06/28/2007

The Federal Trade Commission (FTC) has turned thumbs down on net neutrality.

In a report on broadband availability and connectivity, the FTC found little reason to protect consumers and content providers from attempts by large telecommunications providers to charge more for faster delivery.

"In the absence of significant market failure or demonstrated consumer harm, policy makers should be particularly hesitant to enact new regulation in this area," FTC Chair Deborah Platt Majoras wrote.

Majoras asserted that broadband Internet access was "moving toward more not less competition." (Complete statement - pdf file)

The primary reason for caution is simply that we do not know what the net effects of potential conduct by broadband providers will be on all consumers, including, among other things, the prices that consumers may pay for Internet access, the quality of Internet access and other services that will be offered, and the choices of content and applications that may be available to consumers in the marketplace, Majoras said.

Majoras' position largely echoed statements she made in 2006 while addressing the Progress & Freedom Foundation, a conservative-oriented think tank.

"Broad regulatory mandates that employ a 'one size fits all' philosophy, without regard to specific facts, always have unintended consequences, some of which may be harmful and some of which may not be known until far into the future, " she said at the time.

FTC Commissioner Jon Leibowitz issued a separate concurring statement (Complete statement - pdf file) that supported the FTC's position with regards to consumer protection, but said that reactive antitrust actions might not work as well to protect consumers as enacting net neutrality into law.

"The report also soberly reminds us that regulation often has unintended side-effects...But it seems to me equally clear that this report shows that doing nothing may have its costs as well," Leibowitz wrote.

Differing Opinions

The 170-page report, compiled by FTC staff from several different divisions, sought to provide a general history of the net neutrality debate as well as offer frameworks for discussing the state of broadband development in America. However, many of its conclusions were already in dispute prior to the report's publication.

The FTC supported statistics provided by the Federal Communications Commission (FCC), which claimed that broadband Internet service via DSL was available to 79 percent of households with phone services, and 93 percent of households who subscribed to cable television also had access to the Internet via cable modem.

That drew fire from members of the "Save The Internet" coalition, a group of organizations devoted to protecting the net neutrality principle.

S. Derek Turner, research director of Free Press, criticized the agency for "not including empirical research on competition in the local broadband market."

"They simply take the incumbents at their word that the U.S. broadband marketplace is competitive -- even though most U.S. consumers have at best two choices for broadband at home," he said.

The FCC's statistical measurements of broadband connectivity in America have been heavily criticized for relying on ZIP codes of subscribers to indicate penetration, rather than actual infrastructure development. A report issued by the Government Accountability Office in May 2006 found that relying on Zip codes as indicators of access would overinflate the results and underestimate residents of an area who did not have broadband access.

The Communications Workers of America (CWA) released a report of their own on June 26 detailing that U.S. households that do have broadband Internet access lag far behind users in other countries in terms of connectivity speed.

A study of 80,000 broadband users found that median download speed in the U.S. is 1.9 megabits per second (Mbps), compared to 61 Mbps in Japan, 45 Mbps in Korea, 21 Mbps in Finland, 18 Mbps in Sweden and 7.6 Mbps in Canada.

The FTC report addressed the issue of faster broadband speeds in other countries, pointing to nationalized broadband policy and higher urban density of countries like Korea and Japan as reasons for higher levels of adoption, and claiming that the United States should not closely model its own efforts after other countries.

"For the United States, its larger geographic size and relatively dispersed population make it difficult to compare broadband experiences directly with many of the smaller and more densely populated countries that are sometimes cited as global Internet leaders," the report advised.

No Neutrality In Broadband Battle

Although the FTC's report concluded by agreeing that consumers prefer an open Internet, that enforcement of existing laws should be prioritized, and that the government needs to do more to promote broadband access to underserved markets, the agency shied away from taking a proactive stance to ensure that all content can be accessed equally, a prime tenet of net neutrality.

"Policy makers should be wary of enacting regulation solely to prevent prospective harm to consumer welfare, particularly given the indeterminate effects on such welfare of potential conduct by broadband providers and the law enforcement structures that already exist," the agency said in its conclusion.

The FTC's wait-and-see approach symbolizes the increasingly politicized battle over net neutrality, pitting telecom and cable heavyweights and their Washington allies against tech titans such as Google and Microsoft, and the grassroots coalition of advocacy and consumer groups. AT&T, which had previously announced political opposition to net neutrality, agreed to temporarily abide by the principle for its network as a condition of its mega-merger with BellSouth in 2006.

And the FCC was pushed to open up new investigations into the lack of broadband availability and support of net neutrality after criticism from Congress, the media, and various interest groups on both sides of the issue.

But the issue remains contentious.

A few days ago, John Kneuer, assistant Commerce Secretary in charge of communications and information for the Bush Administration, got into a shouting match with technology experts at a conference in San Francisco.

I firmly believe market forces are going to provide even more open networks and access much, much, much better than I can do as a regulator, he said, and criticized members of the audience for claiming they wanted the government to set mandates and rules for the Internet in the U.S.

When members of the audience disputed Kneuer's contention, he yelled back "That's exactly what you are asking for!"