Winter 2010

What Price Internet?

Net neutrality is one of those Internet policy issues that is defined differently by different people, depending on their interest and perspective. Andrew Keen explains why net neutrality isn’t neutral and why it presents serious consequences for the film industry and the protection of your work.


Every century throws up a conflict of such mind-numbing complexity that it bamboozles even the keenest observer. In the 19th-century age of great power politics, this was the problem of Schleswig-Holstein, an issue so complex that, according to the British Prime Minister Lord Palmerston, only three people understood it: a corpse, a madman and himself who, he confessed, had later forgot it. Today, in the Internet age of the early 21st century, that conflict is the one over “network neutrality”—a technological, legal, economic and political battle so densely multifaceted that it has a Wikipedia entry almost as long and richly footnoted as the American Civil War.

But the real problem with forbiddingly complex issues like Schleswig-Holstein and network neutrality is that they often have unintentionally destructive consequences. Thus the 19th-century Schleswig-Holstein problem eventually resulted in the unification of Germany with, of course, its hideously bloody results for the rest of the 20th-century world, particularly for small countries like Belgium caught in the crossfire between the great powers. And while the unintentional consequences of today’s network neutrality issue aren’t obviously comparable with those stemming from the unification of Germany, they do have potentially destructive consequences for the movie business, which, in a sense, is akin to little Belgium caught in the crossfire of a brutal war conducted by great foreign powers.

So what exactly is the network neutrality debate all about? And why does it have an unintentionally bloody impact upon the motion picture industry?

At its most basic level, network neutrality is a political and economic war that pits the builders of the network against the major riders on that network. It is battle between the owners of the Internet’s transportation infrastructure, the providers of the network’s wires and routers—Verizon, Comcast, Cisco, Time Warner Cable and AT&T—against highly traffificked websites such as Google, Amazon, eBay and Yahoo. It’s a conflict about the moral and economic merits of institutionalizing equality of carriage for data on the Web.

“Network neutrality is shorthand for the idea that the government should mandate that Internet Service Providers (ISPs) act as dumb pipes that transmit data across the net without regards to what is in the data packets,” Ryan Singel of Wired News wrote in September.

This builders versus riders war is a primarily about who can charge whom for what. It is a conflict about whether the telcos and cable companies can discriminate between the different kinds of data that travels in packets over their network. It’s an argument over whether or not there’s a need for government legislation to impose a level playing field for the distribution of these packets. It’s a battle over whether it should be against the law for owners of the network pipes to impose a potentially discriminatory tiered pricing system of usage on Internet content companies.

But, in truth, network neutrality is really about much, much more than the rights of network plumbing companies to hold up or accelerate packets of data. Therein lies both the real complexity and importance of the issue. Like an intellectual version of a Russian nested doll, it contains arguments within increasingly intricate arguments, each making the issue more and more forbidding for outsiders. But at its core, it is an argument about Internet access, rights and privileges. Network neutrality is ultimately a debate about who should control the most valuable and powerful transportation system of the 21st century—the World Wide Web.

The most powerful supporter of network neutrality is FCC chairman and former Barack Obama law school classmate Julius Genachowski. At times, Genachowski has appeared to be an uncompromising advocate of regulation. For example, in a September speech at the Brookings Institution, Genachowski argued that “the Internet’s creators didn’t want the network architecture—or any single entity—to pick winners and losers,” thereby acknowledging that the telecoms and cable companies should indeed be allowed to be nothing more than dumb pipes indiscriminately transmitting packets of data over the network. “The principles that will protect the open Internet are an essential step to maximize investment and innovation in the network and on the edge of it,” Genachowski explained, thus potentially laying the groundwork for net neutrality regulation next year which will cover all broadband data connections including those for smartphones.

Genachowski, after all, is a political appointee of a president popular in both Hollywood and Silicon Valley, and not insensitive to either the economic arguments of the telecoms or the intellectual property concerns of the motion picture industry. For example, in the FCC’s Notice of Proposed Rulemaking (NPRM) issued in October, Genachowski appeared much more nuanced, saying that “a nondiscrimination principle would prohibit broadband Internet access service providers from favoring or disfavoring lawful content…but would allow broadband providers to engage in reasonable network management.” The NPRM could be seen as an attempt to build a consensus amongst moderates in each camp.

