Net Neutrality

Net Neutrality in the United States

The First Net Neutrality Decision

In January 14, 2014, in the case “Verizon v. FCC”, the U.S. Court of Appeals for the D.C. Circuit vacated key portions of the Federal Communications Commissionโ€™s โ€œOpen Internet Orderโ€ โ€” aka the net neutralityโ€ rule.

The majority opinion was written by Judge Tatel, joined by Judge Rogers. Here is the introduction summarizing the courtโ€™s holding:

“For the second time in four years, we are confronted with a Federal Communications
Commission effort to compel broadband providers to treat all Internet traffic the same regardless of sourceโ€”or to require, as it is popularly known, โ€œnet neutrality.โ€ In Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir. 2010), we held that the Commission had failed to cite any statutory authority that would justify its order compelling a broadband provider to adhere to open network management practices. After Comcast, the Commission issued the order challenged hereโ€”In re Preserving the Open Internet, 25 F.C.C.R. 17905 (2010) (โ€œthe Open Internet Orderโ€)โ€”which imposes disclosure, anti-blocking, and anti-discrimination requirements on broadband providers. As we explain in this opinion, the Commission has established that section 706 of the Telecommunications Act of 1996 vests it with affirmative authority to enact measures encouraging the deployment of broadband infrastructure. The Commission, we further hold, has reasonably interpreted section 706 to empower it to promulgate rules governing broadband providersโ€™ treatment of Internet traffic, and its justification for the specific rules at issue hereโ€”that they will preserve and facilitate the โ€œvirtuous circleโ€ of innovation that has driven the explosive growth of the Internetโ€”is reasonable and supported by substantial evidence. That said, even though the Commission has general authority to regulate in this arena, it may not impose requirements that contravene express statutory mandates. Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order.”

Here is what Judge Silbermann said in dissent about the interpretation of section 706โ€™s authority, in January 2014:

“[The FCC] claims it must regulate broadly, so as to โ€œprotect[] consumer choice, free expression, end-user control, and the ability to innovate without permission,โ€ 25 F.C.C.R. at 17949 ยถ 78, which certainly indicates a Commission objective that exceeds the statutory authority granted in ยง 706.

The majority takes the statutory language even further; it states that the Commissionโ€™s authority to promulgate regulations that promote broadband deployment encompasses the power to regulate broadband providersโ€™ economic relationships with edge providers if, in fact, the nature of those relationships influences the rate and extent to which broadband providers develop and expand services for end users.

Majority Op. at 33. So much for the terms [in section 706] โ€œpromote competition in the local telecommunications marketโ€ or โ€œremove barriers to infrastructure investment.โ€ Presto, we have a new statute granting the FCC virtually unlimited power to regulate the Internet. This reading of ยง 706, as we said in Comcast Corp. v. FCC, โ€œwould virtually free the Commission from its congressional tether.โ€ 600 F.3d 642, 655 (D.C. Cir. 2010). The limiting principles the majority relies on are illusory.”

He ends as follows:

“This regulation [the FCCโ€™s rule] essentially provides an economic preference to a politically powerful constituency, a constituency that, as is true of typical rent seekers, wishes protection against market forces. The Commission does not have authority to grant such a favor.”


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24 responses to “Net Neutrality”

  1. International Avatar
    International

    Public utilities are regulated because they are monopolies; they are not monopolies because they are regulated. E.g., an investor is not going to loan an ISP $100 million to connect every household in a city in order to engage an established rival in a brutal price war, and a consumer is not going to pay $5000 to be connected to a new ISP that *might* be better than their current provider.

  2. International Avatar
    International

    I’d suggest people should learn more about how entrepreneurs and business people think when to be able to understand issues like this. Some comment systems send links to moderation so I won’t post one, but I’d suggest looking for the work of Thomas W. Hazlitt for a start, a GMU prof that teaches law and economics and was a former chief economist of the FCC, or the oped in the WSJ today by a former FCC commissioner on a “Victory for an Unfettered Internet”. They’ll explain that for innovation you don’t want the government interfering with the internet. There was no problem that lead to these policies being adopted, they were pushed pre-emptively by some companies for their own benefit.

