The new rules of net neutrality
What is net neutrality?
On Thursday, the internet world was caught up in llamas and debating the color of dresses but it will be remembered years later as the day the FCC voted, 3-2, to reclassify internet access services as a public utility under Title II of the Communications Act. Net neutrality is the concept that all internet service is treated equally. The term originated with Columbia Law professor Tim Wu. Companies that provide internet access like the telephone and cable companies wanted to be able to create separate tiers of access.
A public utility is like water service, heating and electrical service, and phone service. The government is allowed to set rules on how much they can charge and how they must provide basic service to all customers without discrimination.
What do the opponents want?
Broadband service is one of the most highly profitable businesses with an over 97% margin.
The cable distribution giants like Time Warner Cable and Comcast are already making a 97 percent margin on their “almost comically profitable” Internet services, according to Craig Moffet, an analyst at the Wall Street firm Bernstein Research. As Levin points out, “If you are making that kind of margin, it’s hard to improve it.” And most Americans have no choice but to deal with their local cable company.
Broadband companies and other internet service providers want to be able to sell tiered access to increase their 97% margin. As Professor Wu points out by treating the companies as utilities, their margins will be frozen at their 97% rate. Boo effing hoo.
Broadband companies argue that common carrier rules limits expansion (i.e. infrastructure) and investment in improving service. Basically the internet service providers have said that because they won’t be able to increase their ridiculously high margins, they’ll just sit on their money and not try to get better.
In sum, the argument against net neutrality is grounded in pure capitalism. A free market results in the best product at the most accurate price.
A brief history.
Communications Act of 1934. Created the Federal Communications Commission and allowed the FCC to begin regulating telephone and broadcasting via their rule making abilities.
1996 Telecom Act. Congress differentiates between “telecommunications services” and “information services.” Broadband was identified as an information service and therefore fell outside of the FCC regulatory arm.
2010 FCC Open Internet Order. Established rules that prohibited blocking and discrimination of internet service delivery. There were three primary components: (The following are quotes from this Appellate decision).
- TRANSPARENCY: The Order first imposes a transparency requirement on both fixed and mobile broadband providers. They must “publicly disclose accurate information regarding the network management practices, performance, and commercial terms of [their] broadband Internet access services.”
- ANTI-BLOCKING: The Order imposes anti-blocking requirements on both types of broadband providers. It prohibits fixed broadband providers from “block[ing] lawful content, applications, services, or non-harmful devices, subject to reasonable network management.” Similarly, the Order forbids mobile providers from “block[ing] consumers from accessing lawful websites” and from “block[ing] applications that compete with the provider’s voice or video telephony services, subject to reasonable network management.” …The anti-blocking rules, the Order explains, not only prohibit broadband providers from preventing their end-user subscribers from accessing a particular edge provider altogether, but also prohibit them “from impairing or degrading particular content, applications, services, or non-harmful devices so as to render them effectively unusable.” Verizon blocked Google Wallet back in 2011. Verizon also blocked the PayPal app’s fingerprint authorization this year. (Source: CNN Money)
- ANTI-DISCRIMINATION. The Order imposes an anti-discrimination requirement on fixed [rather than mobile] broadband providers only. Under this rule, such providers “shall not unreasonably discriminate in transmitting lawful network traffic over a consumer’s broadband Internet access service. Reasonable network management shall not constitute unreasonable discrimination.” The Commission explained that “[u]se-agnostic discrimination”—that is, discrimination based not on the nature of the particular traffic involved, but rather, for example, on network management needs during periods of congestion—would generally comport with this requirement. In other words, Netflix and Google and Amazon can get the FCC to fight for them when Verizon etc. wants to charge them extra money to deliver the streaming video.
January 14, 2014, the United States Court of Appeals for the District of Columbia Circuit decision. The court struck down the FCC Open Internet Order as it related to the rules regulating broadband service. This is an important decision because it sets the precedent for future lawsuits. In the decision, the court stated:
But after our decision in Comcast undermined that theory, the Commission sought comment on whether and to what extent it should reclassify broadband Internet services as telecommunications services. See In re Framework for Broadband Internet Service, 25 F.C.C.R. 7866, 7867 ¶ 2 (2010). Ultimately, however, rather than reclassifying broadband, the Commission adopted the Open Internet Order that Verizon challenges here. See 25 F.C.C.R. 17905.
Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such.
Essentially the Appellate Court said that until the FCC reclassified broadband, it did not have the power to impose neutrality and non discrimination rules.
February 26, 2015, the FCC votes 3-2 to reclassify broadband from information service to telecommunications allowing them to regulate broadband service like a public utility and it applies to both fixed broadband providers AND mobile providers meaning that it’s going to be more restrictive than the 2010 Open Internet Order that essentially exempted mobile providers.
The rule is based on FCC’s most far reaching power to regulate “communications by wire”.
Verizon, AT&T, Comcast, etc. are gearing up to challenge the FCC’s reclassification.
What does it mean for me?
Data caps are not going away. Chairman Wheeler stated he was not going to interfere or put a cap on rates that companies charge consumers. What we need for better, faster access (in addition to open internet) is more competition. This means allowing local communities to build their own fiber optics networks rather than relying on conglomerate cable companies. New companies will be able to use existing telephone poles to deliver new access services.
It also means that your video streamers like Netflix, Google, Hulu, Amazon, Apple will get the FCC to fight (and fine) companies who are charging them extra money to deliver the streams.
In the short term, though, it means nothing changes for you as the consumer which is a good thing. It means your local bookseller’s website will be delivered at the same speed as Amazon’s even though Amazon could pay for faster speed. In the long term, it may mean increased competition.
Chairman Wheeler’s defense:
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, quote, 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.