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What the FCC's Net Neutrality Decision Means

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Today, the Federal Communications Commission (FCC) voted to regulate broadband companies (including wireless companies) in much the same way that landline telephone companies have been regulated for decades. (This is a regulatory scheme known as "Title II" that reclassifies broadband providers as "common carriers." For more on what that means, see our previous coverage or check out what the ACLU has to say.)

For proponents of Net Neutrality, this is a great victory. For deregulators (and broadband companies), this is just the beginning of a series of court challenges and Congressional action that will attempt to overturn (or weaken) the new regulations.

The Short Video Version

If you're not into reading the details, or what the various voters actually said, here's an overview of the issue from Consumer Reports:

Specifically, What Happened Today?

A five-member FCC committee held a vote on whether to implement a new policy to regulate broadband internet providers. The vote was 3-2, split along party lines, with Republicans Michael O'Rielly and Ajut Pai voting against the new policy.

FCC Chairman Tom Wheeler (who voted in favor of the new regulations) said, in part:

The Internet is the most powerful and pervasive platform on the planet. It is simply too important to be left without rules and without a referee on the field. Think about it. The Internet has replaced the functions of the telephone and the post office. The Internet has redefined commerce, and as the outpouring from four million Americans has demonstrated, the Internet is the ultimate vehicle for free expression. The Internet is simply too important to allow broadband providers to be the ones making the rules.

This proposal has been described by one opponent as "a secret plan to regulate the Internet." Nonsense. This is no more a plan to regulate the Internet than the First Amendment is a plan to regulate free speech. They both stand for the same concepts: openness, expression, and an absence of gate keepers telling people what they can do, where they can go, and what they can think.

Commissioner Ajut Pai, one of the dissenting voters, said, "The Internet is not broken. There is no problem for the government to solve." Commissioner Michael O'Rielly, the other dissenting voter, prepared a written statement. He omitted the first two paragraphs of this statement when he spoke during the meeting:

Let me start by issuing apologies. First, I am just sick about what Chairman Wheeler was forced to go through during this process. It was disgraceful to have the Administration overtake the commission’s rulemaking process and dictate an outcome for pure political purposes. It is so disturbing to know that those efforts were about illegitimately pushing a larger political cause mostly unrelated to technology. This administration went so far beyond what has ever been attempted, and its inappropriate interference in the commission’s activities will forever change this institution.

Additionally, I am sorry to the staff members that were forced to prepare a half-baked, illogical, internally inconsistent, and indefensible document. For an institution that prides itself on quality of work and legal and technical expertise, this document is anything but. I guess that an artificial deadline to meet the radical protestors’ demands means that it is more likely that this item gets overturned by the courts because the work and thoughtful analysis needed to actually defend this completely flawed agenda is not included in the text.

Today, a majority of the commission attempts to usurp the authority of Congress by re-writing the Communications Act to suit its own “values” and political ends.

Clearly, there is a strong divide within the FCC about the core issue here.

FCC Chairman Tom Wheeler on February 26, 2015. Photograph by Getty Images.

Does This Change My Broadband Service Today?

No. The full regulations haven't been published yet, and consumers should expect no change, which is kind of the point. Further, the FCC has said it will not seek to regulate the rates consumers pay for broadband, nor impose any new taxes or fees.

What Happens Next?

Long story short, there will be plenty of court challenges. AT&T has already talked about what it plans to do, and FCC Chairman Tom Wheeler has said, "We are going to be sued." (Meaning the broadband companies do not wish to be regulated this way, and will certainly sue the FCC in an attempt to stop it.) The issue of Net Neutrality now heads (back) to the courts, and it may take years for the legal framework to be fully settled.

It's also certain that Congress will get involved, with legislation that might accomplish some of the same goals but reduce the FCC's ability to oversee broadband providers. Stay tuned, folks. Meanwhile, the Internet Archive and the Electronic Frontier Foundation are holding a celebration tonight in San Francisco.

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#TBT
Before Bitcoin: The Rise and Fall of Flooz E-Currency
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In the late 1990s, Silicon Valley entrepreneur Spencer Waxman was in Morocco on holiday when he heard an Arabic slang term for money—flooz—that stuck with him. In the dot-com boom taking place back in the United States, URLs with obscure etymology were popular. When Waxman and partner Robert Levitan decided to co-found a novel way of disrupting the online commerce industry, calling it Flooz.com was almost a foregone conclusion.

What Levitan and Waxman envisioned was a virtual gift certificate that would drive business to participating online retailers, give consumers some sense of security over their private information, and make shopping for stubbornly gift-resistant recipients easy. Rather than merely offering cyber currency, this was a service with purpose.

Unfortunately, it was also one that was doomed to fail.

A screen capture of Flooz.com
Flooz.com

Non-cash currency has been with us since the Chinese used cowry shells to sort out debt for goods and services more than 3000 years ago. In the 1960s, credit cards became an alluring alternative to saving and carrying paper bills. When online retailing exploded in the 1990s, it was only natural that startups would begin to explore virtual payment methods.

At the time, digital transactions were perceived by many consumers to be a near-guarantee of identity theft. Handing a card to a vendor in a closed-loop retail environment was one thing, but the thought of hackers seizing their information once it was entered into the borderless environment of the internet kept many away from online shopping.

As it turns out, that paranoia would turn out to be justified in our current climate of constant data breaches. It was also good for businesses hoping to turn their apprehension over credit card security into a monetized solution. Flooz.com debuted in 1999, just one year after another currency-based URL, Beanz.com, had garnered press. Beanz were a kind of earned points system, with approved transactions gifting customers with redeemable gift vouchers. Flooz took a different approach: Customers would sign up to Flooz.com and purchase gift certificates for specific retailers, which they could then use themselves or pass along to a gift recipient via email.

