanding technologies like telephone and radio service. It governs “common carriers,” which are public utilities subjected to hundreds of pages of federal regulations designed to ensure that they act “in the public interest” by providing the exact same service, at the same rate, to everyone.

    These regulations make sense for electric, gas and landline phone service, since there isn’t a way for utility companies to deliver services in a significantly more innovative way than competitors who use the same technology and infrastructure to deliver the same product.

    When it comes to Internet access, however, it’s a different ball game. Infrastructure is new and evolving at unprecedented rates. Recent innovations in fiber-optics, for example, are opening up an entirely new avenue for broadband delivery.

    Given how much the Internet has revolutionized our lives in just the past 10 years, it’s absurd to think that an 80-year-old law will ensure the best service to consumers going forward.

    The even darker side of bringing the Internet under Title II is that it will impose new fees on broadband access. Under current FCC rules, telecommunications carriers must contribute to the federal Universal Service Fund, a fee that stands at 16.1 percent of interstate telecommunications revenue. Under the current prices of broadband, that works out to a bill increase of about $7.25 a month for the average customer.

    As a former FCC commissioner has said, that “would be perhaps the largest, one-time tax increase on the Internet.”

  11. Stefan Bauschard   November 16, 2014 11:30 am/ Reply

    Net neutrality undermines the economy

    x — coming soon

    • Stefan Bauschard   November 16, 2014 11:31 am/ Reply

      Net neutrality is key to the Internet economy and free trade

      Ammori, Future Tense Fellow at the New America Foundation, 14 (Marvin, “The Case for Net Neutrality.,” Foreign Affairs. Jul/Aug2014, Vol. 93 Issue 4, p62-73. 12p, ebsco, accessed 11-12-14)

