FCC Internet proposal

[TheBigA]

OK, so now the FCC wants to regulate the internet. We all see what a wonderful job they've done with broadcast.

http://www.washingtonpost.com/wp-dyn/content/article/2010/12/07/AR2010120706533.html?hpid=topnews&sid=ST2010120706947

What I don't get is why they feel the need to interfere in the first place. It's not like ISPs or cable companies need money. It seems to me to be regulation for the sake of regulation.

 

[Goat Rodeo Cowboy]

There are a lot of oxen with a lot of ditches to get into contributing to this political struggle. Maybe what we learn from having this Internet pricing battle will help us solve some other national issues.

We are a nation that looks with a romantic sentiment on young Abe Lincoln working all day in that little Illinois country store and checking out all the library books he could consume by fire-light at night to build his fertile mind into something that would someday save the nation!

There are those of us who worry that young Bubba Hayfroth growing up somewhere in Appalachia today could someday be the nuclear scientist-turned-diplomat who saves the world from destroying itself if we can just see to it that the educational values of high-speed internet reaches his humble dwelling... where there is yet no running water.

It looks to me like we have the same battle here over video that we have in the music business. The long established vendors of traditional (after all, the DVD is historic and established, right?) ways to distribute movies and other forms of culture are in a fight for survival with the johnny-come-lately crowd that wants to eat their lunch with what appears to be a free ride on the Internet.

Let the war-games of the K-street lobbyists begin!

 

[landtuna]

The FCC's claim to fame was that gubmint regulation of the public airwaves was necessary. OK, granted (but only if the FCC would actually do their job).

The Internet is not public domain though and is not necessarily operated in the public interest. It is a private subscriber service and, as such, does not require gubmint oversight (read: 'interference').

 

[Goat Rodeo Cowboy]

In the end, you position may be right. But your logic for getting there is a bit thin.

Operating a bank is a private business transaction business but history has demonstrated that some amount of "gubmint regulation" may be appropriate.

Mixing of chemicals together and creating drugs that heal us is something of a private business transaction but history has demonstrated that regulation may be appropriate.

How fast I drive down the street should be controlled by my business transaction with company that makes the car I choose to buy, but in our wisdom we have this crazy notion in this country that regulation of speed and other traffic details does not seem to be on the verge of being deregulated from gubmint control.

So the fact that my purchase of access to the Internet is a private business transaction between me and my ISP may not be a "get out of jail free card" when it comes to coming to terms on what should and should not be regulated by the gubmint. What branch of government should be studying the situation and proposing possible regulation is certainly a worthy debate.

 

[TheBigA]

The Internet is not public domain though and is not necessarily operated in the public interest. It is a private subscriber service and, as such, does not require gubmint oversight (read: 'interference').

They are using the use of phone lines and cable as their justification. They regulate those industries, thus they should regulate internet.

What's your response?

 

[landtuna]

GRC made some good points but the basis for the regulation he described was public safety. We can't have unlicensed drivers creating mayhem on unregulated highways (as was the case when cars were few and far between) and we can't have companies creating 'medicines' without some sort of third party testing and certification. Makes perfect sense.

But now please describe to me what "safety measures" are required to operate the Internet? It is pretty clear we already have enough laws on the books dealing with child pornography, gambling, fraud (etc.) whether on the Internet or at the local convenience store. What more is necessary?

The Internet is not a public utility and a monopoly only in some under-served areas. I cannot take my electric business across the street to another company but I am free to drop my current ISP and sign up with another at my pleasure.

A common complaint these days is the expansion of our gubmint into areas it doesn't need to be in. Here we have a business that has operated pretty much successfully without any gubmint intervention and we want to expand the gubmint into it, why?

 

[TheBigA]

The Internet is not a public utility and a monopoly only in some under-served areas.

I think the FCC is basing their involvement that the internet IS a public utility. And it's possible for there to be a public utility that is not a monopoly, as the AT&T decision proved. As I said, if they regulate phone lines, then they should regulate the internet. And in typical government fashion, there are some in the FCC that would like the internet to be free to all, and get rid of ISPs.

 

[TexasTom]

Another potential reason for FCC regulation of the Internet: lack of competition.

