FCC Chairman Julius Genachowski

Federal Communications Commission Chairman Julius Genachowski is expected to unveil Monday a proposal to formalize Net Neutrality protections as part of FCC policy governing broadband providers.

Genachowski is expected to make a formal announcement as part of his appearance at the Brookings Institution, according to a series of leaks Friday afternoon.

The FCC chairman is expected to introduce Net Neutrality as the fifth spoke in a wheel of principles governing broadband service in the United States.  The “Four Principles” of broadband service in the United States was developed to set guidelines providers would follow in return for a hands-off regulatory approach by the Commission.:

1. To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to access the lawful Internet content of their choice.
2. To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to run applications and use services of their choice, subject to the needs of law enforcement.
3. To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to connect their choice of legal devices that do not harm the network.
4. To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to competition among network providers, application and service providers, and content providers.
5. To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to open access to content without interference or discrimination by broadband providers.

The fifth principle would become part of formal FCC policy, which should provide assurances that Net Neutrality will be enforced by the Commission staff.

The establishment of Net Neutrality protection would fulfill one of the promises made by President Barack Obama during his presidential run in 2008.  The Obama Administration has consistently advocated Net Neutrality as a core tenet of American broadband service.

Genachowski is expected to underline the seriousness of his proposal by including wireless providers in the definition.  That would subject mobile broadband providers to the same rules wired providers face, an important distinction that could put a stop to wireless phone companies acting as gatekeepers to block third party software applications designed to bypass those companies’ networks and calling plans.  iPhone owners in particular have been subjected to restrictions on the types of software and services they are allowed to use on their phones used on the AT&T network.

Consumer advocates are widely anticipated to applaud the FCC’s action, but some remain concerned that an FCC rulemaking by itself does not provide the robust protection federal law would provide, particularly if an administration in power appoints FCC Commissioners uninterested in enforcing it.  A bill has been introduced in the House of Representatives to make Net Neutrality the law, not just an FCC policy.  Passing the legislation provides even stronger guarantees that Net Neutrality principles will be respected.

The move by Genachowski to move forward on formalized Net Neutrality protection now may have come after the Commission watched a federal court throw out other informal FCC policies as unconstitutional.  Comcast has a pending lawsuit against the FCC after the Commission ordered Comcast to stop interfering with peer-to-peer traffic on its broadband network.  Comcast objected to the FCC involvement and feels the Commission exceeded its authority.  Should a judge agree, in the absence of a more formalized FCC rulemaking, Comcast would be free to resume throttling the speed of certain traffic on its broadband service.

An FCC rulemaking could provide ammunition to Net Neutrality critics that passage of a federal law would be redundant and unnecessary.

Net Neutrality critics argue that broadband networks should be free to manage the traffic on their service as they see fit, suggesting the goal of providers is to provide a consistent level of broadband service to all of their customers.  They suggest consumers that find network traffic policies too onerous would take their business elsewhere, discouraging provider excess.

But advocates for Net Neutrality argue the industry can leverage an undercompetitive marketplace to throttle and restrict traffic — reducing the traffic load on and the need for upgrades. In the absence of robust competition, other providers would could follow suit.  Net Neutrality advocates are also concerned broadband providers may attempt to monetize premium levels of service for content creators.  In return for a fee, content providers would be assured of enhanced speeds and performance in reaching that ISP’s customers, while those who don’t pay find themselves on a broadband “slow lane” that could make them uncompetitive.

Genachowski’s proposal is likely to permit broadband networks sufficient flexibility to do some network management, such as blocking denial of service, spam, and virus attacks, but not allow providers to prioritize traffic based on fees.

Phillip Dampier

FCC Chairman Julius Genachowski recorded a YouTube video to talk to Americans about the development of a national broadband plan for the United States.

In optimistic, flowery language, Genachowski invited Americans to submit their ideas and suggestions not only regarding broadband, but also the priorities Americans think the FCC should have in the future.

The most important part of the five minute video comes right in the beginning when Genachowski called broadband critical to the nation:

“Broadband is our generation’s major infrastructure challenge. It’s for us what railroads, highways and electricity were to past generations.”

