Research Notes

The press claims that the American telecom regulator FCC killed the free Internet. Is it true?

Many of the stories you read about net neutrality and internet regulation originate from the media in the USA and then are copy-pasted into Google Translate to make a story in a local language. Many journalists consider this “reporting” and don’t both to read the underlying source documents or understand the situation in the USA.

These articles cultivate myths, one of which is that removing rules imposed two years ago by the Obama Federal Communications Commission (FCC) will kill either the Internet, hurt consumers, or put the internet at the mercy of some telco “gatekeeper.” These journalists forget that the Internet was free and open before the Obama era rules were imposed in 2015, and it is free and open today under new rules. Indeed, all of the major internet companies we know today began before 2015 when the Obama-era rules were imposed. Moreover, both the FCC and the Federal Trade Commission (FTC) will police and deter abuse if it arises.

Strand Consult engages with many of these journalists to highlight their mistakes. In rare cases, they update their stories with corrections.  Mostly they ignore people who call attention to their bias. A key problem is that these journalists think internet policy begins and ends with net neutrality, so they cover very little of what actually goes on at the FCC.

In fact, the American telecom regulator FCC had 78 items on the agenda the first year of its new Chairman Ajit Pai which covered 28 different policy issues. Eighty percent of the votes were bi-partisan, meaning approved by both Republicans and Democrats. Under the former chairman Tom Wheeler, less than 50 percent were.  But the American tech/telecom media today covers essentially 3-4 issues, which makes up just a small part of the FCC’s actual work.

Many of the myths presented in the articles are supported by a number of professional “grassroots” advocates fighting for mega billionaire foundations (Ford and Soros’ Open Society) and big internet companies such as Google, Facebook, Amazon, and Netflix, and their trade associations.  The various policies they advocate under the mantle of “free and open” is all about them getting access to other people’s property without having to pay for it. It’s a total scam on consumers to make they them foot the bill so that companies with market caps greater than the GDP of most countries don’t have to pay for all the traffic they send on the internet.

This newsletter will explain in plain language what actually happened in the United States and will kill some of the myths stuffed down the throats of readers, including this myth that operators will start charging consumers to pay to access their favorite website.

Strand Consult is a firm which has published much on the topic of internet policy. We have many PhDs on our team, one who earned a PhD at Center for Communication, Media, and Information Technologies at Aalborg University by studying the different regulatory tools used for network neutrality in 53 countries around the world and their impact to innovation ecosystems. Our team members have also trained telecom regulators in these topics and testified about their impacts.

Myth vs. Fact on net neutrality

Myth: There are no rules to protect the internet.
Fact: The new order increases the transparency requirements from 2015. Remember that those requirements were used to bring a $100 million fine against AT&T mobility in 2015.

Myth: There is no protection or oversight of the Internet today in the USA.
Fact: From 2015-2017, there was only 1 cop to protect consumers, the FCC.  As a result of the new rules, there are 4: the FCC, the FTC, the DOJ, and 50 state Attorneys General.

Myth: We should applaud US states are making their own net neutrality rules.
Fact: States with Democratic party strongholds are attempting to create their own local net neutrality rules. However these local rules violate the US Communications Act and the US Constitution. These efforts are illegal, but are conducted as symbolic politics. Net neutrality is fundraising tool for Democrats. They send out a lot of flyers saying “Save the Internet” and people send donations. But states can’t enforce such rules according to American law.

Myth: The new FCC rules will make “fast lanes” and “slow lanes” on the Internet.
Fact: Internet speeds have been increasing for everyone and Americans today enjoy more content per capita than any nation on earth. If there was some systematic blocking or throttling as advocates purport, we would see it in the data. The facts point to the opposite: investment and innovation flourish under limited regulation, and consumers get more value all the time. Since 1996, speeds have increased 3000 fold and prices have fallen per unit by more than 90 percent. The fact is that 95% of the Internet traffic today is already delivered on fast-moving freeways called Content Deliver Networks (CDN), which have never been part of network neutrality regulation. With the new rules start-up businesses have more flexibility when they challenge the giants Google, Amazon, Apple, and Netflix. The ability to buy quality of service was made illegal by the FCC. This is precisely what entrants need to challenge established players. Fortunately, the new rules allow this, provided proper disclosure.

In practice, the United States is merely returning the framework which governed the Internet from 1996-2015, during which time the internet was a great success. The Federal Trade Commission, the top for consumer protection is will police the Internet again, once the order is printed in the Federal Register.  If applied to the EU, it would mean that the authorities at the Director General for Competition would be in charge. If you have any doubts, ask Google and Apple what they think of the EU’s chief of competition Margrethe Vestager.

What the new rules in reality do: Increase transparency and enforcement

The new FCC rules can be divided into two areas, increased transparency for consumers and increased enforcement against companies that abuse their market position. Comparing the rules adopted in 2015, transparency requirements are stricter today. Following the new rules, ISPs have to disclose their way of doing things to consumers, businesses and FCC. This includes network management practices, capacity and commercial terms for broadband services.

Transparency is the basis for an open and free internet, and transparency is the heart of EU rules that were also adopted in 2015. The EU rules are based on the foundation for network neutrality regulation that has existed in Denmark, Norway and Sweden for a long time. In fact, the transparency rules that were in Sweden before 2015 were more restrictive than those the EU adopted in 2015, which prompted the Swedish telecom regulator to say that EU rules were a step back for Swedish consumers.

The new rules restore the right place of competition law in a robust competitive ecosystem, increase legal certainty, and ensure that the authorities can intervene quickly and efficiently. From 2015-2017, the American telecom regulator FCC had a monopoly on policing a complex, vibrant sector of the economy. Now that work will once again be shared by the FTC which brings more than a century of expertise of consumer protection and antitrust to ensure Internet Freedom. The agencies released a memo on how they will work together. In addition, the FTC can get the support of the Department of Justice and the State Attorneys General for its work.

It is not only the FCC enforcing transparency rules, the three other agencies have broad powers to enforce consumer protection and to counteract unfair, deceptive, and anticompetitive behavior. Upon review, consumer had less transparency and enforcement under the 2015 rules than they do today. One other problem of the 2015 rules was that it removed the online privacy protections offered by the FTC, leaving consumers vulnerable. The Obama FCC attempted to make new rules, which were ultimately rejected by Congress.  In the meantime, operators have upheld the FTC rules. Fortunately, the FTC rules are back in place.

The only way to create a free internet is through the will of the people in legislation

In any case, more than 50 countries with net neutrality rules have made them through their Parliaments and the will of the people. There is nothing to stop the Americans from doing this. Indeed a bill emerged from the Congress just 5 days after the FCC’s recent vote. Net neutrality supporters who want to enshrine rules have never had a better opportunity to do so.

The rules made by the United States in 2015 were adopted by the 5 polically appointed Commissioners. That is why in 2017 5 commissioners could make new rules. Unless Congress clarifies the FCC’s authority, the commission will continue to make new rules each time a new party comes into power.

Historically internet wasnot fragmented in the United States. Like many countries, the US had a stable internet policy. In the US has had a long tradition of consensus policy in the telecommunications sector with a market-driven, technology-neutral approach to the Internet. This policy was cemented in 1996 by President Bill Clinton and Congress when they made a law declaring that the Internet should be “free and unfettered from Federal and state regulation”.

What journalists miss is that that Congress never gave the FCC the authority to regulate the Internet. As such, the FCC cannot make network neutrality rules unless the congress authorizes it.

Journalists also fail to mention the 7 petitions at the US Supreme Court against the FCC about their 2015 rules. One of the cases is filed by a civil rights group pointing out that the internet is 1/6 of the US economy and is therefore of such crucial importance for the economy that it requires Congressional clarification in order to regulate. Congress would not leave it to the FCC to decide whether or not it wanted to regulate such a vital part of the economy.

Sensational headlines create clicks and sell newspapers. Unfortunately, it does not give readers a true picture of what is happening in the US on network neutrality. Media are compensated for each click, not for writing accurate stories.  The fact is that the FCC’s new rules reinforce transparency and legal certainty, not the opposite. The reality is that for those who want to have a long-term network neutrality law, the situation has never been better.

What is the greatest threat to a free and open internet?

It is not telecommunications company that builds and operates networks that are a threat to the Internet. Instead it is governments that want increased power and control for surveillance. Net neutrality is the perfect cover for governments to look like they’re being benevolent while they increase their proximity to users. A review of complaints about blocking and limiting Internet traffic around the world shows that it is governments censoring the internet, not operators. Indeed operators have strong financial incentives to maximize the number of customers and content content providers on their networks.  In Denmark, many politicians support legislation that monitors citizens in violation of the European Court of Justice judgment of December 2016. People should be concerned about any government agency claiming they need more power, particularly under the guise of keeping the Internet open and free.

When European Union authorities declare that the EU’s network neutrality rules do not pose a threat to investment and innovation, they are wrong. There is a gap of €150 billion in investment in the EU today, and things have not gotten better since the imposition of rules in 2015.  The FCC reports that rom 2015-2017 in the US, network investment fell by 5.6 percent (between $3-4 billion) and is associated with a negative impact of about 75,000 well-paying jobs. With the new rules in the US, a number of companies have announced new investments.

Going back to 2009, Denmark, Sweden and Norway had the world’s most successful network neutrality regimes. They were organized under multi-stakeholder models with a voluntary code of conduct. Indeed, Switzerland uses a similar method today.  Indeed, Japan and South Korea also have soft rules. But when it came to making EU-wide rules, the European Parliament and Google-funded lobbyist ignored the track record of success in these countries because they were intent enshrining rules that would cement the market position of Google and give regulators powers that they did not have before.

The net neutrality reality is not what the sensational press claims. Around the world, the telecom industry fights to create transparency and defend their customers from spying governments.

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