Internet Myth Busting and Control of the Internet: Are Internet Service Providers the New Internet Gatekeepers? By Catherine Sandoval Assistant Professor Santa Clara University School of Law Carterfone and the Digital Era Santa Clara University School of Law

Internet Myth Busting: Myth #1 The Unregulated Internet Myth of Unregulated Internet Myth of Unregulated Internet Myth that Internet was Born of and Flourished because of Lack of Regulation Myth that Internet was Born of and Flourished because of Lack of Regulation

Internet Myth Busting: Myth #1 The Unregulated Internet Congress repeated this myth in Section 230(b) of the 1996 Telecommunications Act, stating that U.S. policy is designed “to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive services, unfettered by Federal or State regulation.” Congress repeated this myth in Section 230(b) of the 1996 Telecommunications Act, stating that U.S. policy is designed “to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive services, unfettered by Federal or State regulation.”

Internet Myth Busting: Myth #1 The Unregulated Internet The ARPANET used private lines for its initial connections between the four host universities The ARPANET used private lines for its initial connections between the four host universities Some early tests uses Public Switch Telephone Network Local Lines Some early tests uses Public Switch Telephone Network Local Lines The designers of the ARPANET assumed that the Telephone Company (later dubbed the Physical Layer in Internet terms) would act in a neutral fashion in carrying their data traffic The designers of the ARPANET assumed that the Telephone Company (later dubbed the Physical Layer in Internet terms) would act in a neutral fashion in carrying their data traffic

Internet Myth Busting: Myth #1 The Unregulated Internet TCP/IP Protocol first described in a May 1974 paper by Vint Cert and Bob Kahn enables disparate networks to communicate with each other TCP/IP Protocol first described in a May 1974 paper by Vint Cert and Bob Kahn enables disparate networks to communicate with each other The TCP/IP designers wanted to connect radio-packet networks, satellite networks and the ARPANET, as well as other future networks The TCP/IP designers wanted to connect radio-packet networks, satellite networks and the ARPANET, as well as other future networks

Internet Myth Busting: Myth #1 The Unregulated Internet TCP/IP creates a common methodology for communications between networks and routing packets TCP/IP creates a common methodology for communications between networks and routing packets TCP/IP assumes a neutral physical layer that does not independently make routing decisions about packets or discriminate against traffic TCP/IP assumes a neutral physical layer that does not independently make routing decisions about packets or discriminate against traffic

Internet Myth Busting: Myth #1 The Unregulated Internet The FCC’s Carterfone decision was critical in allowing consumers to attach devices to the telephone network as long as they did not harm the network The FCC’s Carterfone decision was critical in allowing consumers to attach devices to the telephone network as long as they did not harm the network With Carterfone and its predecesor Hush-a-Phone, competition in Customer Premises Equipment was born With Carterfone and its predecesor Hush-a-Phone, competition in Customer Premises Equipment was born Carterfone enabled the attachment of devices to the telephone network such as modems used to communicate between computers Carterfone enabled the attachment of devices to the telephone network such as modems used to communicate between computers

Internet Myth Busting: Myth #1 The Unregulated Internet In 1975 the FCC initiated the Part 68 rulemaking in response to AT&T’s delays in permitting customers to CPE In 1975 the FCC initiated the Part 68 rulemaking in response to AT&T’s delays in permitting customers to CPE Part 68 permits consumers to connect equipment from any source to the public telephone network if such equipment fits within the technical parameters outlined in Part 68. Part 68 permits consumers to connect equipment from any source to the public telephone network if such equipment fits within the technical parameters outlined in Part 68.

Internet Myth Busting: Myth #1 The Unregulated Internet The first personal computer the Altair 8800 was released in 1975 The first personal computer the Altair 8800 was released in 1975 The first message using TCP protocol was sent in 1977 The first message using TCP protocol was sent in 1977 The First Computer Bulleting Board, CBBS goes online in 1978 The First Computer Bulleting Board, CBBS goes online in 1978 Usenet, a computer network and discussion group is launched in 1979 using public phone lines Usenet, a computer network and discussion group is launched in 1979 using public phone lines

Internet Myth Busting: Myth #1 The Unregulated Internet The legacy of Hush-a-Phone, Carterfone and Part 68 are critical to the development of the Internet and the ability to attach modems to the Public Switched Telephone Network The legacy of Hush-a-Phone, Carterfone and Part 68 are critical to the development of the Internet and the ability to attach modems to the Public Switched Telephone Network The Internet was traffic over the telephone network, not a service of the telephone company The Internet was traffic over the telephone network, not a service of the telephone company As such, it was subject to Common Carrier regulation As such, it was subject to Common Carrier regulation

Internet Myth Busting: Myth #2: No Permission is Needed to Develop an Internet Application Will ISPs be allowed to act as Internet gatekeepers, much like the cable companies are gatekeepers for video content? Will ISPs be allowed to act as Internet gatekeepers, much like the cable companies are gatekeepers for video content? By selectively blocking content using certain Internet protocols, ISPs limit mechanisms for distributing content and thus limit speech By selectively blocking content using certain Internet protocols, ISPs limit mechanisms for distributing content and thus limit speech Such limits help facilities-based ISPs like cable companies limit competition from Internet-based video Such limits help facilities-based ISPs like cable companies limit competition from Internet-based video