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Genachowski would do well to remember America’s experience with all three of these important history lessons.  The broadband plan Genachowski envisions is subject to the same type of intrusive, anti-consumer tactics that wreaked havoc on past generations of consumers.

The railroad industry’s cartel of ownership and control is a familiar tale.  The Rise of Monopolies tells the story:

The need for all of these industries to stay successful was worrisome for railroad owners. To avoid the loss of production in any of these areas, large corporations attempted to stabilize their situations by pooling markets and centralizing management. By combining all of the fields into one conglomeration, the railroads had a new power, as they acquired control of many facets of the new economy. This body now had the ability to “squeeze out competitors, force down prices paid for labor and raw materials, charge customers more and get special favors and treatments from National and State government” (Chalmers). The railroads had all the power, because they controlled all the prices. Since the new residents of the West could not survive without the use of the railroads, they were forced to pay whatever rates the railroad companies set.

With these huge stores of capital, the railroad companies were able to finance political campaigns through whatever and whomever was needed in government. With this control in Washington, there was no way to stop the overwhelming control of this industry over society. The entire nation was subject to the whims of this monopoly.

It took direct government intervention to break up the railroad monopoly and protect consumers and businesses from the abusive practices of a transportation industry that can make or break you based on pricing and service, with little competition.

Public highways became an important asset that still pays off today.  The Eisenhower Administration’s deployment of the interstate highway system, at the size and scope required, would not have been accomplished by the private sector on its own.  Today’s federal highway system is largely self sustaining through the collection of gasoline taxes paid by drivers.

As Americans struggle with several incumbent providers that refuse to provide 21st century broadband technology, with little competition to drive that infrastructure investment, an uneven variety of broadband networks have emerged, from fiber to the home in some areas to an indefinite reliance on aging DSL slow speed technology for millions of rural Americans, or worse, inadequate satellite broadband.

It may be time to consider the same kind of national approach with a publicly owned fiber network private providers of all kinds can use to serve customers with a uniformly high speed, high quality user experience.

Electricity and the development of rural America is another very familiar tale to any rural broadband user.  From TVA: Electricity for All:

Although nearly 90 percent of urban dwellers had electricity by the 1930s, only ten percent of rural dwellers did. Private utility companies, who supplied electric power to most of the nation’s consumers, argued that it was too expensive to string electric lines to isolated rural farmsteads. Anyway, they said, most farmers, were too poor to be able to afford electricity.

The Roosevelt Administration believed that if private enterprise could not supply electric power to the people, then it was the duty of the government to do so. Most of the court cases involving TVA during the 1930s concerned the government’s involvement in the public utilities industry.

In 1935 the Rural Electric Administration (REA) was created to bring electricity to rural areas like the Tennessee Valley.

Many groups opposed the federal government’s involvement in developing and distributing electric power, especially utility companies, who believed that the government was unfairly competing with private enterprise. Some members of Congress who didn’t think the government should interfere with the economy, believed that TVA was a dangerous program that would bring the nation a step closer to socialism. Other people thought that farmers simply did not have the skills needed to manage local electric companies.

Any community wrestling with a municipal broadband project to provide service the private market refused to offer is already acquainted with this familiar story.  So are many rural consumers who are waiting, and waiting, and waiting, for the private market to bring broadband to their communities.  Unfortunately for them, the private market has already written them off as “not profitable enough” to provide service.

The electrification of America did not lead to a socialist takeover of America.  It led to the development and sustainability of rural communities and their local economies.  Agriculture remains one of America’s most important success stories, and without widespread electrification, this story might not have been written.

Scare tactics and horror stories have come whenever a private monopoly or cartel faces the threat of competition, regulation, or a municipal option to provide needed services communities are denied by the private sector.

The fear mongering was there when the railroad monopolies faced investigation and regulation, the “socialism” scare was heard when government attempted to undertake public infrastructure projects of many kinds from highways to utility service, and the same kinds of rhetoric is heard today about “socialist takeovers of the Internet” and “municipal broadband unfairly competes with private providers,” and the logical opposite “the government can’t do anything right.”

