Mixed Messages from Tom Wheeler

New Federal Communications Commission Chairman Tom Wheeler gave his first major speech on Monday.

The address was the first in a series of speeches outlining his regulatory philosophy. There was a lot to like.

A former top lobbyist for the cable and wireless phone industries, Wheeler acknowledged that he had “seen enough about how markets operate to know that they don’t always, by themselves, solve every problem.”

He described himself as an “an unabashed supporter of competition.” That’s big news since the FCC hasn’t taken the c-word seriously in quite a while.

He committed to ensuring that multiple carriers (read: not just AT&T and Verizon) have access to the airwaves — which could prove crucial in the upcoming auction of valuable spectrum.

He declared that the “right of access also means the ability of users to access all lawful content” on the open Internet. And he emphasized the crucial importance of “interconnection,” a bedrock principle of the Communications Act that makes competition possible.

So far, so good.

But then the chairman took a few questions — and his answers were more than a little troubling.

As the New York Times reported:

In response to a question, Mr. Wheeler indicated that he would not oppose some type of usage-based pricing, with Internet service providers charging so-called data hogs different amounts for service depending on how much data they receive and transmit. …

Mr. Wheeler said variable pricing and service plans represented the effects of competition. “We might see a two-sided market,” he added, in which a company like Netflix might pay an Internet service provider to guarantee that Netflix customers get the best available transmission speeds.

Whoa. Feeling a little whiplash? That’s because that answer is the opposite of everything Wheeler pledged to protect in his speech.

Allowing such anti-competitive practices would be antithetical to his promises to police market abuses and promote competition. Letting incumbent phone and cable companies exploit their dominant position by charging people more to use certain websites and services is a disastrous idea.

Say Netflix (which, by the way, is already paying a lot to put its content on the network where you can find it) did cut such a deal with Comcast. Netflix would likely then turn around and raise the prices you pay to cover its costs. But there’s no chance Comcast would lower your monthly bill. It would just line its own pockets. So Wheeler’s vaunted “two-sided market” just means you end up paying Comcast twice.

Since the existing market for broadband and cable is already so uncompetitive, any company that wants to reach Comcast’s customers is at its mercy. And the next Netflix out there probably couldn’t afford the new tolls, so it would never have a chance to get into the new priority fast lane.

Allowing ISPs to charge for prioritization would encourage artificial scarcity, depress competition, harm online innovation and threaten the very existence of the open Internet.  

There are simply no legitimate economic or engineering justifications for paid prioritization or usage-based billing on wired broadband networks. These practices are simply abuses of market power. 

Letting ISPs impose additional discriminatory charges on content providers, above what they already pay to get their content online, won't magically result in lower prices for Internet users. But it will limit customer choice by imposing tolls on alternatives to the incumbent cable or telco offerings and boost ISP profits — with no chance for reductions in our broadband bills.

Wheeler insists that in his new job as FCC chairman, he sees himself as the “public’s advocate in the midst of an historic revolution.”

The public does indeed need such an advocate — not another sales pitch for new price-gouging schemes from the already powerful phone and cable giants.

So if the new FCC chairman really means what he said in his speech, he should use the next one to correct the record and commit to staying on the side of the Internet-using, cable-watching, competition-loving public.

People + Policy

= Positive Change for the Public Good

people + policy = Positive Change for the Public Good