Time Warner Cable, Cablevision Sink as the FCC Goes ’Nuclear’

http://www.businessweek.com/news/2010-05-06/time-warner-cable-cablevision-sink-as-the-fcc-goes-nuclear-.html

by px • 16 years ago

36 64 16 years ago

jfager• 16 years ago

the agency plans to impose more regulations on Web-access providers after a court stripped the agency of its powers last month.

What does that mean? Which powers were stripped? How can they impose more regulations if they have less power?

showerst• 16 years ago

If I'm reading it right, basically the courts said that the FCC doesn't have the right to regulate internet providers like they do common carriers (like phone networks), so they're just going to reclassify them as common carriers, then regulate them.

IMHO this is probably huge for net neutrality, but I wonder where their (generally accepted) efforts at traffic shaping will end up in all of this? I'm not sure anyone wants broadband that can't throttle its bittorrent users a little.

swombat2• 16 years ago

I'm not sure anyone wants broadband that can't throttle its bittorrent users a little.

Why would your 24MBit/s work slower for bit-torrent than other uses? The whole point of this net neutrality debate is that ISPs have no business deciding which traffic they prefer, much like your phone company has no business deciding which one of your friends you're allowed to call.

westbywest• 16 years ago

I'm not sure anyone wants broadband that can't throttle its bittorrent users a little.

I comment in agreement with the need to maintain QoS for reasons of network health, especially if you need to maintain minimum guaranteed bandwidth in the presence of misbehaving clients (e.g. botnets, ping floods, not just abusive torrenters).

However, the carriers in questions have often not been using QoS for reasons of improving service, but rather to penalize the percentage of broadband users who actually use a large portion of the bandwidth they're paying for.

For example, say you buy 1.5Mbit DSL and then carefully set up your torrent client to use a consistent 1.0Mbit during nighttime. A month later you get a disconnect notice from your ISP claiming that you were hogging bandwidth, probably leaving you SOL since that's the only viable ISP in your area.

This is the sort of business practice the FCC is trying to address.

DanielBMarkham4• 16 years ago

The agency gets to classify new technology in different buckets. They put the ISPs in the data provider bucket.

So the providers started screwing people over depending on what kind of bits they wanted to get over the net -- the beginning of some god-awful 74-thousand tiered pricing structure.

Lots of fuss about that. FCC tries to step in. Court says nope, in that bucket you don't have the authority to act.

So the FCC puts them in new bucket. Huge part of the economy now regulated and nobody had to elect anybody, there was no bill, no debate, no nothing (And I support this, but damn it's a freaking Faustian bargain if I ever saw one)

francoisdevlin2• 16 years ago

Eh, it's not as bad as you think. We (congress) gave the FCC the authority to do this. Granted, we didn't quite understand the implications when we did, but it is still a democratic process.

btilly2• 16 years ago

The decision last month was that the FCC did not have authority from Congress to regulate internet traffic. So now the FCC is attempting to reclassify cable providers in the same bucket as telephone providers. If courts accept this then the FCC has a very clear grant of authority from Congress to regulate as they wish.

The open question is whether the courts will accept this reclassification. This question will likely take several years to wind its way through the courts, but no matter how it turns out it will be a huge headache for the cable providers.

The fundamental issue here is whether net neutrality can be imposed on the cable providers. The standard meme is that net neutrality is a basic right. I am one of the few people who actually don't want net neutrality. Not because I trust ISPs to behave in a reasonable fashion, but because I think that the only real solution to bot nets is to make ISPs liable for the traffic that they let onto the Internet, and any such rule would be incompatible with net neutrality.

swombat2• 16 years ago

Bot nets are a small but annoying problem for a small percentage of people in the world. A pay-as-you-go, "we'll charge you extra for downloading 1MB from youtube rather than some other site" internet such as the one ISPs would like to aim towards would be a huge problem for everyone.

Have a sense of proportions...

px• 16 years ago

The FCC may have to rely on legislative action by Congress or a more favorable federal court opinion.

http://www.washingtonpost.com/wp-dyn/content/article/2010/04...

The real issue question is whether or not enforcing net neutrality would introduce a new level of federal regulation that would scare off investment.

CamperBob3• 16 years ago

This move by the government certainly throws a wet blanket on any deal speculations and hampers all cable and telco stock multiples,” said Chris Marangi, an analyst with Gabelli & Co in Rye, New York. “It’s going to be years-long litigation and the cable guys can’t give an inch. Time Warner Cable sank $2.51, or 4.6 percent, to $52.48 at 10:35 a.m. in New York Stock Exchange composite trading. Earlier the shares dropped as much as 6.4 percent. Cablevision plunged $1.14 to $25.67, after earlier falling as much as 5.2 percent.

And all they had to do to avoid this was not act like greedy assholes.

I guess it was a matter of asking a leopard to change its spots.

fnid211• 16 years ago

Corporate leaders have a fiduciary responsibility to act like greedy assholes. We have to understand that. It's required by the SEC and the law.

