Friday, May 19, 2006

Misinformation from "Save the Internet"

The little cartoon movie from "Hands Off the Internet" (an organization funded by member organizations that include major telcos and equipment vendors) has led to a response from "Save the Internet" (advocates of net neutrality funded by and others).

"Save the Internet" claims that the cartoon is "a clever piece of industry propaganda that is riddled with half-truths and outright lies." It then quotes a few passages from the cartoon and offers responses. Unfortunately, it is "Save the Internet"'s response that contains misinformation, and it fails to point out any alleged lies.

In what follows, I'll quote directly from the "Save the Internet" response (including the quotes from the "Hands Off" cartoon they are responding to) and then respond to each point.
The big telecom companies say: "Is the Internet in Danger? Does the Internet need saving? It keeps getting faster. We keep getting more choices."

The truth: Right now AT&T and others want to take away your choices and control what you can do and watch online. They're on their best behavior while trying to convince Congress to hand over the Internet. But if their high-priced lobbyists get their way in Washington, the Internet as we know it will be gone. Network Neutrality has always curbed the control of the network owners, invited competition and encouraged innovators. It's what made it possible for entrepreneurs and creative thinkers to prosper online. None of the big ideas that made the Internet the innovative engine it is today came from the cable or telephone companies.

Notice that there's no evidence supplied to support the claim that "AT&T and others want to take away your choices and control what you can do and watch online." What the telcos want to do is build new last-mile consumer services by installing a new fiber-to-the-home infrastructure, over which they can offer services in addition to and distinct from the public Internet, just as they currently offer voice telephony as a service separate and distinct from the public Internet. Specifically, they want to offer digital television services and potentially new services which they control, following the model of the cable industry. The telcos' real desire is to compete with the cable industry and be regulated in much the same way. They further want to be able to charge content providers to be able to provide services over this new fiber, because they know that consumer fees alone are not sufficient to recover their costs in rolling out this new infrastructure. (BTW, my opinion is that just as the cable companies lost leverage over content providers as a result of competition from direct broadcast satellite, telcos will lose or fail to gain leverage over content providers using new services over fiber-to-the-home, as a result of competition from wireless broadband providers, as well as from cable companies.)
The big telecom companies say: "Building the next generation of the Internet is going to take a lot of work and cost a lot of money. And some big corporations can't wait to use it.... They're going to make billions. But they don't want to pay anything. Instead they want to stick consumers with the whole bill."

The truth: Nobody is getting a free ride on the Internet. Any Web site or service you use on the Internet has already paid these providers to reach you -- just like you pay to send e-mail and download files. In fact, total expenses from major content and service providers to expand network capacity totaled about $10 billion last year. But the cable and phone companies want even more -- forcing content providers to pay protection money to get a spot in the fast lane. Who do you think will pay that bill? You will … big time. The costs will be passed directly to consumers. If Net Neutrality is so bad for consumers, why do ALL the major consumer groups support it and ALL the major phone companies oppose it? Who do you trust more to defend your Internet rights? Without meaningful protections of Net Neutrality, there will be less choice on the Internet and higher prices, at a time we're already falling far behind the rest of the world.

It's true that content providers are paying Internet providers today to reach the "eyeball customers" of the telcos and cable companies. But they are reaching them over today's best-effort Internet, not over the new infrastructure they want to build out. Now, here there is a real issue, but it's one that advocates of net neutrality have tended to obscure rather than illuminate, and that is that today, telcos are required to allow other Internet providers to provide service over their last-mile consumer broadband (DSL) circuits, and the courts recently ruled that this will no longer be required, putting the telcos on the same footing as the cable companies, which have never been required to share their networks. The difference between the two is that the telcos were given free rights-of-way to build their networks, were given monopoly status for local telephony status, and received huge tax breaks and subsidies in the form of universal service fees collected from long distance providers; this form of public funding justified the common carriage requirements that made them allow their networks to be used by other players that compete with them. The cable companies, by contrast, got none of these benefits and have to pay a portion of their revenues to local municipalities as part of their franchise agreement in an area. The cable model actually seems to be a better model and to be more competitive, though I think both are far from ideal. In any case, the empirical evidence is that the more competition there is for broadband Internet services, the lower the costs to consumers and the more innovation we see.

