A federal appeals court strikes down Federal Communications Commission regulations that ensure equal access to the Internet. The debate over net neutrality, and what the decision could mean for consumers and Internet providers.

Guests

  • Rashad Robinson executive director, ColorOfChange.org
  • Jeffrey Eisenach director, Center for Internet, Communications, and Technology Policy at the American Enterprise Institute (AEI)
  • Susan Crawford visiting Stanton Professor of the First Amendment at Harvard's Kennedy School and visiting professor at Harvard Law School; professor at Cardozo Law School; contributor to Bloomberg View and Wired; author of "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age."
  • Cecilia Kang technology reporter, The Washington Post.

Transcript

  • 10:06:53

    MS. DIANE REHMThanks for joining us. I'm Diane Rehm. In a landmark ruling on Tuesday, a federal appeals court struck down the FCC's net neutrality rules designed to insure open access to the Internet. Broadband service providers hailed the decision, but consumer advocates warn it will lead to higher prices and fewer content choices.

  • 10:07:19

    MS. DIANE REHMJoining me in the studio to talk about the ruling, what it might mean for the future of the Internet, Cecelia Kang of The Washington Post and Jeffrey Eisenach of the American Enterprise Institute. From a studio at Harvard University, Susan Crawford joins us. She's with both Harvard and Cardozo Law Schools. I know you'll want to weigh in. Give us a call at 800-433-8850. Send an email to drshow@wamu.org. Follow us on Facebook or send us a tweet. Welcome to all of you. Good to have you here.

  • 10:08:02

    MS. CECILIA KANGThank you.

  • 10:08:03

    MS. SUSAN CRAWFORDGreat to be here.

  • 10:08:04

    MR. JEFFREY EISENACHThank you very much.

  • 10:08:05

    REHMGood to have you all here. Cecelia, let me start with you. Before we talk about the court's ruling Tuesday, how did we get to this point? Why was Verizon suing the Federal Communications Commission?

  • 10:08:24

    KANGSo, three years ago, the Federal Communications Commission came out with what was actually landmark rule that basically, for the first time, put new regulations on broadband Internet providers known, as you said, net neutrality or open Internet regulations. Those rules were written at a time when the FCC was acknowledging that its jurisdiction or its role as sort of the cop of phone companies was changing as Americans were increasingly using broadband Internet service.

  • 10:08:55

    KANGThis idea, the telecommunications companies that have been the phone providers and are now the broadband providers did not like the new rule that was put in place and specifically Verizon Communications, which has a wireless business and also has a broadband Internet business that goes into homes.

  • 10:09:13

    KANGThe landline businesses sued that FCC in 2010 saying the FCC, which was originally a phone regulator, should not be in the business of regulating broadband Internet providers. So that's what happened in 2010 and the court this week agreed in large part, actually partially, but generally with Verizon saying that the FCC overstepped its authority as a regulator of that particular service, broadband Internet service.

  • 10:09:44

    REHMBut when you say almost, I mean, there's sort of a little bit of wiggle room here.

  • 10:09:54

    KANGThere is wiggle room. And what was very interesting in this opinion, the 63-page opinion by the federal appeals court and a portion that the FCC chairman, Tom Wheeler, this week was, you know, quite a bit of effort to highlight is that the court did say that the FCC does have some authority to be a broadband regulator but that its net neutrality rules, the specifics of its net neutrality rule, go beyond its jurisdiction.

  • 10:10:23

    REHMSo the FCC itself would then have to decide -- would have to vote and decide that it does have the authority to exercise control over Verizon and the other provider.

  • 10:10:42

    KANGThe FCC currently believes it does already. So the FCC at this point would probably go to -- would have to decide whether it wants to appeal again and fight this battle again in the courts or also just claim its authority, re-categorize as this is when you get in sort of telecommunications policy, wonky land, but to re-categorize its services in a way that makes it very clear that the FCC believes that broadband Internet services is a utility, like a phone.

  • 10:11:14

    REHMAh.

  • 10:11:14

    KANGAnd that would give it much clearer jurisdiction over broadband service.

  • 10:11:18

    REHMSusan Crawford, what was your reaction to the ruling on Tuesday?

  • 10:11:24

    CRAWFORDIt's a very thoughtful ruling with profound implications for the future of American communications that go far beyond net neutrality. So Judge Tatel says the FCC has identified a problem. High-speed Internet access providers do pose a threat to Internet openness. Tatel goes on to say the FCC does have authority over high-speed Internet access, but what's happened is that the rules that the FCC adopted in this instance, run headlong into the FCC's decision in 2002 to classify high-speed Internet access as an unregulated service.

  • 10:12:01

    CRAWFORDTatel makes is clear that all the FCC has to do is a bit of administrative work to reclassify internally high-speed Internet access providers as common carriers. It can do that without going to Congress. It has a proceeding that's open and then it has ample power to address what has become a stagnant unproductive infrastructure element of American society.

