We won’t defer when you’re wrong
When should a court defer to an agency’s interpretation of its governing statute and/or its own regulatory actions?
I got interested in this question because deference by a flummoxed Supreme Court gave us Brand X, with its ahistorical “this looks really tricky so we’ll let the FCC categorize highspeed internet access” approach.
In this week’s Third Circuit opinion about the Janet Jackson Super Bowl incident, the court doesn’t defer much. At least three times, it corrects the FCC’s reinterpretation of past regulation.
1.
FCC: We gave notice of and a reasoned explanation for our new policy on “fleeting expletives” before the Superbowl in 2004 and the policy wasn’t much of a change anyway.
Court: “[W]e find the Commission’s unsubstantiated contentions in this regard contradict the lengthy history of the Commission’s restrained enforcement policy. While ‘an agency’s interpretation of its own precedent is entitled to deference,’ deference is inappropriate where the agency’s proffered interpretation is capricious.”
2.
FCC: Anyway, our old “no problem with fleeting imaterial” standard only covered words, not images.
Court: No. You admitted that there was a fleeting material policy. Now you’re “seek[ing] to revise the scope of the policy by contending the policy never included fleeting images. But extensive precedent over thirty years of indecency enforcement demonstrates otherwise. Our reluctant conclusion that the FCC has advanced strained arguments to avoid the implications of its own fleeting indecency policy was echoed by our sister circuit in Fox.…”
3.
FCC: A broadcaster is on the hook for indecent material, even if it didn’t know the material was going to be broadcast. We’ve always said so - we have a regulation that says so.
Court: No. “[T]he Commission’s proffered interpretation of [its rule], which appears to contradict the plain language of the regulation as well as the history of its adoption, would appear to be erroneous and inconsistent with the regulation.”
And more: “The FCC’s interpretation of its own regulation is, of course, entitled to considerable deference. But our deference to an agency’s interpretation of its own regulation is tempered by our duty to independently insure that the agency’s interpretation comports with the language it has adopted. Accordingly, we need not accept the agency interpretation if it is plainly erroneous or inconsistent with the regulation.” [many internal quotes and cites omitted in this last bit].
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It’s nice to see some limits to deference. Judicial deference and a sleepy Congress have gotten us to where we are right now in communications-policy land.
Tying, subsidizing, and IMS
In response to my post a couple of days ago about the possibility that VZ might not plan to comply with the 700 MHz “open platform” rules, someone wrote:
would you have the FCC mandate that every mobile device must be capable of running every operating system? If Verizon sells me a BlackBerry, should the device allow me to install Android, Palm OS, Windows Mobile, or Symbian OS? Obviously, Google believes the answer is yes (they will make the most money if they can install their OS on every device). Is it good for consumers if the FCC starts managing software specifications for computers and mobile devices?
Here’s the problem that the question doesn’t aknowledge: VZ controls its network AND markets devices, and would like to tie the two together. The Google petition suggests that VZ plans to give its subsidized devices exclusive “better” access rights to its network (we don’t know in what way) than other, non-VZ-connected devices. VZ also plans to “cripple” the devices it provides (or “optimize” them) to run only the applications and operating systems and everything else it wants to offer. This isn’t good for anyone other than VZ, and puts VZ in control of innovation in both devices and applications.
Marketing differently-abled devices is obviously fine in the abstract. The problem here is that if VZ can say “only our devices will work well with our network,” “only our devices can be subsidized in the way you’re used to,” and “you can do only X, Y, and Z with these devices, but don’t worry, they’re cheap,” they will have successfully returned us to the pre-Carterfone days. Without Carterfone, we wouldn’t have had modems. Without modems, we wouldn’t have had the commercial internet. That’s why we should be deeply concerned about VZ’s plans.
The problem is that VZ is a dominant, vertically-integrated network operator and device-provider. This isn’t any old new-gadget-maker - it’s Ma Bell, reconstituted.
VZ will say: Trust us. We’re here to provide the best possible consumer experience. Why would we ever do anything that would interfere with all possible uses of our network? Don’t force us to allow all devices to use our network - that will squelch our wildly-innovative nature.
