Today, the FCC announced the results of their vote regarding rules concerning Network Neutrality. Kit Dotson reported on the vote earlier today:

Right now the big row about the net neutrality vote in front of the FCC happens to be about how many groups feel that the rules being considered are broken and don’t go far enough to protect an open Internet. Most proponents advocate a reclassification of broadband as regulated common-carriers much the same way telephone networks are. The new rules do not do this; instead they enforce a sort of regulation against “unreasonable discrimination” for over-the-wire broadband providers but do nothing to wireless providers.

SiliconANGLE’s Glenn Manishin provided his commentary yesterday prior to the vote, in which he described the proposed rules as “modest” at best:

Actually, the modest few rules FCC Chairman Genachowski has proposed are so trivial that, like all good policy, compromises or settlements, they have angered both the left and the right. The former deplores the scheme as worse than nothing, while the latter says it is a slippery slope to full regulation of the Internet.

FCC Chairman Julius Genachowski disagrees with our analysts, though, calling the proposed rules “a strong and balanced order.”

Are the Rules Strong and Balanced?

As my loyal readers know, I’m an advocate for actually researching topics before you pontificate, so before I began this post, I wanted to read the details of the rules that were approved today, unlike many others who posted headlines trumpeting “betrayal” before the rules were even published.

Unfortunately, as is par for the course with government websites, the original documents were unavailable for download. I managed to snake a copy from my favorite policy wonk (since the FCC’s servers had hit their bandwidth trasfer cap) and saved it into a Google Document.

The disclosed sections of the new rules raise more questions than they answer.

The press release contains the much vaunted rules, but skimps out on at least one of the parts I’m most interested in learning more about: penalties for non-compliance. One reason I’m particularly interested in learning about penalties for non-compliance because the rules, as defined, are ones I routinely ask service providers I patronize to routinely violate.

But let’s take this one step at a time; let’s review the new rules first.

Rule 1: Transparency

The first rule essentially demands all Internet Service Providers provide accurate information about their network management techniques, as well as (presumably) plain English descriptions of the terms of service for their usage contracts.

Why Rule 1 is Untenable: It’s harmful for startups and prevents competition.

In general, I’m all for rules that help me understand more clearly the often asinine data contracts my service providers try to push on me. I don’t have a problem with that aspect of the rule (although it quite likely falls under the jurisdiction of the Federal Trade Commission’s existing regulation rather than the Federal Communications Commission’s new regulation).

What the transparency rule hints at is that either live data or summaries of live data must be given to either the public or the FCC (the rule is unclear here) to prove that what’s being claimed in the “plain English explanations” is what’s being adhered to under the hood.

What makes this a dicey proposition is that, as I’ve explained time and time again, this requires the usage of what’s known as DPI (deep packet inspection). In addition to DPI being very intrusive, it’s also very expensive. According to representatives from organizations that offer sales of such equipment, DPI network appliances can run upwards of $800,000 per unit, and need to be installed anywhere there’s a tiered network data center.

I don’t see the government stepping in to foot this bill, so that means the service providers must foot the bill. Either way, the cost gets passed on to the public via taxes or increased service fees. Worse still, it entrenches the incumbent players even further, since $800,000 makes the idea of starting a mom-and-pop or bootstrapped competitor cost prohibitive.

If you don’t think such entrants exist, think again and take a look at the WiMax market in Colorado Springs, for instance. Dozens of these mom and pop operations exist in that market, thanks to an interesting business environment favoring entrepreneurs as well as a geography that lends itself to over-the-air broadband versus wirelines.

Network neutrality would kill the vast majority of those players and leave millions of people without access at all, since the broadband options (aside from WiMax) are severely limited there.

Rule 2: No Blocking

The second rule basically demands that no services be blocked at the service provider level, so long as the content is lawful.

Why Rule 2 is Untenable: It severely retards the development of cloud services.

In case you missed it, cloud computing is hot right now. SiliconANGLE has undergone a radical shift in it’s coverage focus over the last nine months or so, focusing on the enterprise and cloud computing space. We still cover mobile and social, but beefing up our in-house expertise on cloud computing has been a big focus of ours because we see that’s where the market as a whole is headed, both from a perspective of consumer demand as well as a perspective of vendor development.

When the average mainstream person thinks of cloud computing, the first thing that springs to mind is what’s defined as Software as a Services (SaaS). You know this as Google Documents, Facebook, Twitter, Microsoft’s Live Office and millions of other social and enterprise focused online services.

SaaS is only part of the cloud computing pantheon. Cloud also encompasses Platform as a Service (PaaS), and Infrastructure as a Service (IaaS), amongst other things.

IaaS and PaaS are key growth areas in the cloud business, and it’s one that traditional entrenched service providers are key players in. As part of their business class offerings to their customers, telecoms and cableco’s are offering cloud services as package deals, handling server requirements as well as connectivity.