While the NPRM underlined the importance of network flexibility to benefit consumers, there was nothing half-hearted about its stance on intellectual property protection. By stating that “the draft rules would not prohibit broadband Internet access service providers from taking reasonable action to prevent the transfer of unlawful content, such as the unlawful distribution of copyrighted works,” Genachowski recognizes the role of the piracy issue in the network neutrality debate.

In contrast with Genachowski’s carefully calibrated arguments, many other supporters of network neutrality legislation present their argument in black and white terms that pit “we the People” against “They the Telecoms.” Saving the Internet, for many of these proponents of network neutrality, means protecting it from supposedly oligarchic telecoms. Their premise is that the Internet’s purported openness and egalitarian infrastructure needs to be enshrined in law to protect both individual consumers and online content companies against the control of the telecoms. For the pro network neutrality supporters who, not uncoincidentally, also tend to be the “free culture” crowd of intellectual property radicals willing to turn a blind eye to online piracy, the right of cable and phone companies to impose any kind of discrimination on Internet traffic—economic or otherwise—is viewed as a fundamental assault on our democracy, innovation and prosperity.

Writing in an op-ed in the Washington Post in June 2006, pro-network neutrality academics Lawrence Lessig and Robert W. McChesney argue that the Internet has been “such a powerful force for economic and social good” because of its “simple but brilliant end-to-end design” which puts both “intelligence” and “control” in the hands of “producers” and “users.” Thus, they argue, because 60 percent of the content on the Internet is created by “regular people,” the supposed “cartel” of telecoms and cable companies who control 98 percent of broadband traffic shouldn’t be allowed to discriminate between packets of information traveling over their networks. and without net neutrality protecting the equality of Internet traffic, Lessig and McChesney warn, “the Internet would start to look like cable TV,” which would mean that a “handful of cable and telephone companies” could impose “tollbooths at every on-ramp and exit on the information superhighway.”

But Lessig and McChesney, who are both notoriously hostile to mainstream media, particularly Hollywood, don’t represent the issue entirely fairly. While they might be right that 60 percent of online content is created by “regular people,” they forgot to add that a new breed of web 2.0 technology oligarchies—multi-billion dollar companies such as Google, MySpace, Facebook, Dailymotion and YouTube—are massively profiting from all the increasingly video-rich, user-generated content on the Internet. Rather than being a black and white war of David versus Goliath between The People and The Telecoms, the network neutrality issue is actually a grey war between two corporate Goliaths—one that owns the Internet pipes, and the other that travels on them.

From a movie-industry perspective, what Lessig and McChesney also fail to add is that web 2.0 video sites like YouTube, in spite of recent efforts to police itself more rigorously, remain riddled with pirated content appropriated from the websites of television and movie companies. Thus, from the point of view of the motion picture industry, “tollbooths at every on-ramp and exit on the information superhighway” would actually be one potentially highly effective legal strategy for confronting the rising epidemic of online piracy. After all, just as tollbooths police free riders on the physical roads, so virtual tollbooths on the information highway could do a similarly effective job of eliminating illegal free users of online video content.

Much of the hard-core, pro-network neutrality camp is deeply hostile to the traditional movie industry. At the core of their argument is the mistaken assumption that the Internet cultural revolution has successfully liberated creative artists from the clutches of the traditional middleman, the supposed “gatekeeper” of the old industrial cultural economy such as Hollywood studios. Jean Cook, for example, the executive director of the Future of Music Coalition, testified at a November 2009 new York City Council meeting on a net neutrality resolution that musical artists are “collaborating, selling merchandise, booking tours and building fan bases via the web.” Citing examples of successful musicians on free content sites like YouTube and MySpace, and online music services like Rhapsody, Pandora, eMusic and MOG, Cook argues that an open Internet should enable any musician to have “access to the same essential technology as the best-funded companies.”