  3. International Avatar
    International

    A more likely scenario, one that’s already being rolled out, is that the major ISPs will institute data caps on wired internet, like on your cell phone. (Create scarcity) Then they will charge internet companies a fee to give them access to their customers outside of that cap. So if Microsoft paid Verizon for priority access to Verizon customers, then Bing would be free to use and Yahoo/Google would consume data cap (cost money). Because Netflix competes with Verizon’s cable TV business, it might decline to sell access to Netflix, in spite of all the Verizon customers that pay for that service. A startup internet company might have to pay Verizon for the privilege of having its service made available to Verizon’s customers. In effect, Verizon “owns” the consumers on its network and can charge anyone a fee to communicate with them. And as there are no reasonable alternatives to wired broadband, the customers will either accept that or go back to reading books and re-positioning rabbit ears.

    You might think this is crazy talk and that Verizon would never do anything like that. But you’d only have to look at the Verizon cell phone business to see that they do that right now.

  4. International Avatar
    International

    Right up to the point that Google decides that it is tired of it’s potential eyeballs being considered second class citizens on Verizon and decides that Verizon customers don’t get access to Google, at which point Verizon customers leave in droves for a mobile provider that has Google access. This is how the peering wars of the mid 90s worked themselves out.

    It is the content on the Internet that makes the Internet valuable. Any provider that decides to limit that content will feel a backlash on their pocketbook in the fact that people will stop paying them for insufficient access.

  5. International Avatar
    International

    Fixed wireless is also an option as opposed to mobile wireless. But what it really sounds like to me is “I want unlimited internet for the same price I am paying now so I can dump cable and save significantly.” If I am reading more into it then consider the rest of this reply as being aimed at the majority of those that do have this sentiment.

    Cable companies don’t like this because they are losing cable subscriptions, but guess what cable revenues help pay for their infrastructure and expansion, that loss of revenue needs to be reclaimed somewhere so guess where it is going to come from, increased rates.

    Most ISPs aren’t real happy with this trend either because their bottleneck has pretty much become the last mile of connectivity, which is also the most expensive. Even fiber has limits, GPON more so than Home Run, but they are still there and 4K/8K video content will be felt. Especially when you consider most homes with kids will have multiple screens active at one time.

  6. International Avatar
    International

    Fixed wireless is different from “mobile” wireless how? Aside from not having to leap towers during use, it pretty much, as installed, operates the same as a cell phone that never leaves your house. Which means it has all the same transmission issues we’ve come to love about our cell phones.

    Cable companies have a 41% profit margin, which is great if you can get it. It’s not normal in competitive industries, though, and cable/internet is certainly not competitive. (before or after the demise of net-neutrality.) So if cable companies are upset that folks like me cut the cord because they were over-charging me for the “golf channel” (apologies to golfers, but really?!) and a host of other things I had zero interest in but had to buy to get the three channels I do want, tough beans. Their business model is terrible for consumers but does provide them exceptional returns.

    Now if they aren’t charging enough to cover costs, that’s easy enough to fix–charge more. After increasing their fees 400% over inflation year over year, they appear to be doing just that while maintaining those great profit margins.

    What they really don’t like is that they have two main product offerings that are now in direct competition with each other; their internet business is starting to kill their cable business. Unlike the music industry, which faced the internet first, cable/ISP companies have a near monopoly on their customers and thus more tools at their disposal to delay change and prevent competition.

    And yeah, I want to consume internet bandwidth without having to monitor every byte (aka: “unlimited”) at a competitive rate. Killing net-neutrality does absolutely nothing to advance competition in the ISP market but it does give entrenched players more leverage to raise fees on the highly competitive service industry that delivers its services over that internet. They’ll do to those businesses what they’ve been doing to their own customers for decades–siphon every last available penny from them while providing the least amount of service possible.

