Sidecut Reports

With a disclaimer that we here at Sidecut Reports are not lawyers, we nevertheless offer you our speed-reading analysis of the FCC’s full order in the Comcast-BitTorrent case. While most of the top-level details have been known since the FCC’s Aug. 1 vote, the full order does contain a few nuggets we were able to find that may raise some new hackles — while emphatically supporting our opinion that this order is just the start of Phase II of the network neutrality debate, which should get fully underway in 2009.

While Comcast is busy publicizing its own plans for the future (to delay Internet traffic of heavy users), the most interesting information that we see the FCC’s order providing is its request (on Page 33) for Comcast to disclose exactly what kind of equipment it used in its BitTorrent-related management motions, when it was employed, under what circumstances it was used, how it was configured, and where it was deployed. Like we said earlier, we’re not lawyers but it’s probably not hard to guess that disclosing such a granular level of details about its network operations isn’t high on Comcast’s desired to-do list, and will likely be one area that the cable giant will challenge legally.

Or at least try to keep sealed, should Comcast decide not to challenge the FCC’s order in court. While some knowledgeable folks think that a Comcast appeal is a given, several sources we’ve talked to (none at Comcast) note that getting this particular relatively toothless order overturned may lead to some quick rulemaking next year that gives the FCC much firmer legal ground to police such actions. So is the devil you know better than the one you don’t? Fightin’ Joe Waz, the next steps are up to you.

Reading the order so you don’t have to: Feel free to skip the first 22 pages if you already know what this whole mess is about, and could care less about how the FCC justifies its jurisdiction in the case; that’s how long it takes the commission to set the scene, with lots and lots of footnotes that just make these things so hard to read. On page 23 we finally get to the meat, under the title “Resolving the Dispute.” This is where the FCC gets to rip Comcast’s saying that delaying packets isn’t blocking — “We thus find Comcast’s verbal gymnastics both unpersuasive and beside the point.” Smack!

Page 32 is where the most interesting stuff starts — as in, the Remedy. On page 33 you’ll find the “give us all your info” request, along with the “cease and desist” threats if Comcast doesn’t abide by the FCC’s ruling. (You wonder how the FCC would enforce this — “Mr. Roberts, tear down this coax!“) After that it’s just appendixes and bloviating by the commissioners, as if their words here mean more than their votes. Sidecut Take: Not worth your time.

What is worth reading if you need to know more about net neutrality is our recent report, Net Neutrality Phase II: The Battle of 2009. We promise, no footnotes to make you cry as you try to read. And a fun Top 10 list at the end! Order your copy today.

Coming in at 67 pages, the full report on the Comcast-BitTorrent order will take some time to read. We’ll offer our take later, but if you want to give it a go yourself, here is the link to the PDF on the FCC’s site.

Public Knowledge wins the race in getting the first “we approve” email message out today, though we are sure others will follow close behind. If you want something shorter to read in the meantime, check out our Top 10 list of net neutrality influencers, which is without a doubt more fun than the FCC’s order.

Since we couldn’t make it to Aspen this year to participate in the expected discourse on one of our favorite topics — network neutrality — we here at Sidecut Reports humbly offer our “Top 10″ list of net neutrality influencers, the people leading the debate into 2009, what we are calling Phase II of the net neutrality deliberations.

With no further ado, the drumroll please:

SIDECUT REPORTS PRESENTS
THE NET NEUTRALITY TOP 10 INFLUENCERS

The movers and shakers in the net neutrality debate, as of August 2008:

1. Jim Cicconi, AT&T — Still the man with the most pawns and the best grasp of the board.

2. Kevin Martin, FCC Chairman — A lame duck, but with a few big quacks left.

3. Rick Whitt, Google — Looks like Phil Mickelson, and his company plays policy like Phil — sometimes a champion, sometimes hitting from behind the concession stand and off a tree. Capable of major victories, but still not Tiger-solid.

