The Comcast Decision - Why It Matters

by publius

Assuming no last-minute shenanigans, the FCC will approve an order today reprimanding Comcast for “throttling” BitTorrent traffic (background here and here). This is extremely big news for several reasons — but primarily because it advances the ball on net neutrality in critically important ways.

For the foreseeable future, the real action on net neutrality will take place at the FCC. That’s because both the advocates and opponents of net neutrality have enough congressional support to maintain a filibuster, but not enough to overcome one.

So at the FCC level, there are two primary obstacles to imposing real net neutrality requirements — (1) legal; and (2) political. Tomorrow’s decision will help on both fronts — and will help a lot.

Legal

The most common legal argument against net neutrality rules is that the FCC currently lacks authority to enact them without additional legislation. I disagree with that argument, but it’s a fairly close question that requires some quick and dirty background on telecom law.

The FCC, like any agency, only has the power that Congress gives it. Thus, the scope of the FCC’s authority comes from the Communications Act (which incorporates the 1996 Act).

The Act however has a funny quirk — it sees the world in buckets. Under the framework the Act establishes, all communications services are classified and placed into a specific regulatory “bucket.” The type of regulations the FCC can adopt therefore depends upon what bucket it’s dealing with. (The buckets are actually statutory “titles” such as “Title II”, “Title III,” etc.).

The problem, however, is that the buckets are based on the assumption that a given company will only provide one type of service (remember that the Act was signed in 1934). For instance, there’s a bucket for “cable,” and for “telephone service,” and for “wireless/radio” (i.e., spectrum users). These buckets are outdated and don’t correspond to modern conditions where crazy things happen like cable companies providing “phone” and Internet services instead of just cable. For instance, your landline phone is regulated differently than your wireless phone because they fall within different buckets (cell phones are essentially glorified radios and thus fall within the “radio” regulatory bucket).

Obviously, these outdated categories create problems when new services emerge. The FCC’s answer to all this is a catch all bucket in which services are reclassified as “information services” (a/k/a Title I).

This bucket is generally considered unregulated. Thus, when the FCC wants to deregulate a service, it takes it out of the traditional regulatory buckets, and puts it in the “information services” bucket. Virtually all types of Internet access have been reclassified as “information services,” and are therefore largely unregulated. (This is what the 2005 Brand X Supreme Court case was about).

So what does all this have to do with net neutrality? Well, remember that broadband access is an unregulated information service — that is, it’s been put into the “catch all” bucket. To impose net neutrality requirements, the FCC therefore must slap a regulation onto a service that’s been reclassified and put into the deregulated catch-all bucket.

So that’s the million dollar question — can the FCC impose this type of regulation on an information service? For somewhat complicated reasons, there’s a pretty strong argument that it can (one that’s consistent with most of the case law), but companies like Comcast dispute that. For obvious reasons, they want to argue that the FCC can’t touch them.

With all that in mind, the really important part of tomorrow’s decision is not so much the Comcast case itself, but that the FCC is expected to recognize its legal authority to impose regulations on this type of Internet service. In doing so, it creates a strong legal foundation going forward for future net neutrality requirements (particularly given that courts traditionally defer to the FCC on this stuff).

But the fun doesn’t stop there — the decision also has important political benefits. Take it to the chorus.

Political

The other obstacle is of course political. Even assuming the FCC had the power to do something, the agency might not be crazy about jumping headfirst into an area that will inevitably lead to litigation and congressional attacks. The FCC, like any agency, needs political cover to take the type of big steps that net neutrality would require.

And that’s exactly what tomorrow’s expected decision will provide.

Remember that this is a Republican-controlled FCC — thus, scoring this bipartisan coup now will pay enormous dividends for a (hopefully) future Democratic FCC. And it is a bipartisan decision -- Republican Chairman Kevin Martin is expected to vote with the Dems tomorrow. And he’s already had the Wall Street Journal hounds after him for his heresy.

Looking ahead, you can see how Martin’s vote will help on the lobbying front. Whether you’re talking to agency officials or congressional staff, net neutrality advocates can say things like — “the FCC decided on a bipartisan basis last term that this was a problem” or “even Kevin Martin agreed the FCC had authority” and so on.