Well, VZ has every incentive to compete with the open internet. They can’t adequately monetize the open internet. So the point of the “open platform” conditions, weak and game-able as they were, was to de-link network provision from both device-provision and application-provision. Now it appears that VZ may argue that those links are necessary in order for their network to work properly.
Now, I’m not saying that government drafting specs is generally a good idea - but to characterize the certification of Part 15 devices (say) as the drafting of specs is unfair. To the extent there is a need for ANY specifications for attachment to internet access, and perhaps there may be for wireless access, there is a role for government to come up (in cooperation with all netops) with a standard set of specs for devices that are permitted to attach to highspeed networks, to work to ensure that those specs don’t allow the network operators to discriminate in ways that serve its revenue plans, and then to police an effective de-linking of devices from network-provision.
Here’s why this is so important: VZ plans to overlay on all of its networks, wired, fiber, and wireless, a cell-phone-like-billing-system called IMS. IMS comes in many guises and isn’t fully baked yet (I believe, but who knows), but it’s a child of the mobile phone system. It allows for discrimination and billing and other “management” efforts that VZ thinks are appropriate. Add IMS together with network-provision and subsidized-device-provision, and you’ve achieved the traditional telephone model: a fully-managed network, where everything requires permission and can be billed for perfectly.
That’s not the internet.
700 MHz Update: Will VZ comply with the rules?
Last Friday (HT: IPDemocracy), Google filed a petition [PDF] asking that the Commission ensure that Verizon understands what those “open platform” requirements for the C Block really mean. Verizon has taken the position in the past that its own devices won’t be subject to the “open applications” and “open handsets” requirements of the C Block rules, and Google says it is concerned that Verizon doesn’t plan to follow those requirements in the future.
This is big. Here’s the background.
In the 700 MHz auction rules, the Commission noted that public advocacy organizations were claiming that “incumbent wireless carriers . . . routinely choke bandwidth to users, cripple features, and control the user experience” in order to protect their highspeed internet access businesses. Verizon had argued strenuously that “imposing an open access business model undermines the auction process and competitive bidding,” but the Commission nevertheless stated that it would “require licensees to allow customers, device manufacturers, third-party application developers, and others to use or develop the devices and applications of their choice.” The nickname for this requirement imposed on the C Block of spectrum (a large 22 MHz block divided into a few regional licenses) was “open platforms for devices and applications.”
Accordingly, . . .we will require only C Block licensees to allow customers, device manufacturers, third-party application developers, and others to use or develop the devices and applications of their choosing in C Block networks, so long as they meet all applicable regulatory requirements and comply with reasonable conditions related to management of the wireless network (i.e., do not cause harm to the network.).
Specifically, a C Block licensee may not block, degrade, or interfere with the ability of end users to download and utilize applications of their choosing on the licensee’s C Block network, subject to reasonable network management.
The rules explicitly say that C Block licensees may not “disable features on handsets it provides to customers,” and “shall not deny, limit, or restrict the ability of their customers to use the devices and applications of their choice.”
When this rule was released I expressed skepticism about the “reasonable network management” and “regulatory requirements” wiggle room provided. I also noted that Verizon had insisted on retaining the ability (1) to privately “certify” applications and devices for use on its network (a process during which a great deal of mischief is possible, as we know from the pre-Carterfone days), (2) to sell heavily-subsidized handsets of its partners in its retail stores (which will make it unlikely for competing, full-price handsets to be popular), and (3) to prioritize its proprietary or charged-for content over “ordinary” Internet traffic.
But even I didn’t imagine that Verizon would actually claim that the handsets *it sells* for use on its 700 MHz network would not be subject to these limitations, weak as these limitations are. That’s what Google’s petition says:
Notwithstanding the clarity of the rule, Verizon has taken the public position that it may exclude its handsets from the open access condition.
Apparently VZ plans to treat customers using non-VZ handsets differently from VZ-handset customers, by giving them different access rights. And maybe VZ plans to not allow *its* handsets to download particular applications. In a nutshell, it’s unclear what VZ’s plans are in detail, and for this reason Google wants to make sure that VZ will adhere to the rules.
