The following is a summary of the workshop held February 13-14, 2007. For additional workshop materials, including transcripts, audio recordings, PowerPoint presentations, links to academic papers, and complete speaker bios, visit www.ftc.gov/opp/workshops/broadband.
Session 1: Technical Background
Jon M. Peha, Professor, Carnegie Mellon University
- Concerning the current Internet architecture, “discrimination” on the network has many beneficial purposes as well as harmful purposes. The benefits are generally related to security, the ability to block non-conforming devices, and blocking users who use a disproportionate amount of network capacity. Discriminatory prices can provide incentives to the market to force users towards appropriate-use models. On the harmful side, net operators have extensive information on end users and can use that information to set prices as close as possible to what the end user is willing to pay (i.e., the net operator has data that no other party would be privy to). Further, should the network operator have market power, the operator can, in effect, tax e-commerce and use market power to protect legacy services.
- Argues for a “balanced policy” in order to: (a) prevent those that have market power from fully exploiting that power to seriously harm users; and (b) not prevent beneficial discrimination. JP notes that it may not be possible to allow all beneficial discrimination nor ban all harmful discrimination
William Lehr, Research Associate, Computer Science and Artificial Intelligence Laboratory, Massachusetts Institute of Technology
- Wireless broadband is the future of the Internet. No one-size-fits-all network solution is desirable or possible. He asserts that more investment in last mile access networks is needed.
- End users respond to discrimination in the following ways: (a) bypass by going to another broadband provider, which works in a robust, facilities-based market; (b) end user countermeasures, publicized by end users (e.g., through blogs that describe the discrimination); (c) user misrepresentation during sign up for service (e.g., sign up for residential service when the end user actually is a small business); (d) technical workarounds that cover up the actual traffic, etc.; or (e) acceptance of discrimination, perhaps with use of applications that can accept delays without loss of customer acceptance
- The net neutrality issue is complex, and some rules may help discipline.
- More facilities-based competition is necessary, and can be achieved through cable franchise reform, municipal entry, and spectrum reform. Wireless is best hope for facilities-based competition, and flexibility is needed in licensed vs. unlicensed service.
Session 2: What Is the Debate Over “Network Neutrality” About?
Chris Libertelli, Senior Director of Government Regulatory Affairs, Skype Limited
- From the standpoint of a software company that relies on consumers’ access to broadband services, Skype defines network neutrality to be about “protecting their user’s ability to connect to each other whenever and wherever they want.”
- Supports net neutrality for defining a policy of de-centralized innovation by keeping barriers to entry low. Broadband providers stifle innovative software applications by only allowing a user to utilize what the provider allows.
- Supports the FTC in adopting a balanced policy along the lines of the AT&T-Bellsouth merger conditions, along with increased disclosure of information from broadband providers to consumers.
Robert Pepper, Senior Managing Director of Global Advance Technology, Cisco Systems
- “Net neutrality” consists of four questions regarding the accessibility of service, price differentiation, non-discrimination, and charges to application providers and consumers. Differential treatment does not have to equal anti-competitive treatment.
- The FCC and FTC should focus on two key problems: (1) assessing the level of anticompetitiveness of broadband providers; and (2) whether regulations could limit consumer welfare and discourage innovation.
- Supports post-facto regulation of providers on a case-by-case basis. New detailed regulation is not required, but the government must still protect the consumers by requiring disclosures. He stated that the government cannot perform this task without first identifying the specific problems within the broadband community.
- There may be a need for newly-defined jurisdictional boundaries between the FCC and FTC to address emergent conditions.
Gigi Sohn, President, Public Knowledge
- There is consumer discrimination, where providers provide preferential treatment to services in which they have a financial interest.
- Agreed with Mr. Libertelli, stating that the AT&T-Bellsouth merger language provides appropriate language to handle the discrimination issue.
- Asked the FTC to investigate and act on any allegations of anti-competitive actions on the part of broadband providers. She stated that the FCC is better suited to act on complaints, and her organization would lobby Congress to define jurisdiction that would call on both agencies, such as HR 5417 (109th Congress).
- The FTC must also mandate that providers divulge, in plain language, information to consumers so they can make an informed choice on service providers.