  7. International Avatar
    International

    There is an old story where Thurgood Marshall (later Supreme Court Justice Marshall) was the attorney for the NAACP pursuing Brown vs Board of Education. He wasn’t always confident it was a good idea to pursue the case to the Supreme Court, as it could have set a precedent supporting school segregation. The point is, every lawsuit is a risk because you just might set off a chain reaction that ends up cementing exactly that thing you don’t want. In this situation (and in no way trying to equate equal human rights with Internet access), let’s hope Verizon’s strategy is exactly that…

  8. International Avatar
    International

    David Lang

    I think giving ISPs common carrier status would be a good thing.

    Besides addressing this net neutrality issue, it would also settle the ISP liability issue for copyright violations where rightsowners try and sue the ISPs or force the ISPs to play police.

    If they are ‘common carriers’ they automatically gain protection from such lawsuits because they just move bits around and don’t care what they are.

    If an ISP wants to waive common carrier status, I think they should have this option. They are then taking responsibility for all of their network traffic, and should be held liable for anything bad that they let happen.

    Right now the ISPs are trying to play it both ways, getting something like common carrier protections against liability, but avoiding common carrier responsibilities when they come up.

  9. International Avatar
    International

    Bookstores aren’t liable for the content of every book, yet they are free to charge differently for different books. Internet providers aren’t monopolies, there is competition (worst case satellite net providers), and where it is limited it usually because the existing services is sufficient. Obviously some economically illiterate people prefer central planning to free markets, but I would have thought most reading this blog would know better. Obviously some control freaks wish to force businesses to do things their way since they think they know better than actual experts who create those companies, but I would have hoped those here would recognize that while they are experts in legal matters, they, like politicians, should lead building the internet up to actual technical and business experts.

    I’ve been in the commercial net world for twenty years, and the net grew largely because of the free market aspects of it, in spite of government intervention, not because of it. I know some lawyers like making work for other lawyers through regulating, but I would have hoped most reading this blog would have known better. I am amazed at the comments and votes that seem to indicate many know little about the net biz world supporting the very non-libertarian anti-free market concept of “net neutrality”. If you want the internet to prosper, keep government’s hands off it.

  10. International Avatar
    International

    Mark Carrara

    While in theory a free market knows best, there is not a free market in broadband. Once you leave the major cities true broadband is almost always a monopoly. Satellite doesn’t count, however 4G would. Still vast areas of this country are not served at all. I live in town one block from an Interstae and commercial broadband is not available at any cost. Verizion did have 4G but it breaks so often you can’t depend on it.

    As for the history of the Internet wasn’t it born out of a government project DARPANET? And wasn’t the huge growth started by a public university’s release of Mosaic?

  11. International Avatar
    International

    The free market can take time to solve problems, but it will get there (unless those liberals that hate greedy capitalists have suddenly decided they will forget to be greedy and won’t bother trying to make money by providing services or competing). The answer isn’t to squash it in the meantime by those suffering from the delusion that the central planning approach is better.

    The huge growth was started by the government allowing commercial network traffic over the NSF backbone finally, but if they hadn’t done that the private world would have stepped in to link together networks using private backbones from the start. Contrary to the fantasies of those that know nothing about software, the internet isn’t rocket science, many competing private entities developed network technology, it just happens that the government throws lots of money at problems and sometimes it winds up being the one to get there first with the approach that has market share and therefore becomes the de facto standard. If the government hadn’t funded it, those software developers wouldn’t have suddenly lost IQ points and been unable to develop the same sort of software using private money. The commercial world stepped in and competition drove innovation, not centralized political planners that know less about technology and business than the people that built the companies in the private sector.

  12. International Avatar
    International

    If Verizon FIOS broadband is a monopolistic problem, why would Verizon 4G be a solution. The problem is Verizon, not the technology they employ. Plus, wireless has smaller data caps which interfere with the normal use patterns of internet/cable customers.

    The internet was a government project that transitioned into the public in the early 90s, about the same time NCSA Mosaic was released by Sir Tim Berners-lee. It was not built with commercial use in mind and it operated on the concept that everyone shared the load by allowing email and other packets to flow through their servers freely without concern for who sent them or where they were going. The path from UCLA to MIT might take the packets through a bank in Omaha and a community college in Georgia without anyone trying to figure out who should pay what to whom.

