Why I Changed My Mind On Net Neutrality

from the and-why-ben-thompson-should-too dept

Long time readers of Techdirt may know (as I've noted several times), that in the mid-2000s when the net neutrality debate was first heating up, I was against the FCC putting in place rules to protect net neutrality. As I explained at the time, the concept of net neutrality was important, but I had so little faith in the FCC that I expected any rules it put together would cause more harm than good. I similarly argued that the fight over net neutrality was really a symptom of a larger problem (the lack of competition in the broadband market), rather than the problem in itself. I was also heavily influenced by a paper that Professor Ed Felten wrote in 2006 called Nuts and Bolts of Network Neutrality, which mostly (as the title suggests) goes through the various arguments for and against net neutrality rules. But it concludes with a position I agreed with for a while: that while net neutrality was important, actual rules that protected it would be tricky to get right -- and the "best" policy might just be the "threat" of rules should broadband providers engage in bad behavior. Thus, that threat, might prevent bad behavior, without having to put in place bad rules:

Net neutrality advocates are right to worry that ISPs can discriminate—and have the means and motive to do so—in ways that might be difficult to stop. Opponents are right to say that enforcing neutrality rules may be difficult and error-prone. Both sides are right to say that making the wrong decision can lead to unintended side-effects and hamper the Internet’s development. There is a good policy argument in favor of doing nothing and letting the situation develop further. The present situation, with the network neutrality issue on the table in Washington but no rules yet adopted, is in many ways ideal. ISPs, knowing that discriminating now would make regulation seem more necessary, are on their best behavior; and with no rules yet adopted we don’t have to face the difficult issues of linedrawing and enforcement. Enacting strong regulation now would risk side-effects, and passing toothless regulation now would remove the threat of regulation. If it is possible to maintain the threat of regulation while leaving the issue unresolved, time will teach us more about what regulation, if any, is needed.

So, what changed, leading me to eventually move to supporting the Open Internet Order of 2015? Well, as Felten predicted (he's good at that sort of thing...), the market continued to develop, legal precedent got set, and we got a lot more information on what was happening. On top of that, we got decent (though not perfect) rules from the Wheeler FCC, which were non-burdensome, and did quite a lot of good.

I wanted to explore in greater detail what it was that made me change my opinion on this -- and I'll do it while also countering someone else's arguments. A bunch of people have been pointing me to what Ben Thompson from Stratechery has been saying about net neutrality over the past couple weeks. Ben is very smart and extraordinarily insightful on issues related to innovation and policy, and I probably agree with him about 85% of the time. Thus I do find it interesting to explore where we disagree -- and net neutrality is one of those places. But what's most interesting to me is that after going through Ben's thoughts on this multiple times, I think that he's really in the place I found myself a decade ago -- supporting net neutrality, but being wary of the FCC's implementation. So, as part of my reasoning for why I changed my mind, I'll also try to explain why Ben should change his mind as well. If you haven't followed Ben's statements here's his original blog post, which was initially called "Why Ajit Pai is Right," but was later changed to "Pro-Neutrality, Anti-Title II."

His second blog post on it was entitled The Broadband Tradeoff; The Importance of Antitrust. Finally, he did a podcast discussing his views called Two Terrible Options, which focuses on the supposed "tradeoffs" between the current rules and Pai's plan, arguing that he thinks Pai's plan is better for actually keeping net neutrality. But he, unfortunately, bases that conclusion on a series of incorrect or misleading facts, some of which I'll try to correct below.

Ben's starting premise -- which I agree with -- is that there are tradeoffs to any regulations and he, like me, comes from a starting place of being skeptical of the need for regulation without significant evidence that it is necessary.