Corporations must grow. They must increase their share price. They must continue to do more and more and more to get more money or they die. If you aren't growing you are dead.

That's the problem with our system. But this system violates the laws of nature. Organisms in nature don't continue to grow forever. Those that don't stop growing eventually collapse under their own weight. That's exactly what is happening to our corporations -- and our society.

We have to create a new system, whereby corporations -- organizations -- are rewarded for their stability, for their consistency. For their remaining the same for a long time.

Small businesses can do this. At some point, the small business owner can say, "I have enough." But corporate leaders cannot say, "Our corporation is big enough." If they say that, they are fired. If you go public, you have to grow forever until your corporation collapses -- or is broken up by regulators.

There is only one destination for public companies -- destruction, either through collapse or regulatory fragmentation.

CamperBob3• 16 years ago

Corporations must grow. They must increase their share price. They must continue to do more and more and more to get more money or they die. If you aren't growing you are dead.

True, although do they have to do that by trying to decrease service at every opportunity, and by trying to enter markets outside their core competencies?

There's nothing wrong with being a big dumb pipe. For a cable carrier or telco, trying to do anything else will either divide the company against itself, or pit the company against its own customers. It could be argued that by trying to grow into inappropriate areas, the carriers are contravening their fiduciary duty.

kevinh• 16 years ago

This point of view always bothers me because it's not really true. Yes, one of the primary duties board members have is to increase the wealth of the shareholders, but it does not equate to purely performing greedy moves. Look at the case of Dodge v. Ford Motor Company. Here's an excerpt from the decision made (emphasis mine):

"A business corporation is organized and carried on primarily for the profit of the share-holders. The powers of the directors are to be employed for that end. We are not, however, persuaded that we should interfere with the proposed expansion of the Ford Motor Company. In view of the fact that the selling price of products may be increased at any time, the ultimate results of the larger business cannot be certainly estimated. The judges are not business experts."

Yes, they are primarily in it to make money for their shareholders. However, it's nearly impossible to tell the effects of many decisions on the company's bottom line, and moves that increase the company's image in the eyes of the general populace can certainly be argued to have effects that increase the financial well-being of the company.

There's something called the business judgment rule that's applied in cases such as this. The board members must act in good faith, act in the best interests of the corporation, act on an informed basis, not be wasteful, and not involve self-interest. This gives a great deal of wiggle room because, as the judge said in Dodge v. Ford Motor Co., "judges are not business experts."

A move like eschewing moves away from net neutrality is arguably (which is all it needs to be) a move done in good faith to increase the bottom line of the company, especially since it builds goodwill with consumers.

tbrownaw• 16 years ago

It seems to me that acting like greedy assholes to the point that the regulators step in, would actually be failing at maximizing shareholder value.

I believe also that paying dividends would be an alternative to having a pyramidal share price.

anigbrowl4• 16 years ago

Corporate leaders have a fiduciary responsibility to act like greedy assholes. We have to understand that. It's required by the SEC and the law.

Well, specifically it's directors who have that duty, and (naturally) they select managers whose views further their own. Of course, in recent years there have been examples of tension between managers and shareholders in the US (unrelated to the financial crisis), where shareholders' powers to change policy 'from the floor' are relatively limited. Some argue, too, that directors' fiduciary responsibilities need to be rethought in terms of long-term sustainability and stability rather than in purely expansionary terms.

There's an interesting discussion of these issues here: http://blogs.law.harvard.edu/corpgov/2009/11/17/shareholders...

And on a slightly tangential note, a cautionary tale about a company that went bust within weeks of its IPO, and how the arguments of the firm's attorney and directors found short shrift in court: http://ssrn.com/abstract=1567657

clammer2• 16 years ago

I like being right about things, but it's a shame to be right when the Internet has to go completely wrong in order to prove a point.

NN was always a bad idea and this step by the FCC was obvious to anyone who saw through the NN BS. I'll never understand why people still think the government can "help" them by solving problems that don't even exist.

Say hello you're new Internet nanny, the FCC.

clammer2• 16 years ago

Yeah, keep voting this down, that will make the Internet being controlled by the FCC better...somehow.

hga• 16 years ago

I think your problem might in part be from your claim that no problem exists.

I disagree with that while agreeing that a good outcome from this move is extremely unlikely. (Is you faith in the government that strong? In a political body who's partisan nature shifts from administration to administration?

And that was before I read the theory that this would freeze a lot of stuff while it gets fought out in the courts for the next few years.

pieceofpeace2• 16 years ago

Do you prefer large corporations over FCC to "control the Internet"?

jonallanharper2• 16 years ago

clammer, would you mind emailing me sometime? I was just reading some of your other comments on HN, and I really enjoy hearing your thoughts. My email is jon at atlaswebdev dot com. Thanks!

anigbrowl4• 16 years ago

I downvoted not because of your opinion, but for its lack of a substantive argument.

illumin8• 16 years ago

This is a great move. It is simply tragic that we live in the country that invented the Internet, and yet the bandwidth available to the average citizen is very low compared to the rest of the first world countries.

