Internet Regulation in the Age of Hyper-Giants
As we enter the seventh round of the net neutrality fight, advocates continue to make the same argument they’ve offered since 2002: infrastructure companies will do massive harm to little guys unless restrained by strict regulation.
This idea once made intuitive sense, but it has been bypassed by reality.
Standing up for the Little Guy
When Tim Wu wrote his first net neutrality paper, the largest telecoms were Verizon, AT&T, and SBC; they stood at numbers 11, 15, and 27 respectively in the Fortune 500 list.
Microsoft, Apple, and Amazon ranked 72, 325, and 492; Google was an unranked startup and Facebook wasn’t even an idea.
Today these five are America’s largest corporations, with combined market caps in excess of three trillion dollars. Smaller tech companies have thrived beyond our wildest dreams.
The Internet as We Knew It
The rise of these powerhouse companies to economic dominance brought massive changes to the organization of the Internet. In the early days of the web, companies housed their websites on single computers located in well-connected hosting centers.
They reached the Internet in essentially the same way consumers do today: companies paid specialized Internet Service Providers who connected to each other over backbones operated by still more specialized companies such as WorldCom and Level 3.
The neutrality concept was limited to the connections between ISPs and backbone companies. Neutrality made sense, even if it was never the only way to run a railroad.
The New Internet
Backbones are disappearing from today’s Internet. Small companies use Content Delivery networks such as Akamai to accelerate their pages by connecting directly to ISPs in multiple locations.
The Big Five have their own private CDNs, connecting as the public providers do. Hence, the traditional distinction between scrappy content companies and Big Telecom is much less meaningful.
Relationship Status: It’s Complicated
This is a bitter pill for career telecom policy wonks to swallow because the content vs. carriage distinction has been a hallowed principle of telecom policy since the FCC’s first “Computer Inquiry” in 1966.
To make things even more complicated, the Big Five are increasingly invested in providing services to competitors. Amazon’s industry-leading cloud computing service, AWS, is indispensible to its video streaming rival Netflix.
The End of the Internet
Congress discovered net neutrality in 2005, when advocacy groups insisted offhand remarks by phone company officers were portents of doom. Congressman Ed Markey (D, Mass.) and others offered net neutrality bills touted as indispensible. Chief talking point: “It’s the end of the Internet as we know it.”
Senator Al Franken (D, Minn.) wants to apply net neutrality to websites, and others want to apply it to new CDNs and protective infrastructure services such as Cloudflare.
Calls for expansion of net neutrality’s reach make a curious kind of sense, given new business models and the reorganization of the Internet. Cloudflare claims the power to reduce the speed of individual Internet users, such as FCC chairman Ajit Pai.
Simple Rules for Complex Times
More than anything else, net neutrality is a prediction, holding that deregulated ISPs would destroy the Internet. They’re claimed to have unique incentives to harm innovation as well as unparalleled power. While the FCC has paid lip service to its importance from time to time, prior to 2015 the Commission did little of lasting significance to carry it out.
The Internet has thrived in a largely deregulated legal regime regardless. But its not devoid of problems. Not only does fake news affect elections, the Internet is friendly to crime and has become highly concentrated. The prediction that the Internet’s decentralized nature would be the end of intermediaries didn’t exactly pan out.
In Praise of Chaos
But we should never expect the Internet to be orderly and well-behaved; it’s a human system after all. Disruption is the hallmark of the Internet. While extremes of misbehavior on the Internet are worthy of investigation, policy makers should be reluctant to cave in to politically motivated fear campaigns.
If nothing else, the Internet is a dynamic system fully capable of transforming itself in the face of treats to its survival.
The Restoring Internet Freedom order up for vote at the FCC on December 14th certainly is intended to upend the current status quo. While some of its side effects may very well be unsettling, I suspect its overall impact will be positive.
But the impact of the new regime is likely to be very small because it is, in fact, essentially the pre-2015 status quo.
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