Rearview Mirrors & the Rule of Markets: The ITU’s Supposed Big New Global Threat to the Internet, Part III

This is the third in a series of posts on the supposed threat of an ITU/UN take-over of the internet. As I’ve already said in two previous posts (here and here), I think the charges are vastly overblown, although there are interesting things to argue about and legitimate worries to be had.

Facts and Norms

There might also be victories for global internet governance to be had, if we take the ITU’s role seriously and that it, in turn, adopts only regulatory guiding principles that meet a minimum standard of liberal norms governing markets, human rights, a free press and freedom of expression.

To some extent, it already does by anchoring its own operations to Article 19 in the Universal Declaration of Human Rights (1948) (Constitution, Article 33; DRR Res. 71 (1998) & Rec. 2 (1994).[i]Article 19 stakes out a bold international right to communicate and for the free flow of information. The right to communicate includes the internet as well, as a UN report explicitly stated last year – an ideal the ITU duly embraced, although its commitment to it, as we will see, is badly compromised elsewhere by its own rules and regulations (see below and next post).

Some Canadians might be interested to know that legal scholar and McGill University professor, John Humphrey, helped to write the UNDHR as part of a bigger mission to remake the world at Bretton Woods so that peace, capitalism and democracy might survive after having been blown to smithereens by not one but two World Wars in the first half of the 20th century. C. B. McPherson, a renowned political philosopher and incidentally a Canadian as well, saw the UNDHR as elevating and institutionalizing a minimal set of norms that people worldwide saw as their own, and aspired to live by.

Of course, there are technolibertarian and free market, no government fantasists who argue three things against this rose-tinted view of the ITU and global institutions: (1) such things are irrelevant, a fog of rhetoric that (2) obscures practices that are 180° opposite to the values claimed and/or (3) a license for state-controlled telecom-run monopolies to rule telecoms and the internet, and thus impede the global free flow of information.

The ITU is not Irrelevant

I actually agree with point two, and in the next post will lay out a long list of contradictions, hypocrisy and problematic aspects of the ITU’s ITRs, Constitution, Decisions, Resolutions and Recommendations, etc., that I think are at odds with the right to communicate. Articles 34 and 37 in the Constitution, and 7 and 8 in the ITRs that set out governments’ rights to stop or suspend communication, and that address cybercrime, personal data, national security and public decency, in particular, are impossible in my mind to reconcile with the ITU’s commitments to the international right to freedom of the press and freedom of expression. The proposed addition of a whole new clause in Article 8 of the ITRs covering similar matters in an even more expansive ways will only compound the problem in the unlikely chance that they are approved.

While I am onside with critics on these points, I think their argument that the ITU is irrelevant, or a “state-run telecom monopoly club”, misses the mark. If it was irrelevant, we wouldn’t be talking about it. And talk isn’t just cheap fluff, either. Vint Cerf, Google’s “chief internet evangelist”, for instance, felt compelled enough by the UN’s statement on the right to communicate covering the internet that he wrote a column for the New York Times telling the world why he thought such a move was a mistake.

In addition, copyright lawyers and politicians refer to Article 19 constantly to legitimize their actions, laws, and litigation. They say, for instance, that the notice-and-take-down regimes requiring ISPs to act as copyright cops, and to cut-off internet users who have repeatedly used their connections to infringe copyright laws, are consistent with Article 19. Many telecom equipment makers and operators disagree. The same UN report that asserted that the right to communicate includes the internet also sees the notice-and-take-down and internet cut-off rules as running afoul of people’s right to communicate as well.

Of course, academics and rights monitoring groups like Article 19, Index on Censorship, Freedom House, Reporters Without Borders, and so on, use it to rank order countries through annual freedom of expression beauty pageants, with criteria specific to the internet playing a large part in their assessments. In sum, the language and actions of the ITU and UN help constitute the terrain upon which the politics of the internet takes place. High-flying rhetoric reflects not just high-minded words, but values and those values, in turn, make a mark on the real world.

