Are Moves By FCC Chief Ajit Pai on Net Neutrality Good for Copyright Holders?

FCC Chairman Ajit Pai proposes rick rolling back FCC regulation, and this may be good for copyright holders.

A few years ago I was one of a number of artists that signed onto a petition to strengthen net neutrality. You have to understand why an independent musician, songwriter and label owner like myself might see this as important. There is a long history of “paid prioritization” in the music business. Radio payola being the most obvious. But back in the 80’s and 90’s there were all sorts of payola type fees. Even independent record stores (think High Fidelity) demanded fees and free goods for in store play and end racking. It was all a shakedown that favored the incumbent players and discriminated against startup labels.

So to my indie musician brain, net neutrality seemed akin to earlier anti-payola and anti-bribery prohibitions. Sure, in the end it was probably unenforceable but at least it was a gesture towards fairness. And looked at in another way, how was this any different then the public exchanges for equities? Aren’t public exchanges designed to treat each trade the same? Not prioritize some over others? Didn’t this guarantee a flat and fair “market” for each packet of music?

At the time a couple of friends warned me that I would come to regret this. That somehow net neutrality was simply a trojan horse for the FCC to not just regulate the ISPs but also the content creators and copyright holders. As it turned out I should have listened to my friends.

Ironically the true dimensions and implications of the net neutrality debate have been manifested in the hypocritical protestations of the defenders of Title ll in response to FCC Chairman Pai’s proposal to reverse Title ll’s application to net neutrality. First you have to understand that despite all the hyperventilating (and RickRolling) by groups like freepress.net, the FCC is not rolling back net neutrality. Instead it is handing back authority to the FTC. We DID have net neutrality before it was regulated by the FCC. Going back to the FTC does not mean it’s going away. It’s just the FCCs rather extraordinary power will not be hanging like Damocles sword over copyright holders as they negotiate with companies like Google and Amazon.  As songwriters will tell you repeated intervention in music licensing by the DOJ (through the outdated 70 year old consent decrees) has radically depressed songwriter public performance royalties.  Do we really want the FCC intervening in film, tv and cable in the same way?  Songwriters are the last in line to get paid, and we always seem to suffer the most when there is agency capture.

Moreover, it has become increasingly clear that Title ll net neutrality is primarily a fight between corporate giants trying to secure negotiating leverage about who has to pay for what, with over the top providers (Google/Amazon) trying to decrease the costs for reaching their users.

More fundamentally, Title ll net neutrality is a form of internet exceptionalism under which the internet would operate under non-market rules. But why does this make sense? The internet may have started as a vehicle for the sharing of ideas, but today it is also the backbone of the global economy. Property rights encourage investment. We risk undermining the vitality of the global economy if we introduce (or in some cases, maintain) significant encroachments into the operation of market economies. The FTC can, and should, guard against anti-competitive practices by internet giants, whether they are ISP’s, or edge providers (Google, Facebook, Amazon etc). But we should not take actions based on some perception that the internet has upended the reason for encouraging market, rules-based, commerce.

We have already been down this path with the FCC with respect to set-top boxes. In 2016 the FCC under the guise of “opening up” set top box competition came up with its AllVid proposal for cable TV. The problem was that it wasn’t really about “unlocking the set top box” it was really about unlocking copyright holders content and giving Google, Amazon and other technology companies access to the content without having to go through the hassle of getting licenses. Maria Pallante then the US Register of Copyrights warned the new rules “could interfere with copyright owners’ right to license their works … and restrict their ability to impose reasonable conditions on the use of those works.”

Luckily, FCC Chairman Pai has scuttled this proposal, but given the near miss that copyright holders had with the FCC on the AllVid proposal, it probably a good thing for all copyright holders that he has proposed to eliminate Title ll net neutrality in favor of restoring authority to the FTC to address anti-competitive practices. To my fellow musicians and songwriters, I know some of you feel differently, and are drawn to the idea of limiting the capacity of perceived gatekeepers to skew fair and open access. I share that concern. But Title ll is the wrong remedy. There are a broad range of potential gatekeepers, but there is one company that undoubtedly has the greatest influence on what is relevant and irrelevant on the internet, and they support Title ll.  That would be Google.  Doesn’t this tell you something? At a minimum, it is not the David v. Goliath battle that Title ll defenders would have you believe.

I’m sure that some of you will disagree.  Flame and troll away.  I am on tour in Spain and will be off the grid for a while, don’t get your feelings hurt if I don’t respond.

 

8 thoughts on “Are Moves By FCC Chief Ajit Pai on Net Neutrality Good for Copyright Holders?

  1. Fair assessment, but I think there are a few nuances that also deserve examination. One issue with deregulation as you’re characterizing it (with the ISPs as “perceived” gatekeepers) is that they actually are gatekeepers at the user level and have a track record of actively abusing that position. Now, that doesn’t mean that Google, Facebook, etc. should be given free reign to do what they want with content, but believing that the FTC is the silver bullet is just as problematic.

