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I'd like to welcome Kevin warbach to
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knowledge at Wharton Kevin is a
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professor at Wharton of legal studies
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and business ethics and we're going to
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talk about the controversial issue
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suddenly of net neutrality and the new
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proposed Federal Communications
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commission's uh proposals to uh that
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could affect net neutrality and Kevin I
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think the best thing to do welcome to
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knowledge thank you but the best thing
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is probably to start out with a thumb
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sketch of what net neutrality is for
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viewers absolutely no it's funny you say
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suddenly in in some ways this has been a
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sudden controversy after the FCC
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proposals um leaked a few days ago but
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uh in some ways this has been a
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controversy that's been going on for the
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past decade um so Network neutrality is
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basically the principle that internet
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access providers which is the company
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you use to get your broadband service in
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the US that would be companies like
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Verizon and AT&T and Comcast
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it's the idea that they shouldn't
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discriminate in how they handle traffic
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on the internet so whoever you are if
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you want to plug into internet and offer
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information on the internet you get the
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same speed as everyone else well exactly
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what it means is is difficult and
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controversial but the general notion is
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anyone can connect to the internet if I
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have a startup I may have very little
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Capital um but I can get on the internet
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provide my service uh and reach
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customers uh and I don't have to get
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permission from some company I don't
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have to pay them uh some special fee
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just to get online it's on the internet
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and and customers of those Broadband
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providers can get access to anything
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that's there okay so the FCC is
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proposing some changes uh there's a lot
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of hue and cry uh some calling it The
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Death nail for net neutrality uh and
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others saying well I think you have a
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slightly different point of view why
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don't you uh describe for us what
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everyone's worried about and whether or
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not they should be worried the the first
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point that's important to understand is
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where we are today so at this moment in
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the United States there are virtually no
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network neutrality rules that are
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legally enforcable there's some rules
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that apply to Comcast uniquely because
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of some conditions it agreed to for a
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prior merger and there's one FCC rule
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that says that Broadband providers have
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to be transparent in their Network
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management practices all the other rules
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were thrown out in court a few months
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ago uh and that was after the fcc's
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prior attempt to impose Network
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neutrality was also thrown out in court
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um but fortunately the court in the most
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recent decision gave the FCC validation
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on the basic legal Theory they use the
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the big question up until then was does
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the FCC even have jurisdiction to
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address these issues because the FCC
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regulates telephone service television
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and so forth and so there was an
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argument that they couldn't uh impose
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rules on Internet services the court for
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the first time said yes they do Under
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the kind of legal Theory they were using
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they just couldn't adopt the rules that
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they proposed so fast forward to today
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the uh FCC chairman Tom wheeler has
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circulated to the commission a set of
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proposals to adopt Network neutrality
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rules to to ban blocking of traffic uh
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to ban certain kinds of discrimination
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of traffic um the rules aren't public
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yet they're going to be circulated among
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the Commissioners if they're adopted by
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the commission it'll be a proposal that
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goes out for public comment um but the
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concern has been uh from some ERS um
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that the proposal doesn't go far enough
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in uh restricting a certain kind of
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practice which is called paid
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prioritization so the idea is uh there's
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the basic internet Lane that anyone can
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use uh but Broadband providers might
