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Net Neutrality

Internet Pioneers Decry Title II Rules

A group of self-proclaimed Internet "elders," including early pioneers of voice-over-IP services and proponents of Internet freedoms, is now warning that the FCC's move to impose Title II regulations on the Internet will have toxic effects on investment and innovation.

The warnings were issued on a conference call arranged by Daniel Berninger, known primarily for his early work in VoIP, including as part of VocalTec Communications, and that also included Jeff Pulver, VoIP pioneer with Free World Dialup and later Pulver.com ; John Perry Barlow, who founded the Electronic Frontier Foundation and is still on its board; George Gilder, economist and author of Telecosm; and Bryan Martin, chairman of 8x8 Inc. (Nasdaq: EGHT), a VoIP provider.

One over-arching goal of the teleconference was to lay to rest the notion that the technology industry universally backs what the Federal Communications Commission (FCC) has done, Berninger noted. While there is general support for net neutrality, imposing Title II regulations is not the answer, he said.

"The US represents 70% to 80% of the [global] information technology economy -- why would you reverse your strategy that got us to this point?" Berninger said.

Gilder was probably the most agitated of the group in decrying the FCC move. He recalled the telecom crash of 2000, and said another crash could result from the new rules.

"We've had 15 years of marvelous success, just stunning success on the Internet [since then]," Gilder said. "Our seven top technology companies are all related to the Internet. The US has four times the investment in fixed broadband than Europe, with its government intervention, and twice the investment in wireless. Most of Internet traffic in the world flows through the US. What on earth is wrong that the FCC thinks it has to reduce it to a public utility?"

Both Martin and Pulver related their experiences trying to be VoIP innovators in a Title II regime, when their efforts drew negative attention from regulators in the days before the FCC under Michael Powell adopted Internet freedom rules.

Martin said 8X8 was barely off the ground when it received threatening letters from the California state attorney general warning the company it needed to register as a competitive local exchange carrier in order to offer voice over the Internet. Calling Title II regulations "the nuclear option," Martin said he expects the new rules to be overturned in court, but only after the industry has suffered a couple of years of regulatory uncertainty and spent a fortune on lawyers. Instead of an FCC ruling, the industry needs action by Congress.

"I am very concerned that in the era of the Title II Internet, we will see many fewer communication innovators come forward because of regulatory uncertainty," added Pulver. Innovators are less likely to act if they think they have to get permission from the FCC, he said.

Barlow called the FCC's actions "singular arrogance" in that a US agency is trying to regulate a global force. Stressing that he speaks for himself and not the EFF, he said the issue in the US is the monopoly/duopoly of Internet access, and that is a problem the FCC cannot solve.


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The group, in general, was a bit derisive in discussing Silicon Valley's support for the new rules. Gilder and Barlow said many of the companies there are afraid of the FCC and not willing to speak up and take on the government directly.

"There is limited willingness to believe that Title II is the best answer to this problem," Barlow said.

Martin believes that those who haven't previously lived through the government regulation that Title II will bring don't understand what it might mean for them.

"There's been a bubble over Silicon Valley protecting them from the FCC and it's been called the information services category," Berninger said. They have been able to ignore the FCC to this point but that will change now.

— Carol Wilson, Editor-at-Large, Light Reading

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cnwedit 3/3/2015 | 10:11:38 AM
Re: Title II is a Gigabit Killer In the 15 years that the FCC has been paying lip service, as you say, look at the dramatic innovation on the Internet side - businesses like Skype and Netflix have blossomed, as have a ton of things that weren't even in the pipeline back then. How we shop, how we book travel and compare prices, even how we arrange transporation - everything has changed. 

The business of the Internet isn't just about consumer access. But I would argue that even that isn't as bleak as folks are painting it. And if you think consumer service from the broadband ISPs is bad, I'm sorry, Karl, but have you tried to contact your bank, your insurance company or another utility company lately? I've had FAR worse experiences with customer service at those institutions than with my bb provider and my company is the one most widely reviled for its poor customer service.

I think customer service in general is degrading, but that's a rant for another day. 

What Pulver and the others are talking about is business innovation on the Internet and how it might be impacted by these new rules and I don't think what they say can be just brushed aside. Whether or not Wheeler would impose new rules isn't the issue - the guy or gal after him might have a different mindset and there's nothing stopping that person from going to rate regulation or unbundling rules. That's why I say that forebearance needs to be codified.

We still need to see how the courts view this one - as Martin said - I think it was him - this fight is headed there and for the next year or more, this is just one more way the lawyers put braces on their kids and buy their second homes.

 

 
KBode 3/3/2015 | 9:58:58 AM
Re: Title II is a Gigabit Killer I think the TItle II shift was part of an FCC trifecta in trying to get some movement on competition: redefine broadband as 25 Mbps to highlight a lack of effort, eliminate protectionist laws on the state levels written by ISPs prohibiting in many instances even public/private partnerships, and pushing for fair rules of the road for Internet video and other services.

Note, this is after a good FIFTEEN YEARS of  the FCC paying a lot of lip service to competition, but not really doing anything to help the problem.

