Degrading Customer Quality of Experience as a Successful ISP Business Strategy

            In a recent New York Times article, the head of the cable television trade association, Michael Powell, made a curious observation about Internet Service Provider business strategy.  He sees no revenue enhancement possibilities in deliberately lowering the value proposition of broadband Internet access by blocking or degrading specific content deliveries: 

            “They’re as self-interested as Google or anybody else, but they believe they’ve found a good business selling internet access on open, unobstructed pipes. They don’t see how one could create a profitable business model by degrading the experience of their consumers.” See https://www.nytimes.com/2017/07/13/business/net-neutrality-broadband-companies-fcc.html?_r=0 

            Mr. Powell may have made a plausible observation about the broadband market, but there is another big transport market where a rush to the bottom enhances a carrier’s bottom line: commercial aviation.  Three of the four major carriers in the U.S. have created a new Economy Minus service option where previously bundled features are prohibited, or available at a surcharge.  United even prohibits “Basic Economy” passengers from carrying onboard a small bag. 

            Economists and others might welcome the proliferation of pricing options where consumers have to reveal preferences by paying for specific service enhancements.  But in most cases, the legacy carriers offering this new degraded service option have not lowered the fare.  They have reduced the service bundle and now priced out specific elements.   

            So much for not profiting from a degradation in the value proposition. 

            An ISP already has experimented with unbundling and separately pricing specific service elements.  For a brief time in selected markets, AT&T floated a new $29 monthly fee for enhanced privacy protection for broadband customers.  See https://arstechnica.com/business/2015/02/att-charges-29-more-for-gigabit-fiber-that-doesnt-watch-your-web-browsing/.  Most consumers thought privacy protection constituted an integral part of their subscription, but of course they haven’t read their subscription agreements that would disabuse them of that presumption.

            ISP service diversification, unbundling and pricing experiments evidence a maturing market.  As part of this transition, absent an explicit prohibition, expect these carriers to follow the airlines’ lead in pushing the envelope on price increases and service element unbundling.

Differences Between Content and Carrier Privacy

            With narrow thin margins, both the U.S. Senate and House of Representatives have passed Resolutions foreclosing the FCC from imposing privacy safeguards on Internet Service Providers (“ISPs”).  See https://www.nytimes.com/aponline/2017/03/23/us/politics/ap-us-congress-broadband-privacy-rules.html; https://www.wsj.com/articles/fcc-approves-new-customer-privacy-rules-for-broadband-providers-1477583556.  Advocates on both sides of the issue have offered insights that distort reality, but eventually the court of public opinion will get this matter right: ISPs can mine and monetize subscriber data without offering a dime in compensation, or any sort of enhanced value proposition.  Content providers have to provide something of value for the privilege.

            I marvel how smart people, who really should know better, spout the party line that ISPs and content providers should face symmetrical privacy obligations, or freedoms.  Why?  Advocates for foreclosing FCC consumer protection, frame the matter as a giveaway to villainous Google and Facebook, if content providers have easier access to consumer data than the firms like Verizon and Comcast that carry the content.

            Here’s my newsflash: content providers provider something of value for the privacy they monetize, while carriers have to offer nothing in return.  For a brief period, AT&T offered its subscribers the opportunity to pay a surcharge for enhanced privacy protection.  Data about subscribers location, wants, needs, desires, habits, frequent web site visits, search terms etc. have significant value.  But so far, content providers understand that they have to provide something of value in return for the privilege.  Carriers do need some of this information, e.g., subscriber location, to provide service, but clearly lots of it is marketable without costing the carrier anything by way of a discount, or savings to subscribers.

            Even if we ignore the need for a fair exchange between carrier and consumer, there are major differences between what consumers have to give up to carriers versus what content providers can glean.  Carriers need constant monitoring and managing of factors such as subscriber location and data (bandwidth) requirements to manage networks and maintain high quality of service.  However, these carriers can configure network management into quite intrusive and sellable subscriber surveillance.  For example, content providers have to make do with IP addresses rather than specific location coordinates unless and until subscribers opt into such tracking.  Carriers have that information on an ongoing basis without having to ask for permissible to use and sell it.

