Obama's plan to regulate the Internet

You’d think the man who couldn’t launch a website with a billion dollars in funding might be a little more circumspect about trying to seize control of the Internet, but no, there was Barack Obama on Monday, lecturing the supposedly independent FCC on the need to turn cyberspace into a highly-regulated public utility, using an archaic title designed for telecommunications from the rotary-dial era.  The Washington Post reports:

President Obama on Monday called for the government to aggressively regulate Internet service providers such as Verizon and Comcast, treating broadband like a public utility as essential as water, phone service and electricity.

Such a move would have a dramatic effect on cable and telecom firms that have fought vigorously to keep their highly profitable Internet businesses free of regulation.

This is Obama’s most aggressive statement yet in favor of a free and open Internet and against allowing Internet service providers to charge content companies like Netflix for faster access to their customers. The president’s statement, released online Monday while he traveled to Asia, calls for the FCC to adopt the strictest rules possible for ensuring so-called net neutrality, or the principle that all Internet traffic should be treated equally.

“I believe the FCC should create a new set of rules protecting net neutrality and ensuring that neither the cable company nor the phone company will be able to act as a gatekeeper, restricting what you can do or see online,” Obama said in a statement.

Yes, let’s allow the inept, corrupt government that has given you one titanic faceplant after the other to nationalize Internet access.  What could go wrong?

Obama urged Wheeler to “reclassify” ISPs such as Comcast and Verizon under Title II of the Communications Act, giving the agency more power over how the companies operate.  Advocates of this approach say that under Title II, the FCC would have substantial powers to prohibit carriers from blocking Web traffic or favoring some services over others.

The idea is controversial, but popular among net neutrality advocates who want to ensure that ISPs cannot block or slow Internet traffic to consumers.

Telecom providers such as Verizon oppose the measure and have said that they would fight it in court. The industry quickly pushed back against the White House proposal Monday.

“Reclassification under Title II, which for the first time would apply 1930s-era utility regulation to the Internet, would be a radical reversal of course that would in and of itself threaten great harm to an open Internet, competition and innovation. That course will likely also face strong legal challenges and would likely not stand up in court,” Verizon said in a statement.

If your hackles go up at the notion of the Leviathan State ensuring Internet “freedom” through ham-fisted regulation, good: you’re thinking straight.

Obama added that the FCC should extend its net neutrality rules to cellular carriers like T-Mobile and Sprint, a proposal that has drawn resistance from wireless providers in the past. Meredith Attwell Baker, the wireless industry’s top lobbyist, said applying Title II-style regulation on cellular providers would be “a gross overreaction.”

Obama has long spoken against allowing ISPs to charge Web companies for better, smoother access to consumers. But those statements did not include any specific policy.

Monday’s announcement marked a significant departure, with Obama endorsing a proposal that goes much further than a middle-ground approach the FCC was said to have been considering.

Sheesh, the great Obama push for Net Neutrality only just began, and there’s already mission creep – he wants to go after cell phones, too.  That should give you an idea of what awaits you in the Net Neutrality future.  The regulatory apparatus will just keep on growing, pinpointing more targets and assuming more authority, with no end in sight.  Every dictator around the world who longs to control the Internet will be cheered by the United States’ official endorsement of the concept.  Sure, they say they’re doing it to force prices down and make things better for the Little Guy today, but these things always start with such promises.  Allow me to borrow some vernacular from another regulatory scheme that was sold with big promises of increased access, lower prices, and more choices: We’re going to bend the cost curve of Internet access down.  If you like your website, you can keep your website, period.  No one is going to take it away from you.

There are many similarities between Net Neutrality and the long, sorry saga of health-care reform.  In both cases, the commodity in question involves technology that is understandably confusing to the layman.  And in both cases, there are real problems that have irked consumers and prompted calls for regulatory redress.  Net Neutrality is a broad term that covers a lot of individual proposals; not all of them are bad, or incomprehensible.

The primary sin of Internet Service Providers has been to claim that bandwidth is much more limited that it actually is.  Much of the early growth of the Internet was financed by charging premium customers higher prices for the greater amounts of bandwidth they consumed.  This made it possible to offer low-bandwidth deals to the average consumer at cut-rate prices.  The home user who did a little light web-surfing and e-mail could get the level of access he needed for a pittance, because providers charged higher prices to heavy users.  Ditto with web sites, where high traffic meant a higher price.

