Government Policy and Technology Innovation

In a way that mirrors yesterday’s court ruling, the FCC announce they were going to investigate and likely force serious changes in the world of set top boxes. The FCC, at one point, forced and supported the cable industry in controlling the types of set top boxes (Set top boxes are cable boxes – Roku and AppleTV are cableless competitors) available to consumers. Since then, we’ve suffered with mediocre and extremely expensive boxes. Boxes that cost $16/month and over time you end up paying for a box 10 times over. The gist of this issue is whether or not to allow companies to make “soft” cable cards. Right now, if you want to decode any video from a coax cable from Comcast, you must have a physical card to do the decoding. There’s nothing preventing this from being accomplished entirely using software once you get the signal into the box and that’s what this is trying to encourage.

Granted, this has taken a while for the FCC to wake up and look at the competitive landscape and see that this isn’t in the public interest. Defining exactly what is in the public interest is a difficult because everyone sees this in a different light. However, it’s pretty obvious that something that you end up paying $1,920 over span of ten years isn’t in the public interest. The competition, Roku and AppleTV, each cost between 100-200 one time and you can use it until it dies which will probably be something like 10 years. I’ve had my Roku HD for 5 years now and it still works great. It would make perfect sense for me to buy a version, assuming I had cable at all, that would allow me to watch cable through it. Everything all in one place.

This is the type of regulation that government should be celebrated for encouraging. Granted they screwed it up to begin with and they are only righting a wrong now, but they’re on the right path. Regulation like Net Neutrality is a similar decision that can spur innovation. Looking at T-Mobile’s binge on plan, you can see why we need this. If I’m a small streaming company or, ya know, YouTube, I look at this platform and see how it’s slanted against me and limits what I’m capable of delivering on T-Mobile’s network.

in the case of the FBI and forcing technology companies to change their technology to reduce security, it’s nice to see an organization that’s willing to at least consider improving opportunities for innovators. Sure it may look like picking winners and losers – but when most policy is driven by current winners picking them to lose sure looks more like balancing the playing field to me.

Net Neutrality Vs. Title II – They Aren’t the Same

Since Title II passed I’ve seen a lot of articles that either indicate buyers remorse or have always been against Title II and are gloating that it’s going to be overturned. For example, Wired had an Op-Ed yesterday that used major points from Chairman Pai’s dissent against using Title II. Title II is clearly a divisive issue, as the guys over at KBMOD, where I also write, are completely divided over the supposed benefits of Title II. I sincerely hope that when we look back at this debate that we see this discussion as a confusing bit of history, because nothing happened. Where the Internet didn’t change and remained an open platform for everyone to easily and equally use.

Net Neutrality and Title II are not the same thing. Title II is an old law originally written in 1934 to regulate a single monopoly with the hopes of create more competition. It wasn’t successful but the legacy of Title II played an important role in the creation and development of the Internet. Title II was the policy regime that APRANET was developed. Whenever a scientist at MIT wanted to use a graphically powerful computer in Utah Title II was in full effect on that data system. Furthermore, Title II was the law of the land for all of dial up Internet. Which was actually a very good thing. The fact that there was Local-Loop unbundling meant that you could have an Internet service that was different than your phone company. It was also likely, given how low the costs were, that these ISPs didn’t have to pay many of the taxes that the Phone company did that you used to buy access to the Internet. We already know that Title II has and can foster a culture of innovation.

Net Neutrality is different than Title II because it was the architectural approach the initial designers took for creating the internet. There were a few key reasons for this, it was easier, required less computing power, and the majority of the early pioneers believed in what became the Open Source movement. In many cases it was the exception rather than the norm, early on, for scientists to patent their computer research. It’s likely because most of these researchers were Mathematicians and Physicists that came from a military background (WWI and WWII and all), so they weren’t used to patenting due to their educational background and the requirement for secrecy contributing to the war effort.

To provide preferential treatment to one packet of data over another required tools that simply would have prevented the data from arriving at its destination in a timely fashion in the 70’s. Remember this was during the time when a personal computer didn’t exist and computing used mainframes and terminals to do the work (interestingly we’re going back to that a bit with the cloud). This means that the routers would have had to have been mainframes themselves to decode the data and figure out what type of data it was before sending it to it’s next location. This was seen as a waste of computing power as well as an invasion of privacy. The point of the Packets was to help keep the data save and secure as much as to maximize capacity on lines connecting the computers.

