As a Republican I think this is a repugnant idea. ISPs should be treated as utilities in this age. They should simply be dumb pipes. They should not be allowed to monitor, track, and snoop through your data. This is all the more reason that websites should be using HTTPS to prevent eavesdropping and modification of data in transit.
> ISPs should be treated as utilities in this age.
"Treating ISPs like utilities" involves more than just making them do things we want for free. I live in the Annapolis suburbs, and our house just got public water/sewer in 2015. We're paying off the county assessment at $3,000 per year for 10 years (http://www.aacounty.org/departments/inspections-and-permits/...). That gets baked into every new house.
If we did treat ISPs like utilities and impose a $30,000 levy on every house built, we'd have fiber everywhere.
The thing is, we already paid that bill years ago. Taxpayers gave something like $200 Billion to the Baby Bell telcos in exchange for the promise of building a broadband network. We paid, then they didn't build it.
The number is computed by comparing Baby Bell profit margins after deregulation to "utilities" as a whole and calling anything above the average for "utilities" as "excess profits" that were a "taxpayer subsidy" to the Baby Bells. It is based on two fundamentally incorrect ideas:
1) That the expected rates of return of companies in an industry with exploding demand, like telecommunications was in the 1990s, should be comparable to the rates of return for your water or power company. But water and power utilities use 50-100 year old infrastructure to cater to extremely stable demand. That's exactly the opposite of what was happening in the telecom sector in the late 1990s.
2) That regulating telecom rates so those companies were no more profitable than water or power companies would not have affected investment. There is a reason our water system gets a "D" from the American Society of Civil Engineers: http://www.infrastructurereportcard.org/water-infrastructure.
Imagine comparing the profit margins of smartphone manufacturers in 2007-2017 against the average profits of "phone manufacturers" before that time, and calling everything over that average a "taxpayer subsidy." Alternatively, imagine telling phone companies that they could not make any profits beyond the average profitability of the phone industry from 1995-2005. Do you think we'd have iPhones today?
I'd be surprised if the real number was even a net subsidy rather than a net tax. We impose all sorts of extra taxes and costs on the telecommunications that we do not impose on other industries. For example, state and local cable TV franchise fees alone (typically 5% of gross revenue) amount to $5-6 billion per year in the U.S. In comparison, the American Recovery and Reinvestment Act had $7 billion in telecommunications subsidies, and that was a one-time shot.
Then there is the economic deadweight loss created by implicit and explicit cross-subsidies. There is a 17-18% tax on telecommunications services.[1] That is not a net tax, because the money is redistributed within the industry, but it increases prices, which decreases demand, which causes a net deadweight loss. Then there is implicit cross-subsidies in the form of build-out requirements. In nearly every city, you are not permitted to only build out in the neighborhoods where you can count on having enough subscribers to recoup the cost of that part of the build. You have to build out everywhere. The end result is that prices go up in neighborhoods with more potential subscribers in order to subsidize the deployment to neighborhoods with fewer potential subscribers. Again, making the product more expensive decreases demand and imposes a deadweight loss.
The ideas behind these policies are mostly well-intentioned. We want as a society to provide connectivity to rural areas and poor neighborhoods. But the implementations are driven by politics rather than any attempt to achieve the desired end result in the most economically efficient way. We don't pay for SNAP benefits with a tax on supermarkets. We impose a general tax on everybody, to avoid distorting the economy in favor or against any particular industry.
[1] That tax pays for almost all the "subsidies" you hear telecom companies getting. It's like imposing an 17-18% tax on all smartphones, and giving the money to companies building cheap smart phones for poor people. Nobody would call that a "subsidy" to the smart phone industry (it's a cross-subsidy within the industry).
No, more likely we'd see "record profits" from all the carriers because it's not in their best interest to give you the "best available" at construction time. It's in their best interest to check the box. Then later, when you want an upgrade, charge you the extra amount.
Short of having a pool, people use public water/sewer pretty much the same in any given area. Connectivity and bandwidth vary wildly by person. The normal non-technical person is quite happy as long as their Netflix doesn't buffer and their games aren't laggy.
Jesus, it's $3k per YEAR now? My house built in 1995, also AA county, is only $300 per year, but it is for 30 years. Still quite a significant difference, and not fully explained by inflation alone.
