The Good, The Bad, The Internet - Researched Argument

The Good, The Bad, The Internet

            The broadband communications industry is in a state of constant and rapid change. With the rise of video streaming services such as Youtube, Netflix, and Hulu, the demand for high speed and high bandwidth service is at an all-time high. Additionally, the internet has become an integral part of nearly every industry. Unfortunately, as demand has increased, internet service providers in the United States have not taken necessary steps to improve their infrastructure to be able to provide the service that consumers currently want. The situation has turned to arguments and court settlements about who should be paying who. Consumers are left with a subpar service without any options for change since the primary ISP competitors have essentially created a monopoly where none is better than the other and new competitors are kept out. The Federal Communications Commission has failed to change or create regulations that would improve the situation. While there are some bright spots of new companies and municipalities working together to improve the infrastructure in their areas, prohibitive costs are ensuring a continued lack of competition. Internet service providers in the United States are not meeting consumer demand and are actively preventing progress in the industry, because of their refusal to upgrade their infrastructure, anti-competitive actions, and employment of anti-consumer policies.

            The current state of affairs in the internet service industry has many contributing factors, but has been largely shaped by the Telecommunications Act of 1996 and multiple lawsuits against the Federal Communications Commission. The Telecommunications Act of 1996 was the first major change to telecommunications law in the United States since the Communications Act of 1934. The act was necessary to create laws in response to the spread of the internet in the general public. While a primary purpose of the act was to ensure competition in the industry, reduced regulation of media company mergers lead to a massive amount of acquisition by a small number of larger companies. This had the unintended effect of actually reducing the amount of competition in the market. The acquisition of small companies beginning in the mid 1990’s has continued and escalated to this day. Recently, Comcast has announced plans for the acquisition of Time Warner Cable, the second largest internet service provider behind Comcast, which would effectively remove a massive competitor. Additionally, the deregulation was intended to ease the entry of new companies into the industry. However, the few companies that initially bought or merged with the smaller companies became so large so quickly that no new company could possibly compete without billions of dollars. The lack of regulation and vague language from the Federal Communications Commission lead to internet service providers pushing the boundaries even further, eventually leading to Comcast V. FCC in 2010. The case came about when the FCC attempted to stop Comcast from deliberately blocking certain types of internet traffic from Comcast customers. The FCC based their argument on articles within the Telecommunications Act of 1996, but the D.C. Circuit decided that the FCC had no legal jurisdiction to regulate Comcast’s network management. In response to the ruling, the FCC attempted to gain jurisdiction with the Open Internet Rules. Alexander Reicher gives an in depth analysis of the case’s impact on how internet service providers are regulated and the failure of the Open Internet Rules. Reicher asserts that the FCC has failed to “adequately elaborate criteria for reasonable network management in the Open Internet Rules,” and in this failing “the FCC left the concept wideopen to interpretation by future litigants” (Reicher 750). Reicher concludes that “Reasonable network management, in turn, should be defined first by whether or not the discriminatory practice is technically necessary” (Reicher 762). Unfortunately, the lack of strong action from the FCC has allowed internet service providers to continue restriction of traffic in order to maximize profit without regard for the actual quality of service they are being paid to provide.

            Questionable business practices by the major internet services providers in the United States have continued to this day. Since streaming services like Netflix and Youtube have gained massive popularity, accusations of ISPs deliberately limiting the speed and quality of streaming video have arisen again. The accusations come when a customer notices that the quality or speed of their service becomes inconsistent depending on what they are doing. Some have argued that ISPs are limiting their service in a manner similar to Comcast’s actions that lead to the case versus the FCC mentioned earlier. ISPs have consistently denied this however, recent events cast doubt on their claims. In February of 2014, Netflix agreed to pay Comcast an undisclosed amount to ensure quality streaming to Comcast users. This arrangement came about after Comcast refused an offer from Netflix to install Netflix servers in their network in order to ensure a consistent experience for users. Upon completion of the agreement, performance for Comcast customers improved immediately. This makes it unlikely that the problems that were causing complaints were anything besides artificial limitations put in place by Comcast. As Comcast has become the largest internet service provider in the U.S., anything they do essentially sets a precedence for the other large ISPs to follow. Last week, Verizon came to a similar agreement with Netflix. The negative implications of these agreements are immense. First, requiring content providers to pay ISPs for assurance that their content can reach customers severely limits the possibility of new content providers being able to afford to create competition for the established services. Secondly, due to the deregulation established by the Telecommunications Act of 1996, it is possible for ISPs to give an artificial advantage to services, such as highly profitable subscription based television content, owned by the same parent company. Continuing to limit the usability of online video streaming services serves to push users back to television, which is often bundled by ISPs with internet service. This also serves to alleviate pressure to make costly infrastructure improvements to meet demand. Some ISPs have responded to the increase in video streaming and downloading by consumers with the implementation data caps and usage based pricing. A data cap essentially means that while a customer is paying for an advertised speed, she can only use it a set amount before incurring additional charges. This type of pricing was common to mobile phones for years but has been met with heavy resistance when companies have attempted to implement it in home internet connections. Jacob Minnie questions the necessity of this pricing method by discussing both the reasoning stated by ISPs and the clear counters to their arguments. Minnie summarizes the two primary reasons given for implementing data caps as being “it’s unfair that the 99% should be subsidizing [the top 1% of data user’s] usage” and “to prevent network congestion” (Minnie 13). Minnie argues that the first point runs counter to the usage and profit figures released by the ISPs themselves noting Time Warner Cable’s statement in 2008 “TWC’s costs for data access dropped 12% while the number of subscribers climbed 10%” (Minnie 13). This shows that as individual cost for data usage is decreased, the overall subscriber base increases and therefor increases profit without implementing data caps. The second argument of preventing network congestion is more complex. While it is true that data usage has risen to an extent that the current infrastructure is strained during peak usage hours, there is no evidence that data caps are beneficial in dealing with the congestion. In Minnie’s argument against this point he raises the statement of Comcast Senior V.P., Joe Waz, who said “that bandwidth caps do little to change that” and a Comcast White Paper which stated the “cap does not address the issue of network

