How 'net neutrality' really works

WHEN FCC Chairman Julius Genachowski took office last summer, he was probably hoping to have fun with things like broadband plans, spectrum reform and other stuff that excites telecom geeks.

But last week, the D.C. Court of Appeals declared that, due to Bush-era rulemaking, the Federal Communications Commission lacked many of the powers Genachowski needs to do his job.

But the ruling doesn't mean the death of net neutrality, the National Broadband Plan, spectrum reform, or the FCC itself. By statute, the agency retains enormous powers over every form of wire communication - it just has to turn them back on.

Technically, it means declaring cable and DSL broadband the common carriers of our age.

What does that mean? To answer this, we need to go back to 1910, when Congress passed a law declaring that the telegraph, telephone and radio were to be treated just like railroads, as "common carriers." The term is critical for understanding anything about what's going on today.

The idea of the common carrier stems from the premise that some businesses, by their nature, are "public callings." Typically, such carriers of goods or people (taxis, railroads, ferries, bridges) and information (telegraph, telephone) have been charged with a duty not to discriminate among customers or charge exorbitant prices.

You run into this all the time, even if you aren't aware of it: When you get into a taxi, the driver must charge you the posted rate and take you where you want to go. That's being a common carrier in action.

It's easy to understand why courts have long thought such duties were important. Imagine a railroad that charged much less to John Rockefeller's Standard Oil than to would-be rivals in exchange for kickbacks. Or a telegraph owner who had a monopoly and refused to carry Democratic news.

Given these kinds of problems, from 1910 on, firms that offered communication services were declared common carriers and obligated basically to treat everyone the same and not to charge outrageous prices.

But as the 21st century began, the Bush administration decided to abandon the common carrier model. Cheered on by economists, industry and some technologists, the FCC, under Chairman Michael Powell, declared that both DSL service and cable broadband were no longer covered by the FCC's authority to regulate common carriers.

Instead, they were "information services," a category over which the FCC had limited say.

There is an underlying economic logic for this. Economists in the 1990s argued that competition had done away with the need for the old protections. Access to the broadband Internet, the FCC projected in the early 2000s, would soon be a "highly competitive market," making the old rules unnecessary.

Unfortunately, by 2006, it was obvious that things had gone wrong. Instead of more competition in broadband, every year brought less. There are plenty of firms and individuals on the Internet - bloggers, Bing, Wikipedia and the rest - but increasingly few firms carrying the information. The problem is that deregulation, meant to foster "competition," freed the Bell and cable companies to eliminate most of their actual competitors.

AT&T, broken up in 1984, re-emerged. The cable industry integrated into just a few megafirms, like Comcast. Today, there is every sign of more consolidation, and even the re-emergence of an outright monopoly in high-speed broadband (more than 50 megabits per second) in many parts of the nation.

Even if the Bush FCC was wrong about the glory of competition, was it perhaps right to cripple the FCC? Might we be better off with an agency limited to licensing radio and TV stations?

In fact, we actually do rely on broadband as our common carrier, much as our ancestors relied on trains and the way we still rely on taxis. The problems and likely abuses in a system everyone depends on haven't really changed, and why should they?

TECHNOLOGY changes, human nature doesn't. Then as now, carriers have the means and reason to discriminate, charge exorbitant prices and confuse customers with weird bills.

So the FCC is likely to re-establish its common-carrier authority over broadband. It needs this to continue the National Broadband Plan, the Obama administration effort to get fast Internet access to more Americans.

It also needs the power to punish any knavish conduct that may arise. This amounts to returning to the policies that date from the heyday of railroads (and even older common-law principles).

Tim Wu is a contributor to Slate (slate.com), where this first appeared, and a fellow at the New America Foundation.