            Consumers readily give up privacy expectations and rights in exchange for something of value from content providers.  It’s a voluntary and often mutually beneficial transaction.  On the other hand, carriers do not have to initiate such a transaction, but can incorporate non-negotiable, terms and conditions of carriage.  Acceptance of these “take it, or leave it” provisions constitute a pre-condition for the “right” to become a subscriber. 

            Eventually the court of public opinion will see the unfairness in having to abandon most privacy expectations for the “privilege” of subscribing to something that has become a fundamental—dare I say public utility—aspect of life.  One might have reluctance to give up the information, communications and entertainment (“ICE”) services of Google and Facebook, but who wants to abandon tetherless, lifeline access to the real and virtual world via handsets?

            Lastly, defenders of the privacy takeaway seek to assure the public that adequate safeguards remain in place.  Of course, the FCC can apply telecommunications carrier safeguards, e.g., Section 222 of the Communications Act, but only if it the Commission does not re-reclassify broadband as an information service. Does this imply that the New FCC will not remedy Old FCC overreach?

           

Anatomy of Defective Legislation: The No Rate Regulation of Broadband Internet Access Act, H.R. 2666

             The U.S. House of Representatives has passed a bill that would prohibit the FCC from regulating Internet Service Provider rates.  While one surely can appreciate the merits of such legislation, House Republicans have created a remarkably flawed document.

            The drafters do not seem to understand that the Communications Act, which the bill would amend, vests the FCC with jurisdiction in Section 208 to oversee “charges, classifications, regulations or practices.”  H.R. 2666 creates the kind of ambiguity that allows the FCC to remedy through its preferred statutory interpretation, because one person’s rate regulation is another’s lawful regulation of charges, classifications and practices.

            The Supreme Court has created something called the Chevron Doctrine that creates a model for assessing whether courts should defer to regulatory agency legislative interpretation.  While agencies like the FCC must apply the clear meaning of an unambiguous law, court must defer to reasonable agency interpretations when the applicable law is ambiguous.

            On its face, H.R. 2666 is ambiguous, because one could readily argue that this bill does not repeal Sections in the Communications Act that authorize the FCC to investigate complaints about carrier billing and treatment of information about customer network usage (Sec. 222) as well as issues that affect out of pocket cost, but can be deemed something other than a rate.

            In the Internet ecosystem, ISPs often negotiate agreements that do not involve rates and even the exchange of money.  Instead they use customer information as a marketable currency of great value to advertisers.  Data mining configures and analyses ISP subscriber behavior that can be monetized, but not converted into applicable rates and tariffs.

Terminating ISP Monopolies and the Similar Harm to Edge Providers and End Users

            It appears that FCC Chairman Tom Wheeler wants an Open Internet order that differentiates access into 2 categories: 1) edge provider downstream access and 2) end user upstream access to content.  This frame has some appeal, particularly when one looks at Internet access as a two-sided market.  However the real world does not create a bright line dichotomy or separation of these two functions.

            Edge providers and end users can face the same potential for harm if an Internet Service Provider (“ISP”) discriminates in ways that constrain, degrade, block or otherwise meddle with a downstream traffic flow.  Both sides of the market suffer if an ISP exercises its market power: 1) the edge provider sells fewer ads, subscriptions, or product; and 2) the end user encounters a reduction in utility and value for his or her monthly broadband access subscription.

            I do not understand the possible FCC emphasis on upstream edge providers.  Perhaps the drafters seek to structure an order that resonates with the D.C. Circuit Court of Appeals examination of potential discrimination to edge providers.  But the court also endorsed the FCC’s view that retail ISPs providing the last mile delivery can operate as terminating monopolies.  Applying an emphasis on this market power in the last mile delivery, both edge providers and end users suffer when retail ISPs engage in some types of discrimination.

