Posts from Politics

Open Internet Rules

The FCC is expected to approve its Open Internet Rules today. This is a big deal and something we have been fighting for since former FCC Chair Michael Powell unfortunately and incorrectly ruled that Internet Access was an “information service.” We believe that last mile Internet Access is a natural monopoly/duopoly in most geographies and needs to be regulated as such.

My colleague Nick Grossman has a good quick read on usv.com about these rules, why we are strongly in support of them, and what this means.

As Nick says in his post,

We believe in markets. We believe that by recognizing that access to the Internet is an essential service, the FCC has moved to protect the free and open markets that depend on that access. Contrary to much FUD, this is NOT regulating the internet, it’s ensuring open access TO the Internet.

Utility vs Information Service

I saw this headline on the New York Times today:

F.C.C. Is Expected to Propose Regulating Internet Service as a Utility

Now you can argue whether regulating the last mile Internet is a good idea and we have done that ad naseum here at AVC over the years.

But if you accept that some regulations are necessary, you are then faced with the question of whether you should classify last mile Internet as a “utility” or an “information service” as is currently the case.

The decision by then FCC Commissioner Michael Powell to classify internet access (the last mile) as an information service a decade ago is really what’s at stake in this net neutrality debate.

An “information service” is something like AOL or maybe even Wikipedia. It is a service that provides information to a user. The wire (or fiber) that Comcast, Verizon, or some other telco runs from their network to your home or office is most definitely not an information service and should not be regulated as such.

To me it looks like a utility. Just like my electricity service, my water service, and my gas service. The honest to god truth of this matter is that last mile internet service is a utility and has been since broadband arrived a decade or more ago.

Again, we can argue about whether it should be regulated (as electricity, water, and gas are), but we really cannot argue with a straight face that broadband internet access is an information service. It never was and it never will be.

With All Due Respect

We spent the Christmas week on the beach with family and friends. Our friends John and Diana were with us and we talked about a lot of the things that are in the news at the intersection of tech and society. John asked me to take that conversation onto his TV show, With All Due Respect, and I did that yesterday. Here is the segment.

Immigration

Damn. The President has done it twice in the past few weeks. He’s showing a new side of him and I like it very much.

Last night he announced a series of executive actions that “will shield up to five million people from deportation and allow many to work legally, although it offers no path to citizenship”, to quote from the New York Times.

It bothers me very much that the US, a nation of immigrants, a place where many (most?) new businesses are started by immigrants or the children of immigrants, a country that has historically welcomed others with open arms, has become closed minded when it comes to the issue of immigration. We have given a lot of time and money, and airtime here at AVC, in support of immigration reform and I have come to understand that the issue is hostage to the politics of our two main parties.

The Democrats want to remain the party of the immigrant and have been pushing for “comprehensive immigration reform” in search of a big win for its constituents. The Republicans don’t want to let tens of millions of likely Democratic voters into the voting booths in the coming years and have been against any path to citizenship and the voting booth. Both positions are understandable and rational in the context of politics. But caught in the middle are tens of millions of people who are in our country, have been in our country for a long time, and who provide much of the foundation of the hard work that gets done every day. This is not right. We must change it.

And so the President has thrown down the gauntlet and said “I’m going to do what must be done, regardless of whether you like it or not, and I have the legal right to do it.” Is this politically motivated. Hell yes. Is it the right thing to do. Hell yes. Now it is time for the Republicans to do the right thing to. Because they really have no choice.

Every once in a while good politics results in good policy. This is one of those times. Thanks Mr President.

The Cable Model and The Internet Model

The cable industry used the following model to build out the industry in the US:

1) cable operators were given local monopolies as incentive to build out the expensive last mile networks into every home in the market

2) cable operators leveraged this last mile monopoly to determine which cable channels to carry on their networks and which they would not carry

3) cable operators often required large free slugs of equity in the cable channels in order to agree to carry them on their networks

4) even with digital cable technology, cable systems rarely carry more than 1000 channels on their networks

 

The internet industry used the following model to build out the industry globally:

1) the internet was deployed on top of existing telecommunications infrastructure, initially dial-up modems that moved data over voice lines

2) no monopolies were given out as incentives to build out networks. entrepreneurs jumped in, financed by venture capital and other equity capital markets

3) anyone can put a server on the global internet and offer service to anyone. there are no gatekeepers

4) entrepreneurs don’t have to hand over slugs of their equity in order to get carriage on the global public internet

5) there are between 750mm and 1bn active domains on the global internet according to some estimates

 

These are two very different models but in one way they are converging. The last mile telcos and cable companies have taken over the internet access (last mile) market by virtue of the move from dial-up to broadband and today there is a duopoly in most local markets. It is very possible that these internet access providers could evolve the internet industry to the cable model.