It's not about ideology, it's about the distortionary investment incentives that result from government policies. If you regulate one industry more heavily than another, you'll drive investment out of that industry into less regulated industries. Likewise, if you want to discourage investment into an industry, you tax its products. That's why we add extra taxes to cigarettes and soda (and likewise why health experts oppose subsidies on things like corn).
When you regulate the wires more heavily than the stuff flowing through them, you drive investment into content and away from infrastructure. Likewise, when you impose a special 20% tax on telecommunications services (as we do), you dampen demand for those products.
This sounds like a canard. If by "regulate more" you mean the available profit margins are smaller, then yes. However, if profit margins are very high, you can place quite a lot of expensive regulation (not all regulations are expensive, some of them tell you not to do injurious things) and people will still invest.
By its nature, content will drive a huge amount investment. Funneling bits at high speed is an interesting business, but the recombination of those bits has a universe of more possibility in it. I'd be surprised if (after the ecosystem reaches critical mass) content investment always dominates infrastructure investment.
In any case, the case for neutrality is stronger than an abstract argument against an arbitrary regulation. The promise of the internet is that of decentralized many-to-many content generation, i.e. the strong airing of many different opinions by large and small operations. When the people that own the pipes can pick favorites, the strong voices will over time winnow to the favored ones.
This is a pattern that happens over and over again in US media where large corporations are able to pick ideological favorites and narrow the spectrum of discourse to suit themselves. Network neutrality being knocked down is a strategy of corporate dominance over public discourse. Note that very few, very rich, cable companies provide most of the telecommunications for the entire population. Granting them this power allows small groups of individuals with many common interests to pick favorites to a startling degree.
> This sounds like a canard. If by "regulate more" you mean the available profit margins are smaller, then yes. However, if profit margins are very high, you can place quite a lot of expensive regulation (not all regulations are expensive, some of them tell you not to do injurious things) and people will still invest.
The idea that telcos are "very rich" is an alternative fact. Look at the actual operating profit margins of the wireline divisions of the big telcos. Huge amounts of money comes in, and almost all of it goes right back out because maintaining physical wires is expensive.
Wireline has been on the decline for a while now though, why would you look at that alone?
And a high ROIC is.., odd when comparing it to industries like software, or even to F&B.
And if those numbers are American numbers, it's pretty amazing, given that American telcos have historically underinvested in their infra building duties.
What's more interesting is an ARPU comparison with multiple countries. That would be a more apples to apples comparison.
For reference: AT&T 2015 net income was 13 billion.
Which isn't the only source of revenue for these firms, since we are talking about the whole firm.
Even if we did want to talk about just wireline, you would still have to do an ARPU comparison and see how other nations do. The last time I had to analyze a telecom firm was many years ago, but American firms do very well.
Edit: ended up finding a decent primer for the America telecom industry.
Telecos are a weird example. They're more like a utility than a product one can live without. This, combined with the massive duplication of effort competition would entail, is the reason why they are so intensively regulated. Oftentimes the government provides funding & loans[1][2], and tax incentives for telecom infrastructure buildout.
For what its worth, the reason telecoms have such low margins is that they are a commodity (which in my opinion, is what they should be). Their lobbying to get the ability to give non-neutral lanes is to give themselves a way to not be a commodity. I don't really see the upside for society as a whole for them to be essentially granted a state monopoly and then decommodify themselves to make things that were cheap more expensive and risk the internet in the process.
Their profits are nearly risk free even if they're relatively low. According to your link, the average return was between ~2% and ~11%. We're not talking about fractional percentages here. A small low risk margin on a lot of money... is still a lot of money. Notice that the ROIC in exhibit 3 lines up nicely with utilities.
I'm not sure where you were getting your info from about wireline divisions, but I found this interesting report: http://marketrealist.com/2015/01/wireless-telecoms-key-indic... It looks like investment in wires has declined by about 40%, but investment in wireless has increased tremendously. I don't know what the absolute numbers are though. I imagine wireless is much cheaper to deploy.
The utility analogy is superficially attractive but makes no economic sense. Utilities have far lower investment needs and stable rather than exploding demand. Also, even then our utilities are massively underfunded. Regulated rates are just too low, resulting in aging water and sewer pipes and transmission lines. Our power grid is crumbling: http://abcnews.go.com/US/story?id=90321. Our ancient sewer systems are dumping raw sewage into our waterways every time it rains. Old lead pipes are poisoning our kids.
