The Rancho Santa Fe Post

The Net Neutrality Apocalypse

Federal Communications Commission Chairman Ajit Pai had to cancel his talk this week in Las Vegas at the Consumer Electronics Show due to credible bomb threats. I’ve been accosted several times by angry friends demanding to know how badly Trump screwed up the Internet. A virtual (but no less real) online mob is sliding down the slippery slope to becoming a domestic terrorist organization.

All over Net Neutrality.

What the heck is it, and should you be ignoring it or stocking up on guns and ammo?

A little bit of history is in order, bear with me. The Internet network as we know today moved from government-funded academia to full commercialization around 1995, about 23 years ago. The core switches and telecommunication lines were and are owned and operated by a huge number of individual commercial companies.

There is no central governance for the Internet. The de facto rules were to adhere to public technical standards and to pass data across your network. While the FCC heavily regulated traditional telecom carriers, it largely ignored the companies that provided services on and for the Internet. This was a deliberate policy as the Internet was growing quickly and was delivering an explosion of services few had previously conceived. The FCC (and other government agencies) wisely, in my opinion, decided the Internet didn’t need their help.

Net Neutrality became an issue about 10 years ago. If you were a backbone provider of Internet pipes, or a large Internet Service Provider delivering Internet service to end users, you were supposed to deliver all Internet traffic without any prioritization, discrimination or blocking. This is the essence of Net Neutrality, and it sounds pretty good and common sensical when put into those terms. In reality, this was never strictly true since ISPs and core network providers occasionally needed to throttle or outright block some activity for security (think malicious hackers) and stability reasons.

However, this ability to block, prioritize, or throttle traffic became contentious when it was done for commercial or profit-motive reasons.

An early skirmish in the Net Neut wars occurred a decade ago when Comcast decided to severely curtail bandwidth to BitTorrent because so many of its customers were using it and Comcast couldn’t (or wouldn’t) increase access bandwidth fast enough to cope with the increased demand. What, pray tell you ask, is BitTorrent? In principle, it is a way to distribute large files without having to run a centralized server to hold those files, but in practice, it is used to distribute illegal software, copyrighted movies, and porn (legal and illegal). It also happens to be a very good vector for really malicious hacker strikes against your computer. So, if you run a BitTorrent site on your computer, you should under no circumstances hook that computer to your home network, and after you are done with BitTorrent, throw the BitTorrent computer into a shredder. And, no, I’m not kidding. Nonetheless, Comcast’s attempt to save customers from themselves was used as an early rallying cry for more Internet freedom and government regulation to enable such.

Netflix was the company that had the most impact on Net Neut arguments. Even as far back as eight years ago, Netflix was the single biggest consumer of Internet bandwidth, using about 40% of all bandwidth at peak viewing times. As Internet video streaming was taking off, Netflix (and Netflix customers) noticed that their video could get degraded. Basically, the access networks that provided pipes into people’s homes were getting overloaded at peak times.

This resulted in an interesting, commercial, problem. Who pays? The access networks needed to get upgraded because of Internet video streaming demand. Netflix charged their customers for access to their movies, but paid none of that to the access networks. Both the access networks and Netflix had some leverage to extract money from each other, and in the normal course of events, they would have figured out a commercial arrangement to enhance the end user’s experience who just wanted stutter-free video.

And indeed, Netflix did enter into commercial contracts, with, for instance, Comcast to provide a “fast lane” from Netflix’s content servers to Comcast’s customers. Netflix paid a bit of money to co-locate their content servers inside Comcast’s network.

However, the number one rule of contract negotiations is to gain as much leverage over your opponent as possible. And so, in a predictably near-sighted move, Netflix decided to gin up an Internet mob and the regulatory state to help them with negotiations. Netflix wanted the government (the FCC) to mandate that Netflix gets to put their content servers into ISP networks for free.

Politicians got involved. On one side was the rallying cry of no discrimination, on the other was the principle of free markets. No prizes for guessing which side won. Well after the commercial disputes were solved, and no significant incidents of Internet discrimination, throttling or blocking were uncovered, Obama’s FCC passed a rule in June 2016 that not only enshrined Net Neutrality provisions, but also made Internet Service Providers subject to provisions of the 1934 Communications Act and the 1996 Telecommunications Act. The Internet got hit with the full force of government regulation.

So, to solve a non-existent problem, politicians directed the FCC to heavily regulate the Internet.

Which brings us to present day with Ajit Pai and his family being under constant threat of dying in a car bomb. Trump’s new FCC Chairman voted with the majority of the FCC board (3-2) to rescind the Net Neutrality rules, and more importantly, the additional regulatory framework, that was enacted in 2016.

What does this mean? Even Netflix recently said of this move, “We don’t see a big risk actualizing, because consumers know they’re entitled to getting all of the web services.” Which is exactly right. Market pressures will continue to force Internet backbone providers, content providers and access providers to all play with each other and continually improve customer experience. The Internet is too important, and services too popular, for anything else to occur. As always, there will, and should be, commercial skirmishes on the sidelines to determine who and how people will pay, but such skirmishes need not involve a leviathan that can be bribed or hoodwinked into giving one side or another preferential treatment.

And most important of all, the Internet will once again be able to continue to innovate without having to worry about whether a law enacted in 1934 proscribes unforeseen innovation.