This petition appears to be designed to smoke out the truth: did the Commission draft these conditions so loosely (”regulatory requirements”) that VZ’s reading is tenable? Or is VZ simply playing fast and loose, hoping that it will be too difficult for any single actor to challenge it, given the Commission’s comfort with ambiguity? Or were the rules actually designed to be unambiguous?
My own opinion is that VZ will do anything it can to retain discretion over use of its networks, both wired and wireless, and that there likely is at this moment a strongly-held belief inside that company that no reasonable regulator could possibly require VZ to operate an “open platform.”
“Where’s the revenue in being a commodity transport provider? VZ is a broadcaster!” Watch for First Amendment claims from VZ in response to the Google petition.
[My article on the auction is available here.]
Retrograde inversion
Going backwards upside down. That’s what we’re doing with telecommunications policy in the U.S.
The Comcast affair should prompt a re-examination of many decisions the FCC, Congress, and the courts have made over the last few years. When the FCC reports on its reactions to Comcast’s activities, the right response will be “You’re asking the wrong question.”
“What is reasonable network management” isn’t the question we should be asking. Instead, we should be asking ourselves “Why do the dominant network operators always win?” We don’t need retrospective fault-allocation - instead, we need a prospective legislative/structural plan for digging ourselves out of the hole we’re in.
The relevant precedent for the Comcast fracas is not Madison River. Instead, it’s the history of Ma Bell. (Yes, I know Comcast is a cable company. I’ll connect the dots.) AT&T’s enormous market power, vertical integration, skill at using regulation to avoid competition, and opacity (no one could figure out what was actually cross-subsidizing what) led the Department of Justice to investigate and ultimately recommend divestiture of its local phone companies from the rest of its business. In approving that consent decree, Judge Greene made very clear that these local phone companies should continue to be nondiscriminatory, and should not be allowed to be in the business of controlling information — news services — made available across their lines using computers.
The Judge Greene principle (common carriage, no involvement in information provision) has been entirely subverted over the last few years. Assisted by a deregulatory FCC, a quiet Congress, and deferential courts, we’re now moving backwards.
When it comes to highspeed internet access, we’re back in the land of dominant providers (multiple, but dominant), uniform vertical integration, and opacity.
Rather than having proprietary “information services” be the exception to a general rule of common carriage, all forms of access to the internet are now “information services.” The FCC has morphed and stretched (and sometimes ignored - see CALEA) the definition of “information services” to cover all the forms of communication we now care about. Meanwhile, Congress has given almost no guidance and the courts have shied away from interfering (see BrandX). This is neither wise nor efficient.
So even if the Commission says something sharp to Comcast about what practices amount to reasonable network management, that will not be a victory. It will just be a beginning. We need a thoroughly revamped approach to communications law: a revised statute that treats internet access as the general communications network it was supposed to be (as the framers of communications law thought telephone networks should be); a revised approach to judicial review, embedded in that statute, that revitalizes the role of the courts in telecommunications law; and far better information about what network operators are actually doing.
The next Administration could make bipartisan progress on telecommunications policy, given how much interest there is in this subject around the country. I know, it isn’t the Iraq war, but a better approach to this subject could conceivably help this country’s economic growth.
And at least we won’t be going backwards upside down.
Weird boxes
With the help of one of my colleagues, I’ve been going through the history of the Computer Inquiries and all of the regulatory muttering that goes into the “information services”/”telecommunications services” dichotomy.
What a strange story of subversion.
We started off, back in the 60s, with a real fear of dominant telephone companies manuvering/leveraging their way into data processing businesses. So we (basically) cordoned off data processing as a separate business and kept the telcos out.
Then, about 20 years later, the telcos pointed out that they needed to use computers to run their managed networks, and so we let them into the (unregulated) data processing business on the condition that they operate these businesses using separate subsidiaries - at about the same time, we set up a distinction between “basic” transmission services and “enhanced” everything else, and solemnly declared that everything was either one or the other. (That same distinction gets enshrined in the Communications Act as the “information”/”telecommunications” dichotomy.)