Internet Myth Busting: Myth #2: No Permission is Needed to Develop an Internet Application The Internet flourished BECAUSE OF Common Carrier Regulation The Internet flourished BECAUSE OF Common Carrier Regulation During dial-up days, Telephone companies had to allow upstart ISPs such as Earthlink and AOL to use its facilities and offer Internet service During dial-up days, Telephone companies had to allow upstart ISPs such as Earthlink and AOL to use its facilities and offer Internet service Cable modem Internet not initially defined but since it was not a cable service, common carrier assumption applied at least to traffic non-discrimination Cable modem Internet not initially defined but since it was not a cable service, common carrier assumption applied at least to traffic non-discrimination

Internet Myth Busting: Myth #2: No Permission is Needed to Develop an Internet Application The FCC decided in 2002 to reclassify Cable Internet as an “Information Service” rather than a common carrier The FCC decided in 2002 to reclassify Cable Internet as an “Information Service” rather than a common carrier The Supreme Court upheld that decision in 2005 in the FCC v. NCTA and Brand X case The Supreme Court upheld that decision in 2005 in the FCC v. NCTA and Brand X case The FCC subsequently changed all ISP facilities-based service providers to Information Services, rather than Common Carriers The FCC subsequently changed all ISP facilities-based service providers to Information Services, rather than Common Carriers

Internet Myth Busting: Myth #2: No Permission is Needed to Develop an Internet Application Even with the Change to Regulation as an Information Service Provider, Title I of the Communications Act still applies Even with the Change to Regulation as an Information Service Provider, Title I of the Communications Act still applies That change also made ISPs subject to the Federal Trade Commission Act That change also made ISPs subject to the Federal Trade Commission Act Debate over Net Neutrality and Regulation of ISP control over Internet traffic Debate over Net Neutrality and Regulation of ISP control over Internet traffic

Internet Myth Busting: Myth #2: No Permission is Needed to Develop an Internet Application FCC issued order in August 2008 condemning Comcast’s interference with peer-to-peer (p2p) traffic FCC issued order in August 2008 condemning Comcast’s interference with peer-to-peer (p2p) traffic That order is now being appealed, challenging FCC jurisdiction and authority That order is now being appealed, challenging FCC jurisdiction and authority Whether ISPS can act as the net Internet Gatekeepers is at stake in the Comcast order Whether ISPS can act as the net Internet Gatekeepers is at stake in the Comcast order

Internet Myth Busting: Myth #2: No Permission is Needed to Develop an Internet Application Is such conduct permissible under the Communications Act? Is such conduct permissible under the Communications Act? Is it “deceptive or unfair” under the Federal Trade Commission Act Is it “deceptive or unfair” under the Federal Trade Commission Act Is it “unfair competition” under the Federal Trade Commission Act Is it “unfair competition” under the Federal Trade Commission Act Is it a violation of the Sherman Act? Is it a violation of the Sherman Act? Do we need additional net neutrality or deep- packet inspection regulation? Do we need additional net neutrality or deep- packet inspection regulation?

Internet Myth Busting: Myth #2: No Permission is Needed to Develop an Internet Application Facilities-based ISPs have appropriated the model of Internet regulation based on layers: Physical Layer, Application/Content Layer, Logical Layer Facilities-based ISPs have appropriated the model of Internet regulation based on layers: Physical Layer, Application/Content Layer, Logical Layer Emphasize their ownership of physical layer to justify control Emphasize their ownership of physical layer to justify control

Internet Myth Busting: Myth #2: No Permission is Needed to Develop an Internet Application Danger that those who control the physical layer will use their bottleneck facilities control to become the new Internet gatekeepers Danger that those who control the physical layer will use their bottleneck facilities control to become the new Internet gatekeepers Lack of facilities-based competition Lack of facilities-based competition Ability to clandestinely limit traffic enables this gatekeeper role Ability to clandestinely limit traffic enables this gatekeeper role Need to protect consumers, competition and the ability of the Internet to serve as a forum for content distribution without gatekeepers Need to protect consumers, competition and the ability of the Internet to serve as a forum for content distribution without gatekeepers

Internet Myth Busting: Myth #3: ISPs May Choose to Deal with Whom they Want and Interfere with P2P or other Traffic FTC Commissioner Rausch characterized ISP interference with Peer-to-Peer (p2p) traffic as a protected “refusal to deal,” reflecting a trader’s freedom to choose with whom it will deal under the Colgate doctrine FTC Commissioner Rausch characterized ISP interference with Peer-to-Peer (p2p) traffic as a protected “refusal to deal,” reflecting a trader’s freedom to choose with whom it will deal under the Colgate doctrine The FTC’s rules against deception and unfair competition, as well as the Sherman Act and the Communications Act constrain such conduct The FTC’s rules against deception and unfair competition, as well as the Sherman Act and the Communications Act constrain such conduct

