Fake Net Neutrality: Like Letting Enron Write the Electricity Rules
Tuesday December 21, 2010
David Dayen’s post this a.m. summarizes concerns about the apparent regulatory capture of the Federal Communications Commission, which is about to issue new rules to undermine internet open access, aka, “net neutrality.” NYT coverage is here.
I’ll leave to Tim Karr and others to describe the technical features and sell outs that have allowed the Western World’s Worst internet/broadband structure to become slower, more expensive and more discriminatory than services in other countries. Senator Al Franken gave an excellent speech, worth watching on the full range of policy issues.
It may help to have an analogous framework on how to think about what corporate capture of the internet and broadband service means, not just in terms of speed and coverage but in terms of content and pricing. It’s not just that our service is slower and we face monopoly pricing, it’s that a tiny handful of corporations are seizing control of what we’ll be allowed to watch and read.
Suppose that President Eisenhower had proposed we build an interstate highway system, but we’d allow only three or four large corporations to carve up and own all the main interconnections, determine the tolls and decide who got to drive on them during which hours. The corporations could also decide where the on/off ramps were, which communities they did or didn’t serve, where the routes went, depending on which provided better tax breaks.
And suppose these same companies owned a couple of auto companies, and they could decide whether cars and trucks made by their affiliate companies got better access, more lanes, higher speeds and lower tolls than cars/trucks sold by competitors.
Then suppose the Justice Department and the FTC did not think it their job to enforce the anti-trust laws of the United States, while the federal highway regulators did not believe they should have rules requiring open access, fair pricing, and non-discrimination.
Welcome to the forthcoming US policy on broadband/internet access.
We’re now told that the Democratic appointees on the FCC plan to develop a master plan for how this will all work. But until the Obama Administration and Congress forcefully and clearly direct the FCC to adopt and enforce rules for open, non-discriminatory access to the internet, the FCC has no framework consistent with the public interest for talking about some master plan. I doubt they’re even having a relevant conversation.
We saw an analogous battle over access to another network, the electricity transmission infrastructure. That industry spent over two decades struggling with the concepts of open access, non-discrimination, and efficient pricing. And after some failures and very bad false starts — recall California — we’ve made some progress there.
The electricity transmission system now connects the whole country, but its operation, once wholly balkanized, is now split between two types of system operators.
In over half the country, the transmission system is operated regionally by an independent, non-profit organization overseen by a federal regulator. Each independent system operator (ISO) functions under open access, non-discrimination rules. Every supplier, every generator, regardless of ownership, and every buyer/community/utility gets open access to the entire grid on non-discriminatory terms. Every technology/fuel source — wind, solar, coal, gas, nuclear, etc, can get on the grid just by connecting to the interconnected grid and agreeing to the open access rules. This system keeps the lights on in well over half the country, and the same model functions in about a dozen countries world wide.
However, in the rest of the US — mostly the deep South (think Southern Company) and the West (outside California) — the transmission system is owned and operated in a balkanized fashion by a [usually] private regional utility monopoly that has a vested interest in making sure competitors and/or non-preferred technologies are not given the same access as their own generators. If the owner’s lines are “full” or “congested,” the owners can allow their generators to serve their loads but curtail anyone else. Competitors are not allowed to connect to the grid under the same rules; buyers (e.g., municipal utilities) can’t buy from others and use the owner’s lines without negotiating special access deals and paying fees to the owner. The federal regulators tolerate this discrimination, because they can’t overcome the campaign contributions and political influence the monopolists have in Congress. Sound familiar?
Today’s FCC announcement reminds me of where the California electricity restructuring debate was in 1995, about the time Enron and its trader friends (remember “screw granny”?) were at the height of their influence and they were helping the large utilities write the rules that guaranteed discrimination and included rules that we knew would enable Enron’s gaming the system. Those of us who objected and demanded the system operators function as quasi-public entities and guarantee open access and non-discrimination were accused of being socialists plotting a government takeover, even a Soviet 5-year Plan! We’ve been here before, and what’s coming next will be ugly.
It’s blindingly obvious that “citizens” like AT&T, Verizon and Comcast, the nation’s largest cable provider, should never be allowed to write the rules for the internet and broadband access. Nor should their captured regulators ever sanction discrimination and anti-competitive mergers that allow Comcast to gobble up NBC.