As you note, the stock market certainly doesn't see a doomsday scenario in these new rules, and I seriously doubt the FCC will step in and start encouraging even further opposition to the rules by trampling legitimate business models, or engaging in heavy-handed rate regulation. Does Wheeler really strike anybody as that type?

Again, the very nature of the "regulations are always bad and deregulation is always good argument" dictates that after fifteen years of pretty major deregulation across the telecom sector, we should see greater benefits than high prices and customer service (at least on the residential side) that's the worst in ANY industry. 

Then again I tend to believe in a balanced approach to regulation because I tend to approach many  things from the consumer end of the equation. Were taxes and regulatory framework costs in the forefront of my mind I might think more in line with the Pulver camp.

 

 
cnwedit 3/3/2015 | 9:04:22 AM
Re: Title II is a Gigabit Killer Kbode, usually you and I are on the same page but I'm not sure I see why Title II was required to implement open Internet rules. It will do nothing to boost competition in the last mile - we agree that will be the best thing for all - and can actually discourage it. 

I pressed these guys (Berninger, Pulver, et al) to tell me specific examples of how Title II regs would discourage innovation and they went back to their personal experiences with this type of regulation and how it almost killed the VoIP market before it took off. Gilder repeatedly said another meltdown of the  proportion of the telecom crash of 2000 was possible.

Given what the NASDAQ is doing right now, I'm not sure I buy that. But I do think using rules crafted for something very different many decades ago is likely to have unintended consequences and those are never good.

Unless the FCC codifies its forebearance on things like rate regulation, unbundling, etc., there is no guarantee those things don't loom in the future. And as Seven notes, the incentive to create more bandwidth for OTT offerings is negligible under these new rules. 
KBode 3/3/2015 | 8:15:30 AM
Re: Title II is a Gigabit Killer You don't address anything I just said. Also calling fairly modest regulations many ISPs don't think change much a "government takeover of the Internet" is not helpful hyperbole. I understand people's hesitation when it comes to government regulation of anything, but in terms of the uncompetitive broadband duopoly, deregulating them further and letting them abuse their last mile dominance to an ever greater extent simply isn't a realistic trajectory for anybody that seriously wants to see better, cheaper service. 

Government is often bad, it isn't always bad. I don't think that kind of absolutist thinking helpful or realistic when it comes to discussing Title II.
gregw3333 3/3/2015 | 8:07:27 AM
Re: Title II is a Gigabit Killer Really?  Under Title II the PSTN providers depreciated equipment over 30 years....so that was your innovation cycle.  With un-reg broadband SPs depreciate equipment over 5-7 years with actually in network life closer to 3-4.  That's your innovation cycle.

I'll take a 5 year inno cycle over a 30 year cycle ...thank you.

 

"Freak out"...Government take over of the Internet is not a minor thing.  In case you haven't figured it out this is a political move on the scale of obamacare.
KBode 3/3/2015 | 7:43:15 AM
Re: Title II is a Gigabit Killer "Simply put ...  Title II is a gigabit killer."

I just don't think so. Frontier, Sprint, Google, Cablevision, Sonic -- all have stated they expect Title II to have no meaningful impact on their businesses. Wireless voice has been regulated under Title II for a decade without problems. Title II has also governed portions of Verizon's FiOS network for years.

I think the collective freak out over these rules is a bit much. We've been deregulating the broadband sector for fifteen years under the promise of Utopian gigabit deployments that never materialized anyway. Title II rules wouldn't be necessary if we had competition in the last mile, but short of that -- I see these rules as necessary rules of the road given the realities facing the DSL/cable logjam.
gregw3333 3/3/2015 | 7:34:20 AM
Title II is a Gigabit Killer The FCC in all their wisdom has mutually exclusive goals.  On one hand they want to promote gigabit cities and communities (as well as rural broadband) and on the other hand they want archaic regulations.  Simply put ...  Title II is a gigabit killer.

One solution is to let the free market drive gigabit deployments....Then on a neighborhood by neighborhood basis, give them 10 years of market driven competition then migrate to an appropriate "light" regulatory environment. 
Joe Stanganelli 3/3/2015 | 6:15:58 AM
We must consult the elders! It's interesting -- to speak of "Internet elders" -- to note that Tim Berners-Lee is pro-Title II whereas Marc Andreesen is against the concept of strict NN laws.
brooks7 3/2/2015 | 7:18:40 PM
I think the biggest assumption  

Is that the large ISPs (telcos/cablecos) will be required to add bandwidth to support services as they develop.  I think this ruling leaves the future of OTT video very much more in doubt.  I blogged on Friday about it and people in that field were not happy with my analysis.  But to present the outline here:

- All the Big ISPs have a Video offering in Traditional Broadcast.

- These offerings compete with OTT offerings.

- There is no requirement to upgrade to eliminate congestion for OTT video offerings.

- This will make Broadcast video higher and higher quality over time in comparison to OTT.

I think the only way out of that cycle will be to add more and more regulation to Title II Internet Services.  A better way to say it might be less and less forebearance.  

seven

 
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