The FCC Needs to Do the Right (& the Hard) Thing

Back in November 2007, I remember sitting in my office one evening and reading then-Senator Obama’s Technology and Innovation Platform for the first time. I was genuinely excited about this PDF. I was particularly taken by a paragraph that appeared right up front:

. . . Because most Americans only have a choice of only one or two broadband carriers, carriers are tempted to impose a toll charge on content and services, discriminating against websites that are unwilling to pay for equal treatment. This could create a two-tier Internet in which websites with the best relationships with network providers can get the fastest access to consumers, while all competing websites remain in a slower lane. Such a result would threaten innovation, the open tradition and architecture of the Internet, and competition among content and backbone providers. It would also threaten the equality of speech through which the Internet has begun to transform American political and cultural discourse. Barack Obama supports the basic principle that network providers should not be allowed to charge fees to privilege the content or applications of some web sites and Internet applications over others. . . .

I remember being amazed that a candidate had actually come out and said that he understood what net neutrality was about and that he knew it was important to the nation’s economy and culture. President Obama said it again in February 2010.

“I’m a big believer in Net Neutrality. I campaigned on this. I continue to be a strong supporter of it. My FCC Chairman Julius Genachowski has indicated that he shares the view that we’ve got to keep the Internet open, that we don’t want to create a bunch of gateways that prevent somebody who doesn’t have a lot of money but has a good idea from being able to start their next YouTube or their next Google on the Internet.”

“This is something we’re committed to. We’re getting pushback, obviously, from some of the bigger carriers who would like to be able to charge more fees and extract more money from wealthier customers. But we think that runs counter to the whole spirit of openness that has made the Internet such a powerful engine for not only economic growth, but also for the generation of ideas and creativity.”

Net neutrality is actually a very old idea. The idea is that when you’re making point-to-point basic transportation (of information or people) available to the public, you’re not supposed to discriminate against uses of your network. (Barbara van Schewick has a marvelous new book out about this here.) We’ve had this idea for lots of networks, including the telephone, the telegraph, the electrical grid, and the railroads. These networks provide basic inputs that are so important for economic growth and creativity that it would harm society to allow private network owners to pick winners and losers, charging one user more than another for the same basic transport service.

This old idea has a old response: distribution networks that should, by rights, be constrained from discriminating often seize the chance to act in cahoots with particularly valuable shippers to make better profits. They can do this when they don’t face much competition. This is good for the two in cahoots but bad for the rest of us.

Example: If you’re a railroad operator, you have high fixed costs and you’d love to have some deep-pocket shipper guarantee you a constant stream of revenue. The railroad barons of the early 1900s did exactly that, using secret rebates to effectively charge a favored customer (say, Standard Oil), much less than they charged other shippers using their lines. It was worth it to the railroads because they made more from Standard Oil, even with rebates, than they would have by offering commodity shipping to all comers. Result? Standard Oil could use the railroads to raise its rivals’ shipping costs and drive them out of business. Lots of rock-ribbed Republicans hated the railroads because they didn’t allow a free market to operate.

Well, the analogy to the railroad today is high-speed Internet access. It’s a key basic infrastructural input into economic life: transporting everything, and transforming every town in America and around the world. It wouldn’t be a good idea, the President keeps saying, to allow the private network operators who provide us with Internet access to discriminate against particular shippers (now, the content and application providers). These operators don’t have much competition to constrain them, and they have every interest in favoring their own business plans. Even more importantly, they’re providing an essential input to America’s economic future.

Deregulation of high-speed Internet access happened via some Bush-era FCC semantic shenanigans back in 2002. I’ve explained this here, and here. It’s time, the President has said, to go back to the status quo. We won the election, after all.

The Verizon-Google (s vz) (s goog) legislative proposal released this week would, if enshrined in legislation, allow network operators to provide exclusive-deal services over their Internet Protocol pipe that would compete directly with other online applications and raise their costs of doing business, just like our railroad-and-shipper example. A carrier could, say, partner with a cable channel to provide Video on Demand services to its subscribers. That would allow the cable channel to raise the “shipping” prices of rival online video distributors, because in order to reach audiences in a similarly technologically advanced way, the rival online distributor would have to also make a deal with the carrier: a deal that might not be available, or might be too expensive for a start-up.

(That’s why, by the way, the cable industry in particular wants these special services to be indistinguishable from Internet access. Cable wants to destroy its online competition, and this net neutrality issue is deeply related to the Comcast/NBCU merger. )

The companies are saying “don’t worry, that’s not the Internet.” But it will certainly appear to be the Internet to the rest of us, and we’ll give up on the slow-lane services that aren’t satisfying. The companies are also leaving wireless out of any nondiscrimination promises, which most of us also thought of as an access route to the Internet, and the nondiscrimination regime they’ve proposed for wired access is pretty weak.

In an op-ed in the San Jose Mercury News I’ve joined with three other law professors to say that the vacuum we now have in regulating high-speed Internet access has led these companies to divide things up among themselves. The FCC is being disintermediated, in effect. The Commission needs to act quickly to protect entrepreneurs, innovation, and consumers.

Here’s President Obama again:

“So let me remind everybody: Those of us in public office were not sent to Washington to do what’s easy. We weren’t sent there because of the big fancy title. We weren’t sent there to — because of a big fancy office. We weren’t sent there just so everybody can say how wonderful we are. We were sent there to do what was hard. (Applause.) We were sent there to take on the tough issues. We were sent there to solve the big challenges. And that’s why we’re there. (Applause.)”

Dear FCC: It’s time to do what is hard.

Susan Crawford is a member of the faculty of Cardozo Law School and also a Visiting Research Collaborator at Princeton’s Center for Information Technology Policy.