Net Neutrality: What Do The New Rules Mean And What’s Next?

The new “net neutrality” rules passed yesterday by the FCC (3-2 along partisan lines) are a kind of “Rorschach test.” Depending on where you sit on the political spectrum or in the internet economy you may see the new rules as “not going far enough” or “a unnecessary power grab by the government.”

Some people are decrying the new rules as backward (including Republican FCC Commissioner Robert McDowell), warning that they’ll “inhibit innovation and investment.” Many consumer advocates, however, believe the opposite that they don’t offer sufficient consumer protection and are too friendly to corporations.

What was passed?

The specific text of the rules isn’t yet available but here are the principles that were ratified by the FCC  — until the lawsuits come that is:

Rule 1: Transparency

Broadband providers must “publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.”

What this will mean in practice is not clear at all.

Rule 2: No Blocking

Fixed line broadband providers cannot “block lawful content, applications, services, or non-harmful devices, subject to reasonable network management.”

Wireless broadband providers (including carriers) get a more relaxed rule. They cannot “block consumers from accessing lawful websites, subject to reasonable network management; nor shall such person block applications that compete with the provider’s voice or video telephony services, subject to reasonable network.”

Wireless providers apparently will be able to block some apps and services though not those directly competitive (e.g., Skype). This two-tiered system was justified by the FCC on the grounds that “Mobile broadband presents special considerations that suggest differences in how and when open Internet protections should apply. Mobile broadband is an earlier-stage platform than fixed broadband . . .”

This bi-bifurcated approach is pretty much what Google’s “devil’s bargain” with Verizon was advocating. (Google disputes this characterization.)

Rule 3: No Unreasonable Discrimination

Finally fixed (though not wireless) broadband 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.”

This is intended to prevent ISPs from favoring one publisher or content source over another. Note the use of the term “unreasonable” however. More on that later.

Now in English

As mentioned, there’s a basic distinction between mobile or wireless providers and fixed broadband providers. Wireless providers have more flexibility to control what comes over their networks and discriminate in favor or against some types of content and publishers.

There’s a bunch of spurious or questionable reasoning and logic behind the fixed-line mobile distinction in the rules. The basic idea is that there’s more competition in the mobile/wireless market, wireless carriers need more leeway in managing their networks and so there’s less justification for restrictions on providers:

Moreover, most consumers have more choices for mobile broadband than for fixed broadband . . . In addition, existing mobile networks present operational constraints that fixed broadband networks do not typically encounter. This puts greater pressure on the concept of “reasonable network management” for mobile providers, and creates additional challenges in applying a broader set of rules to mobile at this time. Further, we recognize that there have been meaningful recent moves toward openness, including the introduction of open operating systems like Android. In addition, we anticipate soon seeing the effects on the market of the openness conditions we imposed on mobile providers that operate on upper 700 MHz C-Block spectrum, which includes Verizon Wireless, one of the largest mobile wireless carriers in the U.S.

(Emphasis added.)

The fact that Android is mentioned here is very strange. Android (an operating system) has nothing to do with broadband access. How does Android provide more access choice to consumers?

The rules appear to allow wireless providers to favor some content publishers over others or create a “fast lane” (or “slow lane” conversely). Accordingly they would appear to permit carriers to charge content providers for better or faster access to consumers — a kind of mobile or wireless “payola.” The FCC calls this “pay for priority” and argues against it but only on the fixed-line side.

But because we all now live in a multi-platform world, there’s a very real chance that should such “paid priority” system take hold it would result in higher prices for consumers. If Netflix, for example, has to pay more to deliver its services over mobile devices (via Sprint, Verizon, or AT&T’s networks) they’re likely to pass those costs on to consumers who use the service on both the PC and mobile devices. It’s hypothetical of course but the possibility is real.

Mobile carriers are trying to move to tiered pricing on the consumer side, according to speed/bandwidth, so it’s reasonable to assume they may try and do something on the content or publisher side. Carriers are also trying to find ways other than their networks to make money (e.g., ads, services) but they may ultimately be unsuccessful, motivating novel attempts to extract more revenue from access down the line. (I have no problem with ISPs trying to make money or recoup their investments but let that be through fees they transparently charge consumers for access.)

Beyond this the phrase “reasonable network management” in Rule 3 suggests that fixed-line ISPs will have flexibility and may (with justification) “manage their networks.” It may have little or no impact as a practical matter but a paranoid view would be that “reasonable network management” becomes a euphemism for slowing if not blocking some traffic.

A little history

It’s worth remembering that the entire “net neutrality” debate emerged out of a dispute between large internet companies such as Google and broadband providers.

Google (and others) wanted to guarantee access for their services over pipes they didn’t own. Big ISPs were irate (e.g., Comcast, AT&T) about the idea that they wouldn’t be able to control or regulate the traffic coming through their pipes or make money off that traffic as they saw fit. Essentially the ISPs wanted the discretion to block and throttle traffic (“manage their networks”) or charge some companies more that used more bandwidth. They have consistently disputed the FCC’s authority to regulate them.

