Net Neutrality and Title II Reclassification: The Solution To a Problem No One Has

Kevin Glass
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Posted: Nov 12, 2014 9:01 AM
Net Neutrality and Title II Reclassification: The Solution To a Problem No One Has

This week, President Obama announced his administration's desire to have the Federal Communications Commission reclassify broadband internet service as a "common carrier" under Title II of the FCC's regulatory framework. This would subject all broadband internet service providers (ISPs - Comcast, Time Warner, AT&T and others) to the same kinds of regulations that face traditional telecommunications services. [*See update.]

It's a move that has been favored by internet content providers like Google and Netflix while being opposed by those ISPs. Under the current regulatory regime, the content providers are worried about the leverage that ISPs hold and a potential nightmare scenario where ISPs own other content providers and allow their physical networks to favor some traffic over others.

"Net neutrality," the concept, is that all internet traffic is treated the same. That way, Comcast is prohibited from making a deal with Amazon to prioritize their streaming video service over Netflix's. And in a case earlier this year, when Comcast and Netflix were embroiled in a dispute over how to handle their traffic-sharing agreements. Netflix released this chart to attempt to "prove" that Comcast had been intentionally slowing network traffic - the spike comes after Comcast and Netflix reached an agreement.

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Notice the drop in speed for both AT&T and Verizon customers, as well. After this chart was made, AT&T struck their own deal with Netflix, and these both had followed a Verizon deal made in 2013. Despite this, though, Comcast remains in the middle of the pack for Netflix speeds, and AT&T and non-FIOS Verizon remain abysmal.

ISPs argue that non-neutral networks - "smart networks" - make sense in an era in which the internet traffic categories have massively diversified. The principle of net neutrality makes sense in 1995, when the only thing on the internet was a few news websites and some gifs, but makes little sense in 2015, when that principle means that Netflix must be treated the same as a teenager playing Xbox, a grandmother checking CNN, a DJ mixing on Turntable.fm, an explanatory journalist surfing Wikipedia, and a conservative blogger procrastinating by watching Too Many Cooks. That in an ideal world, benevolent ISPs would be able to manage that traffic to deliver the best quality service to each person who uses the internet in different ways.

These arguments often devolve into dystopian fear-mongering. Neutrality advocates warn about a world in which ISP services force people into using different services - if corporate giants strike deals or mergers that incentivize consumers to use different services - Bing over Google, Hulu over Netflix, etc. - and that there is little choice to go around. Smart network advocates warn of the government leviathan levying regulations and taxes that shrivel and destroy the development of internet infrastructure.

Both of those outcomes are plausible, but unlikely. Reclassification, though, is a solution in search of a problem. It's been rare, even in the era of diversified internet, that there have been violations of the principle of net neutrality. While neutrality is merely a principle, not an actual regulation, most pro-neutrality advocates couch their rhetoric as "preserving" the rules that govern the internet rather than imposing new ones.

One reason that the principles of net neutrality give neutrality advocates legitimate worry is the lack of competition in the ISP market. 30% of all American households have only one internet provider, and another 37% have only two. With the vast majority of Americans living in, at best, an internet duopoly, the threat of competition to keep a check on ISPs that violate neutrality principles is non-existent.

A potential response is that to counteract the threat of non-neutral networks, we should deregulate and threaten competition on the duopolist incumbents. That's easier said than done. It takes millions of dollars in capital to get an ISP competitor off the ground in even towns like Lawrence, Kansas, or Colorado Springs - much less a major metropolitan area. And outside of the infrastructure costs, there are permits and franchising regulations to get around - as Ars Technica characterized it, you need "millions of dollars, patience, and lots of lawyers."

The franchising rules are largely why you don't see major incumbents competing against each other. The proposed Comcast-Time Warner merger would create a mega-behemoth in the ISP world, but these companies don't actually compete against each other. They're segmented off into their own individual markets. For a consumer, it's never a choice between Comcast and Time Warner - it's either/or.

While it would be easy to advocate for reform to make Comcast and Time Warner compete against each other rather than team up, that's easier said than done - and it might be out of the scope of the FCC to determine. Franchising reform would be a municipality-by-municipality fight around the country, to bring competitors like FIOS and Google Fiber into the market, much less to allow Time Warner into Comcast's neighborhood and vice versa. Even so, the best we might be able to hope for is something like the cellular market, where there are four monster companies competing against each other. This isn't ideal, but it's better than our current duopoly. As Berin Szoka, Matthew Starr and Jon Henke wrote in Wired:

If we really want more ISPs building better broadband, let’s start by not making it so damned hard to build. The key to promoting broadband competition is streamlining the process for anyone who wants to build a network.

Here's the upside of this approach: it might solve the problems that net neutrality advocates worry about while at the same time addressing problems that actually exist right now as a result of these pseudo-monopolies that local governments have granted to incumbents. It doesn't have the clean, technocratic, top-down approach of Obama's Washington reclassifying the regulations around a massive section of America's infrastructure, but it might, town-by-town, solve the problem before it even becomes a problem.

*Update: The original piece stated that this would subject high-speed internet services to Title II regulations "for the first time." This is not the case; in 2002, the FCC classified broadband service offered by cable companies as "information services," while DSL services offered by telephone companies remained under Title II "common carrier" regulations until 2005. Internet services have been on roughly equal regulatory footing since then.