congestion, which results from traffic levels that vary from minute to minute” (Minnie 14). Minnie goes on to argue that the true reason behind data is monetary gain which is a point also argued by Daniel Lyons who also elaborates on the anticompetitive effects of usage based pricing.  Lyons also points out a statement from Comcast that “estimates that the amount of data required to replace its cable service with an Internet-based competitor would be 288 gigabytes each month, a figure suspiciously close to the 300-gigabyte monthly cap that the company

is test-marketing.” (Lyons 36). Arguments made by ISPs based on bandwidth limitations serve only to distract from the issue that demand is outgrowing the currently installed infrastructure.

            In 2011, Google launched a new service called Google Fiber. Google Fiber provides fiber optic broadband internet and television to users. The current widespread copper wire standard in use across the U.S. is absolutely dwarfed in terms of bandwidth and speed by fiber optic networks. Casimer and Carolyn DeCusatis state it in simple terms; “the reason we are interested in optical fibers for communication is because their available bandwidth far exceeds that of copper wire” (DeCusatis 9). However, the cost involved in upgrading a copper network to fiber optic is immense. This leads to an argument over who should be handling the investment in infrastructure upgrades. Pierre Coucheney, Patrick Maillé, and Bruno Tuffin examine this argument caused by the increased demand for improved infrastructure. They describe the core argument of ISPs as being “The underlying concern is that investment is made by ISPs but content providers get an important part of the dividends” (Coucheney 1). The ISPs do not feel that they should be solely responsible for the cost of upgrades when the upgrades will directly contribute to an increase in profit for content providers. Comcast has used this as justification for requiring payment from Netflix to ensure quality service. On the other hand, Google has taken a different approach by working with customers and individual cities to reduce the cost of fiber optic installation. In cities where Google Fiber has been introduced, the cost of the infrastructure upgrade has been incorporated into the subscription price. Additionally, Google has worked with city governments to speed the process of obtaining and reduce fees for construction permits. While this still leaves Google with a massive installation bill, they seem to have a more long term goal in mind than other ISPs in the U.S. While Comcast and Verizon attempt to make short term gains by charging content providers, Google is working to improve the end product for the consumer. All of these companies are looking to maximize profit but Google’s approach appears to be offering the best product, not to see how many different charges can be created for a product that does not meet demand. Compared to countries like South Korea, Japan, and Sweden, the United States is lagging behind in terms of internet connectivity directly because of the lack of widespread access to fiber optic connections. The response to Google Fiber from the established ISPs serves to show how the lack of competition in the market has allowed the continued lack of infrastructure upgrades. While multiple ISPs immediately announced implementation of their own fiber optic networks in response to Google Fiber, none have actually installed any new infrastructure. At best, ISPs are offering fiber service to areas that have been built with fiber connectivity already. Comcast demonstrated a one gigabit per second connection, approximately 100 times faster than the average connection in the United States, in 2011. Today, the fastest connection speed offered by Comcast is 105Mbps, about one tenth of what they demonstrated three years ago. Similar capabilities have been demonstrated by other ISPs but without real competition being able to thrive in the industry, there is no pressure on ISPs to actually improve their service. Recently, I spoke to a small business owner, Chad Uthe, who described his problems with internet connection for his company’s offices. Uthe is the president of a small landscaping company and recently began experiencing problems with his connection on the business office computers. After contacting his ISP, AT&T, he was informed that the physical copper connection was not capable of reliably supporting the connection speed he was paying for. AT&T’s technician recommended reducing the connection speed by 50% to improve the quality. When asked how this situation was affecting the day to day operations of the business, Uthe responded “obviously it is a problem. All of the time we spend dealing with this is time we aren’t spending on customers” (Uthe).  I also asked Mr. Uthe if switching to another internet service provider was an option to which he responded that no other company had any lines to the building. However, he did say “Comcast offered, but we would have to pay about $6,000 for a new line to be installed” (Uthe). This illustrates not only the problem with the lack of competition that allows ISPs to continue offering subpar services but also that this problem is having an effect on businesses as well as residential subscribers.