One of the largest complaints about implementing Title II is that there’s not enough economic evidence to support it. I believe that to be true to some extent. It’s hard to forecast something that’s happening as it’s happening. Especially since the FCC was unlikely to get access, legally, to the Netflix-Comcast/Verizon deals to ensure equal access (or maybe preferred) to their lines. It was clearly shown by Netflix that Comcast/Verizon were intentionally causing issues they could easily resolve and they did immediately after they got paid. With Comcast/Verizon planning to foreclose the video streaming market in this fashion and violating the spirit of Net Neutrality, some sort of regulation was needed to prevent this foreclosure.

I would have rather not had any sort of regulation go into effect. However, I believe that the actions that Comcast and Verizon are taking are anticompetitive and anti-consumer. Time Warner Cable supposedly makes 97% profit on their broadband service, which isn’t a surprise whenever you have a local monopoly/duopoly for broadband.

Could there have been a better way? Yes, the FCC could have taken action that would have forced increased competition. Something like setting goals for every city in the US to have no fewer than 3 broadband providers and providing assistance to municipalities that wanted to develop their own to meet that goal. Ironically, the one provision not included in the Title II rule that would help with that is local-loop unbundling, which would reduce the cost of a new ISP entering the market as they wouldn’t have to build their own network, which has slowed Google Fiber down considerably.

New FCC Rules and competition

A friend retweeted the Tweet below today and it got me thinking about the broader context of the FCC rules that past last Thursday

Two things struck me about this tweet. First, it’s disappointing that the author doesn’t understand Title II better considering he co-founded the EFF. Second, that Title II as implemented was designed to do nothing about ISP competition. As I wrote on KBMOD this week, Net Neutrality has no provision for “Unbundling” which would promote competition amongst ISPs at the local level. Unbudling, according to Wikipedia, is a regulation that requires existing line owners (such as Comcast) to open up their lines to anyone that wants to sell cable, internet, or telephony access. Unbundling, under a much more restrictive Title II, is the only reason that AOL was successful as a business model. Since this provision of Title II was forborne, Title II will not, in fact, be for promoting competition in ISPs at all.

Instead, the FCC, at least in my opinion, looked at the Internet as a general purpose platform technology. They were looking to ensure competition ON the technology not between technology carriers. For example, the FCC wants to see as much competition as possible between companies like Netflix, Amazon Prime Video, Hulu, and Comcast’s Xfinity service. However, they want to make sure that Comcast cannot foreclose on the video delivery service by leveraging their existing monopoly in telecommunications. What that means is that Comcast could create rules or an environment where Netflix cannot compete and Comcast customers MUST use the Xfinity service because alternatives didn’t function well (Foreclosure is the thing that got Microsoft with Web browsers).

The FCC did enact a rule that will impact competition at the local level though. It’s a limited rule because it impacts only Tennessee and North Carolina. It is preempting state law by stating that it is legal for municipalities to develop their own broadband networks. Broadband build out is prohibitively expensive for an entrepreneur to set up a network, however if they had a backing of a municipality that is willing to share the risk and the reward, it might be possible for an entrepreneur to build out their own broadband network on a limited scale. Municipalities aren’t the ideal solution to this, it would be significantly more preferable if other businesses moved into areas and built new broadband networks, however unless they have a massive amount of money, like Google, it’s unlikely to happen. A bridge between is a public-private partnership where private enterprise, which has the telecommunications expertise, partners with a municipality, which has the demand and financial support, to build a network.

With the ruling on municipal broadband being so limited, it’s not going to make much of an initial impact, however it’s likely that other municipalities will try to jump on that bandwagon and overrule laws at the state level (as a note I’m not going to argue if this is something they have the authority to do, I’m just looking at the potential impact of the rule).

