Congress

While everyone is understandably focused on the changes in Congressional leadership on the Democratic side, arguably one of the most significant potential changes that directly affects the bottom lines of all Internet-related companies and the future of the Internet could be the ascension of Republican Senator Lamar Alexander (TN) to be the Senate Minority Whip, because he is one of Congress' biggest proponents of ending the Internet Tax Moratorium when it expires in 2007.

Why am I flagging this as potentially a very big deal for the Internet world?

First, Senator Alexander, a former Governor of Tennessee, disagrees with the bipartisan and Republican consensus of the last decade that the Internet is inter-state commerce and as such should not be subject to state and local taxes. Sen. Alexander has worked harder than just about anyone in Congress to authorize States and localities to tax the Internet. Why this matters is that any Washington insider knows that tax issues are generally negotiated at the Congressional leadership level and the interests and knowledge of particular leaders can have a very big impact on the policy outcome -- that's why they are leaders. 

Second, adding a new Senate leader, whose pet issue is to end the Internet Tax Moratorium, with the already combusible mix for the Internet of the Democratic takeover of Congress and Democratic support of net neutrality, and one gets a potentially very volatile environment for future taxation and regulation of the Internet. Given the importance of the Internet and broadband to the U.S. economy, and that there is a wide open race for the White House in 2008, this is a potentially very big deal indeed.

With power comes responsibility and with responsibility comes tough choices. Both Speaker-elect Pelosi and Majority Leader-elect Reid have pledged to "govern from the center." The operative word here is "govern." While net neutrality may have been a good "political" issue for the Democrats, it is not a good "governing issue" for them.

With control of Congress, the Democrats can now make policy and pass legislation, which means, very practically, that they have to live with the real world consequences of their legislative rhetoric and decisions -- because Wall Street, markets and voters are taking them very seriously.

 

Conventional wisdom among net neutrality proponents is that a new Democratic Congress is good for net neutrality. Proponents point to the fact that the Senate Commerce Committee vote was 11-11 and two of the Senators that voted “noâ€? (Allen VA and Burns MT) were defeated in the election. They also point to the fact that Ed Markey, a big net neutrality supporter, is now Chairman of the Telecom Subcommittee the subcommittee that defeated his net neutrality amendment last year. They also point to the fact that Speaker-elect Pelosi and Senate Majority Leader elect Reid are also big net neutrality supporters. Those are the positives and they are real and significant, but are they enough?   

FCC Democratic Commissioner Copps editorial in the Washington Post, America's Internet Disconnect" is a very good guide to how the debate over communications policy and net neutrality will shift with Democratic asendancy in Congress.  

I have the utmost respect for Commissioner Copps personally even though I generally disagree with his conclusions when we look at the same set of facts or analysis. It probably results from his greater trust in government than markets and my greate trust in markets than government.

Today is a big day in the history of blogging because the SEC Chairman Cox has gone on record effectivley encouraging companies to blog -- see the original AP story that highlights the SEC's Chairman's comment on Sun Microsystem's blog.

Corporations to date have been reluctant to embrace blogging technology in part I believe out of the fear of the unknown. One of those unknowns was clearly what the SEC and markets would think.

Kudos to the FCC for unanimously ruling that the promising "third pipe" into the home, Broadband over Powerlines (BPL) is an unregulated information service.

• The import of this decision is that it means no net neutrality for BPL.
• The FCC now has ruled all major intermodal broadband compeitors, cable modem, DSL, wireless broadband, and BPL to be information services and not subject to net neutrality regulation. Hooray! You go regulators!
• It is ironic and incongruous however, that the FCC Democratic commissioners who voted no net neutrality for BPL, are reportedly still holding up the AT&T-Bell South deal in part over wanting to add more net neutrality conditions to that merger.

Please also make note of Chairman Martin's clever use of the word "neutrality" in his statement:

• "I believe that it is the Commission’s responsibility to help ensure technological and competitive neutrality in communications markets."
• The Chairman is dead right to remind everyone that net "neutrality:"
• is not technologically neutral -- it would pick edge technologies over network intelligence technologies
• Nor is it competitively neutral since it effectively would pick tech competitors over communications competitors.

Newsweek's article "Diller Weaves a Web" is a very clear example of the gross competition double standard that tech companies are pursuing in asking for a "non-discrimination" principle to only apply to competitive broadband companies but not to themselves.

• (Barry Diller is CEO of IAC which is one of the six online giants funding the "ItsOurNet" coalition along with Google, Yahoo, ebay, Amazon and Microsoft.) 
• Until now, I hadn't been lumping IAC in with the other online giants becuase their name is hardly a household brand although many of thier holdings are: ask.com, ticketmaster, etc.
• Now that IAC is shamelessly trumpeting the great value of its "discrimination-based" Internet business model to pump its stock, I can't resist shining a well-deserved spotlight on IAC.

Don't get me wrong, I don't have any trouble with IAC pursuing this business model. Â I am only needling IAC for its bald, self-serving hypocrisy of seeking to get the government to protect them from potentially "discriminatory" competition so they can freely "discriminate" against the little guy website that ItsOurNet claims to be supporting.

Let's look at an interesting quote from the Newsweek article:

Something that Alan Davidson, head of Google's Washington office, said at our NVTC net neutrality debate yesterday has been troubling me. He said Google believed in "innovation without permission."

While "innovation without permission" may be a useful mantra in encouraging Google folks from not getting bureaucratic and to "think outside the box" -- it's very troubling because it seems it is their public policy too.

I guess it means Google doesn't need any property owners' permission to innovate.

• That must be why the publishers are suing them over digitizing their books without permission.
• That must be why the newspapers are suing them for using their headlines and photos without permission.
• That must be why trademark owners are suing them for using their trademarks for commercial purposes without permission. 

What a buzz kill to have to ASK for permission to innovate. Doesn't everyone understand that Google is just "liberating" that property for the common good and just earning a little commission along the way for their altruism? What's the harm in that? They are not "doing evil" are they?

I launched the debate this morning at the NVTC forum on Net Neutrality with the following comment: "Net neutrality is an online fundraising ploy masequerading as public policy." It certainly focused the debate on the real reason why this issue has become so big so quickly. I pointed out that on substance it was a bogus issue. No substantiated problem or consumer harm and that all the substantive assertions made by net neutrality proponents have proven false. When the substance was so weak and the threat only theoretical, there had to be more going on.

I focused on the dirty little secret that partially-motivated many net neutrality proponents --which is how super-productive it is for groups that want to raise money online to scare people that there are boogymen that want to take the Internet away from them. Net neutrality has clearly become one of the most efficient ways to "shake the money tree."  

Attached is a link to Alfred Kahn's (of Airline deregulation fame) views on Net neutrality. Thanks to PFF for posting this gem.

It's a very relevant read because Mr. Kahn considers himself: "a good liberal Democrat." He is also one of the most respected figures on the subject of regulation and de-regulation regardless of party or political persuasion.

Here are a couple of good quotes:

• "competition is a far better protector of the interest of both consumers and content providers (think radio, television, motion pictures and the Internet) than government ownership or regulation"
• "Why all the hysteria?" over net neutrality.