  • 10:12:24

    REHMSo why do you believe that consumers are at risk if the FCC does not act?

  • 10:12:34

    CRAWFORDIf the FCC doesn't act, every single time it tries to do something about Internet access in America, it's going to have a knock-down drag-out fight with great lawyers over the definition of what it's done. Has what it's done run into this common carriage blockade? Also the FCC is going to run into a lot of First Amendment arguments being made by the carriers. They're saying they're just like The New York Times. So any action by the FCC becomes subject to this presumption of unconstitutionality, unless the FCC reclassifies. Then, it can avoid all these fights.

  • 10:13:14

    REHMJeffrey Eisenach, what was your reaction to the court's ruling? Are you pleased that net neutrality was struck down?

  • 10:13:24

    EISENACHWell, I think in the short run, the ruling is very good news for American consumers, for innovation on the Internet, for our broadband industry because it did strike down these very sweeping one-size-fits-all regulations which banned entire classes of business models, whether or not they helped consumers or harmed consumers, and essentially in doing so, prevents broadband providers and other parts of the Internet ecosystem from innovating new business models that consumers want to see -- essentially bans customization of Internet services.

  • 10:14:00

    EISENACHThat's a good thing for consumers that those very broad and sweeping regulations have been struck down. The bad news is that the court, as Susan has said, did acknowledge the FCC's extremely broad authority to regulate every aspect of the Internet going beyond the broadband and communications providers to the Googles, the Facebooks, even the device makers.

  • 10:14:26

    EISENACHThere's really no obvious limit in the FCC's authority to do something we've never done and that is to put the heavy hand of government regulation on the Internet. The Clinton administration deregulated the Internet, commercialized the Internet, privatized it in the mid-1990s. It's a great American success story, free market success story, and we shouldn't be having the Federal Communications Commission now coming and regulating it, especially give how successful it's been.

  • 10:14:52

    REHMI'm really interested in your statement that this is good news for consumers, and Susan is saying it's really bad news for consumers. Why do you think it's good news for consumers?

  • 10:15:09

    EISENACHWell, so let's start with the fact that this is never going to be a regulation-free zone entirely. It's never going to be do what you want and damn the consumers. Rather, the question is how we go about regulating bad behavior on the Internet. Do we do that on a case-by-case basis under the anti-trust laws or at the FCC? And that seems to be where Chairman Wheeler is going, if you read his statements, that we are going to look out for bad conduct.

  • 10:15:32

    EISENACHWe are going to look for examples. If Comcast were to cut off Netflix tomorrow, that'd be an anti-trust case. Whether its pursued in the anti-trust courts or at the FCC, one way or another, the government's going to look at that and it ought to look at that, but on a case-by-case basis. What the government shouldn't do is ban entire sets of business models.

  • 10:15:48

    EISENACHSo, for example, if ESPN wants to pay AT&T so that AT&T customers can get free access to ESPN streaming sports content without having to pay for it or count it against their usage caps, consumers are probably going to like that. That's an opportunity for consumers to pay less. Why should we ban it?

  • 10:16:07

    REHMIsn't ESPN likely to pass that on to consumers?

  • 10:16:13

    EISENACHWell, ESPN's passing it on to advertisers. ESPN doesn't charge consumers. ESPN charges advertisers and...

  • 10:16:19

    REHMBut couldn't that change the model?

  • 10:16:21

    EISENACHOh, sure. But, you know, the market's an amazing thing, right? So in all of these markets, you have multiple players. In the market for radios, for example, you have advertiser-supported radio, but you also have -- well, let's talk about newspapers. You also have people paying for subscriptions for newspapers. So you have two-sided markets, subscribers and advertisers. You don't want to ban business models and those markets change over time. Who pays changes over time.

  • 10:16:48

    REHMJeffrey Eisenach, he's with the American Enterprise Institute. Susan Crawford, she's visiting professor at Harvard University's Kennedy School and professor at Cardozo Law School. And Cecilia Kang, she's technology reporter for The Washington Post. I know you want to weigh in, Cecilia.

  • 10:17:15

    KANGWell, I think the change of business models on the Internet is really what's most important about this ruling this week in that the Internet has been something that's been very open for the way that it was created and it has so far been in the sense in the control and in the hands of the consumer to figure out what they want to access and how they want to access.

  • 10:17:40

    KANGAnd the fear or the potential for the Internet to become a little bit more -- to be transformed and look maybe even like cable TV where business partnerships between the platform provider and the media companies sort of drive the economic model will just really transform the experience, those are the big questions.

