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28
April
2014

Net Neutrality Update

In January 2014, the D.C. Circuit Court ruled that the FCC did not have authority to mandate “net neutrality” because the Commission had previously ruled that Internet access is an unregulated “Information Service” rather than a common carrier service. As noted in the IMCC’s last Newsletter, the court’s decision left the FCC with two choices: It could reclassify broadband as a regulated “Telecommunications Services” subject to the common carrier obligation to treat all content equally, or it could cobble together an ad hoc order that would at least have the superficial appearance of addressing possible abuses by network owners.

The first way of dealing with the issue would require the political courage to take on an army of industry lobbyists, so naturally the Commission chose the second way.

The FCC has opened a rule-making proceeding to determine what the new “net neutrality” rules should look like. The quotation marks are meant to signal that we are not really talking about net neutrality in any true sense. This much is clear from Chairman Wheeler’s announcement that the new rules would “continue to ensure that ISPs and networks do not act in a commercially unreasonable manner to harm the Internet, including favoring the traffic from an affiliated entity.”

Net Neutrality is a principle according to which networks may not discriminate when it comes to the content that flows through their pipes; owners of last mile facilities should not give certain kinds of content preferential treatment in return for money. The ISP should deliver the information requested by the consumer at the speed promised without playing favorites or blocking or degrading services.

Mr. Wheeler’s use of the phrase “commercially reasonable” gives away the game. Instead of a rule, the FCC will create a framework that allows a case-by-case adjudication on the question of whether any given instance of content discrimination is “commercially reasonable” – whatever that means.

As many commenters have pointed out, this is a round-about way of establishing a two-tier Internet. Large ISPs will presumably be permitted to charge websites and online applications for special “fast lane” delivery, provided the charge is “commercially reasonable.” For example, Comcast could demand that Netflix or YouTube pay special fees to deliver high-quality video to their users. Websites that are unable to pay the premium would be relegated to slower lanes. And of course, the fast-lane fees will be passed on to consumers in the form of higher subscription fees. This is bad for innovation, bad for consumers, bad for the economy.

But it gets even worse, because a premium fee for “fast-lane” content delivery is justified only where there is scarcity in the delivery mechanism, in this case, last-mile connectivity. Thus, it is quite possible that the two-tier Internet now being implemented will encourage large ISPs to artificially create scarcity where it doesn’t really exist – that is, to deliberately throttle consumer bandwidth, keeping the slow lane very slow in order to confer monetary value on the fast lane. Consumer broadband access in the United States is already embarrassingly slow relative to the prices charged; the gutting of net neutrality can only make a bad situation worse.

Shortly after being hand-picked by the Obama administration to head the FCC, Chairman Wheeler loudly announced his commitment to “an open Internet.” But the FCC’s lack of political courage (a pervasive characteristic of the current administration in Washington) means that the Internet of the future will be largely under the control of the largest network owners, who will have the technical power, the legal right and the economic incentive to function as gatekeepers over who may access what content and on what terms – which is pretty much the opposite of “open.” Once again, we see how politics dictates policy.

The FCC hopes to have new rules in place by the end of this year, and plans to release a Notice of Proposed Rule Making (NPRM) at its May 15 open meeting. Once the documents are released, the public will have a chance to comment on them.

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