Do you want [the internet] to be governed by engineers and entrepreneurs, or do you want it governed by lawyers and bureaucrats here in Washington?” That was the question asked to the American public by Ajit Pai, chair of the Federal Communications Commission, when he appeared on Fox News last week to talk about his intention to change the way access to the internet is regulated.
The dark intonation of the words “lawyers and bureaucrats” left the viewer in no doubt that Pai’s rollback of laws governing what is known as “net neutrality” could only be a good thing. Who better to decide the communications infrastructure of a country than a group of wealthy telecoms companies in an almost competition-free environment?
In a 210-page document, Restoring Internet Freedom (pdf), released the day before Thanksgiving, the FCC outlined how it would rely more heavily on business competition and anti-trust laws to regulate how internet service providers charged for access to their services, with a requirement to provide “transparency” to consumers.
Read the document here:http://transition.fcc.gov/Daily_Releases/Daily_Business/2017/db1122/DOC-347927A1.pdf
What is net neutrality?
Net neutrality is the idea that internet service providers (ISPs) treat everyone’s data equally – whether that’s an email from your mother, a bank transfer or a streamed episode of Stranger Things. It means that ISPs, which control the delivery pipes, don’t get to choose which data is sent more quickly, and which sites get blocked or throttled (for example, slowing the delivery of a TV show because it is streamed by a video company that competes with a subsidiary of the ISP) and who has to pay extra. For this reason, some have described net neutrality as the “first amendment of the internet”.
Why is net neutrality under threat?
In February 2015, the Federal Communications Commission (FCC) voted to more strictly regulate ISPs and to enshrine in law the principles of net neutrality. The vote reclassified wireless and fixed-line broadband service providers as title II “common carriers”, a public utility-type designation that gives the FCC the ability to set rates, open up access to competitors and more closely regulate the industry. Two years on, Trump’s new FCC chairman, Ajit Pai, a former Verizon lawyer, has pushed to overturn the 2015 order arguing they overstep the FCC's jurisdiction and hinder corporate innovation. On 18 May, the FCC voted to support a new proposal that would repeal the order and started a 90-day period in which members of the public could comment. A final vote is expected in December.
Activists see the ending of net neutrality, effectively the rules that stop internet service providers discriminating against certain types of content, as having serious consequences for smaller or more diverse web services that will no longer be protected from providers either slowing their traffic or pricing them out of the market altogether. It has also been heavily criticised by large technology companies and social platforms, which see it as tipping the scale in favour of telecoms providers such as AT&T and Verizon.
Net neutrality has long been a contentious issue in US communications policy. The principle that all types of content services should have access to the internet without fear of price or bandwidth discrimination underwrote the ideal of a varied media environment. New services such as Netflix and Amazon could compete with established broadcasters without worrying that ISPs such as Comcast might discriminate against them as they already own television assets such as NBC Universal.
Or at least that was the theory. In practice, platform companies such as Facebook grew bigger than traditional media and Amazon and others rapidly moved from shopping to producing films and video series. One way of interpreting the FCC’s current flurry of activity is that instead of regulating large technology platforms it will simply loosen the restrictions placed on other types of gatekeepers, such as cable TV operators and telecoms companies to allow them to compete more fairly with their new competitors.
However, ending net neutrality forms only part of an agenda by the Trump administration, which is aggressively removing regulations around other restrictions on media ownership.
Buried in the same news dump ahead of the national holiday were further liberalisation rules for media ownership including a limit on how many homes in the US a single broadcaster can reach. At the moment the cap is set at 39%, but the FCC has indicated it might revise or scrap that limitation entirely. A second measure would also allow TV stations to use different frequency channels that count less against this overall cap on broadcasting reach.
In fact, in an administration that has achieved very little in terms of passing new laws in its first year, one exception is in communications policy where a number of longstanding rules have been changed or abolished. Earlier this month, a 42-year old set of rules that stopped mergers between TV and newspapers in the same market was removed, as were restrictions on mergers between stations in the same market. In October, the FCC also removed the requirement for local broadcasters to maintain physical studio infrastructure in the markets they occupy.
Simply put, the idea is to allow for much more consolidation in the US media market. The removal of these rules on the one hand makes some sense in a world where linear and cable broadcasting is losing share to streaming on the web. However, it is hard to separate the machinations of the FCC’s market-driven agenda from a political agenda that is only interested in regulating media as a free market rather than a civic service or cultural good.
On the left, critics have been alarmed at how the rollback of rules around broadcasting might enable the rapidly growing Sinclair Broadcast Group to push through its purchase of Tribune Group, another local media company, for $4bn. Sinclair has a record of airing programming that favours Republican and right-of-centre politics, and now it is set to become the largest local broadcasting company in the US. Although all cable viewing is in decline in the US, cable news at local level still exerts a strong influence.
In fact, the only sign that the FCC isn’t on a headlong path to abolish all regulation is its insistence that a potential merger between Time Warner and Comcast (the vast cable company that also owns the NBC Universal television and entertainment business) must see the disposal of assets for fear of making the company “too big”. One potential asset in play as a result of this is Donald Trump’s least favourite news network, CNN.
The American public is part of a giant experiment in media deregulation with little protection for the consumer. Even if the agenda of Pai and the FCC is not overtly political, it still carries with it an ideology that plurality of voices in the media landscape is less important than efficient business competition.
US media reels from new wave of instability
At the end of an exhausting year of political drama and natural disasters, US media is reeling from a new wave of systemic instability. A trickle of bad news for businesses whose income is based on advertising, both old and new, is threatening to turn into full blown media recession.
Here is the misery ledger for the past week: both BuzzFeed and Vice have reportedly missed their annual revenue targets, with the Wall Street Journal claiming in BuzzFeed’s case this might be by as much as 20%. CNN Digital was also reported to have fallen short of targets by $20m; the Daily Beast is allegedly being put up for sale by its owner, IAC; Univision is looking for a $200m cash injection for its digital division Fusion Media; and Mashable, which last year sacked most of its newsroom in a “pivot to video”, was sold to Ziff Davis for $50m – a fifth of its (largely fictional) valuation a year ago.
So, what went wrong? The first and most important component of this decline is a wholesale restructuring of the advertising market, which has largely eliminated publishers and advertising agencies from the picture. Google and Facebook continue to see advertising revenues rise but even companies that grew impressive native advertising businesses have struggled. And even the large bets placed by venture capital investors over the past decade in digitally native news outlets are beginning to look perilous. Once investors move to take their money out, expect to see further sales, restructuring and closures.
But lastly, in a enormously oversupplied national and international media market, the ability to generate loyalty and revenues away from the swamp of social media is increasingly important. “Social first” used to be a an advantage for companies like Mashable, but now it serves more as a warning to consumers.
Worryingly, the economic context market remains theoretically favourable. The US economy is still in growth and the stock market is at an all-time high, the global economy is also in reasonable shape, and we cannot ignore that 2017 was a booming year for news. But, as every business knows, if you are struggling to make your targets in a strong economy, then it does not bode well for times of greater economic hardship.