EPISODE 3 NET NEUTRALITY TRANSCRIPT Courtesy of YouTubeÕs Closed Caption System. Edited by Jared Cummings [SCOTT WALTER] Thanks for tuning in, IÕm Scott Walter, and I'm Michael Watson in this episode we go in-depth behind the controversy over net neutrality this is the Influence Watch Podcast. Last week the Federal Communications Commission voted to reverse a 2015 rule that instituted so-called net neutrality which requires internet service providers or ISPs to treat all content equally and regulated ISPs using the so-called title to common carriers law which was used in the 1930s to regulate the old phone monopolies the Obama era net neutrality rules were strongly supported by Internet content companies like Netflix Facebook and Google as well as by liberal activist groups like Free Press which want more government control of media access and content But a new president has meant a new head of the Federal Communications Commission and with support from broadband internet providers like Verizon and AT&T as well as free-market advocates the FCC has reversed the Obama era regulations. Now Mike let's start by a little explanation. What is net neutrality? [MIKE WATSON] I'm going to outsource the definition of net neutrality to Peter Van Doren and Thomas Firey of the Cato Institute who gave a pretty reasonable definition. First you have to understand that the Internet is simply a series of pathways for transmitting packages of ones and zeros the basic language of computers from one computer to another when content such as email music video this podcast is transmitted the content is broken down into small packets of information each of which is sent separately over the Internet to a destination computer which then reassembles the information packages back into the content. Network neutrality requires that all the different packages of information be treated and priced alike by Internet network providers regardless of who sent them or what information they contain so essentially we're sitting here having this conversation talking the audience is out there in the Internet our conversation is being broken down into ones and zeros the language of the computer that you're watching this on or the iPhone that you're listening to this podcast on, and then it's being sent through the wires to routers in the bowels of the Internet and server farms and God knows where and it's then being sent on to your computer where it's being reassembled into our conversation and under network neutrality the people who control the router and control the wires the internet service provider cannot show favor either by making it some rear by making it travel faster or by making it travel slower all that data or and all the rest of the data in the internet your you know your son watching Netflix gets the same treatment by the router under network neutrality as you are listening to us have this conversation. [SCOTT WALTER] Yeah well, give us a little of the history of the fight over this policy issue? [MIKE WATSON] Sure, so the question over whether there should be mandatory network neutrality has been going on since the early too since kind of the late 2000s. The left, liberals ostensibly fearing manipulation of information access by Internet service providers and also the pricing of internet at such a level that the average person or that poor people couldn't afford it started to demand it and in 2008 there was an order to Comcast that it needed to stop slowing access. Comcast was slowing access to BitTorrent which is a file-sharing service that is often used to evade copyright and uses enormous quantities of bandwidth which is the rivalry source of the internet. Comcast took the FCC to court. The courts ruled that the FCC did not have the authority to order Comcast not to slow down access to to BitTorrent, to slow down with the downloads from BitTorrent. The FCC then spent the next few years trying to figure out a way to institute net neutrality. This is during the Obama administration without invoking title two of the Communications Act but by 2015 they were pretty set that they were gonna do it and then in 2015, Tom Wheeler who was the FCC Chairman under President Obama ordered that the Internet service providers should be regulated under title two as common carriers which gave the FCC very wide latitude to intervene in the ISPs contracts and with the data companies their rate schedules for use of bandwidth and then the 2016 election happened, and we got a new government and a new FCC meant a new FCC chairman meant a new FCC majority under a gentleman by the name of IG pi who had been a minority Republican commissioner in 2015 and had strongly opposed the original issuance of the title to order once he got the majority after President Trump nominated a new Republican Commissioner. He announced that he was going to have a vote to reverse the net neutrality order and then in December very recently the FCC did vote to reverse the net neutrality [SCOTT WALTER] And let's take a step back for a second to for the kind of Influence Watch tracking that we like to do on the show. Ajit Pai, the new chairman who's reversed this order to be fair he has a background at an influencer. [MIKE WATSON] Yes, as the Liberals pointed out when he announced that he was going to do this, Pai was formerly the associate general counsel of Verizon. Verizon is an Internet service provider it is one of my internet service providers I believe it is also one of your internet service providers and they have a vested interest. Verizon does in this debate. Verizon