But Cook’s argument isn’t convincing, particularly when it comes to the movie industry. The number of filmmakers who are really making money on free Internet video sites like YouTube is, at best, minuscule. And while it’s all very well for musicians to give away their content on the Internet and make their living through booking tours online, it’s very hard to understand how filmmakers can make a living on the Internet by either selling their merchandise or promoting live gigs.

What Cook and the rest of the network neutrality crowd really want is legal protection for the free economy of often-pirated online content that is decimating the traditional media industry. So the interests of this lobby that, not surprisingly, is heavily financed by web 2.0 goliaths like Google/YouTube, aren’t in sync with either independent filmmakers or the studios. The problem, however, is that net neutrality backers are very skilled at pulling at the heartstrings of traditional liberals. For example, Cook cites AT&T’s cutting of some anti-George W. Bush lyrics by Eddie Vedder at a streamed 2007 Pearl Jam concert as evidence of the way in which telecoms have censored content on the Internet. and this specter of a censored Internet has enabled net neutrality ideologues to cobble together a very broad alliance of interest groups—everyone from Jesse Jackson’s PUSH Coalition, which sees the issue in terms of “digital civil rights,” to idealists within the U.S. department of State who view net neutrality legislation in America as a way of challenging Internet censorship in authoritarian states like China and Iran.

The issue has, indeed, become the lightning rod for free speech fundamentalists whose arguments in favor of network neutrality have sometimes bordered on the paranoid. In November, for example, white House deputy Chief Technology Officer Andrew McLaughlin argued that free speech and network neutrality are “intrinsically linked” and went on to compare censorship in China with the behavior of some American technology providers. “If it bothers you that the China government does it, it should bother you when your cable company does it,” McLaughlin—who used to be chief of Google’s global policy and government affairs— controversially blogged.

Filmmakers should, however, view this kind of fear-mongering with deep skepticism. The idea that a cable company has the same totalitarian instincts as the Chinese government is laughable. There is scant evidence that Verizon, AT&T or any of the other owners of the Internet’s plumbing infrastructure would be stupid enough to try to censor a filmmaker over the nature of their content. In an America obsessed with freedom of speech, overt censorship by the already disliked telcos would be an act of suicidal stupidity. Besides, companies like Verizon and AT&T are for-profit organizations that want to maximize the traffic on their networks. So why would they want to censor the content that rides over their pipes?

Rather than censorship, one issue which should concern filmmakers is guaranteeing the technological innovation that will make the Internet a high-quality platform for the distribution of video content. For network neutrality advocates like Tim Wu, a professor at Columbia Law School, the telecom or cable companies control of the so-called “last mile” of the network has the potential to lead to anti-competitive policy with potentially damaging implications for content producers such as filmmakers. Some venture capitalists concur with Wu’s argument, arguing that early stage technology or media start-up companies need protection from the telecoms. As Allan Leinwand, a venture capitalist partner at Panorama Capital and a supporter of network neutrality, argued on, the absence of a completely free and open market in the last mile would “hinder, not foster, innovation and economic growth.”

Leinwand argued that a free and open market is one of the “core principles” of capitalism. But many of the opponents of network neutrality would argue exactly the reverse, seeing in the proposed legislation a government attempt to stifle technological innovation and investment. Take Verizon, for example, the telecom that over the last five years has invested $23 billion in FiOS, a high-speed fiber-optic network called FiOS which brings together the delivery of next generation high-definition video with ultrafast Internet access and traditional telephony. Network neutrality legislation, it could be argued, would discourage similar sorts of investments in the future because it shackles the ability of a company like Verizon to get an adequate return on its massive investment.

So who will pay for the kind of broadband innovation that will guarantee a high-quality video platform in the kind of highly regulated digital economy that the network neutrality camp is advocating? Michael McCurry and Mark McKinnon, the co-chairs of Arts + Labs, an alliance of technology and content companies unconvinced about network neutrality regulation, have argued that ultimately consumers will foot the bill for the $350 billion in private investment that the FCC’s Broadband Task Force says is required to connect all of America with fiber-optic wire. “By cutting off other revenue options,” McCurry and McKinnon blogged in October, “the proposed rules would load all of the expenses on consumers through higher fees for broadband services.”