Any regulatory decision — indeed, any decision period — is about tradeoffs. To choose one course of action is to gain certain benefits and incur certain costs, and it is to forgo the benefits (and costs!) of alternative courses of action. What makes evaluating regulations so difficult is that the benefits are usually readily apparent — the bad behavior or outcome is, hopefully, eliminated — but the costs are much more difficult to quantify. Short-term implementation costs may be relatively straightforward, but future innovations and market entries that don’t happen by virtue of the regulation being in place are far more difficult to calculate. Equally difficult to measure is the inevitable rent-seeking that accompanies regulation, as incumbents find it easier to lobby regulators to foreclose competition instead of winning customers in an open market.

Ben's second point, then, is on the difference between ex ante (beforehand) and ex post (afterwards) regulatory regimes, noting that ex post regimes can allow for more experimentation that can be good:

I absolutely support regulation of ISPs and the preservation of the neutrality (at least in terms of blocking content), I just think we should stick to ex-post instead of ex-ante until there is compelling evidence of systematic abuse.

And, again, that was my position more than a decade ago, and remained as such for quite some time. Here's why I've changed my mind. First, Ben's position (and the position of everyone, including Ajit Pai) who insist that there's no evidence of "systematic abuse" are (conveniently) ignoring (or are unaware of) the long history here. This is not a situation where broadband providers have shown no interest in abuse. They have regularly and clearly stated their intent to systematically abuse their dominant position in the market. As we've discussed, this goes back to AT&T's former CEO Ed Whitacre declaring, back in 2005, his intent to charge edge providers for daring to be what his broadband subscribers demanded from the network:

"Now what they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it. So there's going to have to be some mechanism for these people who use these pipes to pay for the portion they're using. Why should they be allowed to use my pipes? The Internet can't be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!"

But -- Pai, Ben and others may retort -- since then there hasn't been any evidence of them actually doing so. First off, that's not entirely true. There is a decently long list of examples of bad behavior by broadband providers (though Pai and his supporters like to dismiss those as anomalies). But the more important point is that it's always been the Feltenesque threat of rules that have kept the big broadband providers in check. Because it was right around the time that Whitacre announced his intention to start charging edge providers, that then FCC chair Michael Powell had released his guiding principles paper on "preserving internet freedom" that noted the FCC needed to "keep a sharp eye on market practices" to stop broadband ISPs from doing things like blocking competing services. And, soon after that, the FCC fined Madison River for blocking VoIP services.

In other words, the FCC had made it clear that it would crack down on such bad behavior that the big broadband players had clearly stated they planned to engage in. Of course, what followed after that was a series of attempts by the FCC to enforce such rules against other abuses, where the courts repeatedly told the FCC that it didn't have the authority to punish the broadband providers if they were classified as Title I information services. So, you have to know all of this history to understand the threat of systematic abuse. Ben claims that there's no evidence of it, but that's not true. There are the stated intentions of the broadband companies to abuse net neutrality. Beyond the Ed Whitacre statement above, during one of the lawsuits against the FCC (filed by Verizon over the 2010 rules), the company flat out said in court that it intends to violate net neutrality and would do so if the rules were not in place:

"I'm authorized to state by my client today that but for these rules, we would be exploring those types of arrangements," Verizon's attorney, Helgi Walker, said at the time.

So, again, we have multiple examples of the broadband players directly saying that they would violate net neutrality if given the opportunity -- repeatedly held in check by an FCC that tried to set rules saying it wasn't allowed. But eventually, the courts made it clear that such rules were not enforceable under Title I, and the only way to make rules that stick is under Title II, which the Tom Wheeler Open Internet Order finally did.

In other words, the big broadband providers have been clear that they intend to violate net neutrality. They were only held in check by the FCC, but the courts had twice thrown out attempts at rules, until Wheeler reclassified to Title II -- which the courts have since blessed. Given that history, it's reasonable to shift from my Feltonian position of a decade ago to one where it seems fairly obvious that if we are to keep neutrality, we need Title II to make it work. That's exactly what the courts have said.

