In the recent Restoring Internet Freedom order, the Federal Communications Commission, led by Chairman Ajit Pai, voted to repeal the Obama administration’s network neutrality rules and restore the historical classification of broadband Internet as a lightly-regulated information service. A fierce public debate has emerged on the rulemaking’s implications for investment, innovation, competition, and consumer access to online content. In predicting the future Internet landscape, advocates on both sides have focused on the experiences of foreign jurisdictions in regulating both ISPs and edge providers, and how sanctions on content prioritization have affected consumers abroad.
This Teleforum features a distinguished panel with expertise in European, African, Asian, Latin American, and Canadian telecommunications law, and considers lessons from foreign regulators’ attempts to police the Internet ecosystem.
Professor Eli Noam, Paul Garrett Professor of Public Policy and Business Responsibility, Columbia Business School
Professor Roslyn Layton, PhD Fellow for the Center for Communication, Media and Information Studies at Aalborg University and Visiting Scholar at the American Enterprise Institute
Paul Beaudry, Professor, Lawyer and Research Associate, Montreal Economic Institute
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Speaker 1: Welcome to the Federalist Society's Practice Group Podcast. The following podcast, hosted by the Federalist Society's Telecommunications and Electronic Media and Free Speech practice groups was recorded on Friday, January 26, 2018, during a life telephone conference call held exclusively for Federalist Society Members.
Wesley Hodges: Welcome to the Federalist Society's telephone conference call. This afternoon's topic is the aftermath of restoring internet freedom: lessons from foreign jurisdictions. My name is Wesley Hodges, and I'm the associate director of practice groups at the Federalist Society. As always, please note that all expressions of opinion are those of the experts on today's call.
Today we are fortunate to have with us professor Eli Noam, who is the Paul Garrett Professor of Public Policy and Business Responsibility at the Columbia Business School. Also with us is professor Roslyn Layton, who is a PhD fellow for the Center for Communication, Media, and Information Studies at Aalborg University, and visiting scholar at the American Enterprise Institute.
Also with us is Mr. Beaudry, who is a lawyer and research associate at the Montreal Economic Institute. After our speakers give their remarks, we will open for an audience Q&A. So as they're speaking, please keep in mind any questions you might have for them. Thank you for speaking with us today. Professor Layton, the floor is yours to start.
Roslyn Layton: Well thank you so much and thank you to my fellow panelists. I want to begin by first recognizing Federalist Society to take the opportunity to go into the international angles on the issues of net neutrality and internet freedom. Uh, the Fed- if you go onto FedSoc's website, they have a number of discussions of this going into details of all the different legal issues in the United States, uh, the various petitions of the Supreme Court, and you can spend all the time that you want going into those areas.
As I understand today we are gonna take a step back and look at uh, net neutrality and internet freedom as we look around the world, and some of the uh responses to activities in the United States. So uh, what I wanted to do here is to take a, to give you a review of the status of the various, you know the sort of comparative internet regulations in the key regions around the world: the European Union, Latin America, India. And as I hope I understand our Canadian colleague will talk about the unique case of Canada, and I'm looking forward to remarks from Professor Noam, which also has an important and unique insight on this topic.
So I think another important point here is when we talk about net neutrality and internet freedom, these are two very different concepts. And I think that you can ask many people who'll give you different definitions, but I'm gonna give you the working definitions that I have. When we talk about net neutrality it's sort of a notion of treating, all data is treated the same, but it has very important regulatory implications which will entail um, you know, uh, uh, that consumers have to value all data the same. That in certain cases, there will be restrictions on the pricing flexibility, there will be price controls. There will be certain requirements for how providers of internet access provide their services.
And it can also be interpreted by some to mean, let's say it has a relationship to government provision of broadband. Now, in the case of internet freedom, um, I think it's uh, an important way to say it would be permissionless innovation for internet technologies. It is a kind of concept where different broadband technologies should compete. The user can value content differently, the user can be able to decide whether they want to bundle content or not, how they want to pay for it, and so on. So these are two competing visions of how we see the internet and how they play out in different countries may be a blend of both, they may go in between a pendulum.
But in any case, where we are in the United States today, as you all know, in December 2017 the FCC made a, it repealed the 2015 Open Internet Order, it released a new order called Restoring Internet Freedom. That particular order maintains and strengthens the transparency provisions that the FCC ad-adopted in 2015. I'm sorry, adopted back in 2012, excuse me. Uh, those were used to challenge AT&T Mobility, so they are quite powerful. But it also re- importantly, it restores the jurisdiction of the Federal Trade Commission to be able to police the broadband sector. That had been removed from the 2015 rules.
And so in any case, as you'll know, there's been a lot of backlash. Number of governors and state attorneys-general are now suing the FF, they want to implement their own net neutrality rules. That's a whole other discussion about federalism and the Communications Act. But in any case, what's interesting now to look at, where does this leave, now that the United States has made this reverse of a Obama era policy, what does this say going forward?