            It makes little sense to differentiate between edge providers and end users if both groups have similar grievances with the intermediary.

FCC Chairman Wheeler’s Open Internet Strategy Post Verizon v. FCC

            FCC Chairman Wheeler has released a statement outlining his thoughts on how the FCC lawfully can press on for open and neutral Internet access; see http://fcc.us/1c2RBzv.

             I appreciate what Chairman Wheeler has attempted to do: avoid any unlawful mission creep in light of the strong language in the Verizon decision, but also run as far as possible with Sec. 706 authority.  I do think the Commission can move forward with muscular transparency/disclosure requirements.  Just now Netflix subscribers don't know the cause of any service degradation so perhaps ISP disclosure requirements might provide some light on how frozen images came about even for subscribers to FIOS service operating at multi-megabit per second speeds.

    I do think the Chairman and the Commission will find a less than receptive D.C. Circuit should any order ignore the clear prohibition on the imposition of Title II common carrier requirements on ISPs.  I don't see much wiggle room in the no blocking, no discrimination area, nor am I as sanguine as the Chairman in terms of what deference the data roaming decision affords the FCC.  That decision emphasized the use of commercial negotiations and the limited role of the FCC and its ability to intervene. 

    One could draw a parallel between the duty to negotiate, commercially driven data roaming terms and conditions and the similar duty to negotiate retransmission consent between cable operators and local television broadcasters.  In both instances the FCC cannot act proactively and has limited powers even to resolve a protracted dispute. Unfortunately for broadband subscribers there won't be a specific "must see" television program that forces one side to capitulate, so degraded service and not so subtle abuses of last mile access may occur.

 

The D.C. Circuit Court Decision on the FCC’s Open Access Order

            The D.C. Circuit Court of Appeals has affirmed the FCC’s reading of Section 706 in the Communications Act, but also determined that the FCC could not extrapolate from that Section statutory authority to prohibit Internet Service Providers from engaging in discriminatory practices, including blocking access to specific content. See http://www.cadc.uscourts.gov/internet/opinions.nsf/3AF8B4D938CDEEA685257C6000532062/$file/11-1355-1474943.pdf.

            This is “damning with faint praise” at its finest, so much so that the author of the decision condescendingly notes that “even a federal agency is entitled to a little pride” (p. 20) when after losing the first case on network neutrality (Comcast v. FCC, 600 F.3d 642 (D.C. Cir. 2010) the Commission struggled onward to find lawful authority.  This decision offers the FCC a generally worthless victory that the Commission can lawfully find some statutory basis for jurisdiction over Internet Service Providers so long as the responsibilities imposed do not constitute common carriage. 

            The court again reminded the FCC that having classified Internet access as an information service, the Commission has no foundation whatsoever to impose common carrier duties:

even though the Commission has general authority to regulate in this arena, it may not impose requirements that contravene express statutory mandates. Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order. (p.4)

            Some network neutrality advocates had expressed hope that the court would have considered nondiscrimination and anti-blocking rules as permissible in light of a recent case that approved as non-common carriage specific interconnection requirements on wireless carriers. In Cellco Partnership v. FCC, 700 F.3d 534, 541 (D.C. Cir. 2012) the court approved the FCC requirement that wireless carriers negotiate commercial terms and conditions for data roaming, Internet access via smartphones located outside the customer’s home service territory.  The FCC treats all forms of Internet access as non-common carriage by classifying the offering as an information service.  The court affirmed the FCC, because the imposition of some duties to deal, e.g., providing data roaming, does not rise to the level of compulsory carriage, particularly because the FCC only required commercial negotiations and recognized that the duty is not mandatory if technologically infeasible, or that the terms and conditions be uniform across all instances of interconnection.