The typical household in the US has access to two wired high-speed ISPs (local phone and cable companies), which isn't exactly what I'd call robust competition. In the absence of vigorous competition, the temptation for the two companies to restrict Internet services that might compete against their core businesses can be pretty powerful -- ie, a cable company might want to throttle Netflix streaming videos and the phone company might want to block Skype. Well designed "net neutrality" regulations might prevent this sort of anti-competitive behavior.

Now the ideal solution would be more competition -- if the average household could choose between a half dozen ISPs instead of two, the opportunity for the competitive market to deal with these sorts of issues would be much improved. But, unfortunately, that's just not happening in the US.

 

[landtuna]

I think the FCC is basing their involvement that the internet IS a public utility. And it's possible for there to be a public utility that is not a monopoly, as the AT&T decision proved. As I said, if they regulate phone lines, then they should regulate the internet. And in typical government fashion, there are some in the FCC that would like the internet to be free to all, and get rid of ISPs.

There is no such thing as a "free" Internet. Just as there is no such thing as "free" mail or phone service. If you use it you should pay for it. That is the business model upon which this country was built and it works pretty well. As for getting rid of ISP's - they are essential to the operation of the 'net. How would a user resolve a problem with connectivity, changes in service, outages or other issues without a local entity to call?

The Internet does not run over phone lines exclusively. It is a mix of phone, cable, fiber and public and private paths. Using the phone line argument for government regulation is a real stretch.

As is the argument that the Internet is a public utility. No residential user requires the Internet. Business users, before the Internet gained widespread usage, had their own leased lines if they needed that type of communication capability. In some cases they still do given the instability and insecurity of the Internet. Businesses can not be expected to operate without phone or electric service but they could, and did, operate without the Internet and could do so again. Whether it makes sense is another discussion but it is not essential (unless, of course, your business IS the Internet).

 

[landtuna]

Another potential reason for FCC regulation of the Internet: lack of competition.

Please provide one successful example of government regulation increasing competition.

The typical household in the US has access to two wired high-speed ISPs (local phone and cable companies), which isn't exactly what I'd call robust competition.

I live in a major metro area which seems pretty typical of the nation as a whole. My options for connecting to the Internet are: Qwest (DSL), Cox (cable), a couple of satellite services and tens of dial-up. For true high-speed bandwidth connections DSL and cable are the only widespread choices currently but fiber will be coming someday. Each broadband service offers multiple connection speeds from 1.5Mbps all the way to 40Mbps - more than sufficient for any residential user and most business users. About every two years each goes through a major upgrade to increase speeds even further.

Well designed "net neutrality" regulations might prevent this sort of anti-competitive behavior.

Net neutrality is a valid point but it is possible to obtain it without the bureaucracy of yet another government agency (or sub agency). And, as not too many people in the biz are appreciative of the FCC in it's current assigned functions, how would we expect them to acquire and manage yet another major communications entity?

I personally don't want the government expanding into any new ventures. It has proven it has all it can do with the ones it already has. Let the free market manage the Internet and the legal system reign back in the occasional misdeed.

 

[TheBigA]

There is no such thing as a "free" Internet. Just as there is no such thing as "free" mail or phone service. If you use it you should pay for it.

There will be if the government mandates it. And that appears to be their goal right now.

The Internet does not run over phone lines exclusively. It is a mix of phone, cable, fiber and public and private paths. Using the phone line argument for government regulation is a real stretch.

Not really. The government regulates all of those things. And they tax a lot of it. One of the big issues is buying products on the internet and not saying sales tax. That costs states billions of dollars in lost revenue.

You're not arguing with me here...you're arguing with the government. And from what I've seen, they have a plan that's already in motion. So if you don't like it, let your reps know.

 

[landtuna]

There will be if the government mandates it. And that appears to be their goal right now.

What I meant, of course, is that someone (all taxpayers most likely) will pay for the "free" internet.

One of the big issues is buying products on the internet and not saying sales tax. That costs states billions of dollars in lost revenue.

Are we still talking about Internet regulation? Sales taxes are functions of state and local governments, not federal. Separate issue entirely.

 

[TexasTom]

Please provide one successful example of government regulation increasing competition.

