Winston Churchill quipped that the best argument against democracy is a five-minute conversation with the average voter. Dumb Internet regulation may be about to prove his point.
Stimulated by superficial and badly informed skits put on by HBO’s John Oliver and ABC’s Jimmy Kimmel , millions of public comments have poured into the Federal Communications Commission supporting the imposition of 1930s-style “Title II” regulation on the Internet in the name of net neutrality.
We’re having this debate, though, not because net neutrality has become an urgent need of the marketplace. A long, long time ago, perhaps it was reasonable to fear telephone companies might try to block voice and messaging apps like Skype and FaceTime that compete with their traditional services. It was plausible that cable might slow or block Netflix or YouTube to protect its TV business.
That was a different eon. Consumer demand for these apps is now what keeps traditional phone and cable companies swimming in broadband profits. Their self-interest has been transformed. Verizon, a favorite net neut baddie, is giving away a year’s worth of free Netflix to new triple-play subscribers. Why? Because getting customers addicted to Netflix helps Verizon sell more broadband.
We’re having today’s anachronistic debate for two reasons only: The molasses-like speed of the legal process, still dealing with failed FCC efforts to codify net neut rules a decade ago.
The second reason is the unique situation of Netflix, which generates a whopping one-third of peak Web traffic and implicitly sets the investment agenda of the downstream consumer broadband industry. Netflix has a singular incentive to use regulation to impose an economic model that requires all users to subsidize the costs of Netflix users.
Now, nature put Netflix in this position; there’s no point in complaining because a company has discovered its self-interest. But the idea that Netflix is inspired by higher principle is humbug.
Which brings us to the question of the day: Where’s Google ?
Google, along with just about every big tech company except Netflix, is a member of the Information Technology Industry Council, which filed comments with the FCC calling for “a light-touch regulatory framework rather than a heavily regulatory common-carriage framework.”
Google knows that Title II would cast a pall over broadband investment. Google knows that comforting assurances that the FCC would “forbear” from applying Title II’s price controls and service mandates are no comfort at all in the long run.
Google knows that independent experts like the Brookings Institution’s Robert Litan and Georgetown’s Anna-Maria Kovac, who actually understand what Title II means, point out that Title II would not actually prevent the “paid prioritization” that net neuties claim to fear but would introduce every sort of unintended consequence.
Google knows that Title II means regulatory risk for any company that operates telecom infrastructure, which all big Web companies do. Five years ago, Google had to fight to protect its “Google Voice” app from regulation under Title II.
Add the fact that Google itself is a broadband suppler through its Google Fiber affiliate, plus has ambitions to be a wireless distributor using high altitude balloons, underutilized TV spectrum and other novel approaches. Google would become a regulated utility under Title II.
Some say Google has been scared into silence in the current debate by memories of the name-calling back in 2010, when Google crafted a net neut compromise with arch villain Verizon that was widely praised except by liberal mau-mau groups. A telecom lawyer who has worked with Google in the past offers a simpler theory: Title II has become a holy fetish among “the cool kids,” and Google is afraid of being seen as uncool.
Whatever the reason, the company’s brain trust of Sergey Brin , Larry Page and Eric Schmidt (like many in techland, admittedly) seem to hope for a happy ending based on the wisdom of FCC Chairman Tom Wheeler, the quiet representations of sober analysts who say Title II would solve no problem and create destructive incentives, and the fact that most tech companies who aren’t Netflix oppose it.
That the FCC, as of Friday afternoon, has resisted any urge to introduce a provocative Title II rulemaking before next week’s election in hopes of exciting the Obama “base” is a good sign. But as long as Google and others refuse to state forcefully what they know and understand about how net neut politics is morphing into regulatory overkill, the rest of us will have to worry, in the words of Frank Louthan of the Raymond James brokerage, that “the ongoing debate over how to ruin the Internet just will not die.”
