Competitor access to telco fiber would fix “net neutrality”

The Washington Post mistakenly editorialized:

FOR MORE THAN a decade, “net neutrality” — a commitment not to discriminate in the transmission of Internet content — has been a rule tacitly understood by Internet users and providers alike.

But in April, a court ruled that the Federal Communications Commission has no regulatory authority over Internet service providers. For many, this put the status quo in jeopardy Without the threat of enforcement, might service providers start shaping the flow of traffic in ways that threaten the online meritocracy, in which new and established Web sites are equally accessible and sites rise or fall on the basis of their ability to attract viewers?

So-called network neutrality isn’t a magic principle that somehow everyone followed because it hadn’t occurred to them to violate it yet. It didn’t exist only until April when the FCC found a limit on its powers. It’s much deeper than an enactment of Congress.

The “rule tacitly understood” has been enforced for more than a decade by customers, not by regulators. Any ISP that tried to restrict what its customers did, or to discriminate against its customers’ traffic, would lose those customers to a competing ISP.  AOL, MCI, Compuserve were all forced to open their walled gardens that only let you talk to their other customers. The same is true in shoes, in groceries, in cars, and every other free market. We consumers aren’t stuck with bad suppliers, we can pick better suppliers — or become a supplier ourselves. The government doesn’t have to sternly reform self-serving companies; we consumers do that for ourselves. They go out of business when their customers switch to somebody better.

What has changed in the last 15 years is that regulatory actions have eliminated competition in the broadband Internet market. Now that many customers have no serious opportunity to pick an ISP who offers better terms, of course the existing ISPs are going to maximize their own revenue and convenience at their customers’ expense.

It’s convenient that the telcos have locally-regulated cable companies around, since otherwise high speed access would be too obviously a monopoly. But a “duopoly” sounds much better — it sounds like competition even though it ain’t. It’s just as cushy for the duopolists, because anybody unhappy with BOTH providers doesn’t have a chance to start a third, fourth, fifth, or twentieth competitor. So of course both providers, who are benefiting from this situation, will evolve their terms in tandem, while making sure the rules remain that no new competitors can come in and upset their cozy deal.

The cure is easy, but apparently not obvious to most people. It is to re-establish competition in the ISP market just above the level of the wires and fibers. The wires and fibers can remain a monopoly, or duopoly, regulated by the government as they are today, as long as any ISP has the power to lease them at the same price. This is actually the law today, except for an exception that swallowed the rule for high speed access.

The thriving and competitive ISP market of 1995 existed because anyone could go into business as an ISP, leasing point-to-point wires and fibers and phone lines from telcos at non-discriminatory prices related to their cost-plus-regulated-profit. This was because of a long series of regulatory decisions starting from the Carterfone decision, requiring the companies who had a monopoly on wired infrastructure to lease those wires at a fixed price to anyone who wanted them. ISPs could buy phone lines, could buy leased lines (56K, T1, T3, etc), and could hook them together into an Internet.

When I didn’t like the terms available from early ISP’s, I made my own cooperative ISP with friends. When the nationwide ISP who connected us to the larger Internet threatened to cut us off (for violating their terms prohibiting sharing of our connection), we found another nationwide ISP who was happy to connect us to the Internet. Ultimately our network, “The Little Garden”, connected fifty or sixty little mom-and-pop ISPs, and hundreds of other customers, with the backbones of several large international ISPs. We had customers and partners all over the West Coast. We offered reasonable prices and great terms, which meant that any national ISP who wanted to compete in our service area also had to offer great terms. We were happy to take any customers who the big ISPs wanted to drive away with discriminatory terms.

And thus the “rule tacitly understood” was enforced — not by a regulator, but by free competition for the business of consumers free to choose a supplier. But this only worked because new suppliers — like me — were free to jump into the market whenever the existing suppliers started pissing off their customers with bad terms. And if I became a bad supplier, YOU were free to jump in and serve my customers with better terms, better prices, faster service. Yes, you, the reader. Starting a business isn’t rocket science; millions do it every year.

