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There be dragons? Why net neutrality groups won't go to Congress

Campaign risks total annihilation for its fear of politics

By Andrew Orlowski, 8 May 2017

Special report When Obama pushed the FCC into extending Title II rules over US internet services in 2014, I described the President as "writing out a cheque he knew he couldn't cash".

To no one's surprise, that cheque bounced last week, when the FCC chairman formally began the process to replace those rules. Title II has been a dead duck since Americans woke up on 7 November last year to a Republican President Elect, and a Republican Congress. The end just came sooner than expected.

But that doesn't mean "net neutrality" is dead. This is a moment of opportunity for supporters to build a powerful pro-neutrality coalition in Congress. However, the campaign is so busy "grief signalling" and vilifying potential allies, it's funking a historical opportunity to go to Congress and make a lasting change.

Judging from the rhetoric of groups like Public Knowledge and Free Press, net neutrality campaigners seem to have thrown in the towel. They had bet the farm on a Clinton victory in November and now it appears there's no Plan B. Having lost the battle (to nobody's surprise) they've conceded the war.

This is startling. The most bulletproof neutrality regulations come not from FCC rules, imposed and reversed on a whim every few years, but solid law. If you're a net neutrality supporter, wouldn't you want to put it on a solid legal basis, with the authority that only Congress can provide?

For the sake of argument, let's assume two things. Firstly, that the fixed wireline broadband market in the US could be a lot more competitive: with more choice, offering better speeds at better prices. Not everyone agrees that the market is in dire need of a fix, obviously, but many readers do, so let's park that for a moment and agree to believe that cable and DSL regulations made in 2017 will still be as relevant in 2027, or 2037. That might not be the case: the trend is ominous for Big Internet; 40 per cent of Americans use mobile for data at home, and ubiquitous 5G threatens to make the cables underground as relevant as a Georgian canal after the Victorians built the train network. This is why we find telcos frantically attempting to mate with media companies. But again, for convenience's sake, let's park that one, too.

In the past, I've advised consumers concerned about the lack of broadband choice to become more active: petitioning their states to take up the cudgels, for example, or organising "switching parties". State attorney generals can step in where the feds fail. For example, the Big Tobacco settlements were hatched in southern Republican states, and Wall Street settlements following the dot.com crash were the result of state attorney generals. So much can be done at the state level. What if tobacco campaigners had thrown in the towel in the 1980s as net neutrality groups have today? It's hard to imagine.

As one of the godfathers of the internet Dave Farber pointed out last week, if you really want to enforce competition legislation then you want the FTC doing it, not the FCC: "The FTC has an ANTI-trust hammer which the FCC DOES NOT."

The FTC is far more powerful than the FCC in other ways, too. The FTC spends half its budget policing anti-competitive practices, co-ordinates with the state attorney generals, and has punitive powers to recover money from corporate wrongdoers.

All that said, a federal law would be a highly effective remedy. Net neutrality hasn't been permanently killed, it has every chance of being "saved" and put on a permanent legislative basis, just as it is in the European Union, Slovenia [PDF], and Chile, for example.

"Almost every country that wants net neutrality is using legislation, the US is the outlier," said Ros Layton, the first academic to make empirical studies of the effects of neutrality legislation. "No country that wants neutrality has gone back to rules from 1934 rotary telephone and monkey wrench them for the internet. They've written a new law."

How the Supreme Court could snuff out the FCC for good

A district court this week ruled that it would reject US Telecom's request for an en banc hearing into former FCC chairman Tom Wheeler's open internet order, since his successor Ajit Pai has just made it irrelevant by promising to repeal the old rules. The petitioners of US Telecom vs FCC – including VoIP pioneer Dan Berninger, interviewed here – are determined to take repeal all the way to the Supreme Court.

The goal is to ensure that the FCC can never meddle in far-reaching telco regulation again thus extinguishing any hope that a Democrat FCC in 2020 or 2024 would restore agency-formulated neutrality rules. They're spoiling for a fight.