very much wants net neutrality to be repealed, and their former employee now has done. [SCOTT WALTER] So now having said that the previous FCC Commissioner was a law school buddy of President Obama and had fought on the other side of net neutrality. So there always are back stories to the people in the most influential positions. [MIKE WATSON] Sure, and additionally the Obama administration which was fairly involved in convincing Commissioner, former Commission Chairman Wheeler to advance the net neutrality order, to begin with. They had very close ties to Google which we'll get into sort of the lay of the players, but Google was one of the companies that uses the most bandwidth and has the most to gain from net neutrality and advocated pretty heavily for it. [SCOTT WALTER] Yeah okay well, let's as you say let's go into a little more about the providers at issue here. First, tell us a bit about the leading Internet service providers. [MIKE WATSON] Sure, so but the first set of players and the set of players that the media has been most focused on are the Internet service providers. They're the people the cable the cable company that you get your internet from or the wireless service provider that delivers Internet to your phone these are the Verizon Comcast Cox Communications Sprint AT&T t-mobile etc. They control the physical infrastructure that delivers the ones and zeros that are then reassembled into content in your computer. Theoretically, they have the ability to block or slow or speed up access to content and what net neutrality the regulation would it have formerly required them to do was to not do that it was to not block not slow not speed up, treat all packets must be treated the same. [SCOTT WALTER] Now question for you here was the Obama era FCC able to find many examples of abuses like that or supposed abuses like that? [MIKE WATSON] No, they cited four instances over ten years in their first attempt at a net neutrality rulemaking. In 2010 there was not an obvious infringement, this was a proactive regulation by the Obama administration FCC. It was not a reaction to an unfair or to existing unfair business practices. [SCOTT WALTER] they have a trade group I believe the ISPs. [MIKE WATSON] They do. They have a trade association broadband for America, but practically there are a lot of competitive pressures in the isp market. I myself use two of them. I have Comcast wired to my house, and I have Verizon Wireless on my phone and if Verizon let's say was going to slow my access to Netflix or to slow my access to YouTube that would be for me an incentive to change wireless providers you know I might go to Sprint. If Comcast was throttling my access to YouTube at home well, I just drop it because it's Comcast and probably use my Verizon phone in lieu of having a wired internet connection at all [SCOTT WALTER] And in fact, as I recall the horror stories usually revolve around the ISPs that are delivering Internet by wires or fiber to homes and yet it turns out that among the poor it's actually much more common to have internet access through phone contracts rather than through hard-wired home contracts. [MIKE WATSON] I mean that and I mean that may be true I don't know, but certainly I mean you can go to your to your local like if you go to a mall you know there be an 18-2 store there be a Verizon store be a kiosk for Sprint these are all there's there's that competitive pressure and that competitive pressure reduces the incentive again unless the ISPs are engaging in anti-competitive behavior which would then bring in other regulations beyond a net neutrality bring in the Federal Trade Commission. Unless they're gauging an agency competitive behavior that may fall foul of other rules there is a there is a way out that for consumers. [SCOTT WALTER] Now we've talked about the ISPs, the other part of the equation here are the content providers what can you tell us about that? [MIKE WATSON] Sure, the the content providers also known in the in the parlance of the trade as edge companies are the services that may kind of make internet these are the Netflixes, the Googles, the Amazons, the Facebooks and the problem that they create for the Internet service providers is that they use especially the streaming services YouTube Netflix Amazon Prime video Facebook video they hog bandwidth they hog the physical infrastructure of the Internet. Netflix and YouTube alone, YouTube is a Google property in 2016 used over half the bandwidth of the entire internet for America. I said before yeah I believe that was for the United States so the content providers realizing that they use so much of the Internet service providers infrastructure are afraid that the Internet service providers in the new system with net neutrality having been repealed that Verizon and Comcast and Sprints are gonna go to Netflix and say you're using a third of our internet you need to you need to pay your fair share of the cost of maintaining and of delivering all the internet that you use to our customers and that the internet service providers will if Netflix does not agree to bear that cost that they will slow the traffic going to Netflix that it'll take longer to download your the show that you're streaming. [SCOTT WALTER] Now in the in the recent fight over this, of course, this side too had a trade group with the classically impenetrable name of Internet Association yep right [MIKE WATSON] Yep the there that is the trader Trade Organization for the content the content providers there was also when the original set of rules