The big telecom companies say: "These corporations are asking Congress to create volumes of new regulations to control how content is delivered over the Internet. Should politicians and bureaucrats replace network administrators? It will be the first major government regulation of the Internet and it will fundamentally change how the Internet works. These big corporations and the SavetheInternet campaign want the government to take control of the Internet."

The truth: There's nothing new about Net Neutrality. It has been a fundamental part of the Internet since its inception. As a tenet of communications policy, it goes back some 70 years. Only last year did the Supreme Court uphold a bad decision by the Federal Communications Commission to do away with the rules that forced cable and phone companies to open up their networks to competitors. Those rules protected Internet freedom by ensuring lots of competition (think of all the choices you've had for long distance service or dial-up Web access). In fact, these rules still protect the Internet under a temporary FCC ruling. All a Net Neutrality law would do is maintain the even playing field we've always enjoyed -- by preventing big cable and telephone corporations from taking over as gatekeepers.

Now here's where "Save the Internet" goes completely off the rails. Net Neutrality has not been "part of the Internet since its inception" nor does it go back 70 years. This is a confusion about common carriage requirements on telco's networks vs. Internet services. When other DSL services use telco last-mile circuits to reach their customers, they are providing their own Internet services, not the telcos. They aren't using the telco's Internet networks at all. ISPs have never been classified as "common carriers" or required to connect anyone to their networks. Rather, they've been classified as information services or enhanced services, and exempted from common carriage requirements. Internet interconnection is governed by peering arrangements which are arranged either privately between two ISPs or network service providers, or by connecting to a public peering point and governed by the rules of the organization managing that peering point (itself a private, not government, organization).

The sentence about the Supreme Court upholding a bad FCC decision "to do away with the rules that forced cable and phone companies to open up their networks to competitors" is just mistaken in its inclusion of cable companies. Cable companies have never been required to open up their networks to competitors.

(UPDATE May 21, 2006: Timothy Karr of Save the Internet says that the "goes back some 70 years" remark does not refer to common carriage, but he hasn't yet told me what it is referring to. I'll update this entry when he does.)
The big telecom companies say: "The net neutrality issue is a fundamental question about who should control the Internet: The people or the government? And it's a fight about who's going to pay: multi-billion dollar corporations or you?"

The truth: Who should control the Internet? Now that's a good question. But the real choice we face is whether we're going to keep the good government policy that has protected Internet freedom, created a truly free market in content and services, and encouraged free speech to flourish online -- or let predatory companies like AT&T and Comcast rewrite our telecommunications law and place their chokehold on online content and services. For the entire history of the Internet, Web sites and online ideas have succeeded or failed on their own merit based on decisions now made collectively by millions of users. Getting rid of Net Neutrality will hand these decisions over to a cartel of broadband barons. Do we really want Ma Bell and the Cable Guy picking the next generation of winners and losers on the Internet?

This repeats the false claim that net neutrality has been a government policy in force all along, when in fact what "Save the Internet" is advocating is the introduction of new laws which give the FCC the power to regulate the Internet. What "Save the Internet" fails to recognize is that the telcos are an extremely powerful lobbying force in Washington, D.C., and that giving the FCC this power will not change that. Further, the FCC is run by commissioners who want to do more to regulate content for "indecency," and, if given the power to regulate the Internet, that would likely not be far behind. If they have the power to say that ISPs must allow service to X, they're probably also going to have the power to say that ISPs must not allow service to Y. But those are decisions that should be left in the hands of the ISPs, in a competitive environment where the consumer has the power to switch ISPs.

"Save the Internet" tends to avoid spelling out specifically what they are asking for, which is the biggest problem with "net neutrality" advocates. The term seems to mean different things to different people, and a lot of people interpret it to mean prohibition on certain kinds of contractual arrangements and services between providers of network services and their customers that are already common and extremely useful today (e.g., paying for different classes of service).

If you want a better understanding of the issues in the "net neutrality" debate, I can't recommend a better source than the Stifel/Nicolaus analysis, "Value Chain Tug of War" (PDF). Read it, and whichever position you argue for will be better served.

(UPDATE May 20, 2006: Here's a much better commentary on the "Hands Off" cartoon from a net neutrality advocate, Harold Feld, though he also gets some facts wrong. For example, he says that at the time of "Computer Proceedings I" (1971) AT&T was "the only telephone company." It was by far the major player and had attempted earlier to acquire the rest, but this was put to a stop in 1913 via anti-trust action when it tried to acquire Western Union. It was required to allow the remaining independent local telco players to interconnect. These included Rochester Telephone in NY (which was my employer when it was called Frontier). In 1971 AT&T had 100 million subscribers and the independents had 25 million.)


