Why It’s a Good Thing That Broadband Isn’t a Common Carrier

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In a recent decision, the D.C. Court of Appeals vacated key elements of the Federal Communication Commission’s (FCC’s) 2010 Open Internet order. In doing so, it has revived discourse around the open Internet (commonly referred to as net neutrality), what it really means for consumers and the future of the Internet.

We welcome the discussion, but one thing is for sure — the open Internet experience that consumers have enjoyed for years will continue in the future.  Nothing in the court’s decision will change the basic incentives of service providers to offer consumers capabilities that meet all of their ever-increasing needs.

But apart from the practical impact, what will happen now regarding the legal proceedings is a matter of some debate.  Officially, the case has been remanded back to the FCC for further consideration, and parties to the case are weighing whether or not to appeal the D.C. Circuit’s decision.

Some advocates are proposing that the FCC break with over 15 years of bipartisan restraint and treat Internet Service Providers (ISPs) as “common carriers.”  To understand why such a shift would be harmful to innovation and the ongoing evolution of Internet technologies, it’s worth explaining exactly what the term “common carrier” means, why your ISP isn’t a common carrier, and why the court’s decision is a good thing for both broadband customers and for American innovation.

 

What are Common Carriers?

Put simply, common carriers are private companies that sell their services to everyone on the same terms, rather than companies that make more individualized decisions about who to serve and what to charge.  The term originally applied to companies that carried goods or passengers (like railroads or shipping companies), but after the invention of the telephone, it also included phone companies.  Congress created laws to make sure that phone companies provided basic phone service to all customers on a non-discriminatory basis and at reasonable prices, and created the FCC to regulate them. For phone companies, common carrier regulations included strict pricing rules that determined how much they can charge, while also ensuring that the companies made enough money to stay in business.

These common carrier principles are also typically applied to utilities, such as electric and water companies that provide a basic service.  But common carrier regulation discourages infrastructure investment and network enhancements.  When a company’s return on investment is dictated by the government, there’s little incentive to re-invent or improve the system, which is why copper phone lines are still prevalent, water main breaks are an all-too-common occurrence, and the electric grid is in need of serious repair.  Recognizing this problem, the FCC has over the years relaxed many of the requirements on traditional telephone companies, although they still remain subject to significant regulation.

 

Why Aren’t Broadband Providers Considered Common Carriers?

In the 1996 Telecom Act, Congress made a distinction between two types of services:  “telecommunications services” and “information services.”  “Telecommunications services” transmit a user’s information from one designated point to another without changing the form or content of that information.  For example, a phone call transmits the user’s voice from one point to another without changing the content of the voice message, similar to the way a shipping company would deliver a package that you hand to it.  “Information services,” on the other hand, offer a user the capability to create, store, or process information.  Once that information is created, it might be transmitted via telecommunications, but the creation of the message would be done via information service.  Telecommunications services, such as traditional phone service, were subject to common carrier rules.  Information services were not.

Based on the definitions in the 1996 Telecom Act, the FCC classified cable broadband as an “information service” and as a result it is not treated as a common carrier service and is largely exempt from regulation. This was to encourage innovation and investment in private infrastructure and preclude unnecessary government intervention. In hindsight, this was a wise decision. Since 1996, cable broadband companies have invested $210 billion in growing and improving their networks, leading to faster speeds and 93 percent cable broadband penetration in the U.S.  This massive investment by cable spurred substantial broadband investment by our competitors, the traditional telephone companies, particularly after the FCC freed their Digital Subscriber Lines (DSL) broadband service from common carrier regulation.

 

Why Is It Good That ISPs Aren’t Classified As Common Carriers?

Common carrier laws were established nearly a century ago when the pace of innovation was measured in decades. In such a static environment, a regulatory regime in which the government grants a monopoly and micromanages the operations of a service provider was feasible and rational.  We now live in a vastly different world and broadband is a very different service than any traditional utility service. The flexibility required by an ISP to effectively deliver increasingly fast broadband to more people requires a constant state of infrastructure updates fueled by capital investment. Classifying ISPs as common carriers would invariably stifle these investments by inserting the federal government into the operation of broadband networks and the provision of broadband services.

Congress recognized this in the 1996 Act, where it stated:  “It is the policy of the United States . . . to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation.”

Part of what we need to do as a nation is to encourage innovation and vibrant marketplaces. Classifying the most technologically advanced communications network in human history as a common carrier is a terrible mistake. Time and time again both Democrats and Republicans have said this type of regulation delays innovation, creates uncertainty, and inhibits a lively marketplace.

  • Clayton Nash

    This only works in cities where there are lots of customers. Cable TV doesn’t serve me since I am in a small suburb. No regulation for me means no service.

