“Net Neutrality passes as Obama pressures FTC (which is supposed to be independent) to begin to regulate the Internet as a utility. When was the last great innovation from a public utility?” —Annie

From today’s Washington Post

Why Obama’s plan to save the Internet could actually ruin it
By Larry Downes November 11, 2014
By some estimates 850 water mains break a day in North America. So why the urge to turn the Internet into a utility? (Deb Lindsey for The Washington Post)

On Monday, President Obama joined the chorus of those urging FCC Chairman Tom Wheeler to inject federal and state regulators directly into the heart of the Internet, “reclassifying” wired and mobile broadband ISPs as public utilities under a 1934 law written to control the former Bell telephone monopoly.

While Obama has long supported the notoriously slippery idea of “net neutrality,” this is the first time the White House has explicitly asked the FCC to take specific action, let alone to embrace the most radical and legally uncertain approach being considered by the agency — what even many advocates for net neutrality consider to be the “nuclear option.”

The president’s intervention is troubling, in part because as an independent regulatory agency, the FCC is supposed to be immune from White House influence.

But there’s also a global dimension to consider. Even as the administration is suddenly urging heavy regulation of the Internet at home, it continues to fight persistent efforts by the United Nations and other international bodies to shift Internet governance from engineering groups to authoritarian governments who want it less, not more, open. The president’s statement will surely be seen as hypocritical in international circles.

And that’s not all that’s at stake in this confusing Beltway drama.

Net neutrality, for those who haven’t been following the story closely, is a term invented by legal academics that calls on Internet Service Providers (ISPs) to treat equally all Internet traffic traveling on the “last mile” to a consumer’s device, without prioritizing the packets of any particular information source, including each ISP’s own content.

But only those who don’t understand the Internet’s unique architecture take that principle literally.

The engineering of the Internet has never been “neutral,” nor could it be. Voice and streaming video traffic, for example, which is much more sensitive to delays, is regularly given priority.

And given increasingly disproportionate traffic from a few leading content providers, including Apple, Netflix and Google, a wide range of non-neutral technologies and practices have emerged over the last two decades to ensure that the most popular content is strategically located and repeated at key points in ISP networks.

These include servers co-located at ISP or third party facilities, direct connections to ISP equipment, and Content Delivery Networks, which replicate the most requested content throughout the network to provide shorter paths across the Internet, including the last mile.

Against these engineering necessities, the FCC has struggled to craft enforceable net neutrality rules that would not unintentionally make things worse for users.

But in January, a federal appeals court rejected much of the agency’s most recent attempt to pass such rules in 2010, largely on legal technicalities. (The 2010 effort followed an earlier court defeat, when the agency attempted to enforce its informal neutrality principles in a case involving users of the BitTorrent file-sharing protocol.)

The January decision provided a roadmap the court indicated would survive future legal challenges, leading Wheeler, a long-time Obama insider who had just taken over the job of chairman, to describe the ruling as an “invitation” he intended to “accept.”

Sure enough, in May the FCC issued a Notice of Proposed Rulemaking that largely repeated the 2010 approach. Rules requiring ISPs to report their network management practices in detail, and to refrain from blocking user access to legal content, were unchanged from their 2010 counterparts.

The rules proposed in May offered only a single change in wording for a third rule that had given the court the most pause. Specifically, a rule that forbid ISPs from engaging in “unreasonable discrimination” in managing network traffic was rewritten to prohibit “commercially unreasonable” network management practices.

The “commercially unreasonable” language was designed to bring the FCC’s proposed rules into compliance with Section 706 of the 1996 Communications Act, which the court said was the agency’s sole source of authority over broadband ISPs. (In the 1996 law, Congress and the Clinton administration intentionally gave the FCC a minimal role in the expanding Internet ecosystem.) The same court, in a case involving the agency’s authority to supervise data roaming arrangements between mobile carriers, had approved similar language.

Though there is likely no difference in how the FCC would enforce “unreasonable discrimination” versus “commercially unreasonable” behaviors, self-proclaimed consumer advocates who have long called for an FCC takeover of the Internet seized on the change, whipping consumers into a frenzy with misleading claims that the new rules “authorized” or even mandated ISPs to offer “paid prioritization” services to favored content providers, creating last mile “fast lanes” that would destroy the open Internet and stifle future start-ups.

An article on the Huffington Post, for example, rewrote the headline on a Reuters report of the May proposal from “Amid protests,U.S.FCC proposesnew ‘net neutrality‘ rules” to “FCC Votes for Plan to Kill Net Neutrality.”

The carefully choreographed hyperventilating left the FCC scrambling to contain what should have been a straightforward rulemaking process. But intentional efforts to confuse consumers led to a flood of public comments, pro and con, being filed in the proceeding. The vast majority of them were form letters.

What consumers don’t realize is that the public drama has little if anything to do with net neutrality. At the heart of the campaign to undermine Wheeler’s May proposal is a long-running battle to transform the Internet into a public utility, an ill-advised effort that goes back as far as 1999.

At the dawn of the broadband era, the same advocates today predicting imminent doom and gloom for “the Internet as we know it” warned the Clinton FCC that without public utility treatment for broadband, start-ups would be unable to access potential customers, destroying the potential of the emerging commercial Internet.

In 1999, of course, one of those start-ups was a new company called Google, which today is worth over $370 billion. And under the light touch regulatory approach mandated by Congress and sensibly followed by Republic and Democratic FCC Chairman until now, ISPs have invested over a trillion in new infrastructure, building the world’s leading cable, mobile, and now fiber networks.

Despite all evidence to the contrary, however, the advocates continue to call for government takeover of the network, subjecting it to the same slow, inefficient and often corrupt rules that have nearly destroyed existing power, water, transportation and other older utilities. (In California last month, the president of the state’s public utility commission was forced to resign amid allegations of a too-comfortable relationship with a state power company whose poor maintenance and lax oversight by the regulator led to a gas explosion that killed eight people in 2010.)

And now, in more of the kind of political gamesmanship that voters so vocally rejected last week, the White House has joined the call for similar treatment for the Internet.

“[T]he time has come for the FCC to recognize that broadband service is of the same importance and must carry the same obligations as so many of the other vital services do,” the president said in a statement Monday. “To do that, I believe the FCC should reclassify consumer broadband service under Title II of the Telecommunications Act — while at the same time forbearing from rate regulation and other provisions less relevant to broadband services.”

(Forbearance, a legal loophole that allows the FCC to ignore some of the public utility rules that would otherwise apply under Title II, is unlikely to protect consumers from overregulation. Just last week, for example, a federal appeals court upheld the FCC’s bizarre refusal to forbear from duplicative accounting rules applied to public utility phone companies that became irrelevant years ago.)

Worse, as even leading Obama advisors have acknowledged, Title II would not in fact give the FCC authority to prohibit paid prioritization even if courts upheld “reclassification.”

Not that it matters. Comcast is already subject to strict net neutrality rules under the terms of its merger with NBC Universal, while both Verizon and AT&T have repeatedly dispelled any interest in offering such services in the future. So far, no ISP has ever offered “fast lanes” despite the lack of rules prohibiting them.

So why does the president now believe “the time has come” to take drastic measures to prohibit a practice no one offers with a legal framework that doesn’t prohibit it in any case?

The answer, of course, is that there is no expediency, other than the political kind.

Which is no surprise. Regardless of what they say, those calling for the Internet nuclear option never cared about net neutrality in the first place.

Larry Downes is co-author with Paul Nunes of “Big Bang Disruption: Strategy in the Age of Devastating Innovation” (Portfolio 2014). He is a Project Director at the Georgetown Center for Business and Public Policy.