Regulating the Internet?

The New York Times recently published an editorial opining that the Federal Communications Commission should reclassify broadband Internet service, from a U.S. regulatory point of view, as a communications service (rather than an information service, as it’s classified now). That will give the FCC more authority to regulate broadband providers.

The Times acknowledges that such a redefinition “would surely unleash a torrent of lawsuits by broadband providers,” and presaging that is a letter to the editor from Verizon’s Chief Communications Officer, Peter Thonis. Mr Thonis says that “the Internet and consumers have thrived” and that “interconnectivity occurred seamlessly”. He concludes:

To predict that “the odds of a rational debate” on Internet policies are “slim” ignores history. There have been scores of smart conferences. And in February, hundreds of detailed public comments were submitted to the F.C.C., including a filing by Verizon and Google.

Another letter writer, Brent Wilkes, claims that net neutrality regulation “could shield the companies that make billions in profits from the Internet” from investing in broadband infrastructure, shifting the costs “exclusively — 100 percent — onto consumers”. Mr Wilkes doesn’t give his justification for that claim, but goes on to say this:

Net neutrality could also bar broadband providers from managing, in a nondiscriminatory manner, the few bandwidth-hogging applications and services that can consume nearly all of a neighborhood’s bandwidth.

Taking Mr Thonis’s comment first: the Times does not “ignore history”. Yes, the Internet has grown up as an independent thing, and the standards that drive the smooth operation of the Internet continue to be developed openly. Ideas, services, and applications are readily available, and people share them online and at conferences. But that’s not what’s at issue here.

This discussion concerns operational policies of the carriers, and in that regard there’s increasing friction, and strong evidence that debate leading to fair policies that best serve the users of the Internet are not likely in the absence of regulation.

One major reason for that is lack of competition — lack of choice for the consumer. That’s the history. As the Times points out:

Rather than seeing an explosion of new competition, the broadband access business has consolidated to the point that many areas of the country have only one provider. Broadband Internet has unbundled into a business with many unrelated information service providers vying for space on the pipelines of a few providers.

Without real choice of providers, the market forces that would prevent restrictive policies that drive prices up and services down do not work. If Verizon and Cablevision should both decide to block Bittorrent, for example, I would have no alternative. And I’m in a good position, having a choice between those two; many residents have only one broadband provider available to them. Suppose Verizon decided that users of sites such as Hulu should pay a surcharge if they aren’t already paying for TV service from Verizon. Absent regulation, nothing’s stopping them from doing that.

It’s reasonable for carriers to establish terms of service that allow them to manage their networks, and, as I’ve said before, if that’s done fairly, it doesn’t violate network neutrality. Limiting lower-tier users to specified maximum data rates and volumes is fine, if the rates and volumes are reasonable. One difficulty is that what’s reasonable changes over time. Ten years ago, we thought a few hundred megabytes per month was a generous limit; now, that would just be the most basic service. New innovations may push the bandwidth and data volume needs up unexpectedly, and the carriers will have to respond to that quickly, lest they block the new applications and services. Regulation can ensure that they respond.

Of course, the regulation must be sensible, and it’s fair for both providers and consumers to worry about over-regulation, regulation run amok. The FCC is generally reasonable, but they’ve certainly been known to overstep, and it’s easy to foresee demands for regulations that block “offensive sites”, and such. We must be careful not to wade into those waters, using regulation to ensure openness, and keeping the various special interests out of it.

As to Mr Wilkes’s comments, I just don’t see how he reached his conclusions. Regulation can ensure just the opposite of what he claims. Regulation can make sure that carriers do provide broadband access to less profitable areas, as a requirement for expansion into high-profit ones. It can make sure that their management of high-bandwidth users and uses is done in a non-discriminatory manner. And regulation can see to it that providers’ fees are reasonable and non-discriminatory as well. It’s exactly the lack of regulation that’s likely to result in the Internet dystopia that Mr Wilkes fears.

Leaving the last word to the Times:

And most persuasively: broadband access is probably the most important communication service of our time. One that needs a robust regulator.