Sparring Over Access

Unless action is taken, there are fears some developments on the Internet could squash small businesses and limit online consumer choices. But experts say that even though the Federal Communications Commission has some leeway, it may not be in a position to take pre-emptive action.

By Sarah Lai Stirland
Special to The Seattle Times

Civil rights activists and consumer advocates in the digital era
have found an unusual ally: Amazon.com.

Echoing activists' fears through the vocabulary of e-commerce, a lawyer for the Seattle-based company predicted that unless the Federal Communications Commission takes action, certain developments on the Internet could crush small businesses and limit consumer choices online.

But experts point out that even though the FCC has a lot of leeway, it may not be in a position to take such pre-emptive action. Therein lies one significant strand of a fundamental policy debate facing the nation's communication infrastructure today: How can a federal agency most effectively balance the power of various players in controlling the gates to the Internet?

The Amazon letter provides a good look at the complex issues involved in addressing the question and how the Net's further development could affect e-commerce. At issue is the rollout of high-speed Internet access, and conditions underlying how and which companies offer consumers services on the Net.

Amazon's June filing came in a proceeding involving how the FCC should regulate cable companies' broadband offerings. A similar proceeding is under way on phone companies' DSL, or digital subscriber line, operations.

The FCC's proceedings come after disputes arose at the local level over how broadband should be regulated. At the same time, the agency is under pressure from the Bush administration to speed up the rollout of high-speed Internet access.

Though arcane, the regulations have traditionally determined whether the providers of the electronic pipes are required to allow competitors access to their networks and, if so, on what terms.

Question of competition
Activists and academics - and Amazon - worry that the FCC's decision to promote competition between different kinds of broadband access (cable vs. DSL, for example) rather than mandating competition over the question of access itself, means that cable companies and DSL providers will wield total control of their respective networks.

Because cable is fast becoming the dominant broadband medium, the activists worry that such power would allow cable companies to strike deals with online businesses to speed up the content and services of those who have paid up, while possibly hindering access to others. This would violate the original design principles that led to the development of the Internet that we have today.

But lawyers representing the National Cable & Telecommunications Association dismiss the fears expressed by the Center for Digital Democracy, American Civil Liberties Union, Consumer Federation of America and other groups.

"The notion that providing or not providing multiple Internet service providers (access) has any significant effect on the amount or quality of content that is generally available on the Internet is ridiculous," write Daniel L. Brenner and Michael M. Schooler in a letter filed early August in response to the consumer group filings.

Writing with great rhetorical panache, the lawyers argue that the consumer groups' requests that the FCC impose open access specifications on cable companies' networks just aren't feasible, are too expensive, burdensome and may affect service quality.

Amazon's position
Amazon's letter makes the consumer group arguments more concrete by attempting to demonstrate how vulnerable e-commerce businesses like itself could be as the next generation of the Internet evolves. In his June letter to the FCC, Paul Misener, Amazon's vice president of public policy, writes that as Amazon.com envisions the broadband future, "a consumer running low on toothpaste need only to say to the home-networked microphone on the wall above the sink: 'One large tube of Crest Regular.' A day or two later, drugstore.com or some other retailer could have it delivered to the consumer's door."

Among other benefits, Amazon.com envisions faster delivery of e-books, music and videos and enhanced marketing of products. But such a future of ubiquitous connectivity may never arrive, Misener and others argue, if the FCC doesn't change the way it regulates telecommunications providers.

"Amazon.com believes the FCC should impose on cable operators an open access requirement that would permit multiple Internet service providers to provide consumers unfettered access to all the information, products and services that the Internet has to offer," Misener wrote. "In addition, the agency should consider rules that would bar parties either cable operators or broadband ISPs using cable modem facilities) from impeding consumer access to information, products and services."

Amazon's comments reflect a vision that some legal observers say the FCC is ill equipped to regulate because the agency's approach is based on categories of technology - the boundaries of which digital technology has erased. And the same issues of "open access" over cable modems or other kinds of technology will arise repeatedly as new modes arise and companies seek to monopolize the business.

