FCC to Comcast: Cease, Desist, Disclose

By Michael Connor and Farnum Brown

Over a hundred million Americans have high-speed Internet access. Most of them likely assume that, in return for paying a hefty monthly fee, they can use their Internet service privately, for whatever purpose they want, as long as it’s legal. They’d be wrong.

On Friday, for example, a bi-partisan majority of the Federal Communications Commission ordered Comcast, the nation’s largest cable company, to stop blocking Internet access for some of its subscribers and "secretly degrading” their service.

At the heart of the Comcast case are actions euphemistically referred to as “network management.” This innocuous term covers a host of troubling practices employed by Internet Service Providers (ISPs) in general, including Comcast, Time Warner Cable, AT&T, Verizon, Charter Communications, Cablevision and others.

“Network management” sounds like a good idea—making sure all those digital ones and zeroes are shunted along properly so your email message or spreadsheet arrives at its destination. What sounds less appealing is having your ISP secretly block or degrade the Internet service you’ve paid for. Or open and “inspect” the contents of your virtual communications without asking your permission. These, too, it turns out, are “network management” practices.

As Republican FCC Chairman Kevin Martin said Friday, Comcast’s network management amounted to “looking inside its subscribers communications, blocking that communication when it uses a particular application regardless of whether there is congestion on the network, hiding what it is doing by making consumers think the problem is their own, and lying about it to the public…”

Civic-minded groups are rightly up in arms over these practices’ violation of our rights to privacy and to freedom of expression and association. These are core democratic values whose abuse by corporate gatekeepers of our communications infrastructure shouldn’t be tolerated.

As important if less remarked, these practices also threaten the Internet as an engine of business opportunity and innovation. If consumers don’t believe their personal data is safe on the Internet, digital commerce will suffer. If entrepreneurs with new ideas can’t express them freely and share them privately with potential partners on the Internet, innovation will suffer. And if incumbent ISPs can surreptitiously guide traffic on the Internet, we’d be naive to think these conglomerates wouldn’t nudge a competitor into the digital guardrails or close an onramp to a potentially disruptive newcomer, even if it costs consumers.

So make no mistake, this isn’t “just” a democratic issue about maintaining a free marketplace of ideas. It’s an economic issue about maintaining a free marketplace--period. This is about safeguarding and promoting competition in the digital economy.

It’s also about safeguarding and promoting shareholder value for investors in the companies who provide Internet access. The ISPs noted above are all publicly-held companies. And they are rapidly developing and deploying network management practices that may expose them to considerable financial risk.

The Comcast case, for example, turned on the company’s secret interference with subscribers attempting to share digital files on “peer-to-peer” networks. In addition to Friday’s FCC ruling, four class-action lawsuits have been filed against Comcast in California, Illinois, New Jersey and Oregon, alleging the company deceived consumers by advertising that it offered "unfettered access to all the content, services, and applications that the Internet has to offer." How these cases are resolved and what, if any, settlements will be paid no one knows. But the risk is there.

Comcast is not alone. In the face of Congressional and public pressure, Charter Communications last month scuttled a plan that would have employed technology for “deep packet inspection” or DPI. This technology scans the actual content of traffic flowing across the ISP's network in order to track the surfing habits of subscribers. While the stated goal of the “service” was to offer highly targeted advertising to subscribers, some experts suggest the practice would have been illegal—warrantless digital wiretapping, in effect. Here again, such a plan, if implemented, could have posed serious risks to Charter and its shareholders.

There are numerous related instances of ISPs interfering with subscribers’ legitimate Internet usage—AT&T’s censoring of political speech on a Pearl Jam webcast last summer; Verizon Wireless denying NARAL Pro-Choice America use of its text-messaging services last fall. The list is long and will continue to grow.

These incidents reflect management decisions that posed serious financial risks for their firms and their shareholders. Regardless of the legal and regulatory outcomes, each firm has already paid dearly in terms of its brand value and consumer goodwill. These are PR nightmares—redolent as they are of things you read about in China or Pakistan. And yet, across the board, managements of these firms are tight-lipped about these practices, how they made the decisions to employ them and what, if any, policies they’ve developed to avoid such problems in the future.

This reticence is unacceptable, as the FCC has now ruled. For ISPs to vouchsafe their network management practices as “reasonable” without disclosing those practices is meaningless. As FCC Chairman Martin said in his statement Friday, “A hallmark of whether something is reasonable is whether an operator is willing to disclose fully and exactly what they are doing.”

We agree. The best way for ISPs to ward off further regulatory or legislative intervention also happens to be the best way for them to restore consumer confidence and build brand value. It’s called disclosure and, like sunlight, it is the best disinfectant.

As Google has so ably demonstrated, for commerce in the digital era abundance can prove more valuable than scarcity. The telecom and cable firms that now serve as ISPs must learn a similar lesson: to seek competitive advantage through disclosure and transparency rather than evasion and secrecy. To date, these firms have failed to learn this lesson. As consumers, shareholders and citizens of a democracy, we should insist upon their success.

Michael Connor is Executive Director of Open MIC: the Open Media and Information Companies Initiative (www.openmic.org), a non-profit organization working to promote a diverse media environment through market-based solutions. Farnum Brown is Vice President of Trillium Asset Management (www.trilliuminvest.com), a socially responsible investment firm, and Chairman of the Board of Open MIC.