For businesses, it was a way of driving traffic to sites; for consumers, it was a way to keep credit card transactions limited to one vendor; for Flooz.com, being the intermediary meant taking a 15 to 20 percent cut of completed transactions on the selected retail sites, which ranged from Godiva Chocolates to Barnes & Noble and Tower Records.

To help Flooz.com cut through online marketing noise, Levitan enlisted actress Whoopi Goldberg to be their spokesperson. In exchange for company shares and Flooz.com money, Goldberg led an $8 million ad campaign for radio, television, and print that extolled the benefits of using Flooz.com.

Whether it was Goldberg’s pitch or the concept itself, Flooz.com met with a receptive audience. The company debuted in the fall of 1999, and had opened 125,000 accounts by January 2000. That year, roughly $25 million in Flooz.com money was purchased and used. (In a nod to the impenetrable vocabulary of the internet at the time, the media loved to point out that Beanz could be used to purchase Flooz.)

Bolstered by the attention and early success, Flooz.com was eventually able to raise $35 million in venture capital. Consumers could meet their gifting obligations by emailing a code to their gift recipient without having to waste time shopping. For a time, it appeared Flooz.com would become a leading method of payment for online transactions.

Actress and Flooz.com spokesperson Whoopi Goldberg is photographed during a public appearance
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But it didn’t take long for the seams in the Flooz.com model to show. While gifting vouchers to family and friends was convenient for the gifter, the giftee was stuck with a very limited number of vendors that took Flooz.com as payment. If Amazon, for example, had a deal on a DVD or book that Barnes & Noble didn’t, Flooz users were out of luck. Shopping for a bargain wasn’t possible.

The second and most crippling detail was one Flooz.com was forced to make in order to strike deals with vendors. The company guaranteed its transactions, meaning that it would make good on orders even if Flooz dollars had been purchased via fraudulent means. By the summer of 2001, that commitment became a tipping point. Agents from the FBI informed Levitan that they suspected a ring of Russian hackers had purchased $300,000 worth of Flooz in order to launder funds from stolen credit cards.

This created a paralyzing cash flow problem: As their credit card processor withheld funds until Flooz.com could secure the transaction, people were still busy redeeming Flooz dollars they had already spent. Retailers then looked for Flooz.com to reimburse them. Suddenly, customers trying to pay with Flooz were greeted with error messages that the site was down.

Those issues, coupled with the fact that corporate clients had already started to move away from gifting employees with Flooz dollars, forced Flooz.com to file for Chapter 7 bankruptcy in August 2001. Court papers cited almost $14 million in liability. (Beanz.com was also a casualty of the dot-com bust, when participating retailers processing the points steadily went out of business.)

Levitan rebounded, founding the Pando file sharing network and selling it to Microsoft in 2011 for $11 million. Meanwhile, Flooz.com remains a barely-remembered footnote in e-currency, though it would be hard to chart the rise of digital funds like Bitcoin without it. Like with so many other good ideas, timing is everything.

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Big Questions
What Could the Repeal of Net Neutrality Mean for Internet Users?
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What could the repeal of net neutrality mean for the average American internet user?

Zouhair Belkoura:

The imminent repeal of net neutrality could have implications for Americans beyond the Internet’s stratification, increased costs to consumers, and hindered access to content for all. Net neutrality’s repeal is a threat to the Internet’s democracy—the greatest information equalizer of our time.

With net neutrality’s repeal, ISPs could be selective about the content and pricing packages they make available. Portugal is a good example of what a country looks like without net neutrality

What people may not realize is that a repeal of net neutrality would also give ISPs the ability to throttle people’s Internet traffic. Customers won’t likely have visibility into what traffic is being throttled, and it could substantially slow down people’s Internet connections.

What happens when this type of friction is introduced to the system? The Internet—the greatest collective trove of information in the world—could gradually be starved. People who experience slower Internet speeds may get frustrated and stop seeking out their favorite sites. People may also lose the ability to make choices about the content they want to see and the knowledge they seek.

Inflated pricing, less access to knowledge, and slower connections aren’t the only impact a net neutrality repeal might have. People’s personal privacy and corporations’ security may suffer, too. Many people use virtual private networks to protect their privacy. VPNs keep people’s Internet browsing activities invisible to their ISPs and others who may track them. They also help them obscure their location and encrypt online transactions to keep personal data secure. When people have the privacy that VPNs afford, they can access information freely without worrying about being watched, judged, or having their browsing activity bought and sold by third-party advertisers.

Virtual private networks are also a vital tool for businesses that want to keep their company data private and secure. Employees are often required by their employers to connect to a VPN whenever they are offsite and working remotely.

Even the best VPNs can slow down individuals' Internet connections, because they create an encrypted tunnel to protect and secure personal data. If people want to protect their personal privacy or company’s security with a VPN [they] also must contend with ISP throttling; it’s conceivable that net neutrality’s repeal could undermine people’s freedom to protect their online safety. It could also render the protection a VPN offers to individuals and companies obsolete.

Speed has always been a defining characteristic of the Internet’s accessibility and its power. Net neutrality’s repeal promises to subvert this trait. It would compromise both people's and companies’ ability to secure their personal data and keep their browsing and purchasing activities private. When people don’t have privacy, they can’t feel safe. When they don’t feel safe, they can’t live freely. That’s not a world anyone, let alone Americans, want to live in.

This post originally appeared on Quora. Click here to view.

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