Grief and derision are the responses to Pai's new internet rule-making process. For now it's all smears and no politics. The question is whether the neutrality groups' reluctance to make the case for Congress is incompetence, or a deliberate and cynical strategy. And that's a fascinating question worth examining closely.

How neutrality could be made law

The big opportunity for net neutrality groups comes with reopening the Telecommunications Act. It's been 20 years since Congress discussed it and a lot has changed. The power of the edge oligopolies such as Google and Facebook matches, and in some markets exceeds, the broadband oligopoly that so vexes net neutrality campaigners. That would be the opportunity to enshrine "open internet" rules.

And the issue is nowhere near as partisan as activists portray it. Yes, Democrats line up pretty much 100 per cent behind stronger telco regulation and, as you would expect, free marketeers don't. It's hard to imagine the shadowy Freedom Caucus, who shot down Trump's replacement for Obamacare, lining up for stronger control over private contracts, but there are a surprising number of Republicans who are sympathetic, and these include some very powerful figures.

Figures such as John Thune (R-S.Dakota), third-ranking Senator and chairman of the Senate Commerce Committee. In 2015 Thune floated a draft neutrality bill, which would "prohibit blocking lawful content and non-harmful devices, to prohibit throttling data, to prohibit paid prioritization, to require transparency of network management practices, to provide that broadband shall be considered to be an information service, and to prohibit the Commission or a State commission from relying on section 706 of the Telecommunications Act of 1996 as a grant of authority." [PDF]

Does that sound soft or a sell-out to you? Thune abandoned his efforts when Obama did an end run around Congress, effectively challenging then FCC chair Wheeler (a major Obama fundraiser) to impose Title II on ISPs and mobile networks, or else. Thune is reportedly thinking of reintroducing such a bill.

Or take rural wireless ISP operator Brett Glass, a strong and vocal opponent of the Obama/Wheeler Title II order, who supports Pai's repeal of it. He still thinks new wholesale regulation is needed to stop abuses for smaller ISPs.

"Basically for there to be competition you need access to the middle mile facilities at a reasonable price. Middle mile access is priced anti-competitively by the other carriers," Glass told us recently. Title II is a distraction from abuses of the wholesale access market.

Title II is dead, but everywhere you look, a new consensus on ISP regulation is tantalisingly possible.

Now, if you're surprised to hear that a Congressional consensus could emerge, that's forgivable. Neither big telco lobbyists nor net neutrality groups want you to believe there is one: it suits neither side. But as one former FCC insider told it to me, everyone except Verizon's lawyers would accept reasonable non-discrimination orders.

"After 2010 except for Verizon most ISPs had accepted that it was something they could live with it. The Court overturned that on narrow grounds, but showed how to do net neutrality legally. What happened was that the grassroots intervened and asked Obama to step in and go farther left."

So perhaps for the groups now vilifying Pai and shunning Congress, it's about saving face. Since November the net neutrality campaign, backed by tech blogs and op-eds in the big metro papers, has talked itself into a cul-de-sac. The groups have sought to present Title II as the "end of net neutrality", with Pai "killing/gutting/destroying it" (take your pick). But this is not a position sustainable in reality. Why take such a self-defeating stance, then?

We have some ideas. Perhaps it's fear of the campaign getting "real", and net neutrality becoming a genuine political issue requiring coalition building, alliances and compromises – the stuff of politics. Or perhaps support is much shallower than the net neutrality advocates make out. Maybe it's fear of Pandora's Box being opened.

In a sharply observed piece written almost a decade ago, Ted Dziuba described "net neutrality" as a fight about corporate welfare disguising itself as a fashion issue for urban, net-aware slackers.

For many young white people moving to the city to chase venture capital, network neutrality is a good choice. It's a shrink-wrapped, batteries-included, no-money-down way to have an opinion about something, and it doesn't come with the subtle baggage of developed nations' guilt. It doesn't require rallies or protests. All you need to support this cause is a blog and an e-mail address.

Among the metro classes, support proved to be wide but thin. And maybe not all that wide.

"Americans like the concepts of net neutrality and the open internet, that has wide appeal, but they do not like a government-regulated monopoly, and Title II turns the internet into a government-regulated monopoly," says Layton.

