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Forty years after the first successful connection was made on the predecessor to the Internet, the U.S. has given up its fading claims to govern the network.

A fight over governance which erupted in 1998 has ended with a whimper.

In this case, I’m not talking about the regulation of human activity that takes place using the Internet, but of the internal working of the network itself.

As reported by the Advisory Committee of the Congressional Internet Caucus, the U.S. government’s agreement with ICANN was allowed to expire on September 29th. (The Department of Commerce has a separate agreement with ICANN, which was also significantly modified.)

ICANN is a non-profit corporation formed in 1998 to manage two key aspects of network governance: the assignment of domain names and website suffixes and of IP addresses for computers connected to the Internet. There are now over 110,000,000 registered domains.

Hard as it is to believe, before 1998 the management of names and addresses was largely left to the efforts of Jon Postel, a computer science professor at the University of Southern California. As the Internet shifted dramatically from an academic and government network to a consumer and business network, it became clear that some more formal mechanism of governance was required.

But by then the Internet had become a global phenomenon. The U.S. government was adamant that it retain some measure of control over its invention; the rest of the world argued that resting authority for a global infrastructure with one national government would cripple it, or worse.  Hearings were held, speeches were made, the U.N. was called in (literally).

ICANN was the compromise, and it was an ugly compromise at that. ICANN has run through several executive directors and political battles. Just explaining the selection of members of its Board of Directors, as David Post demonstrates in Figure 10.3 of his book, “In Search of Jefferson’s Moose: Notes on the State of Cyberspace,” requires a flowchart with nearly fifty boxes.

It has also been the subject of regular criticism, in particular for the ways in which it subcontracts the registration of domain names, its resistance to creating new “dot” suffixes, and its evolving and weird process for resolving disputes over “ownership” of domains, typically involving a claim of trademark infringement or unfair competition. Former board member Karl Auerbach, quoted in Information Week, put it this way:

At the end of the day it comes down to this: ICANN remains a body that stands astride the Internet's domain name system, not as a colossus but more as a Jabba the Hutt. ICANN is a trade guild in which member vendors meet, set prices, define products, agree to terms of sales, and allow only chosen new vendors to enter the guild and sell products.

Still, through boom and bust, Web 2.0 and social media, the Internet has continued to grow, operate, and reinvent itself as new technologies arrive on the scene.

And what started as a U.S. government project is now clearly a worldwide convenience. According to Christopher Rhoads in The Wall Street Journal, “today just 15% of the world’s estimated 1.7 billion Internet users reside in North America.”

Which is perhaps why the end of federal government oversight of ICANN received so little attention in 2009.

But in 1998, you would have thought the future of civilization depended on keeping the Internet an American property.

at&t logoIt's the morning after Chairman Genachowski's impassioned call for new FCC regulations to impose "net neutality" rules on Internet access providers.  No surprise, everyone is reaching for the aspirin.  Communications users have been partying like it's 1974, when U.S. regulators finally began the painful process of breaking up the long-sanctioned AT&T monopolies on long-distance and equipment.

In the interim, the FCC, in the name of de-regulation, has constructed a remarkably complex machinery of new regulation for existing (telephone) and emerging (data) services.  They're always a good ten years behind the march of new technology--including new infrastructure technologies such as cable, satellite, wireless, and fiber, as well as new applications such as the Web, voice-over-IP telephone, and the convergence of voice, data, television and everything else.  And they always will be, no matter how many smart people are working on the problem.  (There are many smart people working at the FCC.)

In a deja vu of the passage of the landmark 1996 Communication Act, within days of Genachowski's speech, everyone was crying foul.  Wireless operators can't understand why they would be included in neutrality regulations, given the relative competitiveness of the wireless industry (new regulations are presumed to be needed when market mechanisms fail to correct anti-consumer behavior).  AT&T reminded us that the wireless spectrum they bought last year (part of what was given up by broadcast television in the switch to digital broadcast) came with no requirement to be open to any device or application.  Verizon bought a block that did come with that requirement, and AT&T paid "many billions more"  to avoid the open rules.  Oops.

