NetCompetition

At its Thursday meeting, expect the FCC to adopt Google’s PR script to try and better sell the FCC’s upcoming “Extreme Makeover” of Internet regulation.

• The centerpiece of the FCC and Google’s “extreme Internet makeover” plan is the creation of an entirely new, Google-inspired, regulatory classification called “Broadband Internet Connectivity Service” or BICS.
• The BICS extreme makeover is designed to:
  • Enable the promotion of integrated “edge” products and services like Google Voice, Google TV, and Google’s Chrome/Android operating systems; and
  • Empower the FCC to implement its National Broadband Plan on its own without additional Congressional authorization or action.

Predictably, the FCC’s Google-oriented-BICS-scheme has three fatal flaws — making it a disaster waiting to happen.

• First, the FCC has no legal authority to manufacture an entirely new regulatory definition/classification without Congressional legislation.
• Second, the FCC’s expected truncated decision process is designed to minimize opportunity for opposition and Congressional oversight.
• Third, the FCC’s BICS scheme is patently unworkable from an engineering, operational, and business-model standpoint.
  • (I will elaborate on these three points later in this post.)

I. What’s really going on?

The new Google BICS script appears to be the FCC’s latest attempt to try and finese and dodge overwhelming opposition to the FCC’s “Third Way” proposal to regulate broadband as a common carrier public utility service for the first time.

• The FCC majority apparently intends to vote to approve a Notice of Inquiry Thursday that will be very short on new information that could spawn controversy, but long on soothing rhetoric and new questions — all while quietly renaming, repositioning, and reintroducing its public utility “Framework for Broadband Internet Service” yet again to try and make it appear: harmless to competition and investment, edge-innovation-boosting, and user-empowering.
  • While this Notice of Inquiry may not be billed as “Computer Inquiry IV,” Google’s latest ex parte strongly suggests that it basically what it is.
• However, like the supposed “reality” “Extreme Makeover” TV shows, the PR script here has the FCC playing the public role of munificent creator of perfect broadband regulation for consumers, while Google’s behind-the-scenes role as sponsor, producer, director and main financial benefactor of the new “Framework for Broadband Internet Service” remains largely hidden from public view.
  • Just like the “Extreme Makeover” TV scripts, the broadband “before” picture will be all heart-wrenching hardship, while the “after” picture of the FCC’s BICS framework will all be smiles and tears of joy and gratitude.
  • This script requires the FCC to continue its well-worn narrative that portrays the American consumer in most dire of broadband straights:
    • Suffering under a largely choiceless “opoly,” that is always on the prowl to anti-competitively discriminate and block defenseless content, if their is no FCC super-cop on the beat to stop it; and
    • Being forced to consume broadband gruel that is far behind the quality and speed of the rest of the world.
  • To achieve the requisite “Extreme Internet Makeover” oohs and ahhs that the script of this drama requires, it appears that the FCC will try to claim that their new BICS approach will not touch or “disrupt” in any way existing regulatory classifications of regulated telecommunications services and unregulated information services, but just provide a new additional BICS choice/alternative for consumers.

II. So what is BICS?

The consumer vision of the “BICS” service appears to be like a regulatory-mandated virtual broadband dial-tone service or a virtual end-to-end broadband “circuit” that’s always “switched” on, where a consumer would:

• Buy a broadband gateway device, (basically an omni-box/modem that would work simultaneously as a wireline/WiFi router for multiple computers, a soft-switch for multiple phones, a set-top box for multiple TVs, and a converter/modem for every other type of IP device in between); and
• Pay a uniform regulated rate set by the FCC that would cover the purported “total” cost of the service to the consumer, so that Internet applications providers like Google, and content providers would be guaranteed to not ever have to pay to distribute their products/services to consumers over IP-based networks.

The regulatory vision for BICS appears to be like a stand-alone Broadband-UNE-P or Cloud-UNE-P service offering to consumers — where raw unmanaged bandwidth would be provided to the end-consumer like a virtual dedicated telephone circuit or dial-tone, despite the fact that no broadband ISP has regular end-to-end complete control of Internet connections between all users.

• It appears as if the FCC wants to grant the end-user the equivalent of resale rights of a CLEC competitor so that the end-consumer can buy the equivalent of a discounted wholesale broadband omni-connection to every other Internet user without any need to own, control or manage any broadband facility or infrastructure — other than the “edge” broadband gateway device.

III. So what’s the problem?

It’s illegal: First and amazingly, the FCC has managed to conjure up an even more fantastical legal interpretion than their latest legally-doomed “Third Way” Title II Re-classification effort. It seems that with this latest BICS legal re-imagination of its authority, the FCC is spiraling into ever-increasing regulatory-hubris and legal delusions of grandeur.