Now what I would say is, we shouldn't see the reverse as a surprise. If you look at in 2016, the Republican Party laid out a platform for the voters prior to the election that they disapproved of the direction, they didn't like the internet regulation, they didn't believe it was fair. They preferred to go in a direction of legislation. So in many cases it was known by everyone that the um, as a Republican FCC would pursue um, a restoration of the previous policy, which was the Federal Trade Commission had jurisdiction over broadband.
So in any case, but many people have been outraged. You have European Union parliamentarians, 150, which tend to be on the left, made a note of how much they were unhappy with this. Canada and other countries. But what's interesting is that for most of the countries in the world that have net neutrality rules they have done them through legislation. If you look at a country like Chile, the first country to have net neutrality rules, they had gone through a period where they were litigating the issue back and forth and it finally took the Chilean congress to make a law to stop the lawsuits. So where the US finds itself today is not unlike a process that many countries have gone through to decide um, that telecom regulators, if they are to regulate the internet, they may need to specify that in the tele- the communications acts of the various countries, so um, um, that is actually what's happened in the European Union. In 2015, the EU adopted rules which they call for um, access to the internet. They don't say net neutrality, but they have to do with um, a set of um, uh, traffic management and speed disclosure rules. So that was adopted there in the EU.
What's interesting however is that the FCC, when going through its process in 2015, it, at least in the written record, doesn't appear to take into account what we've learned from a lot of there countries. So we know that Netherlands, Slovenia, a number of countries in Latin America predate the United States in terms of their experience with this issue. In the Nordic countries, they have been using codes of conducts and multi-stakeholder rules going back to 2009 with quite a lot of success. And when I say success, meaning that there continued to be investment in innovation, there were no complaints on record, and you have flourishing broadband ecosystems.
Similarly in Japan and South Korea have also used soft methods. Um, uh, so those have been um, actually workable regimes that didn't require some kind of either legislation or regulation, but the uh, the FCC didn't take into account those instruments when it made its rules, or at least it wasn't in the record. We can look at Latin America, which going back to 2010 or so, a number of Latin American countries have implemented their own kinds of rules. You have, Mexico has made it part of its constitution. Various different approaches of some kind of legislation or some sort of a plan.
For example, Colombia adopted a plan that comes with the presidency. But the interesting thing in Latin America is that the countries, the sort of, they haven't reported new innovation. I mean that, and they are, to some degree, some sense of buyer's remorse from a lot of Latin American countries. Because they expected to have the next Google or that they'd have a flourishing of locally-made apps. They haven't had that. And so there is a, by a number of countries, either to not enforce rules or to revisit them to sort of say they, these, "We were promised net neutrality was gonna bring us this sweetness and light. It didn't happen. So we need to revisit this."
Some countries are actually looking to move to the antitrust approach, the similar FTC approach that we have now in the United States. I think Brazil is an interesting case, [inaudible 00:09:20] which was heralded at the time it was passed has now become, because of the tainting with the now um, uh, how, impeached president of Brazil, now the [inaudible 00:09:32] is, is, is many kind of turning away from it because of the unfortunate incidents with their president.
So in any case, we know even in the European Union there are laws in place, and it's certainly the, I would recommend if you wanna make lasting laws you need to do legislation. It's not perfect, but the Europeans would certainly say they believe their approach is superior because it's sustainable. But that being said, there are still issues of litigation, there's issues around interpretation, how the um, how uh, different regulators, uh, their, different countries have different interpretations. There's a number of lawsuits going on now about zero rating. So uh, so, so yeah, the moral of the story is even when you make laws to clarify things, you know sometimes they become more muddy.
So um, in any case, there are uh, so there are gonna be, there are pros and cons to any approach that you take. In the United States, if we look towards a legislative approach, you know the downside, the plus side may be there would be less litigation, but a downside could be reduced First Amendment freedoms. I mean our First Amendment is very clear that the government is not supposed to regulate speech, but net neutrality is a, is a kind of, of, of a speech regulation in that the government mandates that traffic has to be delivered or can't be blocked or so on, those are speech regulations.
So in any case um, we certainly have a lot to learn by looking around the world. We have now a globally active world on this issue, and my last point here and, and I'll be happy to wrap up my remarks, uh I think the other thing that we have observed is that um this is now a global issue. So you may be a regulator in the United States, but you will now, when you conduct a public comment, you will get millions of commenters from around the world who will want to influence the outcome of your policymaking. Now for better or worse, that could be uh, you know, maybe you welcome that. But you, it might also raise um, you know, administrative law concerns around, you know, whom, whom is the telecom regulator accountable to? How does it track or report upon those comments? In the European Union, one third of the comments to its proceeding were made by people from the United States. So what does that say about the European Commission and the body of European regulators who are, they claim, to be accountable to European citizens?
so, so now we have a number of, you know, you might say exciting, interesting developments, but it also raises questions to the classic kind of questions around separation of powers and administrative law. So I, I hope that um, that gets people thinking and um, you know we'll have a, we'll take our discussion through the next steps.