  13. International Avatar
    International

    This may not be crucial to the discussion but Berners-Lee did not release Mosaic. The NCSA created and released the graphical browser which used http (hypertext transport protocol) which was the creation of Sir Tim. NCSA is the National Center for Supercomputing and it’s Applications; specifically the center at University of Illinois at Urbana-Champaign. That team was led by Marc Andreesen who later led development of Netscape Navigator.

    Mosaic was a terrible, frustrating piece of software but it seemed like nothing short of magical and it had ‘the future’ written all over it.

  14. International Avatar
    International

    The law already protects companies who just provide a forum for their users. That’s why YouTube still exists, in spite of rights owners’ best efforts. I think you need to develop your “common carrier or bust” argument a bit more, unless you think that YouTube should also be a common carrier for some reason. (If that’s what you think, I would be fascinated to know the reason.)

  15. International Avatar
    International

    steve glista

    “Common Carrier” is different from a 17 USC Section 512 “Service Provider.” Under section 512, service providers who happen to be ISPs or pipe owners like Verizon have protection from infringement liability as long as they comply with 512(a).

    Unfortunately 512(a) does not, by its terms, prevent Verizon from degrading QOS between particular nodes, or favoring QOS for other nodes. Verizon can give preferential routing service to some favored customers without jeopardizing its Section 512 safe harbors.

    OP is conflating the “common carrier” protections from infringement liability with the “common carrier” requirement not to favor certain traffic based on the content, source, or intended recipient of the traffic. These are different things. The 512 protections apply so long as the service provider is not selcting the content or the source itself, but Verizon can still comply with 512(a) even if it is looking at the content or its source and then deciding whether it goes out on the fast wire or the slow wire.

  16. International Avatar
    International

    davemarney

    Here is something that I might be able to shed some light on. The people arguing against net neutrality are basically saying, let’s wait until someone really suffers, don’t come crying here with your sky-is-falling, slippery slope arguments, we don’t have time for solutions in search of problems.

    Actually, though, you already have a problem, because “net neutrality” is in fact the way the Internet is engineered to work. Every “client” who comes to the net pays for their own on-ramp, on both ends of the connection. A Joe Smith only needs a small on-ramp; a Google needs an enormous on-ramp; both pay accordingly. This peering relationship is how the architecture of the Internet works. Without it, routing does not happen.

    To change the open nature of network routing would be to go against the architecture of the Internet. It interferes with its design in a fundamental way. It is not a solution in search of a problem, it is a problem, period.

  17. International Avatar
    International

    The people arguing against net neutrality are basically saying: we want a free market, that is what led to the growth of the commercial net despite clueless business illiterate people trying to give the government too much credit. When individuals started getting net accounts there were many providers with hourly charges, but competition forced flat rate monthly service. Customer needs and the architecture of the net tend towards net neutrality overall (as you indicate), but there need to be exceptions that should be driven by the market, not by politically driven central planning, often done by lawyers that know little about technical, business or economic matters. I’ve been involved in the commercial net world for over twenty years, and what drove its growth was being a mostly free market, government intervention causes more trouble that it is worth despite utter nonsense about it being needed to support “innovation”, which is the sort of nonsense special interest groups regularly spout to dupe a clueless public and government into regulatory capture favors that help one group at the expense of the rest in ways you folks outside the industry can’t imagine since you aren’t a part of the industry. Central planning doesn’t magically work better in this realm than in others.

  18. International Avatar
    International

    Even with Net Neutrality, there’s plenty of room for competition through the non-discriminatory offering of network services. You seem to ignore the fact that switching ISP’s (if that’s even feasible) isn’t the only way to gauge consumer preference. Every time someone clicks on a link they’re “voting” to have that content delivered as expediently as possible and everyone with a connection has a “vote” the size of their pipe. You’re basically arguing to do away with this time-tested method for determining consumer preference and prefer to let the “central planners” with the biggest wallet decide what should be available.

