All eyes are on the Federal Communications Commission, as commissioner Tom Wheeler unveiled the FCC’s plan for “Protecting and Promoting the Open Internet.” The plan has had many Internet-centric companies up in arms, decrying any plan that might create a two-tiered Internet comprising “fast lanes” for companies that can pay, and “slow lanes” for those that don’t. (See an open letter to the FCC signed by companies including Amazon, Google and Microsoft.) It’s a complicated topic that involves regulation, politicking and jargon, so we called on technology writer and observer Clay Shirky to share his take on what’s going on. An edited version of our conversation follows.
In the press we’re reading a lot about an “Internet slow lane.” What does that mean?
The Internet slow lane means the bandwidth you pay for no longer guarantees you equal access to everything that’s on the Internet. It means that the people you’re paying for bandwidth can decide what services they want you to get quickly, and what services they want you to get slowly. And, they can charge the sites you’re trying to look at for getting access to you, even though you’ve already paid for the bandwidth the first time.
Is this like paying for HBO or paying to upgrade a package?
It’s not. What happens with the HBO model is that you pay HBO for their content. What the cable companies are proposing now is that you pay extra for access. The additional money being extracted is not actually going from you to reward the people making the content. In fact it’s exactly the opposite. People who are making content have to pay money simply to get access to you. So this is not at all like pay per view TV, where you think “I want to watch that, I’ll pay money and get access to that content.” This is more like someone setting up a toll road at the edge of your town to raise the price of groceries.
Ok, but we’re all happy to pay for bandwidth, right? What’s the catch here?
If you wanted to pay more for more bandwidth, for almost any service provider you can do that now. This isn’t about you deciding to pay more for better service. This is about you paying for an existing service and then having the cable company decide how well that’s going to work on your behalf. They are in a way degrading the product you already pay for by intentionally slowing down some of what you’ve already paid for access to the first time.
Many net neutrality advocates seem to think that classifying Internet service providers (ISPs) as “Title II” is the way to go. That would see them classified as “common carriers” and subject them to the same type of regulation as the phone companies. Why wouldn’t the FCC just do that right now?
That’s a political question, not a technical one. There’s no clean way in regulation right now to stand up for the principle that all video produced by anyone anywhere on the Internet should get to you on the bandwidth you’ve already paid for. There is no clear regulatory apparatus for that principle, which is called net neutrality and widely supported by everyone but the cable industries.
Classifying something as a “common carrier” (Title II) or an “information service” carries huge complex regulatory bundles. The reclassification of these services would carry all sorts of other ramifications including, ironically, bringing the telephone networks into the fray. They, of course, are trying to defend voice revenues, where the cable people are trying to defend video revenues.
Because no one had ever imagined a general purpose communication network prior to now, there isn’t a regulatory apparatus for doing just the network neutrality part. It has been suggested that everyone just get the service they want. So if you want a service in which video doesn’t work well, that’s fine. But what companies don’t get to do is say that video from Netflix will work worse than video from Amazon just because they say so.
And that’s essentially what the cable companies are doing?
That’s exactly what they’re doing. That discrimination is based on no characteristic other than wanting to collect a bribe between the people paying for access and the people who are already creating the content.
So … Extortion is an ugly word, but it sure does seem like that’s what you’re describing. Is it really so clear cut?
There are some extortionate services where there is a monopoly provider because by the time you run the first water pipe somewhere you don’t want to run a second. These are then regulated as utilities. The huge complexities around Internet services is that they started as “nice to have” additions to the household and now they have become critical infrastructure. We’re currently in the worst of all possible worlds. We have private extortionate monopolies, which is a nightmare.
Um. Yay? So what do we do?
There are two ways out of the problem. Firstly, you can have competition so there are no longer monopolies. So if someone offers you bandwidth but says they’ll start extorting the people who want to send you video content and another bandwidth provider says they’ll just sell you a faster Internet pipe and won’t degrade anyone’s video quality, the market will sort that out.
The other solution is a regulatory solution, which would be in the way that Ma Bell was a quasi governmental agency. The telephone became such a critical service that in return for not charging purely extortionate rates for running the phone service, the Ma Bell business became a private utility. Notably, even when the Bell system was broken up in the 1980s, long-distance became a competitive market, but the people who owned the wires that come into your home remained monopolies.