            Even with a quasi-common carrier option, the FCC cannot expressly impose non-discrimination and anti-blocking duties.  Section 706(a) of the Communications Act requires  the FCC to “encourage the deployment on a reasonable and timely basis of advanced

telecommunications capability to all Americans . . ..” Section 706(b) requires the Commission to conduct a regular inquiry “concerning the availability of advanced telecommunications capability” and if it determines that access is not available on “a reasonable and timely fashion” “to take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications market.”

            The court determined that the FCC could reasonably interpret Sec. 706 as providing statutory authority for some degree of private carrier oversight, despite the FCC having previously determined that this Section provided no such foundation when the Commission previously sought to classify ISPs as information service providers entitled to a largely deregulated status.  The court defers to the FCC and its later in time decision to consider Sec. 706(a) as providing a statutory basis for regulatory oversight: “Does the Commission’s current understanding of section 706(a) as a grant of regulatory authority represent a reasonable interpretation of an ambiguous statute? We believe it does.” (p.22)

            The court accepts the ability of the FCC to change course and even change factual determinations, as when the Commission determined that the Internet access market lacked sufficient competition having previously determined that it did. The court also does not dispute the FCC’s finding that ISPs have the ability to engage in discriminatory practices: “there appears little dispute that broadband providers have the technological ability to distinguish between and discriminate against certain types of Internet traffic,” p. 38 nor does the court dispute that the Internet access subscribers cannot or will not quickly change providers if potentially harmful discrimination actually occurs:  
For example, a broadband provider like Comcast would be unable to threaten Netflix that it would slow Netflix traffic if all Comcast subscribers would then immediately switch to a competing broadband provider. But we see no basis for questioning the Commission’s conclusion that end user are unlikely to react in this fashion. (p.39)

            However, the ability to discriminate does not automatically translate into illegal discrimination particularly when the FCC has determined that discrimination is something only common carriers cannot pursue.

            The FCC may seize upon the approval of its reliance on Sec. 706 to assert statutory authority to regulate ISPs.  However, the Commission will have little latitude and even less deference to craft quasi-common carrier duties on ISPs.  One permissible duty would require transparency and full disclosure of non-neutral service arrangements.  The Commission lawfully can require "truth in billing" by private carriers.  Perhaps the potential for consumer pushback in response to disclosed sweetheart deals with corporate affiliates and favored ventures might create a disincentive for ISPs not to go overboard. 

Mission Critical Bits and Pay to Play Net Bias

             The proliferation of video content options via the Internet raises questions about what ISPs can and should do to offer “better than best efforts” to enhance quality of service.  Is this an opportunity for “pay to play” extortion, or welcomed quality of service discrimination?  One might assert the lack of a need for service prioritization in light of the absence of network congestion, but as bandwidth intensive, video demand increases does this conclusion make sense?

            Video content often qualifies as “mission critical bits” whose delivery must arrive on time, or the streaming content freezes and evaporates.  For example, Netflix and its subscribers expect each and every link to work with sufficient switching, routing and transmission capacity to deliver packets on a timely basis.  Few Netflix subscribers would stick with the company if suddenly full motion video streams became slide shows of random frames. 

            Increasingly ISPs want to secure surcharge payments from companies like Netflix to guarantee timely packet delivery.  So on top of the double-sided market where ISPs already receive payments from end users and upstream carriers, such as Content Distribution Networks, a third revenue stream should flow further upstream from content providers like Netflix.  Is this being greedy, particularly in light of what ISPs markets to subscribers?  Bear in mind that traditionally both peering and transit agreements involved directly interconnecting carriers, not ones further upstream or downstream.

            Broadband end users expect their $50-75 monthly subscriptions to cover the cost of access without a surcharge to them and others for the privilege of accessing full motion video sites.  ISPs already have the option of charging more for high volume users.  ISPs: send “broadband hogs” fruit packets and a higher bill, not throttled service.  ISPs also tier service based on bit transmission speed.  Are they entitled to more compensation from the sources of content that motivate broadband subscriptions in the first place?