The Market Rules at the ITU

For the rest of this post, I want to consider the idea that the ITU is a club beholden to state-run telecom monopolies. To be sure, this statement probably captured the ITU’s main tendencies in the past, when only nation-states were entitled to be members. Yet, even so, deep in the bowels of national delegations of countries with telecom networks that were mostly privately-owned in part or the whole of the 19th and 20th centuries – the UK, US, Canada, etc. – were representatives from the private companies that built and ran those networks: AT&T, Bell Canada, Northern Electric, Bell Labs, Cable and Wireless, etc. Governments did not act without their approval.

To be sure, national governments were to the fore and, at least until the 1980s and 1990s, most of the world was ruled by national telecom monopolies, and the private sector did take a back seat. Yet, that configuration of power and authority has since been undone.

In fact, the great battle between the market and the state was fought and won decisively in favour of “the market” in the 1980s, notably during the last revisions to the ITRs in 1988 and the Plenipot the year after. More than twenty years on, therefore, it is odd to see so many critics looking in the rearview mirror as they fight new battles over the internet.

The current composition of ITU membership reinforces the point. Today there are “193 countries and over 700 private-sector entities” (544 are telecom companies, with the rest made up of 166 associate members (i.e. ISOC, W3C, etc) and 38 academics).

The U.S. delegation to the ITU consists of a whose who of the telecom-media-internet giants: i.e. AT&T, Cisco, Comcast, Google, Intel, Microsoft, News Corp., Oracle, Telefonica, Time Warner Cable, Verisign and Verizon. Clearly its not only “the market” that rules, but some of the biggest telecom-media-internet companies on the planet.

Furthermore, it is not just that the composition of the ITU changed in the 1980s, but its ITRs and constitution, too. Some changes were subtle but crucial nonetheless, as in the recognition, for the first time, of “private operating agencies” – code for private telecom carriers — in the first Article of the ITRs.

A new Article 9 was included permitting ‘special arrangements’ between countries for whatever kinds of set-ups they wanted to permit. This was the ‘private networks clause’ the US had fought for decades in order to bring about at the international level similar conditions that it had been fostering at home since the 1950s (see last post). Article 9 also sanctioned international bypass arrangements that permitted competitive telecoms operators to skirt around national telecom monopolies, if the countries at both ends of the connection agreed.

In perhaps the clearest statement that the “market rules”, by 1998, the ITU baldly stated “that the development of the Internet is essentially market-led and driven by private and government initiatives” (emphasis added, Res. 102).  NGOs active in the ITU and whose guidance it sought were also called out by name (ICANN, IETF, ISOC, W3C, etc.), not just once in the text and a footnote, but several times and in the main text (see Res. 101-103 & 133) on pages 408, 412, 415-6, 475 & 478. Cooperation with these non-state actors was put on a formal footing at this time, and expanded thereafter, especially with the WSIS processes that gave rise to the Internet Governance Forum (IGF), as I indicated in the second post in this series.

To claim, therefore, as Ryan and Patrick and almost all of those who appeared before the U.S. congressional hearings on “International Proposals to Regulate the Internet” did, that the ITU is a state-dominated, telegraph-era dinosaur is to be either willfully blind or seriously misleading. Of course, there are still undoubtedly many points of conflict, but for better or worse the notion that development of the internet will be market-driven is not one of them.

Four Reasons Why Proposed Changes to the ITRs are Mainly about Economics and Interconnection versus Internet Censorship and Control.

As Mueller observes, proposed changes to the ITRs are mainly about economics and interconnection rather than internet censorship and control. I agree, and in this regard I think four things stand out: (1) Article 9 of the ITRs allowing “special arrangements”; (2) the ETNO proposals to change Articles 2 through 4 in the ITRs in ways that would drive a stake through the heart of network neutrality principles; (3) clauses that add language to deal with anti-trust issues, competition authorities, and ‘alternative dispute resolution’ mechanisms; and (4) proposed new sections to Article 6 (6.12-6.18) that amount to a nascent ‘global consumer bill of rights’ for mobile services.

1) Article 9: Special Arrangements: Article 9 is crucial because it allows companies to build, lease or otherwise cobble together connections outside the ITU rules, so long as countries on both ends of the link agree. Some technolibertian, free marketeer, no government-types misrepresent this as an escape hatch through which “90 percent + of global comms” skirts around the ITU’s rules and regs, but this is not true.

