Comments on broadband regulation
Posted 61 days ago
Although the respective meanings of “information service” and “telecommunications service” may be obscured by political compromises and commercial interests, common sense distinguishes between them very easily. An information service consists of information “content” plus any distribution medium required to deliver it; a telecommunications service is a medium through which users exchange information. An information service is defined by what it delivers, while a telecom service is defined by the universe of content that it’s capable of delivering.
If we go back to the mid-Nineties and the heyday of America Online, we see AOL providing information services to customers nationwide via the familiar telecommunications services provided by phone companies with local monopolies. Many of AOL’s services were developed by AOL and its partners, and ran on AOL servers. The most important service, however, was indirect access to the packet-switched Internet. This access, poor as it was, was valuable because few individuals could afford any telecommunications service providing full access to the Internet.
With the advent of affordable broadband, individuals no longer needed to use circuit-switched telecommunications services to receive simulated Internet connectivity as an information service; they could actually be on the Internet, free to use any kind of software and hardware that complied with the open standards of the Internet. Anyone with full access to the Internet could connect their own routers and switches, run a webserver, and create their own information services. If the broadband foundations for all this didn’t deserve to be called a “telecommunications service,” what on earth did?
Cable TV service, we will all admit, is better described as an information service than a telecom service. The communications aspects of a CATV network exist only to deliver the television channels for which subscribers have contracted to pay the operator of the service. Cable TV is a one-way single-purpose connection between one distributor of program products and many consumers. Regulation of CATV services can reasonably be limited to the usual consumer protection issues and concerns about RF emissions from CATV equipment.
It turns out, of course, that the network infrastructure required for delivery of digital cable TV can also be used to deliver telecommunications services. Broadband Internet may be delivered by the same cable and the same operator as CATV, but it would be wrong to conclude from this that any telecom services delivered that way have somehow become information services.
Telephone and cable TV companies tend to be local monopolies, horizontally integrated into large corporations. Only a very small number of wireless phone companies can offer nationwide coverage, and these do their best to keep their subscribers locked into multi-year contracts that are very costly to break. As cell phones come to dominate telephony, and television moves onto Internet protocols, the natural evolution of telecommunications services will be toward a single data cable for each home or small business, and probably a single operator in each city or region. The public benefits flowing from competition among wired telecom service providers, such as they are, will tend to disappear. Wireless providers will continue to compete, but increasing consolidation in that market seems certain. With market failure so likely, broadband telecommunications services need to be regulated as utilities, with no more regulatory forbearance than can be justified by the amount of competition that remains.
Any broadband telecommunications service that becomes a local monopoly must be regulated as a common carrier if competition among true information services is to remain as healthy as it has been to date in the history of the commercial Internet. Claims that “network neutrality” legislation is made unnecessary by competition make sense only if we ignore the lack of competition for the essential act of connecting the physical network to user premises. The absurdity of such claims are emphasized by the fact that many who claim that equal access is assured by competition will also claim that regulations requiring equal access will destroy private investment in Internet infrastructure.
If the providers of broadband telecom services are not prevented from treating the content delivered over their cables as their own information service, the result will be a reversion to the old AOL model, in which network owners offer only a simulation of Internet connectivity filtered so as to minimize competition with their own paid information services. Any “innovation” that this model can produce will be miniscule compared with the variety of paid and free information services that an open Internet has produced and can continue to deliver.