Why The 'Right' Gets Net Neutrality Wrong

Just in time for the House Telecom Subcommittee’s May 6 hearing on Net Neutrality legislation, Public Knowledge achieved a new level of notoriety when we were prominently mentioned in a blog post on the American Spectator, the publication best known for funneling millions of dollars to investigations of Bill and Hillary Clinton.

The April 28 blog post, cleverly headlined, “Public Know Nothings,” – a play on Public Knowledge — read like a basic corporate hit job on Net Neutrality of the kind one might read at any number of blogs or by any columnists in the thrall of the corporate world. But the story, combined with an April 22 Washington Times column headlined “Spare The Net,” by former House Majority Leader Dick Armey, raise the inevitable question – what is it about individual freedom that “conservatives” like the Spectator and Armey don’t like?

To be fair, the debate is larger than the Spectator and Armey. Most congressional Republicans oppose the idea of giving consumers freedom on the Internet. They take shelter in their anti-government, anti-regulation rhetoric, preferring to allow Internet freedom to apply to the corporations which own the networks connecting the Internet to consumers, rather than to consumers themselves. There could, of course, be a larger discussion about the meaning of “conservative” and Republican, and whether the two are synonymous.

(To be fairer still, it’s not only Republicans. Many a Democrat also speaks out against Internet freedom. They don’t have the fig-leaf of misbegotten ideology to hide behind, as they largely back worthwhile government action in many other areas. They are simply servants of corporate and/or union interests. The question applies equally: What about freedom don’t they like?)

The clues to discovering how the opposition to individual freedom came about are in the two recently published pieces. Each them, in their own way, shows a tragic misunderstanding of how telecommunications policy, markets and technology worked in the past and how they work today. As a result, their interpretations of Net Neutrality, and the role of government, are also wrong.

At the heart of the opposition is the “mythology of the market,” that once government “got out of the way,” as Armey put it, new technologies emerged. “Telecom became a text-book case demonstrating that markets work and are good for consumers,” as the Internet developed and dial-up modems yielded to broadband connections, Armey wrote.

Similarly, Peter Suderman, writing on the Spectator site, misses his telecom history. He criticized the testimony of actor and Internet entrepreneur Justine Bateman, who spoke to the Senate Commerce Committee about the need for a free and open Internet. Bateman asked whether Google and eBay would have been as successful as they are “without the freedoms we enjoy on the Internet today.”

Suderman’s analysis: “In fact, not only were all of these companies [eBay and Google] born in an era with no mandated net neutrality, it’s utterly unclear that a lack of neutrality would’ve impeded them in any way whatsoever.”

Government Helped Create The Internet

Let us review the history. Even setting aside the very basic fact that the underlying technology for the Internet was created under a government program, and was set free for commercial purposes by Congress, it’s still hard to get away from the reality that the Internet as we know it was started, and flourished, in a regulated environment. While the content that went online, through bulletin boards, America Online, CompuServe, Prodigy and the rest, wasn’t regulated, the telecommunications carriers to a large extent were.

Before the advent of the cable modem, the telephone companies that carried the online traffic not only were under tight rate-of-return regulation, but they were also subject to the sections of the Communications Act barring unreasonable discrimination (Sec. 202). They also had to sell their services wholesale. Amazingly, with all of that regulation, the first iteration of the online world grew, with thousands of local Internet Service Providers able to afford access to the network so they could offer their services to the public.

The new and fancy equipment came because the Federal Communications Commission (FCC) in 1968 broke through the tariff of then Bell System and allowed outside, customer-owned devices to be connected to the network. That decision brought competition in long distance as well as setting the stage for the fax, modem and other gadgets.

For the record, eBay was founded in 1995. Google came along three years later. It wasn’t until 2002 that the FCC under Chairman Michael Powell started the process of classifying nascent cable-modem service as an “information service” under the 1996 Telecommunications Act. Both cable and DSL were taken out from under most regulations by the FCC in 2005, when today’s Internet took shape. That decision, combined with some archaic, in-the-weeds technical matters, combined to wipe out the hundreds of local online and Internet Service Providers along with most of the competition for the telephone companies.

One of the rules swept away was the prohibition against unreasonable discrimination – the part of the law that enforced what we now know as Net Neutrality. That’s what the proponents of a free and open Internet are trying to reclaim. It’s very simple – those companies carrying traffic can’t play favorites.

Google’s founders have said repeatedly they wouldn’t have been able to get off the ground if they had been required to pay extra fees for telecommunications services to get onto a “fast lane” of service.

Market-Based Myths Abound

The argument against Net Neutrality really goes off-track when it gets into the nature of private property, the state of competition, and the effect of regulation. That’s more than one track to be thrown off of, so it’s quite the disaster scene. We may need CSI: Telecom to sort it all out.