As the amount of available bandwidth expanded, Internet providers maintained it was still necessary to charge unequal prices for different levels of access because otherwise the growing number of heavy users – such as people streaming movies and music through their computers – would gobble up all of the available data access and require other means of rationing, such as usage caps (your Internet access automatically slows down when you exceed a certain amount of usage in a month) or surcharges.  This has led to challenges in which watchdog groups and legal teams in court cases established that rationing measures were not actually necessary; the ISPs were pretending supply was more limited that in actually was, in order to justify charging more.  There have also been accusations that Internet Service Providers would either overcharge or sabotage third-party competitors – for example, if the ISP offered a movie-streaming service to its customers, it would abuse its “gatekeeper” role to compromise the performance of services such as Netflix or Amazon Prime, or it might hit third-party providers with exorbitant fees to gain access to the ISP’s customers.  One variation of this complaint involved ISPs setting up data caps for standard Internet access customers, but then exempting its own services from the cap, so that a movie streamed from the ISP’s film library wouldn’t count against a customer’s data consumption for the month.

Court actions have already been prompted by such complaints, and there is always the power of competition to punish the abusive, although Net Neutrality advocates maintain that ISPs are near-monopolies because there tends to be a dominant player in each market, usually a cable-TV company, and it’s hard for competitors to offer comparable performance with alternative delivery systems.  Among the objections to Net Neutrality are fears that government regulation would choke off the investment needed to rectify that situation.  There’s also still a lot of work to be done, spreading broadband access to every corner of this vast country, and ISPs will be less eager to complete that work if they know the results will be quasi-nationalized.  This is the core of the Telecommunications Industry Association’s objection to using telecom regulations as a Net Neutrality sledgehammer:

“We are deeply concerned over President Obama’s endorsement of reclassifying the Internet as a Title II utility-like telecom service. Such a move would set the industry back decades, and threaten the private sector investment that is critically needed to ensure that the network can meet surging demand. We saw a significant negative impact on investment the last time restrictive Title II regulation was in place, and no one will benefit from returning to that failed policy.

“As manufacturers and suppliers who build the Internet backbone and supply the devices and services that ride over it, our companies strongly urge regulators to refrain from reclassification that will guarantee harm to consumers, the economy, and the very technologies we are trying to protect.”

Much of President Obama’s Net Neutrality concept amounts to punishing ISPs for something they haven’t done yet.  USA Today quotes a Comcast executive saying a vast expansion of regulatory power is not necessary to keep the industry from blocking content or creating artificial “fast lanes”:

“This would be a radical reversal that would harm investment and innovation, as today’s immediate stock market reaction demonstrates,” said Comcast Corp. executive vice president David Cohen in a statement.

Shares of ISPs fell Monday morning following the announcement. Comcast fell 3.75% to $53.07.

Cohen argued that Congress should be the body to enact new net neutrality rules. “The Internet has not just appeared by accident or gift ??? it has been built by companies like ours investing and building networks and infrastructure. The policy the White House is encouraging would jeopardize this engine for job creation and investment as well as the innovation cycle that the Internet has generated,” he said.

The average Internet user probably doesn’t believe his Internet access is either over-priced or under-performing, making this FCC incarnation of Net Neutrality an atomic-bomb solution to a “problem” only a relatively modest portion of the web-surfing public is aware of.  Prices have dropped, while the quality of Internet service has risen at a dizzying pace; access is so good, and so ubiquitous, that it’s practically invisible.  It’s something we just take for granted now, which is wonderful.  I’ll bet most computer novices would be amazed to log into their home router and look at how many devices in their home are floating through their wi-fi networks.  (And if your router isn’t properly secured with a decent password, you might have some unpleasant surprises waiting for you as well.)

But there’s still room for a big political and cultural push to make the public receptive to Net Neutrality, with such loaded (and nearly Orwellian) buzzphrases as “free and open Internet.”  One suspects Obama chose this post-midterm soapbox because, as with his push for increasing the minimum wage, it allows him to be generous with other peoples’ money.

