Will The FCC Break The Internet?

Scott Cleland Contributor
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Actions speak louder than words.

The world is watching to see where the FCC’s actions will lead international telecommunications regulators going forward.

Will FCC leadership reinforce the successful Internet policy status quo?

Or will the FCC reverse course and risk breaking the global Internet by leading international telecommunications regulators to price-regulate their sovereign parts of the global Internet to restore the national postal and telecom utilities of the 20th century?

Currently the FCC is considering reversing the legal status of American Internet services from lightly-regulated information services to utility-regulated “telecommunications” services in response to a 2014 appeals court decision that limited a portion of the FCC’s net neutrality regulatory authority.

Neither the FCC nor the Internet operates in a vacuum. Most everything is now interconnected.

The big point here is if the FCC unilaterally changes the legal status of American Internet service to utility-regulated “telecommunications,” it could lead to big negative global repercussions that could seriously undermine U.S. trade and foreign policy interests going forward.

Strong Clinton Administration policy leadership was critical to enabling the current global free flow of information that we now know as the Internet.

In the 1990s, America successfully persuaded the world to not subject the Internet to “telecommunications” utility regulation via treaties and agreements overseen by the United Nations’ International Telecommunications Union (ITU).

That’s because ITU agreement ITU-T D.50 recognizes the sovereign right of each state to regulate “telecommunications” as that state determines.

Thus, if the FCC puts domestic politics first in “telecommunications” regulation, every other country can too.

So how could the wrong kind of FCC leadership break the Internet?

Today the Internet is unique because it is global with no borders. The Internet’s free flow of virtual information is not subject to the normal sovereign border inspection or tariffs that physical international travel, delivery or trade must endure.

In stark contrast, the raison d’être of the ITU’s “telecommunications” utility-regulation regime is to create and enforce sovereign borders and tariffs.

Thus over time, redefining the Internet to be common “telecommunications” easily could devolve the Internet back to the 1990’s telephone and postal national utility model, yielding a de facto broken and Balkanized splinter-net.

Trade Policy

What’s the risk to U.S. trade?

The current Internet status quo is as near to perfect-free-trade for American interests as America could aspire.

There is almost unfettered free flow of information from the U.S. to the world, subject to no national customs border inspection, transit accountability, or import tariffs.

In addition, America’s Internet and big data companies have benefited richly from the lax U.S.-EU data protection safe harbor that allows U.S. companies to annually self-certify, with no meaningful system of accountability, that they comply with EU data protection law.

But apparently this as-good-as-it-gets Internet free-trade dynamic is not good enough for Silicon Valley companies.

They now want the FCC to officially subsidize their massive Internet infrastructure-use via a clever re-branding of net neutrality to mean “no-fast-lane” and “no-paid-prioritization” allowed.

Specifically, Silicon Valley companies are heavily lobbying the FCC for a permanent, FCC-set, zero-price for its downstream traffic to consumers and businesses.

How could these FCC subsidies cause trade policy problems?

The ITU’s “telecommunications” settlements regime, “sender-party-pays,” is just like the sender of a letter or package paying for a stamp or postage for delivery domestically or internationally.

Today Silicon Valley companies “export” vastly more volume of Internet traffic to the rest of the world (in videos streamed, content displayed, and services provided) than other countries digitally export to the U.S. via the Internet.

While the FCC may imagine that it is in its political interests to subsidize Silicon Valley as a “national champion” as part of an FCC industrial policy, the political interests of foreign regulators is not America’s.

Any potential FCC revival of the 1990’s ITU “telecommunications” international settlement regime puts Silicon Valley companies like Google-YouTube, Netflix, Facebook, Amazon, etc., at great risk of having to pay many billions of dollars net to foreign governments to reach their foreign consumers and businesses.

And foreign governments could charge that U.S. governmental infrastructure-use subsidies for Silicon Valley constitute an unfair protectionist trade advantage.

The digital section of US-EU trade negotiations over the Transatlantic Trade and Investment Partnership (TTIP) already faces enough trade problems given the EU’s opening positions to end the US-EU data protection safe harbor and its high priority to create a Single European Digital Market.

