THE CABLE PIPELINE

Through continued research of the Net Neutrality debate, distinct realizations come to mind for Regulators’, Consumers, and Network Providers alike in pondering the heated discussions around whether either regulation, or a (hands-off) approach, are sufficient to allow unfettered and equal access, including clear competition, and that all are present on the Broadband pipelines. 

First there has continued to be somewhat of a hysteria and possibly pre-ordained fear, albeit without serious incidents of record, that network providers both have and will continue to throttle speeds and limit access of their customers to the copious amounts of content becoming available through the Internet. Perhaps the hysteria has unfolded as a result of one BitTorrent case, or associated with a fear of other industry debacles as seen with banks, Insurance companies, Investor Management companies, and Wall Street, driving the public to government as their interventionist in reigning in these industries; but how realistic are these fears based on the current Internet model?

Regulation can hamper Broadband Access and Adoption

Increased regulation of a burgeoning Internet on the verge of offering just the recipe the FCC is mandating could backfire in helping startup companies materialize and grow while slowing the proliferation of increased infrastructure, and network upgrades. Without the freedom to invest and seek sufficient ROI’s network providers will cut costs rather than invest for the future. This could stunt job creation, a by-product of innovation and free-flowing investment, in an industry with a broad potential to produce applications and services for the Internet.

Network Management Polices will continue to improve and evolve to handle varying Traffic Needs

It is in the best interest of private network providers to provide the best network management policies for all users in continuing to build their consumer and business base. This correlates to (Business Management – Best Practices-101). If a company cannot offer the best experience for its customers all businesses, whether an Internet Provider or a Wal-Mart, cannot survive the long term.

Use of Anti-Trust Statutes to curtail (Bad-Actors)

Absent a serious history of abuses within the Internet pipelines the FCC should concentrate on harnessing (bad-Actors) with Anti-Competitive Statues, not regulation, allowing that these companies will receive stiff penalties, and will certainly be brought to the forefront via customers and competitors having been abused, disenfranchised, and denied access to fair treatment.

Incentives rather than Regulation

Broadband Stimulus Plan funds should be used to incent companies to build new infrastructure and upgrade their networks to realize an adoption and access vision which the FCC has been mandated to accomplish.  First, detailed maps must be created to determined where the infrastructure is located, and where it is not. Then current providers of Telephone, Cable, or Wireless are incented to build and upgrade their networks in rural areas to provide needed Internet services. Monies will be better spent with incentives associated to quantifiable results rather than regulation and mandates of an existing industry.

The Cable Pipeline has written about both sides of the Net Neutrality issue. It is without question a passionate and personal debate with results having far reaching implications in the lives of individuals, businesses, and public sectors alike. The FCC has been prudent in seeking comment from all stakeholders which will hopefully produce the right results for all concerned. When the dust settles, my preference would lean more toward less regulation and more incentives therefore spurring economic growth and job creation. 

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Comcast is appealing a ruling before a three-judge appeals court panel concerning the FCC’s sanctions in 2008 of the operator, and whether it has jurisdiction under current Net Neutrality rules to do so, for what has become known throughout the media as past throttling of BitTorrent. (See FCC formally rules Comcast’s throttling of BitTorrent was illegal). This could be an important decision for ISP industry operators, who have many (irons-in-the-fire) when it comes to a business model that depends on both residential Internet and business customers, in helping it pay for a broadband pipeline created with private investment.

It also has implications for consumers who are increasingly using more file sharing applications to watch video content from their Internet Service Provider connections, and Internet giants like Google (Nasdaq: GOOG)who depend on free access to its information sharing business model. While Comcast (Nasdaq: CMCSA,CMCSK) has indicated their Internet management practices have since been changed, as a result of the issue, and it no longer throttles customers, what remains is a court challenge this past week in which the court grilled the FCC on its authority to regulate ISP’s under current Net Neutrality rules without a legislative mandate. (See Comcast Scores Against FCC in Court Battle over Net Neutrality).

The wider ramifications is whether the ruling will apply to business applications, which require special and unique service agreements for much larger file sharing and speeds in offering these programs. In essence, ISP’s need the flexibility to charge differing rates depending on the requirements of certain applications, which in-turn allow for infrastructure investments to accommodate these needs. This is their (Bread and Butter) of profitability.

On the one hand the FCC is under a mandate by the current administration to have a free flowing Internet with consumers and file sharing applications having unfettered access, and on the other, private investors which have created the pipeline are mandated by economics to make a profit depending on differing needs, from both consumer and business. If the FCC loses this current battle in court, then future challenges will likely occur concerning any new Net Neutrality rules that are adopted.

It seems from opening arguments before the courts that the FCC may have overstepped its boundaries in taking Comcast to task over BitTorrent, and may have to back up and ask Congress for a legislative mandate in regulating broadband as an information service.

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There are two compelling sides to the Net Neutrality issue before the Federal Communications Commission that can be solved by cutting through the rhetoric and making a few common sense and objective decisions about what is at the crux of the problem.

First, Internet Service Providers are at the center of the debate, and rightfully so, since without the ISP’s providing the gateway for Internet usage, there is no issue. The power of discrimination lays solely in the hands of the Comcast’s, AT&T’s, Time Warner Cable’s, Verizon’s, and other providers of the ISP pipelines.