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have more leeway to offer uh faster or
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better service for an additional fee so
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as soon as someone hears that there
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might be a two-speed service there's
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certain conclusions that are reached and
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uh and and they worry that I guess the
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uh
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the two-p speed service well in the
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beginning it may be a premium service
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that you can pay extra to get the faster
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speed but in the end that the the main
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Lane would be degraded in some way and
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so I guess they worry about protections
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that's one point the other point I think
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is interesting that is that up until now
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industry and all all the stakeholders
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here have been sort of agreeing to
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certain conventions where net neutrality
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has been respected and so far that's
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worked but I guess there's you know this
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is bringing up the idea a that that
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could change absolutely it's important
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to point out that we're talking here
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about connections on the the network
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side so you as an end user customer as
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individual or a business of course you
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have options of different speeds you can
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go to your Broadband provider and say I
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want 5 megabit service 10 megabit
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service what they offer we're not
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talking about Fast Lanes and slow lanes
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that way the issue is for content and
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service providers so if a company like
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Netflix uh wants to provide service to
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customers of Verizon or Comcast
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whether uh they can be offered an
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enhanced delivery service and it's even
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more limited than that um because it's
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only an enhanced delivery service um
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that is differentiating traffic on the
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Broadband provids Network um the FCC has
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said that this doesn't address what's
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called peering uh which is how the
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traffic actually comes into the network
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over the Internet so you're absolutely
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right there are some very serious and
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and reasonable concerns that people have
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expressed um the fact is though we
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haven't actually seen the C proposal and
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what chairman wheeler has suggested in a
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blog post uh is that there going to be
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some substantial restrictions on how
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those paid prioritization Arrangements
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can be adopted I I think absolutely if
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there's too much room for the Broadband
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providers to degrade the basic internet
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pipe um that will violate uh the spirit
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and the reality of network neutrality um
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but but my take on this is that's not
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necessarily going to be the case if
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there's sufficient conditions put into
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into place so why the misunderstanding
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why is it this proposal which will then
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have months of comment and so forth in
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debate why is it seen as such a threat
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by so many people it's a combination of
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just how partisan things have gotten in
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Washington I mean the reason that this
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is at the FCC is Congress has refused to
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act and in fact Congress has uh whenever
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the FCC has tried to act different
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factions in Congress have threatened to
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basically grind the FCC to a standstill
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if they don't do what those members of
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Congress want um so it's a very
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difficult and charge situation again the
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FCC has tried two times before um and uh
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has proposed rules that generally uh
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haven't uh provided what network net
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neutrality Advocates really fully wanted
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um which is what's called
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reclassification um they've been
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advocating that the FCC uh change the uh
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regulatory category that Broadband is
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under in the United States uh to be in
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the category called title that applies
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to telephone service um now what people
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Miss is actually under title 2 under
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that uh telephone regulation category
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you can do paid prioritization uh if
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it's if it's offered on the same terms
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to everyone um but there's a perception
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that that's the only solution that will
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protect Network neutrality and the fact
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that the FCC has now said we're not
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going to do that um and we're going to
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step back somewhat from what the
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previous FCC rules had said before they
