Debunking the Rewrite of Internet Privatization History
November 18, 2009
To help the neutralism movement de-privatize the Internet and transform broadband providers into quasi-public-utilities, some attempt to rewrite the long and very bipartisan history of Internet privatization as a partisan history, despite overwhelming evidence to the contrary.
- One example of some rewriting of the Internet’s bi-partisan privatization history was in today’s Wall Street Journal article: “Fed Mulls Rules, Fees to Spur Net Access” which mischaracterized Internet privatization history in claiming the current FCC proposals:
- “…represent a reversal from the Bush Administration…” when factually it represents a reversal of both Clinton and Bush Administrations’ policies — as I will explain in detail below; and
- “… would be returning to the policies the FCC adopted in the wake of the 1996 Telecommunications Act…” which incorrectly implies that the 1996 de-regulation rules for promoting voice competition to incumbent monopolies should be considered the same as the current proposed regulation of broadband Internet access in a competitive market.
- To be fair, the Wall Street Journal is not the only observer to fall into the trap of re-writing Internet privatization history — by repeating the history-re-write of net neutrality proponents and largely ignoring all the evidence that Internet privatization policy was exceptionally bi-partisan.
In 1995, during the Clinton Adminstration, with broad bipartisan support, the National Science Foundation privatized the Internet backbone by encouraging the decommissioning of the NSFNET and transferring Internet transport to three private sector backbones.
In 1996, Congress almost unanimously passed the 1996 Telecom Act and established U.S. Internet policy: “…to preserve the vibrant and competitive free market that presently exists for the Internet… unfettered by Federal or State regulation.”
In 1997, President Clinton said in “The Framework for Global Electronic Commerce:” “For electronic commerce to flourish, the private sector must continue to lead. Innovation, expanded services, broader participation, and lower prices will arise in a market-driven arena, not in an environment that operates as a regulated industry.”
In 1999, Clinton-Gore Adminstration FCC Chairman William Kennard opposed open access regulation of broadband with broad bi-partisan support. FCC Chairman Kennard said in a public speech to other regulators:
- “It is easy to say that government should write a regulation, to say that as a broad statement of principle that a cable operator shall not discriminate against unaffiliated Internet service providers on the cable platform. It is quite another thing to write that rule, to make it real and then to enforce it. You have to define what discrimination means. You have to define the terms and conditions of access. You have issues of pricing that inevitably get drawn into these issues of nondiscrimination. You have to coalesce around a pricing model that makes sense so that you can ensure nondiscrimination. And then once you write all these rules, you have to have a means to enforce them in a meaningful way. I have been there. I have been there on the telephone side and it is more than a notion. So, if we have the hope of facilitating a market-based solution here, we should do it, because the alternative is to go to the telephone world, a world that we are trying to deregulate and just pick up this whole morass of regulation and dump it wholesale on the cable pipe. That is not good for America.”As the evidence above proves, the privatization of the Internet and pursuit a light regulatory approach to broadband was originally a bipartisan-supported Clinton Administration and a FCC Chairman Kennard policy that the Bush Administration then continued.
It is inaccurate and unhelpful for promulgating sound consensus-based public policy when proponents on any side of an issue attempt to rewrite history to promote their point of view.
***
If you are interested in understanding the genesis of the re-writing of the Internet’s privatization history, consider the 2006 “net neutrality re-frame” put forth in George Lakoff’s Thinking Points, Chapter 8, The Art of Arguments:
“Thus, the argument for Net neutrality becomes an argument for government regulation in this form by the FCC.
The issue is new, but we have seen the values, principles, general argument, and narrative forms before. The Internet is seen as a commons—part of the infrastructure for the common good developed through the common wealth (taxpayer money). The values are freedom (of access) and equality (of access). The government is seen as the protector of freedom and equality through regulation (via the FCC). Substitute “Internet” for “parks” or “clean water” or “telephones,” and the same argument applies—government should secure the equal and fair access to the commons.
The villains are the broadband service providers, or BSPs (e.g., Comcast, Verizon, AT&T, AOL), who own the lines and control access. Their crime is the threat to freedom and equality for the sake of profit. The victims are the citizens using the Internet. The heroes are the companies of CBUI (Google, Microsoft, Yahoo), famous spokespeople like Lawrence Lessig, Vint Cerf, and the Internet community itself, especially the bloggers, who have catapulted this issue to national attention.” [Bold emphasis added.]
Is FCC Declaring ‘Open Season’ on Internet Freedom?
November 17, 2009
The piece below ran on BigGovernment.com today. (One-page version here.)
Is FCC Declaring ‘Open Season’ on Internet Freedom?
The FCC, in proposing to change the definition of an “open Internet” from competition-driven to government-driven is setting a very dangerous precedent, that it is acceptable for countries to preemptively regulate the Internet for what might happen in the future, even if they lack the legitimacy of constitutional or legal authority to do so, or even if there is the thinnest of justification or evidence to support it.
How can we ever hope to influence China, Iran and other undemocratic regimes to provide more Internet access and freedom to their citizens and businesses when our FCC is proposing a radical take back of existing Internet freedoms without legitimate authority or justification?