Gregory Sidak, Professor, Georgetown University Law Center
- Access tiering is “at the heart” of the debate. Policymakers should define the criteria they wish to evaluate when considering competition, consumer protection, and innovation. In response to a question regarding the vitality and applicability of the Telecommunications Act of 1996, the panelists completely disagreed. The debate became more argumentative between Ms. Sohn, Mr. Pepper, and Mr. Sidak on the fundamental differences between their perspectives. Mr. Pepper argued that adhering to the AT&T-Bellsouth language would end up socializing the cost of Internet access and prevent higher quality services, while the pro-neutrality panelists promoted the Act’s inherent broad language as reasons for its strength. Mr. Libertelli cited the controversy over basic telecommunications legislation, to comment that the complexity of the Internet would increase the difficulty of writing legislation.
Session 3: Discrimination, Blockage, and Vertical Integration
Joseph Farrell, Professor, University of California, Berkeley
- There are three concerns arguing against regulation of broadband: (1) charges by content providers may actually be paid by customers of broadband competitors, similar to traditional telephony terminating access problems; (2) potential expropriation of successful content providers if charges are allowed (could Comcast start charging Google for number of users accessing their site), and ultimately the user will bear a significant amount of the cost burden; and (3) resulting harmful leverage such as price discrimination.
- Uncertainty as to how providers will act requires an analytical and not ideological review. Current anti-trust statutes will not be able to handle broadband leverage and anti-competition concerns. Governments could establish principles specific to the industry and create an agency or court to handle prescriptive measures, using preventive enforceability versus stringent across the board regulation.
Gregory Rosston, Deputy Director, Stanford Institute of Economic Policy Research
- Mr. Rosston expanded on Farrell’s views and described the issues of terminating access in Europe to demonstrate the potential result of market leverage among broadband providers.
Simon Wilkie, Professor, University of Southern California Law School
- Mr. Wilkie outlined what data policymakers should be assessing and proposed a policy alternative based on the “real world” situation. Negative aspects on both sides of the debate could indicate that “what we have today is actually optimal.”
- Michael Powell’s four Internet freedoms should be modified to say that, rather than enforcing nondiscrimination, consumers should have the choice of net neutrality being offered at a baseline level and speed of service. A tiering system could be built on the baseline service based on second-degree price discrimination, but only if every consumer was offered access to this premium package. The government should prevent absolute abuses by monopolies, but allow premium charges for enhancements.
Alfred Kahn, Professor Emeritus, Cornell University
• Tiering is not discriminatory. Certain uses will require instantaneous connection and charging for preferential delivery, and from an economic standpoint, this behavior is neither illegal nor entirely harmful. Antitrust law is sufficient to handle problems.
The panel was in general agreement that better and more focused analysis was necessary to address net neutrality. The panelists agreed that policymakers must work from clearly defined goals to address all aspects of neutrality versus regulation. Their consensus discounted the extreme rhetoric on both sides of the argument. It was generally agreed upon, that competition would prevent degradation of a proposed baseline service option to consumers.
Session 4: Quality of Service, Tiering, and Charging Fees for Prioritized Delivery
Alan Davidson, Washington Policy Counsel, Google
- Google views net neutrality as integral for a competitive Internet. Degradation of service will occur if carriers prioritize certain packets over others. Prioritization is a “solution in search of a problem,” and VOIP providers have successfully argued against a need for lastmile prioritization. A solution would be to increase broadband deployment and offer higher speeds for all consumers.
John Ryan, Senior Vice President and Assistant General Counsel for Commercial and Public Policy, Level 3 Communications
- Level 3 is not an advocate of a net neutrality mandate. A market-based solution would be superior to regulating Internet interconnectivity. The goals of Level 3 include preserving the open and dynamic forum of the Internet while encouraging new services and increasing the speed and performance of existing broadband services.
- In regards to prioritization, Mr. Ryan described the varying differences in ways to prioritize, but was unwilling to make a definitive statement on the competitive/anti-competitive nature of prioritization.
Walter McCormick, Jr. President and CEO, United States Telecom Association
- No once can argue that certain packets of information are not more important than others. Proposed net neutrality legislation wrongly disallows any prioritization of any packet over another. There is no problem that requires regulation, as the FCC already mandates open and non-degraded service.