The government funding you point to is a drop in the bucket compared to the costs imposed on the industry. The USF tax is $8 billion per year. State and local governments levy $6 billion in franchise fees annually (for a franchise that is by law non-exclusive). Your report points to a few hundred million in one time payments here and there. Also, remember that those payments are against the background of a universal service obligation. The government can legally prevent a telecom from exiting an unprofitable market. They may or may not provide some subsidy, but the obligation to provide service isn't contingent on getting a subsidy.
ehh well they are rich in that they own actual infrastructure, not just say a digital infrastructure. They often own content networks and of course plenty of IP, so they do fine. When you see telecom failing it's generally them letting themselves get raped due to contracts that serve people internally that they've enjoyed passing off to their customers without care.
The profits one makes should not impact the number of regulations they endure. The regulations should have merit on their own and be only out of necessity for the replenishment of the common goods utilized by the individual or corporation.
You're right to some degree, but there's a practical reality too. If a regulation would make it impossible to do business, and society would like that business to continue then they'll live without the regulation even if it would be good. There's always a cost-benefit tradeoff, and good regulators work with their charges (without getting too cozy) and the public (without listening to the shrillest unsubstantiated voices) to make smart ones.
If there were a regulation that would make it impossible to do business(the war on drugs) and society would like that business to continue (the revenue of cocaine sales were approximately 9 times that of Microsoft last year), then they'll live without the regulation (sweet where do I buy?)
Telecom is a classic example of an industry which will always have imperfect competition because of high barriers to entry and large fixed costs.
You will always need government intervention to ensure that telecom firms don't abuse their position.
American telecom firms are genuinely pieces of work, truly innovative in their means of colluding. They managed to insert pin codes in their bids for spectrum. Thus letting other bidders know they should step out.
I believe there won't be any people around here that vote Republican that will support this. The GOP (we can discuss when it happened, but it definitely) has gone off the rails in terms of supporting their constituents. They feed them red meat in terms of social issues, and then do what they want on economic and other issues, which are almost always completely pro-business and anti-labor.
I disagree with your assessment that Republican voters are primarily motivated by social issues, yet implicitly opposed to "pro-business and anti-labor" things. There are quite a few Republican voters who prefer them on (stated) economic issues and hold their nose when it comes to the social stuff.
Really, the problem (or benefit, depending on your point of view) is that the two party system creates very broad coalitions of people with differing interests. The problem with the Republican coalition is that many of its constituents want things which are contradictory. Like, say, free market economic policies and stricter immigration (which is a form of labor market regulation).
The Democrats have their own versions of these problems, but they're usually less obvious because their coalition is more explicitly transactional.
Yes, well said. I consider myself more of a Peter Thiel type of republican who supports the party on an economic basis but would really love to see the party abandon its culture wars.
The following is less an attempt to start a partisan argument than to clarify the lines along which such arguments have taken place previously.
>The GOP (we can discuss when it happened, but it definitely) has gone off the rails in terms of supporting their constituents. They feed them red meat in terms of social issues, and then do what they want on economic and other issues, which are almost always completely pro-business and anti-labor.
Isn't that, well, normal? I was under the impression that anti-labor Republicanism started around the time of Ronald Reagan and continued indefinitely since then. If anything is especially original about what the Republican Party are doing now, it's that their Presidential candidate ran on an atypically liberal economic platform (no cuts to entitlement programs, major infrastructure spending, rebuilding the blue-collar jobs base in the Midwest), while their Congressional majority continue the traditional Reagan Republican legislative program.
Precisely this division on economic issues, more than anything else, is what has always stopped me from voting Republican. It has done so even when I thought that some or another Republican, especially a moderate, had a valid point or two, or just seemed like a decent and honest person. For example, I always thought that John McCain seemed like an honorable, patriotic Senator who stood up for civil liberties and veterans, but oh well, 2008 was the middle of an economic crisis and the Republicans are anti-labor. So I voted a firm Obama instead of being a swing voter.
What's the perception on the Republican side of the divide? That the party was originally pro-labor in its own way, but conservative on social issues? That there was an appropriate time in our history to be anti-labor?
This isn't about opposing privacy. There is a reasonable expectation to privacy people have but the privacy laws adapted by the FCC in the past have only been applied to ISPs and not other edge providers, such as Google or Skype. So in short, they are just bad laws.
