• Danny Sepulveda

    Professor Lessig and friends:
    S.150 passed the Commerce Committee by voice vote. This is a committee deeply divided over the common carrier questions related to broadband. The Committee is clearly united, however, on the principle that regardless of the access mechanism, internet access should not be taxed at the state or local level. That is a concept that is good for the Internet, although it may be somewhat costly in terms of government revenues (there is no agreement on how costly). It is the intent of the commerce committee and the bill sponsors that the legislation remain strictly connected to the treatment of a service for taxation purposes, not regulatory purposes, and the committee was clear on this. Members on the committee are working hard to clarify this language now to try to provide certainty sufficient for regulators. Thanks
    Danny

  • Danny Sepulveda

    I placed my comment about s.150 in this section of the blog by accident. I’m sorry.

    On this matter, I went to listen to Commissioner Copps deliver this speech at the New America foundation. On this and other matters (most notably, media ownership), Commissioner Copps has led the left to leadership on behalf of consumers and citizens.

  • Justin

    Copps nails it. Now can he convince the other three?

  • Ed Lyons

    Amen!

  • http://www.ofcomwatch.co.uk Russ Taylor

    To me, a regulator with a mindset like Copps represents the dual sides of regulatory activism. On the one hand, when we agree on the underlying topic (in this case, Professor Lessig agrees with him on the network issue), the intervention is good. On the other hand, when Copps speaks about ‘morality’ and ‘righteousness’ in the media (which he does often), I’m sure many of us disagree with him, and would like to see his powers curtailed.

    Also, anyone who truly knows the glacial pace and regulation-mindedness of the FCC’s former Network Services Division that administered Part 68 of the FCC’s rules (the regulatory ‘solution’ imposed after Carterfone) would be hesitant to endorse telecom-style regulatory control over the cable broadband platform. They were fair-minded and helpful people, but not the types you want administering new technologies. I used to occasionally represent clients (manufacturers before the NSD trying to secure approvals for new technologies like DSL and stutter dialtone devices which required ‘waivers’ of the regulations). Part 68 was not a success in my opinion – it became an obstacle for new telephony technologies. Imagine, it was similar to trying to get a waiver from DOT or NHTSA for a new type of vehicle safety device…except in this case, they were just useful telecom gadgets. Do we really want to import that style of attachment (command and control) regulation to the cable ISP platform? I think it would be an innovator’s worst nightmare.

    In other words, I suppose it is easy to point out frailties in the marketplace, but we also need to be even-handed and out point the regulatory failures that regularly occur, and often impede advancements. The history of network ‘choke-points’ is generally a history of government – not marketplace – actions, as Professors Lessig and Hazlett have demonstrated with respect to radio spectrum. There is a balance somewhere – it needs to be found.

    Full disclosure: I work as a lawyer for a cable company that provides the types of internet services covered by the 9th circuit’s opinion, but these opinions are my own.

  • Anonymous

    I have a few questions. Or more accurately, question the Copps theory has some holes, to my mind. First, the cable companies have had a “closed” broadband system for the last 5 years and as a cable modem subscriber I see nothing actually closed about their system. I have access to any and all Internet content that I desire. I use software applications provided by companies with no affiliation to the cable company–from streaming video and audio to phone calls to IM to email. This may be surprising considering that my cable company seemingly has great incentives to close their system (mine is Comcast by the way–the largest cable operator in the country)–on a national basis they have 70% market share and have a wider coverage currently than any other last mile broadband network. Yet the market leaders have not, in their 5 years of market leadership, actually changed a thing about the Internet. In fact, they have helped in get stronger (there was no Vonage 5 years ago; no streaming out-of-town baseball games on mlb.com) my providing me with increased speeds. Again, these guys have not lived in a “common carrier” legal environment under the law for the last 5 years. The government has not compelled openness–yet it exists for me as a user of the service. Despite these facts, the Copps theory introduces an unlikely parade of horribles that will shut down the Internet as we know it.

    But how can that be? Two realities make these suggestions nothing more than political rhetoric. First, some 100 plus million Americans are online; some estimated 600 people worldwide (nua). In the US, the 100 million of us have been using the Internet for sometime now for a variety of reasons–all of us have the expectation as a consumer that we can get to any legal website or service/application of our choosing. Granted the cable and phone companies do not have brilliant track records when it comes to serving consumers’ interests, but you are telling me they are going to be able to ignore the will and purchasing power of 100 million people? Copps does not give the Internet and worse the American people the credit it and they deserve. Second, barriers to entry into the last mile are dropping dramatically with the use of spectrum–those barriers will only decrease with time as more spectrum comes available and transmitters and receivers become smarter. Even if the cable and phone companies acted to choke off the Internet, are you telling me that the WISP community, or satellite providers or next generation fixed wireless providers, or powerline providers will not swoop in to gladly take all 100 million and growing of us who desire openness?