- The FTC should be required to respond to allegations of anti-competition without regard to the technology in question, but rather, taking into account the characteristics of the market and the behavior in question. Broadband providers are part of a competitive industry that should not be facing FTC scrutiny.
Marius Schwartz, Professor, Georgetown University
- The broadband market is not in a monopoly situation, and therefore should be allowed to correct itself. Economically, tools like prioritization could be effective ways to reduce congestion on the current infrastructure. Such a system would require price differentiation, but such tiering is not a problem if a consumer wants a higher tier for certain uses but not all aspects of his or her connection. He called for more a more concrete discussion of policy options.
Barbara Tulipane, President and CEO, Electronic Retailing Association
- Broadband providers should not recoup their investment by regulating the Internet. Tulipane compared the multiple and repetitive steps required by television advertisers to sign with a cable network with the ease that any e-retailer experiences when connecting with their consumers. Innovation allows the small retailer to compete with larger companies, and any prioritization based on source or content will ultimately result in a closed network and harm e-retailers in the same way they are harmed by current television regulation.
Session 5: Current and Future State of Broadband Competition
Michael Altschul, Senior Vice President and General Counsel, CTIA – The Wireless Association
- Consumers have a broad range of competitive services at their disposal. Wireless broadband technologies offer competitive speeds and capabilities. Technological innovation is a major driver of this competition. New wireless technologies enable new services to consumers.
- If the wireless industry were an oligopoly, one would expect rising prices and a general lack of innovation. This is not the case in the industry, as prices are falling and consumers are increasingly using wireless technologies for more and more of their communications needs including voice, browsing, and text. Unlike in oligopoly, we are seeing ramped up investment and build out. In the FCC’s recently conducted advance wireless spectrum auctions, the Commission awarded more than 1000 new licenses to 104 bidders.
- CTIA historically opposes any rules that would impose non-discriminatory net neutrality requirements on network operators. The wireless industry is epitomized by intense competition among carriers to acquire additional customers. The competition guarantees that wireless consumers have a variety of choice among content, devices, and providers. Net neutrality rules that impose nondiscriminatory requirements on operators would make the business model impossible and result in a net loss for consumers as their demands will remain unfulfilled.
Harold Feld, Senior Vice President, Media Access Project
- Cheap broadband access should be available to all who want it. In this light, network neutrality is absolutely critical. Free speech should not be collateral damage to economic efficiency.
Christopher Putala, Executive Vice President, Public Policy, EarthLink
- Any net neutrality initiative must expand the range of competitive alternatives across broadband markets. Robust competition and full consumer disclosure can break the duopoly of cable and telephone broadband providers and can protect consumers thought the market. The Internet has become a dominant economic force because it lets a thousand economic flowers bloom, and does not let the network operators determine which flowers take root. Net neutrality protections are critical to maintaining consumer choice and innovation.
John Thorne, Senior Vice President and Deputy General Counsel, Verizon
- It is a gross misrepresentation that the market for broadband services is a duopoly. Broadband prices do not reflect market power. Verizon, as one among multiple broadband access providers, lacks the ability to regulate content, and even if Verizon could regulate content, it does not have incentive to limit the end user’s experience.
- Over the past three years, Verizon has spent more capital than any other U.S. company deploying fiber to the home.
Scott Wallsten, Senior Fellow and Director, Communications Policy Studies, The Progress & Freedom Foundation
- Mandating net neutrality would be likely to reduce overall economic welfare. Rather than adopt such a policy, the government should intervene to create competition in the broadband market by freeing up more spectrum and reducing entry barriers created by certain local regulations.
Session 6: Consumer Protection Issues
Philip Weiser, Professor, University of Colorado at Boulder
- The Internet is not and will not be egalitarian. Some companies can pay for higher quality of service and guaranteed delivery. You would not want to foreclose the expensive services, and you don’t need to create a level playing field.
- Consumer protection issues are low-hanging fruit. A jurisdictional never-never land exists with respect to broadband: consumer protection is generally left to the states, and states tend to think that broadband is a federally-regulated service. Thus, there is a role for the FTC.
- Consumers need better explanations of speed and performance. Speeds available only at offpeak times are not the “effective” speeds. Providers should explain whether latency and jitter will occur, and what products are available for prioritized service. Providers should disclose network management policies (e.g., those which would affect peer-to-peer sharing of videos).
