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Prepared Witness Testimony The House Committee on Energy and Commerce
The Regulatory Status of Broadband Services: Information Services, Common Carriage, or Something in Between?
Subcommittee on Telecommunications and the Internet
Mr. Paul Misener
Good afternoon, Chairman Upton, Mr. Markey, and members of the Subcommittee. My name is Paul Misener. I am Amazon.com's Vice President for Global Public Policy. Thank you very much for inviting me to testify on this important matter. Today I am representing both my company and the Coalition of Broadband Users and Innovators. I respectfully request that my entire written statement be included in the record of this hearing. Mr. Chairman, the defining characteristic of the Internet is unimpeded connectivity. Americans today may obtain online any lawful information, products, or services available or sold on the Internet, without any discriminatory interference or impairment by network operators. The Coalition's sole purpose is to preserve this unimpeded connectivity despite the changing technical, economic, and regulatory circumstances of consumer Internet access. Unfortunately, the Coalition has many reasons to fear for the future of unimpeded connectivity, because providers of broadband consumer access now have the technical opportunities, economic incentives and, most importantly, the market power to impair consumer access to Internet content. For these reasons, we have asked the FCC to use its existing statutory authority to prohibit any impairments unrelated to legitimate network management until true broadband access competition emerges. Mr. Chairman, we now ask that you and your Subcommittee strongly urge the Commission to adopt this important pro-consumer safeguard to preserve unimpaired connectivity to the Internet. About Amazon.com and the Coalition Amazon.com is America's leading online retailer. We are not a provider of broadband or Internet access service, nor do we have plans to become one. Amazon.com is a member of the Coalition of Broadband Users and Innovators (the "Coalition"), which represents twenty-five premier online content companies, consumer groups, and consumer electronics manufacturers who are collaborating to ensure the continued right of Americans to access their choice of lawful Internet-based information, products, and services, including by the attachment of any compatible device to the network. Amazon.com and the rest of the Coalition share the goal of this Subcommittee, the FCC, and the Administration to promote widespread consumer broadband deployment, and we want the companies that provide it to succeed. In my company's case, the Internet is the way our customers reach our store. On behalf of our customers and company, we certainly want to encourage the deployment of consumer broadband access and, just as certainly, do not want to do anything to discourage it. Unimpeded Connectivity is the Defining Characteristic of the Internet Mr. Chairman, unimpeded connectivity is the defining characteristic of the Internet. The Internet and its predecessor network were developed during the Cold War specifically as a means to communicate within the United States after a nuclear attack on our country. In contrast to the contemporary telephone network, which relied on maintaining direct physical connections between points in communication, novel "packet switching" technology allowed Internet communications between two points to be maintained even if intermediate lines were destroyed. In short, not even a nuclear strike could impede the Internet's connectivity. As the Internet evolved from its military origins to be used primarily for informational, social, and commercial purposes, its unimpeded connectivity took on a new meaning. Almost overnight, American consumers found they were able to obtain for free or purchase any information, products, or services that other people made available on the Internet. Thus, consumer connectivity - i.e., access to Internet content - historically has not been blocked or otherwise impeded by network operators. CBUI's Sole Purpose is to Preserve the Extant Unimpeded Connectivity Mr. Chairman, the Coalition's sole purpose is to preserve the unimpeded connectivity of the Internet. We believe Americans deserve to retain their longstanding ability to obtain for free or purchase any lawful information, products, or services that other people make available on the Internet and to use compliant devices. We do not believe that network operators with market power should be permitted to impede connectivity for any reason other than routine network management. For example, we believe that broadband service providers with market power should not be permitted, other than for purely technical or legal reasons, to block or impair access to Websites that espouse unpopular political ideas or that sell products in competition with entities that might want to pay network operators to block or otherwise interfere with such access. Although it may be self-evident, the issue of the unimpeded access that the Coalition seeks to preserve is distinct from the "open access" matter that has been under consideration by policymakers for several years. The open access question is whether and how broadband service providers should be required to allow unaffiliated ISPs access to broadband network infrastructure. Some members of the Coalition are strong advocates of open access for ISPs, while other members oppose it. Like some other members, including Amazon.com, the Coalition itself has no position on the matter, has not lobbied on it, and is not here to testify about it. Rather, the Coalition has asked the FCC to adopt specific safeguards so that unimpeded consumer connectivity to the Internet is maintained as American households increasingly rely on broadband connections. We have made this request in the context of the Commission's more expansive consideration of the regulatory status of consumer broadband, particularly offered by cable modem and DSL service providers. It bears mentioning what we are not suggesting. For example, we certainly are not suggesting that broadband network operators be subject to extensive, common carrier-style regulation with, for