Headline Highlights -- Media and Telecom Policy Developments August 2008
Ah, August. Time to relax, to vacation. Washington shuts down and heads to the beach. Presidents go to ranches. Nothing important happens in August. But not this year. With the only major test of the digital television transition waiting in the wings, the Federal Communications Commission did not take the month off and issued what may be the most important regulatory decision ever concerning the Internet. And there's no way to forget that this is an election year including telecom policy positions from Republicans and Democrats.
I. "A Major Milestone in the Fight for Internet Rights"
On August 1, 2008, the Federal Communications Commission ruled that Comcast's management of its broadband Internet networks contravenes federal policies that protect the vibrant and open nature of the Internet. Specifically, the FCC found that Comcast:
- had deployed equipment throughout its network to monitor the content of its customers' Internet connections and selectively block specific types of connections known as peer-to-peer connection;
- network management practices discriminate among applications rather than treating all equally and are inconsistent with the concept of an open and accessible Internet;
- practices are not minimally intrusive, as the company claims, but rather are invasive and have significant effects;
- monitors its customers' connections using deep packet inspection and then determines how it will route some connections based not on their destinations but on their contents;
- conduct affected Internet users on a widespread basis -- Comcast may have interfered with up to three-quarters of all peer-to-peer connections in certain communities.
The FCC concluded that the end result of Comcast's conduct was the blocking of Internet traffic, which had the effect of substantially impeding consumers' ability to access the content and to use the applications of their choice. The FCC noted that the record contained substantial evidence that customers, among other things, were unable to share music, watch video, or download software due to Comcast's misconduct. The FCC also concluded that the anticompetitive harms caused by Comcast's conduct have been compounded by the company's unacceptable failure to disclose its practices to consumers.
The FCC did not fine Comcast, but, said that, within 30 days, the company must:
1) Disclose the details of its discriminatory network management practices to the Commission;
2) Submit a compliance plan describing how it intends to stop these discriminatory management practices by the end of the year; and
3) Disclose to customers and the Commission the network management practices that will replace current practices.
Ruling on a complaint by Free Press and Public Knowledge as well as a petition for declaratory ruling, the FCC concluded that Comcast has unduly interfered with Internet users' right to access the lawful Internet content and to use the applications of their choice.
Ben Scott, policy director of Free Press, said, "This order marks a major milestone in Internet policy. For years, the FCC declared that it would take action against any Internet service provider caught violating the online rights guaranteed by the agency. Today, the commission has delivered on that promise."
Gigi B. Sohn, president and co-founder of Public Knowledge, said, "With today's Order, the FCC acted to protect the rights of Internet users and set the precedent that unreasonable, discriminatory behavior like Comcast's will not be tolerated. It agreed with public interest advocates and technical experts that Comcast's conduct violated FCC principles and was not reasonable network management."
Google's Vint Cerf, one of the people credited with creating the Internet, said the matter raised the question: what is a reasonable approach for broadband networks to manage their Internet traffic? In Cerf's view, Internet traffic should be managed with an eye towards applications and protocols. For example, a broadband provider should be able to prioritize packets that call for low latency (the period of time it takes for a packet to travel from Point A to Point B), but such prioritization should be applied across the board to all low latency traffic, not just particular application providers. Broadband carriers should not be in the business of picking winners and losers in the market under the rubric of network management. Network management also should be narrowly tailored, with bandwidth constraints aimed essentially at times of actual congestion.
There was immediate speculation about network management models (here, here, here, and here). By month's end, Comcast amended the terms of its "acceptable use policy," capping Internet usage of its broadband subscribers at 250 Gigabytes per month -- the equivalent of 62,500 digital songs -- starting Oct 1.
II. The State of US Broadband
The Comcast decision was not the only news related to the US broadband market in August. Blair Levin, an analyst with Stifel Nicolaus, said that competition in the broadband space is currently about as good as it's going to get for the foreseeable future, and could even backslide. "Prospects for the long-heralded 'third pipe' appear dim and dimming," Levin said, referring to the notion of a hypothetical major competitor to both telephone and cable companies. "In terms of wireless and broadband buildouts, there's unlikely to be another new national buildout, other than Clearwire, in the foreseeable future," Levin said. "There's not that much left to be disruptive," he continued. "White spaces could be in rural areas, and a little bit in broadband, but I don't think so. Other things that people are looking to be disruptive I don't think will happen."
Levin analysis came on the heels of reports that the number of new broadband Internet subscribers in the United States fell in the second quarter to the lowest level in at least seven years. The 20 largest cable and telephone companies added a net 887,000 high-speed Internet subscribers in the three months ending June 30. The number of new customers is half that of the second quarter of 2007. Saturation of the marketplace, along with the slowing economy, are likely reasons for the slowdown. Leichtman Research believes the decline in new customers was likely exacerbated by decisions at the two largest phone companies, AT&T and Verizon, to emphasize faster, more expensive services over entry-level DSL. Additionally, the Communications Workers of America released a study showing the average download and upload speeds for broadband services across the U.S. have remained relatively unchanged over the past year as the U.S. continues to lag behind other countries in terms of broadband speeds. Forrester Research concluded that telephone, cable and other Internet service providers have not focused on the needs of a growing swath of the population that -- driven by economic changes like the rising cost of gas, social trends like work-life balance, and the proliferation of collaboration technologies -- are looking to work from home instead of commuting to a central office.