was being lobbied on in 2015 they were also supported by the ad hoc telecommunications users committee which consisted of a bunch of tide of Fortune 500 companies that aren't essentially internet providers I believe Bank of America, UPS, that among numerous others that like have web sites and do e-commerce but also but we're also in favor of the of the net neutrality regulations and also lobbied on their behalf [SCOTT WALTER] Yeah and then, of course, you have the ideological wings fighting over the policy area so let's start with the liberal side of the equation who was fighting in favor of net neutrality [MIKE WATSON] So the the liberal sort of tech policy wonk types generally side with the content providers they believe that common carrier regulation is the only way to ensure open access to content which the ISPs may either price out of people's ability to pay or just choke off for ideological reasons the move the most controversial certainly group that has been involved is Free Press which was co-founded by an extreme left communications professor by the name of Robert McChesney [SCOTT WALTER] As my favorite quotation from Mr. McChesney would be ÒI would be hesitant to say I'm not a Marxist.Ó And he's also explained that the final goal for him in of all of this is to simply end media corporations of any kind [MIKE WATSON] And of course they've taken quite a bit of money from the major liberal foundations the Ford Foundation, the Park Foundation the Open Society Foundations, Proteus fund, that we went Fikes Foundation which is the personal foundation of prominent Texas liberal oil man, not something you say not something you say in that order all that often Leland Fikes and then also the Schumann Center for Media and Democracy which is one of the bigger funders of left-wing media projects. [SCOTT WALTER] Yes, Bill Moyers is its guiding star. Moyers being a leading left-wing advocate who himself came from LBJ's White House staff. [MIKE WATSON] WasnÕt he Press secretary? [SCOTT WALTER Yes. So the other thing that I would want to point out is that the folks behind net neutrality and the precisely every one of those foundations that you just mentioned have been in previous fights related to free speech and that would be immediately before this they were all part of the same group of billionaire foundations that were funding campaign finance reform and the leading foundation in both cases was the Pew Charitable Trusts but there are some others those you want to talk about involved in the Obama era FCC. [MIKE WATSON] Sure, both the Obama administration, the Obama White House and Obama's FCC were very close with these liberal tech groups and also with the edge companies with the content providers Obama the Obama White House is deputy chief technology officer Andrew McLaughlin was Google's head of global public policy was the probably the biggest edge company even though Netflix apparently uses more data than they do. And the Obama era FCC had multiple political side staff who once worked with or for Free Press. [SCOTT WALTER] Yeah, and of course the head of Google Eric Schmidt was a very prominent supporter and contributor to both of Obama's both presidential campaigns [MIKE WATSON] and also Hillary Clinton's presidential run in 2016. [SCOTT WALTER] Exactly, so I want to call attention to one thing here which is that the way that in almost every public policy fight the left likes to present itself as an opponent of the big corporations that are threatening the ordinary American but in fact what we see in this fight as in so many is that in fact there are two sets of corporations fighting each other. [MIKE WATSON] Right, it's two sets of two sets of big companies that are on different sides of a transaction in this case paying for use of the infrastructure of the Internet the ISPs are selling it the content providers are buying it and the buyers don't want to want to pay less and the sellers want to collect more and they have both come to Washington and spend quite a bit of money on very nice lobbying chaps who are going to buy very large houses in Great Falls with the proceeds of this fight and theyÕre just gonna keep going at it. [SCOTT WALTER] Yep. Now you've covered the left-hand side of the ideological folks fighting this battle let's flip to the other side the free market advocates tell us a bit about them the [MIKE WATSON] On the right, the AEIs, the Heritages, the Catos, the general position is to be opposed to the title II common carrier regulation the argument being that it chokes off in innovation in the provision of broadband internet especially in rural and other underserved areas. The little ISPs and yes they do exist have basically been put on Death Watch by the Obama era and net neutrality rules complying is simply more than that they make and that they can do with the amount of money that they have. The Commissioner Pai has been very very adamant that it is on the behalf of the small ISPs that he's doing this and a lot of the conservative and libertarian free-market ideologues the argument has gone there's no obviously compelling reason for this regulation to have been put into place. In the first place there's no obvious reason to believe that Netflix and Google have a moral have the more moral position that they should have to pay less for using more than half the Internet then they would necessarily pay under a free market system and so why should the government intervene proactively when anti-competitive behavior can be handled by the existing antitrust laws and by the Federal Trade