The grave mistake the FCC is making in the broader international context is claiming that private companies are the primary threat to Internet freedom and free speech, and not governments. History and common sense tell us only Governments have the effective coercive power to dictate real censorship.
The FCC is effectively declaring “open season” on well-established Internet freedoms.
It is perversely providing legitimacy, justification and political cover for undemocratic countries like China and Iran to hunt down dissidents online and censor free speech while using the Orwellian doublespeak of regulating to “preserve an open Internet.” Undemocratic regimes are always looking for “openings” and excuses to further crack down on their people’s freedom of speech and assembly. Surely, the FCC must appreciate that internationally, actions speak louder than words.
The U.S. has a unique responsibility to not screw up the Internet’s freedoms. As the country that invented, privatized and promoted a free, open and competitive Internet, the world has long taken its cue from America on Internet policy. President Clinton whose administration oversaw the privatization of the Internet, said:
-
“For electronic commerce to flourish, the private sector must continue to lead. Innovation, expanded services, broader participation, and lower prices will arise in a market-driven arena, not in an environment that operates as a regulated industry.”
The FCC’s proposed “Open Internet” regulations are illegitimate. First, they offend constitutional due process in that they assume companies are guilty of anticompetitive behavior until proven innocent; the FCC would regulate roughly 2,000 companies, for what one has admitted it did, and for what the FCC alleges another has done. Second, they offend constitutional equal protection in that they treat similar companies very unequally. Third, they offend constitutional protection against Government takings because they ban competitive companies from pursuing business models that are legal today. Fourth, they offend constitutional free speech because the FCC apparently does not agree with the Supreme Court that companies have constitutionally-protected freedom of speech.
The FCC’s proposed rules also overstep the FCC’s legal authority. Without congressional authorization of net neutrality legislation, the FCC is granting itself near limitless jurisdiction over the Internet. Moreover, the FCC’s proposed rules are arbitrary and capricious. They would arbitrarily reverse FCC precedent and factual determinations; arbitrarily move the competitive goalposts mid-game; and regulate competitive companies’ business practices more strictly than any monopoly in the last 75 years.
Further undermining America’s credibility to lead on the Internet policy going forward is that the proposed Internet regulations are not justified. They are a solution in search of a problem. The near perfect voluntary industry compliance over the last several years simply does not warrant a permanent ban on legal business behavior. To top all this off, the FCC has offered no evidence of market failure to justify regulating this competitive marketplace.
In sum, America risks both Internet freedoms and its Internet policy leadership when it proposes such a radical policy change without the legitimacy of constitutional or legal authority or the justification of facts. International credibility 101 says: if you want others to follow your lead, be worthy of following.
Scott Cleland is President of Precursor LLC, Chairman of NetCompetition.org, and was Deputy U.S. Coordinator for Communications and Information Policy at the State Department in the Bush I Administration.
Any FCC Reliance on Harvard Study Would Damage the National Broadband Plan’s Credibility
November 16, 2009
The FCC’s non-competitive-bid, sole source contract with the Harvard Berkman Center to “conduct an independent review of broadband studies to assist the FCC” with the National Broadband Plan — appears to have been a near complete bust.
- The quality of the Berkman study is so poor, so riddled with key factual errors, so devoid of balance or objectivity, and so dependent on fatally-flawed economic analysis, that the FCC should not risk dragging down the credibility of the entire National Broadband Plan by relying on it in any way.
- The National Broadband Plan is too important a purpose, process, and effort to get right for the Nation to cut corners like the Berkman study routinely did.
A summary of some of the critical flaws/errors of the Harvard Berkman study follow:
NTT-Japan commented that the Berkman study was “seriously in error.” Specifically NTT said: “First, facilities based competition, not unbundling, has been the key to broadband growth in Japan.” … “Second, the report mistates the importance of ‘government-subsidized loans’ to the success of broadband deployment in Japan.” … “Third, the Berkman Center’s draft study is internally contradictory.”
France Telecom found the Berkman Center section on France to be “factually incorrect.” Specifically, France Telecom said: “There are numerous factual mistatements made in the study regarding broadband deployment and developments in France.”
Liberty Global, a leading international cable operator that serves customers in 14 countries concluded the following about the Berkman study: “A single ‘one-size-fits-all’ recommendation is not credible in respect of different market starting points and different investment and competition dynamics. Open access has been outperformed by Infrastructure Competition in the 1st generation broadband market in Europe. Leveraging open access experience from 1st generation broadband to the Next Generation Connectivity market is a big leap of faith.”
The comments of George Ford of the Phoenix Center exposed the Berkman study for committing the “grossest of econometric errors.” Moreover, in the Berkman analysis, “the supply curve is downward sloping! This result implies that as broadband prices rise network operators supply less broadband. Intuitively this result makes little sense, violates the law of supply, and muddles interpretation.” … The economic and econometric analysis in both are clumsily conducted and incorrectly interpreted, rendering them unsuitable for use in formulating public policy.”
