Hypothetical threats to network neutrality should take a backseat to no net-at-all-ity.

The American Homeowners Grassroots Alliance (AHGA) submitted what are known as “reply comments” regarding proposed Federal Communications Commission rules to preserving the open Internet (also known as network neutrality).  AHGA Believes that the importance of an open Internet to economic opportunities and the wellbeing of homeowners and other consumers grows every day.

To their credit, former and current and past FCC commissioners, and the FCC staff, have done an outstanding job in preserving the open Internet that we all benefit from today. In this area of its oversight, the FCC has provided a shining example to other federal commissions and agencies of how a balanced approach in its oversight can simultaneously protect the interest of consumers while avoiding risks that might undermine the objectives of the effort.

At the same time, consumers can benefit from an open Internet only if they have access to it. While the FCC continues to preserve network neutrality, it has yet to come up with a total solution for no net-at-all-ity. The share of consumers who have high speed broadband access has expanded tremendously over the past decade. Despite substantial private investment in the Internet infrastructure, some rural areas remain that do not have high speed broadband access. Private investment will continue to expand broadband access, but it is clear from the economics that it will be years before the most remote and least populated areas will be reached through private investment. Public/private investments in the most remote areas are needed to address this challenge. If the government focuses on building out access, starting with the most remote areas where subscriber investment costs are greatest, it will eventually reach areas that were recently served by the continuing private investments. At that point we will have achieved universal broadband availability.

 In addition, broadband access is unaffordable for many. Some type of broad-based temporary public subsidy is necessary until competition reduces prices to affordable levels. Finally, many consumers who have access to broadband do not currently subscribe. In many cases this is because they do not understand the ways in which they could benefit from such access. There is clearly a public role needed in that educational process. These challenges must be addressed by the National Broadband Plan currently being developed by the FCC. AHGA believes this is the single most important item on the FCC agenda.

This is not to belittle the importance of the FCC’s proposed network neutrality rules. Many of the proposed rules are excellent. There are also some areas where AHGA believes the application of rules should be broadened to cover more members of the Internet ecosystem. In other areas AHGA would urge a bit more caution in order to reduce the risk of unintended consequences.

The experience of American homeowners over the last five years provides an example of how organizations that heretofore have not been seen as members of the ecosystem can eliminate competition and impose huge costs on consumers. Currently about 90% of home buyers search for homes on a consumer-facing private online real estate sales network owned by real estate brokers. Because the vast majority of all U.S. homes offered for sale appear on that network, and the vast majority of online buyers search that network, it’s imperative that sellers’ homes be included in it. Unfortunately, owners of some of the regional network participants decided not to distribute online the listings of home sellers who use “discount” real estate brokers. Discount brokers often charge a flat fee - often only a few hundred dollars – to put home seller’s listing on that network, as compared to the typical 5-6% commission demanded by traditional real estate brokers who own the network. As a result the very substantial savings in real estate commissions - $10,000 - $12,000 on a median priced U.S. home – can benefit both the home sellers and the home buyers.

Fortunately the Federal Trade Commission has challenged and successfully rebuffed efforts of numerous regional Multiple Listing Services (MLSs) networks that have sought to prohibit consumer access to their regional networks through discount brokerage services. While the FTC had oversight authority in this instance, it is impossible to know whether a future practice by another member of the Internet ecosystem who is not an Internet service provider would or would not be under the FTC or Justice Department’s oversight authority. For that reason the FCC should apply its competition principles to application and service providers, because similar future experiences may not come under their jurisdiction.

AHGA also believes that the FCC’s proposed transparency rule will provide critical benefits to broadband subscribers. Public disclosure and transparency are essential to maintain competitive and effective markets. Disclosures should include common, clear information to consumers about the products and services they offer, including price, fees, advertised and actual speeds, reliability, latency, traffic management policies, service limits and guarantees, legal and privacy policies, and contract terms. This will help consumers make informed choices and hold providers accountable to deliver the purchased services as promised. Public disclosure and transparency also provides policymakers with information they need to detect abusive practices. For all these reasons, this rule should be applied to all segments of the Internet ecosystem.

Conversely there are other areas where the proposed network neutrality rules could have serious adverse consequences over both the short and long term. One is employment. U.S. unemployment hovers around 10%, but there are some positive signs. Two of the most positive U.S. employment trends are the continued growth of teleworking and the formation of technology-oriented home businesses. According to the National Broadband Plan, from 2003 to 2008, the number of teleworkers increased by 43% to 33.7 million people.  One survey estimates that 14% of retirees, 29% of adults with disabilities, and 31% of homemakers would be willing to join the workforce if they were given the opportunity to telework.

Both the continued growth of teleworking and the formation of technology-oriented home businesses have been made possible by the Internet, and consumer access to the Internet has in turn expanded very rapidly as a result of the substantial and long term investment in infrastructure that supports Internet access and use. In 2008, U.S. information technology capital investment totaled $455 billion, or 43% of all U.S. non-structure investment. Communications service providers invest approximately $65 billion annually. Clearly the FCC to date has managed to strike a balance that has both protected the open Internet and avoided counterproductive actions that could have undermined continued robust private Internet infrastructure investment.

Another reason that overly prescriptive network neutrality rules are probably unnecessary is the growing sophistication of broadband consumers. Many would likely abandon any ISP that adopted a policy of blocking or discriminating against legal applications or websites. There have been relatively few such efforts over the years, and most broadband service providers have publicly committed their support for network neutrality. Many of those broadband service providers are currently engaged in very aggressive advertizing campaigns that highlight their benefits and their rival’s weaknesses. It is quite likely that any broadband service provider who tried to limit its customer’s access to legal applications or websites in the future would find themselves the target of competitor’s advertising campaigns that highlight that fact. With widespread public recognition of the importance of access to legal applications and websites, many consumers would likely choose to abandon ISPs that restrict such access. Such a marketplace effort could remedy restrictive network practices far faster than regulatory enforcement procedures.