AT&T’s privacy plan may be short-lived and may not even be as bad as we think

AT&T hit a nerve with its privacy-eroding Internet Preferences Plan, which lets customers surf the web at gigabit speeds but also lets the telecom giant see what sites they visit in order to serve up relevant ads. AT&T’s plan may be short-lived, however, if the FCC takes action under its new neutrality rules and, in any case, AT&T may catch less of your web surfing than you fear.

If you’re unfamiliar, the issue arose back in December of 2013 when AT&T launched its GigaPower service in Austin with a footnote in its press release noting that in exchange for giving up their privacy, AT&T gives subscribers a $29 discount. That’s now how AT&T sells its GigaPower plan, which is currently offered in Austin, Texas; Dallas and Fort Worth, Texas; and Raleigh-Durham and Winston-Salem markets; as well as parts of Kansas City, Kansas and Missouri.

But AT&T’s sales pitch deserves a bit more scrutiny. First, the idea that gigabit service should come with a privacy clause that you must opt-into by paying an extra fee each month rubs many people the wrong way. (AT&T charges people $70 a month for its privacy eroding Internet Preferences plan, but $99 a month plus extra fees that eventually totaled $44 a month for a standard plan that lets you surf unseen by Ma Bell.)

The good news is that under Section 222 of Title II of the Communications Act that the FCC recently decided to implement as part of its net neutrality order, the agency can do something about Ma Bell’s plan. Section 222 protects the private information of a customer that carriers are privy to given their position as the providers of telecommunications services, and lays out how that information can be used or shared. It’s not clear if the FCC will choose to implement Section 222, although in the original proposal it has planned on keeping it.

The next question is whether or not the FCC would use it in the case of AT&T’s plan. When I asked the agency, it confirmed that the terms and conditions of any ISP plan would have to be fully disclosed under the FCC’s transparency rules, and Section 222 will require broadband Internet access providers to protect the privacy of their customers. Cynics suggest that the net neutrality ruling took all of the political capital that the agency had, and now it will settle back into complacency, but I suspect that Wheeler has actually shifted his mindset entirely.

And if he has gone to seeing the Internet as a consumer sees it, then my gut says his agency couldn’t ignore a plan like this, especially if a consumer or consumer group filed complaints over AT&T’s plans. Wheeler would very likely take issue with the likely use of deep packet inspection by AT&T to watch where its customers are surfing, and use of economic incentives to essentially coerce customers into accepting this plan.

But, in the meantime, let’s take a look at what AT&T says about its plan to see how bad it really is. I asked AT&T if it was using deep packet inspection, which is the same tool that NebuAd and Phorm tried to use in 2008 here in the U.S. and led to a Congressional hearing. AT&T’s response was evasive.

[blockquote person=”” attribution=””]”As we said last time, we may use various methods to collect web browsing information, with clear customer consent for Internet Preferences.”
[/blockquote]

Note that, under AT&T’s own terms and conditions of the plan, it’s unclear how much of your web surfing Ma Bell can actually track in the first place since more sites have begun using the secure https protocol.

No matter what AT&T is using, it is clear that it will not collect information from secure web sites that use https. When I asked the spokesman relied: “We are not collecting information from secure or otherwise encrypted web sites.” This is actually helpful, because today, more sites outside of the traditional banks and e-commerce shopping carts are using https including Twitter, Google, Yahoo, Bing and Facebook. One reason might be because Google last year let the world know it would use https as a factor when determining how highly a page ranks in its search algorithms.

Still, large portions of the web, from Amazon’s general shopping pages to Wikipedia, as well as many major media sites are not using https, which can cost a lot of time and effort to implement. So while you perform a a search from many of the major search engines (including Duck Duck Go for the truly privacy conscious) you might avoid AT&T’s prying eyes under the plan, but once you land on a non-https page you’ll be back under its scrutiny.

To truly solve the issue, you can pay more and hope that your packets somehow avoid AT&T’s packet sniffing (or are you just avoiding the advertising emails?) or you can write the FCC a letter complaining that AT&T’s Internet Preference Plan invades your privacy in a way you think violates Section 222 of Title II. Or maybe you can hope John Oliver picks up on this story and calls Tom Wheeler a dingo again.

Updated: This post was updated on March 4 to add more cities with GigaPower availability.

5 reasons the FCC might be wrong about net neutrality

This week the FCC passed new rules on net neutrality, which were essentially designed to limit the ability of internet service providers (ISP) to either slow down or boost the speeds of websites. While many experts praised the ruling, not everyone was thrilled by the outcome.

On this week’s Structure Show podcast, Mark Cuban — the billionaire businessman who made his name in tech and now owns the Dallas Mavericks and is featured on the television show Shark Tank — came on to opine on net neutrality and why he thinks the new rules are bad for the internet and bad for competition. What follows are a couple takeaways on why Cuban believes net neutrality will do more harm than good.