That's not the only reason either. Another thing that had become clear over the intervening decade was that these broadband companies had only grown larger, more dominant and more powerful -- along with a long history of horrible customer care (being so dominant does that) and outright nefarious behavior (leading to various fines). Going back to the Powell days, where he insisted that broadband-over-powerlines was the Great Broadband Hope for competition, we've seen consistently less and less competition in the broadband realm.

In short, the situation has consistently gotten worse on the competitive front, at the same time the big players have insisted that they intend to initiate bad behavior, and the only check against that bad behavior (the possibility of rules from the FCC) got shot down in the courts until they were reclassified as Title II. Put all that together, and if you support net neutrality, as Ben claims to, there's almost no argument against Title II.

But, while we're at it, we need to correct a few other misconceptions put forth by Ben (and some other supporters of Pai's plan). First, is the idea that this can all be dealt with via antitrust and the FTC. As we noted recently, depending on the outcome of an AT&T lawsuit, the FTC may be blocked from having any regulatory say over broadband providers as well. Relying on the FTC is unlikely to solve many of the problems put forth by violating net neutrality, because they don't fall under areas where the FTC can regulate -- whether it's false advertising/misleading users or outright scams.

Ben, somewhat oddly, makes a number of other factual errors during his podcast. He claims that the 2015 rules have really only caused problems for small ISPs because of the burdensome cost of those regulations. That's... wrong. A whole bunch of those ISPs told the FCC they want the rules to remain. They're not the ones agitating to remove the rules. Indeed, they point out that by killing the rules and consolidating the power of the giant broadband players (i.e., AT&T, Verizon, Comcast) it creates an even more unfair market. Those giants can craft deals with internet services and companies that make it harder for the smaller ISPs to compete.

Along those same lines, Ben insists that the 2015 rules are obviously costly in compliance terms. But there is no compliance issue. There's nothing you need to do to comply other than not block, not prioritize, and not throttle. If you read the 8 pages of actual rules, there's no compliance issue if you're not violating net neutrality. As one small ISP, Sonic, has noted, the 2015 order is only a regulatory burden if you plan to violate net neutrality. And that's because there are some provisions for services that want to violate net neutrality, whereby they'd need to ask the FCC for permission to do so:

The Commission may waive the ban on paid prioritization only if the petitioner demonstrates that the practice would provide some significant public interest benefit and would not harm the open nature of the Internet.

Another point that Ben and others have raised, partially correctly, but mostly misleadingly, is that the key issues that people point to recently on the net neutrality front: interconnection disputes and zero rating, were not covered by the 2015 order. In one sense, this is accurate. Indeed, one of our big complaints with the 2015 rules was that they left these loopholes in place. But... that's not (as Ben suggests) a reason to ditch those rules. After all, literally days after the new rules were voted on, the big broadband players magically ended all their interconnection disputes. And that's because they knew that without fixing that, they'd face net neutrality complaints, and the FCC would almost certainly find those efforts to violate open internet principles.

As for zero rating? Well, Ben insists in his podcast that the lack of any FCC authority over that meant that the rules don't matter. Apparently, he missed the fact that the Wheeler FCC actually told companies that zero rating was anti-competitive late last year, telling AT&T it needed to knock it off. Of course, it was easy for people who don't follow this stuff to miss, because one of Ajit Pai's first moves upon taking over from Wheeler was to tell AT&T not to worry about that complaint.

This also highlights another error that Ben made in his writing and podcast. In the podcast, he keeps insisting that the difference between Title II and Title I is ex ante v. ex post rulemaking. Specifically, he argued that using Title II is silly because it only allows preset rules, and doesn't allow for "ex post" rulemaking to go after new bad behavior (citing interconnect and zero rating as examples). But, as we just pointed out in the previous paragraph, under Title II, the FCC could still make some ex post rulings on bad behavior that went against net neutrality (which is also why the interconnection fights disappeared -- because companies knew the FCC would find it problematic). What Ben misses is that under Title I, there's basically no "ex-post" process at all. The Pai FCC is washing its hands of any authority or any concern for neutrality at all (removing even the Feltonian "threat" of rules), and handing it off to the FTC which may not have any authority at all, and if it does, fairly limited authority that can't go after much of the promised bad behavior.

