Minutes of the 13 Sept Meeting: Deconstructing Net Neutrality

About 12 people attended tonight’s meeting. Josh Zapin facilitated and Jeremy Kohler recorded the minutes.

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MEETING SPONSORS

Applied Trust (www.appliedtrust.com) provides refreshments, Copy Diva (www.copydiva.com) provides the audio-visual equipment, NCAR (www.ncar.ucar.edu) provides the facility, ONEWARE (www.oneware.com) sponsors the podcast, and ReturnPath (www.returnpath.net) sponsors the minutes.

Thanks also to Brian at covervillemedia.com for creating the podcast.

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ANNOUNCEMENTS

Chris Chalack at Bolder Professional Placements in Broomfield has lots of positions open.

There will be a Net Neutrality conference on November 18–see Digiworld 2011 for details.

The next RMIUG meeting will cover patent trolls. Please forward speaker suggestions to Josh Zapin.

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INTRODUCTION (JOSH ZAPIN)

Net neutrality is about giving everybody unfettered access to on-line information. But from an ISP’s point of view, this can bankrupt them if the rules prevent ISPs from charging on a usage basis. Complicating this is the consolidation of telecom/cable/ISP companies under one roof, with very little competition. These companies can promote their own services by degrading others. Consider the Comcast customer—like me–who uses Netfilx instead of Comcast TV. Sometimes I wonder if Comcast is intentionally degrading my Netflix performance so that I’ll consider getting Comcast TV instead.

 

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ABOUT THE SPEAKER

Cindy Schonhaut (cindy@schonhaut.com) is an experienced and well-known attorney who has practiced extensively in the areas of telecommunications and Internet law on national, state, and local levels including prominent positions with Level 3 Communications, ICG Communications, and MFS Communications. She served as a key lobbyist for competitive telecommunications network and service providers, as well as for VOIP providers. She was called to testify before the U.S. House of Representatives on telecommunications and Internet access issues and has appeared before many state and federal legislative and regulatory agencies on behalf of competitive interests. Prior to her private-sector experience, Ms. Schonhaut was an attorney with the Federal Communications Commission, during which time she served as legal advisor to Commissioner Andrew C. Barrett, an appointee of President George H.W. Bush. Ms. Schonhaut is an honors graduate of the University of Miami School of Law, where she served as an editor of the Law Review, and also has a degree in social work from Syracuse University.

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CINDY SCHONHAUT

Everyone seems to be in favor of net neutrality, but the concept has no definition. Since 1934, law requires "universal service," meaning I can call anyone, and anyone can call me. So politicians are always for universal service. It's the same with net neutrality: everybody says they are for it. But if you look at the rules, is it really open and fair? People refer to this issue as Open Internet, Internet Freedom, or National Broadband Plan. Sometimes they refer to ISPs as IAPs. The language is quite variable.

Important players include the White House, the Federal Trade Commission, the Department of Justice (when they review mergers), and the Federal Communications Commission (FCC), which is the most important. The FCC has five members, and important decisions tend to come out 3 to 2 along party lines.

In Congress, John Kerry and John McCain are big on this issue.

The courts have the final say. The last time the telecom act was rewritten was in 1996 when the Internet was quite primitive. Revisions are long overdue.

The National Broadband Plan addresses the main principles: Innovation, Investment, Competition, Consumer Choice, Technological Neutrality, Economic Growth, Jobs, and Global Competitiveness. Innovation and investment are supposed to facilitate competition. Consumer choice picks the winners and losers, in theory.

Services:
“Fixed wired” is traditional “cable and telephony” plus some satellite. The fixed wired service has access to your house (known as the “last mile” of access), and everyone else wants to hop on and get a piece of that access.

“Fixed wireless” is satellite and some rural terrestrial wireless systems.

“Mobile wireless” is the big one. 61% of mobile wireless is provided by AT&T and Verizon. Despite their competition with each other, they are together in opposing recent net neutrality rulings by the FCC.

Stakeholders according to the FCC include practically anyone, such as the Conference of Catholic Bishops, which are lobbying this. More obvious stakeholders include technology players like Google, Amazon, Skype, Dish/Sling. Stakeholders naturally include broadband providers, which are the cable and telephone companies.

There are also important resellers, satellite providers, and noncommercial users like libraries and schools. Politically, no one is going to say that libraries and schools shouldn't have broadband access.

