Spring 2018

The Net Neutrality Conundrum

Eight years later, we find ourselves asking: "Why shouldn't net neutrality apply to the entire Internet?"


Illustrated by David Plunkert

Issues surrounding the Internet and its use are complex and multifaceted. For that reason, the DGA Quarterly is devoting significant space and thought to presenting these issues. The last issue of the Quarterly presented the latest in a series of articles written for the DGA by Andrew Keen, author of four books on the digital revolution, including his latest, How to Fix the Future. Keen is also executive director of the Silicon Valley innovation salon FutureCast. In this issue, Keen revisits his provocative 2010 article on the net neutrality debate.

Imagine you fell into a deep sleep in 2010 and didn't awake until 2018. What would have changed regarding technology and regulation over the last eight years? How different is our contemporary world from the one we left behind and why is this important to DGA members?

There has, of course, been significant change, some of it quite dramatic and unexpected. The Silicon Valley of 2018 looks increasingly like the Wall Street of 2010. Back then, most Americans loved technological innovators. Eight years later, however, there is increasing skepticism about the impact of social media, fake news and technological addiction on society.

Yet for all this dramatic change, much about 2018 is little different from 2010. Big Tech—epitomized by what CNBC financial pundit Jim Cramer dubbed the FANG super-stocks of Facebook, Amazon, Netflix and Google—continues to tighten its hold on our economy, particularly in the media and entertainment sectors.

And then there's the simultaneously complex and yet very simple techno-political drama over network neutrality—which has both radically changed and yet stayed exactly the same over the last eight years. This paradox isn't surprising given that many of the things that have both mostly changed and stayed the same over the last eight years—the increasingly ubiquitous power of Big Tech, the paralysis of federal government institutions, particularly Congress, and the change in the public's attitude toward Silicon Valley—are intimately bound up with the net neutrality brouhaha.

Back in 2010, I wrote a piece for this magazine underscoring the political, economic and technological significance of net neutrality. I focused particularly on its relevance to the entertainment industry. The DGA's position at that time was nuanced. It supported net neutrality, but was heavily concerned that proposed legislation did not adequately deal with Internet piracy of its members' work.

Despite the complexity of the issue, at its most basic level, I explained, net neutrality is a "political and economic war that pits the builders of the network against the major riders on that network." It pits the providers of the network's pipes like AT&T, Verizon and Comcast against the most popular edge providers—the FANGs whose videocentric customers increasingly dominate traffic on the network.

Then as now, the political fight over net neutrality is essentially about who controls the flow of traffic on the Internet. It's an argument over whether the telcos and cable companies, the so-called Internet Service Providers (ISPs), should legally be able to discriminate between the different types of data that travel in packets over their network. The key question, eight years ago, focused on whether there was a need for government regulators to impose a level playing field on ISPs for how these packets are distributed.

As Wired magazine put it in 2010, net neutrality is "shorthand for the idea that the government should mandate that ISPs act as dumb pipes that transmit data across the net without regards to what is in the data packets."

So how did the 2010 net neutrality debate impact the movie business? On one level, Hollywood, as a creator of high-quality content, was caught in the crossfire between the ISPs and the Silicon Valley edge providers—the two principal antagonists in the struggle.

The studios seemingly didn't have a dog in the fight and might've been considered neutral players. But others in the industry, including the DGA and independent filmmakers, did care about access and prioritization issues because their content was traveling over the network. And in addition, they were concerned that much of that content was being pirated. So, like it or not, government regulation of the way information is distributed on the Internet mattered.

Television and movie folk should, of course, have been able to easily imagine a future in which the prioritization of video ensures higher quality delivery to consumers. "That's what we have today," dryly notes a December 2017 report by the independent analyst firm MoffettNathanson. "It's called cable TV. ESPN gets a dedicated 'channel,' YouTube doesn't. ESPN works better as a result. It's not clear that, that is anything to be afraid of."

In contrast, organizations like the public interest group Free Press had suggested that we should, indeed, be afraid—very afraid—of the prioritization of video content. Hiding behind the mantle of "free culture" and democratic Internet access (and financed, in part, by the FANGs)—groups like Free Press stated that the ISPs were supposedly trying to shut down the internet or create "fast lanes" that would discriminate against the little guy, inhibit free speech and transform the Internet into a digital version of cable TV.

So let's fast forward to the present. How different is the state of play in this war today from back then?

In one sense, absolutely nothing at all has changed. The principles and stakes of this war remain entirely the same. The battle remains between the ISPs and the edge providers over whether or not companies have the legal right to charge carriage for data traveling over their pipes. The trench warfare between buyers and sellers of interconnectivity has barely budged over the last eight years.