  • 10:18:01

    KANGAnd I think that there are, you know, it's really up in the air as whether it is going to be good or bad for consumers 'cause I can see if you are, with this ESPN example, an avid viewer of ESPN, you might love the idea of free ESPN content and those charges not being, you know, part of your bill. But then also there is questions, as you said, Diane, whether those costs, in some way, will be passed down to consumers and if it gives you less control as a consumer.

  • 10:18:30

    REHMCecilia Kang of The Washington Post. Short break here. We'll take your calls, your email, and your Facebook postings and tweets.

  • 10:20:00

    REHMAnd as we continue our discussion about the federal appeals court ruling Tuesday striking down the FCC's Net neutrality rules, we're joined now by Rashad Robinson. He's executive director of ColorOfChange.org. That's a nonprofit founded after Hurricane Katrina to strengthen the political voice of black Americans. He joins us from New York City. Rashad, welcome to the program.

  • 10:20:41

    MR. RASHAD ROBINSONThanks for having me, Diane.

  • 10:20:43

    REHMTalk about why you are concerned about this ruling by the federal appeals court.

  • 10:20:53

    ROBINSONYou know, Color of Change has been at the forefront of efforts to protect our ability to communicate freely online since we fought, you know, the -- to enshrine rigorous FCC net neutrality rules back in 2010. You know, the ability for us to communicate freely, to be able to have access to all sorts of news and for information to be able to rise up organically is sort of at the heart of marginalized communities being able to have sort of free and unfettered access to this type of information.

  • 10:21:27

    REHMSo what was your reaction to Tuesday's court ruling?

  • 10:21:33

    ROBINSONWe're incredibly, you know, disappointed. You know, this is taking sort of ISPs and our ability to access the Internet on landlines much -- it's moving much in the direction that we've seen on cell phones and moving it, as the last -- as one of the last speakers said, moving it increasingly in a direction of how we access our cable.

  • 10:21:58

    REHMGive us an example, Rashad, of how African-American communities could be negatively affected by Tuesday's ruling.

  • 10:22:11

    ROBINSONWell, we've already seen it, Diane, on cell phones. You know, when you account for cell phone usage, when you account for mobile access to the Internet, you know, the digital divide that we oftentimes hear about that separates black community and people of color access to the Internet from others really closes, but because of, you know, something that the -- FCC giveaway that allows for mobile phone companies to have different rules on cell phones, you know, the type of content -- when we can access our content, the rules of the road, per se, on cell phones have been very different.

  • 10:22:52

    ROBINSONSo sort of imagine, for instance -- you know, imagine Comcast, a corporation that because of the lack of competition in the cable industry, we already pay very high bills for cable. Imagine them being able to penalize you for accessing content that's different from NBC, which they also own. They're NBC news affiliates.

  • 10:23:18

    ROBINSONImagine them being able to charge you more for accessing CNN. Those are already sort of the type of rules that are potentially in place on cell phones. And now we're moving in that direction with the opportunity for ISP companies, for folks who provide Internet to the landline, to be able to decide what we get.

  • 10:23:39

    ROBINSONAnd for folks who are maybe trying to access a small blog in a local community, for activists trying to mobilize their communities to fight back against corporate power or to fight back against laws and aftermaths of issues like Trayvon Martin or to fight back against voter suppression, their ability to access the content that they want when they want at the same speed is now limited and is now in jeopardy because of this ruling.

  • 10:24:10

    REHMAnd, Rashad, finally what do you hope to see Chairman Wheeler of the FCC do here?

  • 10:24:21

    ROBINSONWell, you know, my organization and I, you know, we spoke with the chairman two weeks ago out in Oakland and with a number of other community groups. And, you know, we are urging and organizing and mobilizing our members through ColorOfChange.org to push the FCC Chairman to reclassify broadband in our Internet services so that it's the same as telephones. It's the same as transportation.

  • 10:24:53

    ROBINSONYou know, the Internet is no longer a luxury. If you want to apply for a job, have access to education -- everything that we do is increasingly becoming online. And in order for marginalized communities, in order for poor people, in order for those folks who oftentimes have historically not been able to access the Internet, to be able to play at equal footing, we can no longer look at the Internet as a luxury in this country. And so, you know, it's about time that the FCC really looks at reclassifying.

  • 10:25:25

    ROBINSONWe hope that this unfortunate ruling will move us in a positive direction, have Internet reclassified by the FCC so that these telecom companies, these major corporations, which have no incentive to ensure free and fair access to poor people, to marginalized people, to ensure that the telecommunication lines that have been built on taxpayers backs for years are not just something that the big telecom companies can continue to use to make more money off of consumers.

  • 10:26:02

    REHMAll right. Thank you so much for joining us, Rashad Robinson. He's executive director of ColorOfChange.org. And turning to you, I wonder how you actually feel about his comments, Jeffrey Eisenach.