Eli Noam: Uh, shall I uh, shall I begin to address?
Wesley Hodges: Please do.
Eli Noam: Uh, well, uh, this is [inaudible 00:12:23] and uh, I, my observations are the following, after this very, very uh, comprehensive uh, analysis that we just heard about around the world uh, survey, is that, that we're observing here is uh, the, coming to a fore, the internal contradiction as some may say of uh, the net neutrality debate, where the same people, uh, will hold two conflicting views frequently.
So you have the position of people who say the internet has to be free and uncensored and um, viewpoint-neutral, and cannot be any distinct- distinctions based on content or on the speaker. That's the one position. And the same people will also say "Yes, but, there's also some kind of content and some kind of speech where there's just hateful, or otherwise that we have to control." And that question of course is who will control it? So you have on the one hand no control and on the other hand controls. And that is an, an contradiction that is becoming clearer now as we also observe different governments around the world instituting rules applying to the internet, or often applying the rules that already exist, extending it to the internet.
For example, each country has its own traditional history leading it to have certain content rules. For example, in Thailand, you cannot say anything derogatory about the royal family. In Germany, there are some restrictions about um, um, the, the glorification of the Third Reich and uh, various content associated with it. In France you have different rules, in Sweden you have different rules. Each country, in Saudi Arabia, for sure. So each country has its own rules and they now, and they could coexist in some vague way in the past because we were not kind of on top of each other. But now the internet makes it global, and the question then is how do we coordinate this?
Because it is, after all, different beliefs at stake, right? And the ability of sovereign countries and jurisdictions to have their own rules. Whether they're foolish rules or smart rules is another question, but certainly there is the sovereignty right to have rules. And then the question is how do you make it happen on a globally um, prevalent uh, uh, networks, as the internet uh, is. And, and so um, so inevitably then, you would have the extension of these rules uh, to some intermediary, and that could be the network provider or the uh, the ISP that is, or the um, uh, content provider, platforms, the Googles, the Facebooks of this world.
Now, the logic that I see is that the regulation will be extended, uh, the policing of this kind of national content or neutrality rules will be given to, not so much to the content providers, because there are everywhere and in other jurisdictions offshore, sometimes anonymous. Um, uh, uh, so but instead, that th- that those, policing, uh, obligations will be given to, that part of the value chain of the communications chain that is under, clearly under national jurisdiction. That is the transmission part, the telephone, the mobile, uh, [inaudible 00:16:16] parts that, in other words, the ISP parts.
And so therefore the ISPs actually will end up being tasked with some kind of policing of content that is deemed to be undesirable for a particular national jurisdiction of reaching the citizens, of being sent out by citizens of that particular jurisdiction. And that is totally in contradiction to the whole net neutrality basic concept. Uh, it is, it is, in effect making the network provider, the ISP, a responsible party in being non-neutral. Uh, and so we are going to see very soon as people start to kind of get upset about Google and Facebook as Europeans do, sometimes for reasons that are really protectionist in nature, that's often will not be um, admitted but basically is kind of like, big American company, it's kind of a relatively popular thing to mandate rules and restrictions and kind of cloak them into some form of the European flag, um, but basically uh, of, of um, we will see a continuation of, of that trend. And that the national communications providers uh, will be at the forefront of that obligation.
Wesley Hodges: Thank you Professor. Mr. Beaudry, would you like to begin?
Paul Beaudry: Sure. Um, well thank you for having me, it's a pleasure to be uh, discussion the uh, controversial issue of net neutrality with uh, the Federalist Society. I'm, I'm here to provide a bit of an overview of how the issue has been dealt with in Canada. A- and one thing that I've noticed since the debate has uh, exploded in the United States after Chairman Pai's announcement in November was that the issue of net neutrality in Canada has never really been a big issue from a political perspective. I don't think I've ever seen the word "net neutrality" used in a political party's electoral platform. It's never really been discussed, and um, there's really never been public debate amongst elected officials around that concept, until November, where uh, when, you know, a few Canadian pundits started writing about what was going on in the United States, and, and needless to say the issue was quite controversial and uh, uh, one member of parliament, uh, from the Conservative Party voiced uh, support for what was going on in the United States. And quite frankly, that politician got lambasted by, by both sides of the aisle, um, in the Canadian political world.