  19. International Avatar
    International

    The only reason the Internet works at all is because it uses open routing, that’s just a technical fact of its architecture. That really doesn’t HAVE to have anything to do with the free market per se; as you point out, many ISPs in the past have used many different pricing models without interfering with the Internet’s technical architecture.

    But now the threat is that some ISPs will, in fact, interfere with the technical architecture in order to force its customers to follow a business requirement. All I’m saying is, if they do that, they will be breaking the Internet.

    Now, hopefully, once customers get a taste of a broken Internet, they will not use those ISPs. But in many markets, there are only a couple of ISPs, and if they all break the Internet, the customer is out of luck.

    It may be that the market fixes this. If we had a genuinely free market, it probably would almost certainly fix it. But we don’t have a free market, and that’s what makes this a present problem, not some pie-in-the-sky issue.

  20. International Avatar
    International

    It’s rather odd to hear the termination of Net Neutrality on the grounds of “market forces”. There’s no point at which Verizon and the other carriers aren’t operating with some kind of de jure or de facto regulatory oligopoly or monopoly underpinning their business, be it the limitations on spectrum available, restrictions on community broadband, and restrictions on companies just paying through the nose to put up new wires.

    That said, I’m not so worried this is going to be the death of the open internet. Most phones still have open browsers you can use reasonably well even if there’s no Net Neutrality on wireless and about a million different paid and unpaid apps. I won’t be worried unless it dies and we suddenly see a broadband company offering a combination of low bandwidth except for the rights to purchase some additional “channels” that don’t count against that.

  21. International Avatar
    International

    Is there a difference between speeding up the connections for those who pay up and slowing it down for those who do not pay up? One way or another if your destination does not have this relationship, your connection will comparatively suffer. Granted competition in wireless is more lively than wired broadband, so it acts as a helpful deterrent for now.

    In broadband world though, this is sort of happening already. Netflix streams are said to be better if you are lucky enough to get your connection from a smaller carrier, compared to one of the majors who aspire to be content providers and gatekeepers. If it becomes commonplace, streaming video or music apps, news sources, taxicab apps, search engines, maps apps without humongous financial muscle can all be pushed behind a porous wall, which may impede the innovative startups.

  22. International Avatar
    International

    They’re not actually speeding it up or slowing down services. They’re just off-setting the costs of the bandwidth for the customer. You can still do the non-subsidized stuff at the same speed, but it counts against your bandwidth cap/data plan.

    I’ve never heard of that Netflix thing. I’ve got Comcast, and they seem to be just as fast as Youtube – and stuff that I’ve watched on pirated streams isn’t slowed down either.

    Getting companies to subsidize the bandwidth makes more sense, anyways. Providers get to please customers with as many services as possible while also recouping the costs of providing that by getting money out of content providers and companies willing to pay for it. Actually reducing access to services would be much more noticeable and unpopular.

  23. International Avatar
    International

    I’ve heard from an inside (and possibly biased) source that the majors don’t let Netflix place its servers as “close” to customers as it could inside their own networks. This apparently increase the initial loading times and make the link more prone to congestions. The smaller companies are supposedly more cooperative to improve end user experience. That is why I said sort of. Major cable guys’ motivation seems to be favoring their own PPV services, while Netflix is asking for some amount of favoritism compared to other companies who cannot afford to drop servers inside every major network.

    The business model where offsetting the costs, but not changing the quality of connections is a subset of what can be done if net neutrality is not the rule of the land. If that was the extent of allowable favoritism, it may not be the end of the world. It still sounds risky for the tech innovation, when the gatekeepers own some of the content providers.

  24. International Avatar
    International

    Seriously. This is one of those areas where the “market forces” argument falls a bit flat. The broadband providers are typically among the most hated companies in America. They’re typically across-the-board in favor of undermining net neutrality, as they see dollar signs, and yet they really have little to no market incentive to behave otherwise. It’s not as if consumers have a world of possibilities available if they want high-speed internet.

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