  • 10:26:26

    EISENACHWell, you know, I think those are all valid concerns. I think the question is how realistic they are. So if you go back over the history of the Internet, during which we've never had the kind of regulation the FCC tried to impose in 2010, you can count on less than one hand -- fingers, three or four times, where there's been any kind of episode of blocking or discrimination that the rules were designed to present -- and literally zero episodes of politically motivated blocking of any kind.

  • 10:26:57

    EISENACHSo the reality is that the marketplace has produced a tremendous miracle in the United States. Rashad is right that minorities and the less-advantaged people in the U.S. are more likely to use mobile broadband access. They benefit from the best mobile broadband networks in the world in the United States, and networks which have been largely unregulated from their inception. So the marketplace has produced tremendous results not just for the digital elite, if you will, but for all Americans. And the concern is that we now start messing with that magic innovation machine and messing it up.

  • 10:27:35

    REHMSusan Crawford, is there a belief that there are two tiers here?

  • 10:27:44

    CRAWFORDYes. We're suffering from a deep digital divide in the United States which is entrenching existing inequality. Relying on smartphone access is not a substitute for a high-capacity wire to the home. Look, this is just infrastructure. It's like the highway system. It's like electricity or clean water. And it's far too important as infrastructure to leave to a failed market, which is what we've got at the moment.

  • 10:28:09

    CRAWFORDIt cannot be that we leave high-speed Internet access to the vagaries of a few companies to decide where they're going to provide service, at what price, to what communities. If we don't reclassify, we'll be left with this existing digital divide internally and also a national divide. We're falling far behind when it comes to penetration of high-speed fiber optic lines, behind countries in Asia and in northern Europe.

  • 10:28:38

    REHMBut, Susan, is Jeffrey Eisenach right about the FCC maintaining enough power to rein in the bad actors without net neutrality rules?

  • 10:28:54

    CRAWFORDLet me tell you a story. Back in 1996, Section 230 of that '96 act said that Internet intermediaries could not be treated as publishers for purposes of their liability. That language, don't treat us as a publisher, has been turned into blanket immunity for intermediaries through great lawyering. Here we've got the D.C. Circuit saying, any rules that would treat these actors like common carriers would be blocked because the FCC has refused so far to reclassify. That blockade can be lifted. And if it isn't, all we'll be doing is litigating for the next 100 years.

  • 10:29:32

    REHMCecilia.

  • 10:29:33

    KANGWell, in -- when the iPhone came out in 2007 and AT&T was the only carrier of the iPhone at that time, there was a brief time period when Skype actually was not available on the iPhone. And until consumers brought that to the public's attention and said -- and they complained that, why aren't we able to access Skype, the FCC chairman at that time, Julius Genachowski, sort of used the bully pulpit of his position and said, this doesn't sound like it, you know, passed muster in my mind.

  • 10:30:04

    KANGThat's when AT&T changed its mind. I think that those kinds of harms that -- you know, I think Jeffrey's right, that there aren't a lot of examples that I've actually seen. But there also may -- it's harder for sort of these wrongdoings to be discovered in a way.

  • 10:30:22

    KANGAnd also for -- in the case of minority content and other content to really be at -- to get in front of the public, it'll be harder for smaller, like, less moneyed interests to be able to negotiate with carriers potentially, to make sure that their content and their services get the same sort of play as the services and website that are big like Google and Facebook and Twitter. And they have money, and they potentially could pay for better and premium access to consumers.

  • 10:30:54

    REHMJeffrey.

  • 10:30:55

    EISENACHWell, two things. One, it is important to note that the court did not strike down the FCC's transparency rules. And so to the extent that carriers do engage in any kind of blocking of websites, they need to notify their customers that they're doing that. This isn't going to happen secretly in the dark of night.

  • 10:31:09

    EISENACHNow, as a practical matter, I think consumers do a pretty good job on blogs and eventually reaching the media if people are mad about something, of making that known. And I think carriers react to it. So -- but I don't think we're entering a time where blocking is going to happen surreptitiously and nobody will know.

  • 10:31:24

    REHMOK. Let's put blocking aside for just a moment. Couldn't Internet service providers like AT&T and Verizon now charge companies like Netflix and YouTube more money to deliver movies and videos faster?

  • 10:31:47

    EISENACHAll right. So this is -- the answer's, yes, and that's a good thing, right. So we have...

  • 10:31:53

    REHMWhy is that a good thing?

  • 10:31:54

    EISENACHYeah, so it's a good thing because, first of all, we have an extremely competitive marketplace for broadband in the United States. We have cable. We have wire line telephone service, both fiber and copper. We have satellite service in the United States to 100 percent of U.S. households delivering 16 megabits downstream, 4 megabits upstream. That's faster than the average in the fastest countries in the world.