4. Rep. Ed Markey, D-Mass. — Driving the House Bus. A big bus but not a tank.

5. Joe Waz, Comcast — I get knocked down, then I get up again… just like another famous fighter from Philadelphia?

6. Ben Scott, Free Press — Riding the big wave of momentum. How long can the Silver Surfer stay afloat?

7. Lawrence Lessig, Stanford – Always effective as the lone voice storming the castle; can he compromise if he is on the other side of the ruling walls?

8. Tom Tauke, Verizon – Maybe not even the real source of power at Verizon but a former congressman who knows which strings to pull. Can pull hard with Ivan Seidenberg behind him.

9. Blair Levin, Stifel, Nicolaus — If not the next FCC commissioner, he will know who it is before anyone else (and will explain why to Wall Street).

10. Sen. Barack Obama, D-Ill. — First he has to win. Then Reed Hundt’s troops can take over.

Honorable Mention: Tim Wu, Columbia Law School; Kyle McSlarrow, NCTA; Eric Schmidt, Google; Walter McCormick, USTA; Chris Libertelli, eBay/Skype; Gigi Sohn, Public Knowledge; Jessica Rosenworcel, Senate Commerce Committee; Jonathan Adelstein, FCC; Phil Weiser, University of Colorado; Preston Padden, Disney.

Need to know more about net neutrality, or why such leading influencers think that 2009 will be a big year for possible passage of net neutrality legislation? Then order our Sidecut Report on Net Neutrality, which contains complete analysis of the recent FCC decision, as well as a net neutrality timeline and interviews with all the top players in the debate.

Great stuff from Declan McCullagh today over at C/Net, in a post where he skewers the ongoing fake-newspaper-editorial efforts of Comcast and others in the net neutrality debate. In case you’re not up to speed on this tactic, it’s a time-honored practice in D.C. — big lobbying money fueling so-called “grassroots” outlets who spew the company line in op-eds that never reveal the writers’ true source of information and cash.

As McCullagh points out with links, the practice works — mainly because a big bunch of journalists and bloggers are too lazy to care, and instead just snarf up whatever press release or “official” sounding thing they see, and turn it into a quick story or post. This sad example (about a supposedly grassroots group asking Congress to investigate the Yahoo-Google search deal) that McCullagh found shows that there are still too few like Declan who are willing to dig behind the scenes, and too many who rubber-stamp officious sounding material without a second glance.

Of course, that is what the astroturf sponsors are counting on. And while we do sense a softening in the net neutrality debate and more acts of cooperation, that doesn’t mean the astroturfing will end. Not as long as there are lazy folks on the front end and shills on the back end to keep the astroturf train running.

As you can tell from our spiffy new button to the right, our promised report on net neutrality — Net Neutrality Phase II: The Battle of 2009 — is now live and ready for ordering via instant download. By combining our long background of reporting and analysis of the issue with interviews of leading legislators, top policy execs from the biggest companies, as well as representatives of the leading public-interest groups, we have produced a definitive in-depth look at the network neutrality issue, which by all accounts is headed for a big year in 2009.

While I’ll get to some of the report highlights in a bit, I want to point out first that here at Sidecut Reports we have no agenda and no skin in the network neutrality game, something that makes us much different from many players in the debate. By trying to stay as objective as possible, our goal was to produce an agenda-free look at network neutrality, which we consider a vital issue in any discussion about the future of broadband, networks, and the digital economy.

So what’s in the 34-page report? Starting with the FCC’s recent order punishing Comcast for its blocking of peer-to-peer applications, our report examines all technical and political parts of the debate, and how proponents and their opponents will position themselves following the November elections. Highlights of the report include:

• Why the FCC’s recent Comcast order isn’t much more than a starting point for the “next phase” of the net neutrality debate
• Why some close observers put the odds of Congress passing some kind of net neutrality legislation “better than even” in 2009, especially if Barack Obama wins the Presidential election
• What the big telcos, AT&T and Verizon, are planning to do and say to prevent passage of any new net neutrality legislation
• How Google and consumer groups Free Press and Public Knowledge are teaming up to educate the public and regulators on why they think there is a need for baseline net neutrality rules
• How any and all outcomes might affect the investment outlook for companies from startups to large service providers
• Why the debate is getting less rhetorical and moving toward more collaboration between opposing sides

The report also contains a network neutrality historical timeline, as well as the Sidecut Reports ranking of the “top ten” individuals influencing the network neutrality debate. The new report is available for immediate download.

