Detroit News

June 17, 2003

U.S. shouldn't meddle in running Internet economy

Technology titans' coalition wants the government to put its competitors at
a disadvantage: Washington should adopt a hands-off policy on the issue,
saying no to special interests

By Rep. John Conyers Jr. / Special to The Detroit News

One of the wonderful things about public life is the regular occurrence of
irony. The successful ascendancy of congressional Republicans in 1995
helped reassure President Bill Clinton's re-election in 1996. Democrats --
who arguably sublimated the issue of budget deficits in the 1980s -- have
now become the Capitol's deficit hawks.

But rarely have we seen an irony so delicious as the one we are seeing in
the telecommunications industry today. In fact, the irony is so stark that
it compels me to do something which is in itself ironic: write a commentary
on behalf of deregulation.

For nearly a decade, a "hands-off" policy has been the mantra of much of
the high-tech industry. Indeed, the debate over the proper government role
in the tech industry hit a crescendo when the Department of Justice sued
Microsoft, accusing it of misusing its monopoly in operating systems by
configuring them to disadvantage, if not cripple, software and applications
competitors. This type of abuse in a critical nerve center of the
information economy, the government argued, could destroy competition and
innovation.

Microsoft and its allies countered that the software giant was a prime
innovator in computing technologies and so the government would best foster
innovation by simply staying out. "Unwarranted discrimination against
unaffiliated competitors was not only fictional but not in our
self-interest," was Microsoft's often heard argument against a backdrop of
raised fists. In such a "modular" industry, the success of Microsoft's
operating systems depends on its ability to add value by attracting new
applications and services, the argument would invariably continue.

So where is the irony?

Fast-forward 10 years. Now comes the Coalition for Broadband Users and
Innovators -- whose members include Microsoft, Amazon.com and Yahoo! --
urging the government to prospectively regulate the Internet economy to
prevent a theoretical threat to its "openness." At a recent, sparsely
attended press conference, with a few other tech titans in tow, the CBUI
announced its support for the seemingly innocuous notion of "network
neutrality." While unable to define specifically the moniker's meaning, the
CBUI nevertheless urged its adoption.

What the coalition seems to be ambling toward is getting the government to
adopt rules ensuring that high-speed cable modems be configured to allow
interconnection with equipment of end users for such services as WiFi, that
broadband subscribers have unimpeded access to Web sites and portals and
that cable operators be prevented from giving better shelf space to
affiliated applications and services -- relationships similar to those
regularly entered into by CBUI members.

In short, the coalition seems to be asking the government to handcuff its
competitors, preventing them from practicing business strategies that its
members themselves often practice.

Now, we all want to see an Internet economy where competitors can use
different platforms to bring new services to the marketplace. But we also
want to ensure that the government is not commandeered on behalf of special
interests in the putative name of openness. So before the coalition gets
too carried away with a newfound affection for regulation, it should study
the record and examine the vast differences between the histories and
practices of the cable operators on the one hand and industries the
government has historically sought to regulate on the other.

For instance, unlike the cable industry, the publicly switched Bell
telephone monopoly facilities were literally gifted to the Bells by the
federal government in 1984 when the old Ma Bell was dissolved. Their
subsequent investment in maintenance and upgrades is but a fraction of the
total value of their federal inheritance. And by controlling more than 90
percent of business and residential phone lines, these companies have
unparalleled monopoly leveraging ability. But even here, the government has
recently eliminated most of the regulations that apply to the Bells' DSL
broadband services.

By contrast, the cable industry was not built with government welfare, but
rather with hundreds of billions of dollars of privately raised risk
capital, including $70 billion in such private capital for necessary
upgrades since 1996 alone -- a none too insignificant difference. And while
cable broadband service may have solid market share, Bell company DSL
subscriptions are growing more rapidly. Other emerging technologies such as
WiFi, WiMax and electrical grids wait in the wings as potential, vibrant
competitors.

Most important, the cable modems have shown no signs of abusing or
potentially abusing their offering. Cable modem consumers can now choose
from more than 300 cable modems and as many as 69 equipment manufacturers
for interconnecting products. Cable modem online users can freely navigate
the web unimpeded from any site. Notwithstanding the fact of its private
financing, and that cable broadband is a zero-sum "shared system," cable
operators are starting to provide carriage for unaffiliated Internet
service providers.

And cable operators are smart enough not to poison their platform by
restricting when and where consumers can surf on it. In the case of cable
modems, the competitive pressures of a free marketplace seem to be taking hold.

At best, the coalition's proposal is a solution in search of a problem. At
worst, it is a cynical ploy by some tech titans to employ the federal
government on their behalf to disadvantage competitors.

The government is better off staying out of this one.

U.S. Rep. John Conyers Jr., D-Detroit, is the ranking member of the House
Judiciary Committee.

http://www.detnews.com/2003/editorial/0306/17/a09-195169.htm


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