III. Competing Telecom Policies
Sen John McCain continued to take heat as August opened about his lack of familiarity with the Internet and other information and communications technologies. Art Brodsky published commentary on McCain's record on telecom policy and found it to be "a history of siding largely with the big telephone and cable companies, of opposing an Open Internet."
People familiar with the McCain camp acknowledge that the campaign hasn't put enough focus on technology issues, providing an opening to critics. McCain's defenders insist the senator has depth on these matters, and they point to his long track record in the Senate addressing specific telecommunications rules. Douglas Holtz-Eakin became the frontman for policies (see here and here) crafted by former FCC Chairman Michael Powell. As President, John McCain promises to:
- Encourage investment in innovation,
- Develop a skilled work force,
- Champion open and fair trade,
- Reform intellectual property protection,
- Keep the Internet and entrepreneurs free of unnecessary regulation, and
- Ensure a fully connected citizenry.
The campaign also released a four-part value statement on making people more confident in the safety, security and privacy protections on the Internet.
Missing from Sen John McCain's technology plan are two McCain pro-Internet initiatives -- the McCain Lautenberg Community Broadband Act and Spectrum Re-regulation. The McCain plan is also critical of Network Neutrality. Echoing positions taken by major telephone companies, McCain promised to "focus on policies that leave consumers free to access the content they choose; free to use the applications and services they choose; free to attach devices they choose, if they do not harm the network; and free to chose among broadband service providers." But also stated he "does not believe in prescriptive regulation like 'net-neutrality,' but rather he believes that an open marketplace with a variety of consumer choices is the best deterrent against unfair practices." Some people wondered what role, if any, McCain advisor and former eBay CEO Meg Whitman played in his Network Neutrality policy formation. She has a history of supporting Network Neutrality.
The Democratic Party also drafted and adopted its platform in August. The Dems say they will "implement a national broadband strategy, especially in rural areas, that enables every American household, school library and hospital to connect to a world-class communications infrastructure" ensuring that "all Americans have access to broadband and the skills to use it effectively." If you've followed this year's campaign closely, you'll notice some proposals put forth by Sen Barack Obama: to appoint a Chief Technology Officer and harness the power of technology to hold government and business accountable.
The two releases generated comparisons and a great deal of commentary on McCain's new policy statements: here, here and here.
IV. A Major Test -- and Push -- for Digital Television
On September 8 (weather permitting), the Wilmington (NC) television market will be the first in the nation to convert to digital-only television broadcasting. For weeks, the FCC has paid special attention to the community, working will local commercial broadcasters in a push to make local residents aware of the transition and to get them to purchase and install the technology they will need to receive local TV signals after 12 noon that day. The National Association of Broadcasters said that, according to an August poll, 77% of the viewers in Wilmington could identify Sept. 8 as the date when the plug would be pulled on analog signals there. NAB characterized that as "near-universal" awareness of the switch.
Overall, the FCC said 97% of the nation's full-power TV stations are either on the air with their digital signal at full power or will be by February 17, 2009. Of those, 1,002 stations, or 56%, have fully constructed facilities ready for the transition, with the only remaining step to pull the plug on analog. That still leaves 41% of the stations (716) who said they are not done with construction, though all those said they expected to be ready at full power on Feb 17. Of those 716 stations not yet broadcasting DTV in full power to their full coverage area, 502 stations said they had no special circumstances impeding that full build-out, but were making "appropriate" progress. The other 234 cited special circumstances, including 92 stations needing to coordinate with other stations, and 60 stations that were seeking a different post-transition digital channel. 35 stations claimed financial hardship.
The FCC also announced a nationwide initiative to increase awareness about the upcoming transition to digital television. The FCC identified target television markets for specific DTV outreach, including all those markets in which more than 100,000 households or at least 15% of the households rely solely on over-the-air signals for television. Chairman Martin announced that the five FCC Commissioners and other Commission staff will fan out to these and other markets to raise awareness and educate consumers in the days leading up to the digital television transition. At each stop, there will be a public event, such as a town hall meeting, workshop, or roundtable with an FCC Commissioner to highlight the digital transition, and be available to local press. In coordination with these visits, the FCC will work with local broadcasters and radio stations to increase the broadcasts of radio and TV DTV public service announcements.
August's Most-Read Stories
FCC's Martin wants broadband across USA
http://benton.org/node/16263
NBC Blows Olympics Coverage
http://benton.org/node/15879
Don't wait to buy TV signal converter box
http://benton.org/node/15709
21 Years Ago Today
http://benton.org/node/15792
FCC Orders Comcast to End Discriminatory Network Management Practices
http://benton.org/node/15785
Networks Go After Red Lion, Pacifica
http://benton.org/node/15777
McCain's Tech Policy Would Be Like His Computer Skills -- Yikes!
http://benton.org/node/15964
Obama and McCain on Technology and Government: Where They Stand
http://benton.org/node/15918
FCC's Comcast Ruling Opens a Can of Worms
http://benton.org/node/15798
Broadband growth plummets in 2Q, cable stronger
http://benton.org/node/16029
McCain Adviser/Former eBay CEO Meg Whitman Silent On Campaign's Opposition To Net Neutrality
http://benton.org/node/16218