  • Samtsung Cohen

    Why would anyone take this article at it’s word? Look at who is writing it and who stands to gain.

    Big business always cries about the Government’s destructive tendencies, any intervention is terrible!

    read this if you want, its about european broadband figures:
    http://stakeholders.ofcom.org.uk/market-data-research/other/telecoms-research/bbresearch/scorecard

    Europe has governments that are much more heavily involved in their communication infrastructure and guess what, faster internet.

    Governments can spend without expecting to remake their money, that have budgets for spending. Corporations do not, they can only spend money when they are relatively certain they will regain this money and more. they will never update to cutting edge technologies until the price drops low enough to make it attractive.

    Corporate entities speak of penny pinching governments, but Nobody squeezes a cent harder than an entity Legally Required to Ruthlessly Pursue the Bottom Line.

    You exist because the US government handed over monopoly on airwaves. This is Not Your Right, it is your privilege, and it should be the privilege of the general public. Do not grow cocky, you still can lose the rights to the spectrum you control.

  • Falcon89

    If this is true, why do I pay $70/month for broadband that rarely exceeds (or meets) 1megabyte/second? I don’t even live in the boondocks! Comcast and CenturyLink are a duopoly without regulation.

  • MT

    My electricity, water, and telephone are all *vastly* more reliable and cheaper than my broadband internet access. Sounds like based on your argument, common carrier treatment for internet access is *exactly* what I want.

    • lee_337

      I could not have said it better myself.

  • Kelly Tamburello

    So why is my connection so slow, and why aren’t there more isps in rural areas? Lie Lie Lie

  • Suno

    “the open Internet experience that consumers have enjoyed for years will continue in the future.” – Like hell it will. Comcast is already charging Netflix for it’s piece of the the “fast lane”

  • Jimothy Jones

    Yea, so the problem is, you scammers took our money for decades in the for of subsidies to “improve” your network. The only thing you used this to improve was your bottom line. No one is buying this sack of horseshit you are trying to sell us. Go cry to fox news, they gobble this ignorant shit up all day long.

    • Charlie Meyer

      Well said, Jimothy Jones! Taxpayers started the Internet, not cable companies. I am old enough to remember DARPAnet. An unregulated TWC-ComSpastic merger would be a disaster for consumers. The Internet is NOT WalMart. The Fuxd Noise “fluff girls” (a porn industry term) are on their knees ready for action.

  • Peter Frazier

    does anyone know the technical hurdles surrounding opening up broadband if declared CC? i’ve heard mention but no details regarding the statements that the tech is fundamentally different..

    • Falcon89

      There are no technical hurdles, that’s why we don’t get details

  • lee_337

    MT says it the best, but leaves out one thing. We the taxpayers paid for Comcast to install Fiber Ops throughout the country, the private corporations that took that money did not install fiber ops. Now a company that I have never paid a dime to is installing fiber ops, of their own accord. Comcast and TW are duopoly, and will eventually charge for “Premium-Content” which we get now for free any way. Your own arguments work against you when actually fact checking the consistency of Comcast, when required by law to do something, and when the government turned their head. Lastly, I find it funny that not 1 person has commented something positive or in this article’s favor.

  • Endorb

    “Part of what we need to do as a nation is to encourage innovation and vibrant marketplaces”. So, by essentially becoming the illuminati, able to control everything on the internet, you’re able to charge a server $500 to run their server, and charge $160 to the person using it. http://munchweb.com/effect-of-website-speed has shown that 3/4 people will not return to a website that takesd 4+ seconds to load, so all you’d need to do is give a 3.5 second delay to non-premium websites, and you’ve nearly killed the whole thing already!

  • Gregory Garvin

    Telecommunications companies have received hefty kickbacks and tax breaks for investing in the internet infrastructure they currently have in place. However, like NPR so eloquently highlighted with NYC’s FIOS rollout, it is lackluster with a poor rollout that is not widely available. Mergers have left the East Coast with less choices as Comcast & Time Warner have merged in the MaBell of our day. Need I not remind everyone that Comcast/TimeWarner is part of the NBC/Universal conglomerate.

    Consolidation doesn’t mean benefit to us customers or at least we don’t see if financially. Title II, in my opinion, would prevent increased costs to customers without work from telecommunications companies. As you can see, stock prices that are tied to executive compensation are what drive decisions at telecommunications companies. I favor Title II rules as I believe they will keep the telecommunications focused on the customer. Remember, Google GRAIN is 1000 times faster than anything in the USA. Where are Verizon, Time Warner, Comcast, Cox, etc on implementing this service?

