January 2011

[Commentary] Sifting through fact and fiction in the battle over network neutrality. Let’s start with a few of the supposed facts.

The pro-regulation forces justify their position with a long history of wrongful content discrimination by Internet service providers. First was the time back in 2007 when Comcast impeded BitTorrent content. That’s one. Then, a small phone company ISP may have blocked VoIP. We know it wrote the FCC a check to settle the claim, so let’s call that two. Third . . . well, the fact is, there is no third. The FCC mined reams of public comments to find a small handful of accusations, but no more smoking guns. Can this scant history justify a major and controversial regulatory effort? But the small number of past abuses doesn't matter! says the FCC. The broadband ISPs have both means and motive to discriminate! It’s just a matter of time! Again, though, the facts get in the way. The broadband ISPs have had the same means and motive for the past five years. If they were as unscrupulous as the FCC seems to think, by now we should be awash in wrongdoing. But that is not happening. Maybe the FCC is right, and content discrimination is inevitable. Even so, we could wait a year or two, and see whether an actual problem arises, before setting out to solve it.

The anti-regulation folks are equally free with the facts. We don't mean the Rush Limbaugh nonsense about net neutrality being an Obama plot to censor the Internet. We'll take instead an often-heard assertion both sides seem to accept: the Internet has not been regulated until now, a state of affairs which fostered its explosive growth over the last twenty years. Sorry, but that’s just wrong. While the Internet was developing from a tiny, hard-to-use network of nerds into the vast facility we know today, it was mostly under the thumb of the FCC. Otherwise, it might not have happened at all.

Once upon a time, in the dark days before Facebook and YouTube, there was no broadband. People accessed the Internet over a “modem” gizmo on the same phone lines they used to make voice calls. (Old-timers hearken back to the mating call of a modem seeking another of its kind.) Voice lines were (still are) subject to FCC regulation. Under a set of rules called Computer III, a large phone company that offered its own ISP service—all of them did—had to open its network to competing ISPs, giving the competition access to the same internal technical facilities that the phone company ISP used. The result was a breathtaking number of competing ISPs. Computer III was essential to this thriving marketplace. Without it, no other ISP could have matched the phone companies’ quality and cost, so the early Internet would have become the exclusive province of the Bells. The Internet might never have flourished as it did. This bit of history overturns the canard that Internet regulation is a new idea. True, Computer III did not impose content neutrality in so many words, but it had the same effect. A customer unhappy with an ISP’s content offerings could quickly switch to a new ISP, at no added cost. Eager to keep the customers happy, ISPs left the content alone. That was then. In 2002, the FCC declined to apply Computer III principles to cable modem broadband service, and in 2005, it withdrew Computer III from phone-company DSL broadband. Today Computer III applies only to dial-up. But few people use dial-up any more. Most Internet users subscribe to broadband. Without Computer III, this means signing up for the ISP run by the phone or cable company. That leaves most broadband users with one possible ISP, or two at most, possibly with long-term contracts and early termination fees. Changing ISPs is no longer the ready option is once was. This is a big problem for the argument that markets are an effective control on ISP behavior. Markets work only where they exist.

But wait, say the anti-regulation people. New competition is coming! Maybe; but having our hopes repeatedly dashed over the years has made us skeptical.

The world has woken up to the potential of over-the-top TV. To which TiVo’s CEO Tom Rogers might say, what took everyone so long?

While best known for its breakthrough as a recording device, TiVo’s was bringing broadband feeds to the TV set years before it became fashionable. TiVo’s was going over the top before over the top was cool. But being ahead of the curve hasn't helped the company much considering it’s coming off multiple years of revenue and subscriber losses, a trend Roger is hopeful TiVo’s will reverse in 2011 on the strength of both retail sales, which he said ticked up over the holiday season, and distribution deals with cable operators worldwide. But forgive Rogers if he’s a little frustrated with the operators, who he recalled turned a deaf ear to his warnings that they figure out a way to package video from both their cable and broadband pipes. It took some more prominent competitors to get the operators to notice their new competitive threat. “We've found that the entry into this space by Google and Apple has certainly lit a fire under the operator community, which was kind of taking its time as to how this would all come about and affect their business,” he said. Nevertheless, he still believes cable can hold its ground. But he sees TiVo’s providing them the very thing the cable industry has long lacked: a compelling user interface that seamlessly intermingles broadcast, cable, DVR and broadband programming. “You can't have an interface that looks like 1987 when consumers have tablets from 2010,” he said.

The ability to rip CDs helped transform music consumption (and, some would argue, hasten the demise of CD sales) by making songs more portable and accessible. That revolution hasn't come to DVDs -- it takes more technical savvy to convert a movie disc into an easily playable file, and it's illegal in the U.S. to make software or devices to help people do that. Every year at the Consumer Electronics Show, at least one device maker demonstrates a new way to get around that hurdle (this year's entry: Moovida), but stiff opposition from the studios (and their lawyers) has stopped most of those products from reaching the masses. At this year's show, though, studio executives opened the door to retailers converting their customers' DVD collections into movie files stored online. Such conversion services are a likely part of Ultraviolet, the online video distribution initiative by a consortium of studios, tech companies, retailers and service providers. The first UV products and services are expected to hit the market later this year. The catch is that the files stored online would be confined to Ultraviolet's walled garden, playable only on devices compatible with UV's standards. So it's not clear at this point what compatibility problems might emerge.

Ellen Weiss called her decision to step down as the top news executive at National Public Radio "extremely hard" but declined to criticize NPR or back away from her decision to fire Juan Williams, the action that led to her downfall. Weiss would have hit her 29th anniversary at NPR next month, but she agreed to leave her post under pressure after an internal investigation found that Williams' firing had been hasty and not well executed. Weiss stressed that she did not make the decision to fire Williams alone. She acted after the commentator went on Fox News' "The O'Reilly Factor" and described his occasional discomfort flying with people in "Muslim garb." NPR Chief Executive Vivian Schiller, who remains in her job, approved the firing.