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Invitation to Regulate

The vote to scuttle the open internet rules is an invitation to congress: regulate. While there will be litigation over the FCC’s disregard for public comment, including potential violations of the Administrative Procedures Act, it is clear that leaving the rules up to the FCC is insufficient.

Expect that the battle lines will be drawn in 2018. Democrats will overwhelmingly support regulation. Republicans will have their stand-outs, but will generally not.

The Democrats can now run on a bevy of related matters, like the need for affordable broadband, the utility of the internet (Mr. Pai seems to believe it’s all memes and streaming video), and the ongoing problem of regulatory capture and anti-competitive actions by major corporations. That’s piling on other unpopular legislative actions, including the bizarre tax bills and the failed, sadistic attempts to change healthcare.

Once again, Republicans have shown themselves unaware of the risk of their choices. At each turn, they set up another trap for themselves.

But for the modern American netizen, that’s still a ways off. We will see how swiftly the ISPs begin to abuse their powers. We will await the leaks that show they’ll ignore the transparency requirements or try to be as vague as possible in their filings. “Blocking traffic that interferes with traffic,” or some other such idiocy (like blocking access to their own transparency reporting pages).

The basic bad bet here was that net activism won’t translate into votes and that the ISPs won’t piss off enough people to make a difference at the polls. But with the momentum for the Democrats, even if both of those are true, it may not matter.

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Set-top Competition is the Medicine Cable Needs

The FCC has been trying, after last decades attempts fell flat, to open the set-top box market to competition. Cable companies make a lot of money off of forcing subscribers to rent boxes, which are often underperforming and ill-equipped to serve the modern video consumption habit.

Cable is in a bad position as streaming continues to expand, with advertising and subscriber revenues expected to continue falling. The one thing that could help the market transition smoothly, the advent of the all-comer hardware device, is being actively resisted by the industry that needs it the most.

The proposal was already corrupted in a switch from an API-based model where access comes to the companies to an App-based model where the companies go to the devices. Now it is stalled completely.

The cable company is protecting its box rental revenue and its subscriber revenue at a time when it has enough of both to take a hit and resettle its place in the content delivery field. Instead, as entrenched industries are wont to do, it is fighting against the inevitable. It will see its revenues dwindle anyway, and its corpses (or at least the cable-related appendages; the ISP parts may survive) will then be swallowed by the new generation of media companies.

It is the same sort of short-sighted behavior that threatens our planet when major energy conglomerates don’t buy into the next generation of renewable energy. We may not see the pattern repeated with the auto industry, but that will likely depend on how fast they can merge as fleets of autotaxis become the norm.

What is clear is that the Republican seats on the FCC are actively blocking competition, which is antithetical to the Republican charge that free markets rule. The anti-regulation strain of so-called conservativism is stronger than the free market strain, when the two principles find themselves in opposition.

The lack of easy, integrated media devices will continue to drive consumers away from cable, as most streaming services are available through a single device. Media consumption is largely a social behavior, with people watching content those around them also watch. A generation is growing up without caring about traditional content delivery, and cable is basically ignoring that and fighting against a shift that’s already happening.

The best choice for cable would be to embrace the FCC’s original plan, lobby for the door to be two-way (allowing them to support streaming content on their own hardware offerings), and fight to make the best interface they can at the best price they can. They could even try to strike some subscription deals with streaming services, offering their subscribers the ability to add streaming packages in exchange for a finder’s fee.

Unfortunately, the bigwigs in the cable companies think that this is a very different year, where they can afford to weather the storm. They are betting that the unfathomable will come to pass and their ship will magically right itself. They are foolish for thinking this.

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The Closing Web

Taking a break from discussing the FDA’s proposed deeming regulations to talk about the now-released FCC proposal for regulating ISPs and the announcement by Mozilla that they will ship EME (Encrypted Media Extensions).

EMEs in Fx

First, what will Firefox include? They will include the W3C’s EME standard for HTML5 video. This standard effectively says that an implementing browser includes a plug or a mount for DRM. The browser doesn’t have to include DRM directly (though it appears a browser vendor could ship it directly).

Think of it like a car, and because of car theft, a trade group passes a rule requiring members to include remote-controlled self-destruct mechanisms in their cars. Except they didn’t require the car makers to build-in the actual explosives. They just have to provide a place to put the explosives and the remote-detonation functionality to blow the car up if someone installs the explosives.

And then let’s say that all the fast food drive-thrus said you can’t buy our food unless you have the self-destruct system enabled. That’s you going to ACME Entertainment and streaming the movie, getting the popup that says, “please install this EME plugin.”