New, Old and Forgotten Frames in the Network Neutrality Debate

            One key reason for confusion about Network Neutrality lies in the many different and inconsistent frames used to shape the debate.  The Tea Party has entered the fray by characterizing the matter primarily in terms of freedom.  Republicans decry the “job killing” impact of the FCC’s rules.  Network Neutrality advocates appear ambivalent whether the FCC has capitulated to special interests, or shaped a pragmatic compromise.

            Older frames typically use hyperbole to justify government intervention or forbearance.  Network Neutrality advocates frame the matter as impacting the Internet’s openness and its ability to incubate new ventures such as Google, Netflix, Amazon and EBay.  Opponents reject the need for government safeguards based on the view that there is no problem requiring a solution.

            Everyone seems to have ignored a more basic question whether or not the Internet access market currently operates competitively.  If the market is sufficiently competitive one can vote with their dollars and change carriers if and when the carrier operates in ways subscribers do not like.  Of course there are transaction costs in making such a move, and in the wireless market carriers offer subsidized handsets to lock in subscribers for two years.  As well the matter of identifying the cause of network congestion, sluggish service or discriminatory practices presents a forensic problem.  In light of the interconnected and integrated nature of the Internet, where content and conduit converge, an end user cannot readily determine if degradation in service—however defined—is caused by the content or application provider, a long haul carrier, or the ISP providing first and last mile access to the Internet cloud.

            Still if the Internet access marketplace operates competitively, then consumers, if so inclined, can reward or punish ISPs based on the real or perceived openness.  Even in competitive markets, carriers can agree explicitly or decide unilaterally not to emphasize or market different degrees of openness.  But at least the potential exists for an ISP to identify the openness factor and target consumers who consider it a priority.  This is not happening in the Internet access marketplace either because openness, transparency and nondiscrimination are non-issues, because all ISPs are fair and neutral, or because consumers do not have the ability to identify and subscriber to an ISP promising fair and neutral service should the existing carrier explicitly or subversively operate in a non-neutral manner.

            So competition in the Internet access marketplace matters greatly and somehow this issue constitutes a “huge omission” in the debate according to the fair minded writers at The Economist.  See A tangled web, America’s new internet rules are mostly sensible—but the country’s real web problem is far more basic (Dec. 29, 2010); available at: http://www.economist.com/node/17800141.  If I had access to a competitive marketplace ISPs would have offer me something better than the one (and only one viable) option I have now:  $59.95 plus tax and fees for downloads up to 15Mbps, and  uploads up to 3Mbps, or $40.95 plus tax and fees for up to 1.5 Mbps download and uploads up to 384 Kbps.

            Just because many consumers have a choice of two broadband distribution platforms (cable and DSL) does not by definition ensure robust competition with affordable rates. The Economist dares to report the issue frame ignored by the FCC and others:

the failure in America to tackle the underlying lack of competition in the provision of internet access. In other rich countries it would not matter if some operators blocked some sites: consumers could switch to a rival provider. That is because the big telecoms firms with wires into people’s homes have to offer access to their networks on a wholesale basis, ensuring vigorous competition between dozens of providers, with lower   prices and faster connections than are available in America. Getting America’s phone and cable companies to open up their networks to others would be a lot harder for politicians than prattling on about neutrality; but it would do far more to open up the net.

New Publication--Invoking and Avoiding the First Amendment: How Internet Service Providers Leverage Their Status as Both Content Creators and Neutral Conduits

The University of Pennsylvania's  Journal of Constitutional Law (Vol. 12 No. 5 ) has published my analysis of the diverging roles of Internet Service Providers as neutral conduit and content aggregator.  Here's the abstract:

Much of the policy debate and scholarly literature on network neutrality has addressed whether the Federal Communications Commission (“FCC”) has statutory authority to require Internet Service Providers (“ISPs”) to operate in a nondiscriminatory manner.   Such analysis largely focuses on questions about jurisdiction, the scope of lawful regulation, and the balance of power between stakeholders, generally adverse to government oversight, and government agencies, apparently willing to overcome the same inclination.  The public policy debate primarily considers micro-level issues, without much consideration of broader concerns such as First Amendment values.