Then, about 20 years after that, we decided that internet access was an “information” service and so not covered by any nondiscrimination obligations.
What?
The entire early history of this basic/enhanced distinction was based on the premise that of course there would be common carriage transmission services - they’d always be around - and all we were doing was making sure that those carriers wouldn’t be able to leverage their position in society (and their market power!) into new markets.
Now we’ve got carriers with enormous market power, none of which provides naked internet access. They’re all selling bundles of services. So competition for this access is mild at best - no one can compare prices and speeds across varying bundles. The telcos are getting rid of copper. There’s no regime of common carriage. We have no nondiscrimination rules for any form of internet access at this point.
We took a distinction designed to retain the key role of common carriage and subverted it - all carriage is now proprietary and discretionary, because everything has been jammed into the “information service” box. That box was created to shield a new industry from the depredations of an older one. Now the older one has managed to get into the box itself!
The “data processing”/”new market” idea is completely lost. The definitions in the 1996 Act of “information services” etc. are now construed with care as magical/determinative language, with zero context or history.
It would be good to start over.
Freedom to Connect — remarks today.
Many thanks to David Isenberg for inviting me to speak today. Here is a copy of my notes for today’s talk.
Life is short, so I have put on the screen an image of a clock whose hands are close to midnight.
It’s always good to have a sense of urgency, both in movies and in talks like this one. And to face the big questions.
Here’s one: What makes a life significant? There’s an essay by William James with this title that I look back to. James says that some inner ideal is necessary - and that the ideal should be a product of the intellect somehow, and be the subject of conscious reflection, and be novel rather than everyday.
An ideal by itself doesn’t make a life significant. It has to be joined with active will - courage - endurance.
These kinds of ideals, and that kind of will, are present in each of us, and in the people we deal with (no matter what company they work for). And so it is never a good idea to have disdain for the person you meet based on his/her affiliation; that person probably has ideals of his/her own, and a significant life.
Here’s another image of that clock whose hands are close to midnight. My father’s life is slowly drawing to a close, not this month, not next month, but someday. When I visit we listen to music together - Mahler’s 10th symphony, or Beethoven piano sonatas, or Bach organ pieces. He is a composer, and for him the ideal is music - pure human expression.
So I’d like to try to draw together (1) music as an ideal and (2) the great subjects of this conference, while making my short talk as human as possible. There is nothing more human than music; every culture has it.
The key questions on which people here often focus are prompted by the fact that access to the logical architecture that is the internet is now provided in this country by very large companies that we broadly call “network operators.”
It’s well known that there is inadequate competition for network access, but it’s also pretty clear that there is no single provider of these services in the U.S.
Instead, we have a condition of oligopoly. This means that there are few sellers of this access, and all of them act while considering the profits of their industry as a whole. Any one firm may cut its prices slightly, and all the other firms will likely follow, but we will never see real price competition, or price wars, because that would destroy this industry.
There are two unspoken conventions that exist: never use price as a weapon, and ensure that there are significant barriers to entry for new competitors. So the prices they charge don’t reflect the ebb and flow of user demand. Also, the access products of these oligopolists are not completely substitutable - their bundles are not exactly alike. Nonetheless, even oligopolists want to extend their market share, and so we see a great deal of emphasis on persuasion and advertising to make users choose their product.
These actors have enormous market power, different in degree only from that of a true monopolist. It is the same kind of power.
What do we do about this? Well, an antitrust remedy probably would not work; we would be indicting the entire fabric of the U.S. economy, which relies on many sets of oligopolistic players. And these particular network operators are not colluding in classic antitrust fashion; instead, they are merely acting with the interests of the entire industry in mind. Their prices are different enough to withstand antitrust scrutiny; they adhere to the letter of the law.
So what other actions could we take? Perhaps we have been too stuck on the competitive model. We have been too convinced that other companies will constrain these network operators to act in socially appropriate ways.
We need to think differently, and this is where both music and John Kenneth Galbraith come in.
