Wednesday, January 15, 2014

Federal Judge Throws Out Net Neutrality

In most cases federal regulations are used to stifle innovation and competition for the purposes of protecting crony capitalists.  The FCC's Net Neutrality order is one significant exception to this rule.

Unfortunately, a federal judge through out this order using a technicality created by past FCC overreaches, the second time a court has thrown out orders protecting the openness of the Internet.

In a past ruling the FCC declared Internet Service to be an information service and not a telecommunication service.  The purpose of that ruling was to prevent the entrenched cable and phone monopolies from having to open up their networks to competing services, as they were required to do for telephone service.  The FCC made this ruling under pressure from companies like AT&T and Verizon who threatened not to upgrade their networks unless they were given this protection.

The blackmail tactic is one they have gone to again and again.  First, when they were going by the name Southwestern Bell (SBC), they threatened states like Kansas that they wouldn't upgrade their networks unless they were allowed to offer long distance services, something they were prevented from doing because of past anti-competitive abuses.  Then they blackmailed them unless they were allowed to offer TV service and get to negotiate for rights-of-way directly with the state government, while cable companies had to still negotiate with each city municipality.  While AT&T got what they wanted from these actions, they never delivered on their promises to deploy next generation broadband to the majority of consumers Kansas and other affected states.

It is no surprise that the information service ruling, another crony capitalist one, has come back to bite consumers in the rear, as each of these rulings did.

While prices for many service have come down, it is in spite of these actions, not because of them.  Prices have come down because the Internet has remained open and largely free from the kind of two-tiered Internet AT&T wants to create.

The FCC's Net Neutrality order does three simple things:

  1. Transparency. Fixed and mobile broadband providers must disclose the network management practices, performance characteristics, and terms and conditions of their broadband services;
     
  2. No blocking. Fixed broadband providers may not block lawful content, applications, services, or non-harmful devices; mobile broadband providers may not block lawful websites, or block applications that compete with their voice or video telephony services; and
     
  3. No unreasonable discrimination. Fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic.
What these rules say is that ISPs like AT&T and Time Warner, who offer their own services that compete with Internet companies like Netflix and YouTube can't block or degrade their competitors' services in order to gain an advantage.  Likewise, they can not begin blocking or degrading a particular company's service for the benefit of another third party service.  For example in the case of Microsoft and Comcast colluding to give preferential treatment to traffic to and from Microsoft's services like the Xbox network.

This ruling is a blow to innovation and competition.  Net Neutrality is one of those regulations that will allow new competition and innovation to enter the market and slowly stabilize the industry to a point at which Net Neutrality and similar regulations won't be necessary.  But that time can't come until the vast majority of consumers have the option to choose between more than one or two broadband carriers.

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