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were overturned I think that's gotten a
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lot of the net neutrality The Advocates
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upset because they they see that
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President Obama um and other officials
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have have long claimed that they support
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an open internet and yet when they see
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that there's going to be again two
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prices two speeds um they see it as I
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guess the campell's nose edging Under
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the Tent and I guess what you're saying
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is we don't really know that for sure
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but that the concern seems a bit
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overblown at the moment yeah it's it's
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uh always unsatisfying when uh someone
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who is an AC mic or a policy wonk says
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it's complicated um but it's complicated
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um because it's complicated in several
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ways technically it's very complicated
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what exactly these prioritization deals
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are how they work uh the engineering how
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they compare to all the other options
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that those companies have um is a very
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complex subject it's not that uh there's
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just one way you get from here to there
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on the internet a company like Netflix
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has a whole variety of different
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providers it uses it uses caching
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systems called content delivery Network
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works it Engineers where its traffic
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goes and and it's paying for all those
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services so it's not that there's this
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free internet pipe and now for the first
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time there's a paid pipe um there's a
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lot more complexity on that side and
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then on the FCC side there's a lot of
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complexity um again what are the
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practices that go into effect how does
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the FCC respond what are the enforcement
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practices and again that's always going
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to be the issue uh even if the FCC
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adopted this title 2 regulation they
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would still have to make distinctions
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and still have to engage in enforce
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so what do you think is the bottom line
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for people that are looking at this
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issue from the outside they they they
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they see this might be a threat to Net
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Neutrality the the issues are
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complicated what does it mean for
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example for consumers uh will it affect
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what they're paying uh and other
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stakeholders sure so two points one is
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net neutrality is this this this vague
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concept it's it's a buzzword it's a
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slogan um but we need to walk back and
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and break down what what it actually
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means what should people be concerned
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about um people should be concerned uh
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on the one hand if new uh Innovative
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Services can't get off the ground can't
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reach their customers um or you know see
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that their service is being degraded um
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so people should be concerned about that
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and if we have evidence of that then
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that's something that should be taken to
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the FCC and to Congress and so forth to
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say this isn't working um secondly
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people should be concerned on the
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enduser side if they find for example
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that Broadband providers are um creating
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discriminatory cap saying you you know
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you get 50 megabit service but you have
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this limit on your bandwidth uh and only
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certain services are subject to the
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limits hours aren't and the limits are
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far more uh restrictive than what's
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necessary for Network management um then
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that's something and and frankly those
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conditions aren't covered under Network
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neutrality um but they're the kinds of
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things that might make these harms that
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people are worry about come about um and
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then the big thing that that people
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should think about is the reason this is
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such a concern is we don't have enough
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competition for Broadband in the United
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States we do have uh in many places
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multiple providers uh but typically very
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few and and in much of the United States
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there aren't multiple providers for
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truly high-speed service um so we need
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to do in the FCC and Congress need to do
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everything possible to promote more
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competition and frankly the FCC and and
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chairman wheeler has a lot of that on
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its agenda um and the question is can it
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get to that agenda um or is net
