Wireline Competition Bureau Chief Sharon Gillett explains the draft rules under consideration in the Open Internet NPRM. She also explains more generally the FCC rule-making process at work.
Archive for October, 2009
The first time the FCC considered a policy for the Internet was 1966. Yes, 1966. Three years before the first packets were sent on the ARPANET and six years before Vint Cerf and Bob Kahn introduced their paper on the Internet Protocol.
Okay, this is a bit of an embellishment designed to get your attention. On the other hand, it really isn’t. In 1966, the FCC initiated the Computer Inquiries. Computers were relatively new phenomena in telecommunications networks. Some computers facilitated the operations of the telecommunications networks; other computers were interacted with over the network. What was the FCC to make of these computers? What jurisdiction did the FCC have?
The Computer Inquiries consisted of three major proceedings: Computer I (1966); Computer II (1976); and Computer III (1985). Throughout all of these proceedings, FCC policy remained consistent while the agency revisited and revised the implementation in order to more effectively achieve its goals.
The FCC consistently distinguished between the computers that ran the telecommunications networks and computers that were used over the telecommunications networks. The FCC concluded that there was no public interest in regulating computers used over the telecommunications network:
[T]here is ample evidence that data processing services of all kinds are becoming available in larger volume and that there are no natural or economic barriers to free entry into the market for these services. The number of data processing bureaus, time sharing systems, and specialized information services is steadily increasing and there are no indications that any of these markets are threatened with monopolization.
Computer I Tentative Agreement ¶ 20.
The FCC recognized that computer services promised great economic opportunity and innovation for the country, and that these services were 100% dependent on the underlying telecommunications networks. The FCC wanted to ensure that carriers were offering the telecommunications services necessary in order for computer services to thrive and that the telecommunications networks could not use their market power to engage in anti-competitive behavior:
There is virtually unanimous agreement by all who have commented in response to our Inquiry, as well as by all those who have contributed to the rapidly expanding professional literature in the field, that the data processing industry has become a major force in the American economy, and that its importance to the economy will increase in both absolute and relative terms in the years ahead. There is similar agreement that there is a close and intimate relationship between data processing and communications services and that this interdependence will continue to increase. In fact, it is clear that data processing cannot survive, much less develop further, except through reliance upon and use of communication facilities and services.
Computer I, Final Order, ¶ 7 (1971).
In Computer II, the FCC came up with the Enhanced Services (aka “information services”) / Basic Services dichotomy. Basic services were the telecommunications services (the network infrastructure) that moved voice, information, and data – without processing, altering, or changing that data. Safeguards were imposed on basic services in order to ensure that telecommunications networks were open to any computer service.
Information services were the services that did not have market power and were not subject to FCC safeguards. They were the services provided over the telecommunications network that offered some level of interactivity, processing, or alteration. While the Computer Inquiries did not regulate information services, the Computer Inquiries were designed to directly benefit information services.
The Computer Inquiries contained safeguards which included structural separation, accounting rules, information sharing rules, disclosure rules, and bundling rules. These were specific rules that ensured that Internet networks and computer networks could be built. They were designed to open up the telecommunications networks for use by the computer networks, while safeguarding the computer networks from anticompetitive behavior by the telecommunication networks. The Computer Inquiries have been described as “wildly successful.” Prof. Jonathan Weinberg p. 40; Robert Cannon, The Legacy of the FCC’s Computer Inquiries, 55 FCLJ 167 (2003).
What lessons can be taken from the Computer Inquires? What do they say about the FCC’s approach to the Internet and open networks? The Computer Inquiries assumed that Internet networks would have underlying common carrier infrastructure over which they could be built; what are the implications where the Internet has been transformed from a service provided over the common carrier infrastructure, to the network infrastructure itself with no underlying common carriage? How has the Internet service market changed since the time of the Computer Inquiries?
How is the Internet like printing, the steam engine, the factory system, railways, electricity, and the computer? According to economists Richard Lipsey, Kenneth Carlaw and Clifford Bekar, the Internet has joined these and a handful of other technologies on a select list: the twenty-four “transforming general purpose technologies” developed over the entire span of human history. The Internet is in good company. These are all technologies with a broad range and variety of uses, extensive spillovers, susceptibility to improvement through the development of complementary technologies, and the ability to transform economic, political, and social structures.
In light of the Internet’s importance, its custodians – our generation in general and organizations like the FCC in particular – have a responsibility to preserve its dynamic character and maximize its potential for improving our lives. As I think about the FCC’s role, I see four key economic issues. One is the implications of possible market failures that might limit innovation in applications complementary to the network. These might include the transaction costs of contracting, spillover benefits of applications innovation, and perhaps the market power of Internet service providers or applications providers. The second is evaluating the social welfare effects of price discrimination on both sides of two-sided platforms. How do these effects depend on the extent to which mobile Internet service substitutes for fixed service for different types of customers? Or on the number of fixed and wireless providers available in a region? The third issue is ensuring adequate incentives for investment and innovation in the network – or the platforms, if wireless and wireline service are viewed as imperfect substitutes. The fourth is providing incentives for efficient network operation, perhaps through congestion pricing or network management.
