THE SAPIENT SPARROW: conservatism for commoners

"What has always made the State a hell on earth has been precisely that man has tried to make it his heaven."–Holderlin

FCC POISED TO ACT ON “NET NEUTRALITY”

Below I have excerpted important information about the concept of  “net neutrality” and what Government regulation of the internet would involve.  Since the FCC will be taking a vote tomorrow, Thursday, October 22, 2009, it is important for each of you to read through this information.  Then check out this link to further understand the impact of this kind of regulation.  Finally go here to comment to the FCC prior to their vote.  Let’s make our voices heard on this important issue.  We certainly do NOT need additional Government interference in the private sector.  Chirp on, Sparrows!!

Hold Off On Net Neutrality

By David Farber and Michael Katz
Friday, January 19, 2007
Washington Post
The Internet needs a makeover. Unfortunately, congressional initiatives aimed at preserving the best of the old Internet threaten to stifle the emergence of the new one.

The current Internet supports many popular and valuable services. But experts agree that an updated Internet could offer a wide range of new and improved services, including better security against viruses, worms, denial-of-service attacks and zombie computers; services that require high levels of reliability, such as medical monitoring; and those that cannot tolerate network delays, such as voice and streaming video. To provide these services, both the architecture of the Internet and the business models through which services are delivered will probably have to change.

Congress failed to pass legislation amid rancorous debate last summer, but last week a group of senators reintroduced several initiatives under the banner of “network neutrality.”

Network neutrality is supposed to promote continuing Internet innovation by restricting the ability of network owners to give certain traffic priority based on the content or application being carried or on the sender’s willingness to pay. The problem is that these restrictions would prohibit practices that could increase the value of the Internet for customers.
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Traffic management is a prime example. When traffic surges beyond the ability of the network to carry it, something is going to be delayed. When choosing what gets delayed, it makes sense to allow a network to favor traffic from, say, a patient’s heart monitor over traffic delivering a music download. It also makes sense to allow network operators to restrict traffic that is downright harmful, such as viruses, worms and spam.

Pricing raises similar issues. To date, Internet pricing has been relatively simple. Based on experience in similar markets, we expect that, if left alone, pricing and service models will probably evolve. For example, new services with guaranteed delivery quality might emerge to support applications such as medical monitoring that require higher levels of reliability than the current Internet can guarantee. Suppliers could be expected to charge higher prices for these premium services.

Blocking premium pricing in the name of neutrality might have the unintended effect of blocking the premium services from which customers would benefit. No one would propose that the U.S. Postal Service be prohibited from offering Express Mail because a “fast lane” mail service is “undemocratic.” Yet some current proposals would do exactly this for Internet services.

We’re not saying that all discrimination is good or that the market always gets it right. Some forms of discrimination can be harmful, especially when service providers have market power. For example, if a local telephone company that is a monopoly provider of both broadband access and plain old telephone service for a community blocks its broadband subscribers from using an Internet phone service offered by a rival company, this discrimination can harm both competition and consumers.

Public policy should intervene where anti-competitive actions can be identified and the cure will not be worse than the disease. Policymakers must tread carefully, however, because it can be difficult, if not impossible, to determine in advance whether a particular practice promotes or harms competition. Antitrust law generally takes a case-by-case approach under which private parties or public agencies can challenge business practices and the courts require proof of harm to competition before declaring a practice illegal. This is a sound approach that has served our economy well.

The legislative proposals debated in the 109th Congress take a very different approach. They would impose far-reaching prohibitions affecting all broadband providers, regardless of whether they wielded monopoly power and without any analysis of whether the challenged practice actually harmed competition. If enacted, these proposals would threaten to restrict a wide range of innovative services without providing any compensating customer benefits.

Does this mean we believe that we should place all our trust in the market and the current providers? No. But it does mean we should wait until there is a problem before rushing to enact solutions.