Then AT&T complained that Google, a leading proponent of neutrality rules, was itself violating some of the basic principles with its own Google Voice application, which blocks certain services (900 numbers, free conference call services, etc.) that charge high fees to the customer's provider that cannot be passed along.   "Traditional" phone companies can't block those services.  The fees, as the New York Times' Saul Hansell points out, were originally authorized to help subsidize rural telephone service, but everyone understands that the system has now been thoroughly gamed, part of the post-1996 de-regulation of telephony and the end of Judge Greene's oversight of the 1982 breakup of the old AT&T.  (Hate them all you want, but as recently as six months ago, AT&T was losing money on every iPhone customer it signed up under its exclusive deal with Apple.)

Google got into similar trouble in late 2008, when it became known that the company had offered to "co-locate" its own servers at key exchange locations of broadband providers in order to speed up delivery of Google content such as YouTube videos. This "fast lane" service seemed to be precisely what the net neutrality advocates feared most, yet it was coming from one of their chief allies and instigators. Google's defense was that its offer was non-exclusive, meaning any other application provider could make a similar (non-neutral) arrangement.

Reading through some of the comments posted by readers of The New York Times and The Wall Street Journal articles reporting on these developments, one can't avoid the sense that no one really knows what anyone else really means by neutrality.  "Net neutrality is about the Internet, not the telephone network," says one reader.  "Neutrality in general does not apply to telephone companies, nor would it benefit them," says another.

Harold Feld at Public Knowledge, acknowledging that "I do not know how other VOIP providers behave," nonetheless is confident that neutrality is separable from telecommunications regulation.  "[I]t is easy to make [Google Voice] look like a network neutrality question and try to undermine network neutrality than focus on the merits of either the Google Voice question or the network neutrality question."  It is, unfortunately, anything but easy.

All of these stories are conflated for a reason beyond simply trying to muddy the waters as much as possible.  Unfortunately, they really are all hopelessly intertwined. Much as the FCC wishes there was still a clear distinction between "the Internet" and "the telephone network," technology has obliterated that difference.  Internet companies (Vonage, Skype) provide phone service using TCP/IP, "phone companies" offer Internet access over their equipment, while "cable companies" offer the same service over cable--along with phone services and television, which the phone companies also offer.

Under the law, "telecommunications" services are still treated (badly) as common carriers, a significant competitive disadvantage that may or may not still be justifiable.  "Information" services are not.  When AT&T offers Internet, it's a telecommunications service.  When Vonage offers telephony, it's an information service.  The current rules don't distinguish between the two kinds of uses based on the protocol used, the network technology used, or the equipment used.  The current rules distinguish based solely on the historical (that is, pre-1982) business of the provider.  Providers that didn't exist in 1982 (Vonage, Skype, Google) or who weren't in the voice business at the time (Comcast, TimeWarner) are presumed to be offering information services, regardless of what services they are offering.

AT&T's point, hopelessly lost in 25 years of FCC rulemaking, is that regardless of whether it still makes sense to regulate the hell out of their copper-wire phone network, they ought to be held to the same rules as everyone else when offering new services on new infrastructure and new equipment.  Which is to say, far fewer rules than when they are offering POTS (Plain Old Telephone Service).

Pull one strand of this spider web, and every other strand responds.  Unfortunately, net neutrality is bigger than just net neutrality, and not just because Internet providers say it is.  It really is.

There's a simple solution to all this, one that might make a rational conversation about net neutrality possible.  And that is to eliminate the distinction between common carriers and everyone else.  Hold everyone to the same rules regardless of what information they are transporting--whether voice, video, television, data.   Because regardless of who's doing what, these days it's all bits.  There is no rational reason to regulate the bits based on who is transporting them.  The FCC doesn't even try to justify the distinction anymore.  Let's just get rid of it.