    Copps is correct that past FCC policies of openness helped spur the dial up Internet. A policy of openness was essentially when there was only one network in the entire country that actually provided the service (the phone network was it–if you were AOL and wanted to reach your subs–you had to travel the phone wires–there were not alternatives!). Today, there are two, with WiFi, three and ubiquitous in many places, with the continued marches of technological progress in silicon, speed and storage there is great potential for many more. Finally, if the Copps parade of horribles show signs of coming true–a near impossibility to my mind–do you really think the government will sit on their hands about it considering the economic benefits that broadband Internet will bring–do you think that corporate America who has found a low-cost way to conduct business with consumers from our living room will allow the Internet to become some closed system? Look at how fast the government moved for Do Not Call–where 50 million people have signed up; 100 million screaming about the closure of the Internet and an angry business community means it would move in double the time.

    Now think of how regulations, specifically those that were applied to yesterday’s one-wire phone world, has the potential to stifle investment. If you are a small WISP, under the Coppsian theorty (and the Brand X theory) you would have to certify yourself in every state you wanted to provide service; pay into universal service not for broadband but for plain old telephone!; pay various other taxes (and pass those payments on to consumers); forced to sell transmission to other Internet service providers, like Earthlink–the list of regulations goes on and on–regulations that were created not for the Internet, but for the phone network of yesteryear–the only network in town. Would you, as a WISP, or better yet a VC that funds that WISP, invest in such a world?

    We need facts not rhetoric.

  • Justin – same as above

    Anon post #6-

    I don�t intend this post to be a thorough rebuttal but I would like to reply to your following quotes:

    “I see nothing actually closed about their system. I have access to any and all Internet content that I desire. “

    Concern over a closed system is twofold; 1) you may not notice the consequences of a closed system and 2) lack of present abuse is not a protection against future abuse. It behooves us to be proactive against egregious assaults on our communication means.

    And again:

    “do you really think the government will sit on their hands about it considering the economic benefits that broadband Internet will bring–do you think that corporate America who has found a low-cost way to conduct business with consumers from our living room will allow the Internet to become some closed system? “

    I believe a closed system is in the best interest of the owner of the physical infrastructure (e.g. corporate America – SBC and Comcast) and because of their duopoly they will be the major benefactors of deregulation. The government (FCC) is not sitting on their hands regarding economic benefits; they are actively promoting the growth of certain economic growth. The problem is that the economic growth is focused on the owners of the physical infrastructure as an incentive to invest and improve access. But at what expense? Deregulation of the physical layer gives only those with access to the physical layer the ability to reach consumers from their living room. Sounds a lot like Television� but the Internet is different in that it has the ability for two way communication and allowing a closed system will (yes will) rob the internet of it�s unique characteristics, rendering it dead.

  • Manu

    About closed systems. The comments Justin made are on the mark. There is only one, very important aspect, that you barely glossed over. Cable modem is a closed system not necessarily in the sense that you’d get a “broken” Internet (a-la AOL in the early days) but that you don’t have a choice. Just like it was impossible to choose a long distance provider many years ago, it’s impossible to choose a different ISP over cable. This is where things differ from DSL.

    In my narrow understanding of the situation, Cable, being classified as a data service, has an advantage to the customer (no extra mostly outdated taxes) but a strong disadvantage, which is no choice once you’ve decided on cable. DSL however, going over phone lines, is classified as telecom, therefore plenty of provider choices (although you still have to pay the telco for the line) and a few extra outdated taxes whose forgotten purpose has been reached long ago.

    At the end, closed system not withstanding, it totally depends which monster you want to feed…

  • Justin

    I may be wrong but I think both systems are classified as “An Information Service” but DSL has a “telecommunications aspect” that sets it apart from Cable and makes DSL subject to common carrier regulation. If I am wrong, please correct me!

    Manu- you are 100% correct. The choice or lack thereof is of utmost importance. The duopoly I spoke of hints at what you unpacked in your post and I think both concerns over a ‘broken’ Internet and lack of choice are issues with a closed system (yes, the latter is most apparent now but I am not convinced that in the future the former will appear).

    Great discussion by the way. Where else do you post/read/check out?

  • Anonymous

    Justin/Manu–author of the anon post above—great points—a few thoughts:

    The classifications are less important than the reality that the FCC demanded openness on the phone system in the late 70s (Computer Inquiry decisions)–in what was a brilliant move and based on the fact that the phone network was the only game in town—it was a governement sactioned monopoly.

    I completely agree with the both of you in principle—duopoly is not where this country wants to be. Therefore, the government needs to feed as many new broadband platforms as possible (most notably wireless–we have seen what unlicensed can do–even in the last mile–see WISPs).

    Why deregulate government mandated access to the physical layer? As Manu suggests–to feed the infrastructure beasts. These network upgrades or network construction projects cost coin–see $80BB spent by cable industry post 96 Act. To make the investment (like in any sector of the economy), one needs to at least envision a return on that investment. Giving cable and phone companies (and wireless and powerline and any other digital bb platform) the opportunity to recoup investments should get BB out faster, as you suggest Justin. Good from an economic perspective (not just for the companies, but for the public).

