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September 22, 2008
Comcast v. FCC: Now what?

A divided FCC recently issued an order concluding that Comcast acted discriminatorily and arbitrarily to squelch the dynamic benefits of an open and accessible Internet, and that its failure to disclose it's practices to its customers has compounded the harm. The FCC required Comcast to end its network management practices and submit a compliance plan.

Richard Bennett reviews the Comcast "protocol agnostic" network management plan requested by the FCC:

[T]he new system will not look at any headers, and will simply be triggered by the volume of traffic each user puts on the network and the overall congestion state of the network segment. If the segment goes over 70% utilization in the upload direction for a fifteen-minute sample period, congestion management will take effect.

In the management state, traffic volume measurement will determine which users are causing the near-congestion, and only those using high amounts of bandwidth will be managed. The way they're going to be managed is going to raise some eyebrows, but it's perfectly consistent with the FCC's order. High-traffic users - those who've used over 70% of their account's limit for the last fifteen minutes - will have all of their traffic de-prioritized for the next fifteen minutes. While de-prioritized, they still have access to the network, but only after the conforming users have transmitted their packets. So instead of bidding on the first 70% of network bandwidth, they'll essentially bid on the 30% that remains. This will be a bummer for people who are banging out files as fast as they can only to have a Skype call come in. Even if they stop BitTorrent, the first fifteen minutes of Skyping are going to be rough.

Aside from filing a compliance plan, Comcast is also filing suit. For one thing, Commissioner Robert McDowell claims that "the FCC does not know what Comcast did or did not do. The evidence in the record is thin and conflicting." Ouch.

Yes, there could be years of litigation.

Stepping back and looking at the big picture, there are potentially at least four major issues here:

  • Does the FCC have authority to govern this? Over at the Progress & Freedom Foundation, Barbara Esbin concludes that it does not. Personally, I am not so sure the courts wouldn't ultimately uphold the FCC if the commission's jurisdiction is debatable -- which it may be -- and the commission's action seems eminently "reasonable." It has happened before. But I hasten to add Comcast delaying BitTorrent uploads does not seem like an ideal set of facts for such an outcome.
  • May the FCC require light users to subsidize heavy users?
  • May the FCC prohibit or allow broadband providers to discriminate to the extent necessary to receive advertising revenues (not penny-ad revenue from classified ads, but major revenue from exclusive partnerships), which they could use to reduce the monthly fees consumers pay for broadband access to the Web?
  • 

And, hold on to your seat...
  • Should broadband providers be required to assist copyright holders police their copyrights?
This is going to be the first test case.

What we have here is a small number of users using a huge amount of network capacity to exchange an enormous amount of pirated work.

Should Comcast ignore copyright violations? Or if technology allows Comcast to police copyrights, does the company become an accomplice if it looks the other way? Good question.

Verizon Wireless and Google are reportedly in talks right now aimed at featuring the Google search bar on VZW phones in exchange for VZW and Google splitting the ad revenues. A new revenue stream might allow VZW to reduce the price of its wireless service, which would be good for consumers. Would a nondiscrimination principle prohibit agreements such as this? Does the law -- or should the FCC be allowed -- to require that?

FCC Chairman Kevin Martin apparently worries that if broadband providers are allowed to manage their networks they may block the next Google from distributing an unimagined software application which could change the world.



But popular applications don't threaten broadband providers; they make broadband services more appealing to consumers. 

Apple and AT&T allow independent developers to create new applications for the iPhone because they have more to gain if consumers can access new applications they didn't invent than if the iPhone can only be used for a limited number of standard purposes. Now Yahoo! is allowing users to customize their home pages with content from other providers.

In a free market there really is an incentive for suppliers to work to please consumers.



The problem with regulation is that it can be circumvented or exploited for anticompetitive purposes, and that it usually leads to unintended consequences like inhibiting inventive ideas, discouraging investment and preserving the status quo.



If the courts conclude the FCC does not have jurisdiction, Congress will be forced to act. My prediction is Congress would give the FCC ample authority but ambiguous direction (politicians are unbelievably cautious), leaving the commissioners free to exercise their "expert" discretion. That could be the worst of all possible outcomes. Commissioners are unelected politicians and they come and go. So commission policy lurches in one direction and then another. Ask any telephone company (incumbent or new entrant); they have all been on both ends -- teacher's pet and class dunce.

While all this is happening, investors may look for a safer bet, and broadband providers like Comcast will have less to invest in broadband -- which would be a tragedy.


There are many interesting questions here. Thanks to the FCC, the courts will provide answers -- in the fullness of time.

Maybe the FCC ought to have taken a more modest approach and allowed the mere threat of regulation to constrain broadband providers.

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