Picking up where we left off…
Market-Based Myths Abound
The argument against Net Neutrality really goes off-track when it gets into the nature of private property, the state of competition, and the effect of regulation. That’s more than one track to be thrown off of, so it’s quite the disaster scene. We may need CSI: Telecom to sort it all out.
Public Knowledge earned its headline in the Spectator because of the petition we filed with the FCC asking that companies like Verizon which offer text messaging not be able to decide which groups should be deemed worthy of service and which shouldn’t be.
For the American Spectator, PK and our friends are asking for “governmental bullying” that infringes on the rights of a property owner’s right to “manage the content that flows” over its network. Our crime is to want to “treat wireless carriers as public utilities rather than as private property owners. It’s a fundamental misunderstanding about the nature of widely used private networks.”
In the same vein, Armey wrote that Net Neutrality violates the conservative principles of “free market competition and private property rights.”
It is true that Verizon is a private company and that the network is its property. It is not true that the government has no authority over it. Much as zoning ordinances restrict what can be built on private property or regulation sets rates for electricity, it’s well established that private property is subject to the law.
Verizon’s network is not a private network. It is privately owned network, but that’s different. A private network is what a company might have to connect its employees. Wireless has 65.2 million retail customers. That would be some humongous private network. Verizon, as with other cellular operators, offers a service to the public in accordance with the Communications Act. It is a public utility, subject to regulation.
In the text-message case, it’s our view that Verizon, or any other carrier, should not be in the business of deciding which political views are acceptable to be carried on its network and which are not. That’s not network management. It’s censorship, and a violation of consumer rights, just as Comcast’s continual throttling of peer-to-peer applications is goes beyond network management.
Because of our defense of the rights of free speech for every political view, the American Spectator categorizes Public Knowledge as “a left-leaning tech advocacy organization.” If the defense of freedom of Americans to express their political views makes us “left-leaning,” then make the most of it.
Also remember that Public Knowledge’s singular accomplishment so far is a successful court challenge to an FCC rule that would have expanded the Commission’s authority over devices far beyond what was authorized by Congress. In our broadcast flag case, we forced a Republican FCC to retreat when it tried to exercise too much power.
Reports of Competition Exaggerated
Finally, let’s get to the concepts of “competition” and regulation. There is very little competition in the broadband market. To pretend otherwise is folly. If a consumer has two choices among providers, then that consumer is doing well. Most don’t. If this were a truly competitive market, then there would be at least some restraint on prices. There isn’t. Verizon expects to raise its prices on its fiber-optic FIOS service. Comcast raises its rates, even with FIOS in the neighborhood. This isn’t true competition. It’s a duopoly. There may be the odds and ends provider to supply service here and there, perhaps in Wyoming, but for the most part people choose between telephone company and cable if they have a choice at all. It’s hard to see how, as Armey says, consumers would be left with “fewer choices” if a free and open Internet were mandatory.
Perhaps the worst argument from conservatives about Net Neutrality is that “pervasive regulation,” as former FCC Commissioner Rachelle Chong called it, would somehow be such a burden to the poor, deprived telephone and cable companies that their incentives to invest and to innovate would just dry up. Opponents of an open Internet conjure up images of parents unable to protect their children, of government setting up business models, of companies unable to manage their networks.
Those tired-winged canards don’t quack here. Net Neutrality is neither pervasive nor burdensome. It allows for innovation and investment. It allows for telephone companies to sell different levels of service to different customers. Parents can still protect their children. What it doesn’t allow is discrimination. That’s why Michele Combs from the Christian Coalition supports an open Internet, and she is brave and correct to do so in the face of uninformed criticism of her fellow “conservatives.”
As it turns out, there is a real world example of how well this works, because there is a company that is currently under a Net Neutrality mandate. As a condition of its purchase of BellSouth, AT&T agreed to a two-year condition in which it is forbidden to provide any service that “privileges, degrades or prioritizes” any packets of data based on “source, ownership or destination.”
How’s that working out for AT&T? Look at its April 22 first quarter earnings report. Here are some highlights:
Earnings per share up 26.7 percent over first quarter 2007;
$30.7 billion in consolidated revenues, up 6.1 percent from the year earlier;
13.2 percent growth in broadband revenues with a 491,000 net gain in broadband connections in the quarter to reach 14.6 million in service
491,000 net gain in broadband connections in the quarter to reach 14.6 million in service;
first-quarter net gain of 148,000 U-verse subscribers, to reach 379,000 in service, on track to reach target of more than 1 million subscribers by year-end 2008
$4.4 billion in capital expenditures vs. $3.3 billion a year ago.
Those results were achieved under mandated Net Neutrality, the original, fundamental characteristic of the Internet that protects the individual consumer’s freedom to innovate without permission and to receive, and pay for, the services he or she chooses. Why a conservative opposes that, is a mystery of unsolvable proportion.