[soundcloud url=”https://api.soundcloud.com/tracks/193100656″ params=”color=ff5500&auto_play=false&hide_related=false&show_comments=true&show_user=true&show_reposts=false” width=”100%” height=”166″ iframe=”true” /]

Download This Episode

Subscribe in iTunes

The Structure Show RSS Feed

1. The internet is working fine the way it is

“Look, I’ve had my same position on net neutrality for more than ten years and that is I think what is happening on the net works. I mean, I was involved in the internet right when it started. We started Audionet, which turned into Broadcast.com back in 1995 and for the past 20 years things have worked. And now the net neutrality folks seem to be getting some momentum creating the perception that the big ISPs that got us to this point have now become bad citizens and they are going to ruin the internet unless they’re regulated. And from my perspective, I like the way technology goes and I like the competition and I like the way things are going. I think introducing regulations via the FCC is a huge mistake and I said so.”

2. Government bureaucracy is worse than ISP dominance

“Comcast has always had that power, right? It’s not like [company]AT&T[/company] and [company]Comcast[/company] had just recently become super big companies and they’ve changed their actions. I mean, one of the tenets of net neutrality is that no website, no legal website, should ever be discriminated against. Name me one that has been.”

3. Don’t worry about broadband providers. Worry about Google and Apple

“If you’re going to talk about concerns, what’s the fastest growing access methodology for the internet? It’s mobile, right? And who controls access to mobile? [company]Google[/company] and [company]Apple[/company]. So the far greater risk, and I still don’t think it requires legislation, but the far greater risk is OK…if Apple decides that Comcast’s app is not right, Comcast is not going to be able to reach most of their market to get access through an app to their own broadband, which is crazy when you think about it but it’s a possibility.”

4. Net neutrality laws could end up like patent laws

“For all the years that we’ve been in the tech industry since we’ve been about 8 or 9 years old, the majority of tech companies did not get involved in DC. They did not get involved in regulation. This is all a recent phenomenon. And now, everybody’s got a lobbyist, everybody’s involved, everybody’s got their opinion and I think it backfired on us, just like patent laws backfired on us. Look what happened with patents. That’s what happens when…legislation gets involved with technology. And so I just think that if you’re looking for pain points that the broadband ISPs aren’t it.”

5. Remember Janet Jackson’s infamous wardrobe malfunction? That’s the FCC for you

“What if there’s some decision that just shocks everybody … It’s happened time and time again where FCC regulations get tested, the decision goes against the FCC and they fight it for years. Just like the wardrobe malfunction from the Super Bowl in 2004, they spent money for 8 years. The FCC that you want to be the department of the internet is the company that spent taxpayer money trying to cover, debating, arguing the penalty of showing Janet Jackson’s nipple … Now those people who want to protect decency in the United States and the content that’s delivered over the internet is the purview of the FCC, where else would you go?”

Net neutrality’s next chapter: How experts saw today’s milestone and next steps

Pardon me while I catch my breath after all the celebratory dancing I’ve been doing in the wake of the FCC’s historic vote to reclassify broadband under Title II of the Communications Act in order to preserve true network neutrality. We’ve explained what this means for the average consumer here, and why the whole thing was so improbable in this story. But really, today is like the end of a romantic comedy that actually started out all semi-tragic like a Wes Anderson movie and then became something light and fluffy starring Drew Barrymore and restored your faith in humanity.

So yes, I’m thrilled and having written probably a million words on the topic in the last eight years, I could do a victory lap a mile long, but I’d rather share some of the awesome stuff that other people on the web are writing. Because this time, in addition to the 4 million people who commented before the FCC, many thoughtful legal scholars, rarely heard from tech leaders and others have added their voices to the discussion on the FCC’s historic vote today.

So outside of Verizon’s 1930s-era Morse code commenting on the news, or the industry’s whining (which we’ll see parroted in every article), I’ll focus on some very thoughtful points that we should be thinking about as these rules are finally shared and then inevitably head to court.

FCCHQ

Let’s start with Stanford legal scholar Barbara van Schewick, who had written an excellent analysis about the upcoming rules. (You should seriously go read it.) She is optimistic about the chances that the FCC will prevail in court once one of the ISPs or affiliated organizations such as the National Telecommunications and Cable Association decides to sue. From her blog:

[blockquote person=”” attribution=””]The good news is that the FCC’s rules will likely be upheld in court. The agency’s decision to reclassify Internet service as a common carrier under Title II of the Communications Act puts the rules on a solid legal foundation. By coupling reclassification with forbearance, the FCC has adopted a light regulatory touch that preserves Internet service providers’ incentives to invest.
[/blockquote]

Tim Wu
And while Tim Wu, the man who coined the term network neutrality, is hardly an unheard voice in the debate, he hits on an important point that event the Wall Street Journal seems to have missed in its reporting on this issue; that investors seem to feel like this ruling is fine for the broadband providers whose stocks went up or remains pretty much the same. Wu wrote in the New Yorker this afternoon:

[blockquote person=”” attribution=””]Yet the moment that Tom Wheeler announced his plans for strong net-neutrality rules, on February 4th, broadband stocks jumped, and they have stayed buoyant. This has confused experts. Craig Moffett, whom I consider to be the smartest telecom analyst around, was forced to blame the market. “I think it just shows you that the market doesn’t really understand these issues,” he said.

