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Wheeler, Franken, and Wyden show a naivete about today’s internet

In an opinion piece published yesterday in The Washington Post, Senator Al Franken, Democrat of Minnesota, Senator Ron Wyden, Democrat of Oregon, and former Federal Communications Commission chairman Tom Wheeler made the argument that planned attempts by current FCC chair Ajit Pai to remove Title II net neutrality rules would have a negative impact on consumers. The three argue that deep pocketed broadband access providers such as AT&T, Comcast, and Verizon want to take away the consumer protections that Title II of the Communications Act provides. Since broadband was reclassified as a telecommunications service by a Democratic weighted FCC under Mr Wheeler’s tenure, the privacy protections afforded to customer proprietary information connected to telecommunications customers would be lost to broadband consumers. The three go as far as to argue that net neutrality has created jobs because smaller retailers and other consumer services providers are able to get their products and services in front of the eyeballs of the everyday consumer because their traffic is now being treated fairly.

Given that there are two lawmakers authoring this piece I figured that they would at least offer an amendment to the Communications Act that defines net neutrality thus giving policy makers some firm platform from which to proceed and make good policy. The piece conveniently lacked that. Instead, Messrs Wheeler, Franken, and Wyden stuck with the lofty, airy definition of net neutrality that gives the impression that democracy is under attack. This is how the Democrats were able to scare four million consumers into putting their concerns onto postcards while blocking Mr Wheeler’s driveway.

What the opinion piece fails to explain is that net neutrality has to be defined in the context of commercialism, not as an assault on democracy. The internet has been commercialized for a quarter of a century. It provides the platform for gathering, processing, and selling information. Broadband companies are seeking out other revenue streams including processing and leveraging data for the purpose of generating advertisement revenues. Internet portals such as Google, Yahoo, and Facebook have been using customer information to attract advertisers. I sometimes refer to these sights as “legal hackers.” They get consumers to give up personal information for free and craft advertisements based on the personal information they garner. Ironically, Messrs Wheeler, Wyden and Franklin don’t discuss this disparity in treatment; that broadband providers who collect less personal information than these portals should find themselves under more statutory scrutiny than Facebook.

So dismissive of the market aspect of the internet that Messrs Wyden, Franken, and Wheeler could not even offer up a market solution for protecting consumer privacy. One solution I recommend is allowing consumers to sell their proprietary information, allowing them to trade on their info for cash or some other in-kind offering. Instead, Messrs Wheeler, Wyden, and Franken prefer stick with the “Government is a benevolent God” business model of consumer protection, usurping the individual’s power to use the markets to satisfy their own self interests.

Democracy is about the freedom of residents to choose leaders. That term has been tossed about too much by the net neutrality posse to the point where it is near meaningless. Net neutrality is not about democracy. Ron Wyden, Al Franken, and Tom Wheeler should do better than just stirring up the pot.

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John Thune will need some help in November for his telecom initiative

The Hill reported last week on U.S. Senator John Thune’s desire to update the Communications Act of 1934, making it a 21st century law for a 21st century world.  While we have 86 and half years left in this century, Mr. Thune, Republican of South Dakota, only has four and a half months to set the stage for a 2015 re-write.  The Republicans will have to hold the House while trying to capture the Senate.

The House Energy and Commerce Committee, under the leadership of U.S. Representative Fred Upton, Republican of Michigan, has already started addressing an update of the Communications Act by issuing a series of white papers, seeking public comment on the white papers’ issues, and holding a number of hearings.

“The only way to provide the certainly that [Internet service providers], edge providers, content publishers and end users need and want is for Congress to legislate,” Mr. Thune said. “My colleagues and I need to roll up our sleeves and figure out how best to promote an open, competitive and free Internet.”

Mr. Thune and his colleagues on the left and the right of the aisle may have to work on the art of compromise if anything close to a re-write is to be accomplished by 2015.  I expect U.S. Senator Al Franken, Democrat of Minnesota, to lead a charge against any language in a re-write that attempts to negate net neutrality rules.  Mr. Franken has been making the media rounds arguing for an open Internet, expressing his fear that broadband access providers will only seek to block access to content or discriminate against certain content producers by favoring their content over a non-affiliate’s content.

In the immediate term I don’t see any new regulatory threats to edge providers.  I believe Congress’ initiatives will move slower than the innovations we see coming from edge providers.  The only way Congress can catch up to the broadband and Internet industries is to put a moratorium on innovation and that will never happen.

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Dear Al Franken. You’re missing the globe for the bushes

The U.S. Senate Judiciary Committee met today to give their thoughts about the proposed merger between media companies Comcast and Time Warner Cable.

Wait a minute.  Did I say media companies?  Yes I did.  Comcast and Time Warner Cable provide end-users with access to content, whether they purchase that content from programmers such as ESPN or produce that content themselves, such as through their regional sports networks or other entertainment networks.  The questions posed by most of the senators displayed either their ignorance or fear of Comcast and Time Warner’s new roles as content providers.  Their unique position as owners of video distribution pipes that go into the homes of consumers shouldn’t lessen their primary roles as content providers nor should ownership of transmission mediums be the primary determinant of the legal and regulatory framework for their oversight.