For Internet and phone service, rules requiring that owners of the infrastructure lease out the lines to competitors have been pretty successful at increasing competition where it's been tried -- which is to say, most of Europe. A friend in Italy has a choice of a half dozen high speed Internet/phone packages at his apartment. The service he picked is for 7 mbps Internet service plus unlimited phone calls throughout Italy (and discounted calls to North America at 20 cents/call), for which he pays 45 euros ($60 US) per month. The competition that allowed him to choose that level of service at that price exists because the Italian government is willing to impose access requirements on the incumbent companies that own those wired lines. I'd call this a pretty successful example of government regulation increasing competition -- but since it's in Europe, I suspect that a bunch of people will dismiss it, since too many Americans think that we have nothing to learn from other countries.

So going back further in time, does anyone else remember when making a long distance call meant using AT&T -- and that was the only option? The reason that changed was because government regulation forced the local phone companies to open up access to their lines for all long distance providers. Long distance phone rates subsequently plummeted. I'd call that a pretty successful example -- in the US -- of increasing competition through government regulation.

For that matter, the ABC TV network only exists because of government intervention that forced RCA to sell off one of it's radio networks in the forties. And Fox would never have been able to start if it weren't for another government regulation -- the all channel act -- that made UHF television a viable business.

More recent examples are hard to find domestically, since we've pretty much moved away from an attitude that the government should intervene in much of anything.

I live in a major metro area which seems pretty typical of the nation as a whole. My options for connecting to the Internet are: Qwest (DSL), Cox (cable), a couple of satellite services and tens of dial-up. For true high-speed bandwidth connections DSL and cable are the only widespread choices currently but fiber will be coming someday. Each broadband service offers multiple connection speeds from 1.5Mbps all the way to 40Mbps - more than sufficient for any residential user and most business users. About every two years each goes through a major upgrade to increase speeds even further.

Your example pretty much confirms what I wrote, which is that most areas have two high speed wired choices. Dial up isn't high speed by any definition that is more recent than about 10 years ago...and satellite just can't compete on either speed or cost. So my statement stands -- and the problem is that two companies just isn't sufficient for the sort of robust competition that promotes market based solutions. And absent government regulation, we're not going to see that situation change.

 

[landtuna]

Please provide one successful example of government regulation increasing competition.

For Internet and phone service, rules requiring that owners of the infrastructure lease out the lines to competitors have been pretty successful at increasing competition where it's been tried -- which is to say, most of Europe. A friend in Italy has a choice of a half dozen high speed Internet/phone packages at his apartment. The service he picked is for 7 mbps Internet service plus unlimited phone calls throughout Italy (and discounted calls to North America at 20 cents/call), for which he pays 45 euros ($60 US) per month. The competition that allowed him to choose that level of service at that price exists because the Italian government is willing to impose access requirements on the incumbent companies that own those wired lines. I'd call this a pretty successful example of government regulation increasing competition -- but since it's in Europe, I suspect that a bunch of people will dismiss it, since too many Americans think that we have nothing to learn from other countries.

I was thinking more inside the USA as our business climate and geography are different than most European countries, and even Asia for that matter.

So going back further in time, does anyone else remember when making a long distance call meant using AT&T -- and that was the only option? The reason that changed was because government regulation forced the local phone companies to open up access to their lines for all long distance providers. Long distance phone rates subsequently plummeted. I'd call that a pretty successful example -- in the US -- of increasing competition through government regulation.

I seem to remember that the "opening up" was directed more at AT&T more than the Baby Bells but their breakup also contributed to increased availability for other providers. Good example.

For that matter, the ABC TV network only exists because of government intervention that forced RCA to sell off one of it's radio networks in the forties. And Fox would never have been able to start if it weren't for another government regulation -- the all channel act -- that made UHF television a viable business.

The All Channels Act (1961) was issued a generation prior to Fox creating the so-called fourth network and there were many UHF stations operating by that time. I don't think these two events had anything to do with each other.

As for the ABC/RCA thing, I've always understood that one of the original NBC radio networks (Red or Blue) was sold off to create ABC radio and didn't have anything directly to do with the ABC TV network. In any case the breakup of the RCA services was due more to their "monopoly" status than the desire of the FCC to create more competition.

Your example pretty much confirms what I wrote, which is that most areas have two high speed wired choices. Dial up isn't high speed by any definition that is more recent than about 10 years ago...and satellite just can't compete on either speed or cost. So my statement stands -- and the problem is that two companies just isn't sufficient for the sort of robust competition that promotes market based solutions. And absent government regulation, we're not going to see that situation change.