  • 10:32:16

    EISENACHSingapore and Seoul have slower average broadband speeds than are available to every American today for $69 a month via satellite. And those are good services. They're now -- you can use VOIP. You can play games on them. You can download videos. So every American has a choice of broadband services. The question is, how are we going to pay for the billions and billions and billions of dollars of infrastructure investment that make those services available to us?

  • 10:32:41

    REHMJeffrey Eisenach of the American Enterprise Institute, and you're listening to "The Diane Rehm Show." I want to open the phones now, 800-433-8850. First to Dennis in Chevy Chase, Md. You're on the air.

  • 10:33:04

    DENNISGood morning. I'm very concerned that I haven't heard enough about how the consumer's really impacted. The conservative side is really poo-pooing the actual effect on the consumer and their choices. For instance, there are certain -- besides Skype, there are other applications that wouldn't be enjoyed on the -- some Internet service providers because of the philosophies of the service providers. And Verizon's always been a bad one for that. They used to be called AT&T, and they used to have a lot more constraints.

  • 10:33:46

    DENNISFor instance, you couldn't get faxes without paying special fees through AT&T before they got broken up. And the fax -- every fax you wanted to send over en e-fax service was going to cost an extra dollar because AT&T wanted to get that money from you. And then you'd have to pay them for that kind of service. When you want to do a long-distance call over AT&T's -- or over Verizon cable, you might have to pay more because of...

  • 10:34:18

    REHMAll right. Let's see what Susan Crawford has to say. How might the ordinary consumer be affected, Susan?

  • 10:34:28

    CRAWFORDWe're being nickel and dimed to death. And what's going on is these guys want to make more money from the same infrastructure that they've got in place. And how you do that is drive greater fees down on consumers and then fees on content providers who want to attack, to want to be able to reach subscribers. Look, these actors made six times as much money in the last 12 years than they spent on investing in their networks. They're not expanding. What they're doing is harvesting. It's not evil. It's just what a private-making company does.

  • 10:34:58

    REHMHere's a...

  • 10:34:58

    CRAWFORDSo inevitably they'll charge more.

  • 10:35:00

    REHMHere's a tweet: "Verizon claims it has to charge more to assure its profitability. What is Verizon's current profitability?" Do we know, Cecilia?

  • 10:35:15

    KANGI don't have the numbers at the top of my head, but they're extremely profitable. AT&T, Comcast, Verizon, they're extremely -- they do put billions of dollars into their R&D and also into investing in their networks. But they also reap billions of dollars in revenues every quarter.

  • 10:35:31

    REHMSusan, do you have a figure on that?

  • 10:35:35

    CRAWFORDThey're making trillions and investing, you know, a sixth or a fifth of that into their network.

  • 10:35:42

    REHMAll right. And Jeffrey.

  • 10:35:42

    EISENACHWell, let me -- we should go back and fact check trillions, Susan. I think you've got a few extra zeroes in there. But the fact of the matter is that all successful companies on the Internet are profitable. Google's extremely profitable. Netflix is extremely profitable. The Walt Disney Company is extremely profitable. What we observe when we see Internet companies is we see the survivors.

  • 10:36:04

    EISENACHWe're seeing companies that have taken tremendous risks, in the case of Google and investing in software, in the case of Disney investing in content, in the case of Verizon and the other ISPs investing in very expensive broadband networks. The broadband networks that we have in the United States, 85 percent of U.S. consumers have access to 100 megabit service over their Internet service providers. Less than a third of European consumers have that same kind of access.

  • 10:36:33

    REHMHowever, that doesn't speak to the profitability.

  • 10:36:37

    EISENACHWell, so the studies that have been done comparing the profitability of broadband ISPs compared with other components of the Internet ecosystem show that broadband ISPs are far and away the least profitable sector.

  • 10:36:49

    REHMSusan, very quickly.

  • 10:36:51

    CRAWFORDJust very quickly, Jeffrey, there's a difference between Internet access and applications that you use online. All we're talking about here is infrastructure. It's a different animal. It's like a railroad, like electricity, and has different characteristics.

  • 10:37:04

    REHMSusan Crawford, she's with both Harvard University and Cardozo School of Law. When we come back, more of your calls, your email. I look forward to speaking with you.

  • 10:39:58

    REHMAnd welcome back. As we talk about the FCC ruling of the court and efforts to protect open access to the Internet, here from Arlee, in Vermont, is an email. "If you compare our network access and the price we pay for that substandard access to other major European countries, France, for example, you will see we pay dramatically more for dramatically less speed, access, and consistent availability. We are far behind the rest of the world, regardless of how the data is spun."

  • 10:40:56

    EISENACHWell, I'll just let the chief regulator of European Telecoms, Neelie Kroes, answer that question for me. She and the other members of the European commission who oversee telecommunications and Internet networks in Europe have stated publicly, repeatedly over the course of the past year, that Europe has fallen behind on every count. They've fallen behind in investment. There's virtually no fiber deployment throughout most of Europe. They're reliant on these 20th century copper networks which have real limits on the amount of speed that they can deliver.