- There needs to be some self-regulatory efforts. Worst cases should be referred to the FTC, and the FTC should have capacity to handle these complaints.
- It would be in the interests of the industry for the FTC to take a constructive role in regulating disclosures to customers.
Daniel Brenner, Senior Vice President, Law and Regulatory Policy, National Cable & Telecommunications Association
- How many people read disclosures in acceptable use and service agreements?
- Although speeds have increased, one does not usually see a representation guaranteeing speed in a service agreement. Consumers can check speeds (e.g., via online odometers), but speed can depend on whether the website has server farms to promote fast downloads, how many other users are on the same “node,” etc. These factors have nothing to do with the offering’s speed. Although speed is variable, consumers still gain substantial value from purchasing broadband, as demonstrated by the big migration to broadband. Providers need to communicate with customers who are having problems.
- The cable industry acknowledges that section 631 privacy protections apply to broadband offerings.
- There is no market failure with respect to installation. There are no requirements that a consumer purchase a cable modem from the service provider.
- Bottom line: there is no market failure, and there is no need to impose regulation.
Jeannine Kenny, Senior Policy Analyst, Consumers Union
- Disclosures to customers are important, but tiering, discrimination and net neutrality are the key issues. Providers use market power to exclude rivals. There is no competition in broadband markets. So the notion that disclosure will empower consumers to substitute is laughable. Consumers aren’t going to change providers, perhaps losing their email address and bundled services, unless discriminatory practices are severe. The FTC has acknowledged that disclosures are not always an adequate remedy. Consumer complaints are also unlikely to be honored because there are no competitive substitutes.
- Privacy issues are very important to consumers, and no one understands consequences of deep packet inspection that is used in network discrimination.
Ronald Yokubaitis, Chairman, Data Foundry
- Small business owner relates his story of how his business grew due to access to the public Internet. Telephone companies withdrew tariffed access to copper once they realized that DSL broadband services were being provided to rural Texas communities. Verizon thereafter quadrupled prices.
- Closed networks and discrimination have adverse consequences for rural communities. There is a qualitative value to bits for individuals, innovation and freedom (e.g., could deep packet inspection be used for inappropriate or even undemocratic purposes?).
Timothy Muris, Professor, George Mason University School of Law
- The FTC has an important role, as it has jurisdiction over anti-trust and consumer protection in broad sections of the economy. The FTC has a broader mandate than law enforcement, including education and regulation.
- Internet access is not specifically regulated at this point. Some fear that this absence will hurt consumers. But this concern is based on fears that competition will not be robust. “Netneutrality” is a concept without substance. Providers that can’t provide speed and quality will lose out. The common law underpins competition, and the government acts as a check on collusion and fraud to supplement the common law.
- The market for broadband appears competitive. Cable and telephone compete through much of the country, and neither has emerged as dominant. Numerous other providers are entering the market.
- There is no reason for the government to intervene in a healthy market. But there should be an anti-trust and consumer protection rule. If the problems expected by net neutrality advocates emerge, law enforcement have the tools to react.
What two things should the FTC be doing with regard to consumer protection in this area, and of what two things should the FTC be fearful?
- There are serious collective action problems for consumers, and thus, the common law is insufficient. Public utility commissions don’t have jurisdiction, so they cannot act for consumers.
- Although disclosures to customers may not be perfect, the perfect should not be the enemy of the good.
- We need the continuation of the “best efforts” Internet because this approach promote new entry.
- The FTC should continue to monitor practices of service providers, rather than regulate without clear evidence of market failure. Ex ante regulation fearing outcomes that may never occur just works to stifle innovation (e.g., AOL/TW merger conditions stifled advanced instant messaging).
- The government should not subsidize certain broadband service providers. Jeannine Kenney:
- Disclosures to consumers are good, but they are not a remedy to non-competitive provision in the online marketplace. If the FTC waits for entrants to be excluded and damage to the economy to be done, then an anti-trust remedy will be of little utility.
- Privacy and security concerns of consumers are completely unexplored by the workshop.
- Deep packet inspection could lead to the Great Firewall of China. Private communications of subscribers are now the “business records” of providers, and privacy could be compromised.
- The FTC exists because of collective action problems, but not to impose new regulations. The FTC should police the Internet for fraud and deception.