Comcast in particular was blocking and throttling traffic over its cable lines in 2007. The FCC sanctioned Comcast accordingly and Comcast sued in 2008 arguing that the FCC had no legal authority to regulate its manipulation or control of traffic — and won.

In its press release yesterday, the FCC spent a fair amount of time explaining its legal authority for the new rules under the Telecommunications Act of 1996:

Broadband Internet access services are clearly within the Commission’s jurisdiction. Congress charged the FCC with “regulating a field of enterprise the dominant characteristic of which was the rapid pace of its unfolding” and therefore intended to give the FCC sufficiently broad authority to address new issues that arise with respect to “fluid and dynamic” communications technologies. Congress did not limit its instructions to the Commission to one section of the Communications Act. Rather, it expressed its instructions in multiple sections which, viewed as a whole, provide broad authority to promote competition, investment, transparency, and an open Internet through the rules adopted today.

You can bet that the issue of the FCC’s authority will be litigated again.

What’s next?

The FCC and a few others claim that the new rules will guarantee an “open internet” and protect “innovation.” Nobody is really happy, however. The left and staunch net neutrality advocates think this deal is too favorable to corporate interests. The right sees this as another act of unjustified government intervention in “the market.”

My guess, based on the fist pounding and hyperbole, is that the new Republican-controlled House of Representatives may take up legislation that seeks to strip or otherwise undermine the FCC’s ability to regulate broadband providers. (Both Republican FCC commissioners voted against the rules, strenuously dissenting.) Big ISPs and wireless carriers themselves may try (based on the Comcast victory) to throw off these rules to regain unencumbered discretion over their networks.

In other words, these new rules don’t settle much of anything. Stay tuned for round II.

Related posts:

Related Topics: Channel: Industry | Features: Analysis | Google: Critics | Legal: General

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About The Author: is a Contributing Editor at Search Engine Land. He writes a personal blog Screenwerk, about SoLoMo issues and connecting the dots between online and offline. He also posts at Internet2Go, which is focused on the mobile Internet. Follow him @gsterling.

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  • http://www.michael-martinez.com/ Michael Martinez

    “But because we all now live in a multi-platform world, there’s a very real chance that should such “paid priority” system take hold it would result in higher prices for consumers”

    ONLY the consumers who actually use those services would be hit by the higher fees, WHEREAS the braindead FCC has now opened the door to raising fees for ALL consumers regardless of whether they use said bandwidth-hogging services.

    This is why Net Neutrality has always been a lie. It is a way for commercial application providers to artificially reduce the costs of their businesses. They are literally taxing ALL consumers to underwrite or subsidize the bandwidth usage of a few consumers.

    Tiered pricing is, in fact, the ONLY way to make the Internet truly neutral and fair to all. Let those who use the bandwidth pay for it and charge their customers rather than force the rest of us to pay for the bandwidth we are not using.

  • Dwayne Rosenfeld

    I really can’t stand these “Net Neutrality” arguments. If Netflix is charged more for its customer base hoging bandwidth that a service provider has invested in, then Netflix can either raise its price or absorb the cost. If Netflix raises its price, aren’t I free to switch to Amazon, Google, Hulu, or the dozen or so other streaming content vendors.

    If I buy an SUV and somebody else buys an Honda, should we complain to the government to force the manufacturers to make sure that there is no difference in the miles per gallon of the vehicles. I could understand the argument if the costs to Netflix were so egregious such that it was impossible for the company to make a margin. However, last time I checked, Netflix was making oodles of money leveraging a distribution cost (the internet) that they are not adequately and equitably being charged for.

  • http://mauricewalshe mauricewalshe

    @Michael Martinez, do you think that tiered pricing would save ISP doing sweetheart deals? (I spent 15 years working for a big telco – trust me on this you realy realy dont want to go there)

    BTW “reasonable” has a specific legal meaning – if your going to comment on this you really should understand the concept of “reasonableness” before commenting on NN.

    http://en.wikipedia.org/wiki/Reasonable_person

    eg it would be reasonable to use reasonable traffic management to stop the Jacks and Emma’s of the world loading up Daddys company laptop with limewire and saturating the contended link, it would be unreasonable to say slow down access to Google to favor Bing or to slow access to the Guardian or The Times – or in extreme cases site like wikileaks.

    the problem is the federal nature of the states stops the FCC from actually regulating properly – compounded by the very poor way in which mobile has been handled.

    @Dwayne bad argument its more like say making a car running badly if you use a different brand of petrol.

  • http://www.michael-martinez.com/ Michael Martinez

    @mauricewalshe What I care about is not having to pay for someone else’s profitability. Trust me, YOU don’t want to go there.

    If you think you DO want to go there, then just send me your address and I’ll start sending all my utility bills to you. You can pay them and I’ll continue using the utilities.

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