            Internet services providers argue that there is no incentive to change their practices. As described by Coucheney, Maille, and Tuffin, ISPs are unwilling to invest in the necessary changes if it will lead to profits for other companies. While this argument stands on its own, consideration must be given to the fact that ISPs are already charging subscription fees that are designed to be able to cover infrastructure maintenance and improvements. In defense of their questionable network traffic management practices, every argument offered by ISPs has been refuted by their own later statements. Unfortunately, the most powerful argument the internet services providers have is that there is no reason to change. There is no new competition coming in and the established providers have all acted with the same anti-competitive, anti-consumer behaviors.

            Beginning with actions immediately following the Telecommunications Act of 1996, internet service providers in the United States have demonstrated consistently anti-competitive and anti-consumer behavior that is damaging to the industry as a whole. By taking advantage of deregulation that was meant to improve competition in the market, a few ISPs have created a near monopoly on the industry. Instead of making improvements to the quality of their service in order to meet consumer demand, ISPs have turned to ridiculous price hikes and unreasonable network management practices. Not only are internet service providers failing to meet general consumer demand, they are also failing their business subscribers. Their refusal to upgrade the existing inadequate copper infrastructure has brought about a state of stagnation in the industry. New technologies and capabilities are being pushed aside and blocked out in order to maintain a lack of completion. Weak action from the Federal Communications Commission has led to a near monopoly with little oversight. As long as internet service providers in the United States continue their short sighted policies, without oversight, and without competition, consumers will be stuck with a subpar service.  

             

           

           

           

Works Cited

Agrawal, Govind P. Fiber-Optic Communication Systems. Wiley, 2010. Print. 15 April 2014.

Coucheney, Pierre, Patrick Maille, and Bruno Tuffin. "Net Neutrality Debate: Impact of Competition among ISPs” IEEE Transactions on Network and Service Management 10.4 (2013): 425-33. Print. 15 April 2014.

DeCusatis, Casimer and Carolyn J. Sher DeCusatis. Fiber Optic Essentials. Burlington: Academic Press, 2006. Print. 15 April 2014.

Lyons, Daniel A. "Internet Policy's Next Frontier: Usage-Based Broadband Pricing." Federal Communications Law Journal 66.1 (2013): 1. Print. 15 April 2014.

Minne, Jacob. "Data Caps: How ISPs are Stunting the Growth of Online Video Distributors and what Regulators can do about it.(Internet Service Providers)." Federal Communications Law Journal 65.2 (2013): 233. Print. 15 April 2014.

Perren, Alisa. "Rethinking Distribution for the Future of Media Industry Studies." Cinema Journal 52.3 (2013): 165-71. Print. 15 April 2014.

Reicher, Alexander. “Redefining Net Neutrality After Comcast V. FCC.” Berkeley Technology Law Journal 26.1 (2011): 733-63. Print. 15 April 2014.

Shaffer, Gwen, and Scott Jordan. “Classic Conditioning: The FCC’s use of Merger Conditions to Advance Policy Goals.” Media, Culture & Society 35.3 (2013): 392-403. Print. 15 April 2014.

Uthe, Chad. Personal interview. 25 April 2014.

Reflection

     I chose this topic because it is so important to technological development and daily life, but the problems that are occurring seem to not be well-known or well-understood. I am very pleased with the topic. My goals were to bring attention to the negative consequences of current ISP's actions and address their arguments. I think that I met those goals however, I think the large amount of background information needed and overall complexity of the issue made the paper feel somewhat spread thin. I considered focusing entirely on the Telecommunications Act of 1996 as there is certainly enough there to write about. I decided against that because I wanted to show the current situation and bring more clarity to the issues. The most interesting aspect of this topic for me was the Telecommunications Act of 1996. It was an excellent experience to see how widespread of an effect the act had on the industry despite looking good on paper. It shows how little understanding for the industry there was at the time and the lack of change shows that poor level of understanding has continued. I collected a very large amount of information. However, it was difficult to find reliable sources for the immediate situation. In the short period between when I began research and when I was working on the final draft, there were at least three major industry events relevant to the topic. I learned a great deal about parsing sources to check for reliability and cross referencing other sources to verify.