In case you are new to Sidecut Reports, a little background: We are an independent editorial research company that provides business professionals with deep background, up-to-the minute information, and decision-making analysis on pertinent topics that goes far beyond blogs at a price far less than that charged by traditional analyst operations. Led by longtime industry journalist Paul Kapustka, Sidecut Reports provides in-depth looks into topics at the intersection of telecommunications, the Internet and public policy. The net neutrality report is our second report, following the release earlier this year of our Sidecut report on WiMax, which looks at the current market for WiMax wireless services in the U.S.

As expected, the FCC went through with its wrist-slap of Comcast today, voting 3-2 in favor of calling Comcast naughty for its BitTorrent-throttling efforts. Here’s the official release from the FCC, which basically tells Comcast to stop using the management techniques in question, explain its techniques more clearly to the FCC and to users, and to detail how it will do things differently in the future.

Wow, some penalty!

Given that Comcast has already publicly stated that it doesn’t use the packet-reset technique anymore, and is moving to more open, protocol-agnostic measures, some of today’s action may seem like a moot point. But while the order itself may not amount to much, it is significant as a turning point in the overall network neutrality debate — serving as a marker of where the issue turned from theoretical to discussions of a more practical nature about what reasonable network management might be, how it might be disclosed, and who might best adjucate potential complaints or infractions going forward. We will explore all these bigger themes as well as the expected legal, legislative and regulatory tussles coming in 2009 in our upcoming Sidecut Report on net neutrality, which should be available early next week. (If you want an email update when the report is available, ping me at kaps at sidecutreports.com.)

In the meantime, we’ll leave you with a quote from FCC chairman Kevin Martin, courtesy of the Twitter stream from our pal Drew Clark, who attended the meeting:

If we aren’t going to stop a company that is looking inside its subscribers’ communications, blocking that communication when it uses a particular application regardless of whether there is congestion on the network, hiding what it is doing by making consumers think the problem is their own, and lying about it to the public, what would we stop?

Good question!

Other reports: Stacey over at GigaOM has a comment from Comcast; Declan McCullagh at C/Net has some more details on the legal underpinnings of the order; we have received the public statements from both Verizon and AT&T, which both laud the FCC for its decision and go on to say that clearly, no new net neutrality regulations or laws are needed. And Rep. Ed Markey (D-Mass.) sent us a note that also praised the decision but ended with the following statement:

I intend to continue monitoring practices in the industry and pressing for passage of my legislative framework for addressing these issues in the months ahead.

To answer your question — yes, the network neutrality debate is back with us again. Get ready for Phase II!

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FCC commissioner Robert McDowell leaped into the opinion-making fray in the net neutrality debate today, with an editorial in the Washington Post that some have called a sober assessment of the debate, while others have deemed it just more talking points from a former lobbyist.

I actually agree this time that McDowell’s essay is more sensible than most from the GOP side of things, even with a few slips into “regulations will kill the Internet” territory of tired telco BS. Generally it’s not a bad read and it does well to note that in previous instances of Internet pipe-clogging, it was engineers, not lawyers and lobbyists, who solved the problem. A good thing to remember.

What is interesting is to see McDowell say that technical and business solutions are the only way to fix net neutrality problems, at one point claiming the FCC itself simply can’t move fast enough to deliver sensible regulations in Internet time. (So maybe, it’s best we don’t rely on Bob and his co-workers!) But you have to wonder how such “collaborations” might occur in a real world, where typically one party has market power and the other doesn’t. McDowell says the government can step in if needed, but if there are no rules or no clear jurisdiction, then how and when will the government decide to act?

McDowell says, “Sometimes shining sunlight on issues produces amazingly beneficial effects, and the public interest groups that raised the BitTorrent matter should be praised for doing so… Let’s stick with what works and encourage collaboration over regulation.”

A great idea, but would Madison River have stopped blocking Vonage, if not for the FCC’s actions? Would Comcast have listened to the Free Press complaint, or would it have just gone on denying there was a problem, if not for the threat of potential regulator penalties?