We’ve seen this before, with codecs. Mozilla resisted including H.264 because it’s a proprietary codec that isn’t available for all systems. But other major vendors paid for it and shipped it without blinking, and sites put videos out in H.264. Mozilla did what they felt they could, but eventually began relying on operating system support for H.264.

Mozilla is a large organization, risk averse. They do not want to see other browsers force them into a less influential position, potentially causing even more harm to the web. So they run the numbers, hold their nose, and compromise if they think it’s a bad path that may let them get to a better place to fight tomorrow. In other words, they see the risk of DRM entrenchment as less likely or less harmful than Firefox being left behind by users who increasingly watch video in a browser.

DRM serves no real purpose, and at-best represents a gris-gris for parts of the entertainment industry that do not innovate adequately. Valve Software and some other video game creators, are just starting to recognize the economic benefits of openness and artistic community. These are promising signs. As the lines blur of the lines between video games and film/television, it is expected that other industries will follow and that DRM will become rarer and rarer.

FCC’s NPRM: “Protecting and Promoting the Open Internet”

The actual proposal (FCC: PDF: 15 May 2014: Protecting and Promoting the Open Internet) only contains a few rules:

  • Transparency
  • No Blocking
  • No Commercially Unreasonable Practices

The rules that aren’t yet proposed have raised the public’s ire. The proposal requests comments on a variety of issues, taking a “we’ll make the rules later” approach. Early on in the proposal (p. 3) the FCC acknowledges two paths seem viable (sec. 706 and Title II) and they want comments on the best way forward.

Currently the FCC classifies ISPs as information services, and the court that struck down the previous rules said, obiter dictum, that they did not believe section 706 would allow for certain regulations unless the FCC reclassified ISPs. This is not a binding ruling, but should be taken as weight against merely trying to shoehorn non-common-carriers into regulations under section 706.

If you read the definitions of both “information services” and “telecommunications services” I think it’s clear which ISPs should be classified as. Despite the claim of ISPs that they will refrain from innovation if classified as common carriers, they should still be so classified.

If we need “fast lanes” they can be done through some alternate arrangement that is voluntary by the information service, rather than mandated by an ISP (similar to how you can have expedited shipping by a common carrier). Or the ISPs can negotiate for a new classification by statute that will include, e.g., mandatory progress and innovation, restrictions on operating as an ISP and line owner and media company simultaneously, etc.

Currently, the only meaningful way forward seems to be for the FCC to classify ISPs as telecommunication services subject to common carrier rules.

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Value in Television

Happened to see a repost about an old (2011) report by the Natural Resources Defense Council (NRDC) finding high electrical costs associated with cable boxes. The environmental cost of rented equipment often gets overlooked, along with the economic losses it perpetrates. Mostly, renting helps the environment. But chronic/long-term renting, where the energy costs or other negative environmental factors are obscured, should not be confused with short-term, purposeful renting.

But, of course, we went down the equipment rental road with Ma Bell for decades before the government finally stepped in and ruled their scheme illegal. Today most people own their own telephones; the few that still have landlines, anyway.

Still, adoption of subscriber-owned equipment appears negligible in television. Digging around turned up a speech/statement from then-commissioner Susan Ness, 11 June 1998 (that’s 15 years ago) (see FCC: Text document: stsn816.txt). It discusses the FCC implementation of Section 629 of the Communications Act. That section charges the FCC with adopting regulations allowing consumers to replace their rented set-top boxes with commercially-available devices. That section was enacted in 1996.

To date, the adoption rate is dismal. It remains a work in stasis: the government has no ability to bootstrap markets in the manner the law dictates.

We see this pattern repeated. Industry, happy with their oligopolies (hell, just look back at Ma Bell, she never did voluntarily sell phones; it took the government breaking the company up to get it done), maintain them. And that’s what we see with cable. And that’s what we’ve seen with tobacco’s sluggish entry into the electronic cigarette market. And so on.

But given enough time, evolution takes its course. The advent of Internet Protocol video services has begun to foster new set-top boxes. New services. Although still developing, it seems clear that before long the industry that didn’t want to evolve will become extinct. Or will likely use whatever cash they have left to buy some small piece of the new industry just as their mast splinters and their sails (and sales) fall to the sea floor.

Ahoy, but a new raider appears on the horizon. We’ve been reading about self-driving cars, and that the ownership of cars will die off. That’s both good and bad, depending on how quickly an oligopoly develops. We will face the same sort of shipwreck of capitalism that cable has been. Like Michael Caine in The Island, stranded on a desert island of bloodthirsty, inbred swashbucklers.

Does the rental racket, per se, mean oligopoly? Not hardly. The oligopoly of phone and cable came not out of necessity but the desire for an extra subscriber fee. Maybe with a provision similar to the Affordable Care Act’s 80% rule (that 80% of premiums go to actual care), it could have been avoided: if all rental fees had to be at least 80% provisioned for equipment replacement/upgrade.

