Will end of net neutrality rules impact future innovation?

January 15, 2014 at 6:17 PM EST
The FCC's net neutrality rules were adopted to guarantee equal access to all sites on the Internet. But an appeals court ruling releases broadband providers from those guidelines, allowing them to prioritize certain traffic. Hari Sreenivasan talks to Craig Aaron of Free Press and former FCC Commissioner Robert McDowell.
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JUDY WOODRUFF: Now the fallout over a big decision that may change how the Web works and the future of so-called net neutrality.

Hari Sreenivasan is our guide, beginning with some background.

HARI SREENIVASAN: Net neutrality is the idea that broadband Internet service providers, Comcast, Time Warner Cable, Verizon and others, should treat everything that flows across the Internet equally. That means preventing service providers from creating fast lanes for sites they have business ties with, such as streaming video services like Hulu or Netflix, and slowing access to others, like Amazon.

It also means not charging more for YouTube and other sites based on their heavier bandwidth use or in exchange for faster speeds, all of which could affect what consumers see online, how fast, and at what price. The principles were set out by the Federal Communications Commission nearly a decade ago.

The agency enshrined them in its Open Internet Order adopted in 2010. But Verizon sued to challenge the agency’s authority, and, yesterday, the U.S. District Court of Appeals for the District of Columbia found the FCC acted improperly. The 81-page ruling said the agency is wrong to classify Internet service providers as information services, but at the same time regulate them as common carriers, meaning as it does telephone and utility companies.

While the FCC decides whether to appeal, Amazon and others are watching to see if the broadband networks impose their own rules, favoring some content companies over others.

For its part, Verizon issued a statement yesterday that said, in part: “Verizon has been and remains committed to the open Internet. This will not change in light of the court’s decision.”

The ruling doesn’t apply to wireless services accessed through mobile devices, which represent a growing share of the market.

We have two views on this.

From Washington, I’m joined by Craig Aaron, president and CEO of Free Press, a nonpartisan, nonprofit media reform group, and Robert McDowell, a senior fellow at the Hudson Institute. He served as a commissioner on the Federal Communications Commission from 2006 to 2013.

Craig Aaron, I want to start with you.

You have called this a dangerous development for the free Internet as we know it. Why?

CRAIG AARON, Free Press: Well, I really think this court decision puts at risk so much of what we love about the Internet.

With these rules being invalidated, it really leaves consumers at the mercy of phone and cable companies, who are now free to block websites if they want to, interfere with traffic, favor certain sites and services over other sites and services. And I think that’s bad news for the average Internet user, that the agency that is supposed to be protecting them has been told it has no oversight of the most important communications network of the 21st century.

HARI SREENIVASAN: Robert McDowell, you were against these rules even when it was proposed back when you were on the commission. You think it is a good thing.

ROBERT MCDOWELL, Hudson institute: That’s right.

First of all, thank you for having me on. Apologies to Judy Woodruff for not wearing my Duke University tie tonight.

(LAUGHTER)

ROBERT MCDOWELL: But, in any case, actually, I did vote against these.

Consumers actually have ample protections if there is going to be anti-competitive conduct. Basically, the Internet before December 21, 2010, which was the vote on this order, was blossoming beautifully before that. It is going to blossom beautifully after this, but there are antitrust laws, there are consumer protection laws. The Federal Trade Commission has a lot of authority.

The Federal Communications Commission actually still has a lot of authority even under this case and through merger reviews and other things. States attorneys general, the plaintiffs bar, if anything is going to happen, there is going to be massive class-action suits. So consumers have a lot of arrows in their quiver to protect them.

HARI SREENIVASAN: Robert McDowell, staying with you for a second, there seems to be an issue in this case on whether the Internet is a luxury or whether it’s a utility, like so many other countries around the world perceive it and even parts of America do. So, if it’s a utility, should it not be regulated like one?

ROBERT MCDOWELL: It’s neither a luxury nor a utility.

And I think actually our communication laws need to be updated to reflect this new age. We’re still built on a foundation, our laws are still built on a foundation that goes back to 1934, and really the 19th century, of regulating monopolies. And the market is much more dynamic and just different the way it works technologically.

So I think we need to have a fundamental, constructive conversation with Free Press, myself, anyone who is interested, about how the new laws should look so that consumers are protected and that we also can foster innovation and investment.

HARI SREENIVASAN: Craig Aaron, what about that idea of innovation? And in this particular case does this actually increase or decrease innovation…

(CROSSTALK)

CRAIG AARON:  Well, I think it’s potentially very harmful to innovation, because the beauty of net neutrality is that it created that even playing field, where anybody out there with a good idea, with a new product or service had just as good a chance as anybody else to find an audience on the Internet.