Internet Myth Busting: Myth #3: ISPs May Choose to Deal with Whom they want and Interfere with P2P or other Traffic An ISP offer of Unlimited or Unfettered Internet access is Deceptive under the FTC Act if it interferes with certain types of Internet traffic in a manner that was not prominently disclosed in the service offer An ISP offer of Unlimited or Unfettered Internet access is Deceptive under the FTC Act if it interferes with certain types of Internet traffic in a manner that was not prominently disclosed in the service offer The FTC deception statute contains no “balancing test” to balance the pro-competitive benefits of interference to its other consumers or competition against the anticompetitive harms The FTC deception statute contains no “balancing test” to balance the pro-competitive benefits of interference to its other consumers or competition against the anticompetitive harms The FTC focuses on the representation and its truthfulness in light of prominent disclosures to the consumer The FTC focuses on the representation and its truthfulness in light of prominent disclosures to the consumer

Internet Myth Busting: Myth #3: ISPs May Choose to Deal with Whom they want and Interfere with P2P or other Traffic Disclosures buried deep in a service agreement that indicate certain types of traffic MAY encounter delays is not a “refusal to deal” announcement Disclosures buried deep in a service agreement that indicate certain types of traffic MAY encounter delays is not a “refusal to deal” announcement ISPs who delay p2p may run afoul of the FTC Act’s proscriptions against unfair competition or the Sherman Act ISPs who delay p2p may run afoul of the FTC Act’s proscriptions against unfair competition or the Sherman Act First task is Market Definition First task is Market Definition

Internet Myth Busting: Myth #3: ISPs May Choose to Deal with Whom they want and Interfere with P2P or other Traffic ISPs argue that competition between cable and DSL indicates that neither has monopoly power ISPs argue that competition between cable and DSL indicates that neither has monopoly power This depends on how the market is defined This depends on how the market is defined Millions of Americans do not have the choice of both cable and DSL because they live to far from the telephone company central office or there is no cable service available Millions of Americans do not have the choice of both cable and DSL because they live to far from the telephone company central office or there is no cable service available Query whether faster speeds claims indicate cable and DSL compete in different markets or are differentiated products? Query whether faster speeds claims indicate cable and DSL compete in different markets or are differentiated products?

Internet Myth Busting: Myth #3: ISPs May Choose to Deal with Whom they want and Interfere with P2P or other Traffic If the market is defined so that cable-modem based ISPs have monopoly power in certain geographic markets, ISP interference with p2p raise abuse of monopoly power claims If the market is defined so that cable-modem based ISPs have monopoly power in certain geographic markets, ISP interference with p2p raise abuse of monopoly power claims Is Comcast behavior like the Java tools conduct by Microsoft? Is Comcast behavior like the Java tools conduct by Microsoft? Microsoft distributed software ostensibly designed to enable Java programming, but it really enabled Microsoft Windows Microsoft distributed software ostensibly designed to enable Java programming, but it really enabled Microsoft Windows

Internet Myth Busting: Myth #3: ISPs May Choose to Deal with Whom they want and Interfere with P2P or other Traffic D.C. Circuit concluded Microsoft’s conduct re: Java tools was deceptive and an abuse of monopoly power D.C. Circuit concluded Microsoft’s conduct re: Java tools was deceptive and an abuse of monopoly power Is Comcast’s representation to the market that it offers Unfettered Internet Access, subject only to the possibility that some traffic may be delayed, deceptive and an abuse of monopoly power in light of evidence of 24 hour a day/ 7 day a week delays of p2p traffic? Is Comcast’s representation to the market that it offers Unfettered Internet Access, subject only to the possibility that some traffic may be delayed, deceptive and an abuse of monopoly power in light of evidence of 24 hour a day/ 7 day a week delays of p2p traffic?

Internet Myth Busting: Myth #3: ISPs May Choose to Deal with Whom they want and Interfere with P2P or other Traffic Application developers induced to use TCP/IP protocol including the reset function which Comcast used to delay certain types of traffic including p2p Application developers induced to use TCP/IP protocol including the reset function which Comcast used to delay certain types of traffic including p2p Comcast appropriated TCP/IP to “manage” internet traffic and delay certain applications Comcast appropriated TCP/IP to “manage” internet traffic and delay certain applications Those applications pose a potential competitive threat to Comcast’s video business Those applications pose a potential competitive threat to Comcast’s video business

Internet Myth Busting: Myth #3: ISPs May Choose to Deal with Whom they want and Interfere with P2P or other Traffic Like Microsoft’s conduct toward Netscape, Comcast’s use of resets to slow or stop p2p traffic makes it appear that the problem is with the application or site the user is trying to reach Like Microsoft’s conduct toward Netscape, Comcast’s use of resets to slow or stop p2p traffic makes it appear that the problem is with the application or site the user is trying to reach Consumers blame the application, not Comcast because Comcast used techniques to hide the fact it is causing the delay Consumers blame the application, not Comcast because Comcast used techniques to hide the fact it is causing the delay As with Microsoft’s conduct toward Netscape, this conduct harms the competitive opportunity for other applications to challenge Comcast’s video, voice or data markets As with Microsoft’s conduct toward Netscape, this conduct harms the competitive opportunity for other applications to challenge Comcast’s video, voice or data markets