Public Knowledge earned its headline in the Spectator because of the petition we filed with the FCC asking that companies like Verizon which offer text messaging not be able to decide which groups should be deemed worthy of service and which shouldn’t be.

For the American Spectator, PK and our friends are asking for “governmental bullying” that infringes on the rights of a property owner’s right to “manage the content that flows” over its network. Our crime is to want to “treat wireless carriers as public utilities rather than as private property owners. It’s a fundamental misunderstanding about the nature of widely used private networks.”

In the same vein, Armey wrote that Net Neutrality violates the conservative principles of “free market competition and private property rights.”

It is true that Verizon is a private company and that the network is its property. It is not true that the government has no authority over it. Much as zoning ordinances restrict what can be built on private property or regulation sets rates for electricity, it’s well established that private property is subject to the law.

Verizon’s network is not a private network. It is privately owned network, but that’s different. A private network is what a company might have to connect its employees. Wireless has 65.2 million retail customers. That would be some humongous private network. Verizon, as with other cellular operators, offers a service to the public in accordance with the Communications Act. It is a public utility, subject to regulation.

In the text-message case, it’s our view that Verizon, or any other carrier, should not be in the business of deciding which political views are acceptable to be carried on its network and which are not. That’s not network management. It’s censorship, and a violation of consumer rights, just as Comcast’s continual throttling of peer-to-peer applications is goes beyond network management.

Because of our defense of the rights of free speech for every political view, the American Spectator categorizes Public Knowledge as “a left-leaning tech advocacy organization.” If the defense of freedom of Americans to express their political views makes us “left-leaning,” then make the most of it.

Also remember that Public Knowledge’s singular accomplishment so far is a successful court challenge to an FCC rule that would have expanded the Commission’s authority over devices far beyond what was authorized by Congress. In our broadcast flag case, we forced a Republican FCC to retreat when it tried to exercise too much power.

Reports of Competition Exaggerated

Finally, let’s get to the concepts of “competition” and regulation. There is very little competition in the broadband market. To pretend otherwise is folly. If a consumer has two choices among providers, then that consumer is doing well. Most don’t. If this were a truly competitive market, then there would be at least some restraint on prices. There isn’t. Verizon expects to raise its prices on its fiber-optic FIOS service. Comcast raises its rates, even with FIOS in the neighborhood. This isn’t true competition. It’s a duopoly. There may be the odds and ends provider to supply service here and there, perhaps in Wyoming, but for the most part people choose between telephone company and cable if they have a choice at all. It’s hard to see how, as Armey says, consumers would be left with “fewer choices” if a free and open Internet were mandatory.

Perhaps the worst argument from conservatives about Net Neutrality is that “pervasive regulation,” as former FCC Commissioner Rachelle Chong called it, would somehow be such a burden to the poor, deprived telephone and cable companies that their incentives to invest and to innovate would just dry up. Opponents of an open Internet conjure up images of parents unable to protect their children, of government setting up business models, of companies unable to manage their networks.

Those tired-winged canards don’t quack here. Net Neutrality is neither pervasive nor burdensome. It allows for innovation and investment. It allows for telephone companies to sell different levels of service to different customers. Parents can still protect their children. What it doesn’t allow is discrimination. That’s why Michele Combs from the Christian Coalition supports an open Internet, and she is brave and correct to do so in the face of uninformed criticism of her fellow “conservatives.”

As it turns out, there is a real world example of how well this works, because there is a company that is currently under a Net Neutrality mandate. As a condition of its purchase of BellSouth, AT&T agreed to a two-year condition in which it is forbidden to provide any service that “privileges, degrades or prioritizes” any packets of data based on “source, ownership or destination.”

How’s that working out for AT&T? Look at its April 22 first quarter earnings report. Here are some highlights:

Earnings per share up 26.7 percent over first quarter 2007;

$30.7 billion in consolidated revenues, up 6.1 percent from the year earlier;

13.2 percent growth in broadband revenues with a 491,000 net gain in broadband connections in the quarter to reach 14.6 million in service

491,000 net gain in broadband connections in the quarter to reach 14.6 million in service;

first-quarter net gain of 148,000 U-verse subscribers, to reach 379,000 in service, on track to reach target of more than 1 million subscribers by year-end 2008

$4.4 billion in capital expenditures vs. $3.3 billion a year ago.

Those results were achieved under mandated Net Neutrality, the original, fundamental characteristic of the Internet that protects the individual consumer’s freedom to innovate without permission and to receive, and pay for, the services he or she chooses. Why a conservative opposes that, is a mystery of unsolvable proportion.