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Exposing Netflix’ Extraordinary Net Neutrality Arbitrage

Netflix’ defensive reaction to the Appeals Court Verizon v. FCC decision in its recent shareholder letter speaks volumes about Netflix’s unique and extraordinary net neutrality regulatory arbitrage. It also begs much more scrutiny.

This analysis exposes: how deceptive Netflix has been to its investors about its regulatory risk; how critical Netflix’ misrepresentation of net neutrality to investors has been to its entire economic model; and how relatively wasteful and irresponsible Netflix is in its utilization of the Internet’s bandwidth.

Title II Reclassification Would Violate the President’s Executive Order on “Improving Regulation”

Yet another major obstacle to net neutrality activists’ call for the FCC to reclassify broadband as a common-carrier service is the President’s 2011 Executive Order on “Improving Regulation.”

By way of background, just weeks after the FCC passed its Open Internet Order (3-2) the President issued Executive Order 13563Improving Regulation and Regulatory Review.”

Why Professor Crawford Has Title II Reclassification All Wrong

Recently the leading public voice of Title II reclassification of broadband, Harvard Law Professor Susan Crawford, assertedAll the FCC has to do is change their mind and say, ‘We got it wrong.’ [The FCC] has ample political congressional authority to do that, this is just a political battle. The FCC is concerned that if it acts to carry out this administrative relabeling, it will lose half its budget and half its staff.

The FCC did not get it wrong. Professor Crawford and supporters of reclassification have it all wrong.  

There are three key problems with Professor Crawford’s reclassification position:

Hear Cleland/Crawford Debate Common Carrier Regulation on WNYC Radio – 13 min

For those who want to hear some of the best arguments and rebuttals for/against Title II reclassification of broadband, please listen to the 13 minute back-and-forth between Professor Susan Crawford and I today.

  • Harvard Law Professor Crawford is the leading proponent for common carrier regulation of broadband.
  • Click here for the audio stream.

It’s a good precursor of the debate ahead. 

  • It is also part 8 of my Title II Reclassification Research Series

Title II Reclassification Series

Is Net Neutrality Trying to Mutate into an Economic Entitlement?

Net neutrality activist opposition to AT&T’s new Sponsored Data offering exposes that the purpose of “net neutrality/open Internet” is not just about protecting consumers and free speech, or preventing anti-competitive behavior.

Those calling for an FCC investigation of AT&T’s Sponsored Data are trying to mutate the “net neutrality/open Internet” debate to also be about whether or not there should be permanent economic entitlements, i.e. downstream “zero-price” subsidies, for edge websites and applications – to “subsidize creativity” and start-up innovation via an explicit FCC ban on network termination charges.

Translation:  all websites and applications should be entitled, by “open Internet” network design, to no cost Internet distribution/access to consumers forever, regardless of the costs that their services cause everyone else to pay for.

Dial-up Rules for the Broadband Age? My Daily Caller Op-ed rebutting Marvin Ammori’s

Please see my latest Daily Caller op-ed: “Dial-up Rules for the Broadband Age?” -- here -- which rebuts Marvin Ammori’s Wired op-ed: “We’re about to Lose Net Neutrality – and the Internet as we know it.”

This is Part 35 of the FCC Open Internet Order Series.

FCC Open Internet Order Series

Part 1: The Many Vulnerabilities of an Open Internet [9-24-09]

A Modern Vision for the FCC -- A NetCompetition Event 11-4-13

A Modern Vision for the FCC: How the FCC Can Modernize its Policy Approaches for the 21st Century

Join NetCompetition® and an esteemed panel to discuss: how the FCC can modernize its policy approaches to adapt to modern technology and market realities and unleash innovation, investment and consumer welfare in the 21st century global economy. The panel will discuss:

  • The transition to all Internet-Protocol communications networks;
  • Spectrum incentive auctions and building the long-term spectrum pipeline; and
  • Internet ecosystem competition and the future of the FCC.

Where: 2322 Rayburn House Office Building, Washington, DC 20515

When: Monday, November 4, 2013

Time: 12:00 PM - 1:30 PM

What European Broadband Lesson? -- Part 27 Net Neutrality Research Series

If the Washington Post had fact-checked Save-the-Internet’s spin, or even sought out an alternative viewpoint for balance, they easily could have avoided the obvious fundamental factual mistakes in their article: “What Europe can teach us about keeping the Internet open and free.”

First, Mr. Fung inaccurately attributed Save-the-Internet’s extreme and highly-controversial definition of net neutrality -- “all Internet traffic, no matter where’s its going or who it came from, should be treated the same” -- as the FCC’s “concept of net neutrality,” when the FCC’s compromise net neutrality definition was much less controversial and very different than the Post’s Save-the-Internet characterization.

Video: Why FCC Title II Reclassification of Broadband is a Legal Non-Starter – Part 6 of Title II Reclassification Series

Expect net neutrality proponents to pressure the FCC to reclassify broadband as a Title II common carrier telephone service, if as many expect, the D.C. Appeals Court overturns much, or possibly all, of the FCC’s Open Internet Order in the coming months.

Observers of the September 9th oral argument heard Judges Tatel and Silberman strongly question the legality of applying common carrier-like regulation to an unregulated information service.

If you want to know why it would be a legal non-starter for the FCC to then completely reverse course and try to reclassify broadband as Title II common carrier service, please listen to my video explanation, starting at 7:52. (The written version of my argument is part 5 of this post.)

Professor Crawford’s Desperate Search for a Problem to Regulate – Part 26 Net Neutrality Series

Professor Susan Crawford’s Bloomberg op-ed, “New FCC Head Must Reclaim Authority over Telecom,” exposes a profound lack of substance, in being unable to identify any real market problem warranting FCC regulation.

Let’s review Professor Crawford’s litany of contrived policy problems.

First, she charges that ISPs are working “to ensure no regulator has any real authority over them.” No, ISPs are pointing out the unique excessiveness of having THREE government entities having authority over them on the same general matters. ISPs are not asking for any reduction in authority for the DOJ or the FTC. Specifically, Verizon is asking the D.C. Appeals Court to decide if the FCC exceeded its legal authority in imposing prophylactic common-carrier-like regulation on companies that have not done anything wrong.   

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Q&A One Pager Debunking Net Neutrality Myths