Commission and if there is you know widespread blocking and throttling either for ideological reasons or for anti-competitive reasons that you could then either congressionally through legislation or through a regulatory process deal with a problem once you know what it looks like in practice. [SCOTT WALTER] Yep. One more tidbit that I want to stick in here on the the supposedly nonpartisan outside advocates not the corporate advocates back in 2009 when obviously the Obama administration's first year in office and the FCC is wanting to push ahead with this even though it's unclear that there, in fact, is legal grounds for the FCC trying to regulate the Internet in fact as you pointed out they lost court cases because they didn't really have the legal grounds for it, a classic maneuver that again very common in these kinds of fights the FCC went to a nonpartisan Harvard based Research Center and they asked for a quote Òindependent review of existing information so that the FCC could lay the foundation for enlightened data-driven decision makingÓ and so they did indeed get a report for that now the hilarious thing however if you do what influence watch.org and the influence watch podcast do if you connect dots on the funding what do you find when you look at that report in its acknowledgments of its funders you see them gushingly praising the Ford Foundation and the John D and Catherine T MacArthur MacArthur Foundation for being so remarkably open and flexible in their willingness to receive and process our requests for funding in lightning speed now of course what this meant is that those two billionaire foundations which for years had advocated for net neutrality were literally paying for the research to review the research that they had already paid for so that friendly government officials could then turn around and say see we are simply doing what the data-driven decision process is doing. [MIKE WATSON] That's the same thing that that the left is very adamant about when business is doing when businesses commission University or commission think-tank research you know they'll go grab their pots and pans and start banging on them that this is just you know research for hire they're delivering whatever outcome that they were that they were commissioned to deliver. In fact, you know whether it's an ideological foundation or whether it's a business, everybody really knows which researchers are going to make assumptions in their social science research which is notoriously imprecise that will favor one outcome over the other and so it doesn't matter again whether you're a business looking for looking for a favorable research light or whether you're a you know an advocacy group or a or a foundation with an ideological bent you can find somebody who will, following all the rigors of the discipline just happens to be a not terribly rigorous discipline we'll give you an answer that more or less satisfies you. ItÕs similar to how the media has covered the the general fight over net neutrality they've been very adamant about the involvement of the ISPs and that the Ajit Pai side is hopelessly tied to the ISPs both because Pai himself formerly worked for the ISPs and because the ISPs want the role withdrawn, but very little is said about the content providers, the edge companies and the fact that they have a vested financial interest in the in the rule in the net neutrality rule staying and so again when John Oliver goes on HBO and says look at what a horrible thing a sheep is doing that neutrality needs to stay or the internet will die please write your three million comments to the FCC John Oliver is an employee of HBO which delivers a substantial amount of its content through HBO go over the Internet we had through idiot through video streaming which. Which I'm sure he'll get around to mentioning at some point by the third Tuesday and never [SCOTT WALTER] Now, let's also point out that the pro-net neutrality side warns that even though there's virtually no actual examples of this but warns that you know your internet service provider might end up blocking entirely some website that you like because it's unruly, or it's opposed to the corporate interest and all that well that is a theoretical possibility I suppose, but I can think of a lot very concrete examples of the content providers on the other side of this fight very much throttling and shutting down groups. There's the great story of the producer of this podcast is Jake Klein and who runs our all of our film and video work and he did a wonderful video just a couple of weeks ago on attacking identity politics on the left and the right it was as I would say about as fair as you could possibly be and certainly was anti all supremacists in ideology of any kind. Right, and now a little bit of background Facebook and Google combine for 85% of online ad revenue. And Google alone eighty percent of internet search. If you're looking for monopolists in the in the internet space I think you're more likely to find them on the edge provider side rather than the Internet service provider side even when theoretically individual consumers as far as I'm aware the only wired Internet provider to my house is Comcast may be in a situation where they don't have a choice in say their wired internet provision. Of course, then I can go use my wireless and whatever but you know if I'm gonna access the internet search I'm going to use Google if I'm going to you know talk to my friend this is gonna be Facebook. So what happened with Capital Research Centers video with Jake's