    The expense is choice, if you are comparing it to the dial-up world, yes. Today, you are correct. But examine the choice for the mass market—it is not bringing very much value to the consumer. How many BB ISPs do you know of over DSL? Earthlink; some smaller players? And what do they bring to the table other than choice? They cannot really compete on price (government access mandates require only nondiscriminatory pricing–not government mandated prices—so ISPs pay about $40 for the line to ILEC and get about a $5 a month margin at retail—compare this to 50% margins in dial-up). They can package certain things together that are readily available to everyone on the Internet–email; pop-up blocking software, web pages, etc. They aren’t bringing very much value to the consumer and not making very much money doing so. Consider AOL’s move to be more of a content company. According to a recent Fortune article, AOL has less than 1 million BB subs as an ISP (in 5 years of access to the DSL plant). AOL the “bring your access” broadband content company has 1.4 million subs since April!

    That is, in part, why the big dial up ISPs–AOL and MSN–are moving to content companies.

    So what is the solution?

    We want broadband–much faster than we have today–to every American. Foster investment in any and all broadband platforms. Let’s get 3-5 potential broadband wires into every home. Companies can compete on not just price, but speed. Technology is turning this potential (outlined in many of Chairman Powell’s speeches on the subject) into a reality. Do not saddle BB with yesterday’s phone regs made for a monopoly regime. Duopoly is no end game here–but boy it is 100% better than the monopoly we used to have. Foster investment in new platforms by making clear that if they build and compete, they can reap the rewards. And avoid the messy common carrier regulations including having to pay taxes; certify yourself in each and every state you serve and a laundry list of others. Add common carrier regs to emerging wireless (fixed/mobile licensed wireless; unlicensed; satellite) and powerline and we will be stuck with a duopoly forever (and who is going to force the big guys, against their business interests, to roll out next gen BB networks?) Activly promote the third and forth pipes.

    We also want the end-to-end infrastructure to stay in place and flourish. Therefore, ensure the Internet’s true innovators–the software/applications creators can get access to me and you. Do so by giving unconditional access not to the physical, but the logical layer. Tell the current duop and future competitive market that it can’t prevent people from reaching the legal content and/or applications of their choosing.

    Provide incentives for investment in the infrastructure and the applications that will flow over that infrastructure.

    And Justin, I would be happy to walk you through the statutory classifications and their impact in the marketplace if you would like—it is a little confusing, but I think I have it down to the point of being able to plain-english it.

    Again, great discussion. My only real suggestion is that if we start from the intrusive regulatory regime of the monopolistic phone world, we will never reach our BB potential. That is not to say no regulations at all. Just focus the regs and the objectives you want to achieve. Choice is great. As we have learned in the phone world–choice does not always mean vibrant, sustainable competition.

  • Manu

    Justin: to answer your question, I’ve only really posted here, and even there, not very often. Other sites of interest to me, arstechnica, slashdot (for the info and sometimes the perspective) and kuro5hin.

    As to the latest anon post, you do raise three interesting points. The first one is what would the incentive be for the big boys to invest in infrastructure if they have to open up and compete. The second is how would the smaller guys compete in this market. And the third is that a few very big players are getting out of the ISP market and slowly into content.

    Consider that my point of view is that of a “knowledgeable consumer”. I know what I want, usually more exactly and precisely than most others. In answer to the fist two points, I would say that physical layer providers should get out of the business of providing service. This creates an all too well known uneven playing field. A very good example of this is how most of the CLEC’s are out of business now, because the ILEC’s were the ones providing the infrastructure, and therefore the pricing models. Of course it will be harder for a smaller ISP to provide DSL at competitive rates, since the ILEC controls how much the user has to pay for the DSL line. And since they’re also an ISP, they can offer cut-throat rates for the internet service. What makes alternative ISP’s attractive are the extras that many of the bigger ones restrict or deny, like being able to run your own personal servers (mail/web/ssh), having access to an unrestricted newsgroup server that provides decent retention rates, and more consistent bandwidth. I usually laugh when I look at the price difference between business and personal use internet service on cable, since usually service isn’t guaranteed any more on one than the other, and the only difference is the server ports aren’t blocked. Well, I’m rambling on… Back to the subject. If the ILEC’s and cable providers were only allowed to provide the physical layer, it would open up competition to just about any service provider, and keep it open. The cost structure would be fairly stable, and the incentive to maintain and expand the infrastructure would be to serve more “clients”, meaning more service providers, with better, more reliable, faster service.

    The third point relates to the answer above also. The major non-physical ISP’s have started moving to content because they know they can’t compete with ISP’s who control both the physical layer and the Internet service. They have absolutely no incentive in letting anybody else in, and every incentive in getting them out. So MSN/AOL need new reasons to appear competitive. In my proposed “solution”, they wouldn’t be so quick to jump to a content model, they’d be more than happy to maintain themselves as ISP’s.

    I’m sorry if I was all over the place, still haven’t had my morning coffee…

    Please, if you see any holes up here, I won’t mind if you poke at them :)