The free market has failed the Internet. For some things, like utilities, government regulation works best. I think we all can agree that network access is a utility and should be treated as such.

ewjordan• 16 years ago

It is simply tragic that we live in the country that invented the Internet, and yet the bandwidth available to the average citizen is very low compared to the rest of the first world countries.

To some extent that is a result of the fact that we had it early. A lot of money was put into the early infrastructure, and it now needs to be upgraded, but there's little incentive to do so as long as it's working well enough.

Whereas latecomers to the party can get equipment three generations better than what we started with, and install it for a lot less money than we had to sink into our old stuff.

This is not too uncommon in business, either, where (especially in fields where patents don't ensure a monopoly for the innovator), the innovator spends a lot of resources in development, setting up the supply chain, and driving consumer demand. The "me, too!" business then comes along and benefits from all of this without having to pay a dime, and can skip right past many unprofitable months and challenge the innovator to a game of catch-up very quickly.

fnid211• 16 years ago

It's called "leap-frogging." Preventing it is the goal of patents, but many here argue against those as well. It's like they want things to be better, but they don't want to allow the creators of those better things to benefit from the betterment themselves.

When you limit the innovators' ability to profit from their innovations, they'll stop innovating...

r0s• 16 years ago

The free market has failed the Internet. For some things, like utilities, government regulation works best.

It needs both, honestly. Companies need freedom to innovate, and they also need rules to prevent them from screwing consumers and other businesses. I see neutrality as a means to ensure freedom for companies to innovate on an equal playing field.

Here's an over stretched metaphor:

It's as if UPS owned parts of the highway and only allowed delivery of certain items by certain companies.

FedEx would pay huge tithes to them just to compete. Eventually FedEx would need to buy it's own network of highways somewhere else to lock-in an area and compete.

This is an exaggeration, but I see this as analogous to media companies (like TimeWarner) buying up cable companies to become ISPs.

Metaphors end here, because I personally don't see driving on a highway as a Right, and internet communication is very similar to Speech, which is an American Right.

grellas• 16 years ago

The FCC had a choice here (after losing in court on the question whether it had so-called "ancillary jurisdiction" to impose net neutrality rules on carriers).

It could have gone back to Congress to get clearer statutory authority for its mandate to regulate the web. If successful, that effort would have led to a solution in the form of a new statutory provision that carefully defined what the FCC could or couldn't do in regulating the internet. While that would have been an ideal solution, it would have meant having to get support for the agency's net neutrality goals in Congress, and that support was doubtful.

The other choice was to do what it did here, and that is to take its existing authority over common carriers in the telephone market and attempt to extend it to the internet. The problem with this is that such authority is very broad-based and includes (among other things) the power to regulate pricing through a complex system of tariffs.

The FCC is claiming to do a "hybrid," however, by saying that, yes, we are going treat internet access providers like phone companies but we don't intend to regulate their pricing or exercise any of the other broad regulatory powers we might otherwise exercise once we use this this approach. In effect, the agency is saying, "we plan to come in with a scalpel and do only what is needed to implement our narrow regulatory plan that is focused primarily on net neutrality rules - so, don't worry about the rest, trust us that we will not overreach."

Of course, nothing is in place under the FCC's chosen approach to stop overreaching by the agency except its own discretion. By invoking existing statutes designed for another purpose altogether, instead of seeking to get a new statute from Congress aimed at solving the immediate issue of net neutrality only, the FCC is exerting government power in a way that may not have been contemplated by the original statutes and in a way that will most certainly be challenged in the courts.

Maybe this approach will work for proponents of net neutrality but it comes at a price of the government staking out a pretty broad claim to regulate the internet without any particular checks on that power beyond the FCC's own judgment as to what it should or shouldn't do in the future. Thus, this is basically an agency power grab - perhaps supportable, perhaps not - but almost certain to have unpredictable and potentially unpleasant side effects as always happens when there are insufficient checks on government power.

nlwhittemore• 16 years ago

If the trade is the limits on regulation at the discretion instead of limits on speed and access at the discretion of comcast, I'm pretty fine with it.

koanarc• 16 years ago

The whole net neutrality debate scares the shit out of me.

One the one hand, we have ISPs, all with near-strangleholds in their area, making decisions that the market can't effectively retaliate against (high barriers to entry and whathaveyou).

On the other hand, we have the slippery-slope of government regulation of the internet. I know I'm in the minority, here, but frankly, I find this option the more unnerving.

Are we simply damned if we do, damned if we don't? How do we take power from providers without giving any more power to regulators?

roc• 16 years ago

You're begging the question of whether the FCC should or shouldn't have the same regulatory power over ISPs that it does over traditional common carriers.

You're also begging the question of whether treating ISPs as common carriers grants the FCC power to "regulate the internet".

Those are each highly debatable positions that you're assuming as truth.

I'm not going to question your motives, but suffice it to say your argument is hardly convincing for making these assumptions.

Time Warner Cable, Cablevision Sink as the FCC Goes ’Nuclear’

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