Luv2Box said...

Thanks for a great posting Jim. This is the first time I have seen this issue broken down like this and you can see the falseness of this NN campaign. Let's just hope this makes it to MSM because we need more ordinary people like myself to read this and work to stop net neutrality!

Lippard said...

Thanks, but I can't quite agree that we should want to "stop net neutrality." I think that, as general principles, the four elements of "net neutrality" in the FCC's policy statement are reasonable ideals--an open and free (in the liberty sense, not the dollar sense) Internet is something I want. But what I'm very skeptical of is giving the FCC the power to regulate the Internet.

We do need to keep in mind that the telcos have been given lots of special favors from the government for their last-mile networks, which they use in their favor--I think there are real issues there that we need to keep an eye on, though I'm hopeful that between cable companies and wireless providers there will be sufficient competition to prevent anti-competitive activity by the telcos.

My bet is that wireless will be the biggest winner of consumer Internet access dollars in the long term.

watcher said...

A great page! Thanks for the effort you put into this.

I think the solution to this problem isn't regulation. I think it's finding a way to crete real competition across the broadband markets and giving the consumer the ability to choose between providers. If that can be accomplished, then the need for government regulation disappears. Even with a duopoly, the consumer carries a lot of weight in determining ISP policies. If there were 5 or 6 options in every market then no single ISP would be able to abuse their powers without having to deal with the wrath of the consumer.

SoCal619 said...

This is a great posting as it really shows the smoke and mirrors being thrown up to confuse the issue. Ultimately, government regulation might be needed down the line, when customers are getting abused through price hikes or blocked sites or whatever, but that's not even close to reality just yet...can't the government/FCC just cool their horses and go solve some other problems in America first and let the internet right itself naturally?

Lippard said...

As much as I appreciate the positive remarks (and I think both of the last commenters make good points), it makes me nervous to see comments from accounts that have just been set up and which have no associated blogs.

I'm also seeing an apparent attempt by somebody from a Covad connection in Silver Spring, MD to bring my "Net Neutrality and Fair Use" posting up in Google Blog Search rankings by repeatedly searching for "net neutrality" and then clicking on the link to that post. They've done it about 8 times so far.

Whoever that is is using coming from an IP beginning with 67.101.62. and the following browser info:

Language English
Operating System Macintosh
Browser Netscape 5.0
(Macintosh; U; PPC Mac OS X; en) AppleWebKit/417.9 (KHTML, like Gecko)
Javascript version 1.4
Resolution : 1280 x 800
Color Depth : 32 bits

Net Chick said...

Why do people still insist that the government needs to regulate the internet? Because of competition? Competition is not a bad word. Without it, Google would still be a company without a profit.

Harold Feld said...

Jim, as noted in my reply to your comment, I acknowledge that you are absolutely right that AT&T was not the only telco. It would have been more accurate to say that there was virtually no residential phone competition in the U.S. (which was the basis for the Computer Proceeding conclusion to prohibit, and later require separation, of the ILEC from the provision of "enhanced services." Nevertheless, I would assert that the presence of other residential providers than AT&T is irrelevant to the main point- that the concept of "network neutrality" (or, as we used to call it, "common carriage") was the rule of "the internet" (or, at least, what governed the transport of bits) since 1971.

While I disagree with your conclusions on the need for network neutrality, I must add that I respect your integrity for publicizing the attempt to raise your blog profile by a third party.

Harold Feld

Lippard said...


Thanks for the comment, I appreciate your expertise (and anybody who was an attorney at Covington & Burling is bound to be sharp).

I object to the equivalence drawn between common carriage and net neutrality, because the proposals in Congress are going far beyond common carriage for last-mile telcos in attempting to set a common carriage-style standard not just for bit transport over public right of ways but for Internet services themselves.

Lippard said...

For more on the "Net Chick" commenter, see Abstract Factory.

Keunwoo Lee (Cog) said...

Jim, I'm reasonably certain that Luv2Box, watcher, and SoCal619 are all shills too. Just FYI.

Lippard said...

Cog: I agree.