  • 10:41:28

    EISENACHAnd when you look carefully at the prices when you go on an all-in basis, first of all, the prices in the U.S. and Europe are comparable. Entry-level prices in the U.S. are lower than in Europe. But if you look on the basis of what Americans get for their money, Americans use twice as much data. They download vastly more content. They're much more likely to access video on the Internet. And they have much more capable networks to do all of those things.

  • 10:41:53

    REHMCecilia?

  • 10:41:54

    KANGWell, every year, the OECD comes up with a list of the best and the highest quality broadband service. And they rank countries in that order. And consistently, over several years, the U.S. has actually ranked fairly low, past 10 typically. And that comes back to sort of the question of, how profitable are these companies?

  • 10:42:20

    KANGAnd a company like Verizon, if they are making so much money and they talk about the need to be able to use these new business models that the court decision now allows because they do invest so much into their business models, you know, the question is really, what are the economics there and why aren't they investing more to make us higher on that OECD list?

  • 10:42:42

    REHMWe do have some figures here. Lisa Dunn, our producer, has found that in the first quarter of 2013 Verizon made $2 billion in profit. If we can get any other figures, we'll be happy to share them with you. Susan?

  • 10:43:05

    CRAWFORDBetween 2001 and 2012 Verizon, AT&T, Time Warner Cable and Comcast together made $2.5 trillion dollars in revenue and spent about a fifth of that on their networks.

  • 10:43:19

    REHMAll right. Let's go back to the phones to Chapel Hill, N.C. Hi, Margaret.

  • 10:43:27

    MARGARETHi. I have two quick points.

  • 10:43:29

    REHMSure.

  • 10:43:29

    MARGARETFirst, Jeffrey keeps using the phrase free market and talking about how successful the free market model was in the early 1990s. And while that's true, it completely ignores the fact that the reason it was successful was that all Internet was provided via phone lines. And as common carriers, phone lines and phone companies were required to share their infrastructure, that's what allowed there to be so many different ISPs during that time period. Today, everybody's getting their cable Internet. There's not the same sort of competition because they're not being forced to share their infrastructure.

  • 10:44:02

    MARGARETThe second point I wanted to make is actually a question. Wouldn't it be a lot more difficult to reclassify ISPs as telecommunications because of the influence of lobbyists? Lobbyists give a lot of money from the Internet service providers, like Verizon, to Congress. Couldn't they just starve the FCC of funding?

  • 10:44:20

    REHMAll right. Thanks for your call. Cecilia, on that first point?

  • 10:44:25

    KANGCan you remind me of the first point?

  • 10:44:27

    REHMYeah, she talked about the free markets and the phone lines and sharing of infrastructure back in the '70s and '80s.

  • 10:44:39

    KANGRight. Well, specifically…

  • 10:44:43

    EISENACHShe was talking about Selex and the unbundling experiment.

  • 10:44:46

    KANGYeah, right. I think that the FCC's in this real fix right now. And one of the motivating factors of this net neutrality regulation that was created in 2010 was that there was a lack of competition and that, for landline broadband and of the more robust broadband the caller's referring to, most Americans only have a choice of one or two providers.

  • 10:45:13

    KANGAnd so one of the motivations of the FCC is to protect -- given that there isn't a lot of competition, they were afraid or they're trying to prevent the idea of one or two or three companies in the nation being sort of gatekeepers of how Internet content is accessed by consumers.

  • 10:45:31

    REHMAnd then, Susan, she talked about reclassification and the power of the lobbyists.

  • 10:45:40

    CRAWFORDThe caller's unquestionably correct. In fact, the head of the cable association, Michael Powell, former chairman of the FCC has said that it will be World War III from the lobbyists' standpoint if the FCC attempts to reclassify. What they're talking about is political pressure, litigation, campaign contributions, whatever it takes.

  • 10:45:59

    EISENACHWell, you know, I think that's a one-sided story. So what do the net neutrality rules do?

  • 10:46:05

    REHMHey, has he used that phrase, Susan?

  • 10:46:10

    CRAWFORDYes.

  • 10:46:10

    EISENACHYes.

  • 10:46:10

    REHMWorld War III?

  • 10:46:10

    CRAWFORDYes, he has.

  • 10:46:11

    REHMOK.

  • 10:46:11

    EISENACHHe's saying there'll be a fight, but it'll be a two-sided fight. And that's the point. Let's think about what the net neutrality rules do. First of all, they don't specifically ban ISPs from charging consumers for anything. And so there's nothing in the net neutrality rules that say to ISPs, you can't charge consumers for access to a particular website, you can't charge consumers for access to specialized services. They don't protect consumers at all.