example, entry/exit rules, universal service obligations, rate regulation, et cetera. To the contrary, the Coalition merely seeks a narrow rule under existing FCC authority that would ensure that consumer expectations from the narrowband access world would carry forward to the broadband era by barring impairments based on criteria such as content type or source, yet permit differential pricing or other restrictions based on purely capacity-related network management considerations. Please allow me to explain. Contrary to some misinformation about what the Coalition seeks, we firmly believe that broadband service providers have legitimate reasons to seek to manage demands on their network infrastructure by even a small number of users. Such high-bandwidth users impose significant investment and maintenance costs on service providers and, in the view of the Coalition, should be charged accordingly. Why should one customer who sends only a few emails a week be charged as much as someone who watches Internet-delivered high definition videos all day long? Thus, we believe broadband service providers should be allowed to charge their customers on the basis of how many bits they receive or transmit over a given period so that they may manage their networks in a technically efficient manner. One way would be to offer tiers of service - e.g., "Gold, Silver, and Bronze" - based on bits transmitted per month. The expensive Gold level service might provide unlimited bandwidth, while the less expensive Silver and Bronze levels would allow only limited monthly uploads or downloads. Once a consumer signs up for a particular level of service, however, she should be able to use it as she sees fit; network operators should not, within clearly defined bandwidth limits, be able to impair a consumer's access to particular information, products or services. Moreover, current service provider practices, like making promotional arrangements with third parties for advantageously positioned banner ads or links on the initial, or "start-up" page would be permitted to continue. The intent of the FCC rule we seek would not be to prohibit these or similar reasonable private contractual arrangements but, rather, to ensure unimpeded consumer access. And, of course, the Coalition certainly has no problem with - and greatly appreciates - broadband service providers' efforts to prevent unlawful conduct on their networks. There are Three Key Reasons to Fear Impediments to Broadband Consumer Access Mr. Chairman, there are three key reasons the Coalition fears impediments to broadband consumer access. The providers of broadband service have technical opportunities, economic incentives, and marketplace advantages unavailable to narrowband carriers and Internet service providers. And the vigorous protestations of broadband service providers against any non-impairment rule, coupled with their complete refusal to foreswear discriminatory impairment practices, make the Coalition deeply concerned that these service providers actually plan to impair consumer access in the ways we fear. Technical Opportunities. Broadband consumer access is completely digital and, thus, as the FCC already has determined, service providers can impair connectivity in ways that were virtually impossible in the narrowband, analog dial-up world. The most obvious impairment is blocking access to certain information, products, and services. For instance, a consumer attempting to reach the website for Joe's Pizza might find access blocked or impaired by a broadband service provider that has a contract or other business relationship with David's Pizza, a competitor to Joe's. Other likely impairments include the insertion of "pop-up" advertisements or slower delivery rates based on a consumer's intended type or source of information: A consumer, while accessing an online MP3 file, for example, could be deluged with pop-up advertisements from competing online music sources or could find the download to be particularly slow, merely because she was not pulling the content from a source that had a business relationship with her broadband service provider. As the Washington Post analogized, "[i]magine the outcry if a local phone company started preventing customers from calling Lands' End to place an order and redirected their calls to L.L. Bean, which had paid the phone company to be the exclusive purveyor of down jackets to its customers." In addition to these commercial impairment concerns, of course, there are serious free speech problems with allowing network operators to block or filter, at their whim, access to political, religious, or other material on the Internet. It is not hard to imagine, for example, how a service provider might be pressured to obstruct access to sources of "hate speech" or information about a particular religious or political viewpoint, regardless of whether their individual subscribers want access to that content but, of course, consumer-controlled filters are not problematic. In sum, as the FCC itself has said, "it is technically feasible for a cable operator to deny access to unaffiliated content or to relegate unaffiliated content to the 'slow lane' of its residential high-speed Internet access service." Economic Incentives. Broadband service providers, especially those that are vertically integrated, also have clear economic incentives to impair consumer access to certain Internet-based information, products, and services. The economic incentive is obvious when the service providers have collateral businesses in competition with other Internet-based enterprises. A broadband service provider that also holds the rights to audio or video products, for example, likely would seek to discourage its customers from accessing the audio or video products of a separate company. The unaffiliated content could be blocked, slowed, or deluged with advertisements for affiliated content. But broadband service providers need not have an ownership interest in a collateral business to have an economic incentive to impair consumer connectivity: third parties can be expected to contract with these service providers to introduce impairments designed to hurt their competitors. David's Pizza would gladly pay a network operator to impede