So um, generally, uh, net neutrality in Canada is a bit like apple pie. There's, you know, people can't think of any reason why they should opposite it. It's interesting to see how net neutrality has developed in Canada. Um, there's no uh, explicit mention of net neutrality in our telecom legislation. So, so in Canada we have um, th- the general legislation that governs the telecom sectors, the Telecommunications Act, which was enacted in 1993. And despite the fact that there's not express mention of net neutrality, um, in a way there are certain provisions in the act that to a certain extent do enshrine these principles in legislation. So essentially the Telecom Act in particular provides that a telecom carrier cannot give undue or unreasonable preference, for example, to one application or an online service over another.
Um, nor can these carriers influence the content being transmitted over their networks. So, so these provisions in particular has, ha- have served as the basis for several CRTC decisions that have essentially protected what, what most people would, would, would think as a core net neutrality principles. Um, most recently over the past few years um, I would say that the prime casualty of this rigid interpretation of these principles uh have been a zero-rating plan that had been promoted by uh, Canadian carriers. And, you know, when I've been looking at the history of zero-rating plans in the United States, what I've found to be very interesting is that very often they've been used by smaller players, uh, in the market in an attempt obviously to gain market share and to gain a wider customer base.
And um, in Canada you've had a bit of a similar situation. Um, the last decision uh, by the CRTC on, on, that, that had touched upon net neutrality was a decision that essentially sanctioned a regional player, a Quebec regional player called Vidéotron uh, which essentially offered an unlimited, uh, unlimited music service whereby certain music applications which were not owned by the carrier uh, were not uh, were not included, or actually consumers who would use these applications would not see their data, uh, counted as part of their data cap. And the CRTC clamped down on Vidéotron, uh, essentially uh, claiming that uh, by, by providing this zero-rated service uh Vidéotron was going against the spirit of net neutrality and providing an undue preference to certain applications over others.
Um, i- i- it's been interesting to see this because uh, uh, people were saying before, there's a different between enshrining the principles of net neutrality in the legislation versus taking a softer approach. And uh, Canada is currently in the midst of reviewing its telecom legislation. And despite the fact that net neutrality has been protected quite robustly by our regulator, um, some activists are, are activing currently i- in the hopes that the next iteration of the legislation will contain an explicit mention of net neutrality and how it should be protected.
Um, another aspect I find quite interesting is uh, the debate about what utility regulation means. Because I think that title II regulation meant much more than net neutrality, however you would define the concept. And uh, what, what I noticed was that in Canada, uh, tele ... or, internet services or broadband services are treated as utilities. And what we've seen in Canada is despite the fact that we have a pretty robust broadband ecosystem, um, the regulator over the past few years has uh, taken certain decisions that uh, I think will have a deleterious impact on the broadband environment and will ultimately reduce investment and innovation. And the prime decision I have in mind is a 2015 decision by the regulator that essentially mandates the unbundling of next-generation fiber networks to resellers. And uh, this is a debate that's been going on in Canada for a while, and when I compare this to what's been going on in the United States where essentially uh, since I believe the early 2000s there's been a handoff approach on mandatory unbundling and the regulator has abstained from mandating it. I- in Canada we've taken a different route and uh, over the years uh, it's gone from mandating access to legacy networks to mandating access to next-generation networks that haven't even been built yet.
So the reason I'm mentioning this is that um, one of the fears expressed by certain stakeholders in the title II debate in the United States was that title II could lead to additional economic-type regulation and potentially mandatory unbundling. And uh, these types of policies have been extremely deleterious to, to some European countries. Canada hasn't gone to that length in imposing such drastic policies, however um, what we've seen in the past couple of years is uh, an increased appetite on the part of the regulator to stimulate the resell market. And I think that this will have uh, a serious negative impact on Canada's broadband market, and uh, I can understand the fears there are on the US side, that uh, all-encompassing ex ante regulation could bring about um, uh, negative consequences for, for the US broadband ecosystem.
Um, and the, I would like to conclude by saying that um, one thing I find particularly telling is that there's, uh, uh, some people have been very quick to uh, pit the net neutrality debate as being a debate between David and Goliath, so you have the big ISPs and you have the small consumers or the small businesses. When, when I feel like this is much more complex than this, a- a- and especially when you look at some of the parties and stakeholders who've been expressing themselves as part of this debate, I think that the p- you know, the, some of the companies that have been the most vocal about this in the United States are the smaller companies, the smaller broadband companies, who don't have huge regulatory departments like their bigger brethren, and who really fear that this uncertainty could really bring about uh, uh, uh, lower investments and much more uncertainty in the way they conduct their business.
And I see that something could be, uh, that there's a bit of a similar debate in Canada. However, I think in a way in Canada, because we've been so prone to favor reseller policies over the past two decades, uh, we have a lesser amount of facilities-based providers, especially regional players. So I think that's, that's one of the other components that I would keep in mind when looking at these vast regulatory schemes. I would tend to prefer ex post regimes where regulators look at types of behaviors that might be in a certain circumstance abusive or, o- or overly dominant and sanction them on a, on a particular basis, as opposed to banning certain practices ex ante and um, and potentially having unseen consequences i- in the future. So um, in a nutshell this is uh, what I have to say.
