Controversial Compromise on Net Neutrality

The TakeAway: The FCC’s decision on “net neutrality” creates a double set of rules applying to fixed broadband and mobile broadband—with the public interest standard in question.

The near decade-long struggle over “net neutrality” revolves around money, power, and access – in other words, whether Internet communication should be treated as differentially priced real estate, or an open marketplace owned by no one, accessible to all.  Neither, the Federal Communications Commission (FCC) decided yesterday in its 3 – 2 partisan vote on the Open Internet Order.  People are still trying to figure out what happened, but one thing is clear: the battlefield has shifted to wireless, where consumers, investors, and entrepreneurs remain vulnerable to monopolistic practices.  And the “public interest standard” – embedded in successive telecommunications laws since 1927, which attempts to reconcile commercial interests with the needs of democratic society – remains as elusive as ever.

The compromise decision – slated to take effect in early 2011 – marks the FCC’s first-ever Internet access regulation (its authority over the Internet is only 14 years old, rooted in the Telecommunications Act of 1996).  According to the Washington Post, it ensures “unimpeded access to any legal Web content for home Internet users”.   However, exemptions were granted to mobile broadband carriers such as Verizon and Google, who petitioned that mobile networks are fundamentally different than telecom broadband and thus should be free of FCC regulation.  (This departs from Google’s longstanding support for net neutrality; observers claim the reversal stems from Google’s market presence and Android platform, available on a variety of handheld devices—including Verizon’s and AT&T’s.)

The two frameworks, while sharing a commitment to transparency and prohibitions on “unreasonable discrimination”, vary this way: mobile providers can charge pay-for-service fees to “priority” customers, an allowance that doesn’t apply to fixed broadband.  “By creating a different set of rules for wireless broadband, the decision creates a major regulatory loophole—one that, in the long-term, will prove detrimental to the innovation and openness which drives the American economy,” said Michael Connor, Executive Director of the Open Media and Information Companies Initiative (OpenMIC), a shareholder coalition advocating responsible media practices.  OpenMIC helped organize a series of shareholders filings asking 3 companies – AT&T, Verizon and Comcast – to “do the right thing” and let shareholders vote on the matter.  Meanwhile, consumer groups such as Free Press and Public Knowledge criticized the two-track FCC ruling, claiming it doesn’t go far enough to protect individual digital rights.

In an open letter to the FCC published yesterday, Apple’s co-founder Steve Wozniak expressed support for net neutrality, drawing upon his belief, learned from his Eisenhower-Republican father, that “you had a right to listen to any radio signals that came because the air was free and if it came into your home you had a right to listen to it”. Current moves jeopardize that freedom, Wozniak said, when content providers such as Comcast or Verizon “with the best government connections” can determine what we watch—and for how much.  “This is the monopolistic approach and not representative of a truly free market in the case of today’s Internet,” he said.  What he didn’t say is that Apple benefits from net neutrality because it’s not barred from selling iTunes media, software services, and other streaming solutions.

Nowadays, customers are at the mercy of telecommunications and cable companies that determine whether, what kind, and what price access you have—the opposite of free market tenets.  Telecommunications firms argue that FCC protection of “net neutrality” represents government interference with free market behavior—a hard sell in this era of business malfeasance and oligarchic behavior.  Meanwhile, shareholder and consumer activists argue that yesterday’s FCC decision leaves room for media mischief-making, at the public’s expense.  With few happy with the outcome, the lobbying and court challenges will continue.  Perhaps it’s time to reinvigorate the Gore Commission’s recommendations for the public interest standard, in this, yet another, era of digital communication.

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