video is despite the fact that it not only did not endorse but condemned ethnic supremacism it was blocked by the automatic system that you YouTube uses to determine what's bad, naughty videos and what's good fluffy happy bunny videos, and then even upon even on appeal when it's ostensibly supposed to be reviewed by by a human being the age restriction on it was upheld, and that really does affect the ability of consumers if you're not logged in to YouTube if you're not logged in to your Google account you can't access ad restricted videos you cannot I believe you cannot advertise age restricted videos is that correct? [SCOTT WALTER] I'm not certain about that although I do know that in this particular case when the video was put on our Facebook page there were issues with trying to advertise using Facebook the other great advertisement on the InternetÕs [MIKE WATSON] Other half of the duopoly on the internet. And of course, you know Capital Research Center isn't alone in this everything from you know Twitter blocked a political ad by a Republican candidate that discussed her opposition to abortion. YouTube has age locked videos by a conservative commentator Dennis Prager [SCOTT WALTER] He's suing in that case. [MIKE WATSON] Yeah, he is going to court. YouTube is even blocking liberal videos that are attempting to expose haha sinners and to say these are these people they're bad people this is what he said. And again the FCC has taken note of this in in defense of withdrawing the net neutrality rules chairman Pai has suggested that edge companies quote routinely block or discriminate against content they don't like and this is actually happening, and it's actually been seen you know. Obviously we don't know what you know we don't fully know what's gonna happen what the Internet service providers are gonna do now that they have at least for the for the time being freedom from net neutrality or the imminent imposition of net neutrality and you know we'll have to see whether the competition behaves as you know free market people believe that competition will at least sand off the roughest edges. [SCOTT WALTER] Yes, it's no guarantee that no corporation anywhere will do bad things. Sometimes corporations do stupid and bad things but when you have a relatively free market that provides opportunities for innovators to do other things that will draw people [MIKE WATSON] That will draw people away from the old the old service that's doing bad things to the new services [SCOTT WALTER] Whereas if government regulators sitting in Washington DC have enormous power over an entire sector it is very unlikely that any innovation of any kind comes about and in fact we should mention a critical data point in this debate is that after the 2015 net neutrality rules came into effect investment in broadband access declined even though of course under the evil old regime without net neutrality it had been going upward for years and years I do want to throw in one more thing on Robert McChesney and the Free Press folks. This if you go on their website today you will see the horror stories that may happen with Internet service providers but I think you should go back and look up everything that they said in a previous time when they were warning of Armageddon and disaster, and that was when around the turn of this century when AOL then one of the leading Giants in all things remember that [MIKE WATSON] Remember the little CDs that they would send you with like what a hundred free hours [SCOTT WALTER] Yes. So AOL was it was a massively powerful corporation with an astronomical market cap and it wanted to merge with Time Warner which had failed in its efforts to get in much internet play but had massive quantities of content of movies and books and magazines and the rest it was so you've got look up what Mr. McChesney said back then this was going to be horrific everything that you ever read or see or watch will be completely controlled by one evil corporate well of course for those folks listening who have been to business school you know that the merger that was going to be crushing to all speech is now recognized as one of the worst business decisions in the history of American business one of the one of the companies involved lost over ninety percent of its value in 12 months so this was somewhat short of Armageddon in fact it was over. [MIKE WATSON] Armageddon for the company not Armageddon for the public [SCOTT WALTER] Yes, the public and free speech and the rest did survive so well we should we can close out by just saying that there is quite a possibility that this is not the end of the net neutrality fights because in Congress both Democrats and Republicans are talking about this is [MIKE WATSON This is gonna this is going to go on for a while the edge companies, entertainers who use the edge companies, services are going to continue pushing, for net neutrality to be restored either under title 2 or new legislation, so no this is not over this is gonna be around for for a while at least on until the structure of the business of the internet changes [SCOTT WALTER] Yeah well that is our show for this week if you're listening to this on iTunes or Stitcher know that we broadcast a live video version of this podcast at 10:00 a.m. on Thursdays on Facebook live and YouTube. You can find our pages by searching for Capital Research Center and if you're watching the video version we want to encourage you to subscribe to the audio on your preferred podcast platform. We'll see you next week. [MIKE WATSON] See you next week.