The blogosphere has been buzzing since last night, with all manner of “experts” offering opinions about the dispute between Comcast and Level 3 over their commercial arrangement for the exchange of Internet traffic.  While I am a bit hesitant to add to the ruckus, I think it is important to refute the misguided notion that this business dispute is really a “net neutrality” problem that can and should be solved by federal regulation.

We all have heard the Internet described as a “network of networks” but we generally give little thought to the remarkable logistics involved.  For the Internet to operate, thousands of networks – small and large, wireless and wireline, urban and rural, domestic and global – must establish arrangements to govern how they interconnect and exchange traffic.  While there are different types of providers (backbone, content delivery network (CDN), etc.) and different types of arrangements (settlement-free peering, paid transit) – see this White Paper for a good explanation – the key point is that these myriad of arrangements have developed over time, in the marketplace, without any legislative or regulatory intervention.  That the Internet works at all is amazing; that it works 24/7 to bring consumers content from around the world at lightning speed borders on the miraculous.

The FCC consistently has taken a “hands off” approach to these arrangements. It has not imposed any form of regulation on these arrangements, nor has it intervened in the periodic disputes that occur between backbone providers, like Level 3’s dispute with Cogent in 2005 – in which Level 3 insisted that Cogent pay a fee for transmitting content on Level 3’s network rather than peering on a settlement-free basis. Moreover, while the FCC has been considering net neutrality regulations for some time, it has never suggested that it was considering any change in the regulatory treatment of backbone and CDN providers. (Indeed, even the most fervent net neutrality advocates, like Free Press, have recognized the legitimacy of these commercial arrangements; see note 8 on pg. 17 in these comments).

So is there anything unusual about the dispute between Comcast and Level 3 that should cause the Commission to reassess its hands off approach to these types of arrangements?  No.  While some of the initial commentary, reacting solely to Level 3’s press statement, reflected a knee-jerk reaction that any dispute involving the Internet implicates net neutrality; as the day wore on, cooler heads seem to be prevailing, with most observers, including some net neutrality advocates, recognizing that this was nothing more than one party to a commercial negotiation trying to use the regulatory process to gain negotiating leverage (Also see this article from Multichannel News).

Nor can Level 3 credibly claim to be surprised by Comcast’s approach.  Comcast’s policy on settlement-free peering – including its expectation that any peering partner “maintain a traffic scale between its network and Comcast that enables a general balance of inbound versus outbound traffic” – is posted right on its website. When Level 3 approached Comcast and asked for a significant change in the parties’ physical interconnection arrangement, it should have fully expected that Comcast would seek a corresponding change in the parties’ business arrangement, consistent with the general practice across the industry.

Under the circumstances, Level 3’s plea for government intervention in this commercial negotiation is entirely unwarranted.

Yesterday, the FCC voted 3-2 to approve a Notice of Inquiry to change the legal framework of Internet access by reclassifying it under Title II of the Communications Act.

John Eggerton of Multichannel News and Broadcasting & Cable wrote an overview of the FCC meeting and the  day’s happenings.

We issued a statement from NCTA President & CEO Kyle McSlarrow:

“Over the past decade, broadband deployment in America has been an unparalleled success story. That success has been greatly aided by the farsighted judgment of prior Democratic and Republican Commissions to promote innovation and investment in new networks through the exercise of regulatory restraint. As we revisit this question with the start of today’s inquiry, we see little benefit to changing course and great danger in attempting to shoehorn modern broadband services into a Depression-era regulatory regime without serious collateral effects to investment, employment, and innovation.

“We appreciate that Chairman Genachowski is seeking comment on alternatives to a Title II approach. We also very much appreciate and agree with the Chairman’s statement of support for legislative efforts to provide much needed certainty. We believe that is the right next step, and we can preserve our ability to protect consumers, maintain an open Internet, and encourage continued investment and innovation through carefully targeted legislation.”

Comcast also issued a statement from EVP David Cohen.

Here are just a few stories following the FCC’s vote:

• New round in FCC broadband fight
• FCC Advances Internet Plan Backed by Google, Amazon
• FCC Formally Launches ‘Third Way’ Process, Asks for Comments
• FCC seeks comment on broadband reclassification

The column below appeared today in The USA Today, as an opposing view to a USA Today editorial.

Opposing view on ‘Net neutrality’: Providers back Web freedom

By Kyle McSlarrow

On Tuesday, a federal court struck down a Federal Communications Commission order enforcing a rule that the agency hadn’t ever actually adopted. The court’s decision does not call into question an Internet policy adopted unanimously by the FCC in 2005 — endorsed by all broadband providers — promoting a free and open Internet. Thus, the decision has no effect on the Internet experience that consumers enjoy, and it doesn’t alter the government’s existing authorities to protect consumers or to police anti-competitive conduct.

Today, 65% of American households subscribe to services provided by a number of competing broadband companies to access a growing number of exciting applications that have changed the way we all communicate, conduct business, gather news and information and consume entertainment.

But there are still gaps. Not every community has broadband, and not every household that has access subscribes. Here, too, nothing in this week’s court decision affects our collective ability to implement the vision of a connected nation.