Roslyn Layton: So I wanna thank uh, both the panelists for two sets of very stimulating remarks. And, and, and actually, very important points. First uh, to professor Noam. He's absolutely right about this issue of intermediary liability. Uh, this was uh, something brought up as a, what many have called the copyright loophole was coined, I can't recall if it's Electronic Frontier Foundation or whomever, but in any case, there have been these debates that a number of countries have laws that say, you know, only legal content can be blocked, right, can't be blocked for example. So that means that it's a de facto um, copyright regime that, you know, certain content that hasn't uh, been copyrighted for that region can legally be blocked.
So I think that um, uh, Eli is touching on something that we are seeing with a number of activists around the world who are concerned for their particular country, that it becomes a kind of censorship regime that [inaudible 00:27:49] that the government is forcing the ISP to do. Uh, but I would take it a step further, because I don't think that it's only the um, the ISP that's being forced in this position. The regula ... When we look at the European Union, the European Union's rules, their net neutrality rules have a set of what's called transparency requirements, which they define as speed disclosures.
So um, for them, the uh, they have an extremely detailed set of, of, of, uh, of ho- compliance about how an ISP must disclose to the to the con- to the customer, what speed is promised, what is the minimum expected, maximum, average, for 24 hours, there's a whole set of things. And so presently the body of European regulators for electronic communications is trying to setup some kind of a, of a measurement tell that would e- essentially run all the time, so that now regulators themselves will monitor the networks to make sure that they're behaving in this "neutral" way to achieve certain kinds of speeds.
Now, you can say, well it's great that they do their job, but the, the downside of this is that it may in fact violate the privacy rules of the European Union which are not, which have very strict controls around, you know, the government uh, looking in or monitoring the networks. So, so there again I think what professor brought up so well is there is this conflict going on, on the one hand trying to achieve whatever the stated social goal may be, neutrality, if you will. But then, in order to achieve that it has to bring in this other um, concern which is s- surveillance, to ensure that these operators are behaving in the right way.
So, so that's an emerging issue that we've seen in Latin America, in the European Union. Um, the next point I wanted to make I think is very important from the, from countries not being the United States, but uh, for example France, many countries, it could be Canada, they may perceive that they are being overrun by American content providers. The GAFA, the, you know, Google, Amazon, Facebook, Apple, FANG, you've heard all these names, Netflix, and so on. And you know, from their perspective, they say "Well look, we built these networks. They are being o- you know, 80 to 90, 99% of the traffic is coming from another country. They don't pay to help us pay for these networks, this is a raw deal for us. So the regulators actually see net neutrality as their door to regulate the, to do platform regulation.
So as part of the French approach to this uh, they have developed what they call a, um, a platform approach which has an associated set of um, of components. Uh, platform transparency, platform audibility, social impact, what is the i- um, what is the impact of the platform on society, and a ability to rate the reputation of the platform. So France is just one example of a country that is using the premise of net neutrality, regulate the ISPs, as their means to regulate the whole ecosystem. And this is not something that they are, it's not anything they're hiding. They've been extremely upfront about this is, the internet as an ecosystem, the ISP's just the door to the whole thing, and that's where they wanna go.
Now we've also heard this sort of discussion in the United States to leading Democrat senators, they've talked about, uh, you know, Al Franken, Elizabeth Warren, they have also indicated this idea net neutrality has to apply to everything, not just the ISP, we need to bring it on to, it's gonna help us regulate Google for fake news or Facebook for fake news. So, so this is um, many of us who've been concerned about this we predicted that, you know, this is just the door opener, we're gonna use i- this will be used to regulate the rest of the ecosystem. And, you know, you could see some of those things uh, happening.
Eli Noam: Yeah uh, this is Eli, uh, if I can say, I, I, [inaudible 00:31:51] I quite agree. I think it's, it's kind of the foot in the door here. Uh, and in fact uh, you can quite imagine that the non-neutrality will be applied based on those regulatory powers. For example, uh, zero-rating. Uh, it's just a matter of minutes if it hasn't already been done that there would be some national preferences given. For example, Europeans and uh, French in the lead are for national quotas or European quotas. And uh, zero-rating gives you a kind of uh, regulatory way to do that, by, by differentiating between imported American content uh from, say European or French content. One can be zero-rated or partly zero-rated and the other ca- uh, uh, not so.