The regulations placed on ISPs place an undue burden on them but not on other Internet companies. Firstly, this means that users have to understand a lot about the networks they use to understand how privacy laws affect them. Second, it also means that edge providers(Yahoo, Skype, Google) have an unfair advantage. The justification given for this is that ISPs see much more data than edge providers. But this does not appear true and in fact a great deal of personal information and network-usage data appears to be available to other parties besides ISPs. You can search headlines to see that. So it doesn't make sense to single out ISPs for privacy laws but not other Internet companies that have access to user data. Also, it makes the law more complicated regarding user data privacy.
I also want to point out that, in my personal opinion, there is a tendency to view ISPs as malicious actors but not for other edge providers which biases the debate on Internet privacy laws.
"..the privacy laws adapted by the FCC in the past have only been applied to ISPs and not other edge providers... So in short, they are just bad laws."
I feel that builds the argument that they should be implemented more widely, not abandoned. Also, ISPs are targeted specifically not because people believe they are malicious actors, but because they are literally the gateway to everything, impacting you just about any time you use the internet. Think how much it would say about you as a person in detailed logs from your service provider.
Yes, the argument that they should be widely implemented is definitely implied and valid.
Regarding your analogy, end to end encrypted content is not readable by the ISP, they can see metadata for encrypted content, but not the content itself. Whereas webmail providers can see the content[1]. Another example is Google who run a public DNS server. Another example is Apple keeping all phone numbers[2]. So the data that edge providers have access to(in theory) is fairly significant. I think definitely to be consistent the law has to be an all or nothing kind of thing.
There's a competitive market in online services. FastMail scans only for spam, and you can opt out.[1] Microsoft claims not to use email for ad targeting.[2] Google DNS is a standalone service with a reasonable, detailed privacy policy.[3] iMessage is optional even if you choose to use Apple platforms.
Meanwhile, most US households have only one option for 25+ Mbps Internet service because the FCC dismantled competition among residential ISPs. If ISPs don't want the responsibilities that come with monopoly power, they should stop fighting to preserve it.
Im interacting with edge providers, so I understand to some degree that I'm exposing information. Take phone calls as an analogy; obviously the person on the other end of the line can hear me, but I don't want a stranger at the telephone company listening in.
I cannot accept that statement at face value. Supporting this is absolutely about opposing privacy. You are supporting a move whose only purpose is to lessen privacy.
"There is a reasonable expectation to privacy people have but the privacy laws adapted by the FCC in the past have only been applied to ISPs and not other edge providers, such as Google or Skype. So in short, they are just bad laws."
No, they aren't. They are very good laws. They're just not as broad as they could be. The proper response, if you feel this way, is to expand those privacy laws, not to remove the little protection consumers have.
" Second, it also means that edge providers(Yahoo, Skype, Google) have an unfair advantage. "
No, it absolutely does not. Mainly because ISPs are not competing with them. There is absolutely, positively zero reason why any ISP should need that data. None.
The rationalization I've heard is something along the lines of "anything that the free-market is a better regulator than the gov't; gov't regulation reduces competition and creates monopolies like those that exist in the ISP biz today". Please don't shoot the messenger. :)
The point also includes that Facebook and Google which are effective duopoly of on-line advertisements are not restricted but the owners of the pipes are. It also includes interpretation of FCC's core mission and how expansive the powers of application are.
I am more worried about advertising duopoly than ISP eating my data. If you have smart phone, you have pretty much given a heck lot of privacy, including where you go etc. Your android phone sucks so much data about your spatial movement, it can predict when you got sick or about to get sick.
The problem with this comparison is that, while it's not remotely easy, it's far easier to compete with Facebook or Google than to compete with an ISP.
Facebook barely existed 10 years ago. And it wasn't until maybe the last five years that it was recognized as a competitor to Google.
Just because the FCC is 15 years behind the times on this doesn't make it a bad idea.
Google, Facebook, and advertising networks with over a certain percentage of the market should absolutely be subject to privacy regulation as well (and likely will be in another 15 years).
> I'd love to hear from some Republican supporters who think this is a good idea
What idea, exactly? Doing what the title of the article claims?
Obviously nobody wants to reduce privacy except perhaps serious proponents of IAs. You can't even really judge that based on intent or claims, and Obama is a great example of why. He always claimed to be fighting them but in reality he expanded and affirmed their power in ways that make him look more like Bush than a liberal-minded Democrat.