Broadband providers agree that consumers should have the freedom to navigate the Internet and access any legal content or application of their choice. That isn’t at issue. But fears of what broadband providers “could” do have prompted the usual and predictable calls for more — and, in some instances, incredibly far-reaching — government regulation of a marketplace that has been an American success story.

Why? In precisely two instances — and one of them is debatable — out of trillions of transactions over the past decade, has anyone even been able to point to a specific problem. Contrast that with the overwhelming evidence of hundreds of billions of investment to build and expand networks and the incredible array of new applications and sites flourishing because of a bipartisan policy of regulatory restraint.

We fully intend to work with the FCC and other policymakers to preserve the open Internet that is a reality today. But it is a massive overreaction to suggest that we should impose decades-old regulatory regimes designed for the days of Ma Bell and a government-sanctioned monopoly on the Internet.

The United States Court of Appeals for the District of Columbia Circuit today issued its opinion in Comcast v. FCC.  Below is the statement from NCTA President & CEO Kyle McSlarrow on the opinion:

“The Court correctly ruled that a specific order by the previous FCC was wrong.  We cannot state strongly enough that this decision will change nothing about the cable industry’s longstanding commitment to provide consumers the best possible broadband experience.  Nor does the ruling alter the government’s current ability to protect consumers.  We continue to embrace a free and open Internet as the right policy and will continue to work with the Commission and other policymakers and stakeholders to find a sound way of preserving that goal.”

Today, NCTA President & CEO Kyle McSlarrow gave a speech at the Media Institute, the nonprofit research foundation specializing in communications policy issues. Fittingly, since the Institute is very focused on issues of freedom of speech, the address focused on “net neutrality” and the First Amendment. You can read the speech here, but I thought it would be helpful to provide some background information.

There are plenty of freedom-loving Americans who love the Constitution. Some of them even carry around copies of that document. And yet, even among these hardcore fans, there is often a misunderstanding of the First Amendment to the U.S. Constitution.

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

There are many circumstances under which individuals may claim a violation of their First Amendment rights. Someone may lose employment after saying something in the press. A person may not be allowed to appear on a television broadcast. A student might be suspended for something written in the newspaper of a private college. These might be unjust situations, but they are not governed by the First Amendment, which says that the government may not abridge freedom of speech.  What the First Amendment guarantees is that the government doesn’t get to decide who gets to speak and who doesn’t.

In his speech, Kyle McSlarrow says:

…urging the government to impose rules that supposedly promote First Amendment values is too often used to justify regulations that instead threaten First Amendment rights.   By its plain terms and history, the First Amendment is a limitation on government power, not an empowerment of government.  Making these arguments is, ironically, almost proof that First Amendment rights are being implicated.

It’s also important to note that there are many who seem to think that the cable industry is a special case. They argue that cable’s infrastructure was built with government funding and is therefore a public utility and subject to common carrier regulation. All of these assertions are factually incorrect. To quote a previous post:

To be sure, our video services are subject to government regulation – at the federal, state and local levels – but we aren’t like telephone companies (which built their systems with captive ratepayers and a government-guaranteed rate of return) or even radio and television broadcasters (who were given public airwaves for free, but in return had to adhere to certain “public interest” requirements).  Our industry had no government-guaranteed return or government-granted public airwaves – to the extent we used any public resources, we paid for our rights-of-way with local franchise fees. Indeed, the cable industry built analog networks, our new digital networks, our cable modem and digital phone services with private risk capital with no assured return.

Some might argue that, because the FCC has previously regulated speech on the broadcast networks, such an approach would be appropriate in the Internet Age. But note what Kyle said in his address:

…in this case, the FCC is not engaged in the allocation of the public airwaves.  The bandwidth we’re talking about is capacity on private transmission facilities constructed by ISPs.  Imposing regulations that prevent providers from using “too much” capacity for speech-related services not even associated with Internet access should cause all sorts of First Amendment and Fifth Amendment Takings alarm bells to go off.

Finally, it’s not just the cable operators that would be affected. The other concern about the government deciding to involve itself in these debates – which should properly been seen as technology discussions – is that we don’t know what future applications might be developed or how they might need the network to be structured in order to work most effectively.

To quote from Kyle’s speech:

Not all content providers may need the same speed, prioritization of data and quality of service as, say, providers of high-definition video, or maybe 3D video or who-knows-what-else may be invented by application providers.  But ISPs can’t prioritize all content, due to the physical limitations of their systems.  And it may be entirely too costly (as well as unnecessary and inefficient) to offer the same quality of service that a video game service requires to every single content provider.  And so the effect of such a rule would be simply to prevent the offering of the services consumers might want that require such special treatment.

Or to quote one of my earlier blog posts:

If you want a dumb pipe, with every bit treated the same, that will significantly affect telemedicine and other advanced services which may require priority treatment. If creating some method of optimized delivery was such a terrible thing, what does this say about services like Akamai, that help make content distribution more efficient, benefiting both consumers and content producers?

Really, all we’re saying here is that these are very complicated issues and we hope that the government treads lightly as it contemplates taking action.