Session 7: What Framework Best Promotes Competition and Consumer Welfare? Industry Views
Paul Misener, Vice President for Global Public Policy, Amazon.com
- The Internet is fundamentally different from all preceding media. Consumers have to “pull” the requested information they want.
- Amazon does not begrudge the market power of Internet providers. Rather, Amazon is just trying to prevent the spread of market power into content provision. Thus, Amazon believes that Congress should craft a national policy that empowers the FCC to adopt a nondiscrimination rule. Amazon does not believe that the ad hoc, uncertain nature of anti-trust remedies are sufficient. Amazon supports the Dorgan-Snow net neutrality bill.
Chris Wolf, Co-Chairman, Hands off the Internet
- Current antitrust rules can address any intolerable discrimination or degradation of service problems. Network neutrality rules should not be imposed unless there is a clear need. And as of now, fears of discrimination are hypothetical. In fact, the Internet has flourished because it has been unregulated. Network neutrality regulations would have adverse consequences because they would make it more difficult for providers to recoup investments, which would ultimately restrain the development of broadband services.
Tod Cohen, Vice President and Deputy General Council, Government Relations, eBay
- Network neutrality regulations should be implemented now to prevent discrimination in the future. The Internet has flourished because it has been neutral. Applications such as Ebay and Skype have succeeded because they did not need to ask network operators for permission to use networks. In turn, millions of consumers have benefited from the existence of these programs. To ensure further competition and innovation at the application level, the government must require neutrality at the physical level of the public Internet.
- Mr. Cohen disagrees with the notion that competition in the Internet access market would prevent discrimination. He believes all providers will discriminate if it makes sense economically.
- If the United States refuses to enforce network neutrality, other countries will follow suit and allow discrimination for a variety of reasons. In turn, the international public Internet will be severely damaged.
Joseph Waz, Vice President, External Affairs and Public Policy Counsel, Comcast
- Current antitrust laws and competition policies are sufficient to resolve any problem. Network neutrality problems have not arisen, and ex ante regulations typically waste government resources, with limited public benefits.
- The 1996 Communications Act demonstrates that less regulation in terms of conditions to network access leads to greater broadband deployment, and more choices for consumers. Congress took two different approaches to promote competition in the 1996 Act. For the telecommunications industry, Congress took the “lets regulate the access to networks” approach. Specifically, Congress and the FCC crafted resale and unbundling regulations. These regulations led to very little competition. Conversely, the 1996 Act lessened restrictions on cable; thereby generating substantial competitive investment in cable and massive infrastructure build-out. And the existence of this large infrastructure is what allows content providers like eBay to succeed. Thus, Congress should promote investment in facilities and not require sharing of facilities.
Gary Bachula, Vice President for External Relations, Internet
- Nondiscrimination on the Internet is extremely important for academic and medical institutions. Simple rules should enforce network neutrality on the public Internet. The seventy-five word network neutrality condition in the AT&T-Bell South FCC merger agreement would be sufficient if implemented on a national level. The FTC, FCC, or both should craft enforcement guidelines.
- Current competition and consumer protection laws are insufficient. For instance, schools and other non-profits do not have time, money, or standing to rely on the current system. How do the panelists feel about a network neutrality model that relies on the FTC’s existing competition and consumer protection powers? Would the panelists support a rule that requires Internet providers to disclose any discrimination to consumers? Would the panelists support streamlined complaint procedures at the FTC, or maybe even the FCC?
- If pushed, Mr. Waz would probably oppose mandatory disclosure requirements. He thinks Comcast is already open and honest with its customers.
- Mr. Misener would welcome the enhanced FTC oversight described in the question. But such steps would not be sufficient. A Congressional nondiscrimination rule is still needed.
- Mr. Wolf reiterated that no enhanced regulations are needed. The only network neutrality problem has been Madison River, and that was quickly resolved.
- Mr. Cohen remarked that notification measures might be too intrusive and consumers would disapprove of them. He prefers clear and succinct network neutrality enforcement guidelines.
Can anyone provide a prescription to promote competition in the market for broadband Internet access?
- Mr. Waz stated that more effective spectrum management policies could aid the development of more broadband options.
Is there a need to act now on network neutrality?
- Mr. Cohen stated that it is important to act now. Prevention is easier than after-the-fact regulations.