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neutrality going to be such a
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controversy um that that's the only
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thing the FCC focuses on for the rest of
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the Obama Administration could you give
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a couple quick bullet points on how we
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would get more providers and increase
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that competition level absolutely um so
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uh the United States made a choice and I
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think frankly a wrong choice about 10 or
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15 years ago which is different than
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just about every other country in the
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world I did a benchmarking study on on
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fixed Broadband for the oecd which is
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about 40 countries around the world the
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developed countries in the world and the
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United States was one of the only ones
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that didn't require a form of what's
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called Open Access that didn't require
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the high-speed Broadband providers to
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share their networks so we didn't go
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down that path and at this point
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politically it's very unlikely we will
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um so we need to think about alternate
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physical platforms one of them is
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municipalities um cities or
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organizations going in and getting
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access to City capacity polls and
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conduits and so forth in municipalities
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to provide their own Broadband Network
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it's a huge source of Broadband
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competition uh in certain parts of the
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world especially Scandinavia here in the
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US we have laws that prohibit that in
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many uh states and cities um the second
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one the big one is Wireless uh right now
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wireless service isn't a one-o-one
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competitor for high-speed Broadband uh
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but as technology advances uh in
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particular for what's called unlicensed
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uh shared access to wireless there's the
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potential at least for for a chunk of
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the Broadband Market that wireless could
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provide a viable uh competitor so one
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big hot spot one big or many big hot
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spots um and that requires the FCC to
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make Spectrum available it requires the
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FCC to promote unlicensed technology um
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and it requires ability of all those
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networks to interconnect with the
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existing Broadband infrastructure and
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again the FCC is looking at doing all
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those things uh and I think we should
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push it to
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continue
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um is it reasonable for people to be
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skeptical about this sort of like
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postdecision enforcement
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that happens so if if we see uh a
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squelching of competition uh as you
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mentioned or if we see some degradation
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then we go back to Congress or we go to
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the FCC and and yet people have a sense
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that that a lot of times uh that's
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really you're you're up against the
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brick wall you know once once certain
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practices get underway it's very
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difficult to go back and change them
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there's a there's a lot of power and
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money on one side that would like to
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prevent rent change uh when it comes to
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that so are people right to be skeptical
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we can say we're going to do this and if
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it doesn't work we'll we'll fix it but
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can we fix it really yeah so I'm I'm
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more optimistic um first of all there's
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a lot of power and money on both sides
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uh Microsoft Apple Google Facebook these
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are not tiny little companies uh the
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companies in the internet economy
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frankly are much bigger and certainly
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much more profitable and aggregate than
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the access providers the point is once
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you uh uh go to a certain customer you
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have to go through that access provider
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um but um if you look at the history
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here um every time there has been a
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major example of a network neutrality
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violation um for example there was a
00:14:09
company called Madison river that
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blocked Voiceover IP service the FCC
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intervened uh told them to stop doing it
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they changed the practice Comcast a few
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years ago was degrading bit torrent
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traffic uh the FCC um imposed rules even
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though the rules were overturned in
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court Comcast retreated and agreed not
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to engage in the practice once once they
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had gone through that that complaint
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process and the public scrutiny they
00:14:32