Paul Beaudry: Canada has also a, a, a protectionist cultural broadcasting system whereby uh, we have uh, you know, selected uh, we have uh, first of all all the broadcasters need to contribute to a fund that is used to produce Canadian content. And uh, one of the, the big scandals going on right now is that the, the outside platforms such as Netflix don't have to pay into that fund. So needless to say, our broadcasters feel that there's a free rider issue here. And uh, recently the Canadian government struck a deal with Netflix whereby Netflix would agree to spend uh, a certain amount, I think it was $250 million in Canadian content over the coming years, uh, but yet the broadcasters are still not happy about this because they feel like they, they should've been able to extract full contribution of Netflix to the Canadian Media Fund. And, and I find this quite interesting because uh, uh, when you have uh, protectionist cultural policies such as that one, and it's, you know, not particularly surprising. I, I come from a French part of Canada so we don't really feel under siege by the Canadian content and uh, Quebeckers consume a great amount of French content.
However English Canadians feel differently. Uh, however, the fact that the CRTC has banned these zero-rating practices um, is a bit ironic, between it could've been a great cultural tool to promote this protected Canadian content.
Roslyn Layton: There's a point I wanna make, I, I'm not sure if I can, if it can come off so eloquently or not but I'm gonna give it a try. Um, you know, so from the user perspective I think you'll frequently hear an argument from uh, net neutrality advocates, you know, all content is equal, I want to pay one price and access everything.
And uh, you know, that actually can sound quite consumerist on the one hand, that that, well jeez, that sounds like the right way to go. But what, when you hear the international, if you look at it from an international perspective, it's also helpful to understand, you know, let's say, you can certainly look at French-Can- French English, anglophone Canada, French-speaking Canada. Let's say, for example, you know, you live in the Netherlands where, you know, 90% of the, the, the networks, they ha- they use a lot of Netflix content. Well, a lot of the films are Harvey Weinstein Company, for example. You may, perhaps you're not too happy with this company or its uh, former chairman and you really don't wanna watch those movies, um, but you don't have the ability as an end user to say "I don't want my subscription to provision that kind of content. I'm against it for personal reasons, religious reasons, any other, it's not my choice, it's my language, what have you."
So these are real concerns that people have, and that may in some ways uh, you know, the critique from, let's say, a free market perspective is we're forcing consumers to make a judgment about the, th- they can't value, they have to value offensive the same as content that they do value, or what have you. Um, and I think that Eli raises a very good point about this idea about neutrality could actually be used to, you get the opposite thing. So then you'll say "Well, I'm in XYZ country, I- I'm only gonna um, you know, all of this has to be charged at this rate and all the rest is not." So, so in any case it's a sort of a, it's a conundrum around who gets to choose.
The, the one other issue it's important to point out, which has related to the issue around who is the provider, and we've talked about mandated access and reselling and the different policies the countries use. What was important about the 2015 decision to use title II was that that particular instrument has a um, taxation capability such that the FCC could levy a tax onto private broadband provision and earn a source of revenue that the FCC could use to support, for example, municipal broadband. And that that in fact was a um, revenue earner that could be used to support alternative networks.
And in many cases, you know, for, for many advocates, that is the goal. They want to be able to achieve a government provision of broadband, because they don't like the private provisions, or for whatever reason. Now there's arguments for and against that, but there is a sort of a, if we're going back to the public broadcasting model, there were reasons why different countries, for better or worse, said "Well, there's only gonna be two TV stations, and we're gonna make, there will be a national broadcast station because this is the only way it can be neutral and fair and objective." Well, you know, you end up with less content.
But the argument on the internet freedom side is that the technologies itself should compete. So when the European Union comes with the speed requirements, what they're trying to do is to force the European operators to get off their DSL copper plans and upgrade to fiber. Um, because the reselling model didn't work. Uh, in the European Union, that you still have the same incumbents, the former state-owned incumbents have most of the net market share. They, in spite of all the reselling model, it didn't work, so they're trying now, through what's called, what they call transparency and net neutrality. Forcing companies to keep increasing the speeds that they will, through this requirement, upgrade their networks to fiber.
When we come back to the question of internet freedom, the question there is, is fiber to the home the best way to do it? Now, if we're coming to 5G, where you can get the same throughput through the air but through a different technology, you can still get it, but you get it a different way and it's done through different means. So at the issue here is how do we, you know, who decides what kind of technology we use? Is it a government mandate for a fiber to the home with municipal networks, or, is the marketplace gonna drive innovations uh, through um, 5G or different technologies or there interplay thereof, [inaudible 00:38:42] or what have you.
So I'm not tryna say this is black or white, because we have different um degrees of this in every country. But it is important to see that there is a fundamental debate where there's a central planning of the internet or to what degree different technologies can be allowed to be tried and consumers themselves um, can also ex- exert how they want to consume them, and then to what extent these big content companies will also pay for the use of the network. To what degree are there responsible to pay for the networks? Is all the cost to be borne by the end user?
Wesley Hodges: Wonderful. Thank you so much for those remarks. Um, would an- any of our speakers have anything to say before we move to audience Q&A?
Eli Noam: I think we should move to audience [inaudible 00:39:28]
Wesley Hodges: Let's turn to our first caller.