    In my mind, it makes sense for both agencies to have a hand in the regulation. The FCC should stick to regulating platforms rather than content. Set standards for encryption, or data transport or other transmission factors. As long as the FTC policies the business side of things that’s great. The failure is that in the larger scale of things, the FTC is actively attacked by everyone from the gun lobby to pharma and has seen their ability to effectively govern transactional commerce increasingly limited.

    As I tend to see the access to knowledge/information as a public good, I usually look at it compared to other historical public good instances. The US has a pretty shoddy record of drawing an effective line between free market forces and regulation and usually that line is drawn on the side of free markets in a way that ultimately hurts consumers. The handling of cellular in the US is a great example of poorly managed public resources (wireless spectrum). The much larger issue of open internet certainly complicates things, but if the FCC is truly going to help both consumers and artists, they could work to standardize backbone level regulations like encryption schema and rights tagging meta-data models instead of focusing on specific ISPs or today’s use-cases.

    For example, if they regulated a specific encryption schema that had to be supported end-to-end on US networks, they would stimulate adoption of that schema, while not closing the door on other competing schema necessarily. An encryption schema that tied content to users, would solve a lot of licensing problems as well and could benefit consumers and artists by allowing consumers transport of their content, and artists visibility into where that content is used in a more nuanced way. I’m obviously oversimplifying, but the FCC has the power to enact sensible regulation, but handing the keys to access back to the ISPs isn’t any more than answer now than it was every time we had to break up AT&T for anti-competitive action.

    • I don’t disagree with you on a lot of this. But in my view problem is the FCC has already behaved badly when it comes to rights holders. And as noted above every federal intervention into song licensing has resulted in rates that are objectively and demonstratively below market rates. It has become an existential crisis for professional songwriters. The problem is that all of the federal agencies and employees, whether republican or democrat, only pay attention to prices to consumer without considering the anti-competitive long term effects of monopsony.

  2. Hi David,
    You’ll get no flaming or trolling from me, but I do have some corrections and clarifications. I thought Pallante raised some really salient points about the set top box stuff, and I certainly shed no tears over that proposal’s failure, but… none of that was connected to Title II reclassification. Title II reclassification doesn’t give the FCC any new permission to regulate copyright owners. I definitely don’t want the FCC regulating musicians and songwriters (though i do think the ban on payola is good).
    Also, Google’s support of Title II came only after TONS of grassroots pressure. They’re certainly not the ones driving that train.

    • I don’t think we are really disagreeing. Agreed set top box had nothing to do with the title II classification, but I was trying to use it to illustrate how much more powerful the FCC is when it comes to regulation. My concern is that as FCC demonstrated with the set top box, in the wrong hands their power can be used to interfere with copyright holders licensing agreements. For songwriters at least 2/3rds of our income is paid at rates set under various federal licensing schemes. I think also having the FCC in there is inviting trouble. And we both know exactly where the trouble will come: zero rating on music streaming. It’s unclear if zero rating is a boon for artists or not. I could see it going both ways, but I suspect the more licensed subscription spins the better the revenues to artists.

      • I guess I don’t see how how the DOJ’s regulation of songwriters connects to this at all. “X government agency did something bad” connects to “Y government agency regulating something else completely will also be bad.”

        Nor do I see how the FCC’s failed set top box proposal demonstrates anything about the FCC’s power. That proposal didn’t make it far enough to end up being challenged in court. It likely would have failed! Title II, by contrast, has stood up in court repeatedly.

        As far as zero rating goes, there’s no evidence that zero rating impacts subscription vs free consumption…though it does encourage people to stream with whatever service has deals with ISPs. The way I see it, music services should be competing to better serve musicians and listeners, not to better serve ISPs.

    • Net neutrality is a way to entrench monopolies. Google, Amazon, Facebook etc are not subject to it as most of their data travels on their own private networks which are outside of the remit of NN rules. Eventually the data needs to make the short hop from their local server farms to the homes of the ISP customers, and today the big ISPs have dedicated feeds from Google et al to make that happen.

      NN is a weapon to make sure that upstarts do not become the new Google.
      https://www.theregister.co.uk/2010/08/09/neutrality_new_net_hypergiants/

    • Thanks for writing this David, it’s a great piece.

      Kevin:

      You’re correct that Google is ambivalent about some aspects of Title II, but that’s largely because it doesn’t want to be seen to be supporting it too prominently. It’s happy to fund others to make the case for it, including a phoney “grassroots”. Google also operates the largest private network in the world, which just happens to serve a video monopoly (YouTube), so it’s wary of being classified as a public utility.

      But think of Net Neutrality as a love letter to Google: that’s how it began life. Tim Wu at one stage even proposed subsidising edge providers like Google and Facebook from taxes.

      You write: “Title II reclassification doesn’t give the FCC any new permission to regulate copyright owners”

      Title II gives the FCC authority over all internet services, so indirectly it gives the FCC enormous power. I’ll give you a hypothetical example. Suppose an ISP aimed at Latinos licenses and bundles Latino content from South American content producers. The FCC can intervene and in the future could even set the price. (It’s promised to forbear but nobody really believes it would forbear for very long).

      Just out of interest who would you say is driving the train? Or does it have an inexorable momentum of its own?

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