  • CXM

    This is just propaganda promoted and possibly paid for by the Koch brothers. They decry any socialism unless it benefits them monetarily. They will go so far as to say they are for protecting the environment and then fight environmentally protective legislation with highly paid lobbyists through shell corporations to counter said legislation. This site is just another example of them using lies and deception for capital gain.

  • acuvox

    The internet was developed, built and maintained using TAX DOLLARS and belongs to the public. The cable companies enjoy publicly granted monopolies. In most places they are the only effective broadband carriers, and they are NOT expanding their coverage to rural areas or covering cities wirelessly so they do not serve the public, even though they depend upon publicly funded superstructure on the top and publicly authorized suppression of competition on the bottom. The primary expense of broadband is capital investment with a very high long term payback just like the old phone company. The public utility model led to the best phone system in the world, and we now lag far behind government regulated countries like Korea, Japan and Germany in broadband. The NCTA is providing inferior service with less coverage for highway robber prices, and they are complaining! I guess they NEED a bigger yacht! I need a lower monthly bill and faster service.

  • Arya Irani

    This is silly. Broadband is clearly telecommunications. Hard to imagine a benefit to calling it something it’s not.

  • Steven Correll

    This explanation sneakily suggests that common carrier status implies granting a monopoly. Not so: railroads were regulated as common carriers back in the pre-merger-mania days when multiple railroads served the same cities. It’s the cable companies themselves who maintain their own monopoly status, carefully arranging not to provide competing service in the same city, agreeing with telephone companies not to expand fiber networks that might compete with cable, and moving to quash new entrants into their markets. In the absence of net neutrality, cable companies will have even more market power to gouge any company that might threaten to compete with them.

  • Roger Levy

    Show some data. Or perhaps the data isn’t in your argument’s favor?

  • Roger Levy

    Oh and also, if the monopolistic telecoms were being so innovative and infrastructure-building, why does my internet suck?

  • Pwyll

    This argument rests upon one thing (a vibrant and competitive free market) that does not exist.

  • icymarv

    Where is the “Fiber Optics”? Who’s in charge of upgrading the systems? Twenty-years and high speed internet services for all is still a dream that many companies, and the government is not willing to pay for. The customers will wind up paying for all upgrades, and the companies will reap the profits …it rolls down hill, folks.

  • Thomas J. Savino

    Let’s see. Government intervention “stifles” innovation. Would that be like building almost ALL the roads we now drive on in a period of ten years (1933-43) thanks to FDR’s New Deal? Would that be like Kennedy’s push and success in getting us to the moon and safely back (with the thousands of scientific innovations that were born thru that effort)?

    American’s need to know that, now, with ONLY corporate control we have an increasingly slower, less efficient internet experience than European nations whose internet is under more government control.

    American’s need to know that FCC Chairman Tom Wheeler is just one of those cable corporados servicing the members of the NCTA.

    It’s a bunch of b.s. that government regulations will stifle innovation. If there’s a penny to made, the innovations and invests will come as it always has WITH government intervention.

    Broadband internet service, people, needs to be regulated and seen as a common carrier, or we’ll soon be paying by the minute for ever YouTube video we watch, and paying triple for Netflix.

  • Chris Jones

    This guy is right. Government innovation does stifle innovation. If these companies can’t find innovative ways to make billions, then there is no innovation. This country needs a lot more regulation in anything people NEED.

    We need the internet these days (everything is digital at this point). We also NEED healthcare (another industry free from stifling regulation where they are free to innovate new ways of increasing profit.)

    This article is a joke!

  • Bobo Brazil

    Oh yeah, the 1996 Telecom Act. Isn’t that the legislation that gave away hundreds of billions of dollars in subsidies and tax breaks because the ISPs promised fiber to every home by 2006?

    It’s time to re-re-classify ISPs as common carriers.

  • Knuckles Mutatis

    This horrid article fails to provide even one detailed argument as to why classifying ISPs as a common carrier is a bad idea. The best we see is vague, unproven propaganda that amounts to nothing more than “let this quasi-monopoly of a few publicly held ISP corporations – who are duty-bound to make the maximum legal profit off of the public at any given time – do whatever they want, even at the expense of the innovation and the freedom of the Internet”.
    How exactly does THAT spur innovation? – if anything it crushes it by creating a moral hazard to push for higher costs, and more lagging behind the rest of the first world in terms of performance for the sake of monopolistic personal gain before national economic interests.

  • Trever Johnson

    “Classifying the most technologically advanced communications network in human history as a common carrier is a terrible mistake.” What? Last I checked South Korea was getting 10 gbps internet. 10 GIGABIT PER SECOND. Funny, I thought we had the most advanced network in human history, but im sitting on 50 MEGABIT per second and thats my fastest option.

    This article is full of lies and Internet company propaganda. It’s not even clever or hidden. It’s so obvious it is sickening.