David Farber is distinguished career professor of computer science and public policy at Carnegie Mellon University. Michael L. Katz is a professor of economics at the University of California at Berkeley. Gerald Faulhaber, a professor at the Wharton School and the University of Pennsylvania’s law school, and Christopher S. Yoo, a law professor at Vanderbilt University, also contributed to this article.

Excerpts from Jan 15, 2009 CNET

http://news.cnet.com/8301-13578_3-10144035-38.htm

The Bush administration has taken a dim view of Internet regulations in the form of Net neutrality rules, warning (see #1 below) last year that they could “inefficiently skew investment, delay innovation, and diminish consumer welfare, and there is reason to believe that the kinds of broad marketplace restrictions proposed in the name of ‘neutrality’ would do just that, with respect to the Internet.” A report (see #2 below) from the Federal Trade Commission reached the same conclusion in 2007.

In addition, a recent study (see #3 below) from the U.S. Chamber of Commerce says that the absence of Net neutrality laws or similar federally mandated regulations has spurred telecommunications companies to invest heavily in infrastructure, and changing the rules “would have a devastating effect on the U.S. economy, investment, and innovation.”

#1 The Bush administration believes that government regulators should be “highly skeptical” of Net neutrality regulations and instead rely on competition to protect consumers.

The comments came in a public filing that the U.S. Department of Justice sent on Thursday to the Federal Communications Commission, warning against the adoption of extensive Net neutrality rules.

“However well-intentioned, regulatory restraints can inefficiently skew investment, delay innovation and diminish consumer welfare, and there is reason to believe that the kinds of broad marketplace restrictions proposed in the name of ‘neutrality’ would do just that, with respect to the Internet,” the comments say.

(The comments aren’t very long and are really worth reading yourself.)

This shouldn’t really be a surprise. The Republican chairman of the Federal Trade Commission, Deborah Platt Majoras, was almost as skeptical last year, and a formal report from the entire FTC in June came up with the same no-new-laws-needed conclusion.

Public Knowledge, which supports giving the FCC more power to regulate broadband providers, critiqued the Justice Department’s filing thusly: “Perhaps the (Justice Department) does not recall that there is very little in the way of market forces to protect consumers. Perhaps the department has forgotten that many consumers have little or no choice at all for their high-speed broadband services. A more vigorous antitrust analysis would have recognized there is a market failure and would have resulted in conditions on the AT&T takeover of BellSouth that would have benefited consumers and Internet companies.”

#2 The lifelong bureaucrats at the Federal Trade Commission are hardly a bunch of Hayek-quoting, Ron Paul-voting libertarians.

Which is why it’s worthwhile to note the conclusion that the FTC reached on Wednesday about Net neutrality: No new laws.

It took the FTC a mere 169 pages to arrive at that result in its new report on the topic, probably one of the most exhaustive treatments of Net neutrality to date. It concludes: “We recommend that policy makers proceed with caution in evaluating proposals to enact regulation in the area of broadband Internet access.”

Translated from government-speak, that means there’s no need for extensive regulations of the sort that the Republican-controlled Congress considered, and rejected, last year. The Democrats have not tried to resuscitate the legislation this year.

The FTC says, sensibly enough: “Industrywide regulatory schemes–particularly those imposing general, one-size-fits-all restraints on business conduct–may well have adverse effects on consumer welfare, despite the good intentions of their proponents.”

True to form, the FTC isn’t recommending a hands-off approach. The staff report notes that it shares antitrust enforcement with the U.S. Justice Department and is “well-equipped to analyze potential conduct and business arrangements involving broadband Internet access.” It also says that “current federal consumer protection law” can address deceptive marketing practices by Internet service providers.

Commissioner Jon Leibowitz, a Democrat, published what amounts to a dissenting opinion He said that existing antitrust law may not be “adequate to the task” of Internet broadband regulation.

The report drew praise from Tim Muris, who was forced to be circumspect while heading the FTC but can speak speak more freely now that he’s back teaching at George Mason University’s law school in Arlington, Va.

