The Northwest Report
December 26, 2010
It’s Time to Say Farewell to the FCC
The Federal Communications Commission (FCC) made a power grab to control the Internet and there is a raging debate on both sides. Rather than take a position to rollback the FCC action or let it stand, I offer a third alternative. Shutdown the FCC.
The FCC should follow its sister agencies, the Interstate Commerce Commission (ICC) and the Civil Aeronautics Board (CAB) into the dustbin of history. The very technology it is trying to regulate is, or perhaps has, made it irrelevant.
Regulation of telecommunications in the U.S. started with the Radio Act of 1912. This was in direct response to the sinking of the Titanic, based on a lack of distribution of coherent radio signals along the east coast of the United States, preventing the ship’s distress signals from reaching the maritime safety officials. It was through this act that Congress seized control of the electromagnetic spectrum for the first time.
The Communication Act of 1934 created the FCC. The FCC, since then, has controlled the radio spectrum, television, telephones, cable, satellite and microwave communications, wireless communications, digital broadcasting and personal communications systems. It also gave us the Fairness Doctrine, the Corporation for Public Broadcasting, and National Public Radio (NPR). But the technology has advanced at such an incredible pace, this is an area where the free market is ready to show its strength over government regulation.
The key to a successful free market is competition and a free flow of information. Of the distinct technologies above, notice how they have changed and increased competition. I spent most of my technology career as a witness to these changes working in voice and data communications. Telephone is nothing like it was in 1934. The old circuit switched telephone network has been collapsed onto the data network. You no longer have voice and data. Now you have voice as data.
In the internet world, what moves around are data packets. The data packets consist of a header and a payload. As analogy think of a piece of mail. What is inside the envelope is the payload. What is written on the envelope is the header. The header basically includes some address information and some information about options on how to handle the packet, or the envelope to continue our post office analogy. Today, inside the envelope can be part of: an e-mail, a voice conversation, a web page, video, a data file, virtually anything you can digitize. The header contains information on how to get it from one end of the network to the other.
The “Reason” for the FCC’s Action
The FCC has perceived that it is possible for a large company to exert power over smaller competitors or customers, to gain an advantage. Therefore we need the government to be ready to step in and stop it if it happens or put rules in place to prevent it from happening. They call this Net Neutrality. This is a solution in search of a problem. If we have learned anything from the 2008 financial disaster, it is the concept of crony capitalism, where the government joins with a few large corporations and cuts deals to cement and protect the dominance of the big boys. It happened with the ICC and CAB; what makes us think it won’t happen here? What we want is real capitalism, unfettered.
The players who make up the Internet tend not to have any interest in content. One reason is that it takes time and computing power to “open the envelope and look inside” to determine what the content is and then make a decision what to do with it. The second reason is that they want to move the data across their network as fast as possible and to do so, they want to spend as little time as possible reading the packet before moving it on. To use our postal analogy, if they can look only at the Zip code to decide how to handle it that would be better than reading the entire address; if they can look only at the five digit Zip code rather than nine digits, that would be better; if they can look at only the first or second digit of the Zip code to make the routing decision, better yet. The less time a packet is held to examine it, the less capital has to be invested in the infrastructure to move it and make up for lost time.
Back when the Communications act of 1934 was passed there was not a lot of competition, although there were a lot of individual providers they seemed to have their own niches, like radio stations. The competition was for the airwaves. But when you look at it today there is a lot of competition and more coming. For example, I have my phone service, television service and Internet service all through my cable company. It seems like once a week I get a solicitation from the local phone company offering to run fiber optics to my house and provide phone service, television and internet to replace my cable company. Everyone in my house has an iPhone and when a call comes into the house phone we generally ignore it, as it is probably a solicitation. If it’s important we’ll get a message and call back. We have even considered eliminating the house phone altogether. The next generation of wireless, 4G, is starting to roll out with a significant increase in bandwidth and that might be the death knell to wires to the house.
My cable company offers three levels of internet service. The basic service is $29.95 per month and it provides 15 Mbps downstream and 2 Mbps upstream. This is fine for my needs. If not, for another $9.95 per month I can get 30 Mbps downstream and 5 Mbps upstream. Need more? For $55 per month over the basic, I can get 101 Mbps downstream and 15 Mbps upstream. For the internet, all that really matters is bandwidth. Everything else can be provided at the endpoints. It should be like water or electricity. It shouldn’t matter what I plan to use the water or electricity for, just get me as much as I need when I need it.
Regulation vs. Free Markets
An example that actually happened concerns Comcast and a product called BitTorrent. BitTorrent is a peer-to-peer file sharing service. Comcast is a cable based provider designed for fast downloads and slower uploads similar to the services provided by my cable company I mentioned above. Some people use BitTorrent to share movies and music and use both the downstream and upstream equally. This caused congestion problems for Comcast because the downstream and upstream had different capacities. Comcast dealt with this during times of congestion by sending a signal to the BitTorrent service telling it to drop the connection. This process not only affected the heavy file sharing users, but also affected other BitTorrent customers. This was quickly picked up by the media. Comcast couldn’t explain itself out of the jam it created. Verizon jumped in and offered Comcast’s customers alternative service with more bandwidth if they switched over. At the same time, tech wizards were figuring out ways to avoid the “hang up” message Comcast had been sending out.
Comcast backed away from its policy, negotiated an arrangement with BitTorrent to help make BitTorrent more efficient and Comcast promised to implement a traffic shaping regime by the end of 2008. “By the time the FCC released a ruling on Comcast’s behavior in July, the issue had already been rendered a moot point by technological and market developments.” To paraphrase a popular saying, “The Free Market will be half way around the world before the FCC gets its boots on.”
A Fond Farewell
With voice merging into data, with cable and telephone companies competing for customers, with wireless gaining ground on land lines in terms of speed and satellite adding to the mix, there is plenty of competition to keep each provider on its toes. It is standard practice on the business side to connect to two or more Internet Service Providers (ISP). The competition is there. The other piece of the free market puzzle is to make sure that information about what is going on and who is providing what flows freely and the need for a government overseer goes away. News and information travels freely and very fast.
No matter what problem occurs, I have more faith in a Silicon Valley tech head to figure it out than a Harvard lawyer at the FCC. In addition, the tech head can formulate a solution, test it, run a beta trial and roll it out before the FCC has figured out who to call as expert witnesses. The Internet has provided tremendous innovation, throwing cold regulatory water on it is a very bad idea.
On the more sinister side of it we have the likes of Al Sharpton trying to get the FCC to start censoring Rush Limbaugh. The free market laughed at what liberal Air America had to offer and so the progressives want the government to impose what they are incapable of achieving through free speech. Also any expansion of government power is likely to lead to crony capitalism. The progressives will tell you all day long they are doing it to protect the little guy, but in the end the fat cats, give boatloads of money to the politicians, then carve up the pie and the little guy either gets the bill or goes out of business.
To enjoy the riches of technological innovation that benefits us all, we should stand back and let the free market work its magic. To our friends at the FCC, thank you for your service, your country is grateful to you. Don’t forget to turn out the lights on your way out.
Thankfully, reprinted from Liberty’s Lifeline.
Copyright 2010 – The Northwest Report. Permission to reprint in whole or in part is gladly granted, provided full credit is given.