For every Comcast-BitTorrent agreement, there is an Ed Whitacre, ready to say you can’t ride his pipes for free. Ed is retired now, but many who would argue with him remember… and perhaps aren’t as willing to trust in collaboration as McDowell is.

There’s really no need to get confused about the coming FCC condemnation of Comcast’s anti-BitTorrent practices. In fact, it’s pretty simple to figure out when you understand that it’s just Kevin being Kevin, albeit in a much more understated fashion than the man who made that phrase famous.

If you understand that A) Martin has always been a friend of the telcos first, then you understand that any chance to slap at the cablecos is fair game, even if it means crossing traditional GOP voting lines to side with the FCC’s two Democrats. If you further understand that B) at the current point in the net neutrality debate, the telcos don’t want any new regulations or laws, then you also understand that it behooves them to have it shown that the FCC’s 2005 Internet policy statement — previously called not enforceable by Martin himself — is all the authority the FCC needs to police such infractions.

So yes, Kevin, go ahead and call Comcast out for practices it has probably already stopped using, and won’t ever use again. And then don’t say anything about metered services, or paying for QoS or traffic prioritization. Save that for the next chairman!

While we are waiting for the actual order to come out this Friday, we suspect there won’t be much beyond a prosaic hand-slap, and certainly not the hammer some have called the pending order. The real action won’t come until there’s a new President, a new FCC and a new Congress. Look for more from us about “Phase II” of the network neutrality debate, as soon as we can after the FCC commissioners cast their votes on Friday.

We now have an official “starting date” for round two of the net neutrality debate: Aug. 1, when the details of the FCC’s order against Comcast should be made public. News reports Thursday said that FCC chairman Kevin Martin is expected to announce on that date some form of penalties and punishment for the cable operator’s now-infamous blocking actions of peer-to-peer traffic on its broadband networks; but instead of putting a close to the matter, the FCC order is widely expected to just be the start of a fresh round of net neutrality gymnastics, which likely won’t reach a conclusion until after the November elections and into 2009, when the FCC will likely have a new cast of commissioners.

Though Martin said Friday he wouldn’t seek any fines against Comcast, the devil will be in the details of the order, especially the specifics about how Martin interprets how Comcast might have violated the FCC’s 2005 Internet policy principles order. The most immediate question after the order is released is whether or not Comcast will file a lawsuit against the FCC, challenging the agency’s jurisdiction over cable operators; as our analyst friends at Stifel, Nicolaus said in a note today, such legal actions may not be the best move for Comcast, since if the company was victorious in having the order revoked, it could spur Congress into taking more direct net neutrality action, passing legislation giving the FCC clear authority over cable operators.

There are also questions about how the order might affect operators of wireless networks, and how a new President and new Congress will deal with the issue going forward. To quote the conclusion of the Stifel, Nicolaus report today, no doubt penned in part by our good friend Blair Levin:

We see the real significance in how the order and the subsequent court decision sets the stage for how the new Congress and the new FCC may wish to address the wider network neutrality issue.

Sounds like a perfect time for a Sidecut Report on net neutrality, giving you all the background info on the issue as well as in-depth interviews with major players on both sides of the debate, along with analysis on how the topic will affect businesses, entrepreneurs and investors in entities that will be affected by new communications legislation or regulation. If you’d like an email notification when our report is ready, drop me a line at kaps at sidecutreports.com and I will ping you personally.

From the looks of it, the second round of the Net Neutrality debate is going to be a lot like the first: Lots of blather and not a lot of attention paid to facts, as warring factions try to tilt public perception in their favor. Surprising? Hardly, given the stakes of the game. Disappointing? Certainly, especially for those who were hoping that there could be more consensus-building discussions instead of the he-said/she-said arguing of the past, which hasn’t really served either side well.