He pointed out that although in the competitive world we think that other lateral competitors will ensure that action of market-dominant actors will ensure that behavior is socially desirable, instead in this oligopolist world restraint on private power comes from the opposite side of the market. From retailers of the “product” (here, internet access is the “product,” so retailers are ISPs) or consumers or users of that product. His name for this constraining power was “countervailing power.”
So let’s explore countervailing power. Could it come from retailers?
No, not really. In the network operator’s world, they are sufficiently vertically integrated, and have been sufficiently assisted by regulation in this vertical integration, that the retail level of ISP no longer exists.
So where should such countervailing power come from to protect all of us from oligopolist providers?
Whatever direction we end up going, be it structural separation or a nondiscrimination rule enshrined in a statute, we will need the countervailing power of users/consumers.
User power needs to be organized in response to the network operators’ power. It needs to be aggregated and made visible. Without it, we’ll have no votes, no policy changes, and the oligopolists will be able to continue to act with unfettered discretion.
We can be as smart as we want to be, but without user power we will have nothing.
How do we gather together this user power? We need to have users tell their own stories — not about technology, not about gadgets, but about how their own ideals have been joined to action (facilitated, made possible) by access to the internet. Each of us has these ideals. Our challenge is to show the world how access to the internet has made significant lives even more significant.
And here is the music tie-in - Galbraith, our friend with the countervailing power, always led the singing on New Year’s Eve.
Again, life is short. And because it is, if I get hit by a bus tomorrow I want to have asked you to do some local act on OneWebDay. OWD came out of a meeting much like this one. It came from Isenberg, Weinberger, and Searls as well as me. We’re now in the third year of OWD. It’s out of character for me to be working on this. It’s a simple idea, a soft idea, an idea that takes a lot of sales - and I am terrible at sales. I’m not naturally suited to leading a movement, and I am unsure of everything except the idea that people are basically good. Which is why I need your help.
The idea behind OneWebDay is that it is an Earth Day for the internet. We are trying to create a global constituency that cares about the future of the internet. We’re emphasizing the positive impact of the internet on human lives, and reflecting on the threats to the internet around the world (censorship, controllers of different kinds) and what we can do about them. It is a day for local concerns to be paramount, but there are events around the world and online.
Each talk can have only one idea in it, and here is the point of this talk. We need to create countervailing power, and that power will come through users. OneWebDay gives us a chance to build the countervailing force that is needed. We are lucky to have our work and our lives so intertwined; and in our short lives, there is a great debate about the future of the internet going on. The key source of countervailing power that has not yet been called on yet - called to itself - is a kind of human music. I am asking you to assist in drawing out those stories.
Needed: Votes
I’m at the Tech Policy Summit. There was a particularly good panel yesterday that included Tod Cohen and Ken Kay talking about what it takes to do effective policy work. Tod’s quite blunt: “Do you vote?” That’s the question he asks people who want to do policy work with Ebay. You have to love politics, he says, to be in this business. It’s all about incremental advances and relationship-building.
Without votes, nothing happens. Just being smart or persistent won’t make any difference.
It’s sobering. Who has votes for an open internet?
I certainly believe in my side of the argument, and I even think that we’ll have all kinds of economic data that shows that having private gatekeepers with power over a general-purpose network won’t be good for the rest of us. But sometimes I feel like I’m part of the Folk Song Army. Do you remember that Tom Lehrer song?
We are the Folk Song Army
Everyone of us … *cares*
We all hate poverty, war and injustice
Unlike the rest of you squares/ D - G - / A7 - D - / B7 - Em - / D A7 D A7 /
. . .
If you feel dissatisfaction
Strum your frustrations away
Some people may prefer action
But give me a folk song any old day/ F#m - C#m - / / G - D - / Em - F#7 - /
….
Remember the war against Franco
That’s the kind where each of us belongs
Though he may have won all the battles
We had all the good *songs*/ C# - D - / - - C# - / :
So join in the Folk Song Army
Guitars are the weapons we bring
To the fight against poverty, war, and injustice
Ready, aim, sing!
To avoid being a kind of Folk Song Army, we need leadership, votes, and constituents telling stories. FreePress, PublicKnowledge, and SaveTheInternet work at this very hard.