Arielle Ross: Uh, this is Arielle Ross, um, member of the Federalist Society's Telecom and Electronic Media um, practice group executive committee. Um, thank you to all of the participants, uh, for their contributions on this call, it's been very fascinating. I was just wondering if uh, the participants could discuss um, given the, dis- disparate approaches between the US and um, Europe and US and Canada to uh< mandatory unbundling uh, as well as net neutrality uh, can we expect uh, differences in the uh, in broadband deployment in the future uh, among these, among various jurisdictions discussed uh, particularly in the area of 5G deployment?
Roslyn Layton: So we know, United States, 5's, uh, Verizon's gonna want um, five cities this, here in 2018 will be um, will feature a, a fi- 5G test. They're going to uh, deploy that this year. Um, there is a uh, there is a, a track in Japan and South Korea al- already for 5G. China as well. Um, so A- AT&T is not far behind Verizon in doing this. What unfortunately is the case is the European Union is not on track, and they have the, the European Commission's admitted this, this is something of an embarrassment for them because they um, they [inaudible 00:41:03] because they were first with 3G, for example. That was the important thing where they all got everybody to go to the European GSM standard. Um, that was one, the Europeans beat the US. They came out with GSM and that was hey, too bad for your CDMA, we're gonna move to the GSM. And Apple stopped making um, CDMA phones.
So that was what the Europeans were sort of banking on because they were, they had the biggest telecom companies and they were gonna be the winners. Well, you know, then the United States says "Well hey, we're not doing that." Verizon said "We're going to 4G," and now we're at 5G. So it, this is kind of, I think gonna be a, an important debate around the European and US approach, um, and certainly we're gonna be watching this year how quickly that 5G comes online. I mean an argument, let's say for the ISPs was that net neutrality makes, is difficult for us if we wanna do 5G. Because the 5G network model is inherently anti-neutral. I mean it's a smart network, it prioritizes content, it's totally designed to be giving different quality of service for different kind of applications. So you can get less than best efforts, more than best efforts, you have every grade and shade of things depending upon the most efficient use. You know, hundreds of devices in your home, they're not all treated the same. And you don't want your heart monitor to have the same treatment as the fridge, for example.
So that was, I think, a concern from an industry side that net neutrality is a bomb in the 5G future. Um, we have now a period of time to explore how it actually plays out. I think it's interesting to look at East Asia. They have been very uh, soft, if, almost nothing at all around nothing at all around net neutrality. I mean, and I think from their perspective, from video game makers in South Korea, where they're making games that require prioritization for games to work and so on, they really would be concerned about adopting rules that would imperil their gamemakers to use the network's capability. So I think it's quite telling that the, Japan, South Korea, and China, certainly leaders in networks, have been extremely soft on net neutrality, if almost nothing at all.
Paul Beaudry: I just wanted to make a, a short mention of, of what I've already mentioned about Canada. Uh, we have a history of mandating the unbundling of, of last mile uh, networks to, to resellers. And um, I think that the regulator over the years has given too much importance to these policies uh, by thinking that they were the key to have a strong, competitive broadband sector in the country and, and Canada's had a robust broadband market and we have some of the best networks in the world. But that's due to the competition that we have between our incumbents and the cable companies. I mean, the facilities based competition that has allowed Canada to become one of the, a broadband leader.
And uh, as I was mentioning before, in 2015 the government mandated the unbundling of fiber to the home networks. And kinda the first time the government ever mandates the unbundling of networks that were not even built yet. They were still in the process of being built and they still are in the process of being built. So uh, w- we are expecting that, you know, this won't necessarily have an impact in the big urban centers, however Canada's an extremely big country and uh, there's a lot rural and remote communities that are hoping to get these types of uh, high quality high speed networks. And a decision like the decision that the CRTC made on fiber to the home networks will certainly have a negative impact at the margin. And essentially uh, prevent some communities in the country from getting these networks, because it just won't make sense from an economics perspective to deploy the networks in certain areas where um, you know once you build the networks you have to share them with your competitors at a regulated rate and there's a very small potential customer base um, that will, that will ultimately hurt a lot of Canadians who don't live in the global and urban centers.
Eli Noam: Uh, let me add, although some of it has now been uh, discussed, which is that there's a fundamental difference of countries that have a robust cable network, which include the United States, Canada, some of the smaller European countries, Benelux, but also Germany, but not including, for example, Italy, and uh, Japan, uh, and in those countries uh, uh, where you have a strong cable infrastructure the competitive forces, com- competitive forces have required the uh, telecom network providers also to upgrade more aggressively in order to keep up.