Grants to build out networks rules change

Recently there have been a serious debate between the FCC and major telecoms about the minimum rate for broadband. It’s pretty obvious that there’s a strong disagreement between most customers and their ISPs. For the most part rural ISPs are pretty terrible. If you live outside of a major city it’s unlikely that you’ll have a very fast internet service. For a country of our size and population, we have an extremely large portion of our population that does have access to the internet, however we don’t have the deepest penetration of the internet in the world. Which for a country of our wealth that is something of a shame. We’ve been investing, through governmental grants since the middle of the 90’s and we haven’t seen the expected return on investment that we’d expected as investors. We paid for companies like Verizon and Comcast to invest in our network, and I mean we, as in the tax payers. We’re paying for them to get rich off of grants.

Internet Population and Penetration

Smaller countries like the Netherlands and the UK have significantly greater penetration. Sure they have smaller populations than we do, but they also have significantly faster internet speeds than we do across the board including rural areas. Korea has speeds an order of magnitude higher than we do, despite the fact that we’re a significantly richer country than South Korea.

One of the first moves in a long time that the FCC has done that is a positive move in a really long time. As of today, the FCC has decided that the minimum speed for broadband must be 10mbps which is a huge step in the right direction. This will change the minimum threshold for any investment by a company to earn a grant to increase from 4mbps to 10mbps. This is the right direction for our country and I’m really excited about the possibilities. It means that the FCC is starting to really understand that the telecoms don’t fully have our best interests in mind when they make their arguments. We’ll see what happens in the upcoming months.

Net Neutrality, Let your Voice be heard

The FCC is currently taking comments on the net neutrality issue. Please contact them. The agency is currently completely overwhelmed with the feedback on Net Neutrality, but even still, more voices might help tip the scales that are pretty obviously stacked against us. It’s like the scales used to weigh if the witch weighs the same as a duck in Monty Python’s Holy Grail. One of the most important things about net neutrality is the scope that the ISPs actually own in this debate. They are dictating the terms of this debate through money – they make the most, they charge the most, and they have monopolies. This cartoon really helps explain what the ISPs actually own (click here or the picture to see all of the comic).

Economix comix depiction of Net Neutrality

That’s right, basically if you live off a street that says “road not maintained by such and such county”(lots of them where I live) THAT’s the portion the ISP maintains. That’s why a lot of these arguments are over “the last mile.” Basically it’s the mile from their data center that connects to the backbone of the internet to your house. In other industries it might be maintained by one company, but any company can use it. Think about back when you had a modem. You could have that service provided by ANYONE – that’s why AOL got so big they offered free time to just about everyone. Almost everyone signed up and anyone could because the last mile wasn’t maintained by your phone company and had to be shared. DSL still has that requirement only Cable and FiOS don’t and that’s because they were classified as a “information service” rather than a common carrier. The highway above is a common carrier.

If you’d like to see this changed, please go to the FCC and comment (if you can) the link is here: http://www.fcc.gov/comments click on 14-28 and try to leave a comment.

It’s up to us to fight for net neutrality. I’ve left at least two comments. I’ve signed several petitions. I’ve donated to mayone.us all because one of these alone isn’t enough. I’ve contacted by Senator and I know he supports Net Neutrality. If your company is an internet company or uses a large amount of bandwidth on a regular basis see if your company will come out in support of Net Neutrality. It’s the only way we’ll win. We need to get over whelming support.

Should we celebrate about Google joining net neutrality fight?

It’s time we be skeptical of high tech companies that support policies that we want. Today, a large number of tech companies came out against the FCC’s plan to allow internet fast lanes. They aren’t as bold as Mozilla in their claims, they don’t push for the most extreme best for the consumer perspective. We, as consumers, have to understand there’s a reason for this. These companies (and there are a lot) wrote the letter without stating what their position actually is, just that they are for a “free and open internet.” This is essentially a dream statement for a lawyer/lobbyist, because “free” and “open” can mean a variety of things based on that company’s perspective.

These companies are willing to push for a free/open internet insofar as it enables them to make money. We have to understand that. Many of these companies are looking to disrupt incumbent market players and are leveraging the internet to enable them to do that.

Normally, I’d be really excited about all these companies coming out in favor of net neutrality. However, because of their tepid support, their lack of recommendations of what to do to address the net neutrality issue, and tardiness to the conversation I’m concerned as to what their actual motives are for this debate. This is a very different discussion than SOPA, where just coming out against the bill was enough. In this case it’s not, we need them to provide clear direction on what the FCC SHOULD do instead. This provides the FCC a path forward and a way to drive the conversation. Without that, essentially there’s no clearly articulated alternative during THIS debate. Yes, they’ve made an argument before, but they aren’t this time.

