The FCC's Big Net Neutrality Day

By Peter Bernstein February 27, 2015

I am going to admit to being surprised by the U.S. Federal Communications Commission’s (FCCs) Open Internet decision. FCC Chairman Tom Wheeler’s new net neutrality regime got the headlines it deserved, and not part of the surprise was the partisan vote— the two Democrat Commissioners siding with Wheeler with the two Republicans dissenting.

What surprised me is that after the open meeting broke up, and the votes had been counted on GN Docket No. 14-28 (aka the Open Internet order), the sky did not fall, the earth did not move and no party of interest declared immediate bankruptcy.  Despite what was a rather theatrical proceeding (including a rousing dissent by Commissioner Ajit Pai) for a body whose deliberations and votes tend to be civil and hardly emotionally compelling, what the chairman proposed and got approved on Open Internet was precisely what he has been promising for several months.  In his words,  

Our challenge is to achieve two equally important goals: ensure incentives for private investment in broadband infrastructure so the U.S. has world-leading networks and ensure that those networks are fast, fair, and open for all Americans.

The Open Internet Order achieves those goals, giving consumers, innovators, and entrepreneurs the protections they deserve, while providing certainty for broadband providers and the online marketplace.

Indeed, give credit where it is due to Wheeler in crafting a proposal that become politically palatable to get support of his two colleagues and Obama administration endorsement.  And, agree or disagree with the proposal, I happen to agree with most of it as will be discussed below, it is a thoughtful attempt to thread a needle whose eye’s perpetual movement and small aperture make it almost impossible to get right and do so in a timely manner.  How this holds up going forward is problematic, but it is a least a starting point for some type of regime modernization in reaction to the courts upending the previous one over a year ago.  When whatever policy framework is allowed to be implemented remains an open issue based on the nature and speed of possible litigation and legislation.   

Regulating the Internet as a utility under Title II and Section 706

Following what is now a well-worn script, proponents and opponents rushed to have their hyperbolic say. 

For example, Michael Copps, former FCC Commissioner and now special adviser to Common Cause, issued a statement that said:  “The FCC has never done a better job of serving the public interest. History will greatly note and long remember the leadership of Chairman Wheeler and Commissioners Clyburn and Rosenworcel.”  

Meanwhile, in what clearly had been in the works for a while, Verizon on its public policy blog in referring to the decision to regulate the Internet by relying on Title II utility regulations first promulgated in the 1930’s when the FCC was created, tried to drive home its point about how antiquated, unnecessary and harmful the new FCC regime would be by posting its anger in morse code.

NOTE: Not to worry if you can’t read morse code, Verizon has a link to a PDF, written in smudged ink by typewriter.

Source: Verizon

If nothing else you have to admire the creativity here. You also have to appreciate their audacity and duplicity for bashing Title II. After all, Verizon likes being classified as a common carrier when it meets its needs as evidenced by its attempts in New Jersey to use the classification to advantage its FIOS fiber optic service. But, why let the facts get in the way of a good argument?

Since the devil really will be in the yet to be published details of the proposal, a quick review of what all the screaming is about is in order.  First obviously is the classification of ISPs, and now mobile operators, as utilities that fall under the provisions of what is being characterized as a “Modernized, Light-touch” to regulation.

This new regulatory regime, and here Chairman Wheeler I am sure is not happy with the headlines declaring things like “Utility Regulation for the Internet”.  According to Wheeler in his statement about the proposal the exact opposite is how he sees it:

We also ensure that network operators continue to have the incentives they need to invest in their networks. Let me be clear, the FCC will not impose “utility style” regulation. We forbear from sections of Title II that pose a meaningful threat to network investment, and over 700 provisions of the FCC’s rules. That means no rate regulation, no filing of tariffs, and no network unbundling. During the 22 years that wireless voice has been regulated under a light-touch Title II like we propose today, there has never been concern about the ability of wireless companies to price competitively, flexibly, or quickly, or their ability to achieve a return on their investment.

