Yesterday the FCC ruled in favor of Comcast regarding their rights to manipulate consumer traffic . As usual, the news coverage was a bit oversimplified and generic. Below we present a breakdown of the players involved, and our educated opinion as to their motivations.
1) The Large Service Providers for Internet Service: Comcast, Time Warner, Quest
From the perspective of Large Service Providers, these companies all want to get a return on their investment, charging the most money the market will tolerate. They will also try to increase market share by consolidating provider choices in local markets. Since they are directly visible to the public, they will also be trying to serve the public’s interest at heart; for without popular support, they will get regulated into oblivion. Case in point, the original Comcast problems stemmed from angry consumers after learning their p2p downloads were being redirected and/or blocked.
Any and all government regulation will be opposed at every turn, as it is generally not good for private business. In the face of a strong headwind, don’t be surprised if Large Service Providers might try to reach a compromise quickly to alleviate any uncertainty. Uncertainty can be more costly than regulation.
To be fair, Large Service Providers are staffed top to bottom with honest, hard-working people but, their decision-making as an entity will ultimately be based on profit. To be the most profitable they will want to prevent third-party Traditional Content Providers from flooding their networks with videos. That was the original reason why Comcast thwarted bittorrent traffic. All of the Large Service Providers are currently, or plotting to be, content providers, and hence they have two motives to restrict unwanted traffic. Motive one, is to keep their capacities in line with their capabilities for all generic traffic. Motive two, would be to thwart other content providers, thus making their content more attractive. For example who’s movie service are you going to subscribe with? A generic cloud provider such as Netflix whose movies run choppy or your local provider with better quality by design?
2) The Traditional Content Providers: Google, YouTube, Netflix etc.
They have a vested interest in expanding their reach by providing expanded video content. Google, with nowhere to go for new revenue in the search engine and advertising business, will be attempting an end-run around Large Service Providers to take market share. The only thing standing in their way is the shortcomings in the delivery mechanism. They have even gone so far as to build out an extensive, heavily subsidized, fiber test network of their own. Much of the hubbub about Net Neutrality is based on a market play to force Large Service Providers to shoulder the Traditional Content Providers’ delivery costs. An analogy from the bird world would be the brown-headed cowbird, where the mother lays her eggs in another bird’s nest, and then lets her chicks be raised by an unknowing other species. Without their own delivery mechanism direct-to-the-consumer, the Traditional Content Providers must keep pounding at the FCC for rulings in their favor. Part of the strategy is to rile consumers against the Large Service Providers, with the Net Neutrality cry.
3) The FCC
The FCC is a government organization trying to take their existing powers, which were granted for airwaves, and extend them to the Internet. As with any regulatory body, things start out well-intentioned, protection of consumers etc., but then quickly they become self-absorbed with their mission. The original reason for the FCC was that the public airways for television and radio have limited frequencies for broadcasts. You can’t make a bigger pipe than what frequencies will allow, and hence it made sense to have a regulatory body oversee this vital resource. In the early stages of commercial radio, there was a real issue of competing entities broadcasting over each other in an arms race for the most powerful signal. Along those lines, the regulatory entity (FCC) has forever expanded their mission. For example, the government deciding what words can be uttered on primetime is an extension of this power.
Now with Internet, the FCC’s goal will be to regulate whatever they can, slowly creating rules for the “good of the people”. Will these rules be for the better? Most likely the net effect is no; left alone the Internet was fine, but agencies will be agencies.
4) The Administration and current Congress
The current Administration has touted their support of Net Neutrality, and perhaps have been so overburdened with the battle on health care and other pressing matters that there has not been any regulation passed. In the face of the aftermath of the FCC getting slapped down in court to limit their current powers, I would not be surprised to see a round of legislation on this issue to regulate Large Service Providers in the near future. The Administraton will be painted as consumer protection against big greedy companies that need to be reigned in, as we have seen with banks, insurance companies, etc…. I hope that we do not end up with an Internet Czar, but some regulation is inevitable, if nothing else for a revenue stream to tap into.
5) The Public
The Public will be the dupes in all of this, ignorant voting blocks lobbied by various scare tactics. The big demographic difference on swaying this opinion will be much different from the health care lobby. People concerned for and against Internet Regulation will be in income brackets that have a higher education and employment rate than the typical entitlement lobbies that support regulation. It is certainly not going to be the AARP or a Union Lobbyist leading the charge to regulate the Internet; hence legislation may be a bit delayed.
6) Al Gore
Not sure if he has a dog in this fight; we just threw him in here for fun.
Honestly, bandwidth control will always be needed, as long as there is more demand for bandwidth than there is bandwidth available. We will not be lobbying for or against Net Neutrality.
8) The Courts
This is an area where I am a bit weak in understanding how a Court will follow legal precedent. However, it seems to me that almost any court can rule from the bench, by finding the precedent they want and ignoring others if they so choose? Ultimately, Congress can pass new laws to regulate just about anything with impunity. There is no constitutional protection regarding Internet access. Most likely the FCC will be the agency carrying out enforcement once the laws are in place.