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Don't Make the Internet Safe for Monopolies

Tom Evslin

This week I'm going to Washington to argue against regulating Internet access as if it were phone service. Twenty years ago I was there for the same reason. My concern now as it was then is that such regulation will damage the economy and reduce opportunity by stifling innovation and protecting the current dominant players from the startups which would otherwise threaten them.

At that time the proponents of Internet regulation were most regional monopoly telephone companies, who were regulated themselves (and very comfortable living in a regulated environment). The then small Internet industry (including me) argued that startups were not monopolies and could not afford the batteries of lobbyists and regulatory compliance lawyers needed to survive in a regulated world. "Imagine," we said, "if each new Internet app had to be approved by some commission or another".

Fortunately, Federal Communications Commission (FCC) Chair Reed Hundt, a Democrat appointed by Bill Clinton, and a majority of commissioners agreed with us. The Commission policy on Internet regulation became one of forbearance. The monopolists were right to worry. The Internet was disruptive. If they had won, there would be no such thing as Skype or Vonage; calls to China would still be $3.00 minute; and 800 numbers might still be more important than websites for shopping. Google, Netflix, Facebook, and Amazon wouldn't be the companies they are today.

Hundt's successor William Kennard, also appointed by Clinton, listened carefully to all arguments and continued the policy of benign forbearance. Innovation flourished. When Bush was elected, Internet folk were afraid that his FCC appointees would be more responsive to telco lobbying. We could no longer argue that the Internet was a fledgling industry but could and did argue the public benefits of innovation and rapidly evolving business models. Michael Powell, Bush's first appointee as FCC Chair, and the Commission debated and then issued the "Pulver Order” declaring that Voice over IP was not a telecommunications service. That meant in practice that the FCC, whose mandate only extends to telephony services, would have no reason to regulate the Internet.

The FCC did NOT regulate the Internet from then until now. However, in the waning days of the Obama administration, the FCC promulgated a regulation saying that Internet access is a telecommunications service (regardless of whether voice over IP is involved.). Therefor the FCC has the right to regulate Internet access as it used to regulate monopoly phone service. Big reversal.

Those who now want regulation are Google, Facebook, and other major Internet players. They are good marketers so this regulation is called "Net Neutrality". Who could be against a neutral Internet where all bits are equal? Ironically it is the telcos and cable companies (ISPs) who are on the other side and against reregulation; they are the ones who will be regulated.

There are four major things wrong with the "Net Neutrality" regulations as promulgated (they are not yet in effect):

  1. All users of the Internet, as well as the economy itself, will suffer if regulation is used to throttle innovation — that's as true now as it ever was.
  2. This regulation protects the powerhouse incumbents — Google, Facebook et al — from effective and needed competition. It protects them on one side from rich ISPs (why?) and on the other side from would be new providers of Internet access (think mesh networks, access from drones, whatever) who won't be able to satisfy the regulations made for the technologies they are obsoleting.
  3. There is probably no legal justification for the FCC regulating the Internet. FCC has jurisdiction over basic telecommunications service. They said the Internet isn't such a service for years; just saying it is all of a sudden a basic telecommunications service doesn't make it so.

Google may yet regret its call for regulation of any part of the Internet value chain. A Wall Street Journal story last week says that Google is working on an ad-blocking filter for its Chrome browser. Will the FCC next declare browsers a telecommunication service and require browser neutrality?

With all due respect to many people I respect who support the "Net Neutrality" regulations, I'm as much against regulating the Internet now as I was 20 years ago although I no longer have any direct financial interest except as a consumer. I hope both that the legal challenge to this extension of the FCC's reach will continue and that the current FCC will undo the harm that its immediate predecessors did and return to the policy which has so successfully supported economic growth and innovation for the last twenty years.

See https://www.bna.com/pai-engages-silicon-n57982087000/ for a Bloomberg story on this issue.

This post was originally posted on Fractals of Change.

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The problem I have with your position Todd Knarr  –  Apr 24, 2017 4:25 PM PST

The problem I have with your position is that it ignores the implications of the last-mile providers (largely telecomm and cable companies) imposing their own regulations on the Internet. Right now if I want to offer a service over the Internet, the biggest threat I face is the last-mile providers imposing a rule saying I have to pay them or they won't carry packets for my service. That's a problem because the people accessing my service are those same last-mile provider's own customers who're paying the last-mile provider to provide them access to, among the vast array of services we call the Internet, my service. The point of Network Neutrality is to say that, just as the FCC didn't impose regulations on Internet services, those last-mile providers should also not impose regulations on them unless absolutely necessary for reliable network operation and applied even-handedly. As far as end users (which includes people providing Internet services) are concerned rules the last-mile providers impose are regulations, you have the choice of abiding by them or losing Internet access in an environment where (in the US anyway) the possibly one viable alternative imposes the same rules. The effect is indistinguishable, from an end-user standpoint, from a government regulation stating the same rule.

The whole "network management" argument the last-mile providers talk about is a smokescreen in more ways than one. Firstly, they've admitted that congestion control isn't an issue. Secondly, the proposals for network neutrality specifically allow for control of traffic that causes problems for the network. The problem the last-mile providers have is that the proposals say they have to manage all such traffic equally, regardless of source. So, for instance, if they say streaming video's taking too much bandwidth and impacting customers, they can throttle streaming video as much as they want as long as they throttle all streaming video from all services in the same way. They don't want to do that, they want to throttle only those streaming video services that either don't belong to them or don't pay extra for the privilege of being delivered, which means that streaming video itself isn't causing an impact on their customers else why would only some streaming video need throttling?

I'd also note that the last-mile providers themselves forced the reclassification of Internet access as a telecommunications service. The FCC tried to regulate them as data service providers, and the last-mile providers successfully (and IMO correctly) argued that that wasn't allowed. So the FCC went back to their legal authority to classify Internet access as either a telecommunications or a data service, classified it as a telecommunications service and applied the regulations with stipulations that limited what regulations would be imposed and how.

Given the current make-up of the FCC commissioners I suspect you'll win, but make no mistake your argument isn't for preventing regulation, it's 100% for allowing any and all regulation by fiat by private entities not answerable to anyone. Nobody's going to thank you for that. Not even the incumbent last-mile providers, although it'll take them a while to realize it.

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Promoted Post

Buying or Selling IPv4 Addresses?

Watch this video to discover how ACCELR/8, a transformative trading platform developed by industry veterans Marc Lindsey and Janine Goodman, enables organizations to buy or sell IPv4 blocks as small as /20s.