  • 10:46:36

    EISENACHThe net neutrality rules say that edge providers, applications and content providers like Netflix and Disney are not allowed to pay Verizon and AT&T for specialized services. Now, if Disney and Netflix and Google and Facebook all got together and said, why don't we agree that we're never going to pay Verizon, AT&T and Comcast anything for specialized services, that would be a Section 1 violation of the antitrust laws, right? Instead, they've gotten the FCC to do that for them.

  • 10:47:07

    REHMCecilia?

  • 10:47:07

    KANGWell, I've never heard of that. I think it's useful to get a little bit of…

  • 10:47:11

    EISENACHWell, isn't that true though? I'm sorry.

  • 10:47:12

    KANG…historical context in that on the lobbying question on reclassification, in that in 2010 -- so the FCC's been operating in this gray zone of ambiguity and that's sort of the problem. And that's where the FCC is today. And in 2010, when then Chairman Julius Genachowski was confronted with the same question, should the FCC in the broadband era reclassify, he took it under serious consideration and there was a firestorm of protests from…

  • 10:47:43

    REHMFrom?

  • 10:47:44

    KANG…lawmakers, from Republican lawmakers in particular, from the telecommunications industry. It's the idea -- and you can understand if you are of a profit-motivated company. And it makes sense, if you are a telecommunications company, you don't want more regulations. They know what it's like to be regulated.

  • 10:48:01

    KANGTheir whole existence has been regulated under the FCC. So the idea, as these companies move from copper to broadband infrastructure to fiber and other networks, that they would now just shift this sort of oversight that had in the phone era, that was very stringent, to their new technology, is scary to them.

  • 10:48:23

    REHMSusan?

  • 10:48:24

    CRAWFORDJust a brief point. We wouldn't have had the Internet had it not been for regulation. The fact that the existing DSL providers were required to let computers connect to their lines and required to let people dial into ISPs, that's why we had a commercial Internet. It's these rules that created the free market, that created the ability of the Internet ecosystem to boom. We need this infrastructure in place.

  • 10:48:48

    REHMDo you want to comment?

  • 10:48:49

    EISENACHWell, I do. And let's just go back to the previous point. Yes. Obviously, Internet service providers would like the ability to charge the Disneys and Netflixes of the world rather than having to charge consumers. But by the same token, the Disneys and Netflixes of the world would like the ability to not have to pay Verizon and AT&T and Comcast.

  • 10:49:10

    KANGThat's for sure.

  • 10:49:10

    EISENACHAnd they have lobbyists, too. So the notion that this is a telecom monopoly, owns the Congress, lobbies and gets what it wants is a little fantastic and naive in terms of the reality of Washington.

  • 10:49:23

    REHMCecilia?

  • 10:49:23

    KANGWell, I think Jeffrey's right. A lot of the Web companies actually are very moneyed, and they have deep benches. And they're sort of lobbying forces in Washington. The Google, Facebook, these big companies do. And, you know, interestingly, they would be in the best position, actually, to pay for premium access.

  • 10:49:41

    KANGThey themselves have said that they are big proponents of net neutrality. So that would be very difficult for them to do something like that. So there is two sides. I think Jeffrey's right in that way and that these big Web companies are very motivated to insure that any of their content is easily accessible.

  • 10:50:03

    REHMSo that means you've got fights on all sides, Susan.

  • 10:50:08

    CRAWFORDWell, the problem is, think of Facebook just like ESPN, same for Google. These are big guys. And they're happy to close the door behind them, to tell you the truth. There isn't a big organization of yet unborn businesses ready to fight against the possibility that the infrastructure, the sidewalk, is going to rise up and control their fates. That's the problem. If you've got a street grid, it has to sit there neutral and allow the free market to operate. Without clear authority, the FCC will always be at the whim of the giant telecommunication companies.

  • 10:50:43

    REHMCecilia?

  • 10:50:43

    KANGThe real question is how the telecommunications companies, these broadband service providers, will actually -- what their new business models will look like. They've been very open about their desire to not be what's known as a dumb pipe. Being able to only do one thing, is to just funnel high-speed Internet into your home. They want to do what in the business world is called upstream selling, is to be able to, like, create new business models to layer on top of that and create more opportunities for revenue.

  • 10:51:11

    KANGAnd, in fact, in 2006 the chairman of AT&T, then Ed Whitacre, said that. And he sort of scared the whole Silicon Valley web industry when he said, the last thing we want to do is become a dumb pipe. We want people like -- and he didn't name them by name, but, like, Google to pay us. They shouldn't have a free ride on us. And that scared the Internet companies, but you can understand they've been very open, the telecommunications industry, about what their business motivations are.

  • 10:51:40

    REHMAll right. To Pat, in Bono, Ark. You're on the air.

  • 10:51:46

    PATHello, Diane. First time, long time.

  • 10:51:48

    REHMThanks.