Indeed, the speed and cost of DSL technology outcompeted our low-speed Internet market. Again this happened because the monopoly telcos were required to make their wires available to competing DSL companies, and customers were free to choose any DSL company they wanted. When customers deserted low speed telco ISPs in droves, these new competitors forced the telcos to offer DSL themselves, which they had not previously offered. (The telcos also played dirty tricks against those competing companies, such as cross-subsidizing their DSL service with telephone revenues.)

At that point the telcos finally noticed what was happening, and deployed their lobbyists to make sure it wouldn’t happen again in the next generation. They knew the FCC wanted fiber deployed widely. Optical fiber had been invented by AT&T’s Bell Labs, and the Bell and ex-Bell system was already deploying it as fast as economically possible, throughout their whole network. They were putting in fiber everywhere, because it was cheaper than copper, and upgradeable to much higher future speeds at the endpoints rather than by ripping out the whole length and replacing it. Competing long-distance fiber had already overturned the telcos’ cushy long-distance market. But their lobbyists convinced gullible FCC regulators that they would stop putting in fiber unless the FCC exempted fiber from the rule that said the monopolists had to share their facilities with competitors. (This was a Big Lie on par with Hollywood claiming that they’d stop releasing movies if the government didn’t prohibit consumers from copying them.)

The FCC bought the Big Lie, and exempted fiber from the general rule. The result is today’s “duopoly”, in which you have no choice among competitive ISPs. Oh, you can pick a dialup provider, or start up a new dialup provider. You can pick a DSL provider, or start up a new DSL provider. But you can’t pick a provider with speeds higher than what copper wires can carry — nor can you start up a competing higher-speed-than-DSL provider. Your monopoly telco has already installed a huge amount of “dark fiber” in your neighborhood. (There are four almost-empty 100+-fiber cables within three blocks of my house: two owned by the city, one by AT&T, one by Comcast. I can’t get access to any of them.) Your telco doesn’t have to let anyone use that fiber to compete with them. The FCC told them so.

Fixing this in the 2010 market would be pretty simple. Get the regulators at the FCC to rescind their ruling that exempts fiber from the standard rule that monopoly telcos have to lease out their facilities to competitors at their cost plus regulated profit.

Now, listen up, you people who think the FCC should be regulating “the Internet” to protect you from rapacious monopolists. The FCC already has the well-established power to fix this problem. They created the problem in the first place and they can fix it. It’s a regulatory problem at the wires-and-fibers level, not a problem at “the Internet” level.

Why do you think that the FCC hasn’t already noticed and fixed this problem?

Why do you think that the FCC would regulate “the Internet” to serve YOU instead of to serve the companies who have spent decades and hundreds of millions of dollars learning exactly how to manipulate regulators?

It’s because you don’t even know what to ask the FCC for. Instead of asking them for the simple fix to your real problem, you ended up asking that they be given NEW powers to manipulate things at much higher levels in the communications infrastructure. The FCC won’t bother correcting you — they love it when you call for giving them more power. They don’t really care about how good your communications are; like any regulator, or anybody else really, their job is to make their own lives cushy. And the monopoly telcos will be happy to help them with that. The telcos would love it if the FCC had more power to regulate their competitors higher up in the protocol stack. Because any power you hand to the FCC is power you’re handing to the telcos, the world’s experts on pulling the strings at the FCC.

You’ve been duped into this Network Neutrality sideshow, and you’re now begging Congress for larger chains and bigger fetters. All you really had to do was lobby the FCC for a simple change that is already within the power of the FCC. Yes, of course, the telcos will oppose such a change with all their might. But if you as consumers and Internet experts and activists can’t get the FCC to deliver a wide open competitive unrestricted broadband market with a power it already has, merely enforcing the general rule for telcos that it already enforces on every other aspect of telco behavior, why do you think you’ll be able to get the FCC to do that with brand new powers?

(This note was originally written by John Gilmore on 26 August 2010, and posted to Dave Farber’s Interesting-People mailing list and Lauren Weinstein’s NNSquad mailing list.)

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