Today’s editorial by Richard Bennett in the San Francisco Chronicle is a case in point: While Bennett, a self-proclaimed networking expert, makes valid points about the need for regulators to closely examine the market power of Google’s search advertising deals, his emotional one-offs on several items raise two red flags: Not only are some of them inaccurate, but their almost word-for-word mimicry of similar opinions voiced recently by the major telcos, AT&T and Verizon, shows there might be more to his argument than just the concerns of an average netizen.

In recent interviews for our upcoming Sidecut Report on Net Neutrality, I was reminded once again just how good the telcos are at playing the lobbying game by synchronizing their messaging. In separate interviews at the recent NXTcomm show, the top policy execs for both big telcos — AT&T’s Jim Cicconi and Verizon’s Tom Tauke — both stressed the ideas that A) the Net Neutrality debate was started by, and mostly run by, Google; and B) that privacy concerns, especially those related to online advertising, were a much bigger problem than net neutrality, which was already being solved anyway by business-to-business solutions. Clearly, I thought, these are the new marching orders for the telco side of the issue.

Both those ideas are embodied in Bennett’s essay, in which he accuses Google of a “political head-fake,” using net neutrality to distract regulators from the privacy concerns. I would posit that you could flip that coin on its head, and say that it’s the telcos who are raising a big stink about privacy in order to try to move net neutrality to a back burner. To me, they seem like two separate issues that should be resolved on their own merits. But neither am I naive! Welcome to Net Neutrality, Round Two.

While I still hope to interview Bennett for the upcoming report — it’s clear from his writing and public testimony that he knows more about networking than your average law professor — there are several points in his column that shouldn’t go unchallenged. The first is his claim that net neutrality is a topic that “Google thrust into the political spotlight two years ago.” The reality is that Google, if anything, was late to the game and supremely unorganized in its approach to net neutrality, not really getting its act together until it hired former MCI lobbyist Rick Whitt in early 2007. If anything, it was former AT&T CEO Ed Whitacre’s not on my pipes bromide that made net neutrality a front-page topic, more so than anything Google did or said.

Bennett also says Google gets a free pass from the tech press, and that despite its “squeaky-clean” image, Google also has relations with “Washington power brokers,” perhaps an attempt to sketch Google as some nefarious broker of back-room deals. I’m not sure where Bennett is reading his so-called “cheerleading” for Google — most everything I can find in searches on the topic are straightforward, balanced news accounts, with plently of growing cynicism about Google and its endeavors in things like Street View. My pal Om has been anything but a Google cheerleader, like others questioning how Google will square its open networking ideals with the exclusive partner deals that were part of its $500 million investment in WiMax provider Clearwire.

On the D.C. influencer side, all I can say is it wasn’t Google who convinced Congress to change its mind and grant immunity to telcos in their FISA-related lawsuits. According to AT&T’s Cicconi, he oversees a staff of some 700 people. Google’s Whitt, on the other hand, is one of only three Google people “on the Hill,” and he is still the only one with a focus on the FCC. So who exactly is to be feared in Washington?

You could keep picking Bennett’s essay apart — claiming Google had “largely abandoned” net neutrality earlier this year is just laughable — but at some point you just get tired of the game, and wish there was a better way. Fortunately, many of the other players on both sides seem to be eager to work together to find solutions that don’t require political endgames; today’s surprise agreement between Vonage and Comcast to work together on networking concerns is just another signal that maybe there is a better place for the debate, centered around what is reasonable network management, and how it can be achieved so that both sides feel their concerns have been considered, and become part of the implementation. Other interviews we’ve done with folks like Public Knowledge and Comcast reflected such ideas.

Given Bennett’s past calls for more technical expertise and less political interference in debates about matters Internet, it’s surprising to read that he now thinks that regulators, and not market players, should intervene. But it is pretty clear who agrees almost exactly with everything he says today.

“The carriers try to frame this as being between themselves and Google — I’m a veteran of MCI so I saw this in the ’90s,” said Whitt in our recent interview. “They came after MCI as the poster child of the CLEC side, and unfortunately, they did a pretty good job.”

Will the same game work again? That will be one of the questions we ask in our upcoming report, which unfortunately has been slowed a bit by my recent surgery. If you want an email update when it’s ready, drop me a line at kaps at sidecutreports.com and I will ping you when it’s done.