access to the Joe's Pizza website. Market Power. For the next several years, while broadband service providers have market power, competitive forces will not be able to check their technical opportunities and economic incentives to impair consumer access to various Internet-based information, products, and services. Put another way, absent regulatory intervention, consumers will have no choice but to accept such impairments until true competition emerges. Currently, two-thirds of U.S. households have access to only one broadband provider or none at all. And, yet, as everyone who has observed the evolution of the wireless industry will recall, even two service providers in an area do not produce true competition, particularly when the friction costs of switching between them makes reconsidering a prior choice difficult and expensive. Yet the number of households with three or more broadband service providers is miniscule. The Coalition anticipates, of course, that the market eventually will become truly competitive. But it simply is not competitive now. The fact that broadband service providers are vigorously fighting against even a very narrowly tailored prohibition of impairments almost certainly means that they fully intend to impair consumer access. Indeed, the frequent allegation by some broadband network operators that such a regulatory prohibition would hurt investment makes sense only if these service providers count on profiting from impairments. If, as the broadband service providers claim, they are not currently impairing consumer access, and they have no plans to do so in the future, then why do they so strenuously oppose a rule that bans such impairments? The Coalition is aware of current, albeit modest, impairments of consumer access, and also has spotted strong indications that broadband service providers are poised to exercise their market power to impair at will. Several cable operators recently had terms in their subscriber agreements that explicitly banned "virtual private networks," which are merely software arrangements that establish secure communications among groups of network users, yet place no special burdens on the underlying broadband network. When Coalition members and others showed these terms to the FCC, the cable operators hastily modified their subscriber agreements in a way that concealed the prohibition on VPNs, yet reserved the right to ban them at any point in the future. We cannot help but conclude that these operators merely are trying to mask their intentions while the Commission evaluates the regulatory status of broadband. Equally significantly, cable operators say they could block access to gaming sites. But this cannot be for the reason that gaming sites are more bandwidth-intensive; they simply are not. Perhaps it is only because so-called "gamers" greatly value that capability and could be forced to pay extra, even though they use no additional bandwidth. Lastly, cable operators have said that consumers cannot attach a device unless it meets with the operators' approval, regardless of what industry-wide approvals the device manufacturer may have. Imagine someone who wants to make a telephone having to obtain permission from each Verizon, BellSouth, SBC, Qwest, Alltel, and a few hundred other telephone companies. That has been unthinkable since the mid-1970s; yet, absent FCC action, consumers who want to buy devices in the cable broadband world will be at the mercy of their network operators. The cable industry has dismissively characterized the Coalition-requested FCC safeguard as "a solution in search of a problem" but, for the foregoing reasons, the problem is evident; no search is necessary. Widespread Current Problems Are Not a Necessary Precondition for FCC Action But even if there were no current problems, or if current problems were deemed too uncommon to matter, the Coalition believes that widespread current problems are not a necessary precondition for FCC action. To the contrary, the FCC, by its very nature, is a forward-looking regulatory agency that is responsible not just for evaluating past and current conditions but also for predicting future circumstances and acting in anticipation. Notwithstanding its professed philosophical opposition to anticipatory regulation, the cable industry itself has on many occasions sought regulation to prevent purely prospective harms. For example, the industry asked Congress to ban telephone companies from entering the cable market because it feared that, in the future, the telcos would attempt to leverage their market power to cable's detriment. Later, and again because it anticipated harms from telephone companies, the cable industry successfully lobbied the FCC to adopt safeguards requiring telcos to provide competitors access to basic services on a nondiscriminatory basis. Just as the cable industry often has requested and received regulatory checks to future use of market power, the Coalition seeks the same protection for broadband consumers. The FCC Already has the Statutory Charge and Authority to Ban Impairments Mr. Chairman, Congress already has given the FCC the statutory charge and authority to ban impairments of the sort the Coalition apprehends. The mandate to the FCC is clear to ensure that the Internet remains a viable source of information, products, and services for consumers, and that the FCC should adopt policies to promote its widespread use. We simply are urging the Commission to accept the same responsibility in did when it ruled in the seminal Carterfone case, which established that consumers can attach devices to the network, and in the Computer inquiries, in which it adopted prophylactic rules involving the Bell system because the dominant network operator had opportunities and incentives to discriminate. But, as distinct from these cases, the rule we envision would have a light touch and involves a straightforward declaration of network neutrality, not prescriptive filings that these other rules entailed. Title I of the Communications Act gives the FCC the authority to promulgate rules to carry out the goals and provisions of the Act in the absence of explicit authority, so long as such rules are reasonably "ancillary" to existing Commission statutory authority