Transcript Control of the Internet: Will Diverse Voices Flourish or Face

Internet Myth Busting and
Control of the Internet: Are
Internet Service Providers the
New Internet Gatekeepers?
By Catherine Sandoval
Assistant Professor
Santa Clara University School of Law
Carterfone and the Digital Era
Santa Clara University School of Law
Internet Myth Busting: Myth #1 The
Unregulated Internet

Myth of Unregulated Internet

Myth that Internet was Born of and Flourished
because of Lack of Regulation
Internet Myth Busting: Myth #1 The
Unregulated Internet

Congress repeated this myth in Section 230(b)
of the 1996 Telecommunications Act, stating
that U.S. policy is designed “to preserve the
vibrant and competitive free market that
presently exists for the Internet and other
interactive services, unfettered by Federal or
State regulation.”
Internet Myth Busting: Myth #1 The
Unregulated Internet

The ARPANET used private lines for its initial
connections between the four host universities

Some early tests uses Public Switch Telephone
Network Local Lines

The designers of the ARPANET assumed that
the Telephone Company (later dubbed the
Physical Layer in Internet terms) would act in
a neutral fashion in carrying their data traffic
Internet Myth Busting: Myth #1 The
Unregulated Internet

TCP/IP Protocol first described in a May 1974
paper by Vint Cert and Bob Kahn enables
disparate networks to communicate with each
other

The TCP/IP designers wanted to connect
radio-packet networks, satellite networks and
the ARPANET, as well as other future networks
Internet Myth Busting: Myth #1 The
Unregulated Internet

TCP/IP creates a common methodology for
communications between networks and
routing packets

TCP/IP assumes a neutral physical layer that
does not independently make routing
decisions about packets or discriminate
against traffic
Internet Myth Busting: Myth #1 The
Unregulated Internet

The FCC’s Carterfone decision was critical in allowing
consumers to attach devices to the telephone network
as long as they did not harm the network

With Carterfone and its predecesor Hush-a-Phone,
competition in Customer Premises Equipment was
born

Carterfone enabled the attachment of devices to the
telephone network such as modems used to
communicate between computers
Internet Myth Busting: Myth #1 The
Unregulated Internet

In 1975 the FCC initiated the Part 68
rulemaking in response to AT&T’s delays in
permitting customers to CPE

Part 68 permits consumers to connect
equipment from any source to the public
telephone network if such equipment fits
within the technical parameters outlined in
Part 68.
Internet Myth Busting: Myth #1
The Unregulated Internet

The first personal computer the Altair 8800 was
released in 1975

The first message using TCP protocol was sent in
1977

The First Computer Bulleting Board, CBBS goes
online in 1978

Usenet, a computer network and discussion group is
launched in 1979 using public phone lines
Internet Myth Busting: Myth #1
The Unregulated Internet

The legacy of Hush-a-Phone, Carterfone and Part 68
are critical to the development of the Internet and
the ability to attach modems to the Public Switched
Telephone Network

The Internet was traffic over the telephone network,
not a service of the telephone company

As such, it was subject to Common Carrier regulation
Internet Myth Busting: Myth #2: No
Permission is Needed to Develop an
Internet Application

Will ISPs be allowed to act as Internet gatekeepers,
much like the cable companies are gatekeepers for
video content?

By selectively blocking content using certain Internet
protocols, ISPs limit mechanisms for distributing
content and thus limit speech

Such limits help facilities-based ISPs like cable
companies limit competition from Internet-based
video
Internet Myth Busting: Myth #2: No
Permission is Needed to Develop an
Internet Application
The Internet flourished BECAUSE OF Common
Carrier Regulation
 During dial-up days, Telephone companies
had to allow upstart ISPs such as Earthlink
and AOL to use its facilities and offer Internet
service
 Cable modem Internet not initially defined but
since it was not a cable service, common
carrier assumption applied at least to traffic
non-discrimination

Internet Myth Busting: Myth #2: No Permission is
Needed to Develop an Internet Application

The FCC decided in 2002 to reclassify Cable
Internet as an “Information Service” rather
than a common carrier

The Supreme Court upheld that decision in
2005 in the FCC v. NCTA and Brand X case

The FCC subsequently changed all ISP
facilities-based service providers to
Information Services, rather than Common
Carriers
Internet Myth Busting: Myth #2: No
Permission is Needed to Develop an
Internet Application

Even with the Change to Regulation as an
Information Service Provider, Title I of the
Communications Act still applies

That change also made ISPs subject to the
Federal Trade Commission Act

Debate over Net Neutrality and Regulation of
ISP control over Internet traffic
Internet Myth Busting: Myth #2: No
Permission is Needed to Develop an
Internet Application

FCC issued order in August 2008 condemning
Comcast’s interference with peer-to-peer
(p2p) traffic

That order is now being appealed, challenging
FCC jurisdiction and authority

Whether ISPS can act as the net Internet
Gatekeepers is at stake in the Comcast order
Internet Myth Busting: Myth #2: No
Permission is Needed to Develop an
Internet Application
Is such conduct permissible under the
Communications Act?
 Is it “deceptive or unfair” under the Federal
Trade Commission Act
 Is it “unfair competition” under the Federal
Trade Commission Act
 Is it a violation of the Sherman Act?
 Do we need additional net neutrality or deeppacket inspection regulation?