Why Block C matters
Today the FCC announced the winners of the 700 MHz auction - and you can see from pp. 62-63 of this document that Verizon won Block C. (Block C was set up in two nationwide paired blocks of 11 MHz each, which were auctioned off in very large geographic areas—12 licenses, each covering a “Regional Economic Area Grouping”. Verizon won seven of the twelve licenses, covering all of the US except Alaska, Puerto Rico, American Samoa, Guam, and the Northern Mariana Islands.)
Why does this matter?
Context. The 700 MHz auction happened at a particularly interesting time in communications history. Traditional telephone use is shrinking and the cultural sway of broadcasters is diminishing, while Internet use and cellphone use are growing quickly. Although the telecommunications industry has long been divided up into different silos (cable, broadcast, telephony, data), all of these segments are arguably converging into one packet-switched communications realm. Highspeed packetized communications are becoming the key communications medium.
The central question is which model of packetized communications will prevail: Will we converge on a set of proprietary, walled-garden networks, in which the network provider acts as a gatekeeper by deciding which communications (in terms of content, application used, protocol used, how expensive they are) move easily across its network and onto the (authorized) handsets of users (the cellphone model), or will we converge on the Internet model, in which the network provider makes available an interconnected, commodity, nondiscriminatory transport service (essentially, a utility connectivity product) on which competitive communications travel that can be introduced without the knowledge or permission of the network provider and can be accessed via any handset?
The answer. Verizon’s victory in obtaining the C block in this auction means that, for a while at least, the “cellphone” model of Internet access will hold sway - particularly as we move in greater numbers to experiencing Internet communications via mobile handsets.
More background - Verizon was already an almost unbeatable oligopolist. Verizon already had national spectrum licenses before this auction began. The commercial wireless industry in this country began in 1981 when the FCC issued two free cellular licenses in the 800 MHz range for each “cellular marketing area” (or “CMA”) in the country. There are 734 CMAs in the U.S., and this regulatory limitation to relatively-small geographic areas for the licenses (and to only two competitors for each geographic area) meant that cellular technology remained expensive and not widely used. But the operators that were handed these early free “beachfront” 800 MHz licenses retained them, and now (through mergers and sheer staying power) Verizon Wireless and AT&T have most of them.
The most important service attribute for experienced cellphone users is coverage – the availability of reliable signals. Verizon Wireless and AT&T offer the best nationwide coverage, because they held onto those “beachfront” 800 MHz licenses and snapped up smaller carriers. As a result, Verizon Wireless and AT&T experience both much lower “churn” (dropped subscriptions) and much higher rates of “net adds” (new subscriptions) than the third largest carrier, Sprint. Indeed, Sprint is rapidly losing customers. The enormous barriers to entry involved in providing nationwide service, their vast spectrum holdings, and the substantial economies of scale of wireless service generally, make Verizon Wireless and AT&T almost unbeatable oligopolists.
The myth of the “third pipe.” When it comes to highspeed Internet access, current wireless offerings from Verizon Wireless and AT&T do not compete directly in terms of speed or cost with the dominant wireline (DSL, fiber, and cable) transport offerings – which explains why 96% of all residential highspeed Internet access connections are sold by regionally dominant DSL or cable companies. Existing (pre-auction) wireless highspeed Internet access connections cost at least twice as much as a DSL or cable connection, and operate at only a fraction of the speed. Residential highspeed Internet access subscribers simply do not cancel their subscriptions in order to sign up for wireless highspeed access via handsets, because these services are not (currently) substitutable.
At the same time, the dominant existing national wireless carriers, AT&T and Verizon, (1) are controlled by the same incumbent actors that control DSL access through regional monopolies across the country and (2) offer wireless services as part of packages that tie together traditional phone services, Internet Protocol Television (IPTV) access, and internet access. In a nutshell, the leaders in mobile wireless are owned by the same companies who control the DSL marketplace and are, like their corporate parents, choosing to avoid direct competition for highspeed Internet access by bundling three or four services together (voice, video, data) and differentiating their offerings based on their voice or video elements.