"Indeed stripped of its high-minded rhetoric about the First Amendment and freedom of speech," net neutrality is really in large part "a commercial dispute over interconnection pricing," reports MoffettNathanson, exposing the simple truth about the discord. "Would-be buyers of interconnection want the price to be set at zero (or close to it). Would-be sellers want there to be a real price."

And, yet, in another sense, absolutely everything has changed between 2010 and 2018. Over the last eight years, both the making and undoing of net neutrality regulation has been frequently in the headlines, especially in terms of its supposed threat to the romantic ideal of an open Internet.

Let's remember the emotional rallying cry of 2010—"The Internet wants to be free!" The problem with that statement is that it wasn't true then and it is even less true now. The Internet has never been free and never will be. Consumers just aren't paying in cash for their online products and services—not back in 2010 and certainly not now. Most winner-take-all platforms like Google and Facebook are ad-supported. Of the $89.46 billion in Google's 2016 annual revenue, for example, $79.38 billion was generated by advertising revenue. Google's search engine controls some 90% of all searches—then their algorithms offer up prioritized results with their advertiser content at the top. How is this different, in terms of a supposed level informational playing field, from the paid prioritization concerns regarding the ISPs?

Certainly there's nothing either free or fair about this digital economy. It's just that the tolls paid for the Internet's dominant products and services are cleverly disguised. But these tolls do actually exist and, every time we use Google, for example, we are additionally paying with our personal data, which is being used to target those advertisers. Our search history and what websites we visit are all part of the toll paid to use these "free" services. Google has transformed the consumer into the product. We—our appetites, our desires and our shopping habits—make up that almost $80 billion of annual personal data that the search engine sells to advertisers.

As recognition of these concerns increases, much has actually happened over the last eight years. The real action has been political and has taken place in Washington, D.C., at the Federal Communications Commission (FCC), the agency charged with regulating this issue. Back in 2010, the chair of the FCC was Julius Genachowski, an old Harvard Law school classmate of then President Barack Obama and a supporter of net neutrality.

At that time, Comcast sued the FCC over a cease-and-desist letter concerning its management of network traffic. The D.C. Circuit Court of Appeals ruled that the FCC did not, in fact, have the authority to regulate Title I broadband services. Genachowski tried to reclassify broadband as a Title II service—which would have allowed the FCC to regulate ISPs as "common carriers" in the same manner that the FCC regulates telephone companies. But after a series of legal threats from the ISPs, Genachowski retreated, and we were, once again, back to square one.

Then, Tom Wheeler took over from Genachowski as the Democratic chair of the FCC in April 2014, and the following year, like Genachowski before him, he declared ISPs to be common carriers, or Title II services, and subject to the laws associated with public utilities. And once again, the ISPs sued the FCC, this time orchestrated by Verizon.

But once Donald Trump was elected to the White House, the FCC reverted to Republican control under the chairmanship of Ajit Pai. And Pai—much to the outrage of the net neutrality lobby—effectively reversed Wheeler's 2015 reclassification of broadband as a Title II service and overturned all the rules giving the FCC jurisdictional power over net neutrality.

So, in 2018, it's back to the future all over again. In spite of all the political power grabs and public outrage, little appears to have changed and there doesn't seem to be a clear political path to a regulatory compromise over net neutrality.

And yet the zeitgeist has begun to shift in the public's perception of the threat of Big Tech, particularly in terms of the need for regulation on data privacy, and concerns raised about the lack of transparency surrounding political advertising on Facebook in the 2016 presidential election. As a result of these fears, the tech community has become increasingly nervous about possible government regulation of its broader business practices. Thus Silicon Valley has toned down its support for the net neutrality lobby and is seeking a lower profile on the issue, with fewer Big Tech firms financing interest groups like Free Press.

"The leading Internet content companies have largely checked out," confirms best-selling author and technology law expert Larry Downes. "And though the net neutrality lobby isn't especially transparent about their finances, groups like Free Press and Public Knowledge appear instead to get the bulk of their funding from the Ford Foundation and George Soros' Open Society Foundations."

"Things are coming to a head with the platform guys," one D.C.-based senior telco executive confirms about the increasing nervousness of edge companies over the unavoidability of new regulations. "They are coming to realize that regulation is coming and that they have to cut a deal to survive in a new regulatory environment."

The FANGs' shift reflects their own ambivalence about the government's role in the regulation of the digital economy, particularly data, the so-called "new oil" of that digital economy. They're increasingly concerned over the possibility of regulation of data privacy—a development that could threaten the very core of Silicon Valley's lucrative business model of giving away their products for free in exchange for users' data.

