Innovation

What have we learned from the FCC's wise inaction this week, in deciding to not vote to declare broadband a Title II telephone service before the election, and to ask more questions in a further Open Internet regulation inquiry about specialized and mobile services?

#1 Stakeholder collaboration/negotiation works. The FCC apparently now better recognizes that the open industry collaborative dynamic that has been so consistently successful in resolving most every other major Internet issue over the last couple of decades, can also succeed in appropriately resolving the FCC's Open Internet concerns now -- if only given the time and flexibility to negotiate a workable outcome.

#2 Apparently net neutrality is not the popular populist political issue it has been touted to be. The September-October period before an election is when the real political rubber meets the road.

FOR IMMEDIATE RELEASE

September 1, 2010

Contact: Scott Cleland

703-217-2407

FCC Chairman Appropriately Endorses Case-by-Case Open Internet Approach

WASHINGTON – Scott Cleland, Chairman of Netcompetition.org, released the following statement regarding the FCC’s Further Inquiry into the Open Internet proceeding.

Skype, one of the high priests of the net neutrality movement, that preaches for Title II monopoly regulation of all the broadband providers it already rides upon for free, has been caught in the act of being blatantly unfaithful to its widely-professed net neutrality principles, by blocking interconnectivity to Fring! 

• Arstechnica and The Hill have both flagged Skype's hypocrisy and infidelity to its supposed net neutrality and openness principles in blocking mobile video calling competitor Fring from access to Skype's dominant network of a ~half-billion interconnected users.  

  Now we know that Skype's proclaimed principled stance for net neutrality and openness was really just a cynical PR and lobbying campaign of crony capitalism, and political cover for an industrial policy where the FCC picks Skype, Google Android, and Amazon Kindle as the "dumb pipe" market winners, and all broadband providers as the "dumb pipe" market losers.

  Skype's "do as I say not as I do" stance is particularly hypocritical because of Skype's dominant size relative to Fring, in that Skype has about a half billion users and is "responsible for 12% of global international calling minutes" per Skype.  

Google has much to lose in its ill-advised PR and public policy war with Apple, its previous closest Silicon Valley ally.

Antitrust or Fiduciary liablility? Google's recent market behavior puts Google and its CEO Eric Schmidt in a lose-lose situation.

Curious. Very curious. Now reports have it that the FTC is investigating Apple for mobile ads, given what they learned from their ultimate approval of Google-Admob, despite that merger raising "serious antitrust issues." 

What's wrong with this picture?

First, apparently the FTC has concluded that the real risk to competition is not Google-AdMob (that had the #2 player Google buying #1 AdMob for ~75% market share of in-app mobile advertising), but a new entrant, Apple, that had no advertising share at all just a few months ago and bought the weak #3 competitor with less than 10% share.

• There must be a new FTC antitrust doctrine at work here that I had not heard of -- that the biggest anti-competitive threat sneaks up from innovative new entrants with better products and services! Huh?
• The FTC also appears to be breaking new antitrust ground in implying that a non-dominant company's individual products, like Apple's iPhone, iPod, and iPad, are all individually separate antitrust markets and all basically essential facilities. Huh?

Second, if the FTC really concluded that competition was sufficient to mitigate the "serious antitrust issues" of Google-AdMob, why not let that supposed mitigating competition from Apple actually compete and mitigate the "serious antitrust issues" with Google-AdMob combining? Does the FTC have faith in their competitive assumptions in Google-AdMob or not?

The FCC is vastly understating the systemic risk involved in the FCC's radical "third way" regulatory surgery to the Internet, the communications sector and the economy.

• The FCC's proposed "third way" is an elaborate public relations facade that disguises huge problems and fatal conceptual/practical flaws that will become painfully obvious over time.
• The FCC's proposal is long on politics and soothing rhetoric, but short on real world practicality or legitimacy; it predictably will ultimately collapse under its own weight, complexity and hubris -- unfortunately leaving exceptional carnage in its wake.
• Simply, this proposal is too inherently contradictory and mind-numbingly complex, and too big not to fail.
• This analysis will explain why it is a disaster waiting to happen; it's not a matter of if, but when the "third way" will collapse on itself.

I.  Why this "third way" is a disaster waiting to happen:

The best way to understand what is going on here is to think of the Internet as a brain and the FCC's "third way" proposal as brain surgery to fundamentally rewire how the Internet brain operates at its most basic level.

At the recent Senate Health IT hearing, it was very good to hear Senator Wyden say that it's "appropriate for Congress... to start thinking... about an HOV lane for e-care for wireless broadband" and questioning why an emergency healthcare service should not be accorded priority transmission over less important/urgent services.

• This is a much more realistic, reasonable, and nuanced point-of-view than Senator Wyden's original net neutrality stance a few years ago when he said that: "all bits are created equal" on the Internet.  

Senator Wyden's moderating view on net neutrality reflects a better and growing understanding of how essential reasonable network management is. Communications networks have long accorded priority to first responders in a crisis.

The essential needs for prioritization of Internet traffic and reasonable network management are basically two-fold:

Google announced 4-9-10 that "we've decided to take speed into account in our search rankings" in a Google blog post by Amit Singhal and Matt Cutts entitled: "Using site speed in web search ranking." (Thanks to the Register's Cade Metz for flagging this issue.)

I highly recommend two oustanding op-eds that you should be sure to read if you care about the future of the Internet and FCC matters:

• FCC Commisioner Robert McDowell's outstanding op-ed in the Washington Post today entitled "Hands off the Internet"; and
• Former NTIA Administrator John Kneuer's different and excellent take in his op-ed for the Daily Caller today entitled "A Hippocratic Oath for the Internet."