America’s Title II Protectionism Will Hurt Google & Silicon Valley in EU

Last November, President Obama effectively abandoned America’s longstanding free trade Internet policy established by President Clinton, in favor of a protectionist Internet industrial policy to benefit America’s national champions, Silicon Valley, under the guise of “net neutrality” policy.

Flipping U.S. Internet policy from global digital free trade to maximal national Internet regulation could end up hurting Silicon Valley the most, because they most benefit from, and depend on, the current free flow of information globally on the Internet.

Ironically, America also is forfeiting the digital free trade policy high ground by leading the world toward a “Splinternet” vision of more nationalistic maximal utility regulation of the Internet and its content.

In particular, it will be much harder for the U.S. to credibly object that the EU’s: creation of a European Digital Single Market (DSM), tightening of the EU-U.S. Data Protection Safe Harbor, and its aggressive enforcement of EU antitrust, privacy, and tax laws against Google, Amazon, Facebook and Apple, is protectionist, when America’s new FCC utility regulation of the Internet is a transparently protectionist American industrial policy to advantage America’s national champions in Silicon Valley. 

The hypocrisy of urging other nations to “do as we say not as we do” has never been a winning trade negotiating strategy.

President Clinton’s 1997 “Framework for Global Electronic Commerce,” was inherently a global internet free trade vision, with the primary goals that “the private sector should lead” and “governments should avoid undue restrictions on electronic commerce.” The phenomenal Internet we know today is a result of that global-oriented vision.  

In stark contrast, President Obama has called for an inherently nation-centric protectionist Internet vision in urging America’s FCC to impose the “strongest possible” utility regulation of America’s Internet, via a quasi-nationalization of America’s Internet infrastructure by reclassifying the Internet from a non-price regulated “information service” to a price-regulated “telecommunications” service under the “Title II Common Carriers” section of the 1934 Communications Act.

February 26^th, the FCC is widely expected to make operative the President’s November statement of new American Internet policy in a partisan 3-2 vote. 

How is Title II a protectionist Internet policy?

This is not only a domestic decision, but also a seminal trade and foreign policy decision.

By asserting the legal authority to change the legal status of the Internet in America to a “telecommunications” service, the FCC decision will effectively legally activate “telecommunications” trade treaty obligations for the Internet under the United Nations International Telecommunications Union’s (ITU) constitution. 

Specifically, ITU agreement ITU-T D.50 “recognizes the sovereign right of each State to regulate its telecommunications” as it determines.   

Historically, ITU “telecommunications” regulation has long been a “sender party pays” economic model, where every country can set its own per-minute tariff for telephone calls coming into the country much like a nation can set a protectionist tariff on certain types of imports.

However, the phenomenal growth of Silicon Valley’s now dominant Internet companies has flowed directly from the Internet’s opposite “receiving party pays” economic model.

“Receiving party pays” has been brilliantly re-branded in America as “net neutrality” and “innovation without permission” because ISPs and users inherently must implicitly subsidize dominant Internet companies’ substantial costs of distributing their highly-asymmetric streams of downstream Internet traffic. To illustrate, in the U.S. two companies, Netflix and Google-YouTube, comprise roughly half of all American Internet downstream traffic per Sandvine.   

Thus the current free flow of global information that we know of as the Internet today is a direct result of the free trade arrangement of the “receiving party pays” model.

This lucrative model generates an enormous implicit digital trade surplus for America vis-à-vis the world because America’s Silicon Valley companies like Google, Amazon, Facebook, and Apple dominate Internet products and services, and hence downstream Internet traffic, internationally.  

Only in the U.S. does it make economic sense to define the Internet as “telecommunications” to mandate a “receiving party pays” model.

However for the roughly two hundred other countries in the world, the new powerful economic incentive is to legally define their national Internet traffic like America now has as “telecommunications.”

That way, under existing ITU agreement ITU-T D.50, they can legally replace their current Internet implicit “receiving party pays” model that generates large implicit digital trade deficits with the U.S., with a per-megabyte import tariff under the ITU’s “telecommunications” “sending party pays” model to create explicit, large, and highly-lucrative digital trade  surpluses at America’s and Silicon Valley’s expense – all while being able to say they are only doing what the U.S. is doing – looking out for their own nation’s economic interests.

This issue moved front and center this week after President Obama publicly accused the European Union of technology protectionism for pursuing a European Digital Single Market. 