You are partially correct but missing an important point. Local governments are almost always responsible for the granting of franchises to operate within their boundaries. Hence, most communities have only one cable service (since cable requires use of shared utility infrastructure and additional infrastructure). And since there is usually only one terrestrial phone system DSL co-exists on the same physical plant. The federal government is almost never involved directly in the establishment of local Internet capability.

The limiting factor today seems to more related to the cost of providing a competing service (and the profits to be gained) than government regulation. In addition, the upgrading of existing cable and DSL facilities seem to be providing more than enough bandwidth for existing requirements. The increased of the Internet for entertainment purposes (video services mainly) may create new opportunities for additional companies.

 

[Goat Rodeo Cowboy]

I seem to remember that the "opening up" was directed more at AT&T more than the Baby Bells but their breakup also contributed to increased availability for other providers. Good example.

You have painted a good picture of telephone history, particularly for our younger friends who did not live through that era.

I must offer a slightly different view of what you said in what I quoted above. AT&T and the Baby Bells were all one BIG FAMILY. The most invasive part of the anti-trust Federal action was to force AT&T to sell their regional operation local-service companies which would later be dubbed by the public as "The Baby Bells".

But before the Federal Anti-trust action, there was a ground changing court decision which I believe is referred to as "The Carter-phone Case". My foggy memory is that Carter was in the business of providing two-radio radios to business. Plumbers trucks, sales people, etc. Carter cobbled together a system where his customers could call in on a land-line through the phone company and he would connect you to the two-way radio in someones vehicle. The phone company told him to stop it, that they had exclusive rights to any equipment connected to the phone network. When Carter won his case, we began to see third-party companies selling PBX switch-boards, telephone answering machines, and customer owned home phone extensions.

I have very mixed emotions about this history. I love what it has done to long-distance rates. Back in the 1990 Bill Gates wrote a book which I read and did not fully comprehend at the time, but he abruptly changed the course at Microsoft. What he was trying to say was that the cost of interconnection (including distant locations) was approaching ZERO cost, thus how we compute and how we communicate would change radically. We all love this communications "buffet" where the price of the meal is fixed, no matter how much you eat.

What I dislike about all the changes in "the telephone" is the cheap, useless, poor performing CRAP that I now buy to connect to my land line. Since very few consumers can tell the difference between CAST IRON and CHEAP CRAP, and even fewer consumers are willing to pay for better quality, we are all stuck buying Yugos for telephone service. Retailers do not offer a Buick or Lexus or Audi level of telephone equipment.

I am not a pessimist on the whole, but I do not have high hopes for what is coming our way in the future when it comes to Internet service. We may all be getting our e-mail and information and entertainment via the Yugo/Nash Rambler ISP Corp.

 

[TexasTom]

I was thinking more inside the USA as our business climate and geography are different than most European countries, and even Asia for that matter.

Not different enough to render the comparison irrelevant -- if you're comparing service within urban areas. While it is often pointed out that the population density in the US is far lower than in Western Europe, this neglects to take into account that the majority of the US population do live in areas with high population densities -- a lot more people live in places like the Dallas metro area than live in low density rural areas. So I'll stand by the comparison.

The All Channels Act (1961) was issued a generation prior to Fox creating the so-called fourth network and there were many UHF stations operating by that time. I don't think these two events had anything to do with each other.

As for the ABC/RCA thing, I've always understood that one of the original NBC radio networks (Red or Blue) was sold off to create ABC radio and didn't have anything directly to do with the ABC TV network. In any case the breakup of the RCA services was due more to their "monopoly" status than the desire of the FCC to create more competition.

I disagree on both counts. The All Channel Act produced the environment that allowed a whole bunch of new UHF independent stations to go on the air in the seventies and early eighties – and without those independent stations, the Fox network would have been a very small network indeed. Even as late as the mid-seventies, somewhere around 30 markets had four or more commercial TV stations.

And regarding ABC – the fact is that the FCC forced RCA to spin off one of its radio networks, and the spun off network became ABC. The ABC radio network, in turned, spawned the ABC TV network, so without that FCC ruling, ABC would never have existed as either a radio or TV network.

As a side note, the ABC TV network received a substantial cash infusion in the fifties from the Paramount Theater chain – and that the theater chain existed as a separate entity that chose to invest in ABC was the case because the Justice Department had forced the movie studios to spin off their movie theater chains. So not only did ABC exist because of one government action, but it received funding in the fifties from a company that existed because of another government action.