The majority of traffic still runs across the networks of legacy telecom companies, and they are fighting tooth-and-nail to keep things that way. However, and this is where the importance of Article 9 rests, internet companies and over-the-top services (e.g. Netflix, Google, Facebook, Steam, Apple, etc.) are building content distribution networks (CDNs), or leasing them from providers like Akamai, Amazon Web Services, Limelight, etc., that bypass the incumbents’ long-distance and middle-mile connections, while still depending on their last mile links to subscribers’ premises — where monopolies and duopolies still rule.

Internet companies also cross-connect with one another at global internet exchanges and data centres around the world (e.g. Google links directly too Facebook), wherever governments permit ‘special arrangements’ allowing them to do so. Netflix, for instance, recently announced plans to build its own CDN – Open Connect – that will hand-off it’s massive flow of video “at no cost to the locations the ISP desires, . . . [or] at common internet exchanges”. No changes or additions to Article 9 in the ITRs have so far been proposed, so these arrangements will not be directly affected. Here, then, the market and contracts rule.

(2) A proposal to add a new section to the ITRS (Article 3.7) and a similar one by the European Telecommunications Network Operators (ETNO), however, appear to work against these arrangements. The language proposed for a new Article 3.7 directs Administrations (government regulators) to

  . . .  take appropriate measures nationally to ensure that all parties . . . involved in the provision of international Internet connections negotiate and agree to bilateral commercial arrangements . . . that take into account the possible need for compensation between them for the value of elements such as traffic flow, number of routes, geographical coverage and cost of international transmission, and the possible application of network externalities, amongst others (emphasis added).

The ETNO proposal speaks about the need “to ensure an adequate return on investment in high bandwidth infrastructures”, and directs telecom-ISPs “to negotiate commercial agreements to achieve a sustainable system of fair compensation for telecommunications services and, where appropriate, respecting the principle of sending party network pays (emphasis added). As Mueller points out, this is blatantly protectionist language for the benefit of incumbents and has little place in the ITRs. I agree.

This stuff is complicated, but for simplicity sake, let’s say that if you agree with network neutrality, and I do, this is one of the worst additions to the ITRs being proposed. It comes not so much from heavy-handed governments, however, but tracks moves by the incumbent telecom-ISPs in many countries to charge online video, gaming, search and social media platforms for carriage, and at more expensive rates than they charge their own comparable services. At its essence, this is bid to take the “fee-for-carriage” regime from broadcasting and super-impose on the internet, while trying to justify such a move in the name of a ‘higher principle’: paying for the construction of next generation broadband networks built and owned by legacy telecom-internet service providers.

The response to this amongst some critics has been the silliest, with Cnet and others calling this a bid by bad Europeans to impose a tax on Facebook and Google to pay for their own grandiose broadband internet projects. It is nothing of the sort. In fact, proposed additions to the ITRs (Art. 6.1.3a) rule out that prospect.

NZ – Aussie Imperialism?

The ETNO/Art. 3.7 proposals embody a creeping tendency to require Netflix, Google, Facebook, Apple and other heavy bandwidth services to pay for carriage. The trend seems to be flourishing the most in Australia and New Zealand, while gaining momentum in Canada, the U.S. and Europe. I call it the pay-per internet. Such practices allow telecom-ISPs to selectively impose bandwidth caps and heavier charges on some services while lifting the caps and charges for their own or allied services. In other words, some services chosen by the telecom-ISP get an open pipe while the rest are given something less. Call this a proposal for tolls on the global internet.

In New Zealand and Australia, these practices are nearly universal and impose severe burdens on internet users while throttling rivals and eroding the diversity of services.  Dominant players across the telecom-media-internet ecology are typically reinforced because the selective use of bandwidth caps and heavy charges are lifted for them while imposed on others. The basic principle at stake from the incumbents’ perspective was articulated a decade ago by then CEO of internet services at the ‘old AT&T’, who snorted that “AT&T didn’t spend $56 billion to get into the cable business to have the blood sucked out of our veins” (quoted in Lessig, 2000, p. 995).