President Obama told Re/Code: “We have owned the internet. Our companies have created it, expanded it, perfected it in ways that they can’t compete. And oftentimes what is portrayed as high-minded positions on issues sometimes is just designed to carve out some of their commercial interests.”

In sum, as the old adage says, those in glass houses should not throw stones.

America’s Title II Internet utility regulation to protect America’s domestic economic interests, will beget other countries imposing their own nationalistic Internet utility regulation to protect their own national interests.

Tellingly, the UK House of Lords is now recommending just that, i.e. that the UK regulate the UK Internet as a national utility.

Apparently the FCC doesn’t appreciate another relevant old adage here: look before you leap.

 

 

***

FCC Open Internet Order Series

Part 1: The Many Vulnerabilities of an Open Internet [9-24-09]

Part 2: Why FCC proposed net neutrality regs unconstitutional, NPR Online Op-ed [9-24-09]

Part 3: Takeaways from FCC's Proposed Open Internet Regs [10-22-09]

Part 4: How FCC Regulation Would Change the Internet [10-30-09]

Part 5: Is FCC Declaring 'Open Season' on Internet Freedom? [11-17-09]

Part 6: Critical Gaps in FCC's Proposed Open Internet Regulations [11-30-09]

Part 7: Takeaways from the FCC's Open Internet Further Inquiry [9-2-10]

Part 8: An FCC "Data-Driven" Double Standard? [10-27-10]

Part 9: Election Takeaways for the FCC [11-3-10]

Part 10: Irony of Little Openness in FCC Open Internet Reg-making [11-19-10]

Part 11: FCC Regulating Internet to Prevent Companies from Regulating Internet [11-22-10]

Part 12: Where is the FCC's Legitimacy? [11-22-10]

Part 13: Will FCC Preserve or Change the Internet? [12-17-10]

Part 14: FCC Internet Price Regulation & Micro-management? [12-20-10]

Part 15: FCC Open Internet Decision Take-aways [12-21-10]

Part 16: FCC Defines Broadband Service as "BIAS"-ed [12-22-10]

Part 17: Why FCC's Net Regs Need Administration/Congressional Regulatory Review [1-3-11]

Part 18: Welcome to the FCC-Centric Internet [1-25-11]

Part 19: FCC's Net Regs in Conflict with President's Pledges [1-26-11]

Part 20: Will FCC Respect President's Call for "Least Burdensome" Regulation? [2-3-11]

Part 21: FCC's In Search of Relevance in 706 Report [5-23-11]

Part 22: The FCC's public wireless network blocks lawful Internet traffic [6-13-11]

Part 23: Why FCC Net Neutrality Regs Are So Vulnerable [9-8-11]

Part 24: Why Verizon Wins Appeal of FCC's Net Regs [9-30-11]

Part 25: Supreme Court likely to leash FCC to the law [10-10-12]

Part 26: What Court Data Roaming Decision Means for FCC Open Internet Order [12-4-12]

Part 27: Oops! Crawford's Model Broadband Nation, Korea, Opposes Net Neutrality [2-26-13]

Part 28: Little Impact on FCC Open Internet Order from SCOTUS Chevron Decision [5-21-13]

Part 29: More Legal Trouble for FCC's Open Internet Order & Net Neutrality [6-2-13]

Part 30: U.S. Competition Beats EU Regulation in Broadband Race [6-21-13]

Part 31: Defending Google Fiber's Reasonable Network Management [7-30-13]

Part 32: Capricious Net Neutrality Charges [8-7-13]

Part 33: Why FCC won't pass Appeals Court's oral exam [9-2-13]

Part 34: 5 BIG Implications from Court Signals on Net Neutrality - A Special Report [9-13-13]

Part 35: Dial-up Rules for the Broadband Age? Op-ed Rebutting Marvin Ammori's [11-6-13]

Part 36: Nattering Net Neutrality Nonsense Over AT&T's Sponsored Data Offering [1-6-14]

Part 37: Is Net Neutrality Trying to Mutate into an Economic Entitlement? [1-12-14]

Part 38: Why Professor Crawford Has Title II Reclassification All Wrong [1-16-14]

Part 39: Title II Reclassification Would Violate President's Executive Order [1-22-14]

Part 40: The Narrowing Net Neutrality Dispute [2-24-14]                           

