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Broadband: Why would an edge provider let FCC see its business model

Technocrat’s Anne L. Kim blogged on comments Consumer Electronics Association CEO and president Gary Shapiro made at a recent Brookings Institution event.  Here is an excerpt from her post:

On net neutrality, Shapiro wants more of a hands-off approach from the government. He wants to see government allow industry and nongovernmental organizations establish principals. “And if the principals are violated, then act,” he said.

“I personally am fearful of all of a sudden sending those companies into a new area of regulation like utilities,” referring to the FCC considering using Title II of the 1996 Communications Act to rewrite net neutrality rules.

He said he likes things the “way they are” and that he’s rather not see them changed, adding that “good intentions scare me.”

Take a look at Title II, something more edge providers need to do, and you can appreciate some of Mr. Shapiro’s fear.  For example, section 211 of the Communications Act requires that common carriers (a classification that net neutrality advocates want applied to broadband providers) file copies of all contracts that they have with other common carriers.  So, if Google, a broadband wannabe, has peering or transit contracts with Comcast, Google will have to file its contracts with the Federal Communications Commission, and probably with state public utility commissions as well.  If these contracts contain information regarding traffic from certain edge providers a la Netflix, Netflix wouldn’t be happy that some aspect of its business model may be on public display with the FCC.

This type of transparency may bring joy to net neutrality proponents but not to the edge providers they purportedly are so concerned about.  In my opinion, letting the government have a copy of a contract entered into autonomously is the same as the government regulating your free speech.  Unless there is a dispute to be resolved between two parties to a contract, I see no reason to let the government have access to its contents.  If edge providers want to see a slippery slope created that takes regulation right to their doorsteps, Title II will lay the bricks for that driveway.

My walk down the Yellow Brick Road of regulation gets scarier when I take a look at section 215.  Section 215 allows the FCC to examine transactions involving the furnishing of services, supplies, equipment, personnel, etc., to a carrier.  Also, the FCC, pursuant to this section, may examine transactions that impact charges a common carrier assesses for provision of wire or wireless services.  Section 215 also allows the FCC to determine how reasonable these charges are.  Also, the FCC may report its recommendations to Congress as to whether charges are invalid and should be modified and prohibited.

Now, not to knock on Google, but since they are the Internet flavor of the week given the disclosure of their perceived wretched diversity in hiring practices, disclosing matters regarding personnel much less on their services should make the company and its investors think twice about supporting net neutrality brought to you via Title II classification.

All of Title II should be scary to venture capitalists, private equity, and their investor clients, but section 218 should bring great pause. This section allows the FCC to inquire into the management of all common carriers.  The FCC may obtain management information not just from the carriers, but from entities that directly or indirectly control them.  That, in my mind, includes private equity firms or venture capitalists that may have a controlling interest in some little regional or rural broadband provider.  With the SEC stepping up its scrutiny of private equity via the Dodd Frank Act, does private equity want another alphabet soup agency knocking on its door?

Here is one more, especially for the app developers.  Section 231 speaks to app developers, or more definitively access software providers.  This section prohibits the use of the World Wide Web to transmit material harmful to minors.  I wonder how many apps fall under this category.

When you look behind the curtain of good open network intentions, you can find some scary stuff.

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Can the FCC look at peering arrangements? No

The New York Times yesterday reported that Federal Communications Commission chairman Tom Wheeler wants to take a look at peering arrangements.  Here is a definition of peering provided by TechTarget.com:

“Peering is the arrangement of traffic exchange between Internet service providers (ISPs). Larger ISPs with their own backbone networks agree to allow traffic from other large ISPs in exchange for traffic on their backbones. They also exchange traffic with smaller ISPs so that they can reach regional end points. Essentially, this is how a number of individual network owners put the Internet together. To do this, network owners and access providers, the ISPs, work out agreements that describe the terms and conditions to which both are subject. Bilateral peering is an agreement between two parties. Multilateral peering is an agreement between more than two parties.

Peering requires the exchange and updating of router information between the peered ISPs, typically using the Border Gateway Protocol (BGP). Peering parties interconnect at network focal points such as the network access points (NAP) in the United States and at regional switching points. Initially, peering arrangements did not include an exchange of money. More recently, however, some larger ISPs have charged smaller ISPs for peering. Each major ISP generally develops a peering policy that states the terms and conditions under which it will peer with other networks for various types of traffic.

Private peering is peering between parties that are bypassing part of the public backbonenetwork through which most Internet traffic passes. In a regional area, some ISPs exchangelocal peering arrangements instead of or in addition to peering with a backbone ISP. In some cases, peering charges include transit charges, or the actual line access charge to the larger network. Properly speaking, peering is simply the agreement to interconnect and exchange routing information.”

I decided to post this definition to give readers a taste of the complexity of peering arrangements.  The FCC may have a bit of time discerning paid from free exchanges of traffic as well as figuring out whether they are looking at a private arrangements circumventing the public Internet or one that is indeed running over networks used by everyone.

Mr. Wheeler may be throwing a ratchet into the definition of net neutrality with this initiative.  Net neutrality has so far focused on the relationship between an end-user of Internet services and her broadband access provider.  Peering arrangements don’t fall into that traditional net neutrality box since the relationship is between broadband providers, edge providers, or content distribution networks. In addition, Mr. Wheeler made clear last week before a House sub-committee on communications and technology that net neutrality was about that “last mile” connectivity between broadband providers and end-users.  If he is changing the definition, does he have a legal leg to stand on?