U.S. trade negotiators certainly don’t need the FCC effectively commandeering U.S. digital trade policy by unilaterally redefining un-tariffed Internet trade to be tariffed “telecommunications” trade.

Foreign Policy

What’s the risk here to U.S. foreign policy?

First, American foreign policy has promoted freedom of speech and no censorship as important to democracy, trade and civil society.

However, in the post-Snowden context, the world fears widespread NSA deep-packet-inspection of Internet traffic.

Thus it would not be helpful to U.S. interests for the FCC to redefine the Internet to be “telecommunications” trade because that could invite autocratic governments around the world to deploy their own deep-packet-inspection at their borders for the purposes of censorship, under the political cover of an FCC-legitimized “sender-party-pays” Internet “telecommunications” trade regime.

Second, another foreign policy problem with the FCC asserting utility regulation authority over the American Internet would be the de facto FCC abandonment of the multistakeholder process of Internet governance.

Just this month, U.S. Secretary of Commerce Penny Pritzker at an ICANN Internet governance forum promised to “not allow the global Internet to be co-opted by any person, entity, or nation seeking to substitute their parochial worldview for the collective wisdom of this community.”

Certainly it is not helpful to this particular U.S. foreign policy for the American FCC to be the most visible parochial entity “seeking to substitute their parochial worldview for the collective wisdom of this community.”

Third and most importantly, is the foreign policy risk of unwittingly playing into the hands of China’s and Russia’s geopolitical machinations to “de-Americanize” the Internet.

Anyone who pays attention to world affairs knows that China and Russia are aggressively extending their geopolitical spheres of influence at America’s expense.

They know China’s cyber-forces have massively infiltrated most all major American tech companies and stolen an incalculable amount of American trade secrets and intellectual property.

They also know that the U.S. government suspects that Russian-backed cyber-forces may be responsible for many of the biggest cyber-attacks on U.S. retail companies that have made away with tens of millions of Americans’ credit card numbers.

In addition to these Chinese and Russian covert efforts, China and Russia are overtly trying to have the International Telecommunications Union replace the U.S.-backed ICANN and the international multistakeholder community in governing the Internet.

The next Secretary General of the UN International Telecommunications Union is expected to be China’s Houlin Zhao, who is currently Deputy Secretary General of the ITU.

To bring this geopolitical point home, there are two things that China and Russia hopes the U.S. will do to unwittingly advance their plans to “de-Americanize” the Internet and weaken America’s economic and technological leadership.

First they want the U.S. to surrender control of the Internet’s “root zone file,” which is the Internet’s global address book that enables anyone to connect to anything on the Internet, to the multistakeholder community so the ITU can then eventually take it over.

China, Russia and their many autocratic allies around the world know that if the Internet’s address book does not remain on U.S. soil enjoying American sovereign protection, the current global “root-zone-file” could be broken up into sovereign root-zone-files under other sovereign countries’ control, thus breaking the global Internet.

Second, China and Russia could only dream that America’s FCC would redefine the Internet to be “telecommunications” because that would give them perfect political cover to effectively take control of Internet governance via the ITU.

Thus the open question for the FCC and the U.S. government: is the potential risk of partial gaps in the FCC’s domestic net neutrality authority more important to address than causing the very real risks of unwittingly abetting foreign interests bent on breaking up the global Internet?

The FCC is not “independent” of the United States government or free to set its own trade or foreign policy.

On international matters, the FCC knows it must tread softly and carry no stick.

The FCC also appreciates that the Internet has major geopolitical, trade, and economic import, and that the Internet has become a new tacit cyber-battleground with China and Russia, which seek to “de-Americanize” the Internet.

Clearly, the FCC is at a crossroads.

Will the Wheeler-FCC advance the successful Internet status quo?

Or will the Wheeler-FCC reverse course for parochial reasons and lead the international telecom regulator community down a utility-regulation “telecommunications” path that risks the sovereign break-up of the global Internet?

History will be the judge of the FCC’s actions, not its words.

Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, a research consultancy for Fortune 500 companies, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests.