Comments submitted to the Federal Communications Commission in the matter of Broadband Industry Practices

Overview: The Choice Between Net Neutrality or “Bandwealth”

The Federal Communications Commission Notice of Inquiry seeking input on “Broadband Industry Practices,” (primarily net neutrality) arises in an important context. Network neutrality activists—by the thousands—claim that not regulating network owners will leave the Internet at the mercy of a few large companies, when the activists’ backers are themselves large companies.

Grassroots activist hi-jinks aside, both sides in net neutrality debate risk increased vulnerability to political predation as a result of this proceeding, and make themselves more so the longer their respective upper-level managements fail to jointly call these proceedings into question in a CEO-level communications industry “summit” of sorts. It is self-destructive to believe that content companies and their customers ultimately benefit from a regime in which they cannot change course and pay for premium quality services well beyond the capabilities of today’s technologies. Letting lieutenants run this show on the Washington battlefield is disastrous policy for the content industry. The wealth, infrastructure, content, options, consumer benefits and security to be created in a non-neutral regime vastly exceed what “neutrality” can sustain on a regulated network.

Net neutrality mandates imply that private control by dominant vendors is against the public interest. But a better starting point is to appreciate that we have today is not broadband at all compared to future needs. Cable and DSL speeds are a trickle compared to the Niagara needed tomorrow, before even addressing the security and delivery requirements vastly beyond today’s capabilities and glossed over by the assertions of authority permeating the NOI. Freezing today’s Internet into a regulated public utility via net neutrality’s FCC-serving price-and-entry regulation would obviously slow investment and innovation—meaning fewer new companies, networking deals, products and technologies—but will ultimately hurt content companies too. Neutrality undermines wealth maximization, including content maximization. (It will also undermine spectrum maximization, important to note now that efforts are underway to pre-regulate wireless networks that do not even exist, rather than prioritize infrastructure/content industry summits to explore market institutions to develop fluid secondary markets in future spectrum.) A network in which government regulates infrastructure is one in which content regulation is easier as well.

Net neutrality advocates’ premise is that infrastructure companies should not control content, but that it’s perfectly acceptable for content companies, in conjunction with government, to control infrastructure. The implications of entrenching this idea further in law and policy at this stage of communications history are incandescent. This proceeding undermines the aggressive communications liberalization campaign actually in the interest of both sides, and in the consumer interest. Success in inflicting the “infrastructure socialism” embodied in net neutrality would set in place the machinery for endless interventions, not just against the current targets but against today’s advocates.

We stand on the brink of regulating on the basis of what has not happened. The temporary gain by securing regulatory control over the other side pales in comparison to the rewards of network, content and communications liberalization that should be the emphases of both sides. At stake is the destruction of infrastructure wealth, consumer welfare, and even infrastructure security—a crucial consideration largely exiled from a NOI that risks putting a scarlet “D” on the kind of “discrimination” that even security ultimately depends upon.

The agency and both sides in the debate must step back rather than act on the inevitable regulatory impulses that will emerge from this proceeding, impulses likely to entice congressional interest as well. The questions in the NOI, although addressed here, are the wrong ones to ask at this stage if one’s concern is flowering of infrastructure and content. The deliberate conflation of competition with government-defined openness and a sentiment toward forced access (and the attendant government role in price and entry regulation) colors the entire proceeding. What does FCC truly regard as the source of new infrastructure wealth? What definable and limited political institutions foster the necessarily hand-in-hand growth of content and network infrastructure?

An elemental flaw in the FCC’s proceeding is the misconception that the interests of infrastructure owners on the one hand, and content owners on the other (as well as consumers) legitimately conflict in a world where the option of turning to regulators for unearned political favors is unavailable; Rather, the two are natural partners, and the very existence of these proceedings helps create the conflict in which we find ourselves engaged. We stand at the brink of undermining “bandwealth.”

This brief, in the context of addressing FCC’s queries, takes the opportunity to explore what institutions are the true sources of “openness” in civil society. Choices are government or private sector; proprietary networks on which choices and contracts can be exercised and altered, or “neutral” ones controlled politically. Ensuring neutrality on a network that none of our descendants would want to use is an easy thing to do but hardly worthwhile. The federal agency claiming to protect networks can too easily herald their stagnation.