"In the digital world, in this era, there will be perpetually new demands for open access," noted Lee McKnight, a contributor to "The Gordian Knot: Political Gridlock on the Information Highway" and an associate professor of international communications at the Fletcher School of Law and Diplomacy. "There are so many layers to what open access really is."

That is precisely where the threat lies for e-commerce companies like Amazon.com, which rely on the architecture and design of commercial online networks for access. In the digital world, there are an infinite number of points at which bottlenecks can be established, allowing certain players to exert and potentially abuse their market power.


"In practice, there's always going to be some new technology that comes along and their usage will grow to a point where an open access policy is required," notes McKnight.

Which is perhaps why Amazon's Misener asked the FCC to disregard the technology that consumers use to access the Internet - whether it be cable, DSL or satellite. The FCC needs to uphold the general principle of openness and non-discrimination, he said.

But the problem is that the FCC, in its rulemaking procedures, has to determine whether a service is cable, telecommunications, radio, broadcasting, wireless spectrum or a so-called "information service." Those categories then determine the scope of the rules the FCC establishes.

In March, for example, the FCC decided that Internet access over cable modems is an interstate information service. Now it has to decide how such an interstate information service should be regulated, and whether it should be subject to the same competitive requirements as telephone companies providing high-speed Internet access.

Historically, the FCC required local phone companies to open up their networks to providers that want to compete for the phone companies' customers. Because cable companies fall under a separate regulatory category under the Telecommunications Act, they haven't been subject to the same detailed obligations. Yet digital technology is increasingly blurring the distinctions between types of services and what telecommunications companies have traditionally provided.


"The problem really is that connectivity doesn't fit into that framework," Kevin Werbach, an analyst and former editor of technology newsletter Release 1.0, said in a talk this year.

"It's not one network for voice, one network for pictures, one network for something else - it's everything mashed together in a set of vertical ways."
For Amazon and its growing army of customers and partners, this square-peg-in-a-round- hole kind of regulation means that those who control the pipes can still establish subtle anti-competitive chokeholds on the Internet through the various "layers" of technology.

Solving the problems
Telecommunications law experts differ on how to solve this problem. Werbach believes the FCC can still play a valuable role in regulating the Internet. McKnight and his colleagues concluded in their book that the job will increasingly fall to anti-trust enforcers, since the question is over when a technology gains enough critical mass to warrant worry over monopolistic behavior.

Misener declined to discuss his FCC filing. But the issue of ubiquitous connectivity and how it's allowed to unfold is one the company will have monitor with a hawkish eye as it expands its e-commerce technology platform. Though revenues from its services segment (in which the company licenses its platform to third parties) are still dwarfed by its retail business, it already has some significant brands signing up for its technology. They include Virgin Entertainment Group, Toysrus.com, Target, Circuit City Stores, Borders, British bookstore Waterstones and the online travel companies Expedia and Hotwire. In addition, the company continues to add streaming media, downloads and more interactive services to its site everyday. And hundreds of thousands of small businesses and individuals now use Amazon.com as a broker to sell their own products through the Web.

Meanwhile, the open access proceedings grind on at the FCC and a resolution could take years. The last round of comments ended in the first week of August, and the FCC must address the concerns brought up in the hundreds of letters it has received on high speed
Internet access over cable.

At the same time, the Media Access Project, a nonprofit public interest law firm, is challenging the FCC's March finding that high speed Internet access is an information service in the U.S. Court of Appeals for the Ninth Circuit.

"This designation simply removes all the safeguards that have protected content providers on the Internet - they'll no longer be able to determine their digital destinies," said Jeff Chester, executive director of the Center for Digital Democracy.

He believes that the designation is, in fact, a death blow.

"The Internet as we know it is on life support," he said.

All the while, the FCC's commissioners are dealing with the ongoing turmoil in the telecom markets.

"This is an enormously complicated situation," says Harold Feld, associate director of the Media Access Project. "These things take a while - we're not exactly on Internet time."

Sarah Lai Stirland writes frequently about public policy and technology.
She can be reached at sarah@sarahstirland.com