Since the networks and the *aaS are managed at the service provider level, the roles of network administration are also handled at the service provider level. It’s common practice for large organizations with their own in-house IT teams to limit connectivity to certain kinds of sites. Even though they may be entirely “lawful,” they may inhibit productivity.

Preventing service providers from acting as normal network administrators do could inhibit the growth of cloud services and will most certainly limit consumer choice for small businesses in choosing cloud service providers.

Rule 3: No Unreasonable Discrimination

The third rule could effectively be summarized as the “all bits are created equally” rule. This rule is patently absurd on it’s face, though it seeks to hide the absurdity by creating the allowance for “reasonable network management.”

Why Rule 3 is Untenable: “Reasonable network management” isn’t, in fact, reasonable (according to the FCC).

Later on in their press release, the FCC elaborates on the meaning of “reasonable network management.” After their lengthy definiton for “reasonable network management,” they later contradict themselves with a big section with the heading: “Pay for Priority Unlikely to Satisfy “No Unreasonable Discrimination” Rule.”

If you surf the web and read the arguments of long-time network neutrality advocates, you’ll hear things like: “network neutrality is one of the core foundational principles of the internet,” and “it is how the Net has always been,” and “we should continue to be fairly protective of it.”

This perspective fails to recognize that once the Internet stopped being entirely funded by the government, tiered pricing for priority packet delivery very quickly came into play from the network operations level all the way down to the consumer level. In 1998, you’d pay more for a 56k connection than you’d pay for a 28k connection, and you’d pay exponentially more for a mere 128k ISDN or a 1.44mb T1 connection.

The same is true today – of all network connections. An individual or business can expect to pay more money if they’re using more services and speed.

More importantly, when your data absolutely, positively, with no interruptions must get there with no exceptions, you pay a premium.

Let me give you two relatable examples:

1. Emergency Phone Calls – There’s a network service that’s long been in common practice (since, at least, the early part of the last decade) to aid Voice over IP users (VoIP) called Quality of Services (QoS).

   QoS is essentially the practice giving certain ports and data-types priority on the network. It’s what allows VoIP users to make e911 calls, even when someone may be downloading a massive file from Bittorrent on the next computer over. In short, it’s the practice of treating bits un-equally.

2. Live broadcast in crowded environments – If you want to enforce network neutrality, you have to define what the Internet actually is. Does it stop at the ISP level? If I run a convention center and run internal wireless and wired networks, is my private network the Internet?The strictest definition of the term means my entire network is The Internet.

   So if all bits are created equally and private networks set up to accommodate tech conference goers at Moscone Center (for instance) are subject to Network Neutrality rules, then how can you expect to be able to make a Skype call, or perhaps run a live interview on Justin.TV? From a network architecture rules standpoint, you can’t, because those types of operations are governed by Quality-of-Service (QoS) rules.

   QoS is essentially the practice giving certain ports and data-types priority on the network. It’s what allows VoIP users to make e911 calls, even when someone may be downloading a massive file from Bittorrent on the next computer over. In short, it’s the practice of treating bits un-equally.

   Without the ability to apply QoS to our broadcast ports and protect it from the sometimes hundreds of thousands of other attendees on their myriad of wireless devices, we’d be unable to do an Internet broadcast without purchasing literally millions of dollars worth of traditional broadcast equipment.

This Whole Set of Rules Pretty Much Sucks

There’s very little in these rules I find acceptable, which is probably surprising to most network neutrality advocates. I’m the prime demographic for someone who should be in support of the network neutrality rules:

• I’m a broadband consumer,
• I’m in the technology business,
• I’m an advocate of free speech,
• I’m an old-timer in Internet Years,
• I’m not on the payroll of any major service provider concerns,
• and most importantly: my vocation is that of a content producer.

I stand the most to lose should all service providers suddenly decide to be evil and hate on indie content producers.

Y’see, I’m not against network neutrality per se. Network neutrality, in most applications, is a good thing. Service providers shouldn’t, in general, use their incumbent position to monopolize content production and force out smaller players. I don’t like that when it happens, but mostly because I’m a smaller player.

What I hate even more than that is when the government steps in and creates rules around these things. The government is notoriously stupid when it comes to technology (they can’t even keep the FCC server up to serve copies of the new rules).

Whenever the government creates rules and laws about things they don’t fully understand, two things happen: they grant themselves new powers of enforcement and punishment, and they disrupt the natural checks and balances that already exist within the marketplace and the government.

Most of what the FCC seeks to govern here with network neutrality is already governable by the Justice Department (when it comes to antitrust law and service providers using incumbent positions to crowd out minor players) and the FTC (when it comes to misrepresenting what consumer is buying – also known as “truth in advertising”).

Why grant the government a new set of weapons to beat up on small business and innovation?