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Cook’s Edge: An online article in the Register grossly exaggerated what happened during John Kneuer’s presentation at Supernpova on June 22.

The author claimed that Supernova 2007 A San Francisco tech show degenerated into a shouting match today, after a pugnacious Bush commerce official squared off with heated supporters of net neutrality.

John Kneuer, the assistant secretary for communications and information, quickly lost his temper and began shouting back at Supernova 2007 attendees after taking flack for saying the free market - not government intervention - would protect internet innovation and access.

Taking a brief time out from shouting his responses at delegates who’d rejected his claims the free market has ensured consumer choice in US broadband internet access, Kneuer remarked in an aside: “I started out very politely.”

That came seconds after he told delegates what they really wanted was for the government to mandate terms and conditions of internet service in the US.

“That’s absolutely what you are asking for!” he shouted to counter-shots of “no!” and “there is no market place!”, referring to the fact a handful of phone and cable companies control the lion share of broadband internet access and service in the US.

Cook’s Edge: I was in the room and I thoroughly disliked what the man said thinking that he was talking ideology with no deeper understanding of this complex subject. But the Register article cited above in my opinion grossly exaggerates and mischaracterizes the exchange.

Readers may form their own opinion at Stepahnie Both’s Blog which has a 7 minute 48 second video clip.

Meanwhile the issues involved kicked off an informative discussion on my Economics of IP Networks private mail list.

Mark Cooper: Let us never forget that it was Bill Kennard who dithered and could not decide that the obligation of nondiscirmination should apply to cable’s Internet offering. If he had decided to apply those principles, they would have stuck.

Fred Goldstein: I hate to raise this old argument again, but on what legal basis could they have regulated cable modems?

The Internet went public before cable modems were widely available. It depended on ILEC circuits for most users’ access, something the ILECs only provided under regulatory duress: Computer II, Sharing & Resale, and absence of the “Modem Tax” (access charge exemption). But the ILECs were recognized as the monopoly suppliers and common carriers; other than the silly jurisdictional business, they had no say over the content of their circuits. Even “peeking inside the envelope” of a Frame Relay circuit, for instance, would have been illegal.

Cable companies had not been common carriers, nor had they generally offered point-to-point services (Special Access) or switched services. So they set up shop as ISPs, using their cable plant for the transmission. In this regard their legal status was “self-provisioned ISP”, akin to the WISPs who set up their own unlicensed radios. In the United States, they met with some of the least competitive ILECs in the world, so their “broadband” Internet market share became quite large. But there was nothing there to regulate, no underlying “telecommunications services”, any more than a WISP’s WiFi radio could be regulated. Nor was there a need to “open” cable, because any ISP could rent ILEC DSL, which the Kennard FCC defined as an interstate common carrier (Special Access) service.

I have openly advocated for the cablecos to provide ISPs with access anyway, as a commercial choice. But I’m afraid that if we tried to regulate cable modems because they were the most successful self-provisioned ISPs, then other self-provisioned ISPs would also become subject to regulation.

The problem we’re having now is that after the Supremes *upheld* Kennard’s policy in 2005, Martin flat-out lied about what that decision said, and decided to “level the playing field” by relieving the ILECs of their century-old burden of common carriage.

Vint Cerf: I tried to get Reed Hundt, Bill Kennard and Michael Powell to see how important it was to retain the theory that DSL and Cable had a communication component in accordance with the technical architecture but all three kept claiming that this would require that Cable be encumbered with every telecom rule ever invented for telephony. My reaction was that the communication service in both cases was NOT telephony but digital transport on top of which one could provide a wide range of services. The rules of telephony, specifically, did not have to apply. That discretion could be exercised in the case of broadband to treat this as a basic service (as in computer I, II, III). To no avail.

Mark Cooper: John Kneuer while running NIST, shamelessly continues with the primary weapon of mass deception — any regulation is total regulation. The Computer Inquiries were light handed. AT&T and later the Bells hated them primarily because they were so successful in promoting an open communications environment that they could not control.

Fred Goldstein: I agree that not all regulation need be heavy-handed. However, getting back to the key issue,

American Style Regulation

Mark Cooper: The Portland Court was absolutely clear, cable modem service involved telecommunications and telecommunications can be regulated under Title II of the Act.

Fred Goldstein: And I think that Court was wrong on the law. Not that I’m a lawyer or anything, but that Court seemed to confuse “telecommunications” (lower case, something even Bob Frankston would be guilty of) with “Telecommunications Service”. The Act distinguishes between the two. The “service” component would apply if there were ever a raw transport component offered for sale. But it wasn’t — cable only came bundled, telecom as a component of an Information service-telecom package.

I’m not saying that this is necessarily the ideal public policy — that’s debatable — and in fact the distinction is rather stupid for other reasons, but it’s the way American Style Regulation works. And as long as we’re dealing with American Style, we would have to worry about the impact of regulating the telecom component of everybody else who dares cross a property line with a signal.

European Style Regulation “Significant Market Power”

A more interesting approach *might* be to look at European Style regulation. It doesn’t draw the key definitions based on function or market, but on Significant Market Power. If you become big enough in anything to have SMP, you’re subject to more scrutiny, but little guys get the by. This has interesting effects wherein a business handles more regulation once it’s big enough to do so.

But I think both the Cable Act of 1992 and the Telecom Act of 1996 were written with the understanding that cable was a more entrepreneurial, competitive business than ILECs, and that ILECs were to be forever subject to certain obligations, based on their historic blessings as well as carrier-of-last-resort status. The Cheney-Rove FCC has let them keep the blessings and more, while relieving them of the obligations that came along with them.

Mark Cooper: Bill Kennard exercised agency discretion and legal gymnastics to decide that because the telecommunications was bundled with an information service, the whole bundle was information, and the telcommunications component did not have to be regulated. The Supreme Court. merely said the FCC had teh expertise (Huh?) and legal discretion to arrive at this conclusion. If it had the expertise and legal discretion to misdefine the telecommunications component, it had the expertise and discretion to get it right, Bill Kennard just did not have the gray cells to understand what the right policy was.

Fred Goldstein: No denying that “telecommunications” exists, but where do you draw the line? Would Dave Hughes’ radios in Old Colorado City have to become “open” to anyone who wanted to ride them? They too are “telecommunications”, but do not offer a “telecommunications service”. Of course if the rules were based on SMP or some other more useful basis, an answer could be found.

Mark Cooper: Mike Powell pushed Kennard’s dithering one step further with his declaratory ruling on cable modem and took the final step down this road to ruin by invoking the intermodal competition and level playing field arguments to extend it to telcos. Intellectually there was no difference between the Clinton and Bush Administrations. The latter was just more explicit about what it wanted to do.

Fred Goldstein: No, there’s a HUGE difference between keeping one regulated carrier available to all information providers (you can say anything you want, so long as you pay the “just and reasonable rate” for transport — and note that Kennard was very generous with UNEs, making it possible for CLECs to get access to DSL too, which in turn was “telecommunications service” open to ISPs) and having zero carriers available (we say what we want, and ratepayers get subjected to DPI, so go away you pesky ISPs).

Mark Cooper: The court was not wrong on with the law or the policy. The idea of asymetric regulation between two privately owned carriers was unsustainable politically, if not economically. There are few bright lines in policy. The world is gray. We cannot let the perfect be the enemy of the good. The Computer Inquiries should have applied to the telecommunications provided by cable operators.

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