FCC Anti-Comcast Decision is Pro-Business, Pro-Competition and Pro-Growth

By The Myers Report Archives
Cover image for  article: FCC Anti-Comcast Decision is Pro-Business, Pro-Competition and Pro-Growth

Last Friday the Federal Communications Commission bared its teeth. In a 3-2 decision led by Chairman Kevin Martin, and joined by his Democrats colleagues across the aisle, Commissioners Jonathan Adelstein and Michael Copps, the agency ruled against Comcast, finding that the nation's largest cable company had practiced discriminatory network practices – throttling file-sharing traffic – and did so with a lack of disclosure.

 

The FCC Ruling:

 

Going forward, what precedent does the action set? Does it make the FCC the go-to government body for all things Internet? Resurrect Net Neutrality? Will Comcast sue? What about Cox's blocking (sorry, couldn't resist) or AT&T's decision to engage in network management (cough, cough) in its wireless network? Will this trigger metered pricing? And is this a one-off of token consequence, or does it play with bigger, broader themes of the day?

FCC: Pro-Consumer Is Pro-Business

At the top, what is explicit here is that the FCC has accepted jurisdiction to rule-make with regards to the Internet. While it is likely that Comcast will appeal – that's its modus operandi – there is close consensus among experts that the decision will be upheld. While Commissioner Deborah Tate argued for the FCC to play the role of mediator/arbitrator in her dissent, it would have been toothless without taking on oversight. Public Knowledge's president Gigi Sohn, party to the FCC complaint, said, "This is the first time that the FCC granted a policy change in response to public interest groups that wasn't mandated by Congress." Can it be because aligning with Cable and Telecoms would have been bad economics? Marvin Ammori of Free Press, which partnered with Public Knowledge, believes so: "This is definitely a pro-business decision for innovation and for competition."

While House minority leader John Boehner would have us believe that the decision will "hijack the evolution of the Internet," he starts with a flawed premise: That this is a level playing field. In fact, we are lagging behind the rest of developed countries when it comes to broadband access, speed, and value. Less than fifty percent of U.S. households have high-speed access. And those that do must contend with a duopoly, where consumers cannot choose to leave one service for another. Individual states are enacting legislation to support competition: This Monday Massachusetts Governor Deval Patrick signed into law a $40M incentive fund that will see thirty-year bonds issued to bring broadband to un-served communities across the commonwealth.

To those of us who are vexed that inertia is the default because both parties are wedded to the annual political teat of the Cable and Telecom industries (2007 donations: $14M from Verizon; $17.1M from AT&T; $8.9M from Comcast; $4.1M from Cox) often against their own long-term strategic interests, Tech President's Andrew Rasiej offers a palliative: "To stop the influence of money from the cable and telecom industries in defining the rules that will govern our conversion from the 20th century economy to the 21st, is to fight for more transparency. I have been advocating with Commissioners Copps and Adelstein that they should consider revising the requirements of holding a license from the federal government whereby the burden of transparency rests with the license holder themselves rather than with the public after the fact." Rasiej does not ignore the as yet untapped economic opportunity: "We must elect a visionary new set of leaders who understand the economic incentive to end the stranglehold we have been living under the last ten to fifteen years as the rest of the world has passed us by. Until the world of 20th century (scarcity model) business recognizes that the "media ecology" has dramatically changed to one where (abundance model) entirely new forms of value are created and traded, we will continue to see silly stories like the recent one about Scrabble. Just look at the recording industry or the newspaper industry, and I can rest my case."

Don't take a policy wonk's word on the matter? Vuze CEO Gilles Bianrosa (his Comcast petition was rolled into the Public Knowledge/Free Press complaint by the FCC) uses P2P file-sharing technology to offer legal content on behalf of 300 content partners including PBS and Showtime: "Every large and small content owner that I can think of is trying to figure out how to reach an ever more elusive audience, especially younger generations. Every studio and TV network is experimenting in this space. Trying to impair innovative technologies such as P2P hurts the ability for content owners to increase their reach online. [T]he best way to fight piracy is by outperforming it, with a better user experience."

What of the argument (forwarded by analysts including Sanford Bernstein) that tiered pricing will emerge as a result of this order? Gigi Sohn characterizes this as a "false choice" between blocking and metering, and a scare tactic. She is authoritative: "We've not seen it in any of the countries that are now leading us."

Regarding a recent CNET piece on an emerging technology by Lawrence Roberts [the father of Arpa/DarpaNet packet-switching] used by Universities to detect P2P traffic flows and suppress them, he offers, "If the goal is to curb piracy, I would encourage Universities to use the "carrot" (i.e. provide compelling alternative access to content), in addition to the "stick" (i.e. filtering). Bigger takeaway: Mr. Roberts based the marketplace need for his invention on a false premise: Gigi Sohn refutes the oft-cited statistic that five to eight percent of users are throttling fifty percent of an ISP's capacity. Looking into the future she predicts, "Today's bandwidth hog is tomorrow's user. The right answer is to build out their networks."

For those who bemoan the growth of DVRs, file-sharing is coming up in your rear view mirror. A fall 2007 study by PC Pitstop held that Bittorrentapplications are installed on over thirteen percent of all PC desktops. BitTorrent president Ashwin Navin predicts this figure will balloon to eighty percent in three years. BitTorrent was one of those outliers that was able to strike deals with ISPs. It partnered with Comcast back in the spring and has since been embraced by Warner Brothers, Paramount, and MySpace TV. Navin is eager to move into online gaming: P2P will offer a ninety to ninety-five percent reduction in the server power needed for distribution. Moving past the frame of Piracy King, Navin walks his talk: "Conversation wins over litigation."

But not all the time. In the same news cycle two seemingly unrelated stories crossed the wires: Online crossword puzzle Scrabulouswas sued by Hasbro's Scrabble (July 24); disabled on Facebook the following Tuesday; reborn as Wordscraper less than two days later. Redlasso, an elegant and intuitive online broadcast content tool (a video clipper for the rest of us) was likewise cease-and-desisted by Hulu JV partners NBCUniversal and Fox. It immediately "suspended" operations except for its enterprise clients including XM Satellite Radio.

What of those who continue to flout the FCC's ruling – including AT&T and Cox? Ammori is clear, ""We will be vigilant – not only we – it will be the public." Certainly he can count on mobilizing the 1.65 million who contacted the FCC during the Comcast hearing process.

This watershed ruling, which doesn't negate the need for Congressional passage of Net Neutrality laws, should be read as a call to arms – in both invention and to transparency. Just as the solution to our energy crisis is to create an economy around green-collar jobs and be the leader in alternative energy, technology should never be deployed at the expense of consumer choice. If you are moving in a restrictive manner because your bottom line seems to dictate it, any wins will be short-lived.

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