Network Neutrality and Industry Influence of the FCC

There has been much discussion regarding the recent joint proposal to the FCC by Verizon and Google on network neutrality. Where there is dispute with the proposal, it is asymmetrical regarding the roles played by each company. Everyone expects established and large ex-monopolistic firms like Verizon to lobby hard, and the complaints over their continued lobbying efforts and the allegedly friendly ears in Washington that listen to them.

By contrast, Google is seen by many as the feisty upstart that ought to live by its "do no evil" motto, but where evil seems to be in the eye of the beholder, and in many of those eyes Google allying with Verizon in any way is evil.

While this tactic of pre-empting real consumer protections with lobbyist-written fluff is Verizon's usual modus operandi, it's an interesting shift for Google (at least in terms of neutrality). It's clear the search giant is now willing to shelve their previous principles in order to protect their lucrative Android relationship with Verizon.

However, this isn't terribly surprising since Google has an obligation to its owners, the shareholders, to maximize the value of their investment. This is what companies do and why they exist.

...Susan Crawford, a professor at the Benjamin N. Cardozo Law School and a longtime supporter of net neutrality. “A large private company is always going to operate in its own interest, and for anyone to believe otherwise would be naïve.”

Countering every company's efforts to maximize returns (sometimes at any cost) there is the country's people, through its elected representatives and the legislation they enact and regulatory agencies they establish, to put constraints on the operations of companies and enforce compliance. When the balance is right, companies thrive and bolster the country's economy and standard of living while also protecting the country against harm. It often goes wrong but that's the objective.

This goes for the telecommunications industry just as it does for industries as diverse as pharmaceuticals, resource extraction, transportation, among many others. Many of the constraints placed upon companies are specific to the industry's unique character, and that very much is the case with telecommunications and network neutrality.

It is perfectly natural to expect that a regulated company will lobby for lower restrictions on the company's operations. As a society we must also accept and affirm that this is perfectly okay, and even desirable. It would be unreasonable to unfairly restrict an industry from meeting with, informing and lobbying the regulator, whether they do so as individual companies, ad hoc groups of companies or industry associations. After all, so can you and I, and we should not accept favouritism when it comes to permitted communications with the government and its agencies.

But -- and this is a big "but" -- it is up to the regulator to choose whose input they rely upon to render decisions and formulate policy. We should demand that they act wisely in response to all input received and act purely with regard to their legislated objectives. In the present case that means they must accept the proposal from Google and Verizon in good faith even though they should be under no obligation to accept any part of it. Other parties are already weighing in on their proposal, both pro and con, and that, too, is to be encouraged.

While some would decry this joint position as either the co-opting of Google by Verizon (by oozing evil all over them?) or the selling out of Google for their own (evil?) ends, it is hardly unprecedented and is in fact the very sort of thing that the FCC welcomes. This is for a very good reason: if a compromise on a politically-sensitive issue such as network neutrality is reached independently of government action, the FCC can confidently refer to and even choose some aspects of it in their decisions without having to thread the needle entirely on their own. In the latter case any decision is sure to be attacked from all sides -- industry, the public and politicians on all sides of the issue -- and it will get certainly get dragged into federal court. This will delay a resolution, create enemies and imperil jobs within the FCC upper echelons.

From a personal perspective I don't really like the Google-Verizon proposal since I do not believe it is the right balance between consumer choice and industry's right to make a fair profit. It would not even be worth considering if there were more competition since competition is a superior path to ensure that incumbents' business practices would change, since they would have to in response to other companies' attempts to attract away their dissatisfied customers. As a non-American my opinion is of low worth. However I know that what happens in the US will create pressures in Canada to move in the same direction, therefore I can't help but be interested.

Although it is understandable that my opinion does not count, some Americans are wondering the same about their own views. There is a general fear (by those who are paying attention) that politicians are in cahoots and will happily screw the public -- whose diverse and largely uninformed views are unlikely to sway future elections -- in favour of their friends and election fund contributors among the carriers. (Notice how I switched the focus from the FCC to the politicians, which I did deliberately since the FCC has to be sensitive to the positions of their political masters who can have very different ideas about policy direction.)

There is another important reason why the FCC will listen to Google and Verizon. If their proposal is seen as a compromise whereby two major competitive forces both see it as a way to grow and be profitable, that is good for overall economic growth, global competitiveness and employment. Much of the public is paying no attention to the issue of network neutrality or understands it poorly, but if a policy can be seen as able to create jobs and increase public wealth, the FCC may see it as a convenient pass out of the controversy. With broad support from across industry and the political class, the FCC can weather criticism from other, contrary voices.

In conclusion, there will continue to be much heated debate about what is right and what is wrong, and what is or is not evil, all of which may accomplish very little of enduring significance. I would not blame the FCC if they are ultimately persuaded by the compromise position. It would be better if they were to encourage more competition, but unfortunately I see little prospect of this happening in the current political climate, partly due to the lessons learned from the pro-competition Telecom Act of 1996 where the end result was far from what was envisioned, and will dissuade the government from again enacting rules that seek to favour new entrants.

Without increased competition or a proactive government policy, compromise on network neutrality may be the best outcome.