This is a huge social responsibility for private sector companies, who do not necessarily compete with each other in every market, in controlling the complexities of sharing access to all who ask. The Internet has evolved into more than just picking which provider will allow individuals or companies to link through to others; it has evolved into a massive highway of commerce and social connection. And this is where the problem with competing interests and two sides of the coin begins to emerge.

To solve the issue the FCC can take either of two paths in ensuring openness and fairness to all concerned, with both large and small stakes, in both getting where they need to go and receiving what needs to receive, via broadband. One path is to let the market sort itself out; in that encouraging competition within the marketplace between ISP providers will create less of a reason for providers to favor one entity over another or risk losing customers to the competition.

This would work well if it was easy and inexpensive to get into the ISP business while building an infrastructure to support a broadband pipe sufficient enough handle the range of users, content, and applications needed to ensure true competition. Only Verizon, to my knowledge, is able say that it welcomes all comers with its FTTH-FIOS infrastructure and with bandwidth to spare.

An alternative path would be to mandate all ISP providers open their networks to competitors and set standards for download and upload speeds, thereby ensuring everyone is treated equal. And yes, creating tiers of service for unusual traffic needs. While this could be considered a heavy-handed approach, it does take somewhat of a burden off the private sector in choosing whether to upgrade their networks for increased bandwidth, or which entity it will prefer when having to choose between conflicts of interest, protection polices, or Wall Street demands.

But a common sense approach is fraught with political mine fields. Lobbying is alive and well on Capitol Hill and the larger companies have the lawyers, insiders, and money to back up those efforts. However, in my opinion, there needs to be a compromise between public and private sectors that are willing to support an (Internet Super-Highway) which fosters innovation, competition, new businesses, and robust commerce that spreads success to all corners of our country. It is only common sense!

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It goes without saying that the FCC has a daunting task of rule making when it comes to filling the needs of Broadband Access for Americans in 2010. Therefore it comes to mind, when the Federal Agency is through taking comments on Net Neutrality, The Universal Service Fund, Broadband Adoption, Broadband Access, and Spectrum Allocation, commissioners should consider a mere simplistic and underlying fact of the success of our economy in the past, in best serving its current purpose.

Robust competition, as stated by both Commissioners Mignon Clyburn (Democrat) and Meredith Attwell Baker (Republican) back in July 2009, within the marketplace has served the U.S. well to eliminate most of the ills associated with economic affordability, adoption, and therefore access to the masses of both innovative, and quality products and services Americans enjoy today, and the Internet should be not any different. However, dubbing one-self a (broadband opinion-ator) can be risky, and suggestions to the complex issues facing the current broadband marketplace woes could be deemed as too simple, but here they lie:

Create and incent a competitive broadband environment to reach all markets, large and small.

Incent companies to build and upgrade infrastructure and content thereby creating new jobs.

Use the Universal Service Fund to incent broadband providers in rural and non-competitive markets.

Incent companies to partner with government to educate the public on Broadband Adoption.

For instance, the current Universal Service Fund, mentioned by FCC Chairman Genachowski in an interview with C-SPAN, was created to incent Telco’s to build out infrastructure which has helped with the adoption and access to telephone service. Now, this model is woefully outdated and should be redirected to Broadband Access in creating the necessary incentives for companies to move faster in upgrading and building new networks in all communities, not just highly populated metro centers. The FCC must know that while some larger markets have enjoyed competition in broadband networks, most communities do not have such competitiveness, thereby severely limiting their options.

Companies are not going to heavily invest in markets where the status quo or lack of serious competition exists, and there is no justification for ROI. Their monies are going to be concentrated in markets where competition does exist, or risk losing market share, and these markets are primarily in more affluent and high population centers. They will innovate and add new services in these markets, and related consumers will benefit from again, robust competition. So, the mantra of the FCC should be Robust Competition, and its tools of the trade should be the creation of a business environment to propagate that mantra in all markets.

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The Federal Communications Commission recently led discussions on proposed Net Neutrality Rules including, broadband speeds to be adopted for those companies using federal dollars to upgrade their networks. This comes at the same time the FCC is proposing to provide the underpinnings of a governmental mandate to; serve the underserved.

 This is yet another dangerous road the FCC is attempting to navigate from a top-down regulatory standpoint, and could simply derail the original efforts to have success in the broadband investment philosophy it generated.

 Here are the perilous implications:

• Mandating ISP speeds on the front end of legislation could impede private investment from taking on the challenges of serving sparsely populated or lower demographic areas

• Creating an open and share all approach for content access will again scare off potential investors who will be suspect of  reaching respectable returns on their money

• The burgeoning internet advertising market will be hampered, or even stopped, from   investing in the very sector the FCC is attempting to help grow and prosper

 These are the important issues related to recent discussions on Net Neutrality to be addressed, but need to be considered while proposing to regulate an industry on the verge of creating just the applications and services that consumers want with internet connections.  My message to the FCC is; do not blow the very opportunity to let private investment create the infrastructure, content and applications which you have incented them to accomplish, by over regulating those companies into inaction.

 It continues to be evident that the best incentive would be to take a hands-off approach to regulation while providing the capital incentive for the networks to build out their infrastructures. What scares Wall Street more than anything is the prospect of heavy regulation that will stifle investment opportunities. This has a negative effect on company stocks, shareholders, and the willingness of private investment to flourish, and in essence, get the job done.

 The FCC should be promoting a healthy investment and competition environment rather than a heavy-handed regulatory approach for the future of Internet access. This would create the (win-win) situation the government agency is looking for, whether it realizes the implications, or not.

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