When you ask Gerry Waldron, a prominent Washington attorney, why he’s pushing hard to have the government regulate cable Internet services, he presents you with a comical hypothetical situation. “Imagine if you called 1-800-L.L.-Bean and your phone company said, ‘Sorry, we’re not going to connect your call because we have a deal with Land’s End.’” For telephone service, that would be preposterous; the phone company is prevented both by laws and by customer outrage from limiting your calls to specific phone numbers.
But Waldron says that on the broadband Internet, customers enjoy no such protections. If your cable company decides it wants to sign a deal with Land’s End and stop you from visiting L.L. Bean’s Web site, it’s free to do so — what are you going to do, find a new cable company? “And that situation gets us worried that the Internet that we’ve grown up with, the Internet that has been characterized by consumers’ ability to go wherever they want — that may not continue in the broadband age,” says Waldron.
Waldron isn’t expressing just his own personal worry; he’s channeling the anxieties of some of the biggest corporations in the country — including Microsoft, Amazon, Yahoo, eBay, Disney, Apple, and Earthlink. Late last year, these firms joined together with a few consumer groups to form the Coalition of Broadband Users and Innovators, a lobby that aims to prevent cable companies from shaping the future of the Internet. “A cable company is used to operating in the cable world, and it’s routine for them to pick and choose content,” says Waldron, who represents the coalition. “In the broadband world there’s no need to pick and choose” — but what if the cable companies do so anyway, giving some Internet content preferred status on their network, and banishing other stuff altogether?
The issue of cable’s influence over the Internet is set to become a hot potato for policy circles in Washington. The Coalition and several of its member firms, acting separately, have already submitted to the Federal Communications Commission a number of proposals intended to bring to the broadband world a concept the Coalition calls “net neutrality.” Proponents of the neutrality rules describe them as simple and straightforward: if the proposals are enacted, broadband providers would essentially be prohibited from “discriminating” between the various types of content that come into your home. Under the rules, your cable company could not force you to visit Barnes and Noble instead of Amazon, or prevent you from using Microsoft’s online game system while allowing you to use AOL’s games, or exact a surcharge when you download videos that aren’t in the QuickTime format — the kinds of seemingly arbitrary practices that the Coalition says cable firms are itching to put into place.
Cable firms say there is precious little evidence to suggest that the industry wants to interfere with what people download from the Web; in the five or so years since cable modems were introduced, there hasn’t been a single recorded instance of a cable company arbitrarily cutting off customers from legal Internet content. There may be no rules preventing firms from doing so, but “the whole point of broadband services is to go anywhere on the Net faster,” says Howard Symons, an attorney for the National Cable & Telecommunications Association, the main cable industry trade group. “If they turn the Internet experience into something that it’s not, people will go to the many alternatives that are available to them.”
Faced with a unified assault from some of the leading lights of the tech industry, the cable firms have also been privately suggesting that members of the Coalition harbor base ulterior motives for regulating cable. Certainly, cable companies say, the neutrality rules will benefit members of the Coalition. Microsoft, for instance, might want the rule to prevent cable systems from signing special deals with competitors to its X-Box Live online gaming system (such as Sony’s Playstation). The same goes for Amazon, Disney, and others — they could all stanch the power of rivals by preventing the sort of contracts that cable companies say will lead to faster adoption of broadband services. Moreover, cable firms complain that it’s hypocritical for Microsoft — which, during its long battle with the Justice Department, made clear its antipathy to government-imposed strictures on business — to be calling for regulations on potential rivals now.
“You have to ask how much of this might be blatant regulatory gaming of the system,” says Adam Thierer, a telecommunications analyst at the Cato Institute. “Yahoo, Microsoft, Amazon — if they can push any regulatory mandate that benefits them in the long run, they’re going to do it.”
It’s perhaps telling, though, that many of the people who’ve come to the defense of the cable industry in this fight are, like Thierer, of the libertarian school of telecom policy — folks who believe that all regulations are bad regulations, certain to do more harm than good. Indeed, the cable industry’s main argument is a paean to a live-and-let-live broadband marketplace — a world in which regular market forces prevent cable company mischief. We won’t do anything terrible, the cable firms say, because our customers would leave us if we did.
Can we trust your cable company — and the free market — to let us do what we want on the Internet? So far, there’s no reason not to. But Gerry Waldron points out that the cable firms have both the technical capability and the financial incentive to block some things on the Internet and to feature others. And at least for now, the broadband world does not resemble a very free market; if customers get sick of their cable firm, most people have little choice to go elsewhere. What’s the problem, therefore, with adopting a simple rule? “You told us you’re not going to drive over 100 miles per hour,” Waldron says. “So what’s the harm in having a rule that says, ‘Don’t go over 100 miles per hour?’”
The rule proposed by the Coalition of Broadband Users and Innovators, which the group submitted to the FCC on July 17, is, at first blush, rather simple. It’s just two paragraphs long. The first paragraph, labeled a “preamble,” says that the rules people have come to expect in the dial-up world should prevail in the broadband world — customers should have “unfettered” access to Internet content, and they shouldn’t be prevented from connecting “their choice of nonharmful devices to the network.”
The proposal allows cable firms to charge customers extra for the bandwidth they use, but only if the cable company does that in a “nondiscriminatory” manner — which presumably means that a cable firm can’t charge you $1 for every gigabyte you download from a rival video-on-demand service if it charges you nothing to use its own video service. And one of the best features of the rule, according to its fans, is that it’s limited: the rule is only in effect “until the market for the delivery of broadband services to consumers is deemed competitive.” (You can see the rule on Page 12 of this lengthy PDF document.)