On top of that, there's much more uncertainty without the rules -- and uncertainty itself can be a pretty large regulatory barrier. The rules set out principles and key issues that the FCC believe in about the internet. And they allowed the FCC to step in "ex post" to correct behavior that violated those principles. But under the new lack of rules, there are no such principles. And while the FTC may step in, ex post, to go after some really egregious behavior, it's not clear what it will focus on (if anything) or why. That leads to much greater uncertainty than the set rules of the 2015 Open Internet Order.

During the podcast, Ben also suggests that the FCC's "success" in getting Comcast to stop throttling BitTorrent (pre-Title II) shows that we don't need Title II, and that the FCC's ex-post orders under Title I were sufficient. Except, once again, that ignores the actual history here. Yes, Comcast stopped throttling BitTorrent. But it took the FCC to court and won. So, what "worked" back in 2008 would not work the next time. It's odd to claim that the FCC succeeded against Comcast when it lost the lawsuit. Comcast didn't go back to throttling BitTorrent because other net neutrality rules were still pending (and because the company had agreed to some temporary net neutrality conditions for mergers. But those will go away).

I'll just end with one final oddity from Ben's position. During the podcast, he argues (as we have argued for a long time) that getting more competition should be the focus -- and to get there he's specifically a supporter of local loop unbundling. That's the process by which the service layer is separated from the infrastructure layer and you can have multiple service providers offering service on the same fiber. I'm all for that as well. It's what we had in the dialup days when there was a ton of competition. But... amazingly, what Ben seems unaware of, is that the law that enables local loop unbundling is Title II. It's right there in Section 251(3). Of course, it's important to note that the Wheeler order (unfortunately) deliberately promised not to make use of this part of the law (via "forbearance"). But moving away from Title II is, by definition, moving away from local loop unbundling. So to say you're against Title II, but for local loop unbundling is just... strange.

The larger point here, though is that while there certainly were a number of reasons to be hesitant about supporting Title II or even explicit rules from the FCC a decade ago, enough things have happened that if you support net neutrality, supporting Title II is the only current way to get it. Ajit Pai's plan gets rid of net neutrality. The courts have made it clear. The (non) competitive market has made it clear. The statements of the large broadband providers have made it clear. The concerns of the small broadband providers have made it clear. If Ben does support net neutrality, as he claims, then he should not support Pai's plan. It does not and will not lead to the results he claims he wants. It is deliberately designed to do the opposite.

So, yes. For a long time -- like Ben does now -- I worried about an FCC presenting rules. But the courts made it clear that this was the only way to actually keep neutrality -- short of an enlightened Congress. And the deteriorating market, combined with continued efforts and statements from the big broadband companies, made it clear that it was necessary. You can argue that the whole concept of net neutrality is bad -- but, if you support the concept of net neutrality, and actually understand the history, then it's difficult to see how you can support Pai's plan. I hope that Ben will reconsider his position -- especially since Pai himself has been retweeting Ben's posts and tweets on this subject.

Update: And... just as this post was going live, Pai was, once again, tweeting about Ben's post, even though Pai must know that Ben's claims are wrong, and Pai's plan does not match with what Ben claims:

Along those lines: @benthompson's post in @stratechery, in which he explains why he "believe[s] that Ajit Pai is right," remains vital reading. https://t.co/C6DBODRzwJ https://t.co/LpSiQ5jnPb — Ajit Pai (@AjitPaiFCC) December 7, 2017

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Filed Under: ajit pai, ben thompson, broadband, competition, ex ante, ex post, fcc, ftc, net neutrality, regulations