Economists: this is your opportunity to educate me and the Commission. Am I thinking about our task in a productive way? What other economic issues should be on my list?
After yesterday’s Open Meeting, Chairman Julius Genachowski recorded some reflections on what happened. Check out his thoughts below and see the Open Meeting page for the recorded video, the full text of the NPRM, and any other information.
Thank you for joining us today. This morning saw a productive Open Commission Meeting and we are now looking forward to the Rulemaking process that will transpire over the coming months. These discussions will shape the openness of the Internet. Please add your voice as we seek public input. As a reminder, all videos, slides, documents and other resources can be found on our new Open Meeting portal. Please continue to follow our Open Internet efforts and stay up to date on all FCC happenings through FCC.gov/Connect.
Open Meeting Live Blog
Chairman Julius Genachowski opens the meeting, recognizes a handful of helpful staffers, and outlines the agenda. Today’s Open Commission Meeting will focus on one item. Commissioners will consider a proposed rulemaking on Open Internet.
The presentation begins, “We present to you a draft Notice of Proposed Rulemaking that seeks public input on draft rules to preserve an open internet.” There is good precedent for this movement toward an open internet. “The Commission has considered the issue of Internet openness in a wide variety of contexts and proceedings.” A policy statement released in 2005, several enforcement actions, and a notice of inquiry on broadband industry practices in 2007 are among those steps taken toward the issue.
Specifically, the presenters mention that the FCC previously created four principles regarding the management internet. Today’s Notice will add two more principles to the list and will seek to codify them. The six principles are below:
“Under the draft rules, subject to reasonable network management, a provider of broadband Internet access service may not:
1) prevent any of its users from sending or receiving the lawful content of the user’s choice over the Internet;
2) prevent any of its users from running the lawful applications or using the lawful services of the user’s choice;
3) prevent any of its users from connecting to and using on its network the user’s choice of lawful devices that do not harm the network;
4) deprive any of its users of the user’s entitlement to competition among network providers, application providers, service providers, and content providers.
5) A provider of broadband Internet access service must treat lawful content, applications, and services in a nondiscriminatory manner.
6) A provider of broadband Internet access service must disclose such information concerning network management and other practices as is reasonably required for users and content, application, and service providers to enjoy the protections specified in this rulemaking.”
The Notice will seek comment and input on these principles and their affect on internet services. With the tremendous growth of mobile and wireless broadband enabled devices, there will be a large question concerning the application of these principles to those devices.
There is no doubt that this is a momentous day for the Commission and the trajectory of the internet. The conclusion of the presentation reflects this. “Today’s Notice is the beginning of the process towards adopting clear, enforceable, and common sense rules of the road that broadband providers and Internet companies of all sizes can build their businesses around.”
Following the presentations, each Commissioner is given a chance to deliver a statement. Chairman Genachowski cedes the microphone to Commissioner Michael Copps and he begins. “This is a truly historic day at the FCC. It is historic because the Commission takes a long stride, perhaps its longest ever, in ensuring a free, open, and dynamic internet. While in one sense today’s Notice of Proposed Rulemaking marks a natural progression from our adoption of the Internet Policy Statement in 2005, in reality it is the clearest statement yet that we will ensure that the genius of the Internet is not subverted as it leaves its infancy and begins to come of age.”
Commissioner Copps, highlighting the central role that consumers play in shaping the direction of FCC policy, continues. “I have advocated long and hard for the Commission to establish a mechanism to ensure that consumers have continued access to a vibrant, open Internet—an Internet that was born on openness, thrived on openness, and depends on openness to realize its going-forward potential. This Commission will act, I predict, to maintain that openness. …The principles I pushed for in the Internet Policy Statement four years ago focused on consumer rights. This is, after all, a consumer protection agency. While just about everybody gains from the availability of an open Internet, no one gains so much as consumers. …We need to recognize that the gatekeepers of today may not be the gatekeepers of tomorrow. Our job is not so much to mediate among giants as it is to protect consumers.”
In this next statement, Commissioner Robert McDowell notes that he appreciates the collaboration between the slate of Commissioners but emphasizes that they do not agree on all policy recommendations. He contends that internet providers have taken care of the problems and the hiccups that have arisen.
Commissioner Mignon Clyburn shares her experience running a small newspaper in South Carolina. With the assistance of the internet she may have been able to adequately compete with the larger newspapers and media outlets in the area. The internet is a crucial pillar of our society and our economy that we must protect, she explains in supporting today’s Notice.