I also am concerned by this turn of events because of the recent report that Google and the NSA had a very close relationship. In very strict version of net neutrality deep packet inspection wasn’t possible because there was no way to actually do it. The first step to packet discrimination is knowing what’s in the material. Truly end-to-end net neutrality precludes the ability to eavesdrop and snoop on content being passed along the IP backbone. Any sort of relationship between the NSA and arguably the largest internet company in the world necessarily limits the full extent that Net Neutrality can actually be implemented.

Furthermore, we also must remember that a large number of these companies that are now for Net Neutrality were also for CISPA which includes handing over data to the government. Which, based on Google’s relationship with the NSA, they essentially did anyway.

So, it’s a good thing that these companies came out for Net Neutrality because truly only the power of their lobbying can overcome the FCC’s proposal and push Comcast and Verizon into accept the new rules. I don’t think that we citizens could do it on our own.

(if you want to try to fight corruption that’s sort of on display here, check out Mayone.us)

Lack of Net Neutrality will be a competitive liability in the future for the US

Net Neutrality could be dead in the US and I think that this creates problems for companies that do business in other parts of the world. Or rather, it creates incentives for companies based in the US to focus on non-US markets for conducting business. There are several reasons for this. Let’s take this from a Netflix perspective, assuming they were able to get the same catalog they currently have in the US and took it into Europe (this has been difficult for US companies while it’s been easier for EU companies to come into the US – see Pandora and Spotify as references). Let’s assume that can happen and they have they opportunity to continue to work in one region or the other.

The EU has recently enacted end-to-end Net Neutrality as the law of the land. So, Netflix traffic cannot be slowed down because of the volume. It cannot be slowed down because it is Netflix traffic, all traffic if it needs to be groomed happens at the same time (likely random or everything gets slowed down). Netflix cannot be charged by the ISP to ensure specific speed to guarantee quality of product, if Netflix wants to control this, it’s up to them (they could manage this through increased buffering before the video starts, for example). The average internet speed is significantly higher than in the US, so the quality will be higher and the need for buffering lower, because the speed can account for dropped packets much more effectively. This means if they charge 8 Euros a month, they are able to keep more of that.These conditions would also apply in Argentina.

In the US, Netflix traffic is now subject to the whims of the ISP. the ISP can slow down traffic based on the time of the day, based on the source of the traffic (using deep packet inspection). They can and have charged Netflix for equal access as, for example, Comcast Xfinity’s streaming service. The US has some of the lowest average internet speeds in the industrialized world. Netflix charges $8/month they have to pay Comcast to ensure that their service meets their end users requirements.

As a company that makes money based on the fact that they are able to deliver high quality content (where the price of said content is continually rising), I would prefer to operate in the EU rather than the US. I will have significantly less issues with the ISPs because they can’t discriminate my traffic and I won’t have to pay to make sure that they do not discriminate my traffic. This means that my quality will increase and my cost per user will not increase as it will in the US. I would begin focusing on providing local language content as well as the best content I can provide from the highest quality sources in the world.

As we start moving towards higher speed requirements in our applications, this will become a larger problem. I know of people online that have issue streaming up to Twitch and Mixify as well as streaming the content to their computer. This is a problem now. We will be moving into significantly higher quality video and games (PS4 streaming a game to your console, that will require a lot of bandwidth and low latency $$$$$). Furthermore, if we start having more tele-medicine we’ll need higher quality video feeds to ensure best results.

These are all examples of applications we know of that will suffer from a lack of net neutrality. As we get people that develop applications for gigabit connections, we’ll start to see net neutrality as paramount. These companies will not be able to afford the required costs for the internet speeds required for effective applications.

This means that the EU and other net neutral countries may become the source of innovation for these applications or companies that create them in the US will need to move to markets like the EU for a user base that can fully exploit their application.

We’ll effectively be playing on an Xbox 360, when high quality PCs are out there. We’ll be at a serious disadvantage.