      What’s Wrong With Obama’s Internet Policy For all the withering criticism leveled at the White House for its botched rollout of HealthCare.gov, that debacle is not the biggest technology-related failure of Barack Obama’s presidency. That inauspicious distinction belongs to his administration’s incompetence in another area: reneging on Obama’s signature pledge to ensure “net neutrality,” the straightforward but powerful idea that Internet service providers (ISPS) should treat all traffic that goes through their networks the same. Net neutrality holds that ISPS shouldn’t offer preferential treatment to some websites over others or charge some companies arbitrary fees to reach users. By this logic, AT&T, for example, shouldn’t be allowed to grant iTunes Radio a special “fast lane” for its data while forcing Spotify to make do with choppier service. On the campaign trail in 2007, Obama called himself “a strong supporter of net neutrality” and promised that under his administration, the Federal Communications Commission would defend that principle. But in the last few months, his FCC appears to have given up on the goal of maintaining an open Internet. This past January, a U.S. federal appeals court, in a case brought by Verizon, struck down the net neutrality rules adopted by the FCC in 2010, which came close to fulfilling Obama’s pledge despite a few loopholes. Shortly after the court’s decision, Netflix was reportedly forced to pay Comcast tens of millions of dollars per year to ensure that Netflix users who connect to the Internet through Comcast could stream movies reliably; Apple reportedly entered into its own negotiations with Comcast to secure its own special treatment. Sensing an opening, AT&T and Verizon filed legal documents urging the FCC to allow them to set up a new pricing scheme in which they could charge every website a different price for such special treatment. Obama wasn’t responsible for the court’s decision, but in late April, the administration signaled that it would reverse course on net neutrality and give ISPS just what they wanted. FCC Chair Tom Wheeler circulated a proposal to the FCC’S four other commissioners, two Democrats and two Republicans, for rules that would allow broadband providers to charge content providers for faster, smoother service. The proposal would also authorize ISPS to make exclusive deals with particular providers, so that PayPal could be the official payment processor for Verizon, for example, or Amazon Prime could be the official video provider for Time Warner Cable. Word of the proposal leaked to the press and sparked an immediate backlash. One hundred and fifty leading technology companies, including Amazon, Microsoft, and Kickstarter, sent a letter to the FCC calling the plan a “grave threat to the Internet.” In their own letter to the FCC, over 100 of the nation’s leading venture capital investors wrote that the proposal, if adopted as law, would “stifle innovation,” since many start-ups and entrepreneurs wouldn’t be able to afford to access a fast lane. Activist groups organized protests outside the FCC’S headquarters in Washington and accused Wheeler, a former lobbyist for both the cable and the wireless industries, of favoring his old clients over the public interest. Nonetheless, on May 15, the FCC released its official proposal, concluding tentatively that it could authorize fast lanes and slow lanes on the Internet. Although the FCC is now officially gathering feedback on that proposal, it has promised to adopt a final rule by the end of this year. Despite the missteps so far, the administration still has a second chance to fix its Internet policy, just as it did with HealthCare.gov. Preferably working with policymakers of all stripes supportive of open markets, it should ensure that the FCC adopts rules that maintain the Internet as basic infrastructure that can be used by entrepreneurs, businesses, and average citizens alike — not a limited service controlled by a few large corporations. In the arcane world of federal administrative agencies, that guarantee comes down to whether the FCC adopts rules that rely on flimsy legal grounds, as it has in the past, or ones that rely on the solid foundation of its main regulatory authority over “common carriers,” the legal term the U.S. government uses to describe firms that transport people, goods, or messages for a fee, such as trains and telephone companies. In 1910, Congress designated telephone wires as a common carrier service and decreed that the federal government should regulate electronic information traveling over wires in the same way that it regulated the movement of goods and passengers on railroads across state lines through the now defunct Interstate Commerce Commission, which meant that Congress could prevent companies from engaging in discrimination and charging unreasonable access fees. When the FCC was created in 1934 by the Communications Act, those common carrier rules were entrusted to it through a section of the law known as Title II. Today, the broadband wires and networks on which the Internet relies are the modern-day equivalent of these phone lines, and they should be regulated as such: like telephone companies before them, ISPS should be considered common carriers. This classification is crucial to protecting the Internet as public infrastructure that users can access equally, whether they run a multinational corporation or write a political blog. However, in 2002, Michael Powell, then chair of the FCC, classified ISPS not as common carriers but as “an information service,” which has handicapped the FCC’s ability to enforce net neutrality and regulate ISPS ever since. If ISPS are not reclassified as common carriers, Internet infrastructure will suffer. By authorizing payments for fast lanes, the FCC will encourage ISPS to cater to those customers able and willing to pay a premium, at the expense of upgrading infrastructure for those in the slow lanes. The stakes for the U.S. economy are high: failing to ban ISPS from discriminating against companies would make it harder for tech entrepreneurs to compete, because the costs of entry would rise and ISPS could seek to hobble service for competitors unwilling or unable to pay special access fees. Foreign countries would likely follow Washington’s lead, enacting protectionist measures that would close off foreign markets to U.S. companies. But the harm would extend even further. Given how much the Internet has woven itself into every aspect of daily life, the laws governing it shape economic and political decisions around the world and affect every industry, almost every business, and billions of people. If the Obama administration fails to reverse course on net neutrality, the Internet could turn into a patchwork of fiefdoms, with untold ripple effects. INNOVATION SUPERHIGHWAY Net neutrality is not some esoteric concern; it has been a major contributor to the success of the Internet economy. Unlike in the late 1990s, when users accessed relatively hived-off areas of cyberspace through slow dial-up connections, the Internet is now defined by integration. The credit for this improvement goes to high-speed connections, cellular networks, and short-distance wireless technologies such as WiFi and Bluetooth, which have allowed companies large and small — from Google to Etsy — to link up computers, smartphones, tablets, and wearable electronics. But all this integration has relied on a critical feature of the global Internet: no one needs permission from anyone to do anything. Historically, ISPS have acted as gateways to all the wonderful (or not so wonderful) things connected to the Internet. But they have not acted as gatekeepers, determining which files and servers should load better or worse. From day one, the Internet was a public square, and the providers merely connected everyone, rather than regulating who spoke with whom. That allowed the Internet to evolve into a form of basic infrastructure, used by over a billion people today. The Internet’s openness has radically transformed all kinds of industries, from food delivery to finance, by lowering the barriers to entry. It has allowed a few bright engineers or students with an idea to launch a business that would be immediately available all over the world to over a billion potential customers. Start-ups don’t need the leverage and bank accounts of Apple or Google to get reliable service to reach their users. In fact, historically, they have not paid any arbitrary fees to providers to reach users. Their costs often involve nothing more than hard work, inexpensive cloud computing tools, and off-the-shelf laptops and mobile devices, which are getting more powerful and cheaper by the day. As Marc Andreessen, a co-founder of Netscape and a venture capitalist, has pointed out, the cost of running a basic Internet application fell from $150,000 a month in 2000 to $1,500 a month in 2011. It continues to fall. In some ways, the Internet is just the latest and perhaps most impressive of what economists call “general-purpose technologies,” from the steam engine to the electricity grid, all of which, since their inception, have had a massively disproportionate impact on innovation and economic growth. In a 2012 report, the Boston Consulting Group found that the Internet economy accounted for 4.1 percent (about $2.3 trillion) of GDP in the G-20 countries in 2010. If the Internet were a national economy, the report noted, it would be among the five largest in the world, ahead of Germany. And a 2013 Kauffman Foundation report showed that in the previous three decades, the high-tech sector was 23 percent more likely, and the information technology sector 48 percent more likely, to give birth to new businesses than the private sector overall. That growth, impressive as it is, could be just the beginning, as everyday objects, such as household devices and cars, go online as part of “the Internet of Things.” John Chambers, the CEO of Cisco Systems, has predicted that the Internet of Things could create a $19 trillion market in the near future. Mobile-based markets will only expand, too; the Boston Consulting Group projects that mobile devices will account for four out of five broadband connections by 2016.

  12. Stefan Bauschard   November 17, 2014 8:54 pm/ Reply

    Net neutrality means a tax increase

    Fox News, November 17, 2014, “FCC Official Warns Obama-backed ‘net neutrality’ would bring ‘immediate’ Internet tax, http://www.foxnews.com/politics/2014/11/17/fcc-official-warns-obama-backed-net-neutrality-plan-will-bring-backdoor-tax-on/

    nternet users would be forced to pay a new federal tax on their monthly bills if the government approves regulations recently endorsed by President Obama, a member of the Federal Communications Commission predicts.

    Commissioner Mike O’Reilly addressed what’s known as “net neutrality” at a Washington seminar on Friday. He spoke after Obama backed stricter rules by calling for preventing service providers from charging more for speedier service and for regulating them like telecommunications companies under a decades-old law.

    That law requires telecommunications companies to pay into the FCC’s “Universal Service Fund” — and would likely require the same of Internet companies. But O’Reilly says history clearly shows that the fees would quickly be “passed off” to customers, just like they are now on monthly phone bills.

    “Consumers of these services would face an immediate increase in their Internet bills,” O’Reilly said Friday during the seminar held by the non-partisan Free State Foundation. “Let’s accept a truism: Consumers pay [the fund], not companies.”

    O’Reilly, a Republican on the five-member commission, also quoted scholar and net neutrality guru Tim Wu in saying, “Ultimately, consumers always pay for everything, no matter what we say otherwise.”

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