And that is why Ted Cruz is wrong when he says this (at 3:50min in this talk):

This whole net neutrality thing is a fight between big boys, between gigantic companies on one side and gigantic companies on the other.

It’s actually a fight between the 1bn active domains and the roughly six or seven wired and wireless carriers who own the internet access market in the US. This is a David vs Goliath issue and the Davids don’t have the ability to go toe to toe in the market with the Goliaths. And that is why Net Neutrality is a conservative idea. Let’s keep the Internet industry operating on the Internet model and not allow it to be moved to a cable model. That is all that this is about. And I am going to do what I can to make that case to Ted Cruz and his conservative colleagues as soon as I get the chance.

Internet Freedom

The President did one of the gutsiest things he’s done in the six years he’s been in office yesterday. He came out in favor of treating access to the Internet as a basic and essential service that should be approached like phone calls, electricity, water, sewer, and the other utilities we have in our life. Politicians on the right like Ted Cruz immediately reacted negatively.

What Ted Cruz does not understand is that the Internet in the US already operates at “the speed of government.” Going slow is a feature of government, not a bug. The same is not true of something as essential and important as access to the Internet. Here are global average download speeds by country:

download speeds

Our communications policy in the US is backward. We have allowed the telcos to capture the regulators and they are spending their dollars lobbying and buying off congress instead of investing in their networks.

The telcos argue that they cannot afford to invest in their networks and yet Verizon makes $23bn in net after tax income, AT&T makes $28bn in after tax income, and Comcast makes $7bn in net after tax income. Maybe if they were investing in their networks so we can have the 100Mbps that people in Hong Kong get, I’d be a little more sympathetic to their argument.

But this isn’t really about download speeds anyway, Ted Cruz just thinks it is because he hasn’t done his homework yet to understand the issue. I hope he will.

This is about something more simple and more important. It is about making sure that the Internet remains open and free for innovation. It is about recognizing that the last mile of the wired and wireless internet is a natural monopoly/duopoly where scale creates massive advantages, just like the electrical grid and the water system. It is about making sure that the massive companies that operate these last mile monopolies don’t use their market power to extract rents from the entrepreneurs, developers, and companies that must go through those networks to reach their customers.

This is about keeping the Internet the way it has been operating for the past twenty years. This is a conservative idea. Don’t change something that has worked so well for so long. Don’t allow the telcos to start inspecting each packet and prioritizing some over others. Because that is what they want to do, and are doing, and we as a society cannot allow that to happen. Thankfully the President understands this issue. My hope is politicians like Ted Cruz will step back and take the time to really understand this issue because it is a conservative and pro business idea. This is something the GOP should get behind instead of fighting. And I’m happy to come down to Washington and explain it to anyone who is willing to listen.

Today, September 10th, Is A Day Of Protest

When you come to AVC for the first time today, you will be met with a “modal” that shows the site loading slowly. This is my way of participating in a day of protest to send a message to the FCC and others in government that I don’t want to see an Internet where some sites can pay to load more quickly than others.

We’ve discussed this issue so many times at AVC that it’s old hat to most of us. Many of you don’t see things the way I do. I understand and respect that. But today, I am showing solidarity with everyone who sees it my way.

The modal will be gone tomorrow in case it annoys you.

Why The GOP Should Embrace Net Neutrality

The politics of Net Neutrality (ie preventing the creation of fast lanes and slow lanes on the Internet) in Washington is pretty simple. Democrats are largely for Net Neutrality. Republicans are against it. The reason is simple. Net Neutrality has been sold to Washington by the telecommunications lobby as a regulatory overreach. And in that context, the politics are simple.

But if one thinks of the way the commercial Internet has operated for roughly 20 years, it has operated as a level playing field where everyone’s bits are treated the same. So Net Neutrality is just embracing the way it has always been.

Another way to look at this debate is that big corporate interests (Verizon, ATT, Comcast, etc) have been lobbying for the right to build fast lanes on the commercial Internet for almost as long as the Internet has been around and that investment is finally paying off. They have effectively bought their way into the halls of government and are now looking for their payday.

And the GOP, particularly its Tea Party wing, should find that abhorrent. As Dave Brat, who beat Eric Cantor, said:

I’m an economist. I’m pro-business. I’m pro-big business making profits. But what I’m absolutely against is big business in bed with big government. And that’s the problem.

I am headed to DC today to meet a few people and make this point. Wish me luck.