Internet Service Providers as Natural Regional Monopolies
Yesterday the F.C.C. circulated a draft order that would reclassify broadband as NOT a Title II common carrier, but as a Title I unregulated enhanced service.
FCC chairman Ajit Pai stated in his announcement:
“ For almost twenty years, the Internet thrived under the light-touch regulatory approach established by President Clinton and a Republican Congress. This bipartisan framework led the private sector to invest $1.5 trillion building communications networks throughout the United States. And it gave us an Internet economy that became the envy of the world.”
What does that mean? Why does it matter? Why did I mention Natural Regional Monopolies in the title to this peace?
What is the internet?
The internet is a global network of computers. Any computational device that is part of this network is a part of the internet. The computational devices (blu-ray players, x boxes, smart phones, tablets, laptops, servers, desktops PCs) connect to each other by different mediums. Those include Digital Subscriber Lines (DSL) cable modems, Fiber, Wireless, Satellites, Powerlines, wifi, radio waves (cell data).
Since the internet is a network, its tough to refer to “it” as one thing since the network is REALLY an ocean of devices that are connecting to each other in a number of different ways.
So why are people on the internet losing its mind over net neutrality?
It has to do with the CONNECTIONS. How does your device link into the network?
Internet Providers as Natural Monopolies
Natural Monopolies * are monopolies (a specific entity is the only supplier of a particular commodity or service) in an industry when barriers to entry (costs to get into the industry) are so high that competition cannot afford to compete in that industry.
Infrastructure for Fiber and Radio Wave Data (cell tower data) are so expensive that new companies cannot enter and compete with the first company who lays the infrastructure. Regardless of who is reading this right now, chances are that there are 3 viable cell phone data providers and maybe 2 cable providers in your area at best, and more likely that there are only 1 or 2 options at all.
What this means is the access of your devices to the internet is controlled by a small group of companies in your area.
With that control comes bad customer service, bad quality of connection (slow speeds), and artificially high costs due to lack of competition.
One other possible impact of a natural monopoly is pay for preference for use of the broadband infrastructure. If you want a great connection, you pay more. Makes sense as an individual using an iphone or home PC. Does not make as much sense if you host internet content. Netflix, Facebook, Hulu, CBS, NBC, FOX, ABC, Disney, Amazon, or any other company that hosts content on the internet needs super fast connections AND they need their customers to be able to get to their content fast.
This is the only issue that net neutrality address.
Common Carriers
This is where we get into the weeds of the FCC and US regulatory law. A common carrier is a transport service that moves something (in this case data) to the general public without discrimination to meet the needs of a public necessity. The without discrimination part is what this is all about. Can an internet infrastructure owner (like Comcast) charge a customer for the connection on one end AND a content provider for a “faster” website? Can the internet infrastructure owner treat website differently based on how much the website owner pays?
By designating the internet service providers as common carriers, the owners of cell towers and cables in the ground can’t double and triple dip on price SINCE THEY ARE NATURAL MONOPOLIES and don’t have competition to stop them from double and triple dipping.
Ajit Pai is intentionally misleading the public when he says that 2015 changed how we approach the internet.
David Weinberger gave an excellent summary of the history of regulating the infrastructure of the internet in a blog post for TING.
In 2002, the agency (the FCC) had to decide how to classify broadband Internet access provided by a new player: Cable TV companies. With Republicans now in the majority, the FCC took the opportunity to undo the very framework it had established. Now the FCC declared that cable broadband access would come under Title I, along with the “information services” provided over the network. Cable companies would not be required to live up to the demands of common carriage even for the transmission service they provided.
The cable companies rejoiced. If they were common carriers under Title II, the FCC could decide if they’d be permitted to sell “fast lanes,” they’d need FCC approval to block data they don’t want to carry and they’d have to provide delivery at prices that the FCC determined are “just and reasonable.”
Keep in mind that “common carrier” is not a label that’s slapped on an industry willy-nilly. You are a common carrier if (basically) you are moving other people’s stuff from A to B for them. Cable-based broadband is as clear a case of common carriage as you’re going to find.
Cherry joined the FCC just as it made this decision about broadband. She says that the lawyers and engineers she talked to there were dead set against it. But the chairman, Michael Powell, insisted on it. “The mantra at the time was ‘Deregulation.’”
He says later:
The issue arose again in 2008. The FCC, now under Chairman Kevin Martin, a Republican, had fined Comcast for blocking peer-to-peer traffic that used BitTorrent, a popular way of sharing large files. Comcast sued the FCC, arguing that since the FCC had put broadband under Title I, it was exempt from the obligations of common carriage. In 2010, the DC Court of Appeals agreed.
In another case, in 2014 the DC Circuit Court again told the FCC that it didn’t have authority to impose common carriage obligations on a service that the FCC itself had classified under Title I.
The cable providers have consolidated more and more every year. The AT&T-Time Warner merger is the next step. Owner of the internet infrastructure (AT&T and Time Warner) also buy and own their own websites. Competition goes down more and more every year as the companies consolidate more and more. Not surprising in a natural monopoly environment.
Net Neutrality is not government overreach. It forces those who own cell towers and cables in the ground to treat websites the same. I can’t think of any reason why discriminating against websites based off of ability to pay the owners of fiber and cell towers is good.
Reclassifying connection infrastructure helps no one EXCEPT the stock holders in Internet Service Providers.
