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Net Neutrality? Much Ado or Nothing To Do?

Here is how Wikipedia (as of January 4, 2011) defines "Network neutrality":

"Network neutrality (also net neutrality, Internet neutrality) is a buzzword used to describe a principle proposed for users’ access to networks participating in the Internet. The principle advocates no restrictions by Internet service providers and governments on content, sites, platforms, the kinds of equipment that may be attached, and the modes of communication." The Wikipedia article, which goes on for pages, and with more than 100 footnotes and citations, then says, "The principle states that if a given user pays for a certain level of Internet access, and another user pays for the same level of access, then the two users should be able to connect to each other at the subscribed level of access."

Now I confess. Lawyers are often accused of writing 1000 word manifestos and calling them "briefs," but I have read and re-read the definition and the ensuing pages of "clarification." I’ve paid attention in the media and to learned articles. I have no clue what "net neutrality" means. I do, however, take comfort in the fact that if you read the Wikipedia article, and dozens, if not hundreds of other articles, you will see that nobody really has a well-defined meaning of what "net neutrality" is.

But good news. I think I know why all of this confusion exists. It’s actually pretty simple. Take the words apart. When you think of the Internet and World Wide Web – references now include wireless and mobile as part of this amorphous, nebulous cloud (oops, another buzzword) – it’s simply hard to define. It is dynamically evolving. It has features, functions and uses that morph almost daily. The devices change. The transmissions change. "Internet" has different meanings for different people, from different perspectives, at different points in time, and even the names and categories of parties injecting themselves into the debate are changing.

Then there’s "neutrality." What does that mean? Switzerland is neutral. Is it? Everybody on board? Any questions? Good. We all know what that means – especially when referring to the Internet. Right? Technology? Economics? Pricing? Access? Shall we go on? I think not. Perhaps government regulators use the term "neutrality" because it is a term often applied to conflict – wars. Perhaps there is a war going on. A turf war over which government agency gets to control what and who and where and when – not to mention who wants to tax it. Darn, I promised not to mention taxes.

In recent years, the FCC has sought to take the lead in being an advocate for "net neutrality," despite having its share of difficulties with the courts. Undeterred, in December, the FCC released a new report proposing "net neutrality" – a proposal to regulate the Internet. [See, e.g., cnet news article FCC makes Net neutrality rules official.] Remember how easy it is to define the Internet? The vote was hardly unanimous: 3–2. Have you read the FCC document? Almost 200 pages. The legal standard for regulation: "reasonableness."

Now I confess I did start to salivate reading the report. Think about it. We are lawyers. Who wants certainty? Think of all the litigation and dispute, the angst, the risk memoranda, and the frantic consultations that might be avoided if there was certainty. No, no, who am I to call for clarity.

The discussion reminds me of a wryly humorous tale of an architect, engineer and lawyer, all debating what profession the Lord would have chosen. The architect extols the talent necessary to envision and lay out detailed plans for the creation of heavens and earth and everything within – surely a task for an architectural genius. "Nay," cries the engineer. The greatest master builder that ever was and ever will be. "Who else could possibly build such glorious work? Who else could bring such magnificent order out of such utter and sheer chaos?" exclaims the engineer. Quietly the lawyer looks up and whispers, "First and foremost, the Lord would have been a lawyer." Quizzically, the two peer over at the attorney for an explanation. The lawyer lowers the reading glasses and whispers, "Who else could have created such utter and sheer chaos?"

So I’m risking my own self-interest to say, please, FCC Chairman Genachowski and all the others at the FTC, the Department of Commerce – I’m not even going to go overseas for this one. Please end the meaningless war over what, who, why, how, where and when the Internet needs to be controlled in order for it be "neutral." Stop! Nobody knows what you mean or what it means. Change words. Change focus.

How about "net vitality"? Worry about innovation. Encourage competition. Stimulate commercial robustness. Protect the helpless, the vulnerable – intervene where you must, no argument. But IMHO, in this case, less is more. Bayless Manning, former Dean of Stanford Law School and past president of the Council of Foreign Relations (although in a different context), summed up the problem best when he noted, "As batting averages are to baseball players, stars to restaurants, ribbons to generals and stock price to corporate executives, so new statutes are at the heart of the scorekeeping system by which legislators are measured and measure themselves. No legislator ever gained renown as a great non-law giver." Perhaps this too can change.