Data roaming for mobile is very important, and the FCC recently required it.

The earliest policies from the FCC came in 2005 (which was way too late), and then “neutrality” came in December 2010. That decisaion will actually become effective later this year (the actucal date is not even certain). The vote was three democrats to two republicans in favor. Then in April 2011, by the same 3 to 2 vote, the FCC adopted   the data roaming order. AT&T and Verizon were against it and are now trying to reverse it. Data roaming levels the playing field for smaller competitors–the big guys have to offer roaming under “commercially reasonable” conditions. The idea is consumers have access to all data services on mobile devices anywhere in the country.

Before this, AT&T prevented Slingbox from getting roaming for six years after AT&T started using 3G.

Data roaming also helps rural carriers. They want to be able to hook into the big guys.

Regulatory lag–the long time it takes to get the rules updated–is very sad. In fact it’s completely nuts.

Net neutrality rules imposed by the FCC ruling:

1. Transparency and Disclosure
Consumers were not given any information about security, traffic management, privacy, etc. Pricing is the biggest concern. Also performance. This information has to be available to consumers now. This is a really big deal–a huge change. Verizon and Google want to exempt wireless from disclosure.

2. No Blocking of Lawful Content. For mobile, you can't block competing things like VOIP or video telephony. You also can’t block the devices that provide it.

3. No Unreasonable Discrimination: You can't favor your stuff over that of competitors. Usage-based pricing might be ok (this is under case-by-case review). For heavy users, they may have to pay more to their ISPs. But “paid prioritization” is likely to be unreasonable. That's where you pay the service provider to make your content more accessible.

LOOPHOLE: "Specialized Services" that are not traditional data services may not be subject to all these rules. The danger is that everyone might decide that what they offer is a “specialized” service.

There's going to be a lot of fighting over these rules in the next several years, and they may be settled by the courts.

There is a history of the FCC allowing broadband providers to screw the consumer. On the other hand, the broadband providers do have legitimate interests to protect, and they want the ability to make a reasonable profit.

Q&A

Q: I don't think the short-term desires of corporations and the longer-term regulations serve me well. On the other hand, elsewhere in the world net neutrality is a much bigger problem (like in Libya, etc).

A: The White House does care about broadband deployment to catch up with other countries.

Q: I think it's about competition over the “last mile.” For me, it’s either Qwest or Comcast, who own the pipes to my house. Either you’re on the last mile or you find some way to eliminate the need for the pipe.

A: The answer to the last mile has got to be wireless for the typical consumer. That can give you the last mile competitor.

Q: What about publicly owned–could a municipality, for example, foot the bill for infrastructure and make the area more attractive to live and work in?

A: There are municipal utilities, electric coops, etc, but that’s taxpayer money to do this and people won’t vote for it. I think it can be done commercially. Imagine if mobile phone connections could instantly switch over to satellite when the connection grows weak? I’d pay a bit extra for that, but of course the infrastructure is expensive.

Q: We have a duopoly—Century Link and Comcast–that isn't really competition. I think the FCC should begin to regulate these companies like they did the telephone companies in the old days.

A: The republicans would block anything like that. A: Bills of that sort have been introduced that never went anywhere. The courts will likely rule on this instead. It's all political, and that's disturbing. It is a regulated market with limitations.

Q: But it's not regulated enough.

A: Two of the democrats on the FCC said the rules they voted for don't go far enough.

Q: Pricing: Discrimination could be a benefit to society when done correctly–like volume discounts that provide economy of scale.

A: Yes, that's the key: it’s a question of whether the discrimination is considered “unreasonable.” There are resellers that buy minutes in volume and resell to make a small profit.

Q: Regarding AT&T and T-Mobile merger: What if Apple bought Sprint? This would be interesting because that could create vertical integration of a good data service with good devices.

A: That does simplify things for the consumer, and that idea is a big deal to AT&T and Verizon.
AT&T competes on network. T-Mobile competes on price. If they merge, the price competition goes away.

Q: Antitrust laws are pretty clear about that kind of thing.

A: The blocking of this merger is exciting, because not a lot of mergers have been blocked in the past.

Q: What about data roaming?

A: It won't be free, but it will be fairly priced. We have it now with voice, and that’s the model. The question is how should wired and wireless be treated differently?

 

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