Recent Posts From Fred Campbell
Internet Analogies: Twice as Many Americans Lack Access to Public Water-Supply Systems than Fixed Broadband
After abandoning the “information superhighway” analogy for the Internet, net neutrality advocates began analogizing the Internet to waterworks. I’ve previously discussed the fundamental difference between infrastructure that distributes commodities (e.g., water) and the Internet, which distributes speech protected by the First Amendment – a difference that is alone sufficient to reject any notion that governments should own and control the infrastructure of the Internet. For those who remain unconvinced that the means of disseminating mass communications (e.g., Internet infrastructure) is protected by the First Amendment, however, there is another flaw in the waterworks analogy: If broadband Internet infrastructure had been built to the same extent as public water-supply systems, more than twice as many Americans would lack fixed broadband Internet access.
Beyond enforcing the antitrust laws, the Antitrust Division of the Department of Justice (DOJ) advocates for competition policy in regulatory proceedings initiated by Executive Branch and independent agencies, including the Federal Communications Commission (FCC). In this role, the DOJ works with the FCC on mergers involving communications companies and occasionally provides input in other FCC proceedings. The historical reputation of the DOJ in this area has been one of impartial engagement and deliberate analysis based on empirical data. The DOJ’s recent filing (DOJ filing) on mobile spectrum aggregation jeopardizes that reputation, however, by recommending that the FCC “ensure” Sprint Nextel and T-Mobile obtain a nationwide block of mobile spectrum in the upcoming broadcast incentive auction.
In Part 1 of this post, I described the history of government intervention in the funding of the Internet, which has been used to exempt commercial users from paying for the use of local Internet infrastructure. The most recent intervention, known as “net neutrality”, was ostensibly intended to protect consumers, but in practice, requires that consumers bear all the costs of maintaining and upgrading local Internet infrastructure while content and application providers pay nothing. This consumer-funded commercial subsidy model is the opposite of the approach the government took when funding the Interstate Highway System: The federal government makes commercial users pay more for their use of the highways than consumers. This fundamental difference in approach is why net neutrality advocates abandoned the “information superhighway” analogy promoted by the Clinton Administration during the 1990s.
Remember when the Internet was the “information superhighway”? As recently as 2009, the Federal Communications Commission (FCC) still referred to the broadband Internet as, “the interstate highway of the 21st century.” Highways remain a close analogy to the Internet, yet by 2010, net neutrality advocates had replaced Internet highway analogies with analogies to waterworks and the electrical grid. They stopped analogizing the Internet to highways when they realized their approach to Internet regulation is inconsistent with government management of the National Highway System, which has always required commercial users of the highways to pay more for their use than ordinary consumers. In contrast, net neutrality is only the latest in a series of government interventions that have exempted commercial users from paying for the use of local Internet infrastructure.
Free Press is holding its National Conference for Media Reform next week. The conference agenda describes the Internet as “central” to freedom of expression, which is how all mass media technologies have been described since the invention of the printing press ushered in the mass communications era. Despite recognizing that the Internet is a mass media technology, Free Press does not believe the Internet should be accorded the same constitutional protections as other mass media technologies. Like so many others, Free Press has forgotten that the dangers posed by government control of the Internet are similar to those posed by earlier mass media technologies. In a stunning reversal of the concepts embodied in the Bill of Rights, Free Press believes the executive and legislative branches of government are the source of protection for the freedom of expression. In their view, “Internet freedom means net neutrality.”
At Mobile World Congress in Barcelona last month, I was surprised that nobody had access to 4G mobile Internet services. How could Barcelona, the second largest city in Spain and host to the “world’s premier mobile industry event,” lack access to 4G? In the opening day keynote session, Vittorio Colao, Vodafone’s CEO, said Europe has only 6% of the world’s LTE connections, and Telefónica’s CEO, César Alierta, said only 17% of European mobile subscribers have smartphones. European mobile operators agreed they are lagging the world in 4G deployment and penetration due to existing price regulations that discourage new infrastructure investments.
Europe now stands at a crossroads: Does it adopt the modern, investment-based approach toward wireless markets that made the US the world’s 4G leader, or does it further increase regulation and impose new obligations on “over the top” (e.g., Skype) services? Our history with the regulation of rural telephone companies demonstrates the perils of the second option. Yet European mobile operators appear ready to embrace new regulations as a means to enhance their business and create a “balanced relationship” with “US companies” that provide over the top (OTT) services.
At the Consumer Electronic Show two weeks ago, Netflix announced that it would block consumer access to high definition and 3D movies (HD) for customers of Internet service providers (ISPs) that Netflix disfavors. Netflix’s goal is to coerce ISPs into paying for a free Internet fast lane for Netflix content. If Netflix succeeds, it would harm Internet consumers and competition among video streaming providers. It would also fundamentally alter the economics and openness of the Internet, “where consumers make their own choices about what applications and services to use and are free to decide what content they want to access, create, or share with others.”
Ironically, Netflix’s strategy is a variant of the doomsday narrative spun by net neutrality activists over the last decade. Their narrative assumes ISPs will use their gatekeeper control to block their customers from accessing Internet content distributed by competitors. Of course, ISPs have never blocked consumer access to competitive Internet content. Now that the FCC has distorted the Internet marketplace through the adoption of asymmetric net neutrality rules, Netflix, the dominant streaming video provider, has decided to block consumer access to its content.
Three rings for the broadcast-kings filling the sky,
Seven for the cable-lords in their head-end halls,
Nine for the telco-men doomed to die,
One for the White House to make its calls
On Capitol Hill where the powers lie,
One ring to rule them all, one ring to find them,
One ring to bring them all and without the Court bind them,
On Capitol Hill where the powers lie.
Myths resonate because they illustrate existential truths. In J.R.R. Tolkien’s mythical tale, the Lord of the Rings, the evil Lord Sauron imbued an otherwise very ordinary ring – the “One Ring”– with an extraordinary power: It could influence thought. When Sauron wore the One Ring, he could control the lords of the free peoples of Middle Earth through lesser “rings of power” he helped create. The extraordinary power of the One Ring was also its weakness: It eventually corrupted all who wore it, even those with good intentions. This duality is the central truth in Tolkien’s tale.
It is also central to current debates about freedom of expression and the Internet.
Given the rate at which telephone companies are losing customers when they cannot raise prices as a regulatory matter, it is preposterous to continue presuming that they could raise prices as an economic matter.
Today, the United States Telecom Association (USTA) asked the Federal Communications Commission (FCC) to declare that incumbent telephone companies are no longer monopolies. Ten years ago, when most households had “plain old telephone service,” this request would have seemed preposterous. Today, when only one in three homes have a phone line, it is merely stating the obvious: Switched telephone service has no market power at all.
The FCC already knows that plain old telephone service is no longer a “dominant” service (“dominance” is more likely when a service has a market share exceeding 60%). Last year, the FCC’s Technological Advisory Council found that the legacy, circuit switched telephone network “no longer functions as a universal communications infrastructure” and telephone service “does not provide anything close to the services and capabilities” of wired and wireless broadband Internet access services.