Network Neutrality Backlash

Don’t look for the network neutrality controversy to go away anytime soon.

The Federal Communications Commission’s “Christmas Surprise”—its December 21 vote to adopt new network neutrality—touched off criticism from mainstream pundits despite the distraction of the holiday season. Political cartoons like this, plus a column by George Will, which succinctly linked net neutrality to the Obama adminstration’s overall regulatory bent, belie the notion that the issue was only front-and-center among tech policy geeks.

What’s most frustrating about the new rules is that they all but concede there’s no real problem.

Larry Downes, in the first of a series of posts about the net neutrality order at Technology Liberation Front, points out that the new rules likely would not prevent three of the four so-called violations that neutrality advocates repeatedly cited as egregious abuse (Comcast-BitTorrent, an on-line payment service blocking use of competitive payment services, and AT&T’s restriction of certain iPhone apps). The fourth—the Madison River-Vonage case already had been dealt with under the existing rules.

In his ensuing posts (catalogued here), Downes cites the real problem: the creation of a framework that can be arbitrarily applied by either Genachowski or future chairpersons, and can spark a series of petitions and complaints aimed at rent-seeking or delaying competition.

Under the new network neutrality rules, the FCC is a referee stepping onto the field and declaring he will make the rules up as the game progresses. Teams won’t be told what plays are legal or illegal and won’t know if they’ve committed a foul until the ref tells them have. And a fair play in the first quarter may be ruled a foul in the fourth and vice-versa.

It also doesn’t help that in the run-up to the neutrality decision, a neutrality complaint came not from some tiny website that activists like Free Press claim the rules are designed to protect, but from Level 3 Communications and Netflix, two large companies, who asked the FCC to prevent Comcast from charging them more to cover the cost of the massive bandwidth Netflix’s video-on-demand service was going to consume.

Now comes the first neutrality complaint since the new rules were adopted. Note it concerns neither AT&T, Verizon, Comcast or any of the large service providers accused of monopolizing access. Instead, neutrality proponents Free Press, Media Access Project and the New America Foundation have accused Metro PCS, a second-tier wireless service provider with little brand recognition beyond Dallas, Texas, with a violation because it offered a low-priced “all-you-can use” data plan that blocked access to YouTube and other high-bandwidth sites. Never mind MetroPCS’s competitors offer wireless YouTube access, and never mind that Metro PCS made the package available on the assumption that a subset of customers may not be interested in using their phone for YouTube and would happily pay less if the choice were offered. So there you have it—network neutrality used to force consumers to pay higher prices for services they don’t want, rather than allow a small company to peel off a bit of market share by addressing a subset of the market with particular needs.

So much for the Free Press argument that network neutrality would safeguard competition. Here, regulation would close off an incentive that might lead some consumers to switch from a larger, dominant carrier and thereby strengthen a small one. This is exactly the sort of unintended consequence that opponents of neutrality regulation warned of—and it is showing up mere weeks after the new rules were adopted.

Now that net neutrality’s problems are emerging for all to see, there’s been some pushback from antiregulatory circles. Rep. Marcia Blackburn (R-Tenn.), now part of the House majority, already has reintroduced a bill to prohibit the FCC from further regulating the Internet. Blackburn had sponsored this bill during the last Congress, too, where it went absolutely nowhere. This time around, is has gained 59 cosponsors. As Ars Technica reports, “it contain[s] only a few lines, chief of which was this one: ‘In General—The Federal Communications Commission shall not propose, promulgate, or issue any regulations regarding the Internet or IP-enabled services.’ National security issues and wiretapping rules would be exempt from this restriction.”

Meanwhile, according to Downes’s reporting from last week’s CES, Neil Fried, senior counsel to the House Energy and Commerce Committee, told a packed session on net neutrality that the Committee would take up the FCC’s “overreaching” as its first tech agenda item. In the same session, Verizon Executive Vice President Tom Tauke refused to dispel rumors that the company is preparing to challenge them in court.

Good news all round.