- Mr. Wolf believes that new regulations are unnecessary until real world problems appear.
- Mr. Misener stated that there is a need for action now. Misener stated that broadband providers have not discriminated yet because they are on their best behavior until the network neutrality fights die down. Misener cautions that providers have already placed pre-orders on technology that facilities discrimination. Additionally, providers have reassured Wall Street that discrimination will hopefully begin once the policy debates end.
- Mr. Bachula echoed Mr. Misener’s remarks. For him, a wait and see approach is not sufficient.
- Mr. Waz sees no need for regulations. Providers do not intend to discriminate. So far, providers have abided by the FCC’s policy directive. If a problem arises, the FTC and the FCC will be able to successfully handle it.
If network neutrality regulations are enacted, what is an appropriate timeframe for their implementation, and how will network neutrality violations be determined?
- Mr. Cohen chooses not to address the specifics of how the regulations should be implemented and enforced.
- Mr. Misener believes that regulations are needed when meaningful competition (i.e., choices for consumers) does not exist. He stated that the FTC could determine whether meaningful competition exists.
What should we learn from the ways that other countries are addressing the network neutrality issue?
- Mr. Misener fears that a decision not to enforce network neutrality in the United States will signal to European countries that their Internet providers may extort rents from United States content providers.
- Mr. Waz remarked that the current United States model of promoting facilities based competition is the best approach. He hopes that the United States exports this idea to the rest of the world.
Session 8: What Framework Best Promotes Competition and Consumer Welfare? Academic/Policy Views
Timothy Wu, Professor, Columbia University Law School
- Professor Wu has just released a study concerning anticompetitive behavior in the cellular telephone market, and he spent most of his time on the panel reviewing that study. He implied that the purpose of the study was to indicate that a “competitive” telecommunications market does not necessarily ensure that the market operates in a consumer-friendly manner. It also implies that refusing to prevent vertical integration in a market can severely restrict consumer choice and innovation.
- The data collected for the study indicated that the vertical integration in the cellular marketplace has caused three problems. First, it has caused “product crippling.” Wireless companies have been able to limit the ability of consumers to use their wireless phone across networks. They have used this limitation to force manufacturers to limit phone features and the use of innovative technology, like Bluetooth and wi-fi.
- Second, cellular telephone providers have used their network monopoly to discriminate against other uses and content providers. Professor Wu cited the restrictions within wireless contracts on the use of a provider’s wireless data transfer capabilities. Providers often prevent subscribers from accessing networks not run or owned by the provider, including video services and VoIP capabilities. Violation of these restrictions can result in termination of a subscriber’s service.
- Finally, cellular companies have used their network control to stifle application development. Carriers limit and control the ability of third parties to develop new applications for wireless phones. These limitations cause a bottleneck in application development and utilization of the capabilities of next generation wireless phones.
- Vertical integration has created “situational monopolies” for wireless providers. The costs associated with transferring wireless providers ties subscribers to their service provider, further strengthening the vertical integration controls cellular companies have over their networks.
Christopher Yoo, Professor, Vanderbilt University Law School
- Net neutrality is really about two things: competition and innovation. With respect to competition, vertical integration is not the competitive evil others engaging in the net neutrality debate had made it out to be. In fact, vertical integration in telecommunications had resulted in communications innovations like caller ID. It is true that vertical integration can cause competitive problems, but where a market structure has proven to be both good and bad, it is best to proceed on a case-by-case basis, dealing with competitive problems retroactively. It is best for the government to avoid over-regulating a market system on the basis of a hypothetical competitive problem so that the system is able to mature. He also reminded the audience that the reality of the communications marketplace is that either the content provider or the consumer would be tasked with paying for future network upgrades, so it is best to allow the market to sort that issue out.
- It is best to allow the market to experiment with new transfer protocols and network architectures to ensure that that it is responsive to the needs of consumers. Standardization is not necessarily the ultimate good, although it has some value in narrowing the universe of options. Diversification must be valued as well, particularly when regulators are dealing with a hypothetical competitive imbalance. Valuing the status quo and preserving it in a regulatory regime must be supported by more than a hypothetical.