I’ll be blunt: you have to be incredibly naive to think anything Barack Obama wants to get involved in would be more “free and open” after he got finished with it.  Debating individual abuses and legal, or perhaps even legislative, remedies is one thing… but haven’t we learned our lesson about giving hungry regulatory agencies an open-ended mandate to “improve” our lives as they see fit?  Whatever problems we might have with profiteering ISPs are going to look like peanuts compared to the problems a profiteering government can saddle us with.

That’s not to say that ISPs should have carte blanche to rook people, if lower prices are feasible, and competition would ordinarily bring them.  However, some of the Net Neutrality discussion veers dangerously close to asserting that private owners are not free to conduct their own business enterprises or dispose of their own property.  America has gone much too far down that road over the past few years.  Are we going to drag the most visible component of the Internet industry, the ISPs everyone pays for service every single month, into the public square for a beating as designated villains?

The issue on the table at the moment involves both specific regulatory proposals, and the regulatory environment that will shape the future.  The President’s statement, which you can read in full here, specified four “bright-line rules”:

No blocking. If a consumer requests access to a website or service, and the content is legal, your ISP should not be permitted to block it. That way, every player ??? not just those commercially affiliated with an ISP ??? gets a fair shot at your business.

No throttling. Nor should ISPs be able to intentionally slow down some content or speed up others ??? through a process often called ???throttling??? ??? based on the type of service or your ISP???s preferences.

Increased transparency. The connection between consumers and ISPs ??? the so-called ???last mile??? ??? is not the only place some sites might get special treatment. So, I am also asking the FCC to make full use of the transparency authorities the court recently upheld, and if necessary to apply net neutrality rules to points of interconnection between the ISP and the rest of the Internet.

No paid prioritization. Simply put: No service should be stuck in a ???slow lane??? because it does not pay a fee. That kind of gatekeeping would undermine the level playing field essential to the Internet???s growth. So, as I have before, I am asking for an explicit ban on paid prioritization and any other restriction that has a similar effect.

Those are carefully-chosen crowd-pleasers, which imply that ISPs are robber barons who are unfairly sabotaging Internet traffic to turn excessive profits.  One might compare them to, say, a health-insurance company that uses government power to cancel existing plans so that customers are mandated by law to buy new, overpriced policies from a sheltered market.  But can’t even the most cursory reader see how a regulatory semi truck could be driven through the superhighway of regulatory power opened by his “increased transparency” proposal?  (How can Barack Obama, of all people, talk about “transparency” with a straight face?)  The government’s going to decide what qualifies as “special treatment” and how much companies are allowed to charge for it?  They’re going to decide what qualifies as the legitimate sale of enhanced performance, and what should be banned as “slow lane” extortion?  (And in the very same statement, the President promised there wouldn’t be any price controls!)

“If carefully designed, these rules should not create any undue burden for ISPs, and can have clear, monitored exceptions for reasonable network management and for specialized services such as dedicated, mission-critical networks serving a hospital,” the President promised.  “But combined, these rules mean everything for preserving the Internet???s openness.”  After what we’ve seen over these past decades, stretching back long before the Obama age began, why would anyone implicitly trust the government to decide what “reasonable” exceptions there should be, without tons of influence from well-connected lobbyists?

I wouldn’t counsel blind faith in ISPs, either, or any other player in the Internet industry… or any other industry, for that matter.  I’m all in favor of hassling ISPs day and night over how much they charge, and whether measures they claim are necessary to conserve limited bandwidth are justified by the limitations of their infrastructure.  They might be charging too much, or providing less bang for the buck than they could.  This is true of everyone in any marketplace.  The big difference with ISPs is the absence of easy competition to punish them for business practices that aggravate consumers.  To the extent that some of them seem to have gone out of their way to aggravate their customers, they’re reaping a Net Neutrality whirlwind they have sown.

There are reasonable cases to be made for government regulation, and of course the industry isn’t exactly unregulated now.  But using archaic laws to set up a massive new regulatory regime is just too much.  It might begin with four proposals that sound good to many ears, but it surely will not end there.  I counsel skepticism towards the regulators at least as deep as the cynicism we feel toward their targets.  No matter what objections we might raise to their business practices, those companies will always easier to bring to heel than Big Government is.