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An offer Democrats shouldn’t refuse

Internet Innovation Alliance honorary chairman Rick Boucher recommended a compromise between Congressional Democrats that favor the transparency and non-discrimination that net neutrality rules is supposed to provide and Congressional Republicans who see net neutrality rules as onerous and intrusive while hampering the level of investment ion broadband deployment.  Mr. Boucher would like net neutrality principles codified in federal statute in return for internet service providers being returned to their prior information services classification.  From a market reality perspective, Mr. Boucher’s offer in compromise makes sense.  You can read Mr. Boucher’s persuasive argument here.

I’ve argued before that Comcast, AT&T, Verizon, and a host of other broadband access providers have gone or heading beyond their old classifications as broadband providers or even communications companies.  These companies sell ad space on their portals; provide news and information; collect data from their customers that may be used to enhance the quality of the ads consumers see or any other services the broadband entity provides.  Collecting and distributing information is an increasingly important part of their business model as they compete with Google, Facebook, and Netflix for consumer eyeballs.  Classifying them as information service providers is appropriate and would show that the Federal Communications Commission has some understanding of the information market that they are trying to regulate.

Of course I’d rather the rules not even exist thus eliminating the need for Congress to come up with another statute.  Market realities and the philosophy of openness that the internet has adhered to for a quarter of a century should be enough incentive for broadband providers not to discriminate against traffic from certain websites or block their subscribers access to websites of their choosing.  The internet has always been the geeks haven for information flow and its commercialization hasn’t changed that,  If anything, keeping the tap on information flow wide open only drives up the value of a provider’s network leaving the provider with the fun challenge of monetizing that flow.

Mr. Boucher’s offer is one that the Democrats shouldn’t refuse.

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Democrats plan to counter GOP attempts at defunding net neutrality

Senator Ed Markey, Democrat of Massachusetts, and Senator Al Franken, Democrat of Minnesota, will like to thwart their Republican colleagues attempts at reducing the amount of money the Federal Communications Commission will have to enforce net neutrality.  Mr. Markey wants to organize enough Democrats in the Senate to block a rider in the GOP appropriations bill that would make it harder for the FCC to enforce the new rules.

From a capital flow perspective, some investor advocates argue that the wrong net neutrality regulatory framework may disadvantage start-ups who do not have the deep pockets of incumbents.  For example, paid prioritization has been cited by the National Venture Capital Association as an example of how larger, well financed firms can leverage their advantages stemming from their greater access to capital.

But as Harold Furchtgott-Roth argues in a piece for Forbes Magazine, capital expenditure growth in the information sector has been sub-par when compared with capital expenditures in the rest of the economy.  Between 2010 and 2013, capital expenditures in the information sector grew at an annual rate of 8.2% while capital expenditures in the remainder of the economy grew at 10.7%.

But if paid prioritization is the primary concern of venture capitalists like Marc Andreesen, their fears could be partially allayed by Republican willing to meet Democrats half-way by codifying in legislation net neutrality principles of no paid prioritization, no throttling, and no favoring of particular websites over other sites.  If the paid prioritization concern can be put to rest by legislation, then maybe a budget fight (which the Democrats will lose) or the pending lawsuit against the FCC in the federal court of appeals can be terminated.

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What would a mid-term election loss by Democrats mean for the Open Internet

Based on the latest prognostication of election poll watchers, House congressional initiatives to rein in the Federal Communications Commission’s attempts to further regulate broadband access may be in for a small boost.  That boost may be tempered, however, by presidential veto power.

A post in The Economist blog, Democracy in America, cites a number of polls giving the Republican Party a chance in this November’s mid-term elections to win the U.S. Senate while keeping the U.S. House of Representatives.  That may provide initiatives promoted by House Republicans Marsha Blackburn of Tennessee and Robert Latta of Ohio some additional ammunition in their attempts to prevent the FCC from reclassifying broadband access providers as Title II common carriers.

Last July, Mrs. Blackburn secured an amendment to the fiscal year 2015 financial services appropriation bill designed to retard FCC attempts to preempt state laws that regulate municipal broadband.

Meanwhile, Mr. Latta introduced H.R. 4752, a bill that would limit the authority of the FCC over providers of broadband access.  Specifically, the bill would prevent the FCC from reclassifying broadband access providers as common carriers under Title II of the Communications Act of 1934.

