Recently,
a colleague in the Bellisario College of Communications, asked me who gets a
freedom boost from the FCC’s upcoming dismantling of network neutrality
safeguards. He noted that Chairman Pai
made sure that the title of the FCC’s Notice of Proposed Rulemaking is: Restoring
Internet Freedom. See https://www.fcc.gov/restoring-internet-freedom.
My colleague wanted to know whose freedom the FCC previously subverted and how removing
consumer safeguards promotes freedom.
With
an evaluative template emphasizing employment, innovation and investment, one
can see that deregulation benefits enterprises that employ, innovate and invest
in the Internet ecosystem. However, the
Pai emphasis lies in ventures operating the bit distribution plant reaching
broadband subscribers. The Chairman
provides anecdotal evidence that some rural wireless Internet Service Providers
have curtailed infrastructure investment because of regulatory uncertainty, or
the incentive-reducing impact of network neutrality. If the FCC removes the rules, then rural ISPs
and more market impactful players like Verizon and Comcast will unleash a
torrent of investment, innovation and job creation.
O.K.
let us consider that a real possibility.
Let’s ignore the fact that wireless carriers have expedited investment
in next generation networks during the disincentive tenure of network
neutrality requirements.
To
answer my colleague’s question, I believe one has to consider ISPs as platform
intermediaries who have an impact both downstream on end users and upstream on other
carriers, content distributors and content creators. My research agenda has
pivoted to the law, economics and social impact of platforms; see https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2935292.
Using
the employment, innovation and investment criteria, the FCC also should have
considered the current and prospective freedom quotient for upstream
players. Does nearly unfettered price
and quality of service discrimination options for ISPs impact upstream ventures’
ability to employ, innovate and invest more?
Assume
for the sake of discussion that ISPs can block, throttle, drop and prioritize
packets. A plausible, worst case
scenario has an innovative market entrant with a new content-based business
plan less able to achieve the Commission’s freedom goals. Regardless whether you call it artificial
congestion, the potential exists for an ISP to prevent traffic of the content
market entrant from seamless transit. The
ISP could create congestion with an eye toward demanding a surcharge payment,
even though the market entrant’s traffic had no possibility of itself creating
congestion. The ISP also might throttle
traffic of the innovative newcomer if its market entry might adversely impact
the content market share and profitability of the ISP, its affiliates and its upstream
content providers that previously agreed to pay a surcharge.
Of
course network neutrality opponents would object to this scenario based on the summary
conclusion that an ISP would never degrade network performance, or reduce the
value proposition of its service. The
airlines do this and so would an ISP if it thought it could extract more
revenues given the lack of competition and the inability of consumers on both
sides of its platform to shift carriers.
ISPs
do not operate as charities. The FCC soon
will enhance their freedom which translates into higher revenues and possibly
more customized service options for consumers willing to pay more.
Before
the FCC closes shop and hands off any future dispute resolution to the generalist
FTC consider this scenario. Subscribers
of Netflix, or the small content market entrant discussed above, suddenly see
their video stream turn into slide shows.
The FTC lacking savvy as to the manifold ways ISPs can mask artificial
congestion and network management chicanery orders an investigation with a “tight”
six month deadline for reported findings.
Just
how long after the onset of degraded service will video consumers get angry and
cast about for a villain? Might the list
of candidates include Congress, the FTC and FCC?