But for cars, as long as the fleet-ready regulations are low enough, anyone could likely purchase and maintain a vehicle that could generate revenue. That is, if the requirements for an autonomous car to be rentable are low enough (some simple quality test system, payment/route system, etc.), it will thwart the ability for some few companies to simply control the market, excluding competitors.

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IP Neutrality

Let’s stop calling it Network Neutrality, and let’s start calling it what it really is: Internet Protocol Neutrality.  If you are sending data via Internet Protocol (IP), then it should conform to the rules that have existed since the Internet began.  What are those rules?  Let’s quote from RFC791, shall we?

The internet protocol treats each internet datagram as an independent entity unrelated to any other internet datagram. There are no connections or logical circuits (virtual or otherwise).

What does that mean?  It means that if I send you a file, it filters down to the low levels of your Internet connection and is broken up into datagrams, chunks of data.  When these are sent out over the Internet, they are to be treated as wholly independent messages and routed as such.

That is the essence of network neutrality: a datagram is a datagram.

Now, let’s analyze the Google/Verizon proposal.  I do not have the stomach to ramble endlessly on each point, so I am taking pains to be brief on each of their “key elements.”

Consumer Protections

There is this word that crops up repeatedly in the document: lawful.  The word is problematic for a number of reasons, but primarily it is because the suggestion is that all data be inspected as deeply as needed to determine its legality.  Not only is this impossible (as data can always be disguised in a novel or unexpected fashion), but it flies in the face of the above-mentioned RFC.  It’s treating each datagram as a potential bad egg (if: blacklist) in the best case, and in the worst case it would only allow data it deemed innocuous to be routed (if: whitelist).

Non-Discrimination

This is probably the funniest of the “key elements.”  It states that data should be treated fairly, unless “the presumption [is] rebutted.”  No, really: the whole element relies on something that the element itself says may not hold!  So we might as well just chuck this one out (except it makes it seem like they care at all).

Transparency

Another proposal that an industry tell their customers what the deal actually is.  I’ve never, not once, in my entire life, seen a company actually do that.  If you want to change your phone, cable, internet, travel, bank, credit card, electricity, water, gas, insurance, or any other service (including government, depending on the department), good luck.  Their phone systems, their policies, their websites (including supposed industry leaders like Google) simply fail to meet their customers’ needs.  And it’s on purpose.

Your only real hope is that you get a real person that hasn’t been promoted or fired that is a good soul.  They are like angels from heaven when you find them, because you actually get what you need and you don’t have to kill anyone to get it.  But their legislative proposal isn’t going to deliver any angels.

Network Management

Boiler plate that basically indemnifies providers if they decide to violate any of the protective elements.  Some of the items here are valid (protecting against DoS and DDoS, for example), but that’s not its purpose.  It’s simply there to grant them permission to ignore the whole idea of Network Neutrality.

Additional Online Services

Here’s where my claim it should be renamed to IP Neutrality comes into play.  They aren’t talking about a separate, Non-IP realm where new services could be developed.  Their only distinction is based on whimsy: if the provider wants to charge you separately, or charge the provider of the service separately, then they can deem it to be an “Additional Online Service.”  More grinding away of any sort of teeth the Verizon/Google Network Neutrality could possibly have.

Wireless Broadband

They basically gave up at this point.  They flat out state that wireless is Laissez-faire.  Apparently Wireless never needs to stoop to the level of IP, eh?  No, it does… they just gave up trying.

Case-by-Case Enforcement

Here you can smell the arbitration clauses breeding like rabbits.  The FCC would have no rulemaking ability, regardless of ongoing harm that might be happening.  Consumers and providers would be “encouraged” (through binding arbitration agreements, no doubt at all) to forget the Seventh Amendment.  The FCC would have limited enforcement capabilities, and a maximum penalty of a measly $2 million (hardly deterrence if the service they are biased toward garners them an excess of the penalty, which it likely will).

Regulatory Authority and Broadband Access for Americans

Fully restricting regulation to Internet access itself and some palaver about “[spurring] deployment in unserved areas.”  We’ve given massive gifts to the telecommunications industry in the past, and they failed to roll out a single nanometer of the fiber or services they claimed they would.  Google is likely positioning itself to become an ISP in the long-term, and this is just one of the tools they hope will allow them to do just that.  Verizon, for its part, is watering at the mouth over the wireless portion, but also sees vast profits in its land-based broadband if this happens.

No amnesia for me, though.  The New York Times was conceptually right the first time and Google’s response was simply a misleading truth.