Given this situation, in which 96% of residential wireline highspeed internet access is provided by regionally dominant DSL or cable companies, and wireless communications are largely provided by two oligopolist players who are in turn owned by wireline companies, the dominant providers of internet access services in this country, both wireline and wireless, have ample market power to nudge users towards the proprietary, cellphone, managed model of packetized highspeed communications. These carriers, just like all makers of potentially-commodified information goods, have substantial incentives to both lock their customers in with high switching costs and to differentiate their informational offerings from those of other companies running across their network. They obviously also have great incentives to avoid cannibalizing their own wireline highspeed internet access market dominance.
It wouldn’t have been possible to create a “third pipe” competitor through the 22 MHz available in the national C block. That much spectrum just can’t carry enough data to compete with DSL or cable. But this 700 MHz spectrum might have been able to support long-range provision of wireless highspeed Internet access in (1) areas where faster “wired” DSL or cable Internet access is not available, or (2) for personal, portable wireless uses. And it might have been able to do this while requiring far less capital expenditure for the building of transmission towers than for higher frequency bands.
Most importantly, if someone other than Verizon or AT&T had won this auction, we would have seen a test case for non-cellphone model Internet access.
But we won’t. During the wrangle over the auction rules, Google and others proposed that this spectrum be made available on a wholesale basis - so that the licensee would be obliged to sell access to its network on a wholesale basis at commercial rates. This would mean that any ISP could come and buy bandwidth and build its own business. Everyone would share the same transmitter and neutral connection, but ISPs would compete on price and the services they offered to their customers.
This kind of approach has led to dramatic competition for the provision of highspeed Internet access in Europe.
But even though the incumbents (Verizon and AT&T) could have accepted this limitation, won the auction, and then priced wholesale access at a high level (thus discouraging anyone from using it), avoiding the precedent of wholesale access – and retaining the cellphone model of access – was their central goal. And they achieved that.
Now, the FCC did mandate that any winning licensee have in place “no locking” and “no blocking” provisions conditioning its use of this spectrum:
Licensees offering service on spectrum subject to this section shall not deny, limit, or restrict the ability of their customers to use the devices and applications of their choice on the licensee’s C Block network, except:
(1) Insofar as such use would not be compliant with published technical standards reasonably necessary for the management or protection of the licensee’s network, or
(2) As required to comply with statute or applicable government regulation.
As I’ve said here before, these no-locking, no-blocking requirements are hedged in by substantial limitations: Verizon will be able to lock and block devices and applications as long as they can show that their actions are related to “reasonable network management and protection,” or “compliance with applicable regulatory requirements.” We’ve already seen how loosely “reasonable network management” has been interpreted in the Comcast fracas.
Verizon has said that all of its wireless operations will be “open” and that it will allow any device to attach to its network. But. Verizon has also insisted on retaining the ability (1) to privately “certify” applications and devices for use on its network (a process during which a great deal of mischief is possible, as we know from the pre-Carterfone days), (2) to sell heavily-subsidized handsets of its partners in its retail stores (which will make it unlikely for competing, full-price handsets to be popular), and (3) to prioritize its proprietary or charged-for content over “ordinary” Internet traffic.
The bottom line. Verizon has won spectrum it arguably didn’t even need, given its existing spectrum holdings. It retains the discretion to act as a traditional cellphone-model company - picking and choosing among applications and devices, underselling “open” devices, and discriminating against traffic that undermines its business model. This isn’t great news for the Internet model of access.
On the other hand, openness is more popular and more talked-about than it used to be. It may be that the pressure of consumer preferences makes Verizon provide a truly open Internet and truly open devices to the rest of us. (The pressure of competition won’t be doing that - AT&T and Verizon have divided the U.S. between them, and the other players in the wireless space are far behind.) The Android project, Verizon’s own words about openness, and concerns about the place of the U.S. in the international race for innovation may all push towards a more open future.
We’ll see. The results of this auction don’t suggest that we’ll be seeing such a move any time soon.
