The Antitrust, Competition Policy and Consumer Rights Subcommittee of the House Judiciary Committee held its hearing on network neutrality this afternoon and the sole opponent to mandatory net neutrality regulations didn’t stand a chance. (I was wrong. The witness list was not evenly divided between pro-and anti net neutrality witnesses.)
In a hearing filled with surprises, Walter McCormick, CEO of US Telecom, the trade association representing the phone industry, was forced again and again to defend his members’ desires to create a “two-tiered” Internet. McCormick was out-talked, out-argued and, in the case of many subcommittee members, out-ranked as he tried to support the idea that phone companies have the right to enter into special deals with selected Internet content and application providers for improved broadband service delivery.
It started with the subcommittee’s chairman, Rep. Chris Cannon (R-UT), who kicked off the hearing by saying that the “open architecture of this medium is central to our fundamental understanding of the Internet.”
Ranking member John Conyers (D-MI) was even more impassioned. “We have telecom companies that have indicated that they do not intend to let companies like Google and Yahoo or next-generation Internet entrepreneurs go free or use the pipes without significant payments.”
The pro-network neutrality witnesses returned repeatedly to the idea that the phone companies’ promises to not “block, degrade or impair” Internet connections are thin smokescreens. Columbia law school professor Tim Wu said that phone companies want to pursue the “Tony Soprano” model of Internet delivery.
With their notions of a “fast-lane” or premium tier of Internet delivery for content and applications providers, the phone companies are in essence saying “pay us or we will ruin your business,” Wu said. “That’s a protection scheme and not a market strategy.”
Paul Misener, Global Public Policy VP at Amazon.com, said the phone companies’ proposed higher priority services equate to the telcos’ saying “pay us for prioritization or your content will be degraded compared to those who are willing to pay.”
All of the panelists agreed that a vigorous broadband infrastructure is critical to the U.S. economy, but that’s about as far as it went. The pro-network neutrality witnesses warned that what the phone companies want to do will damage U.S. competitiveness.
“The real threat is that the anti-competitive side of these networks will spill over into what is one of the best functioning markets in the U.S. today,” Wu said. “I worry that if we allow the incumbents to control access to Google, what happens to the next company, to the next Larry and Sergey in their dorm rooms,” Rep. Zoe Lofgren (D-CA) said.
McCormick tried to raise the point that broadband providers need incentives to invest in the network, and that network neutrality proponents threaten to weaken those incentives with regulations. “Continued advancement rests on continued investment in these networks,” he said. “The answer is investment. Not legislation that would prevent it.”
In response to McCormick’s argument, several of the witnesses agreed that expanded networks require stepped-up investments, but disagreed with McCormick that this equation justifies charging third-party providers more for preferred or superior Internet delivery. As Rep. Lamar Smith (R-TX) said, “the debate here is: Who should pay the costs?”
“We support consumer tiering of services, where a gamer pays more than someone who uses the Internet just for email,” Amazon’s Misener said. “The question to the Committee and the question to the Congress is what is the best way to fund these things,” Wu said. “The worst way is to allow the network owners, as gatekeepers, as crown corporations to distort this part of the American economy.”
McCormick tried a risky Washington gambit and failed miserably. McCormick attempted to equate what the phone companies want to do with what Google, a big network neutrality proponent, already does. McCormick tried to liken the preferred Internet delivery that telcos want to offer with Google’s sale of advertising to the highest bidder on search results pages.
“There is a screen bias in Google,” McCormick said. “The reason is that there is a priority in advertising that discriminates against Trover” [a local DC bookstore] in favor of Amazon.com.
The metaphorical howls were loud and long in response to this analogy. “The search engine market is a highly competitive market in which it’s truly survival of the fittest,” Wu said. “What we’re talking about here is a completely different issue. The analogy is not apt.”
Rep. Lofgren, whose district borders Google’s home town of Mountain View, said “it is a mistake to suggest that anything but the algorithm that they use comes up with the results. They also have paid placements but I think it’s a mistake and misleading to mix those two things together.”
Amazon’s Misener said “there are two dozen search engines out there. If there were two dozen broadband providers out there, we wouldn’t be seeking legislation.”
McCormick was also put on the spot by Rep. Adam Schiff (D-CA), who pressed the telco lobbyist on whether the phone companies would rely on their “dumb pipe” defense if they actively worked with third-parties to create special and improved Internet tiers. Hollywood, home turf for Schiff, wants broadband providers to take a more proactive role in sniffing out content pirates, but the telcos have maintained that’s not their responsibility given that they are merely passive content conduits.
“Aren’t you going to be taking on the responsibility - won’t it be more difficult for you to say we’re just a dumb pipeline?” Schiff asked. McCormick seemed at a loss for a response and then ultimately argued, not convincingly, that the telcos will help to speed the distribution of legitimate content on the Internet by working with the Hollywood studios.
Judiciary is clearly upset about the telecom reform bill moving through the House Commerce Committee (mark-up started at 5 pm today) and several members indicated that they felt the net neutrality provisions in that draft legislation attempt to side-step the antitrust laws, which is within the Committee’s juridisdiction.
Rep. Cannon asked what would happen to antitrust enforcement if the Barton Bill were to pass. “The bill entrusts exclusive authority with the FCC and then limits that authority,” Misener said, suggesting the role of antitrust analysis would be diminished.
McCormick, no doubt battle-weary at the end of a long, intense hearing, said “I’m sure if there is a concern that that language would have any negative impact on antitrust enforcement, that the three of us could agree that that language would drop out and that antirust law would prevail.” This move would probably delight the telcos given that they didn’t want any network neutrality language in the Barton bill to begin with.
Cynthia Brumfield at 6:08 PM|Comments(0)
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