Well, he can’t look to Title II.  Section 251 of the Communications Act describes interconnection requirements for telecommunications companies and the intent behind that section was to help spur competitive markets for local telephone service.  Unless Mr. Wheeler is ready to make a dangerous Title II reclassification move, I don’t see him going down that road on peering arrangements.

How about under Title I, specifically section 157 which encourages the provision of new services to the public.  I don’t see a winner here either.  Peering arrangements are not services for the public.  They are network management strategies employed by network owners to regulate and manage traffic.  Sure in the end the end-user may benefit when traffic flows to his computer, but peering arrangements may not be for consumer traffic and the FCC would have to determine which portion of traffic is flowing for what purpose.

Finally, section 1302 of the Act, otherwise known as section 706 of the Telecommunications Act of 1996, doesn’t seem to help out Mr. Wheeler either.  Yes, the section calls for incentivizing deployment of advanced telecommunications services through regulatory mechanisms such as price cap regulation, regulatory forbearance, or other methods that remove barriers to investment, but again peering is about network interconnection, not about encouraging local telecommunications competition.  The local competition boat successfully left the regulatory harbor years ago and demand for broadband services and the benefits of the Internet appear to be encouraging infrastructure development on its own.

No, the FCC need not look at peering arrangements.

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Net neutrality whiners need to man up

David Carr posted an article in The New York Times, “Warnings Along FCC’s Fast Lane.”  The following is my response to his argument that the Internet should be treated like a utility.

“The Internet is not a utility. Civilization would not regress to the Stone Age if everyone, except for a bunch of research nerds at universities, think tanks, and other research centers, decided to go back to the year 1985.

Any value that the Internet brings to the global economy is an additive that should be compensated for. For the backbone and last mile providers of traffic, that compensation should be in any fees that they can extract from traffic causers.

A commercialized Internet is just that; commercial. Commerce moves up and down it and someone has to pay. The more content providers that try to get their information to consumers; the more policy tries to get broadband into every home in the U.S.; the more consumers that decide to binge watch their favorite shows, the higher the costs of providing services.

If you really want to treat the Internet like a utility, then compensation arrangements for the interconnection of networks and exchange of traffic should be expected. You can’t have it both ways. If you value the content you seek to share, then end-users should expect to pay to receive it and content providers should expect to pay to transmit it.

The net neutrality whiners need to man up.”

 

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A free Internet is a naive Internet

A big shout  out to my friend, tech evangelista Sian Morson for sharing Danny Crichton’s insightful post in TechCrunch discusshow a mobile web is displacing the old world wide web.  Mr. Crichton opined on the declining openness of the Internet.  For example:

“Openness could have been the key competitive angle for the Web. Yet the stories over the past two years about the NSA’s Internet surveillance program have completely undermined that argument for consumers. Now, with the potential of the FCC gutting its net neutrality policy, even the ability to equally access information online is at risk. To a degree, we only have ourselves to blame. When websites started blocking links connecting to their content and companies began walling off more of their data to non-members, the development community became instrumental in making openness an empty phrase.”

Mr. Crichton adds:

“We need to return to this kind of world again, and the only way we are going to get there is to rebuild our stack from the bottom. In short, we need a literal “Web 2.0,” a new edition that brings back some of the critical features that have been removed in our race to build better Internet applications.

What would a new Web look like? For one, it would make very different assumptions about users and their habits. It would assume multiple devices and a cloud-based infrastructure, and so it would handle synchronization services fundamentally as part of its protocols. It would assume two-way communications between the client and the server and thus could natively handle push communications. It would simultaneously have better facilities for handling identity online, while also providing better anonymity.

Like the expansion of the United States to the West, the Web started as a world with an open mindset and local, flexible rules. Over time, fences appeared, property was divvied up, and society became more process-driven to protect the property people already had rather than to ensure the best possible development of the future. For the internet to evolve, we need to move away from the technologies that are slowly degrading and infantilizing our experience, and strike a new path toward a world where the Internet once again is open and free.”

 

In my opinion “free” was always the word that from day one led to confusion.  Should we expect anything less than a World Wide Web or Internet for that matter that is divided up into fiefdoms?  Of course not.  The Web and the Internet are commercialized which means property stakes are expected to be placed all over cyberspace.  Monetization and value optimization occurs when property is cordoned off, at least under our current model.  In the beginning the thought may have been that the world wide web and the Internet create some global commons for information from whence we could all take a free drink, but the notion was naive from the get go and the applications we see being developed today are acknowledgment of that reality.

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My response to Mignon Clyburn’s blog on open internet rules

Today Federal Communications Commission member Mignon Clyburn shared via her blog some of her thoughts on the FCC’s second shot at net neutrality rules.  Here is what I shared in the comments section:

“First of all, thanks for sharing your thoughts on the matter of an open Internet. 

 
One of my concerns is the FCC and net neutrality advocates’ continuous reference to “the Internet”.  Broadband access is about the last mile.  When the FCC refers to the Internet I can’t help but see the FCC expanding its section 706 authority to edge providers. 
 
Section 706 cannot be used as an on-ramp to a slippery slope where edge provider investment would be dampened by regulations that try to mold the future of the Internet, including determining which broadband providers and edge providers should participate in providing innovative products.

 
The FCC is already demonstrating a tendency to pick winners and losers in spectrum auctions and this approach toward policy cannot be allowed when discussing broadband access.  The best approach the FCC can take is evaluating a provider’s action after it has been taken in order to determine if any harm has occurred versus trying to regulate an event before it has even occurred and create a box of dos and don’ts in anticipation of what the industry may look like. 
 
Again, thanks for sharing your thoughts.”
I hope she reads them ….