Part 41: FCC’s Open Internet Order Do-over – Key Going Forward Takeaways [3-5-14]

Part 42: Net Neutrality is about Consumer Benefit not Corporate Welfare for Netflix [3-21-14]

Part 43: The Multi-speed Internet is Getting More Faster Speeds [4-28-14]

Part 44: Reality Check on the Electoral Politics of Net Neutrality [5-2-14]

Part 45: The “Aristechracy” Demands Consumers Subsidize Their Net Neutrality Free Lunch [5-8-14]

Part 46: Read AT&T’s Filing that Totally Debunks Title II Reclassification [5-9-14]

Part 47: Statement on FCC Open Internet NPRM [5-15-14]

Part 48: Net Neutrality Rhetoric: “Believe it or not!” [5-16-14]

Part 49: Top Ten Reasons Broadband Internet is not a Public Utility [5-20-14]

Part 50: Top Ten Reasons to Oppose Broadband Utility Regulation [5-28-14]

Part 51: Google’s Title II Broadband Utility Regulation Risks [6-3-14]

Part 52:  Exposing Netflix’ Biggest Net Neutrality Deceptions [6-5-14]

Part 53: Silicon Valley Naïve on Broadband Regulation (3 min video) [6-15-14]

Part 54: FCC’s Netflix Internet Peering Inquiry – Top Ten Questions [6-17-14]

Part 55: Interconnection is Different for Internet than Railroads or Electricity [6-26-14]

Part 56: Top Ten Failures of FCC Title II Utility Regulation [7-7-14]

Part 57: NetCompetition Statement & Comments on FCC Open Internet Order Remand [7-11-14]

Part 58: MD Rules Uber is a Common Carrier – Will FCC Agree? [8-6-14]

Part 59: Internet Peering Doesn’t Need Fixing – NetComp CommActUpdate Submission [8-11-14]

Part 60: Why is Silicon Valley Rebranding/Redefining Net Neutrality?  [9-2-14]

Part 61: the FCC’s Redefinition of Broadband Competition [9-4-14]

Part 62: NetCompetition Comments to FCC Opposing Title II Utility Regulation of Broadband [9-9-14]

Part 63: De-competition De-competition De-competition [9-14-14]

Part 64: The Forgotten Consumer in the Fast Lane Net Neutrality Debate [9-18-14]

Part 65: FTC Implicitly Urges FCC to Not Reclassify Broadband as a Utility [9-23-14] 

Part 66: Evaluating the Title II Rainbow of Proposals for the FCC to Go Nuclear [9-29-14]

Part 67: Why Waxman’s FCC Internet Utility Regulation Plan Would Be Unlawful [10-5-14]

Part 68: Silicon Valley’s Biggest Internet Mistake [10-15-14]

Part 69: Will the FCC Break the Internet? [10-22-14]

Part 70: Net Neutrality Has Become an Industrial Policy [10-31-14]

Part 71: The Federal Communications Congress? [11-7-14]

Part 72: The Top Ten Adjectives to Describe Net Neutrality [11-11-14]

Part 73: Top Ten Questions to Ask About Title II Regulation of the Internet [11-20-14]

Part 74: The Only Legitimate FCC Hybrid Net Neutrality Approach [12-1-14]

Part 75: Who Pays for Net Neutrality? [12-3-14]

Part 76: Top Ten Deficiencies in FCC’s Title II Record [12-8-14]

Part 77: FCC Title II Internet Regulation: “Believe it or not!” [12-17-14]

Part 78: The FCC Is Unnecessarily Undermining its Legitimacy [12-18-14]

Part 79: NetCompetition Statement on New FCC Net Neutrality Legislation [1-16-15]

Part 80: Need for Modernizing Communications Law – Seeing the Forest for the Trees [1-18-15]

Part 81: Why the FCC Needs Congress [1-20-15]

Part 82: NetCompetition on FCC Publicly Sharing its Proposed Open Internet Order [1-23-15]

Part 83: The FCC’s De-Americanization of the Internet [1-25-15]

Part 84: Testing the FCC’s Net Neutrality Calculus [1-28-15]

Part 85: Net Neutrality Bait & Switch to Title II [2-3-15]

Part 86: FCC Internet Utility Regulation Is a Really Stupid Idea [2-9-15]

Part 87: The FCC Is Not Neutral [2-17-15]