Unfortunately, the FCC has a long history of cozy relations with lobbyists who understand how to work within the agency’s nearly-impenetrable bureaucracy.  A review of the broadband plan submissions to the FCC reveals a large  number of them come from lobbying groups and the providers themselves.  Most consumers were left typing comments into a box on the web submission form, with every indication those remarks will be deemed “not serious” by FCC staff.

This time, Chairman Genachowski has to show more than a YouTube video inviting consumers to share their input.  We’d like actual evidence the consumer point of view is actually being taken seriously for a change, and is not simply one tiny noise drowned out in a loud crowd of special interests with profit agendas to protect and public policy to influence.  The FCC already knows what consumers want: widely available, fast, reasonably priced broadband free from Internet Overcharging schemes protected with robust Net Neutrality policies enforced by law.

If the existing providers want to erect roadblocks to competition, oversight, and hell-or-high-water-broadband-deployment, it’s time to break them up and get them out of the way.  That’s broadband we can believe in.

A federal appeals court in Washington has struck down, for a second time, a rulemaking by the Federal Communications Commission to limit the size of the nation’s largest cable operators to 30% of the nation’s pay television marketplace, calling the rule “arbitrary and capricious.”

Judge Douglas Howard Ginsburg

The 30% rule, designed to keep no single company from controlling more than 30% of the nation’s pay-TV subscribers, was originally written in 1993 by the FCC because the agency feared a concentrated cable television marketplace would stifle innovation, lock out potential new independent programmers, and discourage new forms of competition.  The cable industry immediately called the cap an overreach, and in 2001, found a friendly reception in court, with a ruling demanding the FCC reconsider the rule in light of competition from satellite television.

The FCC determined satellite competition was inadequate alone to justify reversing the 30% ownership limit, and essentially kept the limit in place, mostly at the urging of FCC Chairman Kevin Martin, who regularly tangled with the cable industry during the Bush Administration.

The decision striking down the 30% rule came in a harshly worded ruling from Judge Douglas H. Ginsburg.

“In light of the changed marketplace, the government’s justification for the 30 percent cap is even weaker now than in 2001 when we held the 30 percent cap unconstitutional,” Judge Ginsburg wrote for a three-member panel of the court.

Ginsburg wrote the FCC was egregiously derelict in its revised rulemaking because it failed to heed the court’s direction, requiring the court to vacate the rule.

The ruling is a “significant gain for cable and apparent big victory for Comcast,” said Andrew Lipman, a Washington- based partner in the media, telecommunications and technology practice at Bingham McCutchen LLP.

The Philadelphia Inquirer noted some Wall Street analysts were pleased with the court’s decision:

Wall Street analyst Craig Moffett called the decision a “moral” victory for Comcast, which contended that the market-cap rule was politically motivated by the Federal Communications Commission and wouldn’t overcome a court challenge. The rule was passed under former FCC Chairman Kevin Martin.

Speculation about what companies Comcast could likely snap up began immediately, ranging from a conceptual merger with Time Warner Cable, the nation’s second largest cable company, to quick buyouts of smaller players like Cablevision or now-bankrupt Charter Cable.

Consumer groups were alarmed by the court ruling.

“This is not the end of the fight,” Andrew Jay Schwartzmann, president and chief executive officer of the Media Access Project, a nonprofit policy advocacy group, said in a statement. “Big cable’s anti-competitive ownership structure has increased prices and limited choices for the American public. Therefore, we will consult with the FCC on whether Supreme Court review is feasible. If not, we’ll be asking Congress to pass new legislation to ensure more choice and lower prices for cable TV service.”

Ben Scott, policy director for Free Press, noted that the intent of the original 1992 Cable Act was to promote competition and consumer choice.  Yet in most cities, consumers face a cable cartel.

“Today consumers experience perpetual price hikes by large operators that already have market dominating purchasing power to decide the fate of new channels. The promises of lower prices through competition from satellite and telecom companies in the video business have never been realized. We encourage the FCC not only to revisit cable ownership limits, but to examine a variety of policy proposals to achieve Congress’s goal to bring consumers more competition and more choice in the cable industry.”

ABC News reported that while Comcast won this legal battle, it has a way to go in the court of public opinion.