Either competition or regulation could work. The nightmare is that there’s a private service that through anti-competitive practices develops a monopoly that they then use to extort money from both ends of the pipe with limited government interest in the public good. That is, to our surprise and horror, the situation the FCC proposed implementing a few weeks ago, and moved us closer to with today’s awful 3-2 vote.
So why did the FCC do that?
Again, it’s a political question. The difficulty with all governmental regulation is what’s called commercial capture. There’s a very large group of people who want the Internet to work well. But none of us are paid to make sure the Internet works well. It’s simply what we want. We sit in our houses and we access websites and watch videos and we’re glad it all works. There’s a very small group of people who recognize that if they can successfully adopt an extortionate business model they can do what’s called rent extraction. They can generate enormous new revenues without creating any new value.
Al Franken has criticized the revolving door between the ISPs and the FCC. Meredith Baker is the former commissioner of the FCC and now she’s a lobbyist for Comcast. What’s going on? That is crazy, right?
It is insane. There’s no deep complicated reason why it’s good that there’s a revolving door in Washington. That’s just bad for the Republic, full stop. The ability of any industry to both have its own lobbyists move into government and more importantly to hold out million dollar paydays to regulators who move out is incredibly distorting of an agency that’s meant to work in the public interest. There’s no subtle judgement call here. The industry that has the most to gain from the US allowing it to adopt extortionate policies can spend unlimited time and energy trying to populate the regulatory agencies with its own people, and also hold out what is essentially a time-delayed bribe for current members of the FCC. They’re essentially saying, “If you exhibit a willingness to let us extract money while creating no new value, we’ll hire you in the future. If on the other hand you lobby on behalf of what the American public wants, there is no chance we will give you a job.” When the salaries for these jobs are in the hundreds of thousands, if not millions of dollars, that’s a very powerful incentive.
What happens if net neutrality dies?
If net neutrality ends, the innovation on the American internet subsides. Not completely, obviously, but the countries that have net neutrality become better laboratories for the future. In the same way that Samsung became the world’s biggest handset manufacturer by simply being in the most wired, most connected country in the world, you can expect innovation in other kinds of services to move there.
In the same way the US didn’t capture the international mobile phone market, by initially treating mobile telephony as a luxury service, we are now potentially pushing the market for internet innovation outside our borders, by making the US a less good place for startups and users to do business with one another, because there are always bribes to be paid in the middle of the system.
What will happen on the home front is that people will start to look at plan B. Which is more functional competition for bandwidth. As long as Comcast (the worst actor in this though there are several bad actors), can count on not having a competitive alternative, you’re going to start to see city by city competition. Cities with Google Fiber will have cheaper bandwidth at faster rates and more satisfied companies and they’ll start to become places where Internet businesses locate and so forth. The customers only served by Comcast will be ill-served, and we will look for ways to reach them with competitive, not regulatory means. That’s Plan B. Plan A, regulation that protects the public interest, is clearly superior, but plan B is because you have to do something.
What’s wrong with Plan B?
Think of it like running water or electricity to the house. Whoever gets there first with a fast pipe is generally the person you want to provide the service. It’s not like, say, competition for food, where this grocery store sells Cheerios, that one only sells organic stuff. Then, that kind of variety benefits the public. Imagine three people competing to bring you water to the house. It’s all the same water, but just has confusing, different pricing regimes. You don’t need it.
By design, the Internet is meant to be an interoperable and interchangeable service, so the only reason you’d need competition is if someone is actively trying to make the service less interoperable. As long as the principle of inter-networking is abided by the various participants in the system then it’s fine to have the first person who gets to the house with a fast enough pipe be the person who gets to collect your money. Pushing for Comcast to have competition only makes sense when they start using extortion as a business model.
So this isn’t about stopping the ISPs from innovating?
It’s about getting them to start innovating! The business model that Comcast wants is that they collect new dollars for no new value created. They want to say they laid the wires and they would like to get extra money for the work they did in the past while generating no new expenses and no new value for either the public or the content providers. If that’s off the table, then the kinds of services they have to think about providing will have to create novel value.