Thursday links
The House Commerce committee investigation of the FCC continues. According to the Washington Post, a detailed letter signed by Rep. Dingell has gone out to the FCC asking for a host of documents that (among other things) relate to “management practices that may adversely affect the Commission’s ability both to discharge effectively its statutory duties and to guard against waste, fraud, and abuse.” This is serious - business as usual at the Commission must be under severe pressure, and the idea of real structural reform of the Commission (and perhaps a new telecommunications act) can now be talked about with some confidence. This won’t happen now, but it could be happening a year from now.
According to CDT, the House should approve H.R. 3773, the FISA Amendments Act. It requires prior FISA court approval of surveillance procedures (if not of actual surveillance), ongoing judicial oversight of compliance with those procedures, does not grant retroactive immunity to the carriers, and has a Dec. 31, 2009 sunset.
I’m feeling prescient (or maybe just trend-aware) about yesterday’s post - today, WIRED has a substantial article covering a music industry notion of charging highspeed internet access subscribers a levy for access to music. Never mind that it’s impossible to figure out who’s doing what - particularly if everyone starts encrypting their communications. Never mind that the network access provider may not be shielded from liability if it starts looking at every transmission. As the article concludes, the music industry’s feeling is:
Pay up. . or we’ll sic Washington on you — and London and Paris and anybody else we can find.
The rock star, the Christian Coalition, and NN
Yesterday’s House Judiciary hearing (witness statements and archived video here) had a deeply political angle - what committee should have jurisdiction over network neutrality issues - but also revealed to me that:
We’re seeing the moment when Hollywood, law enforcement, and the network access providers publicly attempt to join hands in favor of monitored/monetized network access.
I loved meeting Damian Kulash and hearing him testify. His opposite number (for purposes of the hearing) was the president of the Songwriters Guild, Rick Carnes. Carnes was there to talk about piracy, p2p file-trading destroying his industry. Here’s the angle, from Carnes’s point of view: isn’t it true mandating neutral internet access won’t allow network access providers to watch for copyrighted files?
And then there was the “but what about pornography” line of questioning. Although the Christian Coalition representative, Michele Combs, was there to testify about the importance of neutral network access for speech of all kinds (and it was great to see the alliance with the ACLU), the direction of questioning seemed to be: isn’t it true that mandating neutral internet access won’t allow network access providers to watch for nasty files of various kinds?
There are many responses to both of these points.
Copyright infringement is a judgment call, not something that can be figured out automatically at the network level;
screening for infringing files will make the last mile grind to a halt;
network access providers will lose their immunity from copyright claims if they search for these files;
given the concentrated market for internet access, the idea of screening for (and filtering out) particular content creates the opportunity for a great deal of anticompetitive mischief;
content-layer applications are a far better place for this kind of screening - they know what artists they have licenses with, and they can actually respond to notices under the DMCA structure.
On the indecency etc. front, same kinds of arguments:
there’s a dramatic risk of overblocking, threatening innocent speech;
it’s impossible to tell in advance which packet bears the “wrong” kind of flesh tones;
screening will cause the last mile to grind to a halt;
network access providers already cooperate with law enforcement;
we should go after behavior, not tech mandates that will burden all uses of the network;
etc.
But it’s a concerted theme. Avoid network neutrality by summoning up all the evils that it will loose upon the world. Never mind that law still applies online, and that the idea of neutral access is not predicated on facilitating unlawful activity; never mind the costs to all users of creating a carefully (and invisibly) filtered access regime; never mind the outright impossibility of the task - just do it.
It seems to me that it is not in the long-run interests of network access providers to be too closely tied to any particular content industry representative, or set of representatives, given the dramatic change in liability risk that such a partnership represents; it also seems to me that it is not in the long-run interests of law enforcement to push users towards a dramatic uptick in the use of encryption technologies; and it seems clear that it is in no one’s interest to establish a kind of private police force in this highly-concentrated market for highspeed internet access. Mischief, unaccountability, arbitrariness, censorship for commercial reasons - why would we want this?
I had my picture taken with the guys from OK Go. It was an interesting hearing. I’m hoping that these various industries discover their differing interests soon.