David Sohn, Staff Counsel, Center for Democracy & Technology
- Net neutrality is as much about preserving what is good about the Internet as it is preventing illegitimate actions by network providers. The goal is to preserve the neutral and open architecture of the current Internet while allowing for experimentation at an acceptable level. Thus, regulators must address two situations:
- network operators using their power to totally block access to the network; and
- network operators using their power not to totally block access but to degrade the services of a content provider without violating antitrust regulations.
- The limited thrust of current law means that new legislation is necessary. The legislation must be narrowly tailored to the major problems associated with net neutrality and avoid creating a bureaucratic nightmare. Future legislation:
- should address only consumer broadband services;
- should not impose a full common carrier regime with price controls;
- should not impose a complete ban on prioritizing Internet content provided that consumers are given the option of what can be prioritized; and
- should not grant openended regulatory authority to any agency and instead should establish clear regulatory parameters.
George Ford, Chief Economist, Phoenix Center for Advanced Legal & Economic Public Policy Studies
- Mr. Ford eschewed discussing policy proposals concerning net neutrality in favor of discussing the broader public policy debate. He made two general points. First, persons engaging in the net neutrality debate should stick to their area of expertise. It was his belief that far too often, commentators are venturing beyond their area of expertise to make assertions that are unsupportable (for instance, lawyers making pronouncements about economic theory). Second, commentators should be sure to make their statements as specific as possible and to take particular care with how they use certain terms like discrimination.
- He made several isolated comments on the economic reality surrounding the net neutrality debate. First, he reminded the audience that the Trinko antitrust decision applies only when regulations are applied to a particular market. Second, he made the point that economic leverage or “sabotage” generally results not from economic pressures but from overregulation (arguing that net neutrality regulations could actually encourage network operators to increase their attempts to use their networks to “sabotage” content providers). Finally, he stated that the Carter phone regulations should not be applied to cellular providers.
The question and answer period allowed each participant a chance to expand upon their initial comments. Professor Wu and Mr. Ford engaged in a lively debate over the contentions made by Mr. Ford that net neutrality commenters often move beyond their competencies. Professor Wu was particularly concerned with Mr. Ford’s lack of experience with network operation, making the observation that the facts associated with network operation are integral to resolving the debate concerning net neutrality. Professor Wu also raised a question concerning why the general public does not question centralized control of wireless networks when the public often reacts negatively to centralized control.
Mr. Sohn, responding to the comments made by Professor Yoo, expressed his discomfort with an AT&T-like after-the-fact solution to illegitimate monopolistic actions by network operators, arguing instead that the government should act proactively to preserve the benefits of the Internet. Professor Yoo, in response, reiterated that it is better for government to let the market play out when problems are hypothetical. In his opinion, it is better to allow the market to experiment with new ideas and test the boundaries of the market, as opposed to creating architectural rules that restrict such actions. He also argued that the imposition of net neutrality rules would not result in greater competition amongst network providers. Finally, he rejected application of the Carter phone rules to cellular telephone companies.
The panel then addressed a question of whether spectrum reform or bandwidth/network deployment incentives could resolve some of the issues associated with the net neutrality debate. There was general consensus that spectrum efficiency and usage reform would be valuable, but no one on the panel truly believed that such reforms would act as a panacea in the net neutrality debate. Professor Yoo favored spectrum reform as a way to spur additional competition, noting the increased investment in broadband services after the Brand X decision. Mr. Ford agreed, but he also contended that the net neutrality debate would continue. It was his position that the net neutrality debate should move beyond issues of competition to privacy and free speech.
As the session closed, the panelists debated the value of hypothetical competition to future net neutrality regulations. Professor Wu asserted that hypothetical future competitors should not be used as a means of thwarting needed competition. He then argued that the whole of the net neutrality debate can be distilled down into the question of whether an ISP can charge a content provider a termination fee for delivering content to a consumer, a transaction he argued violated the fundamental “bill and keep” architecture of the Internet.
Mr. Ford disagreed, noting that competitive experiences in isolated markets can be extrapolated to larger markets. He also expressed his reticence to the prohibition of any economic transactions before the market has a chance to weigh their value. Professor Yoo reminded the panel that the FTC has an economic formula for determining when potential competition should be used in antitrust regulation. Mr. Sohn again reiterated his position that it is better to preserve the Internet architecture as it is now, while allowing for some experimentation on top of that “floor,” than to try to resolve competitive issues after the original Internet architecture has been modified.