December 06, 2013

FCC Chair Wheeler Re-Opens Conversation on Net Neutrality


Is the Federal Communications Commission prepared to reverse its stance on Net neutrality? The commission’s new chairman, Tom Wheeler, was slammed this week for implying that ISPs may be able to charge premiums to content providers like Netflix in exchange for prioritizing that traffic—but his remarks were ambiguous.

The FCC's 2010 Open Internet Order, of course, expressly prohibits this type of arrangement:

"[B]roadband providers that sought to offer pay-for-priority services would have an incentive to limit the quality of service provided to non-prioritized traffic," it reads. "For a number of reasons [...] a commercial arrangement between a broadband provider and a third party to directly or indirectly favor some traffic over other traffic in the broadband Internet access service connection to a subscriber of the broadband provider (i.e. 'pay for priority') would raise significant cause for concern. ... [A]s a general matter, it is unlikely that pay for priority would satisfy the 'no unreasonable discrimination' standard."

What Wheeler said regarding that, during a session at Ohio State University, again, is ambiguous:

"I am a firm believer in the market," he said. “I think we’re also going to see a two-sided market where Netflix might say, ‘Well, I’ll pay in order to make sure that you might receive, my subscriber receives, the best possible transmission of this movie.’ I think we want to let those kinds of things evolve. We want to observe what happens from that, and we want to make decisions accordingly, but I go back to the fact that the marketplace is where these decisions ought to be made, and the functionality of a competitive marketplace dictates the degree of regulation."

Of course, Wheeler’s remarks can be interpreted as supportive of giving ISPs the ability to charge content owners for reliable service—something that consumer advocates were swift to condemn. Noting all of the old pro-Net neutrality arguments, Public Knowledge Vice President Michael Weinberg wrote in a blog that "In other words, [he is] giving ISPs the power to pick winners and losers online. This endorsement was all the more unexpected because it followed his explicit endorsement of 'Net Neutrality' and a speech that touted the FCC's role in protecting the public interest.”

"ISPs should not be allowed to charge some websites or services extra just so those websites and services actually work," Weinberg continued, pointing out that “in order for this type of 'fast lane' to make sense there needs to be a 'slow lane' that is bad enough to make someone like Netflix need to pay to get out of it.”

And, “this sort of pricing structure works to freeze out new innovation from companies that cannot afford to outbid incumbents.”

However, when asked directly, Wheeler emphasized that his support for Net neutrality is an unqualified “yes.” In the speech, he noted that “as networks evolve, so should government oversight,” Wheeler said in his speech. “There are some who suggest that new technology should essentially free the new networks from regulation, that market forces are enough to ensure that the public interest will be served. I am a rabid believer in the power of the marketplace. But I have seen enough about how markets operate to know that they don’t always, by themselves, solve every problem.”

In this light, the statement reads in a less sinister fashion. Cable, telco and wireless companies have long complained about “bandwidth hogs,” the top 2 percent of Internet users that consume the vast majority of traffic. They’ve also long complained about the rise of over-the-top (OTT) video services, which are spurring more and more bandwidth usage. ISPs have been focused on upping broadband speeds in the connected device era more effectively and stave off churn, which translates to making significant investments in network infrastructure, a time-consuming process that eats into profit margins and shareholder value. And the ARPUs, as they are, they claim, simply cannot make up for that hit.

So, as an alternative to violating Net neutrality to control what rides their networks, ISPs have been innovating new service packages. For instance, the idea of application-specific packages has been bandied about for years. A consumer could choose to purchase a premium bandwidth tier that would come with unlimited access to a Hulu or Netflix, let’s say, and the ISPs would then offer the content company a revenue share on the back-end. In this sense it’s more of a channel partnership than a discriminatory practice.

The remarks come as a court decision on Net neutrality stemming from Verizon’s challenge of the Open Internet Order is expected in the next two months—the case is in front of the U.S. Court of Appeals for the District of Columbia Circuit. Verizon is arguing that the FCC lacks the authority to enforce Net neutrality because, it claims, Congress did not grant the agency the ability to do so. “The FCC has acted without statutory authority to insert itself into this crucial segment of the American economy, while failing to show any factual need to do so,” Verizon said in its brief to the court.

If Big Red prevails, it’s not just the pay-to-play prohibition that will go away—the Order also prohibits ISPs from throttling or blocking high-bandwidth services or services that compete with their own (i.e., Verizon is prohibited from throttling Hulu and prioritize its own Redbox video service). And expect Wheeler to make more than just ambiguous comments in the matter should the case go that way.




Edited by Blaise McNamee



Related Tags

Wireless    Broadband   
       

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