• The FCC has no constitutional or legal authority to de facto legislate new law and policy by virtue of three votes at the FCC.
  • The latest D.C. Circuit Comcast decision (that the FCC is not appealing) could not have made that limitation of the FCC’s authority more clear.
• The 1996 Telecom Act legally superceded the FCC’s Computer Inquiries I, II and III, by codifying the Computer III concept of mutually-exclusive regulated “basic service” and unregulated “enhanced service” — into a regulated “telecommunications service” and an unregulated “information service.”
  • It is difficult to imagine how Google and the FCC think that with three FCC votes they can effectively enact a “Computer IV Inquiry” that would effectively rewrite and overturn settled U.S. law — without Congressional action.
  • If the FCC could do this on their own without Congressional authorization, they would be advancing the notion that there is effectively no limit to the FCC’s self-appointed powers.

It’s Not Due Process: Second, the FCC’s unusual proposed NOI to Declaratory Ruling maneuver is designed to minimize the opportunity for opposition and refutation by those affected, and to subvert normal Congressional oversight.

• The normal appropriate process here would be a Notice of Inquiry (NOI) with a comment period… then a Notice of Proposed Rule Making (NPRM) with a comment period and a reply comment period… before deciding on a formal order.
• By zooming from the NOI to a final Declaratory Ruling/Order, the FCC would be short-circuiting the normal process in order to:
  • Prevent any correction of the record;
  • Block any challenge of the advanced legal theory, arguments, or precedents; and
  • Mute/thwart Congressional oversight or opposition.

Moreover, this theory would not even return things to a pre-2005 state of affairs like net neutrality proponents have long argued for, this would create something that has never been done before or that has never even been publicly discussed before now.

• This is a tried and true recipe for backlash from the Congress and the Courts.
• This is beyond regulatory overreach; it is FCC Exceptionalism.

It’s unworkable: Third, the FCC’s BICS is patently unworkable. The FCC BICS theory rests on several fantastical immaculate assumptions.

• Centralizing the de-centralization: BCIS assumes that an international unregulated network of networks, that was by design de-centralized and not dependent on any particular nation’s connection points to work, can be forced by the regulatory fiat of one nation to operate as a single, centralized monopoly network that can ensure any two desired end-points can be connected as a “dumb pipe” at any time without any network management.
  • The FCC seems to have fogotten or never really understood that the Internet was designed to be the architectural antithesis of a monopoly copper wire phone network.
  • Forcing the Internet to operate as a system of BICS dedicated end-to-end phone-like circuits, would undercut most every attribute of the Internet that makes it so empowering and innovative.
• Rest of world unlikely to follow: BICS assumes that the FCC can convince most every other nation’s regulators to follow the FCC’s lead when the rest of the world is proving to not be very cooperative with American initiatives — to put it mildly.
  • The FCC’s attempt to centralize the Internet in Google’s image, risks triggering a balkanization of the Internet, as other nation’s are naturally growing more suspicious of Google after the international WiSpy scandal, Google’s data spill when the Chinese hacked into and stole Google’s password system computer code, and Google’s reported partnership with the NSA, the top U.S. spy agency.
• Dumbing down smart networks: BCIS assumes that the FCC can unilaterally mandate the Internet to become a “dumb pipe” when the Internet’s network of networks are replete with all sorts of built-in smart network functions to manage capacity/congestion, cope with disasters, prioritize for public safety, prevent cyber attacks, filter for viruses/malware and spam, etc.

IV. Conclusion:

The FCC’s Google-BICs-scheme would be a de facto “de-competition policy” designed to recreate and facilitate the return of a public utility monopoly for broadband.

• Strict uniform regulation of the price, terms and conditions of a BICS offering would eliminate most any opportunity or benefit from competitive differentiation or innovation over time.
• Mandating all technologies create the same monopoly-regulated BICS offering also would kneecap the U.S.’ leadership in creating the most facilities-based broadband competition in the world.
• In addition, mandating that all parts of the Internet that route or carry bits be subject to common carrier regulation would have huge unintended consequences.
  • It could crater the unregulated peering system that have been the way the Internet backbone operators have operated since the early 1990s, by potentially forcing fiber backbones to run their Internet routing through FCC-price regulated interconnection agreements for the first time.
  • This could capture currently unregulated companies like Akamai, Level III, Cisco, Juniper, and others that participate in the routing of bits to consumers.
  • Apparently, the FCC has no idea how complicated this would be, its the regulatory equivalent of brain surgery, and a predictable disaster waiting to happen.

Very conveniently, this Google-BICS-scheme would also enable Google to efficiently, and at no cost to Google, extend its search advertising monopoly power and its digital information monopsony power to increasingly become the Internet’s digital distribution bottleneck.

• BICS is all about what’s most efficient, convenient and cheapest for Google to promote ubiquity for Google Voice, Google TV, and Google’s Chrome/Android operating systems.
• At core, this Google-BICS-scheme would destroy competition and foster Internet monopolization by Google.
• Simply, the FCC mandating ONE universal Google-BICS gateway device logically would further entrench the ONE universal dominant content and application gatekeeper — Google.