Monday, November 03, 2014

Thinking the Unthinkable - Part III

Nothing has changed my mind that it would be “unthinkable” for the FCC to classify Internet service providers as common carriers under Title II of the Communications Act, the part of the 1934 communications law derived directly from the Interstate Commerce Act of 1887. The purpose of the Interstate Commerce Act was to constrain what was then seen as the monopolistic power of the railroads. The railroads were deregulated in the 1980s – long before the emergence today’s broadband Internet providers.

In the first paper in this series, “Thinking the Unthinkable: Imposing a ‘Utility Model’ on Internet Providers,” I explained why, as a matter of domestic policy, it would be wrong to regulate Internet providers under Title II. In the second, “Thinking the Unthinkable – Part II,” I explained why classification of Internet providers as common carriers here in the U.S. likely would have substantial adverse consequences abroad as other countries use the FCC’s pro-regulatory action to justify their own Internet regulation designs.

In this third piece, I wish to focus further attention on the real-world impact of Title II regulation (or even rigid, inflexible non-Title II regulation) by taking the Title II advocates at their word regarding what they demand. In doing so, I hope to encourage those inclined to align themselves with the Title II advocates to understand the import of such alignment. And I hope to get the general press to ask each FCC commissioner whether he or she agrees with the Title II advocates that particular service offerings that the Title II advocates say should be banned as discriminatory and inconsistent an Open Internet should, in fact, be banned.

As the time for a potential FCC votes nears, it’s time to talk about real cases with real consumer impacts, rather than simply regurgitating open-ended mantras concerning preservation of an “Open Internet.”   

For this purpose, here I’m going to copy in this excerpt from my August 26 FSF Perspectives titled “Net Neutrality v. Consumers”:

In the cause of furthering such consumer understanding, let’s begin by reviewing excerpts from recent Wall Street Journal stories about new wireless pricing plans offered by Sprint and T-Mobile.

·      “For about $12, Sprint Corp. will soon let subscribers buy a wireless plan that only connects to Facebook. For that same price, they could choose instead to connect only with Twitter, Instagram or Pinterest—or for $10 more, enjoy unlimited use of all four. Another $5 gets them unlimited streaming of a music app of their choice.”  “Sprint Tries a Facebook-Only Plan,” Wall Street Journal, July 30, 2014.

·      “T-Mobile US Inc. will let customers listen to several popular music services without counting it toward their data use, giving up a potential revenue source to bolster its subscriber base. The country's fourth-largest wireless carrier said it is going to waive data charges when subscribers use services like Spotify, Pandora and Rhapsody.”  “T-Mobile Will Waive Data Fees For Music Services,” Wall Street Journal, June 18, 2014.

Each of the plans announced by Sprint and T-Mobile would appear to be attractive to consumers. In one way or another, they all offer subscribers additional choices for accessing services the subscribers wish to enjoy at a price lower than otherwise would be available or, alternatively, without incurring data usage charges that otherwise would be incurred. In the latter instance, such as the T-Mobile’s “Music Freedom” plan, this feature has become known as “zero-rating” because data usage charges do not apply when subscribers access sites covered by the plans.

I do not know whether these new wireless plans ultimately will prove successful in the marketplace, which continues to evolve at a rapid pace. But I have not heard of any meaningful consumer discontent with the plans. To the contrary, I surmise that consumers welcome the additional options, especially low-income or budget-conscious consumers who either are unable or unwilling to pay for wireless plans that are not limited in some fashion.

Leading Title II advocates are opposed to these plans on the basis that they discriminate by picking and choosing certain “edge providers” to favor, say Facebook over the “next-Facebook,” or certain music sites over others, or music sites over poetry sites.

In my “Net Neutrality v. Consumers” essay, you can see for yourself the statements by Free Press’s Matt Wood and Public Knowledge’s Michael Weinberg opposing these T-Mobile and Sprint wireless plans as inconsistent with their understanding of an Open Internet. And in the FCC’s Open Internet Roundtable (“Tailoring Policy to Harms”) in which I participated, Julie Veach, FCC Common Carrier Bureau Chief, very perceptively zeroed in on this issue right after the opening statements. You can view my exchanges with Mr. Weinberg and also with Stanford law professor Barbara van Schewick regarding the so-called “zero-rated” plans here beginning at the 33 and 93 minute marks. You’ll see they object to the plans.

It is possible, of course, to imagine other “zero-rated” or “sponsored data” plans, or other hypothetical offerings of a different variety, that similarly would run up against the Title II advocates’ claim that they are discriminatory and, therefore, should be banned. But we don’t need to imagine other hypothetical examples because we have real-world offerings to which they object.

To be clear, in my view, in light of the competitive environment, spectrum constraints, and unique technical requirements, the Commission should not extend any new net neutrality mandates to wireless providers. The costs of doing so very likely will exceed the benefits to consumers.

In thinking about imposing new net neutrality mandates, the current Commission Democratic majority appears to have a pronounced proclivity to elevate supposed potential harms to edge providers (especially non-existent ones, such as the “next Google or next [fill in the blank”]) above real-world consumer welfare benefits. So, Chairman Wheeler and each commissioner should consider whether they too, like the stringent Title II advocates, think that plans like those of T-Mobile and Sprint described above should be banned as discriminatory – despite the fact that, as far as I can tell, they may be attractive to consumers, especially low income consumers. (I am not suggesting that these particular plans will ultimately succeed in the marketplace, only that consumers will not be harmed by the providers’ seeking to meet perceived consumer demands.)

If the three Democratic commissioners think such apparently consumer-friendly plans should be banned, then perhaps, David Farragut-like, they should just proclaim, “damn the torpedoes, full speed ahead.” But make no mistake: In actuality, they will not be moving ahead, but retreating into last century’s world of legacy regulation, confining Internet providers into the strictures of a common carrier public utility-like regime.

If, on the other hand, the commissioners see the merit of allowing Internet providers to experiment in the marketplace by making available innovative, consumer-friendly service options such as the T-Mobile and Sprint offerings discussed here, perhaps they will slow down and think twice about the wrong direction the net neutrality proceeding seems to be headed.

PS – Oh yes, and perhaps some enterprising member of the press will actually ask the commissioners whether they agree or disagree that plans like T-Mobile’s and Sprint’s should be banned.