Cable providers Comcast, Time Warner and Charter draw low marks on the American Customer Satisfaction Index, tracked by the University of Michigan. On a scale of 0 to 100, Comcast and Time Warner each scored 59 this year. The satellite provider DirectTV ranked first at 71, with Cox Communications cable at 66 and DISH Network at 64.

FCC Chairman Julius Genachowski

In a dramatic departure from the former Federal Communications Commission’s largely “hear no evil, see no evil” oversight, Julius Genachowski, the new Chairman of the Federal Communications Commission, is a downright activist.

Genachowski, over the course of several interviews given this week, has made it clear that he sees major problems in the American broadband industry — it’s too expensive, it’s not competitive enough, and its widespread availability is absolutely critical to the economic success of the United States in coming years.  He’s made it clear broadband will be the most important issue before the agency for the immediate future.

“It’s tremendously important. I’m convinced that broadband is our generation’s major infrastructure challenge, akin to what railroads were, what the highway system was and universal electricity. This is the platform that will determine whether the country can compete in the 21st century. If we get this right, our broadband infrastructure will be an enduring engine for job creation, economic growth, investment, innovation, so it’s essential,” Genachowski said in an interview published today in The Wall Street Journal.

Although short on specifics in most of the interviews given to date, Genachowski has signaled his interest in preserving the concepts of Net Neutrality — providing open and equal treatment of Internet traffic without favoring or throttling traffic.

“The openness of the Internet has been a big driver of that. And it is important that we preserve that openness in order to drive investment, innovation, job creation and economic growth,” he said.

With the departure of the former FCC Chairman Kevin Martin earlier this year, Genachowski will mirror much of the Obama Administration policies and their telecommunications agenda.

Martin’s FCC, with a Republican majority, exercised a deregulatory approach to oversight, and was frequently criticized for not protecting consumer interests.  But Martin did routinely clash with the nation’s cable television operators, in his unsuccessful effort to force them to provide a-la-carte cable television programming tiers.  Martin’s leadership also brought about heightened oversight of “decency” policies impacting broadcasters, and resulted in substantial fines for radio and television stations that violated language or decency standards.  Most agency watchers summarize the last eight years of telecommunications policy as generally industry friendly, particularly to telephone companies, and mildly hostile to cable.  The Commission also sought to permit an increase in ownership concentration of the nation’s radio and television services, and approved mergers routinely, including one between former competing satellite radio providers XM and Sirius.

Genachowski’s FCC is expected to substantially change its regulatory approach, but only over time.

Although it will maintain an activist approach to broadband issues, Genachowski believes a top-down ‘agency makeover’ is required to prepare the FCC to meet the challenges of the 21st century.

“There are real challenges given the state of the infrastructure at the agency. As an example, there are literally millions of pages of documents that should be available to the public, and technically are because people can come in and look them up, that aren’t in digital form at all. They’re in paper. Some of these are historical documents, but there’s a huge resource downstairs in the pubic reading room that has something like 7,000 linear feet of paper that we really do need to digitize and put online. There’s a lot of paper that is online but not in machine-readable format, it’s not searchable,” he said.

Most FCC watchers believe the agency will move forward on several issues in the next 12-24 months:

1. A review of the Universal Service Fund (USF), which collects several dollars from every telephone customer in the United States to help underwrite and defray expenses of the nation’s most rural and disadvantaged telephone subscribers.  The USF has been roundly criticized for collecting an enormous amount of money, and squandering it on projects that go well beyond the Fund’s original intent, resulting in considerable waste, fraud, and abuse.  Genachowski’s FCC will be asked to consider using USF money to deploy and/or underwrite broadband service in areas not economically viable enough for private companies to provide service.
2. A review of the state of the competitiveness in the broadband, telephone, and wireless telephone industries, with particular emphasis on the latter.  Wireless phone companies like Verizon Wireless and AT&T Mobility are already under scrutiny for their exclusivity agreements with telephone equipment manufacturers, and their attempts to hold consumers’ hostage by refusing to permit them to reactivate their phones on other company’s networks.
3. A review of applications and filings by broadcasters relating to low power radio and television, improving reception for digital over the air television signals, indecency complaints, and mergers and acquisitions in the industry.