Uh, and that where, in contrast, in countries where you had basically only the telecom infrastructure, there the unbundling requirements in fact um, made it, gave a disincentive to create alternative networks, because you [inaudible 00:45:58] relatively, on a relatively convenient terms on the existing infrastructure so, so you have a less competitive um, market and that leads therefore to greater possibly incentives for others to come in with 5G. Um, so it would not surprise me if after all is said and done that there would be more of an open mark- more of an opportunity for 5G providers not being the incumbent telecom providers in countries where there is no strong cable infrastructure or where there is an alternative.
Wesley Hodges: Thank you caller for your question. It looks like there are no other questions in the queue. If you'd like to ask a question before we end the call today, just enter the star key and then the pound key on your telephone.
Eli Noam: If we don't have any questions I can make a few more comments, but I will defer to any questions listed in the queue.
Wesley Hodges: It looks like there are no questions currently in the queue, so professor Noam please, please go ahead.
Eli Noam: I think one of the things that we observe here is that the uh, forces that were unleashed by some of the companies that were advocating net neutrality are going to come and bite them significantly. Because all the arguments about neutrality and market power, et cetera, are going to be turned against them to almost with the identical arguments and analysis. So today, yesterday, perhaps the ISP were in the driver seat, there was only a few of them, and they were powerful.
But now uh, the tide is turning, and it is actually those [inaudible 00:47:38] that are becoming increasingly part of um, public attention and activism and regulatory scrutiny. And once you have established that there are certain public uh, utility type of um, applications to the internet, it's going to be very hard to differentiate that from Google itself. And Google has been at the forefront uh, a while ago, of advocacy for uh, for net neutrality, and it's gonna be very hard to differentiate these uh, that. Uh, and now what you're observing though is that, whereas for ISPs, because they are relatively territorial, you could have national regulators dealing with their net neutrality type principles and ISPs within their jurisdictions, but when it comes to the content providers and the um, the platforms and the cloud providers, uh, that is a much more supernational, international type activity where the regulatory activities of one country are going to inevitably spill across their borders um, to the rest of the world.
And we will see soon advocacy of something that can be called cloud neutrality uh, that will affect those providers of content and of cloud services. Uh, in a fairly significant way, and it is the sorcerer's apprentice in some ways, scenario here. The forces some companies have unleashed are going to come back to bite them.
Wesley Hodges: Thank you professor. Do any of our other speakers have any comments they would like to make?
Paul Beaudry: I would just say that I would tend to agree with what professor Noam said about uh, the uh trend of neutrality expanding uh, much, on a much wider scale than what it was originally meant to cover. And I find it very interesting that some of the companies that were the initial cheerleaders for these types of policies might realize that it was a bit of a Pandora's box to start lobbying about uh, net neutrality.
Um, and especially nowadays where we have these big content platforms increasingly appearing to be in the bullseye of antitrust regulators across the world. Um, I think they may come to regret their appetite for uh, more stringent regulation of ISPs and uh, the ultimate impact it will have on their own businesses.
Eli Noam: There, there was a time when the internet community was very staunchly libertarians. Um, and it could make that as an principled argument. But once it became advocating regulation of parts of it, it kind of lost its libertar ... Then it became a, well regulate the other guy, but not me. So it became a very selective libertarianism. And that loses a lot of its um, its credibility.
Roslyn Layton: So um-
Paul Beaudry: Agreed.
Roslyn Layton: I wanna, I wanna add one other point here from the regulator's perspective, and to thank my two panelists for, you know, just scintillating remarks, extremely uh, interesting for me to join you. Uh, that what's interesting as a regulator, uh, I'm gonna think of my, like my colleague Brent Skorup um, at George Mason University's written very well on this, is that there is um, how, there's a regulator and it's either responding to or being involved in these public discussions, and how does it recast what their role is? So in some [inaudible 00:51:10] there is a fundamental debate we have in the Federalist Society: is your role defined by the statute, right? Um, you know, let's, we go back to this whole debate about title II, the internet as a, uh, the communic- the Telecom Act says the internet should be free and unfettered. Well, you know, but then that's interpreted, well, we need to regulate the internet.
So there is also a question for what is the regulator's role here and then it becomes incumbent on does the legislator, does the uh, legislative branch need to weigh in to define what that role is or to what degree is it self-defining for the regulator? How do they see it? And then there's a role in um, in, in activism as we've discussed. Uh, so they're uh, this isn't going away. I mean, you know, it's long been predicted, this'll be our long term debate. Um, but it is absolutely true, you know, th- this, this whole platform neutrality, cloud neutrality, that is now, you can just add whatever noun you want and it all will be neutral. But what that means is the regulator gets to decide. So um, you know, they will certai- I'm sure we'll, I hope we can come back again in a year and discuss how it's going.
Wesley Hodges: On behalf of the Federalist Society I would like to thank our speakers for the benefit of their valuable time and expertise today. We welcome all listener feedback by email [inaudible 00:52:27] @fedsoc.org. Thank you all for joining us today. This call is now adjourned.
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