Netflix — the primary whiner behind the successful campaign to get the Federal Communications Commission to regulate the Internet by pushing the concept of net neutrality — is having second thoughts.
The Los Gatos-based entertainment provider has been hogging up to one-third of the broadband network capacity nationwide during peak times to stream its videos. They were worried about their bottom line given providers such as Comcast, Verizon, and AT&T among others might actually start charging them more in line with what they were using. That, of course, would blow apart their cheap business model built by sucking the broadband capacity out of a host provider — much like a mosquito — they weren’t paying their proportionate share to use.
And what better way to rally the troops to pressure Uncle Sam to slap chains on broadband providers than to stir up fear that Comcast et al were preparing to slap on data caps and to price broadband in such a manner that little guys wouldn’t be able to start up web-based businesses.
What Netflix didn’t count on was the FCC saying not only will they exert government power to regulate broadband providers but they will also review interconnection agreements, network tools, as well as give itself oversight of Internet content and business models.
The FCC, in keeping with the times, is drawing its authority from the Communications Act of 1934 that was designed to give the government near control over AT&T and its telephone monopoly
Title II of that legislation — enacted when wall-mounted crank phones were still prevalent and the Bijou was the de facto Netflix service — gave AT&T more than a half century of government protection to squeeze out new competition, to fight off piggyback products that used phones that they did not manufacture and sell, and to have the government work in concert with them to set prices to keep money flowing unbated into their coffers.
In short, the government helped AT&T stifle competition and innovation that they didn’t profit from while at the same time establishing floors for phone rates that assured them a steady and reliable cash flow.
During the past 20 years since commercial ISPs were established, the Internet has exploded.
And while specific transactions conducted on some sites — just like at brick-and-mortar enterprises — fall under existing government regulations such as taxable retail sales, prescriptions, gambling, room taxes for hotel bookings and such, the government hasn’t placed an albatross around the proverbial neck of the Internet. That is until now.
What Netflix rightfully fears is the FCC’s decree that they can review all interconnect agreements as well as claim oversight of Internet content and business models.
Mark Zuckerburg would have struggled to gain traction under FCC oversight let alone grow Facebook into a $202 billion enterprise. Instead of moving at the speed of the Internet, innovations will be subjected to FCC oversight and approval.
Government oversight always has — and always will — make entry into the field it has under its regulatory thumb extremely difficult at best for small start-ups especially since the FCC has made it clear they don’t intend to only exert their ability to issue decrees to broadband providers.
As the FCC noose tightens around the Internet, the structure of the Communications Act of 1934 gives existing broadband providers the tools to shut the door on upstarts using government power to do so. Facebook may say they have no interest currently in putting together an Internet backbone like Google is doing, but the emerging FCC control over the Internet may make that option next to impossible to pursue in the future.
Government — as we know by its Byzantine rules imposed on everything from workplace safety to trucking — never stops at basic and common sense measures designed to ensure public safety and unscrupulous price gouging.
Consumers, for example, paid dearly before the Federal Trade Commission backed off on how aggressively it had been regulating the trucking industry. Prior to the 1970s, the Motor Carrier Act of 1935 restricting interstate freight service and made it hard for new players to enter the field. There were also rules imposed such as some trucks could only carry freight in one direction on a route.
Comcast, Verizon, AT&T and other broadband providers are constantly evolving — and in relatively short periods of time — to provide better service. You could never accuse Ma Bell in its hey day of moving at such speed and catering to consumers. The reason is simple. There is always someone looking to take broadband customers.
And perhaps the most galling aspect of the net neutrality debate is the assumption government can do it better by treating the Internet as a utility.
You do not have to look farther than the Manteca Unified School District to find out how expensive and ineffective bureaucratic arrogance can be when it comes to the Internet.
More than 15 years ago, Manteca Unified under the leadership of Superintendent John Reickewald was convinced they could bring wireless Internet service to the great unwashed masses of Manteca and Lathrop. They were irked that Verizon and other carriers hadn’t extended service to the region.
So Manteca Unified decided they would do what Verizon wouldn’t do and would offer it at rates below what Verizon would if they did extend service. Some $1.2 million later the district had only a dozen or so subscribers as Verizon and others moved their infrastructure into Manteca along with investments that left the capacity and speed of the district service in the Stone Age.
Perhaps the Obama Administration might want to hold up Manteca Unified as the ideal public utility Internet provider.
This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA. He can be contacted at email@example.com or 209.249.3519.