H.R. 4752 would amend the Act by clarifying that the term “common carrier” would not include a provider of information service or of advanced telecommunications capability.  The bill is currently in the House sub-committee on communications and technology but is not on the House agenda for hearing, markup, or vote.

There doesn’t appear to be any movement in the Democratic controlled U.S. Senate on legislation that would have the opposite effect of what Republicans in the House are proposing.  While Senate commerce, science, and transportation committee chairman John D. Rockefeller, Democrat of West Virginia, has been an ardent proponent of the Open Internet and Senator Al Franken, Democrat of Minnesota, an equally strident advocate for reclassifying broadband access providers as Title II common carriers, there are no bills scheduled for hearing, vote, or markup, that would implement the Title II regulatory framework.

If the prognosticators are correct, the Republicans maybe biding time until after this November’s mid-term elections.  A number of forecasts are giving the GOP anywhere from a 51% to 60% chance of winning the U.S.Senate while keeping the U.S. House.

But even if the Republicans were to take both chambers and pass legislation similar to H.R. 4752, they would face the stiff challenge of a presidential veto.  They would need at least 290 votes in the House and 67 votes in the Senate to override a veto by President Obama and even with the chance of winning both chambers, I don’t see those numbers materializing.

Without statutory authority, open Internet rules are dead.  Adherence to open Internet principles, as evidenced by past broadband access provider behavior, will continue, however.

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So what might net neutrality proponents, opponents do after court ruling

Two articles, one published in the The Wall Street Journal, the other in The New York Times, raises the issue what next for consumers of broadband services and investors in broadband carriers. I would caution investor and consumer not to put too much weight in the questions posed by judges or even the tone within which judges pose their questions (as anyone who followed the U.S. Supreme Court deliberations can attest to. Just ask a few shell-shocked Republicans).

I do agree in general with conclusions made by The Wall Street Journal about fee behavior on the part of broadband providers should the court hold in favor of Verizon. I expect broadband providers to enter more strategic partnerships with large content providers like Facebook and Google over that “last mile” between broadband provider and consumer. Large content providers are already paying backbone and long haul providers tribute for giving their traffic special priority. Under net neutrality rules that HOV lane comes to a grinding halt. To keep the traffic flowing at higher speed and capacity for a Facebook or Google, paying a high-speed fee to get to the consumer would make business sense.

Consumers should have an interest in receiving high-quality content, which means content that flows uninterrupted from Netflix or Google to their tablets and laptops. Broadband providers should have an interest in meeting this consumer demand for quality and the FCC should have an interest in bringing about this quality even though its net neutrality rules and posturing against strategic partnerships say otherwise.

But what if the court holds for the FCC? I suspect broadband providers will appeal to the U.S. Supreme Court, but I also suspect that both proponents and opponents of net neutrality will have to carve out clearer definitions of what the Internet is. Unfortunately this argument has gone way beyond broadband carrier as mere gatekeeper to your download of “House of Cards”.

A divided Congress, with Republicans in control of the House and Democrats running things over in the Senate, doesn’t give broadband providers much latitude in drumming up legislation that says hands off the entire Internet including the last mile.

We’ll see in a few months.

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Ooops. I hope I’m not stirring up a liberal uprising

We are in the middle of the silly season and social networking sites will be abuzz this week as the Democratic Party kicks off its national convention in Charlotte, North Carolina. It’s a good time to have a broadband connection as the activity on Twitter showed last week during the Republican Party’s convention in Tampa, Florida. Whether you support the GOP or not, if you are an avid political geek as yours truly, you were definitely getting in your two cents on how well the Republicans were making their case for whether they should be allowed four years in the White House.

Pew Research recently released an assessment of how all this tweeting and Facebook posting is impacting political discourse in America. Overall, the report found that postings to social networking sites are having some impact on political views, especially among people who identify themselves as Democrats or liberals. According to Pew Research, 24% of liberal social network site users and 18% of moderate social network site users said that use of social network sites have prompted them to change their political views. Only 11% of conservatives who use social network sites are prompted to change their views as a result of interacting online.

In addition, 25% of social network users have become more active as a result of using social network sites. Sixteen percent of social network site users have changed their political views as a result of interacting on the sites. Nine percent of social network site users took the opposite turn and became less engaged with political discussion as a result of postings online.

Oh well. Happy tweeting and see you tonight online at least.