  • 10:51:50

    PATThis is kind of directed towards Jeffrey, but this is more of an ethical issue. Now, Jeffrey has kind of defended the ethics of the phone companies all the way through. Now, let's start way away from here. Verizon sold off a lot of -- now, I'm stepping back to wire line, to copper. Verizon sold off a lot of its rural areas and kept the large cities.

  • 10:52:15

    PATNow, when you imagine a mile of cable in a city versus a mile of cable in a rural area, there's a large profit difference here. But in my area here, I had customers -- I no longer work for a telecom company, but at the telecom company I worked for, I had miles and miles and miles of customers who had not cell service, which is where our broadband is focused on. I had elderly ladies, elderly men, family people who had no cell service, who had terrible phone service. They had telephone cable in 1960, 1970, some of them even 1950's telephone cable that was bought, paid for years ago.

  • 10:53:05

    REHMAll right. Thanks for your call, Pat. Cecilia?

  • 10:53:08

    KANGDefinitely the FCC, one of its big mandates is to insure that there's what's known as universal service of telecommunication services and broadband services to anyone in America, to the most hard-to-reach areas. And that's been a big challenge. And it's actually a mandate from Congress as well to the FCC to insure that. So the good news about the court decision is that the court actually affirmed that the FCC should be doing that and they should continue that role.

  • 10:53:38

    REHMAnd you're listening to "The Diane Rehm Show." I know you want to comment, Jeffrey.

  • 10:53:44

    EISENACHWell, just very quickly. So the examples that we've heard of, dysfunctionality -- I think it was Dennis earlier who talked about charging for faxes. We've just heard…

  • 10:53:51

    REHMTelephone service.

  • 10:53:53

    EISENACH…Pat talking about phone service. Those are all regulated services, right? So if you look back over the history of certainly the examples that people are bringing to us on the show today, these are examples of services that were regulated just the way that Susan is proposing that we regulate the Internet going forward.

  • 10:54:07

    EISENACHRegulation has not been a successful way of providing broadband service -- and it hasn't been applied to broadband service. Hasn't worked with respect to lots of aspects of telephone. I want to come back and just ask your listeners to Google ViaSat broadband satellite. And you'll see that I'm not making it up. It's very fast broadband Internet service available for $70 a month to every American.

  • 10:54:27

    REHMSusan?

  • 10:54:27

    CRAWFORDIt's 22,000 miles up, 22,000 miles down. That service will never, never substitute for what's possible over a fiber optic line to homes and businesses. And in Sweden, 90 percent of people in Stockholm have exactly that. They're paying a quarter of what I'm paying in New York City for speeds that are 17 times as fast. We've got a problem in America.

  • 10:54:50

    REHMConsidering not only today's discussion, but what all of you have referred to as the likely backlash if the FCC tries to move forward to net neutrality, what do you think is likely to happen, Cecilia?

  • 10:55:11

    KANGThe FCC chairman has to do something. And if that's to appeal the decision or to reclassify remains to be said. He has said only that he's considering all options. This morning he was speaking, actually, at a minority media conference and he said something to the effect that he's encouraged by statements from the telecommunications companies that they will -- no matter what the court has said -- try to continue open policies on the Internet.

  • 10:55:38

    KANGAnd that's sort of an interesting statement in that I wonder if that means the FCC chairman would like to see business self-regulate a little bit more, as opposed to taking a heavier hand. This is his first big test. That's for sure. Tom Wheeler.

  • 10:55:56

    REHMHow do you interpret Wheeler's statement, Susan?

  • 10:55:59

    CRAWFORDHe's a man of great backbone, and he's keeping his options open. His lawyers will let him know what latitude he would actually have to make deals in this setting. He'll remember he's a regulator. Government doesn't do deals. Government makes sure that Americans have adequate telecommunication service.

  • 10:56:16

    REHMJeffrey?

  • 10:56:18

    EISENACHWell, I think Tom is a very level-headed guy. And what he has said -- and I think what will happen -- is he'll take a case-by-case approach. He'll wait and see if the dire predictions of the net neutrality advocates now come true. We're going have a natural experiment. We're going to see what happens without net neutrality rules. If the broadband ISPs start cutting off sites they don't like because of their political views or if we start to see discrimination, you can't start a small business on the Internet, I'm confident the FCC will act. I predict that those predictions won't come true.

  • 10:56:45

    REHMJeffrey Eisenach of the American Enterprise Institute, Cecilia Kang of the Washington Post, Susan Crawford of Harvard Law School and the Cardoza Law School, thank you all so much.

  • 10:57:04

    CRAWFORDThank you.

  • 10:57:04

    EISENACHThank you, Diane.

  • 10:57:04

    KANGThank you, Diane.

  • 10:57:05

    REHMAnd thanks for listening, all. I'm Diane Rehm.

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