Old attitudes don’t die easy and the same disparaging view of rival internet services ‘free-riding’ on the incumbent carriers’ pipes was once again expressed by the ‘new’ AT&T in 2005 after it had been brought back from the brink of a debt-addled death by SBC. The ‘new’ AT&T’s CEO Ed Whitacre put the matter this way:

 How do you think they’re [Google, MSN, Vonage, others] going to get to customers? Through a broadband pipe . . . . Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes?

Adding Article 3.7, or some variation of it, as found in the ETNO proposal, would be just the “mechanism” Whitacre was seeking. If adopted, it could accelerate a practice that has already been gaining momentum by giving it the ITU’s seal of approval.

For those with minds like an elephant, this might look like the “to-the-wall” debates about ‘international bypass’ that was suppose to have been put to rest in 1998 when the ITU embraced the hegemony of market rule. They’d be right, but this version of ‘old wine in new bottles’ would now neuter network neutrality.

Supporters of that principle might want to work hard to kill the ETNO/Article 3.7 proposals, because, as I said at the outset of this post, the words of the ITU matter in the global politics of the internet. For the technolibertarian, free marketeer crowd, the hypocrisy of calling out the ITU as a threat to the internet while remaining silent on telcos’ plans to foist the pay-per model on the global internet is stunning.

(3) Anti-trust issues, Competition Authorities, and ‘Alternative Dispute Resolution’ mechanisms: Consolidating the “Market-State”

Perhaps the fact that the proposals to enshrine the pay-per internet model through additions to Article 3 are at war with Article 9 (Special Arrangements) is the reason behind other proposals to add new language on anti-trust issues, competition authorities, and ‘alternative dispute resolution’ mechanisms in Article 6.8:

“When evaluating significant market power and its abuse, national competition authorities should also take into account international market share and international market power”.

Such language might come as a surprise to the self-annointed vanguard of the technology liberation front, but for those whose heads are in the real world rather than some idealized fantasy of perfect markets, its not surprising at all. In fact, at the same time that the market in telecoms and internet were being expanded by the ITU in the 1980s and 1990s, a significant new actor, the World Trade Organization, also emerged to galvanize the marketization push through two telecom agreements.

The market builders also turned to the nation state for help in droves. In 1990, there were 14 national telecom regulators worldwide, by 2000 there were 90; today there are 155 – most of which were built according to specs spelt in the regulatory annex to the WTO 1997 telecoms agreement.

(4) New Additions to Article 6 (6.12-6.18) hint at a ‘global consumer bill of rights’ for mobile services

Political economists like Karl Polanyi and Charles Linblom have long focused on the role of the state and regulation in constructing and shaping the contours of markets. The peculiar qualities of telecoms and internet communication means that such processes are especially evident in this domain.  While most of the expanded regulatory apparatus just referred to was all about constructing viable markets, they were mostly silent with respect to things like freedom of expression and consumer rights.  They were market-building exercises and only indirectly, if at all, concerned with freedom of expression issues and democracy.

Some of the proposed additions to the ITRs take a tentative step to filling in a few gaps on the consumer protection side of things by sketching ever so gently some guidelines with respect to international roaming charges for mobile services. In some respects, the language is familiar from the 1980s, with the emphasis on “cost-based pricing”, “pricing transparency”, etc., but it also reaches a bit further to add new language about the need to avoid the well-documented issue of billing shock and sky-high international roaming charges in many countries, not least in Canada, the U.S. and UK.

Indeed, Canadians are saddled with some of the highest international mobile roaming rates in the world, and that has recently been parlayed into a consensus proposal from regulators, industry and advocacy groups for a new ‘national code’ for wireless services.  The proposed additions to the ITRs, thus, are swimming with the tide.

Seen in this light, whatever moral suasion that these suggested additions to the ITRs might have might just be welcome by many people, especially in light of the mobile internet explosion.

Next Post: Really Scary Proposed Changes to the ITRs

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[i] The basic texts of the ITU can be found here: http://www.itu.int/pub/S-CONF-PLEN-2011.