Tuesday, December 21, 2010

FCC Posts its Internet Ruling

The FCC posts its Internet Ruling by days end. They begin by stating:

The Internet is a level playing field. Consumers can make their own choices about what applications and services to use and are free to decide what content they want to access, create, or share with others. This openness promotes competition. It also enables a self-reinforcing cycle of investment and innovation in which new uses of the network lead to increased adoption of broadband, which drives investment and improvements in the network itself, which in turn lead to further innovative uses of the network and further investment in content, applications, services, and devices. A core goal of this Order is to foster and accelerate this cycle of investment and innovation.

 In summary here are the rules:

Rule 1: Transparency

A person engaged in the provision of broadband Internet access service shall publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.

Rule 2: No Blocking

A person engaged in the provision of fixed broadband Internet access service, insofar as such person is so engaged, shall not block lawful content, applications, services, or non-harmful devices, subject to reasonable network management.

A person engaged in the provision of mobile broadband Internet access service, insofar as such person is so engaged, shall not block consumers from accessing lawful websites, subject to reasonable network management; nor shall such person block applications that compete with the provider’s voice or video telephony services, subject to reasonable network

Rule 3: No Unreasonable Discrimination

A person engaged in the provision of fixed broadband Internet access service, insofar as such person is so engaged, shall not unreasonably discriminate in transmitting lawful network traffic over a consumer’s broadband Internet access service. Reasonable network management shall not constitute unreasonable discrimination.

This in many ways is what we proposed a few years ago. It is kind of a common carriage without the legal protection. If the three rules are all then it is fine. The real issue is whether the FCC has any legal basis to make these rules. That is where the next round of fun begins. One suspects that the players will contest just to be able to say the FCC does not have the authority.

The concern seems to be that people worry they may be charged more for the use of more bandwidth. Simply that should be a true fact. But examination of the cost equation is worth a look.

First, CATV systems were never designed for broadband data to many users. They were broadcast substitutes, the same stuff to many users. Digitizing them allows for more of the same stuff to many users and the data for Internet was an after thought.

Second, DSL is slow and limited, even if using highly efficient data rates, lots of bps per Hz. Yet it is also limited by distance.

Third, fiber is great and is relatively unlimited to each home. Verizon has a lead but seems to have stalled.

Fourth, as we said a few days ago, video is exploding and I do not mean the downloading stuff. I mean video conferencing of a sophisticated type. So how do we see that going? We anticipate explosive growth, subject to bandwidth availability. That will be the sticky wicket part.

The WSJ states:

Carriers say privately they are concerned that one of the only alternatives left to make a profit off the Internet and pay for network infrastructure is to charge consumers for the amount of data they consume.

That is clearly the only alternative. But the issue is how much. As we noted above CATV will be stuck in a rut. The CATV operators were never really data types, I tried in the early 80s at Warner but with little success.

The rules would allow ... companies to sell faster priority delivery services for extra money.... That means a video streaming company ... could pay a wireless company extra for guaranteed delivery of its YouTube videos to consumers' ...

The question will be who pays for what. There is also the question of what it costs. The main problem as we have stated many times before is the cost of the Tier 1 backbone. For a counter example all one needs look at is Internet 2 and the academic networks. It appears time and time again that no one understands the cost structure here.

But FCC officials said any such priority service would have to be disclosed to regulators... and the rules warn that such "pay for priority" plans.... if used on landline networks, would be "unlikely" to satisfy the FCC's new standards, which could prompt legal challenges.

This seems to open up the Telecommunications Service issue and the re-institution of the FCC setting rates. I doubt that this will ever happen. All one need do is read the classic by Coll called The Deal of the Century about MCI. One sees a truly incompetent FCC being dragged into the 20th century by Bill McGowan and his team. And the FCC then was pretty smart, just look now, and what do we have?