and are directed at protecting or promoting a statutory purpose. This authority was validated by the Supreme Court over 30 years ago and many times since. There are two specific provisions of the Communications Act - Sections 230 and 706, both established in the Telecommunications Act of 1996 - that give the FCC the policy direction sufficient to address the discriminatory impairments the Coalition apprehends. Section 230 of the Act makes it "the policy of the United States to promote the continued development of the Internet and other interactive computer services and other interactive media; to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation; and to encourage the development of technologies which maximize user control over what information is received by individuals, families, and schools who use the Internet and other interactive computer services." The Coalition's request that the FCC proscribe impediments to consumer Internet connectivity certainly would "promote the continued development of the Internet," because Internet development is driven largely by the availability to consumers of the content and devices of their choice, and regulatory certainty from the Commission would spur investment by content providers and device manufacturers. Moreover, FCC action would "preserve the vibrant and competitive free market that presently exists for the Internet," because a free market simply cannot exist without the consumer choice that FCC action would safeguard. Conversely, if broadband service providers were permitted to impair consumer access at will, the Commission would have manifestly failed Congress' directive to preserve the current vibrant free market. Section 706 of the Act requires the FCC to "encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans . . . by utilizing, in a manner consistent with the public interest, convenience, and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment." The Act defined this advanced telecommunications capability to cover all high-speed services that "enable[ ] users to originate and receive high-quality voice, data, graphics, and video telecommunications." Clearly, the FCC action proposed by the Coalition would be a "regulating method[ ] that remove[s] barriers to infrastructure investment," because infrastructure includes not only that employed by broadband service providers, but also consumer infrastructure (the devices consumers attach to the network to receive advanced services); and the Internet-based information, products, and services to which the Coalition seeks to preserve consumer access. It is noteworthy that the Commission relied on Section 706 in its 2000 decision extending the rules allowing consumers to install over the air reception devices, finding that consumer access "foster[s] the deployment of advanced telecommunications services." The same undoubtedly is true for broadband: unimpaired consumer access to Internet-based information, products, and services drives the deployment of advanced services. FCC Action is Needed to Prohibit Impairments until True Competition Emerges FCC action is needed to prohibit impairments until true competition emerges. Without such action, and for all of the foregoing reasons, broadband service providers with market power will have the technical opportunities and economic incentives to impair consumer access to Internet-based information, products, and services. Although perhaps subtle at first, the resulting change to the fundamental character of the Internet would be nothing short of radical and tragic. No longer would Americans be able to obtain for free or purchase all the myriad content they have grown accustomed to receiving at home. The Internet would metamorphose from being the ultimate "pull" medium, in which consumer choice is paramount, to being yet another cable TV-style "push" medium, where gate-keeping service providers decide what content Americans are allowed to obtain. By destroying unimpeded connectivity, the anti-competitive exercise of market power by a handful of broadband service providers would do to the Internet what even a nuclear strike could not. The Coalition asks, therefore, that Congress urge the Commission in the strongest terms possible to preserve in the broadband era the unimpeded connectivity that has enabled the Internet to flourish to date. More specifically, the FCC should be urged to adopt a narrowly targeted rule that would, until true competition emerges, effectively bar broadband service providers from impeding consumer access to Internet-based information, products, and services. The exception to the rule would be purely capacity-based pricing or restrictions that would require high bandwidth subscribers to pay more in order to compensate service providers for the additional investments necessary to accommodate such use. In other words, discriminatory impairments must be banned, but bit rate-based pricing, such as "gold-silver-bronze" tiering, and other purely network management limitations, should be permitted. Otherwise, unimpaired consumer connectivity will be lost. Conclusion In conclusion, Mr. Chairman, the defining characteristic of the Internet is unimpeded connectivity. Americans today may obtain online any lawful information, products, or services available or sold on the Internet, without any discriminatory impairment by network operators. The Coalition's sole purpose is to preserve this unimpeded connectivity despite the changing technical, economic, and regulatory circumstances of consumer Internet access. Unfortunately, the Coalition has many reasons to fear for the future of unimpeded connectivity, because providers of broadband consumer access now have the technical opportunities, economic incentives and, most importantly, the market power to impair consumer access to Internet content. For these reasons, we have asked the FCC to use its existing statutory authority to prohibit impairments unrelated to legitimate network management until true broadband access competition emerges. Mr. Chairman, we now ask that you and your subcommittee strongly urge the Commission to adopt this important safeguard to preserve unimpaired consumer connectivity to the Internet.
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