Higher fees for next generation broadband services, an absolutely essential prerequisite for 21st-century filmmakers, would of course be very bad news for the motion picture industry. And so would a likely consumer revolt against footing the bill for true broadband connectivity, which, in all likelihood, would reduce the chances of America becoming networked with fiber-optic wire.

From the perspective of free market economics, Steve Forbes, one of America’s most ideological apostles of a pure market economy, sees network neutrality as being all about the future of democracy, innovation and prosperity. But the hyperbolic Forbes turns the Lessig and McChesney hyperbole on its head and suggests that the principle of dumb pipes is actually designed to undermine economic innovation. “What do the Obama administration, the FCC, a handful of liberal academic elites and Google all have in common?” Forbes asks rhetorically in a December editorial on The answer, at least according to Forbes, is a “radical plan to regulate the Internet that may totally upend the free market in today’s massive information economy.”

Neutrality isn’t really neutral, Forbes argues. Instead, net neutrality is actually government regulation of Internet pricing dressed up as a defense of democracy with very clear winners and losers. Forbes says that the “information is free” crowd of radical academics and Google billionaires have infiltrated the White House and the FCC to promote their own highly ideological and self-interested agenda. And the end result of network neutrality legislation, Forbes warns, is that innovative online entertainment— from prioritized high-definition movies to networked games, television shows and music—will be forced to be free, thereby undermining the economic viability of next generation Internet media businesses.

So how can the movie industry steer itself between the free market fundamentalism of Steve Forbes and the free content fundamentalism of Larry Lessig?

Fortunately, the highly ideological Forbes isn’t alone in attacking network neutrality. Many critics see it as a governmental freezing of technological innovation to reward the current winners such as Google, Amazon and Yahoo and to punish the next wave of commercial innovators (whose identity none of us know yet) in a fast-moving digital economy that is increasingly focusing on developing high quality and secure technology for the distribution of video. Others, like David Farber, professor emeritus of computer science at Carnegie Mellon University, are uncomfortable counting on the ability of the FCC to legislate this remarkably complex process, arguing that the “cure might be worse than the disease.”

Nor should Forbes’ raising of the Google specter be dismissed by filmmakers who still think of the Mountain View media leviathan as a cuddly search engine. As he argues, the FCC definition of an Internet service provider has conveniently excluded Google even though, he says, it’s the “largest ISP in the world.” What Forbes doesn’t say, however, is that Google’s ownership of YouTube also makes it the largest distributor of video in the world, the 21st-century version of the movie theater chain. And the inconvenient truth about net neutrality for the movie business is that it’s really a high-stakes poker game between oligarchic content providers like Google/YouTube and the telecommunications and cable oligarchies over the pricing for carriage of online video.

And in this war, the movie business is the 21st-century version of little Belgium, caught between two great economic and technological powers each aggressively pursuing their own selfish economic interests.

So what should be done? If all this is really a complex war between today’s dominant content companies like Google and the large telecoms and cable companies, where should the film industry stand on the issue of network neutrality?

The promise of the Internet as a democratic platform remains a powerful ideal with many filmmakers. I spoke, for example, with Jonathan Dayton, the co-director with Valerie Faris of the critically acclaimed 2006 movie Little Miss Sunshine, who reminded me that it’s “clear there has never been a ‘media pipeline’ as democratic as the Internet.” While Dayton is supportive of regulation to curb the piracy of intellectual property, he remains troubled that the Internet could degenerate into another version of cable television. “Cable providers promised there would always be shared access for the haves and have-nots,” he warned. “But ‘public access’ channels were a joke and have slowly disappeared.

But is Dayton’s scenario possible? Could the Internet—without the protection of the government—really start to look like cable TV? are dumb movies the only alternative to dumb pipes?