The theory of the wisdom of crowds suggests that the markets have noticed something: the broadband industry hates net neutrality, but its existence has always had a huge and unnoticed upside. Selling broadband is a great business: Moffet has pointed out that the margins are north of ninety-seven per cent. Stated simply, a strong net-neutrality rule locks in the status quo for the most profitable part of the cable industry’s business.[/blockquote]

As for the effects of these rules on new business models, including things like zero-rating of applications and other services that ISPs might want to implement that might generate questions for carriers or consumers about their “neutrality,” Fierce Wireless’ Phil Goldstein explains a little bit more about the process that carriers and consumers can go through to get an FCC opinion under the General Conduct Rule.

[blockquote person=”” attribution=””]FCC officials made clear that carriers will not need approval from the agency to launch new business models and service offerings like sponsored data or zero-rated data. But the officials said carriers may ask for the FCC’s opinion on whether the plans meet the future conduct standard. Wheeler and other FCC officials also described some of the criteria they will use in determining the standard, which will include an offering’s effect on competition, innovation, consumer protections and user control. The full list of criteria will not be known until the FCC publishes the rules.
[/blockquote]

Sonic CEO Dane Jasper on Feb. 26 in front of the FCC.

Sonic CEO Dane Jasper on Feb. 26 in front of the FCC.


And lest you think that all ISPs oppose this, there are those that welcome the news, even if there are concerns about certain aspects of the regulations, especially as they relate to utility pole access and other minutiae we may not understand fully for quite some time. Still, Dane Jasper, CEO of regional ISP Sonic, wrote on his company’s blog:

[blockquote person=”” attribution=””]It is important to draw the distinction between regulation of the Internet, and regulation of carriers. The FCC’s order will disallow carriers from discriminating against sources of traffic that their customers choose to access via the Internet. This is common carriage at its core, and as a carrier, I am supportive of being regulated as a common carrier by the FCC.
[/blockquote]

Finally, if you’re wondering how far the FCC could have gone, beyond the dreaded rate regulation that the cable industry so feared, Jon Brodkin over at Ars Technica brings it up. The agency could have demanded that the ISPs unbundle their services (something that would have never happened given our country’s regard for private investment). That would have been far more disruptive than the FCC’s actions on municipal broadband today or its vote to regulate broadband as a transport service under Title II. From his story:

[blockquote person=”” attribution=””]The FCC could have tried to use Title II to require last-mile unbundling, in which Internet providers would have to sell wholesale access to their networks. This would allow new competitors to enter local markets without having to build their own infrastructure. But the FCC decided not to impose unbundling. As such, the vote does little to boost Internet service competition in cities or towns. But it’s an attempt to prevent incumbent ISPs from using their market dominance to harm online providers, including those who offer services that compete against the broadband providers’ voice and video services.
[/blockquote]

A year later, is the huge Comcast-Time Warner Cable deal doomed?

One year ago, Comcast, the largest cable provider in the country announced it would buy Time Warner Cable, the nation’s second largest cable provider, in a deal valued at $45 billion. Not since AT&T tried to scoop up T-Mobile had a communications deal rallied consumers and activists to a cause in such a huge way. At the time, the deal was perceived to be a mistake, but something that would likely pass muster with regulatory agencies. However, a year in, things have changed.

When it was announced, we argued that the deal was about achieving broadband dominance, noting that even if Comcast pledged to reduce its pay TV customers by ditching subscribers in select markets to reduce its overall pay TV market share to below 30 percent, judging the deal by television standards was looking into the past. This deal wasn’t about TV, it was about controlling the only pipe that mattered, which in this case was the coaxial cable that brought broadband into the home.

coax cable

With that, Comcast already offers on-demand video, voice, home alarm and automation services and even could one day offer mobile if it wants to get aggressive as its cable colleague Cablevision has done. A year ago, regulators and even the mainstream media seemed fixated on the value of television and what this deal would mean for media companies, cable TV customers and the like. But in a year, that too has changed.

Streaming media has become more popular. Live TV viewing was down by 12.7 percent in January this year compared to the year before. HBO plans to launch a stand alone streaming service this year as does Nickelodeon.

