Should You Be Freaking Out Over the Net Neutrality Ruling?

by Reihan Salam

Brian Fung of The Switch answers “11 questions you were too afraid to ask about the net neutrality ruling.” Essentially, the D.C. Circuit Court of Appeals has ruled that the FCC doesn’t have the authority to require that Internet Service Providers not discriminate between different kinds of web traffic. So if I’m an ISP, I can’t charge you the consumer more for accessing Netflix rather than Hulu. 

Tim Wu of Columbia Law School, an early champion of net neutrality regulations, is dismayed:

Without net-neutrality rules, a firm like Verizon or Comcast can do whatever it likes to content moving across its network. If it wants, it can make a blog that criticized its latest policies unreachable, or block T-Mobile’s customer support. Acting together, the Internet service providers could destroy Netflix by slowing its data to a crawl, making movies impossible to watch.

Such obvious outrages are unlikely; the firms will surely promise to behave themselves. But they might, instead, slowly begin bleeding money out of the Internet economy with quiet threats and expensive carrots, extracting fees and tolls wherever they can. “You better pay for ‘turbo’ access, Mr. Blogger, otherwise who knows how long it will take readers to reach your content.” Or, to a new video-streaming service, it might say, “We’re going to put Hulu ahead of you, unless you pay up”—meaning that its customers would have an easier time watching Hulu videos than content from the new guy. A. T. & T., Verizon, and Comcast already collect more than three hundred billion dollars in revenues every year. But, like any good corporate citizen, they’d like more.

That’s not all. These days, Internet firms like Google and Facebook are so powerful that they could decide to turn around and demand that Internet providers pay them for the right to access their sites. This is the norm in cable television, and the situation was painfully illustrated to Time Warner Cable’s customers, this fall, when they lost CBS programming for a month during a fee dispute between the two companies. (CBS ultimately prevailed in extracting higher fees to carry its content.) In the absence of net-neutrality rules—which set a norm of zero prices—we face the prospect of pricing wars pitting all against all, in the Hobbesian sense. The losers will be smaller speakers, nonprofits, and the consumer, who will be forced to pay more for less.

In September, Larry Downes, management theorist and co-author, with Paul Nunes, of the new book Big Bang Disruption, anticipated the FCC’s ruling, and he testified before Congress that the FCC did not have the legal authority to impose net neutrality regulations. And he has a very different take on the subject than Wu. First, he argues that the net neutrality concept greatly oversimplifies the workings of real-world networks. And second, he argues that the regulations designed to enforce a content neutrality principle are stymieing innovation by ISPs:

As text-based transmissions have been overshadowed in volume by voice and video, which put more strain on the packet-switching architecture and which require more predictable delivery to maintain coherence, the neutrality principle has largely disappeared—at least as a feature of the Internet’s design.

Load balancing and other network management techniques are constantly evolving, making the most of existing infrastructure as demand spikes. Frequently-accessed content (think YouTube videos) is replicated at key points in the network to ensure rapid delivery to user demand, using technologies including content delivery networks. Services that require higher-bandwidth and more predictable performance, such as telemedicine and internal corporate networks, have long had dedicated resources operating on the same equipment as consumers.

In all, the FCC’s Open Internet order itself cataloged a dozen major non-neutral technologies, protocols, and business arrangements that have long been necessary parts of the Internet.  Sensibly and of necessity, the agency granted exceptions from the rules for each and every one of them, recognizing that the “open” Internet, at least from an engineering standpoint, was anything but.  For the Internet to continue functioning at all, the rhetoric had to give way to reality.

But there was no way for the rules to preemptively grant similar permission to any future network optimization technologies, other than to caveat all of the rules with exemptions for “reasonable network management.” That term couldn’t be defined, however, meaning that any future innovations will require FCC approval before large-scale implementation.

What’s so dangerous about that? The short answer is that innovation delayed is innovation destroyed.

Downes is also more sanguine about market competition as a disciplining force — ISPs won’t screw over their customers because they can’t afford to do so:

The FCC couldn’t find any examples of consumer harms in urgent need of address because there weren’t any. And not because the companies large and small who make up the Internet ecosystem always act principally in the best interests of their customers. The market and the technology deter counter-productive behavior. If not perfectly, than certainly more effectively than slow-moving federal regulators and even slower-moving federal courts.

I am inclined to think that Downes is right. Yet it is worth keeping in mind that the looming threat of FCC regulation might have done much to keep ISPs in line. The broadband market is defined by high barriers to entry, and one suspects that at least some ISPs will be willing to test the bounds of their customers’ patience before competitors spring up to challenge entrenched incumbents. Or perhaps ISPs will find ways to differentiate their offerings in ultimately consumer-friendly ways. I would feel more comfortable if the U.S. were more open to alternative arrangements, like municipal broadband networks, and if more spectrum were available for innovative wireless technologies deployed by new entrants. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.