FTC Appears Stymied on Net Neutrality

A 165-page report issued yesterday by the US Federal Trade Commission examines the arguments surrounding the issue of whether to enforce "net neutrality" provisions - which would essentially mean equal access among consumers to all Internet content regardless of provider or service class - before coming to almost zero conclusions regarding a possible course of action.

Since the phrase first entered the public vocabulary two years ago, supporters of what they claim to be net neutrality say lawmakers were busy inserting new provisions for future nationwide broadband licensees that would enable them to charge different rates to different customers. Such provisions could let some ISPs give preferential treatment to selected customers, or what lawmakers called an "Internet fast lane." Today, broadband providers require regional and municipal licenses for each region of the country where they do business.

But two years ago, debate began over whether to enable alternative, federally-managed nationwide licenses for broadband providers. No such system should be allowed to come into existence, proponents argued, with language that permitted selective pricing for bandwidth among federal licensees, for that would restrict consumer choice, they said.

Opponents of what they claim is net neutrality say their counterparts are seeking to create escape clauses within the law for classes of Internet service that they feel deserve greater protection than others on account of their size.

That level of government interference with free enterprise, they believe, stifles innovation and restricts a company's willingness to expand its services, especially into rural areas where as few as zero broadband providers currently do business. No such system should be allowed to come into existence, opponents argued, with language that permitted selective protection for qualifying federal licensees, for that would restrict consumer choice, they said.

If both sides of the issue could agree upon what it is they were arguing over, perhaps they could realize they could all get what they want out of a comprehensive national licensing system. But such a system needs an enforcement body, lawmakers on both sides concede, which is why the Federal Trade Commission was asked to report on how it would handle the issue of net neutrality when it comes before them.

Those lawmakers may be disappointed to learn the FTC's plan is to volley the issue back over the net, and onto the side of who they call "policy makers" - probably referring to Congress, or in the absence of Congress, the executive branch...or in the absence of the executive branch, the courts.

While the FTC claimed its authority as a federal enforcement agency on behalf of consumer welfare, the report - which is attributed to the entire five-member Commission, including chairperson Deborah Platt Majoras - blamed the current wording of telecommunications law for tying its hands in dealing with the multiple providers of Internet services and how they should be classified.

For example, a law set up at the beginning of the competitive telephone era in this country mandates that the lines from one company must carry the traffic of all other licensed company's customers.

You'd think that law - called the common carrier provision - would translate nicely into the Internet age. The problem is that it translates too nicely. The report tells of instances where defendants in lawsuits brought by the FTC cited the common carrier provision in their own defense. In one such case brought against Verity International, it was accused of hijacking modems, forcing them to call an international long-distance number in Madagascar, at rates close to $8 per minute, for what was described euphemistically as an "entertainment service." Those rates were passed on to customers through AT&T's and Sprint's own billing.

The defendant claimed the common carrier provision protected it by denying long-distance carriers the right to refuse its traffic. "The defendants therefore argued that the entertainment service in question was provided on a common carrier basis and thus outside the FTC's jurisdiction," relates the report. "One defendant also claimed to be a common carrier itself and hence beyond FTC jurisdiction."

The FTC eventually won that case, though not without first spending considerable taxpayer dollars, it says, to counter-argue the defendant's case.

"As the Verity case demonstrates," the report goes on, "enforcement difficulties posed by the common carrier exemption are not merely speculative. The FTC regards the common carrier exemption in the FTC Act as outmoded and, as it creates a jurisdictional gap, an obstacle to sound competition and consumer protection policy. As the FTC has explained before Congress, technological advances have blurred traditional boundaries between telecommunications, entertainment, and high technology. For example, providers routinely include telecommunications services, such as telephone service, and non-telecommunications services, such as Internet access, in bundled offerings. As the telecommunications and Internet industries continue to converge, the common carrier exemption is likely to frustrate the FTC's efforts to combat unfair or deceptive acts and practices and unfair methods of competition in these interconnected markets."

Which brings up perhaps the point of the FTC's whole report: If new federal laws were to enable discriminatory practices, just exactly who is it that those practices would favor, if service convergence makes it impossible to distinguish the "carriers" from the "carried?" And if an alternate class of new federal laws were to prohibit discriminatory practices, upon whom is the burden to be fair, and to whom go the benefits? Must Yahoo promise to be fair to Comcast? Or Comcast to Yahoo?

In short, tell us what we're supposed to be dealing with, the FTC is telling lawmakers, and we'll tell you what it is we think we can do.

Later, the report states: "Recent judicial and regulatory decisions have helped clarify the status of broadband Internet access services as information services not subject to the Communications Act's common carrier requirements." Which is nice, except it's the FTC that's expected to enforce those requirements, it reminds us; and with the Internet (or selected parts of it) being exempt, that doesn't give the FTC much to enforce. And since current law divides Internet enforcement responsibility among the FTC, the Federal Communications Commission, and the Dept. of Justice, it's just that much more difficult to decide who does the oversight and who does the enforcement.

Analysts and reporters eager to skip to the end of the 165-page report to see "who won" weren't exactly treated to a final score, though they did find one passage where opponents of net neutrality may have at least caused one bell to ring in their favor. "While there is disagreement over the competitiveness of the broadband Internet access industry, there is evidence that it is moving in the right direction."

With broadband rollouts accelerating, prices falling, access rates over lines being boosted almost monthly, and new technologies such as WiMAX entering the field, the FTC says this new marketplace is dynamic and evolving. "Such evidence challenges the claims by many proponents of network neutrality regulation that the broadband Internet access market is a cable-telephone duopoly that will exist for the foreseeable future," it goes on, "and that the two primary broadband platforms do not compete meaningfully."

But everyone seems to agree that more competition is better - at least, that's what both sides of the argument vehemently claim. So if everyone could agree that's the end goal, perhaps they could stop arguing over what it is they think they're arguing over, admit they agree on that point, and come back when they have something solid.

At least that's the implication from this paragraph that appears toward the close: "While we take no position on these particular proposals, policy makers should consider pursuing ways to increase competition in the broadband Internet access area. To the extent that calls for regulation are based on concerns that competition is not sufficiently vigorous to protect consumers' interests, then pursuing ways to increase that competition would seem to attack the potential problem directly at its source."