FCC vs. Internet Providers

Published August 7, 2008

For three years, Congress has failed to pass legislation implementing the doctrine of net neutrality. Recently, the FCC’s patience ran thin, and the commission decided to act as if the doctrine were law anyway.

On August 1, the FCC punished Comcast for allegedly blocking Internet traffic on its network. Comcast, for its part, admits to “throttling” access to peer-to-peer file-sharing site BitTorrent, slowing connections at peak times, but says it never blocked access. The company claims it throttled in order to prevent a small percentage of users from consuming most of the available bandwidth. By some estimates, 5 percent of network customers can occupy up to 90 percent of bandwidth at certain times.

When the knowledge of Comcast’s network management activities surfaced via an Associated Press report, some of Comcast’s customers voiced their disapproval, joined by a blogging army of net neutrality supporters. Responding to customer dissatisfaction, Comcast engaged BitTorrent in talks, and the two companies reached an agreement in March. Comcast pledged not to interfere specifically with access to the Web site’s peer-to-peer services.

One might presume the drama would cease at this point. Net neutrality advocates, however, do not let a little thing like free parties’ consensual agreements get in the way of their plans. Unfortunately, FCC Chairman Kevin Martin counts himself among the advocates’ ranks. The Bush appointee believes “a set of principles” the FCC established in 2005, which Comcast violated, gives him the “authority to … stop broadband service providers when they block or interfere with subscribers’ access.” Martin and the two Democrats on the commission are using the Comcast case to “send a message to the industry that bad actors will be punished.”

The FCC misses two vital lessons in this situation. First, Comcast and BitTorrent’s agreement in March exemplifies how free agents acting in a market can solve problems through mutually beneficial agreements without any assistance from government. The fact that most of the FCC’s ruling requires Comcast to do what it has already planned to do shines a spotlight on the true nature of the ruling: to expand the FCC’s control of the Internet.

Second, in many markets, consumers have a choice as to their Internet service provider (ISP). If they are unsatisfied with their ISP’s network management practices, they can switch to a more appealing competitor.

In some markets, of course, local governments have granted specific ISPs monopoly power in their jurisdictions. This prevents customers from finding alternatives when they are not fully content with their service. Instead of policing networks, the government would better serve net neutrality goals by refraining from bestowing favors on specific companies, so consumers have a say in the activities of their service provider.

With this latest ruling, the FCC sets a dangerous precedent: that they, not service providers or customers, determine how Internet traffic is to be managed. If pursued to its logical conclusions, this decision will constitute a lunge in the wrong direction, away from freedom and creative problem-solving, toward control, bureaucracy, and stagnation of the engine of progress that is the Internet.

The following articles provide a wealth of information and insightful commentary regarding the Comcast issue, net neutrality, and network management in general, exposing the benefits of a free Internet market and the dangers of FCC control.

Comcast P2P Blocking Reignites Neutrality Debate
Heartland Institute Senior Fellow Steven Titch dispels some myths about ISPs’ supposed access “blocking,” and notes that Comcast is rightly defending itself by asserting its right to adjust its network to meet customer needs.

A Bill of Rights to Enshrine Net Neutrality?
Ryan Radia, a senior scholar at the Competitive Enterprise Institute, highlights the threat of further regulation stemming from Comcast’s declaration of a consumers’ bill of rights.

Free the Web — From the FCC!
Wall Street Journal columnist L. Gordon Crovitz compares the FCC’s Internet access approach to the Interstate Commerce Commission’s approach to railroads in the nineteenth century.

“Net Neutrality”: Destroyer of Internet Freedom
Alex Epstein, an analyst focusing on business issues for the Ayn Rand Institute, explains how the doctrine of net neutrality, heralded as necessary to protect Internet freedom, achieves the exact opposite of its stated goal.

Sadly Comcastic!
Reason contributor Jeff Taylor contends Comcast was justified in its bandwidth-throttling attempts, and that breaking up government-granted monopolies, rather than expanding regulation, is the best way to ensure customers are served well.

Net Neutrality Concerns May Soon Fade as P2P Improves ISPs’ Performance, Reduces Costs
Christopher Petro highlights how recent industry efforts to deal with peer-to-peer traffic might make net neutrality regulations obsolete.

This Wall Street Journal editorial argues that giving the government power over the Internet opens the door to “all kinds of political mischief.”

U.S. Senate Committee Debates Proposed Internet Regulations
Nicholas Katers discusses recent Capitol Hill events related and in response to Comcast’s throttling activities.

Golly Gee, The Free Market Works After All
This Reason Foundation blog post notes the significance of Comcast’s business practices agreement with BitTorrent, showing the market preempted and exceeded any possible government solution.

Nothing in this document is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit The Heartland Institute’s Web site at http://heartland.org and PolicyBot, Heartland’s free online research database.

If you have any questions about this issue or The Heartland Institute, contact Brian Cost, Heartland’s assistant government relations director, at 312/377-4000 or [email protected].