The comments of Randy May of the Free State Foundation state: “The Berkman study does not accomplish its intended purpose. It fails its purpose because it does not provide a complete and objective survey of the subject matter and because it does not accurately or comprehensively summarize the broadband experiences of other countries. … A principal failing of the Berkman study is… it simply ignores several studies by well-respected economists concluding that the U.S. experience with FCC-mandated network unbundling regulation resulted in diminished network investment by both incumbents and putative competitors…”
The comments of Tom Lenard of the Technology Policy Institute state: ” the study is incomplete and not objective; therefore it does not accomplish its intended purpose. … Indeed, if the Commission acts on the study’s recommendations, it will adopt measures that are likely to inhibit broadband deployment.”
In sum, the Harvard Berkman broadband survey is like a makeshift raft thrown together with poor quality materials and sloppy craftsmanship; it simply can’t be counted on to carry the heavy weight of credibility required to get the FCC to the goal of producing a National Broadband Plan that actually meets the needs of Americans.
- To the extent the FCC relies on the Berkman study to try and accomplish its broader purposes, the study could prove to be less of a vehicle of support for the plan, and more of an unnecessary anchor dragging down broad potential support for the FCC’s broadband recommendations.
Why Has Google Stopped Investing in Broadband?
November 13, 2009
Google, flush with a $22 billion cash horde and generating a whopping ~$10 billion in annual free cash flow, was the only original funder of Clearwire not to provide new investment capital for Clearwire’s broadband deployment expansion, in a $1.5b fund raise announced this week.
- Clearwire’s CEO Bill Morrow, said: “Today’s news is also further validation of the importance of our 4G network to our strategic investors.”
- The open question here is why was Google the only original funder to not believe it strategically important to continue to invest in accelerating a cutting-edge, national broadband buildout to all Americans — or to invest in more national broadband competition?
In these tough economic times and with much less cash on hand or free cash flow to invest, Sprint, Comcast, Time Warner Cable, Bright House, and Intel, all concluded it was indeed strategically important to continue to invest in accelerating broadband deployment to all Americans and increasing broadband competition.
Unfortunately, the hard-to-avoid conclusion here is that Google only invests in broadband when it has something specific to extract for Google’s special benefit.
- It appears that once Google’s original investment secured the quid pro quo that Clearwire would support net neutrality and would operate in accordance to Google’s version of net neutrality — Google no longer sees a need to “invest’ further in Clearwire.
- It also appears that now that Google is confident that the FCC’s proposed net neutrality regulations will only apply to their broadband cloud computing competitors and not to Google, there’s no need to invest in broadband because the FCC will ensure that broadband providers can’t charge Google for its world-leading bandwidth consumption.
- Remember how Google offered to bid the minimum amount for the 700 MHz wireless spectrum auction, in order to ensure that the FCC would go ahead and encumber the “C” Block license with two of Google’s special open access conditions/regulations.
- Remember more recently, Google has admitted to blocking calls via Google Voice and justified its actions with the assertion that Google should not have to pay high rates to ruralcos like everyone else is required to pay by the FCC.
- The obvious implication here is that Google does not believe it has any obligation to contribute to the overall cost of the network like everyone else does.
- Also relevant to this question of Google reticence to invest in broadband is the recent Arbor networks study, which concluded Google is the biggest generator of Internet traffic globally, and which directionally confirmed the core conclusion of my first-ever estimate that Google’s uses many times more Internet bandwidth than it pays for.
- This “who pays” for the broadband Internet question is particularly timely and relevant to two big public policy developments:
- The FCC’s National Broadband Plan to Congress; and
- Chairman Boucher’s planned House legislation to reform Universal Service to support broadband access service.
- This “who pays” for the broadband Internet question is particularly timely and relevant to two big public policy developments:
What all this means is that the evidence continues to mount that Google looks at broadband for what it does for Google and not anyone else.
- Google has long supported the government and others investing more in broadband because, as Google’s cofounder Larry page told a Washington forum last year, Google will make money off every new broadband subscriber eventually.
The common theme here is that Google is highly self-serving and expedient when it comes to broadband funding/investment.
- In essence it appears Google has concluded why should they invest in broadband for all Americans if they can get the government and others to do it for them and on Google’s terms?
- At core Google appears to believe it is entitled to be a net-taker from the broadband system not a net-contributor — even though Google is the single biggest user of bandwidth and the single biggest beneficiary of more broadband.
In sum, concerning the National Broadband Plan and Universal Service, Google apparently believes — why contribute when one can be such an enormously profitable free-rider?
- No one profits more — if the FCC’s Open Internet regulations turn broadband providers into de facto public utilities — than Google.
Phoenix’ Ford Skewers Harvard Berkman Competence
November 12, 2009
Anyone who cares about the competence of the studies the FCC has commissioned/outsourced to produce the FCC’s National Broadband Plan, needs to read George Ford’s devastating critique of the economic literacy of Harvard Professor Benkler’s broadband survey for the FCC.
In a nutshell, the econometric analysis Professor Benkler relied on would have earned a failing grade in any Harvard economics class, because the supply curve slopes in the wrong direction. Oops!
To be fair, Professor Benkler is a law Professor not an economist, but even an undergrad economics 101 student could have caught the fatal flaw in the analysis Professor Benkler relies upon.