I doubt it. The fear that the telecoms or cable companies—even if they wanted to— could transform the Internet into a digitally walled version of cable TV is no longer credible. For better or worse, the Internet has made the idea of both limited public and private media “channels” redundant. Power on today’s Internet lies with user-generated content networks—multi-billion dollar advertising-supported businesses like Google or Facebook—as well as the tens of millions of blogs and independent music and video websites. The idea that the telecoms or the cable companies could stuff the billion channel chaos of Internet back into a bottle and re-establish their limited channel hegemony over the content industry is about as likely as Lawrence Lessig quitting Harvard and going to work as a lobbyist for Comcast.

Much of the hysterical fear of the supposedly all-powerful telecoms stems from a single 2008 case involving Comcast and its attempt to limit users of its broadband service from accessing BitTorrent, a file-sharing software commonly associated with peer-to-peer intellectual property theft. and while this case seems to have fueled the paranoia of digital utopians that Comcast was about to morph into the Chinese government, it also raises a fundamental question for the movie industry: what is and should be the relationship between network neutrality and piracy?

The Motion Picture Association of America (MPAA) correctly raised this issue in a commentary before the FCC in April 2007. They argued that new anti-piracy technologies like digital watermarking, deep packet inspection, acoustic fingerprinting and filtering should not be impeded by the legislating dumb pipes. “Whatever the FCC decides to do about “net neutrality,” the MPAA wisely argued, “it is crucial that the action not inhibit the development and deployment of these new technologies.”

I talked with Richard Bennett, a 30-year veteran of the telecom industry and a research fellow at The Information Technology & Innovation Foundation in Washington, D.C., about the impact of network neutrality on the movie business. In his opinion, the salient issue for Hollywood is piracy. He argues that if network neutrality legislation is passed, it will make it much more difficult for movie studios to use new Internet technologies like deep packet inspection to police against the rampant intellectual property theft of video content.

So should the movie industry be for or against network neutrality? This is an incredibly complex issue that should generate studied ambivalence rather than paranoid partisan fervor. Yes, of course, nobody in their right mind would want Comcast, AT&T or Verizon to monopolize the Internet pipes and build so many tollbooths that the information highway becomes too expensive for all but the most privileged digital travelers. But, in reality, this vision is so far-fetched as to be more suited as a script for a science fiction movie than the foundation for a serious political discussion about the impact of broadband technology on either the creative industries or the consumer.

Just as both sides of the network neutrality debate are driven by intrinsically selfish goals, so the movie industry needs to pursue its own rigorously self-interested agenda on the network neutrality issue. Its goal needs to be the construction of high-quality, secure and reliable pipes that can distribute the highest definition video to the most people. The pro network neutrality alliance is probably an ally on the issue of ensuring that the pricing and availability of broadband delivery is attractive to consumers. On the other hand, the anti-net neutrality camp is likely to be more sympathetic on using next generation networks to fight piracy. But when it comes to guaranteeing technological innovation, which is probably the most important issue of all for the motion picture industry, it actually remains very unclear which group offers the most credible arguments.

On the 19th-century Schleswig-Holstein problem, Lord Palmerston remarked that only three people understood it. But I’m afraid that, in our digital age of hyperbole, the thorny issue of network neutrality issue is even less well understood. The real problem is that the future has yet to be invented and so is impossible to know, especially for a movie industry desperate to find both a secure and high-speed platform for the digital distribution of video.

As the platforms for television, telephony and the Internet converge in a fiber-optic broadband triple play, most of the technologies and companies that will dominate the 21st-century video industry have yet to be born. For the moment, therefore, the movie business needs to avoid becoming Belgium and regard all great power arguments closely with a studied skepticism. On network neutrality, I’m afraid, everything is either conjectural and everyone—both the owners of and the riders on the network—is either mostly paranoid, self-interested or just plain wrong.

Internet Theft
As part of the Guild’s effort to keep members informed about the complex issues of Internet theft, the Quarterly has run an ongoing series of stories on the subject.
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