The Federal Communications Commission (FCC), under the leadership of its new Chairman Ajit Pai, may soon begin a reassessment of the Obama FCC’s aggressive regulation of the internet. If so, we will be greeted by voluminous and high-volume denunciations. What we are unlikely to hear or read, based on the past 15 years of net neutrality wars, are fact-based, reasoned arguments.
The effort to regulate the internet was factually challenged from the beginning. The politics quickly outstripped the policy. The fervor built even as no net neutrality violations could be found. As the digital economy delivered ever greater wealth and consumer benefits, the demands to overturn the existing, successful, and bipartisan policy of internet freedom only intensified.
It was a cause in search of a purpose. But eventually, the net neutrality activists won a bigger victory than they ever expected, as the FCC dropped the hammer of Title II telephone regulation onto the internet. It may therefore be useful to recount a little history as an inoculation against the coming fever. Here are some of the empty stories that led to Title II, which will likely be repeated in various forms in the coming months.
The American broadband backwater story
To change the nation’s bipartisan internet policy, the activists had to manufacture a story of US broadband failure. For a period of more than five years, hardly a week would go by without yet another alarmist story that the US had fallen “dangerously behind” the rest of the world in broadband and that America’s networks were “pitifully slow” and “expensive.” Charts like this one (0) circulated on Twitter and the web, supposedly showing broadband nirvana in Slovenia and France, compared to the broadband backwater in the US.
The alarmists desperately wanted a change in policy, but they always had difficulty answering a simple question: How did the American internet economy get so big if US broadband was so bad?
It turned out the hundreds of alarmist stories were built on bad analysis and data. Better analysis showed the US, which had invested some $1.5 trillion in broadband infrastructure over the preceding two decades, in fact enjoyed broadband that was faster and more widely deployed than any other large nation. For most metrics of broadband health (1), the US was second only to South Korea.
The bungled Berkman report
In service of the failed-broadband argument, the FCC in 2009 commissioned a report from Harvard’s Berkman Center on the state of US broadband. The FCC asked Berkman to compare international broadband markets and policies, and so, naturally, Berkman set out to show how poorly the relatively free US broadband market compared to foreign markets with more heavily regulated broadband.
The report’s preconceived outcome undermined its methodology. As I wrote (2) at the time, the 231-page report “botched its chief statistical model in half a dozen ways. It used loads of questionable data. It didn’t account for the unique market structure of U.S. broadband. It reversed the arrow of time in its country case studies. It ignored the high-profile history of open access regulation in the US. It didn’t conduct the literature review the FCC asked for. It excommunicated Switzerland.”
After withering critiques by eminent economists, Berkman excised some of the most egregious mistakes and issued an updated version, but the report was so compromised that the FCC quit citing the research. Too bad the report had already generated dozens of alarmist news articles before it was debunked.
The false Netflix narrative
Perhaps no event over the past 15 years advanced the effort to regulate the internet as much as the supposed throttling of Netflix in the winter of 2013–14. To great fanfare (3), Netflix accused internet service providers (ISPs), most notably Comcast, of slowing its streams to consumers. For the previous decade, net neutrality had been a cause without any purpose. Activists could find no aggrieved parties to justify their aggressive regulatory proposals. Now, they had their victims and villain. The media and political furor helped propel a far more radical policy at the FCC, culminating in the White House’s push for and the FCC’s surprise adoption of Title II after the 2014 election.
Except the whole thing was a sham and a manufactured publicity stunt. It wasn’t Comcast and the other ISPs that had been throttling Netflix videos, it was Netflix itself. After examining actual network data, it was clear Netflix had purposely been allowing its traffic to congest at under-provisioned connection points. It then used its own poor performance to launch a media and policy campaign blaming ISPs. It insisted “strong net neutrality” was necessary to protect consumers. In reality, Netflix was just angling for better terms on its bandwidth bills. Netflix quickly used the leverage of the FCC’s forthcoming new rules to strike favorable interconnection deals with ISPs.
A year after the FCC’s new rules took effect came an even more galling revelation. In March of 2016, Netflix admitted (4) it had been throttling video to mobile subscribers of AT&T and Verizon — but not other mobile carriers — for the previous six years. FCC Commissioner Michael O’Rielly told a gathering (5) soon after that “these revelations call into question the entire foundation and rationale for the net neutrality decision.” The tragedy of Title II had become farce (6).
Predictably, with its favorable ISP connection deals now in place, Netflix’s supposed concern for consumers and the viability of future garage entrepreneurs has evaporated. “The expectations of consumers are very strong,” CEO Reed Hastings admitted last month. “So even if the formal framework gets weakened, we don’t see a big risk actualizing, because consumers know they’re entitled to getting all of the web services.” Now you tell us.
Hysteria and hypocrisy over digital privacy
We are already seeing the next outbreak of fever. When Congress a few weeks ago voted to overturn the FCC’s new digital privacy regulations, which duplicated and contradicted the Federal Trade Commission’s existing rules, the web exploded with indignation. As we wrote,
“The architect of the intrusive and discriminatory rules, former FCC Chairman Tom Wheeler, took to The New York Times, for example, to tell us “how the Republicans sold your privacy to internet providers (12).” On the same day, The New York Times also editorialized that “Republicans attack internet privacy (13).” The tech magazine Wired headlined that “Congress is about to give away your online privacy (14).” And the Los Angeles Times headlined that: “Senate votes to kill privacy rules meant to protect people’s sensitive data from their internet providers (15).” The tech news site Recode was just as bad: “Congress just voted to strip away FCC rules that protected your internet privacy (16).”
It was, of course, mostly nonsense. The move didn’t eliminate privacy regulation, which is alive and well. The biggest collectors of personal online data, the search and social network firms — and the news sites editorializing against the ISPs — will, moreover, continue collecting more data than anyone.
Net neutrality was never about anything so technical as “treating all bits equally” or anything so economic as protecting “innovation at the edge.” It was about gaining bureaucratic and political control of the digital economy — and thus, increasingly, because of the centrality of information networks, the physical economy, too. A rollback of this short-lived, unnecessary policy will thus ensure the internet’s continued upward trajectory.