A Fresh Look at Internet Management

Scientific American ran a very good article on net neutrality that I almost missed because of its trollish headline: “Net Neutrality Foe to Head the FCC.” The subhead is a lot better: “Under new chair Ajit Pai the agency would likely to reverse its Open Internet Order—a regulation expected to become less relevant as the Net continues to evolve.” Sometimes it’s important to persist in reading as well as speaking.

A Regulation for a Different Time

Sci Am’s writer Larry Greenemeier distinguishes technical considerations from political ones:

Public dialogue on net neutrality is often more political than technical—but the technical aspects are crucial to understanding exactly what the Open Internet Order controls, and what it does not. Today’s internet is a lot different than it was even a decade ago, with new complexities that demand a fresh look at how the information coursing through its networks should be managed, regardless of whether this is done by the FCC or the businesses that run those networks.

The Internet of 2002 – when Tim Wu dreamt up his one big regulation to rule them all – had a very different organization than it does today. In the old days, consumer ISPs rarely made direct connections to “edge services” such as YouTube and Amazon. Rather, they connected to the large transit networks  that carried data around the world. The edge services paid transit networks directly – if they were large – or through their own ISPs. It was organized around backbones.

This meant that each ISP only connected to a handful of networks, each of which carried data from a fairly large number of sources. Most of this data was web pages, so the overall state of affairs was highly uniform. So Mr. Wu believed he could ensure fair play by requiring each packet in each pipe to get the same treatment. And indeed he could, apart from differences in web page design and server performance.

A More Concentrated Internet

In today’s Internet, small networks have largely disappeared and ISPs have direct connections to large ones. Your web site is probably not hosted on your own computer, it’s on a service like Amazon or Rackspace, and it’s probably protected from DDoS attacks by Cloudflare. And the applications are more diverse as we have Webex, Skype, and Netflix as well as the classical web.

So the notion of fair play for the Internet is much more complicated. Treating each packet the same way means nothing when the underlying connections that carry information are wildly different. The factors that differentiate fast lanes from slow ones are the number, capacity, and location connection ports.

Because each ISP runs a monstrous mesh of interconnections between its own routers and those of highly concentrated edge service networks, there’s no easy answer to the question of Internet fairness. In today’s Internet, neutrality is a mirage. Hence, advocates of Internet fairness increasingly focus on issues such as zero-rating that are quite distinct from treating each packet with the same urgency as all the other packets.

Reorganizing Internet Regulation and Regulators

When the notion of net neutrality was invented, it appeared that the Internet had a special structure known only to experts. Proper regulation was simple for this priesthood: all they had to do was ensure that ISPs behaved as the fathers of the Internet wanted them to behave. Net neutrality was a matter of enforcing well-established norms.

This was an illusion because the Internet’s organization in the early 2000s was accidental. Before there was an Internet for common people, there was an Internet for researchers built around the backbone concept. Now that the Internet is a tightly coupled mesh, its fundamental elements are negotiated agreements among service providers.

Despite high concentration among both residential and commercial service providers, the Internet of today is more like a marketplace than it’s ever been. Hence, service providers are good candidates for the same sort of regulations that apply to the rest of the economy. The Internet just isn’t as special as it appeared to be 15 years ago.

It turns out we have a federal regulatory agency that knows how to deal with ordinary businesses: the Federal Trade Commission.

Offending the Priesthood

Career telecom lobbyists and regulators regard my claim that the ordinary business regulator can manage the Internet as heresy. Former FCC Chairman Tom Wheeler said as much in a Berkman Center interview with Susan Crawford:

It’s a fraud. The FTC doesn’t have rule-making authority. They’ve got enforcement authority and their enforcement authority is whether or not something is unfair or deceptive. And the FTC has to worry about everything from computer chips to bleach labeling. Of course, carriers want [telecom issues] to get lost in that morass. This was the strategy all along.

Somebody’s not being truthful. If Wheeler is correct, the FTC’s powers are too limited to make any difference. But just today the FTC mailed out $2.5M in refunds to consumers who bought tanning beds from fraudulent doctor Joe Mercola. Mercola had made claims that the devices were perfectly healthy, but the FTC noted these claims were “false and not supported by science.” These bogus tanning beds were sold from a web site where the charlatan maintains his innocence.

What the FTC Really Does

Contrary to Wheeler’s claim, the FTC also has an enforcement division focused anti-competitive practices, either by firms acting alone or in concert. Isn’t this exactly the kind of conduct net neutrality is meant to control?

The FTC takes action to stop and prevent unfair business practices that are likely to reduce competition and lead to higher prices, reduced quality or levels of service, or less innovation. Anticompetitive practices include activities like price fixing, group boycotts, and exclusionary exclusive dealing contracts or trade association rules, and are generally grouped into two types:

  • agreements between competitors, also referred to as horizontal conduct
  • monopolization, also referred to as single firm conduct

The FTC generally pursues anticompetitive conduct as violations of Section 5 of the Federal Trade Commission Act, which bans “unfair methods of competition” and “unfair or deceptive acts or practices.”

Boom. The claim that the FTC can protect consumers from deceptive treatment and abusive, monopolistic behavior is not a fraud, it’s reality.

UPDATE: Rulemaking Power Not as Important as We May Think

The argument that the FTC can’t regulate ISP behavior because it lacks rule-making authority is hollow. The FCC’s 2015 Open Internet Order tried to formulate bright-line rules against blocking, throttling, and “paid prioritization”, but each is riddled with so many exceptions and presumptions as to require adjudication.

On three very important questions – non-Internet data services, peering, and free data – the FCC was not even able to formulate rules because of similar complexities. In these cases, the FCC vowed to examine the issues case-by-case to make a “balance of the equities” determination.

So what good is it for the regulator to have rule-making authority if it can’t figure out how to formulate rules? Maybe the “expert agency” isn’t quite as expert as it thinks.