 

[FreddyE1977]

Yesterday a group of 35 incoming Republican House members sent a letter to Genachowski voicing their strong opposition.

If he goes ahead and does this he should expect to spend the next 2 yrs. of his life giving testimony in front of House committee hearings, and to have a very difficult time getting FCC appropriations bills passed.

Let the game of chicken begin!

 

[w9wi]

The All Channels Act (1961) was issued a generation prior to Fox creating the so-called fourth network and there were many UHF stations operating by that time. I don't think these two events had anything to do with each other.

The number of operating UHF stations peaked in 1954 at 122 stations, then dipped as stations found it financially impossible to continue. The 122 figure wasn't reached again until 1965 -- after the All Channel Receiver Act kicked in & got a reasonable number of UHF receivers into viewers' hands.

The 1961 Broadcasting Yearbook lists only eight independent UHF stations. I am nearly certain two of them are typos. (actually had network affiliations)

Whether any of that has anything to do with Fox - probably not. But I don't think it's unreasonable to believe the All Channel Receiver Act was a necessary prerequisite to the presence of enough independent TV stations to make a fourth network eventually possible.

_________________________________________________

Is there really any significant difference between government and a single private provider? Where I live, I have a single choice of broadband providers. (Charter. DSL and uVerse are not available here.) That provider has absolute control over what sites I may access for streaming video, for movie downloads, for online radio. If Charter decides they don't like Fox News, they have the ability to prevent me from watching either on TV or online. I find that difficult to distinguish from government regulation establishing the same prohibitions.

The limiting factor today seems to more related to the cost of providing a competing service (and the profits to be gained) than government regulation.

I think this may be the important statement. Competing systems are generally permissible - the ability of local governments to issue exclusive franchises is essentially gone.

There are several reasons franchises were issued in the first place:

1. To ensure entrants have enough potential customer base to pay for the cost of building and maintaining infrastructure. Charter doesn't seem to be having much trouble making a profit on 100% of the broadband market here. They could probably still make a profit on 50%. I strongly suspect if they had to compete with 10-15 other broadband providers, they'd find it impossible to make any money -- and probably wouldn't bother making the investment.

2. To ensure universal availability of service. If you're building a new telephone service, where are you going to start? Probably, the densely populated rich neighborhoods where everyone can & will subscribe and the construction and maintenance expenses are low. The poor neighborhoods -- and the sparsely populated areas with few subscribers per mile -- will see service last, if at all. The franchising process requires a company to serve high-cost areas if they wish to have access to high-profitability areas.

3. To limit redundant infrastructure to reasonable levels. Ever see a photo of a major city around the turn of the century? HUGE utility poles with dozens of wires. Multiple competitive telephone and electric companies, each running their own wires. For better or worse, most Americans don't want to see that in their cities, or suburbs, today. Yes, you could require the lines be buried (though that's government regulation again) but then you'd be watching various utilities digging up the road/adjacent properties almost continuously.

_________________________________________________

I'm really primarily concerned with network neutrality. Much of the benefit of the Internet is in the ability for just about anyone to provide content and make that content available worldwide. I see little difference between the U.S. Government requiring an (expensive) license to broadcast - vs. Charter requiring an (expensive) non-throttling agreement to post a website.

Nobody is proposing to tell ISPs they can't limit usage of their networks to levels the infrastructure can handle. What neutrality proposes is to require such limits be non-discriminatory. There are two reasons for the battle:

1. ISPs that also have a cable TV business want to discourage customers from dropping their TV packages (or switching to a less-expensive tier) and viewing their TV online.
2. More customers are likely to be aware of content-neutral bandwidth limitations - it will be easier for competitors with looser restrictions to compete.

 

[TheBigA]

Pretty good article on the FCC's internet plan from the Washington Post:

http://www.washingtonpost.com/wp-dyn/content/article/2010/12/17/AR2010121703792.html?hpid=topnews

 

[TheBigA]

Wow...this proposal is going to open a hornet's nest. Al Franken is comparing limits on access to certain applications to censoring political speech. That's a huge jump in simple logic. Unless those applications relate directly to politics, the point is moot. In any case, whatever the FCC says, this will be going to the courts.