Ben Scott Speaks at Stanford
April 17th, 2008 by caaronAmong those testifying at today’s FCC hearing will be Ben Scott, policy director of Free Press. Here’s a sneak preview of his prepared remarks:
This hearing is a pivotal moment in the short history of Internet policymaking.
There are two competing visions for the future of the Internet — open versus closed. Will we embrace the openness that has shaped the Internet to the present day? Or will we permit network owners to move to the closed systems of content control we have had with cable television and broadcasting?
It is not hyperbole to say that few choices in the history of the FCC carry as much weight as this one does.
Let’s be clear: Openness does not mean an end to all network management. It does not mean every bit should be treated exactly alike on the Internet. Openness does not stop us from protecting children or copyright or security on the Internet.
Openness simply means that Internet policy should promote free speech and commerce in the online marketplace. Openness means faithfully guarding against interference from the cable and telephone companies who have the power to become gatekeepers between consumers and producers of Internet content.
The Comcast case is a bellwether that will guide our communications system for a generation. That is why it has been the focus of so much money, influence and attention. It is not ordinary.
The Commission adopted its 2005 Policy Statement to stand in place of long-established and successful nondiscrimination provisions in the Communications Act. Many of us feared then that handing over the legacy of an open communications systems that has served us so well to such a weak guardian was a dangerous business. Today we are testing the mettle of that guardian.
This history of deregulation has led us to a bright red line of basic consumer protection — beyond which we should not stray. We see the clash between open vs. closed most famously in the Net Neutrality debate — but it is also in merger proceedings, spectrum auctions, wireless policy, white spaces, text messaging — and now, network management. I’m pleased to point out that several key decisions have leaned toward openness, rather than against it. Throughout, the network owners have asserted their right to create a closed Internet.
So what plot line in this story brings us to Stanford? Was it Silicon Valley finally organizing its corporate might to challenge the telephone and cable companies in a battle of the titans?
Nope. It was a barber shop quartet. Robb Topolski began the testing that ultimately exposed Comcast’s interference with peer-to-peer software because he couldn’t share with his friends his favorite recordings of early 20th century barber shop tunes. Comcast first denied blocking, then acknowledged it, then directly challenged the legitimacy of the Policy Statement, and finally reversed itself and promised to stop in the future.
Robb has proven why this debate isn’t about Google, AT&T or Comcast. It’s about every consumer wanting to seek or share information on the Internet.
But few of us are even capable of doing what Robb did. Fewer still will witness their personal conflict with the cable company become first tier business for a federal agency. Yet the pressure of public scrutiny and regulatory oversight was highly effective — triggering industry collaboration previously deemed impossible. But that doesn’t mean the FCC can pack up and go home.
A cursory glance at the record makes that clear. The response has been extraordinary precisely because it is a bellwether, a one-off chance to pass or fail a signal test. The side deals and announcements of self-regulation are not the magic of the market at work. It is the magical threat of regulatory intervention.
If the agency doesn’t act decisively, it will not have sent the correct signals to the market. Violations are almost certain to recur when the dust settles.
From a consumer perspective, Net Neutrality, or openness on the Internet, is a user experience. That’s what is at risk here. In turn, that user experience depends on preserving the seedbed for emerging technologies, new ideas and the latest invention. The test case of Comcast-BitTorrent will shape the future of investment in innovation.
It will determine whether entrepreneurs choose to introduce their ideas in our markets or others. It will determine whether consumers get access to the new services, devices and content that this environment breeds — or whether they will never have a chance to exist. These are the stakes of this debate.
Finally, I would be remiss if I did not extend the olive branch to the cable industry. In my view, cable Internet service providers have a legitimate issue with network congestion — in part because they have not yet upgraded their networks for the future of broadband. It will only get worse if we do not acknowledge and address it.
There are many other legitimate ways for network providers to handle capacity problems together with consumers and innovators. Application blocking simply isn’t one of them. Meanwhile, consumers pay for all-you-can-eat broadband that is too limited and a specific menu of cable TV that is too broad. As consumer demand for bandwidth increases, the cable industry will shift capacity to high-speed Internet services.
Consumers are relying on the Commission to set a baseline standard to protect openness on the Internet. A duopoly market of access providers will not discipline itself. Nor can we expect that fans of barber shop quartets will always be the white knights that ride to the rescue. This is a clear moment for the FCC to act. The future of the Internet for everyone depends on it.
For more information, visit www.savetheinternet.com/=stanford
April 18th, 2008 at 8:59 am
A SERIOUS ERROR OF DEFINING NETWORK CONGESTION AS AN ECONOMIC EXTERNALITY IN THE FCC STANFORD HEARING
George S. Ford of the Phoenix Center asserted in effect, that as an externality, network congestion is caused among crowded customers and their overuse of underpriced bandwidth. From this he concludes that the alleviation of congestion by a broadband provider generates economic benefit via the elimination of the externality, a cost on all customers, and further that the provider has no particular strategic incentive to exploit conditions of congestion since externality reduction by definition benefits customers rather than the company.
He has it backwards. In this case, congestion is exactly a strategic phenomena between the company and its customers, and does not reflect typical conditions of congestion among only customers like traffic jams or overcrowded free public parks.
Is bandwidth underpriced and if so, how would it create such an externality?
When Comcast markets bandwidth, it does intentionally underprice it by virture of overstating its availability with an “up to” maximum but no “at least” minimum. In theory, as long as customers don’t experience chronic congestion or blocking, they could still get what they pay for, no matter how large the difference between potential and actual bandwidth use. For Comcast, it’s an economic incentive to minimize cost and maximize revenue and profit by loading up the system with these customers as close to the point of congestion as it can get without going past it.
Here’s where Ford’s “externality” backfires. Once congestion occurs, bandwidth is effectively overpriced in the sense that the service is degraded at a lower quality level for the same price paid. But Ford and others insist the opposite, that from a falsely characterized “all you can eat” pricing model, bandwidth is underpriced at zero for the marginal GB consumed in peak, which therefore is posed to drive aggregate consumption past the point of congestion.
This is a Catch-22 pricing model. Service X is sold for price Y available for Z use between zero and a maxmum, for which the provider can restrict use down to zero if necessary to control congestion. There’s no externality here. Service X has a price for any range of Z use between zero and a maximum. That’s the TOS.
The use of service X may or may not contribute to congestion in the aggregate. If it doesn’t, it’s not called an “externality”, and if it does, it is. How much use of X above zero Z use causes congestion? … It’s a mystery … Comcast will let you know, and when it does, opponents of net neutrality like Ford will chime in and call it an externality.
As long as the provider maintains enough network bandwidth capacity to avoid congestion, it can claim the bandwidth was not “oversold” or “underpriced” from the perspective of an individual customer who is never blocked or experiences congestion. But once congestion occurs, it is characterized mistakenly as an “externality” by Ford and others when in fact, it’s a forced degradation of service by virtue of an intentional undersupply of bandwidth maintained by a combination of underinvestment coupled with discriminatory restrictions on its use.
How would net neutrality solve this problem? At one level it would require transparency and at another level, it would require all sources of congestion to be treated equally via pricing, non-price rationing and TOS, like it is in genuinely competitive markets without externalities.