Net Neutrality, FCC, and Title 2. Wow.

It seems more likely FCC Chair Wheeler is going to propose full blown “Title 2” common carrier regulation for internet service.  This is a huge progression from early 2014’s talk of Internet “fast lanes.”  Some thoughts.

  • The real regulatory question is when (not if) broadband Internet gets defined as a “universal service” on par with electric power (and telephony before it).  The massive consumer and media response to this proposal shows how perceptions are shifting.  We would never accept electric power servicing only the wealthy, but that it how it started out.  Expect the same progression over the next 10 years of the Internet.    Note that this is not necessarily a bad thing for the carriers.  Buildout will involve subsidy.  And subsidized businesses are GREAT businesses if set up right (see AT&T in the 70’s after they completed the nationwide phone build in the 50s/60’s).  The key will be when and if the carriers shift to influencing this inevitability vs fighting it.  The winning carriers will be the first movers in that bit of realpolitik.  
  • Public response was not the only factor.  Look at all the over-the-Internet subscription video offers that came out this year (HBO’s service, DISH’s recent announcement, the various sports leagues).  None of those players want to be paying “fast lane” fees either.
  • The public response and the rise of over-the-Internet video also means faster (universal) service.  I think we will move towards Gigabit service (1,000 megabits).  Thank Google for setting that bar. Gigabit is technically easy, but requires a whole lot of plant upgrades the carriers have been putting off since the 80’s.  Shortly after deregulation.  Shortly after we completed the last big subsidized buildout gravy train (telephony).  Which allowed them to privatize and maximize cash flows from infrastructure built with public subsidy money.  What a coincidence!.  What a surprise they don’t want to renew or rebuild the plant!  Isn’t our free (ahem) market wonderful?
  • Obama’s White House deserves huge credit for jamming Wheeler into a corner on this one (by publicly stating support for Title 2).  White House staffers – mostly young folk – like their Netflix too….
  • I think the White House and FCC’s motivating logic also evolved to “This is going to get litigated to death anyway.  We might as well go whole hog and move to the strongest legally defensible position for that battle.  And the courts made it pretty darn clear that invoking Title 2 was that position.  So…
  • I still wonder (almost certainly wrongly) if Wheeler was playing some sort of genius jujitsu game.  1.  Propose some really objectionable Internet “Fast Lane” regulations.  2.  Provoke a massive backlash (most consumer comments EVER for a FCC proposal and widespread coverage in media etc…).  3.  Use the backlash to move to a stricter regulatory stance (Title 2) that seemed unthinkable a few months ago.  He’s almost certainly not that smart, but still fun to think about.
  • As I’ve often stated before, this has basically ZERO impact on the carrier’s business models or financials.  They can charge the same amount for the same service today as they did yesterday.  It does take away some hopes and dreams fr charging differential rates, but those were likely unrealistic anyway….  And once they face reality and start advocating for subsidized buildouts, they could make a lot of money for a long long time.
  • How much is Verizon regretting bringing the court case that set this whole process in motion?  Hee hee hee.  Yet another case of the carrier’s own actions doing more than any activist could ever hope for.  The seeds of creative destruction are often sown internally (e.g. AT&T One Rate destroying roaming fees industry-wide…).
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