didn't want to have it happen again um
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so it's it's right to say uh hold the
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fcc's feet to the fire U but something
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important to remember is that that third
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that that additional requirement in net
00:14:41
neutrality that I alluded to earlier the
00:14:43
transparency requirement which the FCC
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apparently is going to beef up um if uh
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the light of day Shines on the practices
00:14:52
of broadband providers um then there's
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opportunities for pressure and we've
00:14:57
seen the effects of this so um it's not
00:14:59
net neutrality but uh Netflix uh has a
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chart that shows Broadband performance
00:15:05
from their streams from all providers um
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and they've made a lot of hay by showing
00:15:10
companies like Comcast that are out
00:15:11
there all the time advertising how fast
00:15:13
our service is and how great it is
00:15:15
they're way below a lot of providers or
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they were way below a lot of providers
00:15:19
that that have supposedly higher speeds
00:15:21
um I think that has an impact uh on
00:15:24
companies uh like Comcast uh and if
00:15:26
there's more disclosure that will help
00:15:27
with enforcement you mentioned Comcast
00:15:30
uh could this announcement well this
00:15:32
blog I guess um and those kinds of
00:15:35
proposals have an effect on say the
00:15:38
proposed Comcast uh Time Warner merger
00:15:42
yeah it's an interesting question so so
00:15:43
legally they're separate issues the
00:15:45
merger gets reviewed by the justice
00:15:46
department and it gets reviewed by the
00:15:48
FCC um as I said Comcast is already
00:15:51
subject to Net Neutrality rules and
00:15:52
they've already said sure we'll we'll
00:15:53
put Time Warner Cable under those two um
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but in the court of public opinion um
00:15:59
people are concerned that the big
00:16:01
Broadband providers are getting bigger
00:16:03
and that a company like Comcast if it
00:16:05
acquires time order will have will have
00:16:06
even more leverage in this market um and
00:16:10
frankly um if the FCC puts into place
00:16:13
net neutrality rules that are less than
00:16:16
what uh Advocates want that's only going
00:16:18
to redouble the pressure to say well if
00:16:20
you're not going to do that then the
00:16:22
least you can do is kill this merger um
00:16:24
so I think there is some risk for
00:16:26
Comcast but but as a formal matter um
00:16:29
two separate issues uh you referred to
00:16:31
possible Municipal competition do you
00:16:34
think that the government will ever view
00:16:36
Broadband as a public
00:16:38
utility um so it's hard to know what
00:16:41
that means um so at some level um it
00:16:43
should and I I wrote a paper a few years
00:16:45
ago called the networking utility um
00:16:47
talking about how um internet access
00:16:49
essentially is is a utility but it's a
00:16:52
different kind of utility the the
00:16:53
problem when people use the term public
00:16:55
utility is they're either talking about
00:16:57
the title to regulation I describ and
00:16:59
and that itself is not so problematic um
00:17:02
but people need to understand that's not
00:17:03
a Panacea people think well once it's a
00:17:05
public utility then all of a sudden
00:17:07
those companies have to change all their
00:17:08
business practices um no not necessarily
00:17:11
it's just a different category of
00:17:12
Regulation and and the reality is it's
00:17:13
probably not going to get adopted in the
00:17:15
US um when you think about public
00:17:17
utility people think about the kind of
00:17:19
pervasive regulation of either
00:17:22
governmental or very um slow highly
00:17:26
regulated Industries like the old AT&T
00:17:28
telephone Network and um energy
00:17:31
utilities and while there's some
00:17:32
benefits of that um I don't think most
00:17:35
people feel like those were Dynamic
00:17:38
Innovative companies um so if we want
00:17:40
Broadband providers to invest in new
00:17:43
technology to give us higher speeds and
00:17:45
more capabilities um then I think it's
00:17:47
fair to say these are private companies
00:17:49
they should have the incentives of the
00:17:50
free market we shouldn't just say well
00:17:52
let's let's essentially make this a
00:17:53
government run Monopoly which is what
00:17:55
we're we're moving away from in every
00:17:56
other sector of the economy um I I don't
00:17:59
think that's the solution uh but I think
00:18:01
we need to understand that they're
00:18:02
they're so important to the economy to
00:18:05
daily life to free expression um that it
00:18:07
is appropriate to have different
00:18:09
requirements for them than for other
00:18:11
companies what are the next steps for
00:18:13
this whole procedure and argument uh the
00:18:16
FCC proposal has been circulated to the
00:18:18
five Commissioners three of them have to
00:18:20
vote for it which is not a sure thing um
00:18:22
because the Republican Commissioners
00:18:24
have suggested they're not going to vote
00:18:25
for any net neutrality rules and the
00:18:27
other two Democrats want something
00:18:29
stronger um so assuming the commission
00:18:31
votes for it uh they have a meeting
00:18:33
scheduled in miday it will go out for
00:18:35
public comment typically for two to
00:18:37
three months anyone can weigh in the
00:18:39
fcc's already set up an email box for
00:18:41
public comment but there will be an
00:18:42
opportunity for anyone who wants to to
00:18:44
go on the web and make a comment that
00:18:45
goes in the formal docket um then the
00:18:48
FCC will review all those comments uh
00:18:50
and will uh issue an order which adopts
00:18:53
final rules um that would probably
00:18:55
happen sometime later this year um but
00:18:58
again there's a number of ways that that
00:19:00
could get blocked Congress could
00:19:02
intervene um I think it's most likely
00:19:04
that some version of this proposal will
00:19:06
go into effect and then we'll be in the
00:19:08
realm of potentially more legal
00:19:10
challenges unfortunately uh and this
00:19:13
question about all right what actually
00:19:14
happens do these fears get realized more
00:19:17
broadly what does the future of
00:19:18
broadband look like in the US um again
00:19:22
the fact that there is not more
00:19:24
competition um is a drag on broadband in
00:19:27
the US the United States is
00:19:29
the uh World Center for internet
00:19:32
Innovation internet uh economic value
00:19:35
creation and and internet Freedom um but
00:19:38
um that's been um weakened um in recent
00:19:41
years um partly because of some of the
00:19:43
revelations about government
00:19:45
surveillance which have caused uh
00:19:47
companies and governments to not no
00:19:48
longer trust the US on that front uh but
00:19:51
partly because uh we don't have the
00:19:53
level of broadband connectivity by some
00:19:55
measures that they do in other places so
00:19:58
I think that will be a drag um and uh I
00:20:00
think you know we talk to companies like
00:20:02
Comcast and Verizon and so forth they
00:20:04
say look we are investing we are
00:20:06
providing these highspeed Services we
00:20:08
we're putting fiber networks into the
00:20:09
ground um which by some measures we have
00:20:11
more widely than other countries um but
00:20:14
I think if you look at the potential we
00:20:15
haven't gone far enough so um I'm
00:20:18
worried um that at some point even
00:20:21
though silic Valley is here and even
00:20:24
though Wall Street which which funds so
00:20:26
much of this is here and even though we
00:20:28
have this extraordinary Innovation
00:20:29
culture the the the smartest and best
00:20:31
entrepreneurs and technologist want to
00:20:33
come here from around the world um
00:20:35
that's not going away U but I I think
00:20:37
there is some risk if we don't have a
00:20:38
true National policy of promoting
00:20:42
advances in broadband and more
00:20:43
competition at every turn um that the US
00:20:46
falls behind and also that we lose some
00:20:48
of this potential that the internet has
00:20:50
and that Broadband has um for catalyzing
00:20:53
both economic benefit as well as all
00:20:55
these great social benefits thanks very
00:20:57
much for joining us thank thank you for
00:20:58
having me
00:21:02
[Music]