We need, as I say in Chapter 6 of The Laws of Disruption, a cure for the common carrier.  We need to eliminate most if not all of the FCC's byzantine sets of taxes, rules, funds, rate-setting, and (for broadcast but not cable TV) content oversight.  When the 1996 Communications Act was signed into law, Congress predicted it would signal the end of the FCC, much as the deregulation of the airline industry ended the reign of terror of the Civil Aviation Board.

Today, the FCC's budget is bigger than ever.  And in the thirteen years since deregulation, American consumers have fallen behind in every conceivable metric their counterparts in much of Europe and Asia.  We pay more and get less, even as Moore's Law makes everything faster, cheaper, smaller and Metcalfe's Law converges all the networks and protocols and applications into a single glorious buffet of information.

True consumer interests are absent from the picture here.  So even when they win, they often lose.  And what constitutes a win is anyone's guess.

Consumer activists and consumers themselves would do well to channel their anger and energy away from individual providers and individual problems and focus on the real devil.  Let's really deregulate the communications industry.  Let's put the squeeze on the only group that actually makes a profit here--industry lobbyists and lawyers.

By the way, understanding the impact of federal regulation on the infrastructure industry (which no one does, or can) is only part of the puzzle.  Phone, cable, and wireless providers are also subject to local regulations, many of which add to and subtract from the perverse incentives that  dictate  industry behavior.  We need to get the almost entirely corrupt local agencies out of the regulatory business altogether.

Ready for that hangover helper now?

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(I apologize in advance for the length of this blog entry. If you get all the way through this post and think to yourself that net neutrality is more technical and more complicated than you thought, and that in all honesty you really don’t understand it well enough to form an opinion, than I have done my job. Business journalists take note: simplifying the story to make it readable doesn’t really help in a policy debate that is, unavoidably, confusing.)

In 2008, CNet’s Declan McCullagh declared the death of legislation floating around Congress that would enforce the so-called “Net neutrality” principle. His article, which made good sense at the time, was titled “Ten things that finally killed net neutrality.”

Well, Net neutrality has returned from the grave. Today, President Obama’s newly-confirmed head of the FCC, Julius Genachowski, announced a proposed rulemaking that would establish a neutrality regime over broadband, cable, and wireless Internet providers. The text of his speech is here.

I spend far too much of Chapter 6 of “The Laws of Disruption” laying out the case against net neutrality, an argument I also made briefly in an earlier CNet post and an article in CIO Insight. See “Preserve Internet Freedom…From Regulation” and "What's Wrong with Net Neutrality?"

I still think Net neutrality is a bad idea, top to bottom. As reader comments to today’s coverage of the Chairman’s speech reiterate, however, I recognize it has also become, unfortunately, an emotional subject, a proxy for all kinds of powerful emotions and unrelated topics. It’s hard to talk about it rationally with both proponents and opponents. Not unlike, come to think of it, another famous death and resurrection.

So instead of repeating myself, I’ll just highlight a few points worth noting about today’s developments.

What does a “proposed rulemaking” mean? Many of the stories from the business press today described a fundamental shift in Internet policy. Not quite. The Chairman gave a speech, in which he announced an upcoming rulemaking process to develop and possibly adopt new rules. That process is long, political, and weird. What actually comes out of it can’t be predicted. And if history is any guide, any rules ultimately adopted will be vigorously challenged in court. It may be years before any enforceable new rules come into effect, and they may bear little resemblance to the six guiding principles announced today.

Rulemaking vs. legislation. In its earlier incarnation, net neutrality was being considered not by the FCC but by Congress. The difference is significant. Congress can add to or remove from the authority of the FCC; the FCC cannot expand its own jurisdiction. In the Commission’s earlier decision to sanction Comcast for violating the FCC’s original neutrality principles (which were never formally adopted as rules), Comcast objected on the grounds that the FCC has no authority over its Internet business.