But it’s precisely the brevity of the rule that gets the cable companies agitated. The proposal might seem simple, Howard Symons says, but words like “discriminatory” and “unfettered” are the sort of artful terms that, in a determined attorney’s hands, could be expanded to mean just about anything. What if Comcast starts bundling its service with Microsoft’s X-Box Live game system — is that discriminatory? What if Time Warner Cable wants to give you free access to Time Warner media content when you sign up for its broadband service — is that OK? “The specific rule that they’re proposing suffers from the problem of vagueness,” Symons says, “but I doubt that you could write a rule that isn’t going to be subject to mischief.”
It’s more than vagueness, though, that cable companies object to. Symons says that the cable firms would protest any rule — even one that he feels is not especially vague — that prevents them from operating freely, because there’s just no sign, he says, that cable companies’ actions have caused any harm. The cable firms say that regulations will add “uncertainty” to their businesses, and uncertainty would reduce investment in broadband services, and that would slow down the deployment and adoption of fast Internet connections.
“You don’t know who’s going to come out of the woodwork and challenge an arrangement,” Symons says. “The leading edge of creativity will be stifled. That’s where you want the drive to be, you want people to be looking for the next killer app — but if every move has to be vetted by teams of lawyers, that’s not going to happen.”
If you talk to both sides in this fight, it becomes clear that they have fundamentally divergent ideas of the purpose of telecommunications regulations. Cable companies say that it’s not the government’s place to impose prophylactic rules — rules meant to prevent wrongdoing, rather than to punish it. The government should stand by and watch while the free market does its work, and it should only step in when it’s needed. The Coalition of Broadband Users and Innovators rejects that view. The FCC, it insists, shapes telecom policy for the future, and should therefore try to prevent bad things. “You don’t need evidence that they’ve done something wrong,” says Andrew Jay Schwartzman, president of the Media Access Project, a public-interest telecommunications law firm. “The argument they make — ‘We’re not doing it so don’t prohibit it’ — misses the point. All you need to show is they have motive and capacity to do it.”
Nobody argues that the cable firms don’t have the technical means to block certain sites and services — everyone agrees they do. The matter for debate is whether they have any incentive to pick and choose what their customers can access. To Schwartzman, it’s obvious that they do.
“They are trying to apply the cable television business model to the Internet,” says Schwartzman. “The cable television business model is where you give away the basic service and make money from the premium services. So, for example, they want to make money selling access to multi-user games or from video-on-demand movies. Now, if they have their own video-on-demand service, under their theory they own the cable head-end and can do whatever they want with it. So they could just not transport Movielink [the video service backed by Hollywood studios] through the pipe,” a situation that would leave the cable company with a video-on-demand monopoly on its service.
Asked about such a possibility, Symons called it “fevered speculation.” “Are there additional services that cable operators might want to offer?” Symons asked. “Sure, and they’re looking at creative ways to do that. I think that there are a lot of smart people looking at services to exploit broadband speeds — but in a way that is completely consistent with the Internet.”
If cable companies do not live up to the free principles of the Internet, customers will notice, says Cato’s Thierer. “If at the end of the day they’re playing a lot of games with my broadband service, I’d be hoping for an alternative,” he says. “If an operator starts to engage in these shenanigans that’s all the more incentive for another operator to crack that market — and with the wireless option that becomes much easier, and it might be something we drive consumers to.”
That may be so; the market may, indeed, kick in to correct problems that emerge. At the moment though, there isn’t a whole lot of competition in broadband. In a letter to the FCC, Gerry Waldron pointed out a JP Morgan study that determined that only a third of American households had access to both DSL and cable modem services. About 38 percent had access only to cable, 10 percent had access only to DSL, and another 20 percent had no access to broadband services at all. When it comes to broadband, in other words, Americans seem completely at the mercy of their cable and their phone companies. Where’s the freedom in that market? (At least for now, phone companies are prohibited from engaging in the sort of content examination on DSL that people fear cable firms will do with cable modems; but the phone companies say that those regulations are unfair, and they’re trying to have them overturned.)
Under Michael Powell, the FCC has been loath to impose new regulations on telecom firms, so the coalition certainly faces an uphill battle in this fight. In a speech on June 27, W. Kenneth Ferree, whom Powell appointed as the FCC’s media bureau chief, sarcastically pooh-poohed the idea of “net neutrality.” “What a lovely notion,” he said, according to a copy of his prepared speech. “Net Neutrality. Who could possibly object to that? The Swiss are neutral. Everybody loves the Swiss, right? This is real motherhood and apple pie stuff.”
Ferree, who made clear that his remarks reflected his own views and not those of the FCC, came down squarely on the side of the cable companies. Net neutrality, he said, “is, in substance, surrendering to regulation as a substitute for competition. The theory of this model, if you will, is that there is not, nor will there soon be, sufficient competition at the distribution level — ergo government must regulate access on the currently existing platforms. It’s very much common-carrier thinking — it’s very much 19th century thinking.”
But in recent months leading members of the coalition have been trekking to Washington in an effort to change the FCC’s thinking. Craig Mundie, a senior vice president at Microsoft, has been there, as has Jeff Bezos of Amazon. Waldron characterizes these visits as something new for members of the FCC. “The FCC typically hears a lot from the pipe owners,” he says. “They’re not used to seeing Jeff Bezos. So frankly, this is a new message for them.”
Will the appeal work? What happens when the biggest tech firms line up against the biggest cable companies? The fight, with deep-pocketed players on each side, is destined to become brutal. And the worst part is that it’s not at all clear which side has the consumer’s best interests at heart; both the cable companies and the content companies see huge gains in having the FCC go their way, and all the while the public stands on the sidelines, waiting to see which side gets to shape the future of the Internet.