Senators like Al Franken, Democrat of Minnesota, have the tendency to focus on small issues that generate the most political excitement and this tendency results in myopic analysis of the issue in front of them.  The senators rather focus on consumer issues of increased prices for ESPN and sports blackouts.  They would rather cater to testimony from content providers complaining about their inability to get their products displayed the digital version of a grocery store shelf, complaining that the store brand is getting the prime spot in the middle of the eye level shelf.

Take for example the testimony of James Bosworth, chief executive officer of Back9Network Inc.  Back9Network provides video programming that promotes the golf-lifestyle.  Mr. Bosworth argues that for independent programmers like his company, it will be near impossible to compete against similar programming provided by Comcast.  Mr. Bosworth would like the merger halted because he believes his firm will not be able to compete with Comcast’s other golf and/or lifestyle programming.

Could the real issue be that programmers such as Back9Network don’t bring much value to the end-user much less the “digital grocery store” that is Comcast to put it in a deserving position for more eyeballs?  In an industry allegedly valued at $177 billion with approximately 26 million golfers, maybe Back9Network, still an infant having been in business only since 2010, hasn’t come up with that compelling business model that Comcast’s David Cohen admits is necessary for the company to place a network in its network line up.  Maybe programmers need to focus on creating something that people want to see in the first place.

But there is something more fundamentally telling in this debate over the merger of Comcast and Time Warner.  If there are so many independent programmers out there jostling for room on a media company’s platform, maybe it’s time for programmers to explore technological alternatives for getting their products into market.  For example, why couldn’t independent programmers combine their content, establish a network, and distribute their programming to end-user laptops, tablets, and smartphones via Roku devices similar to the services provided by Aereo.

Mr. Franken and other senators would rather see the media bottleneck forcibly widened by denying mergers like the proposed Comcast-Time Warner combination.  Instead, politicians and policymakers should promote alternative methods of distribution, especially for content providers who are still trying to make a compelling case that their content provides consumer markets sufficient value.

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Democrats in the U.S. Senate have misplaced focus

With all the talk out of Washington about how regulators are not keeping up with the dynamic eco-system we call the internet, there is news out of Washington that contradicts the public stances of our representatives.

First, a letter written to Federal Communications Commission chairman Tom Wheeler from Senator Al Franken, Democrat of Minnesota.  In his letter, Senator Franken urges Mr. Wheeler to adopt net neutrality rules that would prevent blocking of subscriber access to websites and prevent broadband providers from determining which content providers would get to use a fast lane to subscribers while placing other content providers in second class and slower lanes.  The letter was also signed by senators Ron Wyden, Jeff Merkley, Edward J. Markey, and Richard Blumenthal.  To avert what progressives have described as a fiasco with the first attempt at anti-discrimination and anti-blocking rules, the letter urges that the FCC ensure that a new batch of rules be written pursuant to the correct legal authority.

Second, Senate Democrats reportedly are in no hurry to update the Communications Act of 1934.  According to a blog post on The Hillicon Valley,  Senator Mark Pryor, Democrat of Utah and chairman of the Senate Commerce sub-committee on communications, believes that while some improvements are needed, the law has spurred tremendous growth in the U.S.

The Democrats are wrong on both counts.  While Senator Franken believes that section 706 of the Communications Act gives the FCC broad authority to regulate broadband, the argument that the FCC was subjecting internet service providers to common carrier regulations.  The only internet providers that were subject to common carrier treatment were incumbent local exchange companies using digital subscriber line technology to provide access to the internet.  Competitive local exchange carriers, notably cable companies providing access via cable platforms were not subject to common carrier regulations.  The reason for this exemption was to facilitate the promotion of competition that Senator Pryor alluded to.

Today those incumbent local exchange carriers are playing catch up to cable providers, so much so that AT&T and Verizon spent billions since the middle of the last decade trying to put themselves in a position to provide bundled packages of video, telephone, and internet access, bundling strategies that put Comcast ahead in the broadband  market.

The Senate should not put itself in a position where a one-year stall in delivering an updated Communications Act results in a FCC increasingly struggling to regulate in a digitally converged broadband world.  It’s time for some expedited bi-partisanship in re-writing an Act that respects the more than two-decade old light touch approach that has given us a dynamic open internet.

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Why Does Al Franken Want to Force a Market?

The Hillicon Valley reported last Thursday about Senator Al Franken’s displeasure with the settlement agreement between Verizon and the U.S. Department of Justice. The Minnesota Democrat reportedly believes that the Obama Administration via the DOJ has not gone far enough to ensure competition in the video distribution industry.

No wonder Democrats get accused of choosing winners and losers. Mr. Franken is advocating for government forcing companies to compete with each other.

It’s one thing to accuse a company of practices that keep another company out of a market, but just because Verizon knows how to provide video distribution services doesn’t mean it should be compelled to do so versus cross selling the services of another competitor.

If a third party wants to take advantage of the opening Verizon is providing by not providing video distribution services, let them step in and do so.