It’s less that Republicans will suddenly become convinced of the virtues of net neutrality, and more that shaky-spined Democrats will be less frightened to act, or at least to support the FCC for acting.

* * *

On a final note, people should really take a step back and marvel at the accomplishment of the good people at Free Press who brought the complaint in the first place. A group of underpaid, overworked public interest lawyers took on the mighty cable industry juggernaut and convinced a GOP-controlled FCC to act against them. I know that Martin doesn’t like cable, but still.

One of the big problems of the administrative state is that many good causes simply lack the organizational might of large companies and their trade associations. Indeed, it’s remarkable net neutrality advocates were able to fight off bad legislation in 2006, given the strength of the telecom lobbies.

But anyway, very good news.

(*One disclaimer — I submitted one ex parte letter to the FCC in this proceeding in support of a narrow part of Free Press’s arguments.).

[UPDATE: The link got broken last night for some reason -- it's never happened before. So I've erased the post and republished (with a couple of wordsmithing edits). Let me know if problems continue. Thanks.]

Comments

[tgirsch]

I have this little fantasy world, in which free "public" internet access is widely available and completely open, thus putting pressure on the private pay providers to truly add value while also maintaining some degree of openness. Think the public school model, but applied to internet.

I also envision unicorns and leprechauns and universal health care and day care, but that's another story...

[John]

Publius,

I don't dispute your reading of the FCC's powers, but a few years working at a telco do leave me wondering how you think telcos are supposed to manage an ever-growing streams of traffic. Some sorts of traffic are small (normal webpages) and/or time-critical (Voice calls). Given that bandwidth is a scarce resource, and is becoming increasingly squeezed by a small minority of users throwing ever bigger Peer-to-Peer files at each other (which are massive and typically not time-critical), what exactly is wrong with prioritising the HTML and VoIP traffic that matters to the vast majority of users? Is it really fair to make telcos pay to expand the networks to carry this stuff, when you can be sure that the aforementioned small number of heavy users won't be paying for that? It will be funded either from the ordinary users or the stockholders.

I'll admit that some of the things that have been talked about (deprioritising particular web-pages because they don't pay) are wrong, but from my point of view, rate-shaping P2P is something we do in an honest attempt to benefit the majority of our customers. And I'm fairly sure that a government-owned service would do the same.

[publius]

John - that's why "neutrality" isn't a very good word that should frankly be cast aside.

No one has any problem with prioritizing VoIP or other time-sensitive applications. also, not all that many people have problems charging for bandwidth consumption (assuming it's transparent).

the fear is more about the way these things get prioritized. for instance, making sure all VoIP goes first - fine. making vonage pay out the arse for that benefit - not fine. same way - generally-applicable bandwidth limits, fine.

i think the real fear -- looking down the road -- is video competition. and bandwidth is an issue to worry about. but, i think the answer to that is to create incentives to improve capacity and to develop end applications that compress. without some sort of nondiscrimination/openness/neutrality requirement, broadband providers don't have all that much incentive to increase capacity AT THE RATE THEY COULD b/c they just charge people higher rates for guaranteed delivery.

i mean, imagine a busy interstate. then imagine we let a private company run it. rather than adding lanes. they proceeded to block off two lanes and only let "gold members" in. for the rest of hte people, the transportation is far more crappy, so crappy that you'll use it less

that's not a perfect analogy, but that's the idea

[mattH]

Is it really fair to make telcos pay to expand the networks to carry this stuff, when you can be sure that the aforementioned small number of heavy users won't be paying for that?

When a bunch of local organizations attempted to create a public a fiber optic network, the local cable and telephone companies (essential monopolies for their respective provisions) told the communities that were contemplating it that they would provide high-speed access to their citizens. Five years later, there are still places in urban Utah where you can't get anything remotely high speed, and the people I talk to want it. The only way I can see these companies following through in their implied commitments is through governmental regulation, indirect or otherwise.

So yes, I don't care that they'll have to invest in the infrastructure to meet this requirement. It's the price they pay for controlling the infrastructure that is essentially a public good, not unlike the airwaves.

Of course, I think they should be more like roads in ownership and maintenance than they are.