While professing to support marketplace resource allocation and a regulation-free Internet, the FCC has selectively imposed compulsory duties on ISPs who qualify for classification as largely unregulated information service providers.  Such regulation can tilt the competitive playing field, possibly favoring some First Amendment speakers to the detriment of others.  Yet the FCC has summarily dismissed any concerns that the Commission’s regulatory regime inhibits First Amendment protected expression.

For their part, ISPs have evidenced inconsistency in how seriously they value and exercise their First Amendment speaker rights.  Such reticence stems, in part, from the fact that ISPs combine the provision of conduits, using telecommunications transmission capacity, with content.  While not operating as regulated common carriers, the traditional classification of conduit-only providers, ISPs can avoid tort and copyright liability when they refrain from operating as speakers and editors of content.   In other instances, the same enterprise becomes an aggressive advocate for First Amendment speaker rights when selecting content, packaging it into a easily accessible and user friendly “walled garden,” and employing increasingly sophisticated information processing techniques to filter, prioritize and inspect digital packets.

Technological and marketplace convergence creates the ability and incentive for ISPs to operate as publishers, editors, content aggregators, and non-neutral conduit providers.  No single First Amendment media model (print, broadcast, cable television and telephone), or legislative definition of service (telecommunications, telecommunications service and information service) cover every ISP activity.  Despite the lack of single applicable model and the fact that ISPs provide different services, the FCC continues to apply a single, least regulated classification.  The inclination to classify everything that an ISPs does into one category promotes administrative convenience, but ignores the complex nature of ISP services and the potential for to harm individuals, groups and First Amendment values absent government oversight.  For example, the information service classification enables ISPs to engage in price and quality of service discrimination that network neutrality advocates worry will distort a free marketplace of ideas.

This paper will examine the different First Amendment rights and responsibilities borne by ISPs when they claim to operate solely as conduits and when they combine conduit and content.  The paper will show that ISPs face conflicting motivations with light FCC regulation favoring diversification into content management services, like that provided by editors and cable television operators, but with legislatively conferred exemptions from liability available when ISPs avoid managing content.  The paper concludes that current media models provide inconsistent and incomplete direction on how to consider ISPs’ joint provision of conduit and content.  The paper provides insights on how a hybrid model can address media convergence, and promote First Amendment values while imposing reasonable nondiscrimination responsibilities on ISPs.      

New Work in Progress

I have completed a draft of a paper that examines how Internet Service Providers claim First Amendment speaker rights even as they also claim to operate as neutral conduits. By claiming to operate as conduits, ISPs can secure “safe harbor” exemption from tort and copyright liability.

I argue that current media models provide inconsistent and incomplete direction on how to consider ISPs’ joint provision of conduit and content. The paper provides insights on how a hybrid model can address media convergence, and promote First Amendment values while imposing reasonable nondiscrimination responsibilities on ISPs.

Here's the abstract:

Much of the policy debate and scholarly literature on network neutrality has addressed whether the Federal Communications Commission (“FCC”) has statutory authority to require Internet Service Providers (“ISPs”) to operate in a nondiscriminatory manner. Such analysis largely focuses on questions about jurisdiction, the scope of lawful regulation, and the balance of power between stakeholders, generally adverse to government oversight, and government agencies, apparently willing to overcome the same inclination. The public policy debate primarily considers micro-level issues, without much consideration of broader concerns such as First Amendment values.