A federal appellate court is considering that argument now, but given the Supreme Court and the FCC’s own interpretation of the Communications Act of 1996, it seems quite plausible that today the FCC has no regulatory authority over cable or wireless Internet providers, only phone companies such as AT&T. Doesn’t make much sense, but that’s the law as it stands now. And changing such a fundamental feature of communications law is even less likely than getting through the rulemaking process.

Chairman Genachowski’s retcon. The Chairman is certainly right to say that the Internet’s original architects designed an “open system,” but what exactly does that mean? Open to any device or software that supports its underlying protocol, TCP/IP, or “not biased in favor of any particular application,” as the Chairman defined it today? I think he’d be hard-pressed, if it matters, to find any indication that the Internet architects were even thinking of applications, let alone bias for or against.

In any case the protocols—that is, the Internet—still aren’t biased. Net neutrality has everything to do with techniques (good, bad, or otherwise) for managing network traffic, about which the original architects of the Internet wisely architected nothing. As the Chairman later said, using that horrible “it’s not about/it’s about” formulation, “This is not about government regulation of the Internet. It’s about fair rules of the road for companies that control access to the Internet.” (emphasis added) The architects of the original Internet couldn’t possibly have designed a system that built in “open” principles for companies that would come to control access to the network for consumers.

The “open” design of the Internet couldn’t possibly have said anything about access, in other words. As it stands, the concerns of those who are pushing for Net neutrality have to do with traffic management between the ISP and the end-user, that is, on the last mile. No ISP can tinker with the flow of packets once they enter the cloud, which is part of the genius of the design. Let’s be clear that it isn’t the design of the “Internet” that’s at issue here, but rather the regulation of access provisioning. Rhetorical devices are part of the reason no one can talk calmly about the subject.

Why has the Internet succeeded? I agree with the Chairman that one lesson of the Internet’s success has been that “we cannot know what tomorrow holds on the Internet, except that it will be unexpected…and that the fewer obstacles [ ] innovators face…the greater our opportunity.” But what sort of obstacles do the most damage, those introduced by network operators or those introduced by federal regulators? Put another way, has the Internet succeeded because network operators have so far treated all packets with identical priority in routing traffic, or has the Internet succeeded because there has been little if any interference with the development of an enormous new industry by state or federal regulators?

Phyrric victories all around. Let’s say the rulemaking goes forward and in the end, the six principles of Net neutrality proposed by the Chairman become law. DSL, Cable and Wireless Internet providers will be forbidden (subject to “reasonable network management” exceptions to be determined) to block or otherwise throttle high-bandwidth applications including IP telephony, file-sharing, and video streaming.

In order to keep the networks operating efficiently, the likely response will be to switch from unlimited bandwidth plans to metered plans, where high-volume users will pay more for access, or pay more during peak periods, much as happens today with large commercial water and electricity users (or even consumer users during droughts, heat waves, and other emergencies). The mechanism for metering adds cost and overhead, reflected in everyone’s rates. Perhaps more ominously, metering means closer tracking and inspection of traffic, which will raise legitimate new privacy concerns.

Furthermore, the Chairman has proposed that the FCC “evaluate” alleged violations on a “case-by-case basis” using “fact-based determinations.” What does that mean? Imagine for a moment that you want to complain to the FCC because you believe your ISP has violated the Net neutrality rules. The facts the FCC will need in order to “evaluate” your complaint will, of necessity, include details of the applications, content, and information you were trying to send and receive, and perhaps that of other network users trying to access the Internet at the same time. To me (although no one else seems to mind), this raises even more privacy concerns.

If nothing else, these new “fact-based determinations” will require the FCC to build new capacity, including significant network expertise on its staff. Even if the rules get enacted, Congress will have to appropriate new funding for enforcement.

Good luck with that, Chairman Genachowski.