Most Americans, whether willingly or not, have likely heard the pros and cons of net neutrality—ad nauseum. Bonus points (and my condolences) if you’ve been dragged into the policy vortex so far as to invoke Title II of the nation’s Communications Act in polite, cocktail-party conversation.
Either way, the FCC’s recent 3-2 decision to deepen its day-to-day involvement in the Internet’s oversight marks a new chapter in U.S. consumers’ broadband, and particularly mobile, experience. We are rapidly transitioning from celebrating or bemoaning the changes, into witnessing a tiresome partisan debate about the real-world consequences of Internet regulations.
Will this sea change in US Internet policy go down in history as a win, an inconsequential whimper, or a waste of our nation’s global innovation leadership? With the 400 pages of the FCC’s new rules finally public today, here are eight key questions to ask:
In our brave new Title II world, nobody quite knows for sure whether American consumers will be forced to spend more time staring at the dreaded loading symbol of doom. And there is the rub. What we do know is that in 2010, a busy day for engineers might entail one network configuration update. On today’s 4G networks, a busy day might feature six updates every minute. Innovation moves quickly. Regulation does not. How deeply and frequently will the FCC use its newly claimed authority to override the engineers and gum up the works?
These new rules could put an extreme chill on new business models—even those that would undoubtedly prove wildly popular with consumers. Case in point: Netflix just cut a deal in Australia to ensure consumers there can stream as many TVshows and movies as they like without any data charges. But as Chile, the Netherlands, Norway and Slovenia already have ruled, it could now be argued here in the U.S. that such an approach violates the amorphous new “general Internet conduct standard,” and thus should be prohibited. With Title II, the FCC has claimed broad authority to determine which business models are best for consumers. Even Netflix itself is beginning to comprehend the Pandora’s box it helped open with its support of Title II. The company’s CFO told an investment crowd last Wednesday that Netflix made a mistake in supporting Title II and would prefer “a non-regulated solution.”And speaking of Pandora, the jury is literally out as to whether this or a future FCC will outlaw under Title II such innovative new services like T-Mobile’s Music Freedom, providing consumers streamed music without using their data plans.
With the global race to deploy faster, smarter and more secure networks now fully underway to keep pace with consumer demand, continued evolution to even more advanced 4G, and eventually 5G, networks in the U.S. will require massive investment. Yet even the slightest whiff of uncertainty from the FCC’s new rules could lead network operating companies and their suppliers to sit on the sidelines waiting for more investment clarity at precisely the moment when the U.S. should be forging full speed ahead to maintain our lead in 4G deployment. Even Facebook CEO Mark Zuckerberg— no BFF to carrier business models—acknowledged recently at the Mobile Work Congress in Barcelona that “it’s really important not to lose sight of the fact that the real companies that are driving this are the operators .” The pace and scale of all mobile innovation rests on the strength and sophistication of wireless networks. Carriers are investing north of $30 billion annually in U.S. mobile infrastructure. Is that sustainable under the new “heavy-touch”regime?
Broadband and wireless leaders in Europe could not appear more flummoxed by what they view as a U.S. self-immolation. The Secretary General of the center-right European People’s Party was baffled that our nation is pursuing a path that “led Europe to fall behind in levels of investment.” An executive from investment bank Rutberg & Co. summed up the takeaway abroad in this way: “The top-line message is that Obama is regulating.”And the former chairman of Europe’s telecom association expressed chagrin at the risky precedent set for rising Internet regulation around the world, while noting the opportunity for non-U.S. companies to catch up.
Much has been made of the “Internet versus telecom” divide on this issue. But John Perry Barlow, founder of the Electronic Frontier Foundation, believes Silicon Valley’s support for Title II has been overstated. Despite a desire to court FCC regulators and general support for a level playing field, he said that “almost everybody I know who is a major technologist” has “limited willingness to believe that Title II is the best answer.” And no wonder. Silicon Valley after all is where minimally viable, smart and simple product design reigns supreme. In contrast, Title II, by far one of the most cumbersome, complicated and clumsy of all regulatory frameworks ever conceived by our government is the antithesis of these values. With Facebook extending an olive branch and Netflix playing both sides on Title II, will there be mounting pressure to achieve a more rational middle ground, perhaps via Congressional action?
Will it be harder for new broadband service providers and business plans to get off the ground? Will capital markets and private equity balk at new broadband business plans? How do rules written for a bygone era of telephone monopolies encourage broadband and wireless competition? FCC chairman Tom Wheeler insists they will. Many who build and invest in businesses for a living believe he’s dead wrong on this count. Time will tell.
That wide berth you got at the cocktail party when you mentioned Title II? You’re likely to maintain that perimeter if you utter the new geek-speak word of the day— “forbearance.” Wheeler promises forbearance from the more onerous aspects of Title II. It’s a good idea in theory (assuming you go down the unfortunate rabbit hole of Title II to begin with). But in reality it is the equivalent of ringing the dinner bell for Washington regulatory attorneys. Forbearance is fraught with legal and political risk. While this path is sure to finance many lawyers’ second homes in Tahoe, Cape Cod and the Hamptons, it’s hard to envision how such a “mother may I” approach doesn’t add to the uncertainty surrounding this still as-yet-unseen rule. And in tech land, any new uncertainty equals less investment, which equals less innovation. Likely winners? Members of the Federal Communications Bar Association. The losers? Consumers.
Yes, the FCC approved this debacle, but don’t prick your ears for the fat lady’s tune anytime soon. Congress is questioning the ability of three unelected officials to upend the Internet. Voices from across the industry have alluded to a legal challenge. The last court rejection made clear a straightforward, non-invasive path to what could be a clean, Kumbaya rule. Will Congress or the courts force a more constructive direction? Can they do it fast enough to shield consumers and innovators from the FCC’s retro approach?
Americans enjoyed an open Internet before the FCC’s vote, and they will continue to enjoy one after. The question before us: What is the collateral damage of a more regulatory path for the Internet?
It is my view that the FCC’s divisive and unnecessarily politicized decision to impose utility-style regulations on the nation’s broadband infrastructure effectively pumps the brakes on an unprecedented era of American innovation. It is my fervent hope that I’m wrong. How the FCC uses (or abuses) its wide-ranging new authorities, and how Congress, the courts and consumers respond, will ultimately determine what comes next. Until then, we all will remain in digital limbo. As tempting as it would be to breathe a sigh of relief that the debate is finally over, now is the time for mobile consumers and innovators alike to truly lean in.