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Delta Farce Takes Brazil

You can't get much English-language television when you stay at a hotel 100 miles outside Sao Paulo, Brazil, but you can get a good Internet connection. These days, that’s all you need.

When I visited Brazilian clients with my colleague Shomari Hearn, we relaxed after work by watching an on-demand movie directly from the cable box at my Florida home. I have a Slingbox, which makes the cable service accessible from any room in the house over my wireless network, and from anyplace in the world via the Internet. So Shomari and I were able to enjoy Delta Farce on the other side of the Equator. (You didn’t expect two guys on a business trip to watch a romantic comedy, did you?)

Thanks to the Slingbox, my family does not need to subscribe to HBO or other premium channels at our vacation house in Vermont. The Vermont home has Internet service provided by Comcast. This lets us use the Slingbox to watch Entourage and other favorite shows from our main television, where we have the more expensive programming package.

Comcast might not like this very much, since it wants to sell us more programming in Vermont. Comcast also might not like it if I put an Internet telephone adapter from Vonage in the Vermont house, since Comcast sells its own Internet-based phone service.

For a long time, cable providers and telephone companies enjoyed minimal competition except, in recent years, from one another. Cities and towns generally grant monopoly franchises to prevent multiple companies from running their own sets of wires along our streets, and homeowners want to limit the number of businesses that run their connections under our lawns and through our walls. Once a company established its infrastructure in an area, it had a captive audience. The Slingbox, Vonage, and Web-based services like Hulu.com (which streams a wide assortment of television content) are changing that.

But the cable and phone companies have a powerful weapon with which to fight back. The companies, which generally offer Internet, television and phone service, can use their power over customers’ Internet service to protect their programming and voice businesses. By blocking or slowing competing traffic, landline Internet providers can tilt the field toward their own offerings.

The same is true with wireless Internet service. Sling Media, which makes the Slingbox, has software that can route your cable TV programs to your iPhone. But AT&T, which sells the iPhone, might decide to try to block the Sling service, perhaps in favor of its own offerings or services provided through its partner, Apple, via the iTunes store.

We need “net neutrality” rules to preserve innovative, competitive offerings and to avoid becoming captive customers of our Internet providers’ other businesses.

The net neutrality concept was first developed in the context of phone networks. Phone companies were prohibited from completing certain calls faster than other calls. This idea was carried over into the early days of the Internet, but, in 2005, the Federal Communications Commission ruled that Internet service providers were not subject to the same regulations as phone companies.

Since 2005, the FCC has relied on four “guiding principles” to preserve net neutrality. The first three principles assert consumers’ rights to access the lawful Internet content of their choice, run applications and use services of their choice, and connect their choice of legal devices that do not harm the network. The fourth principle states that customers are entitled to “competition among network providers, application and service providers, and content providers.” But these principles are not laws or official regulations, as Comcast rightly pointed out after it was fined for violating the principles by blocking certain high-bandwidth video connections.

FCC Chairman Julius Genachowski outlined a plan this week to restore meaningful net neutrality standards to the Internet. He proposed converting the four existing principles to mandatory regulations, adding two new provisions, and applying all of these rules to wireless Internet services as well as to conventional telephone, cable and other landline connections. Genachowski’s new rules would prohibit discrimination against particular Internet content or applications and would require service providers to disclose the ways in which they manage their networks.

Internet service providers oppose the plan, saying that they have a right to manage their own networks without government interference. The service providers claim that, if they are required to give equal priority to data-heavy sites, their bandwidth will be overwhelmed, damaging service to customers who do not access such sites for the benefit of those who do.

The service providers are not entirely wrong, but they are more wrong than right. If the FCC takes the position that “all bytes are created equal,” it could actually degrade the service we receive. Smart network management would give higher priority to certain data packets, such as those used for telephone conversations or streaming video, than to other packets, such as the ones that carried this Web page to your screen. A momentary delay downloading this page is insignificant, while a momentary delay during a phone call can be annoying or disruptive. The FCC’s rules should leave enough room for network managers to do their jobs.

But their jobs should not include strong-arming customers into buying only what the service providers want to sell. A Vonage phone call should get the same treatment as a Comcast phone call on Comcast’s network, and a Hulu or Slingbox television show should be given the same expeditious service as one delivered by Comcast.

That’s net neutrality. It would mean that the Internet belongs to the people who pay for it, not to those who deliver it.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s most recent book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book, Looking Ahead: Life, Family, Wealth and Business After 55.

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