There are also conflicting motives behind the campaign, as Pai noted last week. In an interview seemingly designed to enflame Breitbart readers, Pai pointed out that Robert McChesney, the founder of Free Press, which has been raising the issue since 2005, explicitly saw net neutrality as a vehicle to control the media. Alas, Pai did not have to exaggerate McChesney's views by very much.

"The ultimate goal [of net neutrality] is to get rid of the media capitalists in the phone and cable companies and to divest them from control," McChesney told an interviewer in September 2009. There's more here, some of which would make a Corbynite blush.

"We want an internet where you don't have to have a password and that you don't pay a penny to use. It is your right to use the internet."

It would be unfair to tar the entire net neutrality campaign as bedroom Trotskyists, as many supporters do not favour the state seizing the pipes. Many simply want a more competitive marketplace, not government control. Others, like Susan Crawford, disagree.

"Net neutrality" has morphed over the years – from a legal theory confected by a law professor in 2003, to being about blocking (in 2005), to throttling (in 2008), to bundling, leaving the impression that the solution (state control) was decided first, and the justifications found later.

As an aside, "zero rating" is a great example of net neutrality campaigners finding something and believing they're the first humans on earth to ever encounter the phenomenon. The latest panic to exercise supporters is about bundling services, a subject antitrust authorities have been grappling with for decades. "Zero Rating" may be genuinely anti-competitive, if the bundler (here the ISP) and the provider of the good or service being bundled have a significant market share. It can clearly be used to discriminate against smaller players. Yet after it was used to launch an outcry against T-Mobile's Binge On service it was justifiably met with derision. T-Mobile was the fourth largest of four national networks and the bundling plan was open to all. Hilariously, one net neutrality professor condemned Binge On because, er, she felt it would discriminate against boring videos.

"Binge On harms free expression by favoring commercial entertainment over other forms of video content," warned Stanford's Barbara van Schewick, who is clearly a fan of documentaries on Bulgarian agricultural co-operatives, or those ten-hour YouTube clips of train journeys. And let's be honest, who isn't?

All neutrality violations fall into categories well known to economists for decades: denial of access, discrimination, predatory pricing, bundling, margin squeeze, selective distribution agreements. The Sherman and Clayton anti-trust acts were all about "neutrality".

As Larry Downes observed recently: "Much of the DC-based advocacy promoting net neutrality has nothing to do with the network management principle vaguely defined in 2003 by a legal academic, which argued that traffic traveling on the public internet was not and should not be sped up or slowed down for anti-competitive reasons – a principle no one disagrees with, regardless of how they think it ought to be enforced. The actual (and only sometimes admitted) goal of the most vocal inside the beltway activists and their chief funders in the decade-long net neutrality 'debate' has instead been to turn broadband into a government or quasi-governmental service."

If that's the goal, then it's a goal best kept hidden, and perhaps that explains the fear of coalition building.

And some cynics may suggest the fear of going to Congress reflects the priorities of the campaign's main corporate backers: Big Internet. Today's internet oligopolists like Google and Facebook have done very well out of the 1996 Telecomms Act and don't want it reopened. Best not go there, for there be dragons. One thing large corporations rarely admit is how regulation suits them, and I've found this with both the internet oligopolists and huge telecoms companies. It's their shared dirty secret.

Acting FCC chair Ajit Pai thinks Obama's evangelism of Title II was only ever a cynical political manoeuvre, a distraction "days after a disappointing 2014 midterm election and in order to energize a dispirited base". With Trump in the White House, that base has other things to concern it today.

Now imagine a world some years hence, long after Title II has been repealed, that looks like this. US Telecom has prevailed at the Supreme Court and succeeded in eviscerating the FCC's regulatory powers; it now performs a narrow technical role. And Congress revisited the Telecomms Act but Americans forgot to ask it to include open internet provisions.

If that comes to pass, whose fault would it be, exactly? Moderate Republicans are net neutrality supporters' best hope right now. But they don't want to be seen to be talking to them. ®

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