Commissioner Meredith Baker also acknowledges the collegiality among the commissioners while noting their differences on some policies. As for the current proposal, she cautions against adding additional rules, saying, “Before imposing new rules, we need to carefully think through all potential unintended consequences that could harm consumers by increasing prices, impeding innovation, eliminating choices, and/or reducing quality of service.” Although she will dissent in the current matter, Commissioner Baker states that she agrees that “it is reasonable to take a step back and ask tough and probing questions about the Internet as it exists today and about where we want it to be tomorrow.” Her reservations aside, “a complete and accurate understanding of the internet ecosystem” is vital.
In the last statement of the five commissioners, Chairman Genachowski advocates strongly on behalf of the concept of Open Internet and for this Notice of Proposed Rulemaking in particular. This begins with the central idea that “we must promote investment and innovation broadly.” In outlining his beliefs he says, “Government’s role in preserving openness is important but also modest. It should be no greater than necessary to achieve the core goal of preserving a free and open Internet.” Essentially the goal is to minimize the roll in government, not to enlarge it. Addressing the fears of those who believe this will constitute an overreach, he clarifies:
“Government should promote competition. It should protect consumers’ right to access the lawful content, applications, and services of their choosing. It should ensure that there is no central authority preventing people or businesses from communicating over the Internet. …This Commission fully agrees that government must not restrict the free flow of information over the Internet.”
To end the Commission’s Open Meeting the Chairman says, “I am pleased to see leaders outside the Commission working to find common ground on enforceable rules. Given the importance of an open Internet to prosperity and opportunity for all Americans, our country deserves no less.”
The Chairman motions for a vote and all five commissioners vote in favor of pursuing the Rulemaking . Chairman Genachowski and Commissioners Copps and Clyburn vote yes without qualifications. Commissioners Baker and McDowell “dissent in part, concur in part,” meaning they support the inquiry but not the associated underlying arguments.
With the structured portion of the meeting having come to a close, a press conference will begin shortly.
Chairman Genachowski begins the press conference and is taking questions.
One reporter asks about the connection between the Broadband Plan and Open Internet. “The Broadband process has always assumed…that there needs to be a free and open internet, it needs to be preserved,” the Chairman responds. Though with regards to the overlap between the two, “we’ll be dealing with them in separate proceedings.”
Following another question, the Chairman makes a point that he wishes to emphasize, “There’s nothing in anything we’ve suggested” that would indicate that the FCC will meddle with companies’ delivery of the internet. “We’re not going to require anyone to come to the FCC and ask permission,” he says. Instead, this Notice is focused on “how we’re going to codify the rules of the road.”
Many of the questions asked of the Chairman seek an answer concerning specific effects of codifying the six open Internet principles. He explains that these cannot be answered now. These issues “will be addressed vigorously” during the rulemaking process, Genachowski replies. Through this process, he assures the assembled reporters, answers will arise in the months to come.
Zac Katz, Deputy Chief of the Office of Strategic Planning and Policy Analysis, discusses the upcoming Open Commission Meeting and Notice of Proposed Rule Making on preserving an Open Internet:
There are many important public safety and homeland security issues that are being examined by the FCC right now as part of the development of the National Broadband Plan, as well as in open FCC proceedings. These areas range from ensuring that broadband communications is available to the public safety community for their day to day communications, helping to ensure America’s cyber security, developing Next Generation 9-1-1 and of course, ensuring that emergency alerting is brought into the twenty first century. All of these issues can be affected by open internet rules. Accordingly, one of the areas we are actively exploring is how best to address the needs of law enforcement, public safety, and homeland and national security.
It is important that the public safety and homeland security community, and other interested parties have a voice in this debate. It could impact the next generation technologies that are being rolled out to the public safety and homeland security communities already and will only increase in proliferation. Accordingly, interested parties are urged to file comments, providing data and other evidence of how the FCC should look at these very important issues.
The first full-time job I had was opening and sorting mail in my Congressman’s office one summer in high school, years before websites and email were widespread. Every day hundreds of letters would arrive, and every day I’d open them, read them, and sort them into different piles to be answered. I was impressed by how many constituents cared enough to write a letter, but looking back, I wonder how many more had a stake in those issues and would have shared their views if it had been cheaper and easier to do so.
One of the great benefits of the open Internet is that it makes it easier to learn about and express our views on public issues and to engage with our government, wherever we are. Earlier this year the FCC launched blog.broadband.gov, the official blog of the National Broadband Plan, and last month we launched OpenInternet.gov as a place to discuss issues related to the future of the open Internet.
If the Commissioners approve a Notice of Proposed Rulemaking regarding the open Internet at the FCC’s open meeting next week, we will use the Internet to enable you to engage in the rulemaking process. Anyone will be able to participate by commenting on posts on this blog, attending (in person or via webcast) and asking questions at public workshops we’ll be holding, suggesting and rating policy ideas on an online collaboration platform we’ll be setting up, or submitting formal comments through our Electronic Comment Filing System.
What else could we do to help you participate in the rulemaking process? What information and tools would be helpful? I can’t promise that we’ll be able to accommodate all requests, but we’d like your ideas on what we could do.