The Internet, network neutrality, and permission to innovate

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Article Highlights

  • FCC should keep “permissionless innovation” in mind when designing regulatory policy for the Internet's on-ramps.

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  • Restrictive, monopoly-oriented telephone network regulation effectively preserved the status quo in telephone service.

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  • History has shown that technology is clearly a more powerful force for progress than regulation.

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The internet champions “permissionless innovation,” the ability to develop new services without tedious negotiation and approval. As the Federal Communications Commission makes its third attempt to develop a fair, coherent, and lawful regulatory policy for the internet’s broadband on-ramps, it can either apply this principle or it can adopt Title II — a contrary rule that once limited the pace of innovation in the historic telephone network.

Much of the internet establishment, many ordinary citizens, and even some cable network comedians urge implementing Title II without acknowledging the harm it’s likely to cause. The father of net neutrality, Columbia law professor Tim Wu, is an exception: he admits that “excessive regulation can stagnate an industry” even while preferring monopoly-style regulation for increasingly competitive broadband networks.

A historical precedent

There is no clearer example of stagnation than traditional telephone service. Since the passage of the Communications Act in 1934, telephone service has remained remarkably constant. While telephone operators gave way to automatic switches and rotary phones were replaced by touch-tone, the nature of the telephone call itself hardly evolved: there was no migration to high-definition calls, video calling, or calling on the go until broadband and mobile networks took over.

Restrictive, monopoly-oriented telephone network regulation effectively preserved the status quo in the face of massive upheavals in technology, many of them created by the phone company itself.

Unlike the telephone network, the internet was not designed for the purposes it serves today. Its original “killer app” was computer time-sharing, an application driven by the economics of computing in the 1970s. Before the PC, mainframe computers cost millions of dollars. They had to be intensely shared by many to justify their price tags; the internet made this possible, but it didn’t stop there.

Broadband technology allowed the internet to become a Swiss Army knife, nurturing an expanding range of applications beyond time-sharing from email to web surfing, mobile calling and messaging and many audio and video uses. Despite the internet’s essential indifference to the phone call, it massively outperformed the telephone network as a medium for personal communication.

Technology trumps regulation 

Technology is clearly a more powerful force for progress than regulation. For example, tone dialing was invented in the 1940s, but it didn’t make its way to the consumer until the 60s and didn’t serve more people than rotary dialing until the 80s, an astonishing four decades to reach mainstream status. This slow diffusion was all because of regulatory overhead.

In the overall scheme of things, tone dialing is a minor feature that’s dwarfed in significance by innovations offered through the internet on an almost daily basis without regulatory approval. If eBay had been subject to telephone-style regulation we’d still be waiting for the first online auction.

The internet has succeeded because it’s flexible and open to new applications, new users, and new networking technologies, not because it’s rigidly confined to a regulatory box with an established history of stifling innovation.

Technology has an affinity for competitive markets: it provides entrepreneurs with an edge that can help them stand out from the pack, and it enables them to constantly improve products and services to stave off competition. Highly regulated industries and public utilities never quite seem to know what to do with technology other than apply it in small ways to increase efficiency.

A blank slate for innovation 

But the most dramatic consumer benefits actually stem from re-imagining the big picture. The interstate highway system forced the railroads to realize they were transportation companies with an intrinsic interest in integrating their operations with those of truckers and manufacturers.

A similar dynamic is afoot in entertainment, where internet-based middlemen such as Netflix, Amazon, and YouTube are beginning to realize that their continued success depends on constructive partnerships with both creative industries and broadband services.

Understandably, all three industries beseech Washington DC and the states for a thumb on the scale. All play important roles, as do their counterparts in consumer electronics, technology R & D, and venture capital. But recent history underscores the fact that technology-driven innovation is too rapid and unpredictable for micro-management. No matter how strongly we may be drawn to neat and tidy utopian visions, the future always zigs where we think it should zag before exceeding the scope of the overseer’s imagination.

Technology regulators must be humble, only intervening in commercial squabbles as a last resort. For all its warts, the permissive broadband approach to internet regulation is the better way forward. The FCC should free broadband networks from the specter of telephone-era regulations and nudge them in the direction of even higher performance, including expedited delivery services for applications that need them, such as immersive video conferencing, HD voice, and other real-time applications.

Networks need the freedom to improve 

The argument for applying telephone regulations to broadband is typically cast in terms of fears about “fast lanes” that are blind to the way the Internet operates. I have offered a rebuttal to this thinking in my comments to the FCC.

Expedited delivery is also important for voice and other real-time applications that can’t be helped by CDNs which are better suited for web sites and video streaming. Plus, expedited delivery of real-time applications is unlikely to affect the performance of web sites at all.

The single most important question for internet policy makers today is not how to keep the internet “the way it’s always been” — it’s how to make it a better platform for more applications. The answer is to allow more experimentation – with appropriate oversight – not to fossilize it in its current, essentially accidental form.

Richard Bennett is a network engineer, co-inventor of Wi-Fi, and a Visiting Fellow at the American Enterprise Institute.

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