How Clever is That?—More Thoughts on the Google-Verizon Deal

As I reflect on the Google-Verizon “Legislative Framework Proposal” I increasingly marvel at its cleverness. First consider the title. As legislation, much less a bill, appears quite unlikely for the foreseeable future, Google and Verizon actually have targeted the FCC. Of course if the ventures had gone by the book they would have petitioned the FCC for rulemaking and the Commission would have invited comments from interested parties with an eye toward generating a complete evidentiary record. That won’t happen in this case.

Others have noted that the managed services exception creates a gaping loophole. When I wrote about allowing ISPs to offer “better than best efforts routing,” I considered ad hoc, special events, such college basketball tournaments, not a bifurcated Internet. Additionally I specified that ISPs should not so partition their networks—even if it is their property—in such a way as to guarantee that “best efforts” regularly results in dropped packets and degraded service. The deal exempts “additional or differentiated services” “distinguishable in scope and purpose from broadband Internet access service.” With that kind of definition we can expect disagreements. Consider how stakeholders manipulate words like “robust competition.”

The proposal contains the following language that appears to differentiate between oversee and regulate. The FCC “would have exclusive authority to oversee broadband Internet access service,” but “[r]egulatory authorities would not be permitted to regulate broadband Internet access service.” Are Google and Verizon trying to make a metaphysical distinction between regulation with a direct statutory link and stakeholder consent to oversight? Or does the deal have a missing first word in the second sentence: State?

The Good, the Bad and the Ugly in the Google-Verizon Legislative Framework

Google and Verizon have developed a “Proposal” on Internet access which I am sure they expect to serve as a template, starting point and frame of reference going forward. See Google-Vz Deal. In light of the FCC’s judicial reversal in the Comcast case, the absence of substantive progress at the FCC and the unlikelihood of congressional action, two major stakeholder can and have taken the lead.
It should come as no surprise that Verizon and Google have emphasized and begrudgingly compromised on their corporate interests. Any support for an “open Internet” and consumer protection is subordinate, or the product of serendipity.

The Good.

The proposal embraces three of the four Internet policies briefly articulated by the FCC in 2005. They pass on endorsing competition, but at least indirectly now agree that the 1968 Carterfone policy applies to the Internet, wired and wireless. Additionally, they support non-discrimination, albeit not applicable to wireless and conditioned by the ambiguous modifier “undue.” Google and Verizon accept exclusive FCC jurisdiction to oversee broadband Internet access service along with hefty fines for violations. The companies wisely exempt software applications, content or services from FCC jurisdiction.

The Bad.

Google apparently caved on applying the conditional non-discrimination policy to wireless, an increasingly important broadband medium. The rationale for exempting wireless does not pass the smell test: “the unique technical and operational characteristics of wireless networks, and the competitive and still-developing nature of wireless broadband.” The technical and operational aspects of wireless strongly necessitate the non-discrimination requirement. Spectrum scarcity, ISPs’ incentive and ability to discriminate in favor of corporate affiliates or favored third parties, deep packet inspection, traffic throttling, and the ability of ISPs to obscure discriminatory practices necessitate FCC scrutiny of discriminatory and anticompetitive practices. Wireless carriers in the U.S. operate in a mature market with near saturation in voice market. The top four carriers control over 92% of the market and the top two with over 60% share (Verizon and AT&T) are vertically integrated and have substantial wireline broadband market power. This is hardly an infant industry in need of government nurturing.

Increasingly consumers will use wireless broadband as their preferred medium for Internet access. I have parted with network neutrality advocates by supporting some types of price and Quality of Service discrimination, including “better than best efforts” routing. However, abandoning scrutiny of discriminatory practices all but guarantees that ISPs will migrate from controversial, but lawful practices, into the realm of what Comcast did and beyond.

The Ugly.

A vacuum of leadership, initiative and follow through has provided Google and Verizon with this opportunity to help shape the agenda and frame the issues. The FCC has a history of deferring to industry to compromise and reach consensus. In old school telephony, the major interconnection and revenue sharing arrangements for decades occurred when the National Association of Regulatory Utility Commissions decided it was time. The NARUC-managed deals took the name of the location where the association members met, e.g., The Ozark Plan. So there is a history of stakeholders making the deal.

Still I feel as though the “fix is in” when major stakeholders can cut a deal and move on to the main goal of “enhancing shareholder value.” I would like to see the addition of “in a socially responsible manner,” but that may be too much to expect even from “do no evil” Google.

The State of Telecom Policy Discourse in Washington

This week I accepted an invitation of Educause to appear on a panel discussing network neutrality. See http://www.educause.edu/about. As in my writing I try to offer an unbiased perspective that can see both sides particularly in light of the fact that I avoid financial sponsorship of my academic work.

Scott Cleland, a paid network neutrality opponent and agent provocateur attended and had particularly obnoxious and inappropriate comments about my presentation. See http://www.precursorblog.com/node/397. In a nutshell Scott could not come up with anything substantively incorrect about my presentation so he dissed it by writing that he could not understand it and that it offered nothing substantive.

I soon will post the presentation on my web site at:http://www.personal.psu.edu/faculty/r/m/rmf5/. Additionally I wrote Scott the following:

Hello Scott:You are sorely mistaken if you think I am an "ardent" supporter of net neutrality.As a matter of fact you know damn well I expressed clear support for most types of price and service discrimination and that my point of view does not jibe 100% with the net neutrality folks. Did you not hear me characterize the save the net folks as viewing change as "curtains for the free world."?

I know it does not make good copy to give me some credit for a fair and balanced perspective, but that is exactly what I offer as an unsponsored and unbiased observer.It is both unfair and obnoxious to deem my presentation and thoughtful commentary on network neutrality as nothing you can understand. Why not review the presentation and paper substantively and in the true spirit of peer review get back to me on areas with which you have a problem. I will need your email address to send you the presentation, but in the event I never hear from you I'll attach it here in any event.

Two papers I have written on the subject that quite frankly lies midway between Mssrs. Wu and Yoo are available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=893649 andhttp://www.personal.psu.edu/faculty/r/m/rmf5/Internet3.htm.

So here's the state of play in D.C.: hire a junkyard dog to spew vitriol and personal attacks. Is there any wonder why the level of discourse and analysis is so low? I take time out to prepare a fair and balanced point of view that Scott from his bully pulpit deems as echoing the collective brilliance and moral superiority of the panel. Ouch. I like to come across as self-effacing.