While professing to support marketplace resource allocation and a regulation-free Internet, the FCC has selectively imposed compulsory duties on ISPs who qualify for classification as largely unregulated information service providers. Such regulation can tilt the competitive playing field, possibly favoring some First Amendment speakers to the detriment of others. Yet the FCC has summarily dismissed any concerns that the Commission’s regulatory regime inhibits First Amendment protected expression.

For their part, ISPs have evidenced inconsistency in how seriously they value and exercise their First Amendment speaker rights. Such reticence stems, in part, from the fact that ISPs combine the provision of conduits, using telecommunications transmission capacity, with content. While not operating as regulated common carriers, the traditional classification of conduit-only providers, ISPs can avoid tort and copyright liability when they refrain from operating as speakers and editors of content. In other instances, the same enterprise becomes an aggressive advocate for First Amendment speaker rights when selecting content, packaging it into a easily accessible and user friendly “walled garden,” and employing increasingly sophisticated information processing techniques to filter, prioritize and inspect digital packets.

Technological and marketplace convergence creates the ability and incentive for ISPs to operate as publishers, editors, content aggregators, and non-neutral conduit providers. No single First Amendment media model (print, broadcast, cable television and telephone), or legislative definition of service (telecommunications, telecommunications service and information service) cover every ISP activity. Despite the lack of single applicable model and the fact that ISPs provide different services, the FCC continues to apply a single, least regulated classification. The inclination to classify everything that an ISPs does into one category promotes administrative convenience, but ignores the complex nature of ISP services and the potential for to harm individuals, groups and First Amendment values absent government oversight. For example, the information service classification enables ISPs to engage in price and quality of service discrimination that network neutrality advocates worry will distort a free marketplace of ideas.

This paper will examine the different First Amendment rights and responsibilities borne by ISPs when they claim to operate solely as conduits and when they combine conduit and content. The paper will show that ISPs face conflicting motivations with light FCC regulation favoring diversification into content management services, like that provided by editors and cable television operators, but with legislatively conferred exemptions from liability available when ISPs avoid managing content. The paper concludes that current media models provide inconsistent and incomplete direction on how to consider ISPs’ joint provision of conduit and content. The paper provides insights on how a hybrid model can address media convergence, and promote First Amendment values while imposing reasonable nondiscrimination responsibilities on ISPs.

You can access the paper at: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=102928, and http://works.bepress.com/robert_frieden/

What Can the FCC Do When ISPs Block or Degrade Certain Types of Traffic?

A group of pro network neutrality advocates have filed a Petition for Declaratory Ruling and Formal Complaint in response to Comcast’s furtive traffic “shaping” and “management” tactics that have the effect of blocking or degrading peer-to-peer traffic. See http://www.freepress.net/docs/fp_et_al_nn_declaratory_ruling.pdf; and http://www.freepress.net/docs/fp_pk_comcast_complaint.pdf.

The group asks the FCC to issue preliminary and permanent injunctions prohibiting Comcast from engaging in such tactics, to fine Comcast and to declare that such tactics violate the Commission’s Policy Statement that establishe network neutrality “principles” (see http://www.publicknowledge.org/pdf/FCC-05-151A1.pdf).

While I endorse the groups’ efforts, I believe the petition and complaint would achieve greater impact had the authors addressed the issue of whether and how the FCC can act in the ways the group proposes. Specifically both the group and the FCC have to examine the breadth of jurisdiction and regulatory options available to the Commission under Title I of the Communications Act.

Both the petitioners and the FCC assume that the Commission can act to enforce the network neutrality principles articulated in a three page Policy Statement that devotes two sentences to the issue:

While acknowledging that it cannot assert conventional, Title II common carrier regulation, because ISPs provide information services and not telecommunications services, the FCC stated summarily that it “has jurisdiction to impose additional regulatory obligations under its Title I ancillary jurisdiction to regulate interstate and foreign communications.” According to the Commission that translates into having “the jurisdiction necessary to ensure that providers of telecommunications for Internet access or Internet Protocol-enabled (IP-enabled) services are operated in a neutral manner.