“Net neutrality is a meaningless term, lacking a rationale or analytical basis to impose new regulations on the Internet,” Muris said. “Some government actions, while seeking to help consumers, harm them instead. As the FTC report today detailed, robust competition and dynamic business models pervade the Internet.”

In contrast, pro-regulation groups, who would like to see the Federal Communications Commission receive the power to enforce Net neutrality rules, attacked the FTC report.

It “falls far short in its analysis of a competitive market and the related issue of Net neutrality,” said Public Knowledge, which has pressed Congress to give the FCC that authority.

The Bush administration believes that government regulators should be “highly skeptical” of Net neutrality regulations and instead rely on competition to protect consumers.

The comments came in a public filing that the U.S. Department of Justice sent on Thursday to the Federal Communications Commission, warning against the adoption of extensive Net neutrality rules.

“However well-intentioned, regulatory restraints can inefficiently skew investment, delay innovation and diminish consumer welfare, and there is reason to believe that the kinds of broad marketplace restrictions proposed in the name of ‘neutrality’ would do just that, with respect to the Internet,” the comments say.

(The comments aren’t very long and are really worth reading yourself.)

This shouldn’t really be a surprise. The Republican chairman of the Federal Trade Commission, Deborah Platt Majoras, was almost as skeptical last year, and a formal report from the entire FTC in June came up with the same no-new-laws-needed conclusion.

Public Knowledge, which supports giving the FCC more power to regulate broadband providers, critiqued the Justice Department’s filing thusly: “Perhaps the (Justice Department) does not recall that there is very little in the way of market forces to protect consumers. Perhaps the department has forgotten that many consumers have little or no choice at all for their high-speed broadband services. A more vigorous antitrust analysis would have recognized there is a market failure and would have resulted in conditions on the AT&T takeover of BellSouth that would have benefited consumers and Internet companies.”

#3 Broadband development should not be stifled by federal regulation that intends to make networks more “neutral,” the U.S. Chamber of Commerce is arguing through two papers released Monday.

The papers, the first in a series of five that will examine the impact of broadband on certain user groups and for certain purposes, argue that the federal government’s current loose regulatory structure has enabled broadband to become a “life-altering tool” both for the general population and for senior citizens specifically.

“An estimated $60 billion has been invested in broadband infrastructure by the communications industry this year,” William Kovacs, the U.S. Chamber’s vice president for environment, technology, and regulatory affairs, said in a statement. “Given these turbulent economic times, federal policy must continue to support this high-level of investment. This will spur job growth, innovation, and consumer choice.”

The lack of Net neutrality laws or other federally-mandated regulations has spurred telecommunications companies to heavily invest in broadband infrastructure, according to the first paper, “Network Effects: An Introduction to Broadband Technology & Regulation.” (PDF)

“Moving away from a pro-investment model would halt this organic progress and would have a devastating effect on the U.S. economy, investment, and innovation,” it says. “Moreover, policies aimed at management practices are unnecessary and would serve only to chill innovation at the network level and at its edges, resulting in net consumer welfare losses.”

Network owners need to be able to manage content flow in order to prioritize important data like 911 voice over IP calls, according to the paper, authored by Charles Davidson and Michael Santorelli of the Advanced Communications Law & Policy Institute at New York Law School. The need to manage networks will only grow as the amount of services offered online grows, it says.

“A variety of proposals have been put forward to regulate the broadband sector under the guise of making the physical infrastructure more ‘neutral’ to the data flowing over it,” the paper says, but such regulations would lessen incentives for investment in broadband and slow the development of content and applications.

The paper recommends legislators focus on targeting broadband funding in regions where it is most needed, reforming the Universal Service Fund, and embracing public-private partnerships to promote broadband deployment.

The second paper, “The Impact of Broadband on Senior Citizens,” (PDF) recommends similar support for broadband deployment as well as educating seniors on the usefulness of broadband and expanding their options for getting online. If obstacles for adoption are removed, the paper says, broadband could transform senior life and senior care, just as the senior population is set to expand significantly.

The chamber will later release papers examining the impact of broadband deployment on telemedicine, education, and people with disabilities.

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