Net Neutrality and Section 230

Hi this is Jim Sherriff and welcome to Contrary Evidence. This week, we are going to look at two widely discussed internet regulatory issues — Net Neutrality and Section 230 of the US Communications Decency Act. In the debate about these two important internet issues, there is lots of bad information being propagated.

Let’s start with Net Neutrality. Commercial Internet Service Providers first launched services in 1989. In order to accelerate the development of new services and platforms, regulations for Internet Service Providers were kept to a minimum until about 2005. The fundamental question about regulating internet service providers or ISPs is “What authority does the FCC have to regulate them?”. The FCC first started pushing net neutrality rules in 2005 and their attempts were rebuffed by the courts with the contention that the FCC lacked authority. After two attempts by the FCC to implement regulations that withstand court challenges, the FCC changed course in 2015.

In 2015, the FCC reclassified ISPs as Common Carriers which substantially increased the FCCs power to regulate them. In 2017, during the Trump administration, the FCC reversed course and reclassified ISPs as Information Services companies. With Joe Biden’s executive order on Net Neutrality, the FCC is once again developing policies that lock in Net Neutrality.

So, what is net neutrality? Net Neutrality is the policy and regulatory view that ISPs cannot provide preferred performance for some content providers while throttling back or blocking other content providers. To illustrate this in more concrete terms, Comcast and ATT both offer video content services, Cable TV, and land-line telephone services. Net Neutrality would prevent them from prioritizing their traffic over the traffic from other companies like Netflix, Hulu and Vonage.

The ISPs want to be able to prioritize traffic as this impacts their revenue and profitability. It impacts the competitiveness of their own content offerings as well as their ability to create new revenue streams from external content providers who would be willing to pay to have preferred performance.

Not surprisingly, the Content Providers and over-the-top service providers, do not want to have to pay for preferred service nor do they want an unfair competitive environment with the ISPs content services.

In metro areas with lots of ISP competition, there is less of an issue than in areas where there is only one viable provider. Competition is key and there has not been enough focus on increasing competition in all markets. If there was sufficient competition, the Net Neutrality issue would likely be moot as no ISP would have the power to demand payment to differentiate performance for chosen content providers. As a point of reference, ISPs in markets with less competition have been very aggressive in establishing data caps for their customers. In markets with lots of competition, there are very few data caps.

Without Net Neutrality, ISPs have a more compelling interest in building out their networks. We saw a significant slowdown in network buildout during the two years in which Net Neutrality was in place. However, we also saw an increase in buildout in highly competitive markets. When Google Fiber entered the Austin market, both Spectrum and ATT significantly improved their networks to remain competitive.

After looking at all the facts, I recommend a blended approach to net neutrality. In competitive markets which would be defined as having at least three providers with a minimum of 15% market share, there would be no Net Neutrality. Competition rather than regulation would govern ISP behavior. In markets that are not defined as competitive, Net Neutrality rules would apply. As most national ISPs operate in both competitive and non-competitive markets, they would likely not have the ability to negotiate national contracts for preferred performance.

One final point, if the FCC is not successful in implementing net neutrality, it is unlikely that consumers would see much harm. Even if the FCC were determined to lack authority to regulate ISPs, the Federal Trade Commission would have authority to block unfair trade practices.

Now let’s shift to Section 230. Ironically, there are factions on both ends of the political spectrum that want this law changed. Political leaders on the left want Platform Providers to more proactively police content. Leaders on the right want to keep Platform Providers from censoring content. The left wants to punish providers for not doing enough to validate content and the right wants to punish the providers for doing too much. Both sides should be very worried about potentially getting what they want.

Section 230 contains only 26 words.

“No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

The reason that Section 230 was written is that without it, Platform Providers would have two choices. One is to stay completely out of the content moderation space. The second is to face lawsuits for their moderation decisions. This second option adds so much risk and is so potentially labor intensive that most if not all providers would choose option 1. This would be the wild-wild west with no constraints on the dissemination of disinformation. In contrast, traditional media has complete control of the content in their broadcasts and publications but the corresponding legal liability for the veracity of their content.

Section 230 has been challenged in the courts on numerous occasions and the courts have consistently ruled that it is constitutional. In other words, Section 230 does not violate the First Amendment right to free speech.

There are court cases pending that challenge the perceived extension of the protections of Section 230 and Justice Thomas has been vocal that the current interpretation of Section 230 goes well beyond what Congress intended when it passed the legislation.

There are numerous proposals to reform Section 230. Some of the reform proposals contain provisions that are likely to get bi-partisan support including the elimination for protections for some egregious content such as child pornography and sex trafficking. Conservatives are proposing to only offer Section 230 protection to providers that are judged to be neutral or un-biased. The challenge on that is who makes that determination and are they neutral or un-biased.

One of the beauties of Section 230 is the simplicity of its language. In only 26 words, this section has been a major catalyst to the growth and evolution of the internet. I recommend a small tweak to the wording to encourage consistent blocking of content.

I would add a short qualifier at the end of the original language.

“No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider unless that service provider selectively blocks content in a biased or inconsistent manner”

Section 230 is not perfect but we should be very cautious about the unintended results of major reform.

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