Internet Myth Busting: Myth #2: No
Permission is Needed to Develop an
Internet Application

Facilities-based ISPs have appropriated the
model of Internet regulation based on layers:
Physical Layer, Application/Content Layer,
Logical Layer

Emphasize their ownership of physical layer to
justify control
Internet Myth Busting: Myth #2: No
Permission is Needed to Develop an
Internet Application
Danger that those who control the physical
layer will use their bottleneck facilities control
to become the new Internet gatekeepers
 Lack of facilities-based competition
 Ability to clandestinely limit traffic enables this
gatekeeper role
 Need to protect consumers, competition and
the ability of the Internet to serve as a forum
for content distribution without gatekeepers

Internet Myth Busting: Myth #3: ISPs May
Choose to Deal with Whom they Want and
Interfere with P2P or other Traffic

FTC Commissioner Rausch characterized ISP
interference with Peer-to-Peer (p2p) traffic as
a protected “refusal to deal,” reflecting a
trader’s freedom to choose with whom it will
deal under the Colgate doctrine

The FTC’s rules against deception and unfair
competition, as well as the Sherman Act and
the Communications Act constrain such
conduct
Internet Myth Busting: Myth #3: ISPs May
Choose to Deal with Whom they want and
Interfere with P2P or other Traffic

An ISP offer of Unlimited or Unfettered Internet
access is Deceptive under the FTC Act if it interferes
with certain types of Internet traffic in a manner that
was not prominently disclosed in the service offer

The FTC deception statute contains no “balancing
test” to balance the pro-competitive benefits of
interference to its other consumers or competition
against the anticompetitive harms

The FTC focuses on the representation and its
truthfulness in light of prominent disclosures to the
consumer
Internet Myth Busting: Myth #3: ISPs May
Choose to Deal with Whom they want and
Interfere with P2P or other Traffic
 Disclosures buried deep in a service
agreement that indicate certain types of traffic
MAY encounter delays is not a “refusal to
deal” announcement

ISPs who delay p2p may run afoul of the FTC
Act’s proscriptions against unfair competition
or the Sherman Act

First task is Market Definition
Internet Myth Busting: Myth #3: ISPs May Choose
to Deal with Whom they want and Interfere with
P2P or other Traffic
 ISPs argue that competition between cable and DSL
indicates that neither has monopoly power

This depends on how the market is defined

Millions of Americans do not have the choice of both
cable and DSL because they live to far from the
telephone company central office or there is no cable
service available

Query whether faster speeds claims indicate cable and
DSL compete in different markets or are differentiated
products?
Internet Myth Busting: Myth #3: ISPs May Choose
to Deal with Whom they want and Interfere with
P2P or other Traffic

If the market is defined so that cable-modem
based ISPs have monopoly power in certain
geographic markets, ISP interference with p2p
raise abuse of monopoly power claims

Is Comcast behavior like the Java tools conduct
by Microsoft?

Microsoft distributed software ostensibly
designed to enable Java programming, but it
really enabled Microsoft Windows
Internet Myth Busting: Myth #3: ISPs May Choose
to Deal with Whom they want and Interfere with
P2P or other Traffic

D.C. Circuit concluded Microsoft’s conduct re:
Java tools was deceptive and an abuse of
monopoly power

Is Comcast’s representation to the market that
it offers Unfettered Internet Access, subject
only to the possibility that some traffic may be
delayed, deceptive and an abuse of monopoly
power in light of evidence of 24 hour a day/ 7
day a week delays of p2p traffic?
Internet Myth Busting: Myth #3: ISPs May Choose
to Deal with Whom they want and Interfere with
P2P or other Traffic

Application developers induced to use TCP/IP
protocol including the reset function which
Comcast used to delay certain types of traffic
including p2p

Comcast appropriated TCP/IP to “manage”
internet traffic and delay certain applications

Those applications pose a potential competitive
threat to Comcast’s video business
Internet Myth Busting: Myth #3: ISPs May Choose to Deal
with Whom they want and Interfere with P2P or other
Traffic

Like Microsoft’s conduct toward Netscape, Comcast’s
use of resets to slow or stop p2p traffic makes it
appear that the problem is with the application or site
the user is trying to reach

Consumers blame the application, not Comcast
because Comcast used techniques to hide the fact it is
causing the delay

As with Microsoft’s conduct toward Netscape, this
conduct harms the competitive opportunity for other
applications to challenge Comcast’s video, voice or
data markets