The FCC passed a net neutrality rule last December to prevent service providers from treating different types of Internet traffic differently. A "resolution of disapproval" raised in the U.S. Senate attempted to prevent the FCC from making rules about net neutrality, but that resolution was struck down last week by a slim margin of Democrat votes. It was a major victory for net neutrality, but should anyone care?
Not really. But before I explain why, here's some context for non-policy-wonks.
First, why do telecom service providers object to the December 2010 FCC net neutrality guidance? They say it prevents them from engaging in necessary "traffic management." In its most innocent form, traffic management can be used to make sure that malfunctions by endpoints don't unduly affect other endpoints. But a carrier could also use traffic management to gain an unfair advantage over competitors. For example, AT&T could slow down Vonage traffic in order to show its customers that AT&T's VoIP service is far superior. Or cable operators, freaking out customers defecting to Netflix, could create a bad Netflix customer experience.
Second, was the FCC addressing an actual problem? Kind of. In 2008, Comcast used traffic management techniques to stop customers from using peer-to-peer file sharing, which it argued was placing a heavy burden on its network for which it wasn't being compensated. The FCC objected and sanctioned Comcast. But in April 2010, a federal appeals court said the FCC had exceeded its authority. The net neutrality rules passed last year and now due to go into effect on Nov. 20 will ostensibly give the FCC that authority.
Third, what exactly is a "resolution of disapproval?" Was Congress going to wag its fingers at the FCC? Well, no, a resolution of disapproval by Congress is really a veto of the agency's rule. If the resolution were to pass, "the rule may not take effect and the agency may issue no substantially similar rule without subsequent statutory authorization." So, yes, those in Congress who voted against the resolution did in fact save net neutrality.
Net Neutrality Treats The Symptom, Not The Disease
The problems that would be created by a lack of net neutrality are generally monopoly-related. That is, should network operators have the right to slow down various types of competing services? Most reasonable people would say no. After all, is it fair to essentially control the network infrastructure and also compete with smaller businesses that rely on that infrastructure?
This theoretical problem becomes a real one in the broadband market, because in many parts of the country there are at most two choices for last mile service. As I've argued before, having two providers (telco and cable) in an area doesn't constitute a free broadband marketplace. It encourages cronyism, even collusion.
Net neutrality is a divisive issue. Fans think the FCC's rules will head off monopolistic practices. Critics think it's yet another government intrusion into a flourishing market. It will continue to be a divisive issue, and we'll spend a lot of time and taxpayer money on it. So why don't we agree to disagree and just broaden the marketplace?
[ Read another opinion on this topic. FCC's 'Net Neutrality' Scam Is Dead On Arrival ]
The right way to proceed is to emulate Europe: Unbundle the middle mile network from the last mile. That is, don't let the same entities that control the middle mile compete in the last mile market. The middle mile--between the cable company and phone company--is a commons. There, the providers don't overbuild fiber optic; they do fiber swaps.
If we had privatized the U.S. highway system and the companies that owned the roads and set the tolls also competed in the trucking market, how much real competition would exist in trucking? Not much.
In an unbundled network, the middle mile carrier's only incentive to do traffic management would be to rectify traffic that interferes with network operation--malfunctions, malware, etc. Under this model, the last mile carrier can manage traffic as much as it wants. If it's too onerous, it will lose customers to competitors. If middle mile providers are only in the business of providing middle mile bandwidth, then they have no incentive to engage in monopolistic manipulation of Internet traffic. Problem solved.
Unbundling requires regulation. But we already regulate local exchange carriers in a complicated and obtuse way. Rewriting and condensing those regulations to create more of a clean break between middle mile and last mile carriers would be a welcome simplification.
Interestingly, even the InformationWeek readers who violently disagree about the FCC's new broadband plan agree on one point: that centralizing the Internet backbone might make sense, in the same way that the Interstate highway system is centralized and controlled by the government. We all understand that some level of government control is needed for critical, common infrastructure. Would citizens put up with a proliferation of telecom poles and massive digging in their neighborhoods simply because there was no centralized infrastructure for broadband? No. Middle mile infrastructure shouldn't be replicated, just as highways shouldn't be.
Even the fans and critics of municipal networks would be pleased. Municipalities could build middle mile networks in places that need them, or make wholesale deals with providers and benefit operationally from them by connecting firehouses, police stations, and other anchor institutions. But they couldn't offer retail service, which is what the incumbent carriers and other critics object to, saying--correctly, in my opinion--that the government shouldn't be competing in the retail market against them.
Governments, for their part, generally offer municipal networks only when there's a perception that the private sector isn't innovating. So governments wouldn't even want to offer retail if there's fair access to the middle mile, letting multiple last mile entrepreneurs compete.
Bottom line: While the FCC has gained a temporary victory in Congress, it can expect substantial legal challenges as it tries to enforce net neutrality rules. Net neutrality is a distraction. Consumers would be better served if the FCC focused on unbundling, increasing broadband choice, decreasing costs, and creating conditions in which net neutrality is unnecessary.