Who Wins & Loses Under FCC’s Net Neutrality Rules

After the Federal Communication Commission released the complete version of its first set of so-called network neutrality rules last Thursday afternoon, I read the full order to understand what the FCC has created. In short, the rules:

  • Protect the current state of the Internet;
  • Are ambiguous, and hence less protective of the mobile future for the web;
  • Show that the FCC punted on pretty much every challenging issue that lay before it, from requiring open network provisions on wireless networks to allowing managed services provided by ISPs.

For those wondering how we got here, check out our timeline and links to the original FCC proposal from 2009 and a later proposal from Google and Verizon (s vz) that became the framework for the Congressional bill that subsequently became the framework for the compromise order. The new FCC order enshrines three principles as the framework for implementing network neutrality:

  • Transparency for fixed and mobile broadband providers.
  • No blocking for fixed broadband providers in general, while mobile broadband providers can’t block competitive services, although blocking apps is fine.
  • No unreasonable discrimination by fixed broadband providers while mobile broadband providers have to justify their discrimination.

The full order contains pages of exceptions and justifications that explain what the FCC is trying to do and why, but the primary things the FCC has done with this order are clearly separate the act of providing access to the Internet from the Internet itself, and rejected the idea of a one-size fits all concept of network neutrality. These are both huge, the first primarily for legal and policy reasons, and the second because it creates different versions of the web for end users.

As it determined that ISPs don’t provide the Internet, merely access to the Internet, the FCC also separated out the act of consuming the Internet and contributing services on or devices to access it. So AT&T (s T) isn’t an Internet provider; it merely provides a mechanism to access the Internet (an access service). Likewise Google (s goog) doesn’t provide the Internet; it provides a service using the Internet (called an edge service).

This framework helps the FCC assert its authority to rule on network neutrality, since it has jurisdiction over access services provided by wire and radio, but it also helps create a distinction so the FCC can say it’s not regulating the Internet, merely the means that people get access to the Internet. The FCC lays out several pages justifying the need for it to act on network neutrality that basically can be summed up as: The last mile access providers have several incentives to muck around with traffic in order to profit, while end consumers and edge service providers have few alternatives to keep them honest because the market isn’t competitive.

Unfortunately, as it tried to please everyone from consumers to carriers, the FCC has enshrined rules that create different policies which could fragment what people think of as the Internet. Let’s look at those rules.


A person engaged in the provision of broadband Internet access service shall 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.

The FCC doesn’t go as far as to establish a so-called Schumer Box for broadband which would disclose speeds or details in some type of consumer-friendly standardized language, but it does say an ISP must disclose on their websites and at the point of sale how it manages congestion on its network, the speeds it offers and what types of applications would work over those speed packages. It also needs to explain how a user might trigger security restrictions, how the ISP inspects its traffic generally and how an aggrieved end user might address issues with the ISP. An ISP must also show how its own VoIP or IPTV services affect how it delivers broader Internet traffic.

The FCC also outsources the tracking of violations of these rules to consumers and engineers. It provides the enforcement, but isn’t going to hunt down the problems, it seems. Since transparency is the foundation of this whole order, the lack of a standard framework that’s easily understood by end users is bad for consumers, but outside applications and watchdog groups can fill in the gap and may find the task easier with these rules.

On the whole, this compromise is good for carriers, because it’s minimally invasive in terms of how they market their services, yet poor for consumers, because it won’t help the average user much, and good for tech-savvy edge service providers who will have the information needed to build apps for certain networks.

No Blocking

A person engaged in the provision of fixed broadband Internet access service, insofar as such person is so engaged, shall not block lawful content, applications, services, or nonharmful devices, subject to reasonable network management.

The rules lay out a bunch of specifics here, starting with the idea that ISPs can’t block lawful content, but won’t be put in a position to judge what is lawful or not. ISPs also are not allowed to degrade content to the point where it can’t go through. For example, Comcast (s cmcsa) always maintained it didn’t block P2P files; it merely slowed the transmission of those files. However, that had the same effect as blocking P2P files, a distinction the FCC won’t tolerate. The rules also seek to prohibit the blocking of devices from wired networks by creating ungainly and expensive certification procedures such as Comcast was recently accused to be doing with Zoom Telephonics.

This is good for consumers on fixed broadband networks, good for service providers in general, and bad for ISPs interested in overtly blocking competitive content.

No Unreasonable Discrimination

A person engaged in the provision of fixed broadband Internet access service, insofar as such person is so engaged, 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.

Here’s where transparency comes into play. Thanks to ISPs telling end users how they manage their networks, consumers can ensure that discrimination isn’t unreasonable. End users can also discriminate, for example, blocking porn from their homes. This is also where the FCC condones usage-based pricing, although it assures us it will keep a watchful eye out for anti-consumer packages. In general, the FCC will scrutinize discrimination that harms end users, harms a competitive service to one an ISP provides or stifles free expression, such as slowing traffic from a website the ISP doesn’t agree with. It also calls out paid prioritization, by which a content provider pays an ISP more money in order to deliver its content faster as problematic.

In general, this section lays out specifically how carriers can manage their networks, which is good for them and good for the FCC, because it sets its framework for how it will rule on future disputes. It’s not great for consumers or web service and device providers, because they will have to go to the FCC and prove the ISP is being unreasonable when problems occur. Not every consumer or company has the resources for such a fight.

More Details That Matter

As part of the definition of a broadband access provider, the FCC has carved out an exception for application-specific devices such as e-readers, medical devices and home energy monitoring tools that connect to or use the Internet, primarily because they only connect to some places on the Internet as opposed to a variety of services and end points. It has also carved out an exception for content delivery networks and private or customized Internet services provided to businesses or other services that aren’t targeting the mass market.

Airplanes, coffee shops and other businesses providing broadband access as a service can block web sites or content the provider deems objectionable or too bandwidth-intensive. Many may find these rules hard to swallow given the prevalence of Wi-Fi access points at coffee shops and food establishments as a means for people to content to the web and work.

Mobile app stores can be as closed as they want to be under these rules. While the Internet as accessed through the mobile browser is subject to most of these rules, app stores can be as walled as they want to be, which will effectively keep certain apps from being able to take full advantage of the hardware provided on some mobile devices. For example, Apple (s aapl) remains in control of how much functionality a Skype application for its iOS platform can have.

The rest of the order lays out the FCC’s legal authority to implement such rules — which will most assuredly be tested in the coming months — and lays out the way the FCC plans to tackle complaints. With this order, the FCC has managed to preserve the web of today, leaving the web of tomorrow relatively regulation-free while assuring itself job security as it will have to sit in judgement on the complaints to follow as consumers, content providers and ISPs test the boundaries of these rules. Whether or not this is a good thing depends on where you sit in the food chain.

As a consumer, it’s depressing, and as a lover of technology and innovation, it leaves the mobile field open for the creation of walled gardens and incentivizes the creation of application-specific devices. Sure, these new devices and walled gardens may be lucrative, innovative and life-changing, but they encourage innovation around pricing and business models as opposed to innovation of new technologies to deliver better networks or new services that combine the full power of the web with mobile devices. We might be witnessing the birth of what Jeff Jarvis has called the Schminternet.

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