What the FANGs most fear is the kind of comprehensive bill of online consumer privacy rights that has just appeared in Europe in the form of the General Data Protection Regulation. This fear is reasonable. As one entertainment executive confides, "An American version of GDPR is inevitable."

This fear of data privacy regulation has also become entangled in the net neutrality morass. Shortly before the end of the Obama administration, the Federal Trade Commission imposed a load of privacy requirements (rumored to have been written by Facebook and Google lawyers), which held ISPs to a much higher standard than the edge companies.

Yes, it's complicated. And just as the FANGs have become quite uncomfortable about Title II regulation, so the ISPs have edged closer to actually being in favor of net neutrality. What's really bemusing about today's net neutrality debate is that fewer and fewer people, it seems, are actually against it. Even some of the ISPs are willing to accept its basic premise, as long as they aren't reclassified as Title II companies, which would give the FCC regulatory power over their business and pricing models. Robert Quinn, senior executive VP of external and legislative affairs at AT&T, recently said as much, telling me that he isn't opposed to rules outlawing blocking and throttling on the Internet as long as AT&T isn't reclassified as a Title II company, and it applies to the broader Internet ecosystem.

In a January blogpost this year, AT&T CEO Randall Stephenson called for what he terms an "Internet Bill of Rights" to be established by Congress. While this remains an inchoate idea, it appears to represent a kind of grand bargain bringing together all the players in the digital economy—covering everything from net neutrality regulation to new privacy rights for Internet consumers.

The manifesto, Stephenson blogged, should be applied to "all Internet companies" and should guarantee "neutrality, transparency, openness, non-discrimination, and privacy protection for all Internet users… Legislation would not only ensure consumers' rights are protected, but it would provide consistent rules of the road for all Internet companies across all websites, content, devices, and applications."

Is Stephenson offering a deal, a quid pro quo, to the FANGs with this call for a comprehensive regulatory digital deal? Might he be swapping a compromise on the regulation of data privacy in exchange for a similar regulatory compromise on neutrality?

While the FANGs haven't formally responded to Stephenson's proposal, it certainly suggests a more flexible approach to this whole issue from AT&T. And it's not unrealistic to presume that the edge companies would be at least willing to come to the table to help construct a grand digital compromise on consumer rights. After all, in a world in which Silicon Valley is increasingly seen as the new Wall Street, there is also a growing political chorus in and out of Congress calling for the regulation of Big Tech.

And the noise isn't just about data regulation. Anti-trust is squarely on the congressional radar as well. There are also calls to rescind so-called safe harbor regulation to force the online platforms to be more accountable for their content. The issue is whether the FANGs recognize that the times are changing and that they need to change with them.

Stephenson's trial balloon of a grand bargain is echoed in the thinking of the Directors Guild of America about the need for a more comprehensive and long-term solution to the regulation of the Internet. While the DGA is opposed to Pai's repeal of net neutrality rules, it sees it as an opportunity to cobble together a broader alliance of partners supporting regulation that applies to all Internet players, not just the ISPs.

The DGA believes everything needs to be put on the table in this grand bargain in order to provide the best digital environment for both consumers and producers of entertainment. Establishing a level playing field is the key, and this can only be guaranteed with regulation that doesn't favor one sector of the digital economy over another.

There's no doubt the DGA is right to hold the edge companies to the same standards as the ISPs. A grand bargain that included compromise from all online parties would provide insurance against the chaotic reversals of the last eight years. When nobody wins, everyone loses. And the real story of net neutrality between 2010 and 2018 has been the tremendous opportunity costs associated with the changes of policy direction.

"Between 1996 and 2005, all the telcos fought endlessly over long-distance charges," remembers AT&T's Robert Quinn about a previous political fight that, in today's smartphone world, seems particularly archaic and irrelevant.

"We fought over it for 10 years," Quinn adds, smiling grimly at the memory of a ridiculously expensive and time-consuming war in which everyone ultimately lost.

Quinn is correct, especially in the way that we are always fighting yesterday's war. Between 2010 and 2018, nobody—except the expensive lawyers hired to sue the FCC—have benefited from the wars over net neutrality. In eight years' time, by 2026, it's essential that this issue be finally resolved.

Yes, a genuine level playing field is the most essential condition of both an innovative and fair digital economy. The challenge for all of us over the next eight years is to create both a light and fair regulatory framework to enable this.

The Industry / Technology

Articles on creative issues and new technology in features, television and new media.

More from this issue
Check out the latest DGA Quarterly, featuring articles about the craft of directing feature films, documentaries, television content, standup specials and commercials. In addition, we explore of the theatrical experience in the cinematic age and discuss the net neutrality conundrum.