The American people reasonably expect and deserve an Internet that is fast, fair, and open. Today they get what they deserve: strong, enforceable rules that will ensure the Internet remains open, now and in the future

A major part of the new regime will be the “Bright Line Rules” designed to stop harm to Internet from service providers employing discriminatory practices. The rules include:

  • No Blocking: broadband providers may not block access to legal content, applications, services, or non-harmful devices.
  • No Throttling: broadband providers may not impair or degrade lawful Internet traffic on the basis of content, applications, services, or non-harmful devices.
  • No Paid Prioritization: broadband providers may not favor some lawful Internet traffic over other lawful traffic in exchange for consideration of any kind—in other words, no “fast lanes.”  This rule also bans ISPs from prioritizing content and services of their affiliates.

As the FCC says in its own release on the vote, “The bright-line rules against blocking and throttling will prohibit harmful practices that target specific applications or classes of applications. And the ban on paid prioritization ensures that there will be no fast lanes.”

The order also includes a standard for future ISP conduct regarding discriminatory practices; greater ISP transparency on things like rates and network performance. It also includes and a host of other provisions: designed to give ISPs some operational discretion; delineates what is not broadband Internet Access (which includes VoIP from cable companies that honestly is an odd exception); provides the FCC for the first time authority to address issues involving network interconnections and the traffic exchanges between various network service providers. 

In short, the Commission gave the industry a lot to chew on.  Yes, this comports with President Obama’s stated wishes to use Title II regulation to keep the Internet open.  And, despite industry observations about current regulations in theory being good enough to prevent traffic discrimination it really is not a bad thing to have this on the books with some specificity.  But, putting aside all of the screaming and yelling about “regulation” and “fairness”, this is about money as it always has been and will be.

Whether ultimately some court in the distant future says regulation is legal or not regarding the Internet is almost beside the point.

The caveat in my mind is that hopefully via FCC or dare I say congressional action, the Communications Act of 1934 should be “modernized” so that broadband access is classified as “basic service” which all citizens have a right to at affordable rates and not just as a service option.  It also should be flexible in terms of defining what at given points in time should be considered basic access speeds and feeds. 

This is about what’s in it for them, depending upon which commercial interest they are, and how from the standpoint of consumers this likely will not matter since the cost of services no matter which way this goes will go up.

I say this because somebody is going to have to pay for the need to upgrade communications networks, particularly the “last mile” be it wired or wireless, to meet our customer experience expectations in a world that is only becoming more connected and more bandwidth-hungry thanks to video and the way in which we consume it.  Personally I am on the side of not allowing bandwidth hogs the ability to hog/degrade my online experience because of their needs and network operators accommodating them.  I am also on the side of ensuring I have access to the content and applications I desire without a commercial interest dictating what I can and cannot do. But, I also appreciate the fact that network modernization costs money.  In fact, it cost big bucks.

It is not the purpose here to revisit all of the misguided business and regulatory decisions that have brought us to the regulatory mess we are in.  As the saying goes, “It is what it is!”  However, there is more than something to be said about the cost causer being the cost bearer.  When Google, Netflix, Facebook, etc., account for so much of the traffic on the Internet and have made hundreds of billions from not having to pay, or pay their fair share, for consuming network resources, there just seems on its face to be something out of kilter. 

It is why, although most parties will not admit this during all of their posturing about what does or does not violate free enterprise principles versus what stifles free speech and innovation, this really boils down to questions of who gets paid, how much, when, where, why and how. Realities are that the public policy process could be adjusted so that there can be “fast lanes” that give us an “open Internet” but the road hogs have their own lanes for which they pay for the privilege. If such an adjustment is not done via public policy it will be through content providers bypassing network operators. This means doing so by building out content delivery networks as far as economically feasible and getting last mile access via acquisitions, building new networks themselves ala Google’s fiber efforts, or working deals with municipalities. The latter is an interesting wild card given that the FCC gave a green light to just minutes prior to the Open Internet vote by pre-empting state laws that restrict community broadband efforts.

The point is regardless of the scenario you think is probable in the above, we are all going to pay more it is just a matter of how much and how soon.  Indeed, one thing that is predictable is that our costs will continue to go up a lot sooner that the net neutrality regime the FCC approved will actually be implemented.  




Edited by Maurice Nagle
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