You get rid of net neutrality, and all of a sudden all those innovators need the permission of a Verizon or an AT&T or a Time Warner Cable to have their product or service reach an audience. So I really worry that the next Google that is being built out in a garage somewhere today isn’t going to get the same chance to build a business, to thrive online that the dominant players have, and that this decision will actually lock in the power of those dominant players over consumers.

HARI SREENIVASAN: Robert McDowell, what about this idea that the cable company or the person that brings me that Internet, the last mile, they have essentially been thought of as almost the infrastructure folks, the piping guys? This seems to give them a tremendous amount of gatekeeper possibility and power.

ROBERT MCDOWELL: Actually, if a last mile provider were to do what Craig outlines, there are a number of government hammers that would come down on them. That would be sort of a de facto kind of showing of market power and abuse of that power that results in consumer harm.

And there are a number of laws that would come down to prevent that from happening or to cure it from happening. But you are absolutely right to point out that actually technology is evolving. And things are converging. The concept of the edge, where we have applications and content, is also merging and converging with the so-called core of the Internet, where there are now intelligent networks.

And we have unlicensed spectrum. We have the wireless broadband market as the fastest growing segment of broadband that we didn’t have 10 years ago, when net neutrality first started to become a debate. And so consumers have some choices at their fingertips to help keep the marketplace wonderfully chaotic in a positive and constructive way that I think acts as a counterbalance to any possible incentives for anti-competitive conduct.

But if there were anti-competitive conduct, again, there are a lot of laws that can be used to help correct that situation.

HARI SREENIVASAN: Craig, what about the idea that the market will take care of it if there is bad behavior?

CRAIG AARON:  Well, I think the problem is, is that we don’t have enough competition.

Most Americans have at best two choices for high-speed Internet service at home. Many of them are saddled with just a single choice. When all these companies are saying they’re going to block or discriminate or are free to block or discriminate, there is really nowhere else for consumers to turn.

So, I think we need a Federal Communications Commission serving in a role of a watchdog, being on the beat, having the authority to step in if necessary. If there aren’t any problems, they won’t need to step in. But the idea that we should strip away all these protections and be told by these companies that we should just trust them, I don’t think they have yet earned that trust.

ROBERT MCDOWELL: Can I interject just really quickly?

HARI SREENIVASAN: Sure.

ROBERT MCDOWELL: Not all of the protections have been stripped away.

First of all, the court left in place a new body of law under what is something called Section 706, which is untested. The commission has an avenue there. The commission also has a big avenue. Every time one of these Internet service providers has a transaction before the commission, if they want to buy new spectrum, they want to merge with another company, there are merger conditions put in place, like Comcast is living under for the next four years.

And that can help be a deterrent. So, those are enforceable. There are a lot of tools and a lot of other tools that we don’t have time to enumerate, but there are a lot of protections still in place for consumers, I don’t want people to be panicking.

CRAIG AARON:  Well, I think the most important tool, though, is what the FCC should be doing, which is reasserting its authority under the Communications Act.

The sort of dirty secret of this decision is that it didn’t come out against net neutrality. It didn’t say that was a bad idea or a bad policy. It said the FCC is doing it wrong. And the reason they lack that authority is because they gave it up themselves during the Bush administration. They abdicated — abdicated their own authority.

And they now have an opportunity to set that right. We urged Commissioner McDowell and Chairman Genachowski during his term to do just that. They failed to do it. And now we have this legal mess.

The cleanest way, the best way would be to restore that authority. And I hope that is what the FCC will do.

(CROSSTALK)

HARI SREENIVASAN: Robert, briefly, what should the FCC do?

ROBERT MCDOWELL: Well, I think the FCC should really do an inventory, work with other agencies to do an inventory of all applicable laws that could be used to protect consumers, but also restate its commitment to what we call the multi-stakeholder nongovernmental model of Internet governance.

Part of the problem of what is going on here is, as we bless more state intervention into the Internet’s affairs, this is giving fuel to regimes across the globe to do the same thing, maybe on an international level. I have an op-ed in the Wall Street Journal today about that.

HARI SREENIVASAN: OK.

ROBERT MCDOWELL: So it’s got a lot of collateral damage here.

HARI SREENIVASAN: All right, Robert McDowell, Craig Aaron, thanks for your time.

ROBERT MCDOWELL: Thank you.

CRAIG AARON:  Thank you.