22 December 2017

Ajit Pai Is Wrong for the Right Reasons

Last Thursday, the Federal Communications Commission (FCC) voted on party lines to reverse the 2015 net neutrality rules put in place by former FCC chairman Tom Wheeler. All three of FCC chairman Ajit Pai’s arguments for his decision are technically correct. He just chose the wrong solution to the right problems. Pai’s decision to eliminate Title II protections against internet service providers (ISPs) throttling traffic or blocking content on the internet will not lead to the demise of the internet as we know it, but it does raise the risk that they will migrate over time toward unfair or anticompetitive practices in order to boost their flagging profits. And neither Pai nor Wheeler’s approach does anything to address the fact that the internet is not and has not been neutral. Major technology companies, not ISPs, control virtually all of the content we see on the internet in exchange for providing us with free, personalized services, and consumers seem happy with this.

Chairman Pai, in his speech announcing the result of the vote, gave three key reasons for his decision. First, “the internet was not broken in 2015.” The FCC’s 2015 net neutrality rules were unnecessary because ISPs were not systematically abusing light touch regulation to undermine net neutrality for a profit. Second, he pointed out that “under Title II, investment in high-speed networks has declined by billions of dollars.” Investment in our broadband infrastructure has declined at a time when the character of the internet is evolving in ways that will require significant investment in new infrastructure. Finally, he argued that many of the same major tech companies that supported the net neutrality rules make money by promoting and blocking certain types of content on their platforms, more or less the same thing that the net neutrality rules are supposed to prevent ISPs from doing. This, according to Pai, constitutes government “picking winners and losers in the internet economy.” He is right on all three counts. 

ISPs were not systematically undermining net neutrality before the 2015 decision.Before the 2015 decision, the internet was not being systematically manipulated for profit by sinister ISPs. Users did not have to pay for specialized content packages. Content providers did not have to pay extra for fast lane access. The 2015 decision ultimately traced back to revelations that Comcast had throttled high-volume traffic on its network, primarily movies and video. Comcast’s critics argued that this violated the principle of net neutrality by prioritizing some traffic over others. Comcast argued that it was trying to manage its bandwidth because a small number of websites like BitTorrent and Netflix and a small number of users who downloaded and streamed a lot of movies were clogging up their infrastructure, limiting other users’ ability to access the web. The issue was not born out of a sinister plot by ISPs to undermine the free and open internet, but by their attempts, perhaps misguided, to manage a limited resource—their network bandwidth. 

We need ISPs to invest in a new generation of internet infrastructure, and that is not happening. The character of the internet is changing dramatically. The old days when the internet was something you accessed via the browser on your personal computer are gone. Internet access is increasingly wireless, mobile, high-volume, and embedded in everything we do. As mobile apps and internet-of-things devices continue to grow exponentially, with billions of new devices coming online each year, the demands on our broadband providers will only continue to grow. Chairman Pai’s primary goal is to drive an infusion of capital into ISPs that they can use to expand their bandwidth, build out a fifth generation (5G) network, and give everyone access to high-speed internet, and that is something the country desperately needs. Annual traffic on the internet is projected to increase almost three times in the next five years, and our networks are not prepared to handle it. 

The internet is not neutral, and consumers seem happy with this. For companies like Google, Twitter, Apple, and Facebook, controlling what content you access online is the core of their business model. These companies offer consumers free access to their platforms in exchange for controlling what content those consumers see and don’t see, and in what order. Google promotes search results and ads. Facebook and Twitter curate your feed and promote posts.

Perhaps the greatest irony is the way that Google and Apple, who control more than 90 percent of the smartphone market and both of whom lobbied aggressively for the FCC net neutrality rules against ISPs, manage their app stores. The internet has changed from the old days of browsers and websites on desktop computers. The majority of internet activity now occurs through apps on mobile devices. Apps are the new websites: they generally offer the same content and services as websites you can access through your browser, but the use of an app allows providers to offer a more tailored user experience. To participate in the Apple App Store or the Google Play Store, content providers have to follow rules on everything from style to content; they have to use Apple and Google services like Apple Pay in their apps; and they have to pay Apple and Google a share of the revenues generated by their apps. The result? Content providers end up paying Apple and Google fees to provide a good user experience to their mobile customers. This is essentially the same as ISPs charging websites extra for faster connection speeds. The FCC’s 2015 rules did nothing to address net neutrality for the mobile internet, despite the overwhelming evidence that this is where the bulk of internet activity is going to come from in the next few years. 

Pai is right—the FCC picked winners and losers in crafting its 2015 net neutrality rules. It allowed tech companies to make money by controlling what content users access online but banned ISPs from doing so. Add it up. How often do you access online content without going through your mobile phone, social media, or a Google search? These are all controlled, curated platforms that are designed to direct you to certain content. The great irony of the debate over Pai’s net neutrality decision is that the net neutrality rules that some are so determined to preserve protected the old internet of desktops and browsers, which is already fading into irrelevance, and not the new internet of smartphones and apps that has never been and will never be neutral. 

Consumers seem happy with this. The major tech companies provide high-quality, personalized services for free in exchange for collecting their data and curating their online behavior. Perhaps we should give ISPs the opportunity to do the same—offer free or discounted products and services to consumers in exchange for data they can use to target content to them. 

The fact that I agree with Pai’s arguments does not mean I agree with his decision. The FCC did not need to reverse the decision to classify ISPs as common carriers under Title II of the Communications Act in order to give ISPs new revenue and put them on a more level playing field with tech companies. The best way to do that is to maximize their ability to monetize consumer data. Earlier this year, Congress reversed another set of FCC rules that limited ISPs’ ability to monetize data on their users. The broadband privacy rules, also put in place under Chairman Wheeler, helped to cement Google and Facebook’s hold on the advertising market, making it even more difficult for ISPs to compete.

What Chairman Pai could and should have done is maintain protections against ISPs blocking or throttling content and providing differential pricing, or “fast lanes,” for some content providers online, but issue new guidance to replace the broadband privacy rules that expands ISPs’ ability to monetize the data they collect on their users. This would allow them a chance to go head to head with the tech companies on an even playing field in the digital advertising business. ISPs have a huge amount of unique and valuable data on their customers’ online behavior and could use the profits from getting a share of the digital advertising market to reduce costs to consumers and invest in new infrastructure and services. Even a small slice of the $80 billion digital advertising market in the United States has to be worth more than removing the costs of filing Title II paperwork.

Privacy advocates would surely condemn such a proposal, but the reality is that the privacy impact of this policy would be negligible. First, ISPs already have access to a huge amount of data; the rules just prevented them from making money from it. Second, major tech companies are already using very similar data to target advertising and are making billions from it. The reality is that our personal data is being collected by dozens of companies, they are analyzing it and profiling it, and consumers are not decrying their lack of online privacy but appreciating the free products and services they get in exchange. What if everyone could have a free unlimited mobile data plan too?

At the end of the day, Chairman Pai is wrong for the right reasons. Supporting investment in the next generation of broadband infrastructure is a worthy and important goal. Giving ISPs the opportunity to compete with tech companies on a level playing field can help to do that. But letting them compete for a piece of the consumer data business is a better way to do both of those things than rolling back protections against them throttling and blocking traffic on their networks.

William A. Carter is a fellow and deputy director of the Technology Policy Program at the Center for Strategic and International Studies in Washington, D.C.

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