The FCC and the bandwidth wars

By Steven Pearlstein
Friday, August 13, 2010; A10

As a general rule, whenever you hear special-interest groups using near-hysterical language to warn that some proposal will destroy jobs, snuff out innovation and end free-market capitalism as we know it, you can generally assume that progress is being made.

So it is with the controversies swirling around Internet regulation.

A few months back, when Federal Communications Commission Chairman Julius Genachowski proposed classifying broadband as a "telecommunications service" for purposes of defining the scope of possible regulation, you'd think from the reaction of the industry and its defenders on Capitol Hill that he was proposing a Soviet-style takeover of the Internet.

Never mind that broadband is, by any common-sense definition, a telecommunication service that includes telephone and television offerings that the FCC has been regulating for decades, plus access to this thing called the Internet that was hardly contemplated by the authors of the Communications Act of 1934.

And never mind that the chairman, a former venture capitalist with a deep entrepreneurial streak, explicitly rejected the kind of heavy-handed price and service regulation that industry critics nonetheless conjured up in a doomsday scenario envisioning a market drained of innovation and investment.

Then this week it was the ayatollahs of "net neutrality" who worked themselves up into a self-righteous lather over a compromise proposal from once-bitter foes Google and Verizon. Much of the criticism focused on a provision of the proposal that would let broadband operators set aside a portion of their networks for premium services to consumers or businesses willing to pay extra -- metaphorically, a toll lane on the information highway.

In rejecting the Google-Verizon compromise, net-neutrality zealots predicted that the open, democratic first-come, first-served Internet would give way to one auctioned off to the highest bidders, whose privileged content would flow quickly and reliably while everyone else's would have to fight the stop-and-go traffic in the slow lanes.

These critics seem to have skipped over the part of the Google-Verizon proposal that explicitly prohibits "paid prioritization" of Internet content, at least for wired connections. Also the part that would require that companies offering new premium services do so only if they can maintain the quality of service on the open, public Internet.

They also seem to have forgotten that various forms of tiered service have been part of the telecommunications landscape ever since the days of the old "party line," and that phone companies for years operated "private networks" for big corporations that ran alongside their public networks. Even today, as part of most broadband offerings, higher-priced television service gets priority over Internet access, which is why phone calls and TV shows don't get interrupted in the same way as a download from YouTube.

The point here is that the debate over Internet regulation has long since morphed from a reasoned policy discussion to something akin to religious warfare. Crusaders for net neutrality are determined to stop abuses that don't exist, while cable companies and phone companies are equally determined to preserve their God-given right to manage their networks in ways they now say they have no intention of doing, or offer services sometime in the future that they can't yet identify.

Precisely because this is a fight more about principles than about the real world, Genachowski is likely to be foiled in his effort to broker a consensus. At this point, it's not even clear that the public interest can be found in a compromise among these warring special interests. The better course is to take the bull by the horns, push forward with a reasonable and effective policy, defend it vigorously in Congress and the courts, and let the chips fall where they may.

Such a policy should start from the premise that some government regulation is necessary because broadband has become vital to nearly every household and business, no less so than electricity and phone service in the past. Unlike those services, which were once considered natural monopolies, broadband has developed into a natural oligopoly, with a handful of large competitors providing enough competition to justify light-touch regulation but not enough to justify no regulation at all.

The promise of the Internet -- what we might call the public Internet -- is that it allows anyone who is on it to send any type of content to anyone else at any time. As it did with earlier generations of "common carriers," the government should set minimum service standards for speed, reliability and equal access, including a "neutrality" requirement that traffic be managed on a first-come, first-served basis. Beyond the minimum standards, companies should be free to offer different tiers of service at different prices while managing their networks as they see fit, as long as prices and practices are clearly disclosed.

Beyond that basic Internet service, companies should be free to use any spare capacity in their lines and networks to offer additional private services, including priority lanes for themselves or other businesses to offer enhanced services such as movie downloads, health monitoring, home security and the like. To ensure that companies don't concentrate their investment in more-lucrative private services while letting the public Internet stagnate and degrade, the government should set a reasonable cap on the percentage of any network dedicated to private services.

If the FCC were to promulgate such rules, of course, it would immediately be criticized by members of Congress for going too far, or not far enough, or simply for exceeding its authority. To accommodate that political reality, Genachowski should make the new rules effective Jan. 1, 2012, giving his congressional critics enough time to update the telecommunications statute and legislate their own Internet rules. If they don't, they'll be hard pressed to criticize the FCC for showing leadership where they could not.

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