One of the other sessions I attended at CES was a 1-on-1 interview of FCC Chairman Kevin Martin by Gary Shapiro. As I'm writing this considerably after the event my memory of some of the details is a bit foggy, but there was one aspect in particular that came up that I noted and wanted to at least call attention to for further scrutiny.
It had to do with network neutrality, which I've blogged a bit about before. At first the conversation focused on the issues involved with rolling out broadband Internet to all Americans. Per Martin - and this sounded reasonable to me - the goal should be for 100% of Americans have access to an affordable broadband connection. The problem, however, is that it's very expensive to deploy any sort of telecommunications network, such as broadband, to all Americans. Telecommunications companies usually don't mind making the investment in urban areas because there are lots of customers per mile of infrastructure, essentially guaranteeing a decent rate of return, but the US is an enormous country, and the people who live spread out in it need access to these networks too. Historically telecom companies have been regulated in such a way as to insure that they did, in fact, wire the hinterlands by making it economically viable for them to do so, as well as mandatory. However over time the industry and technology have changed to such an extent that the old regulatory models may now interfere with further telecommunications investment, rather than facilitate it. If we're going to ensure that everyone gets an affordable broadband connection, something may have to change. Of course, the devil is in the details, because how this regulatory structure will directly affect whether and how (and how expensively) consumers get access to these technologies.
But at the presentation these details weren't specifically delved into, and Martin merely "blue-skyed" what the ideal should be. Every American having broadband? Sounds good, let's shoot for that. Still, the dialog always focused around the investment terrain telecom companies are entitled to, and Martin's administration feels that it should be one where the they are able to discriminate among the content that they deliver. Not that they should be able to block content, necessarily, but that they should be able to prioritize certain content's delivery.
Tremendous problems will result if this happens, especially while telecom companies are also content providers. Of course they would want to prioritize their content above that of a content competitor, yet there would be a significant anti-competitive impact if a telecom company could get away with that. But what Martin's comments really reflect is the vision where content providers would pay the telecommunications carriers to have their content prioritized. Naturally that, too, would have anti-competitive effects, but the most glaring problem with this vision is that it ignores the consumer-driven nature of the Internet that gives it its value in the first place.
Martin made the comment that since a company like Yahoo can charge its customers a premium for prioritizing certain email content, so should telecommunications companies be able to. My jaw dropped at hearing this, because it is such a flawed analogy. For one, Yahoo's prioritization is itself consumer-driven. The consumer is basically paying to outsource some of its labor. Rather than having to prioritize his own email, he pays Yahoo to do it for him automatically. It is not similarly consumer-driven to have the telecom provider step in and elect how the consumer's chosen content should be prioritized. The consumer has already made that decision by choosing what to download. The telecom company has no business unilaterally second-guessing that decision.
Furthermore, the analogy ignores the essential utility of the telecom connection, an importance which underlies why we would be having this discussion about providing broadband in the first place. Yahoo as an email service doesn't have this utility value. If someone didn't like Yahoo, or didn't want to pay for its prioritization, the consumer has many other choices for its email service, including handling it entirely on their own systems. As long that email data reaches them in some form, consumers can make their own choices for what to do with it. But the only way for that data to reach them is through their broadband connection. Without this connection, the consumer gets no data (or gets data very slowly with a non-broadband connection, and ultimately misses out on all the content that requires more speed to be effectively delivered). So an email service is a choice, but a broadband connection is essential. Indeed, even Martin understands this. Look at how important he acknowledges a broadband connection to be, that we would even endeavor to ensure that everyone have one. Why is it so important? Because it's an essential link connecting the consumer to every bit of information anyone has ever connected to this vast network called the Internet. But if a telecom company can step in and fray that link by discriminating against content, it undermines the whole philosophy of why we think that link was worth having in the first place.
Furthermore, given the expense and difficulty in providing that link, it's not likely that consumers will have much choice if their broadband provider interferes with the content they choose to consume. Few people, even if their local market could provide it, would have more than one broadband connection, and in many markets - as it was noted in the presentation - people will be lucky to have even one provider, meaning there will be no one to take their business to when that provider starts telling them what they may or may not access. True, we're not (necessarily) talking about outright censorship, but when Internet data can be scrutinized as to its content and then delivered either more or less expeditiously depending on what it is, consumers' content choices are meddled with in a way that debilitates their ability to enjoy the content that they choose, which is roughly the same effect that actual censorship would have.
Interestingly, there is some tension between the FCC and the FTC on the issue of network neutrality. In another panel I attended a representative of the FTC indicated that it would be ready, willing, and able to use its clout to ensure that there not be the anticompetitive effects that would come in the absence of network neutrality. Whether this is an effective regulatory framework is a discussion for another day, but there's reason to believe that the horse would be out of the barn by the time the FTC can get to the issue because what gives companies their potentially disproportionate market clout is the rules the FCC enforces. If the FCC lets broadband providers act as a market gatekeeper by permitting their discrimination, then there will be something for the FTC to later handle. The better approach, however, is to not put telcos in the regulatory position where they can take these discriminatory measures at all, and to recognize the unique need they fulfill simply by offering their connection. Few are arguing that they can't offer price discrimination based on the size of the link they offer - a consumer can pay more for a larger "pipe" - but offering different pipe sizes is not the same as deciding what can be put down that pipe, which is what Chairman Martin thinks they should be allowed to do.