Also noted by the petitions was a sentence in the FCC’s its order assigning the information service classification to cable modem Internet access where the Commission stated its intent “to take action to address . . . conduct” that violates network neutrality.

I fully expect opponents of the petition and complaint to state that the FCC has neither the jurisdiction nor the intent to impose on ISPs such as Comcast what opponents will frame as common carrier obligations. So the Internet Policy statement has to be interpreted as lawfully imposing responsibilities that serve the public interest without imposing common carrier responsibilities, but which cannot constitute the kind of unlawful expansion of jurisdiction Justice Scalia predicted would occur in his dissent in the Brand X case. I examine the risk of overstating the scope of Title I “ancillary jurisdiction” in What Do Pizza Delivery and Information Services Have in Common? Lessons From Recent Judicial and Regulatory Struggles with Convergence, 32 RUTGERS COMPUTER AND TECHNOLOGY LAW JOURNAL, No. 2, 247-296 (2006).

The FCC has taken great pains to create a deregulatory “safe harbor” for information services providers. The Commission has managed to shoe horn DSL, cable modems, BPL and wireless Internet access into the information services classification which the Commission considers completely separate from regulated telecommunications services. To underscore the absoluteness of this dichotomy the Commission has come up with a tenuous differential based on whether a carrier “offers” telecommunications versus “provides” telecommunications. The former falls into the common carriage telecommunications service category, while the latter qualifies for private carriage of an information service, because the Commission chooses to subordinate the telecommunications component into a minor and integrated activity.

The FCC already has invoked its Title I ancillary authority to impose a number of traditional common carrier duties on Voice over the Internet Protocol (“VoIP”) providers and courts have deferred to the agency’s expertise absent a clear statutory mandate.

But at some point the FCC may go to the Title I well too often. I suspect the FCC will have to flesh out its authority to abrogate contracts between landlords and cable operators, particularly in light of the traction gained over the years by incumbent telephone companies that interconnection regulation, such as unbundling and line sharing, “confiscates” their property. Perhaps also the FCC will have to explain why it and not the Federal Trade Commission should act on what can be deemed a consumer protection matter.

At the very least the FCC will have to do more than unilaterally and summarily state that it has jurisdiction under Title I to impose network neutrality principles. The petitioners could have helped the Commission come up with a compelling rationale.

Limited Regulatory Relief When ISPs Misbehave

Consumers and the FCC have limited recourse when an Internet Service Provider acts in a fraudulent, discriminatory or abusive manner. ISPs are not common carriers. They are classified as information service providers and do not have to comply with the regulations deriving from Title II of the Communications Act that apply to telecommunications service providers.

The FCC has a back door way to regulate ISPs, something called "ancillary jurisdiction" based on the Commission's general public interest mandate contained in Title I of the Communications Act. The FCC invoked this authority to regulate cable television as potentially harmful to the availability of "free" broadcast television. Recently the FCC has stretched its Title I authority to
impose selective re-regulation of ISPs.

However, the FCC's limited regulation of ISPs will do nothing to prevent the cable modem/DSL duopoly for abusing collective market power. Even as the FCC plays games with broadband statistics to show how advanced we are compared to other nations, the data shows that nationwide over 96% of all broadband services are supplied by two types of ventures: cable television companies typically allocating 6MHz of bandwidth and telephone companies typically expanding the copper wire local loop by 1500 kHz.

By the FCC's self-fulfilling prophesy the broadband marketplace is robustly competitive and any extortionate or draconian ISP action would trigger a mass migration of subscribers. The FCC calculates that I have 9 broadband choices in my zip code, so I should be able to "vote with my dollars." In reality I have one and only one broadband option: $60 cable modem service. I can't get DSL, cellular broadband offers dialup 60-80 kilobits per second and satellite offers slow speed broadband at double the price.

So much for marketplace self-regulation.