Opinion: The FCC's wrongheaded, bureaucratic, governmental meddling threatens to stifle networking investment and raise costs for small and midsize companies.
The Internet is poised to enter a new era, one led by new Federal Communications Chairman Julius Genachowski. The chairman has started to articulate policy changes that it plans to implement in the coming months, alterations that I believe could have a deleterious impact on small and midsize businesses.
For the past few years, a controversy has raged between the government agency and Internet Service Providers (ISPs), with Comcast at the center of it. In the summer of 2007, it became clear that the company was putting restrictions on how much information some of its customers could transmit. Certain customers were using lots of bandwidth, so the ISP throttled back some of their transmissions. In August of 2007, the FCC ruled that the practice was illegal and been moving to clarify its position.
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Comcast was testing the waters and thinking about offering tiered services where customers paid different rates depending on how much bandwidth they used. To date, most ISPs have offered flat rate pricing, a simple "All You Can Eat Approach." However, that business model was devised when users were mainly transmitting small amounts of textual data, and may no longer be viable as the market evolves.
Increasingly, video transmissions (some featuring very large high-definition files) are generating a larger portion of Internet traffic. If everyone started to transmit HD files, the Internet might slow to a crawl until carriers, such as Comcast, invested billions of dollars in network upgrades. The ISP viewed tiered pricing as a potential way to recoup its investments. However, once the government objections arose, the firm backed off from those plans.
When rendering such decisions, the FCC has traditionally followed four principles. The Comcast brouhaha did not fit neatly with any of them, so Genachowski proposed adding two more, one of which would make charging users by the amount of bandwidth they send virtually impossible. Another change that the new chairman wants to make is extending the reach of the six FCC principles to wireless access, a market that the agency has let evolve largely on its own. In sum, the federal government is exerting more control over wired and wireless ISPs' business plans.
It is simple to deduce who is for and against the increased government regulation. Carriers, who are spending billions of dollars to deliver high-speed Internet access to millions of Americans, are voicing frustration. They are engaged in a difficult, highly competitive (some would say cutthroat) market, which has been littered with the remains of unsuccessful ventures. They must now determine not only how to differentiate themselves from competitors but also whether or not their business plans will pass federal muster.
On the other side are individuals, such as Craig Newmark of Craig's List, and companies like Google and Microsoft. They want to hamstring ISPs so they can build businesses using as much bandwidth as they desire without having to worry about paying extra for their gluttony.
Chicken Littles, like bMighty editor in chief Fredric Paul, make a number of ridiculous extrapolations and spout a wide range of conspiracy theories. Rather than focus on the issue at hand (holding bandwidth hogs responsible for their actions), they think that ISPs are suddenly going to get into the content management business and start blocking their competitors' traffic. It doesn't seem to matter that there is no evidence to support such bogus claims.
They also like to take unwarranted potshots at carriers who have invested billions of dollars to deliver inexpensive, high-speed broadband to millions businesses and consumers in the United States. By hocus pocus, the canard of how much bandwidth is theoretically available to Japan and South Korea users is translated into the premise that the U.S. is losing the lead in delivering Internet capabilities to users and domestic businesses are at a competitive disadvantage. The reality that typical users (not the bandwidth hogs) use a minuscule portion (usually less than 1%) of the available bandwidth and that companies do not have enough computer or networking processing power now to fill up a 50Mbps pipe for even one second is somehow rendered irrelevant.
In sum, the FCC's new policy making may have a harmful effect on small and medium businesses, which the agency is theoretically designed to protect. Without the freedom of being able to develop new business plans to recoup their investments as the Internet continues to evolve, service providers may be leery of upgrading their networks. If carriers do make such investments, they will then have to charge businesses that send a few Mbps of information a day the same rate that Craig Newmark pays.
That may not be the FCC's desired end but it appears to be the most likely result from wrongheaded, bureaucratic, governmental meddling.
See more columns by Paul Korzeniowski.
Paul Korzeniowski is a Sudbury, Mass.-based freelance writer who has been writing about networking issues for two decades. His work has appeared in Business 2.0, Entrepreneur, Investor's Business Daily, Newsweek, and InformationWeek.
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