I'm not even comfortable putting a political party label on myself (it just so happens more libertarian and classical liberal minded people like me seem to be more favorable of some people in the Republican party as of late, largely due to the disturbing trends going on in the Democratic one), but I personally don't find the idea of repealing laws that protect privacy very palatable. That's a gut reaction, because I'm not aware of what other plans are in place because the media doesn't appear to be reporting those, nor do I have any confidence it would if that news would conflict with what they've set out to do: to vilify Ajit Pai and the FCC under new administration.
What's more important to me, however, isn't necessarily the clickbait-tier quality of the title presented here, but the larger strategy. If you opened a code review and saw someone removed a critical piece of code as part of a much needed refactoring and immediately yelled "THIS IS A REALLY BAD IDEA!" but ignored the part where that critical function was maintained and improved upon further down, you'd be seen as a bit of a reactionary focusing far too narrowly on specifics. I think that's a genuine risk here, and all too often in politics in general.
Why am I not outraged? Because I don't think I'm getting the whole picture.
Did you apply your genuine curiosity to reading the rules in detail and formulate why you specifically think the entire rules' contents are important to retain and have no downside?
Did you then ask yourself if the need for this rule, as written, is so compelling, why did the Obama Administration only sneak it in the week before Trump was elected?
It's pretty simple. If you have a technical understanding of the topic and have no vested interest then you'll almost certainly be against overturning privacy rules regardless of politics. If you don't have a technical understanding then you'll just take your cue from your political tribe.
It doesn't necessarily matter that an arbitrary member of the republican party has sponsored this resolution, at this time, republican values among the masses are totally subject to Trump's opinions (which are not always in-line with republican orthodoxy), so Trump's position on this will ultimately dictate whether or not republicans constituents are ok with this.
2) Individual freedom is about not restricting your actions, not about defending you from others.
3) Privacy is something of the past anyway. In a 100 years we will know every word you say, every thing you buy, every breath you take. You're defending the right to spit tobacco on the street.
4) In a few years when something happens everybody is gonna turn around and blame the government about not knowing enough. It is good for PR for that reason. "We tried, you didn't want to."
I will try to counter your counter-counter arguments.
1) Security versus privacy is a trade-off and should be respected as such. There can be lives at stake. If I can save 1000 lives by having a border patrol guy reading my email I would immediately sign up and travel to the US for it. The difficulty is that in reality this trade-off is not transparently made. However, this does not mean that there is no such trade-off.
2) To protect someone from others can be done in multiple ways. You can create laws that protect someone from having others reading his/her letters, protect someone from having others entering their home, protect someone from others saying bad things about them, protect someone from others stealing from them. Although recommendable, all these laws are restrictive and not necessarily promoting individual freedom.
3) In the future there are so many sensors in the (virtual) world that they will find it ridiculous that people in the past thought that there were things private. Are you an owner of the photons that bounce of you? Are you an owner of the audio waves generated by those neurons formed by interactions with you? The concept of privacy is arcane and in certain situations criminal.
4) Blaming the government is gonna happen. This is a cynical argument. However, the political parties that have political fitness will survive. In the end a party should reflect would its majority want. If that is enough data collection to prevent 9/11s, then that is what it should try to do.
1. "If I can save 1000 lives by having a border patrol guy reading my email..."
So we're going to train all the border patrol people to be intelligence analysts? That sounds really expensive.
If we're not going to do that, then they're not going to have the training required to make sense of that material. It's a pointless invasion of privacy. They're going to put innocent people in jail and be completely oblivious to actual bad actors who know how to hide their tracks.
Remember, September 11th was avoidable but because the information channels were clogged with too much garbage the real threat information got lost in the noise. The real priority here should be to collect less information and ensure it's of a very high quality.
I am also curious about how one can vocally defend freedom to carry guns but not care too much about having surveillance and censorship free communication.
From what I can tell, they believe that the FCC regulating the ISPs is an overreach of government, which should be as small as possible.
I think they are either ignorant on the topic of surveillance and its breadth and implications, or they have some kind of belief that the intelligence community is fighting for our country.
I'm conservative on a lot of issues, including 2nd amendment rights, and my family is full of "right-wingers." None of them would support spying on our own citizens or the violation of the privacy of American citizens.
The Republican party at large does not reflect the values of most modern conservatives that try even a little bit to not have hypocritical views.
However, while conservatives tend to believe in small government, they have never believed in small military/intelligence/etc.
I don't mean to start a flame war, but am genuinely curious.