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Will Net Neutrality Compromise Net Profits?

Earlier today, Julius Genachowski, Chairman of the Federal Communications Commission (FCC), telegraphed the Commission’s plans to open a formal rule-making process on the issue of “net neutrality.” It’s likely the specifics regarding hearings and a timetable for any proposed rulemaking procedures will be on the agenda for the FCC’s October meeting.

While many of the major carriers – including wireless carriers who have typically been out of the fray when it comes to the Web – have argued against both the need and the wisdom of competitive regulation amongst carriers, open Internet advocates, many of whom were ardent campaign contributors and supporters of President Obama, have been aggressively pushing for regulation. Companies such as Amazon.com and Google, have long argued for rules that would prohibit carriers from denying their right to give consumers complete freedom of choice when it comes to both the content they receive and the devices they use to receive it. While not necessarily quibbling with what appears, on its face, to be a reasonable and market driven approach, opponents point out that the government stay away from intervening in yet another major marketplace – this time one, they argue, that isn’t broken. Further, and perhaps more significantly, companies such as ATT and Verizon, now joined by ATT Wireless, Verizon Wireless, Sprint (Sprint Nextel) and T-Mobile (Deutsche Telekom) argue that forcing carriers to open up their networks without corresponding economic counterbalances in place will force them to either raise consumer prices to keep up with virtually unrestricted broadband demand, but may require them to limit availability and accessibility for capacity and technological reasons. Wireless carriers may have special reasons to be concerned given current pricing models and the technological limits of current bandwidth capacity. That said, the major cable television, fiber optic and DSL-based Internet providers have long had to cope with government regulation and requirements.

Back in the days following the breakup of AT&T’s telephone monopoly (anyone remember Judge Green and his landmark 1983 rulings?), the regional and local companies spawned by carving up the nations’ previously regulated monopoly – the so-called ‘Baby Bells’ – worried about long-distance carriers (including the remaining long distance carrier, AT&T) making deals for preferential treatment over interconnections. Thus the principle of equal (“neutral”) treatment for interconnectivity arose. When cable companies started offering Internet service – previously the domain of phone-line intensive telephone companies (remember dial-up?) – they tried to convince everyone that neutrality didn’t apply to them. They carried information, and weren’t, after all, common carriers.

OK. Fast forward to the market response. Phone companies decided to get into the content business! Cable companies are offering Internet and VOIP services, telephone companies are offering entertainment, programming and information services, wireless phone services stream video content and provide messaging of news, sports scores and applications galore (oh, they do still carry voice traffic when you need to make a call).

So back to 2009 and the future. According to Commissioner Genachowski: “This is not about government regulation of the Internet,” adding that “We will do as much as we need to do, and no more, to ensure that the Internet remains an unfettered platform for competition, creativity, and entrepreneurial activity.” That said, his proposal would add a fifth principle to the FCC’s existing four that relate to the Internet. To wit, that carriers will not be permitted to be selective about the content they carry (subject, of course, to their continued ability to block illegal content) and will be required to be transparent about how they are managing the carriage of content across their networks. Violations and allegations of discriminatory practices would still be reviewed by the FCC as and when the facts of each specific case arise. You can read or download the complete statement of Commissioner Genachowski’s prepared statement today, entitled “Preserving a Free and Open Internet: A Platform for Innovation, Opportunity, and Prosperity,” right here.

Clearly if you are a small Internet application provider or software developer that has traditionally had to pay for access through a carrier, open, non-discriminatory access would prove a major boon. Then again, Internet carriers – wired and wireless – have invested huge amounts of capital in building their own proprietary networks. Since there is no evidence that there is a lack of competition, why should the government tell any of them what they should or should not carry on their networks? Indeed, since the early 1990s, when the Web evolved from a glimmer in the eye of Tim Berners-Lee, to a reality, there have been so few real complaints (and so few complaints from consumers, even as competitors bash each other about), why fix something that doesn’t appear to be or have been broken for almost two decades?

Confused as to how the FCC proceedings might or might not affect your business? Thinking about participating in the dialog or submitting comments to the FCC? Let Rimon help you. To stay informed, keep your mouse tuned to Legal Bytes, and if you need to know more, please feel free to call me or the Rimon attorney with whom you regularly work.