As television follows voice over to broadband, more of the industry recognizes that pay TV — where the combined Comcast and Time Warner cable would hold less than 30 percent of the market share after the deal closes — means little. They are taking a closer look at the broadband market where the combined entity would hold about 35 percent of the market. That number is even higher — as high as 55 percent under a new definition of broadband that the FCC approved in January that defines the service as at least 25 Mbps downstream and 3 Mbps upstream.

In a post-transaction world only 37 percent of U.S. households would have access to multiple providers for 25/3 Mbps service, the new FCC definition of broadband, according to merger papers filed with the FCC.

In a post-transaction world only 37 percent of U.S. households would have access to multiple providers for 25/3 Mbps service, the new FCC definition of broadband, according to merger papers filed with the FCC.

BTIG Tech and Media Analyst Rich Greenfield has pointed out that because the FCC has shifted its perspective on broadband being of greater importance than television (because TV is increasingly reliant on broadband) and because the post-merger Comcast would have such a dominant position providing the faster speeds necessary to deliver high quality television services over broadband, the deal is unlikely to pass. He wrote on February 4:

[blockquote person=”” attribution=””]With Comcast’s scale both before and especially after the Time Warner Cable transaction, they become “the only way” for a majority of Americans to receive content/programming that requires a robust broadband connection.

Over time, the fear is that Comcast will favor its own IP-delivered video services versus third parties, similar to how it is able to offer Comcast IP-based video services as a “managed” service that does not count against bandwidth caps, while third-party OTT services that look similar count against bandwidth caps (remember this Hastings/Roberts debate from 2012, link). As we see a rapid rise in niche, OTT subscription services and virtual MVPDs, the natural inclination will be for the incumbent video provider to protect their business (think usage based caps that only apply to outsiders, peering/interconnection fees, etc.).[/blockquote]

Since then the FCC has only become more bold in what is indicative of perhaps the most important change that has occurred in the year since the merger was announced. The FCC has stepped up as a force for consumer advocacy when it comes to broadband competition and access. The agency, which has acted as a rubber stamp at worst and as a priggish scold doing little more than wagging a finger at the industry when it steps too far out of line at best, has changed.

That is the change that has thrown the deal into the most doubt. Last week the FCC Chairman Tom Wheeler proposed reclassifying broadband under Title II of the Communications Act in an about face for the agency that has been five years in the making. By classifying cable, DSL, wireless and other broadband services as transport rather than information , Wheeler subjects them to greater FCC authority and allows the agency to place strong network neutrality rules on providers — rules the ISPs were trying to avoid.

FCC Chairman Tom Wheeler

FCC Chairman Tom Wheeler

And while AT&T and now the National Cable and Telecommunications Association has threatened to sue if the agency passes those new rules, the markets are concerned that this newly brazen FCC has recognized the importance of broadband. And with this recognition that broadband is an essential service that could be better in parts of the U.S., as well as the recognition that the Comcast and Time Warner deal is really about broadband, the markets are concerned that regulators at the FCC and the Department of Justice may stop the deal.

They should. In a year a lot has changed. But here at Gigaom we have seen that change coming for almost a decade. We have argued for faster broadband, more competition, network neutrality and an elimination of broadband data caps. Because we are aware that broadband is platform on which our current innovations spring, and if we hand Comcast control 55 percent of the U.S. broadband market, even with the strong network neutrality rules that the agency has proposed, we are handing the future of half of our nation’s households to a company that has shown a willingness to invest in the future so far as it immediately benefits its bottom line.

Comcast doesn’t believe in disruption from startups. It believes in squashing them using its enormous market power and networks. It understands that it has to continue investing in new products and builds very good ones; its Xfinity home products are well designed and have a nice interface. But it’s not going to push pricing down. It’s not going to disrupt its business models and it’s certainly not going to change the way it treats its customers once it has more power.

A lot has changed in a year, but Comcast hasn’t. Is the federal government finally ready to show that it understands what’s at stake?

Amsterdam Internet Exchange broadens its foothold in the US

The Amsterdam Internet Exchange (AMS-IX) is partnering up with Telx to establish a new internet-access point inside Telx’s NYC2 data center, according to an announcement  by the companies. The new point of presence (POP) comes just a few months after AMS-IX opened up another access point in Digital Reality’s San Francisco facility.

AMS-IX’s new POP is another step towards entrenching the European internet exchange model in the U.S. Instead of having internet service providers (ISPs) or data-center operators determine the cost structure of an internet exchange — which are basically the data-center locations where content providers, ISPs, telecoms and others link up and exchange traffic — the European internet exchange model operates a bit more like a commune in which all parties are owners and have equal say.

Advocates of this type of model claim that it hampers the ability for any specific entity, typically a telco, to monopolize the internet exchange and game the system for its advantage.

Netflix has been a big proponent of the European internet exchange model and made a splash in December 2013 when it signed on as AMS-IX’s first customer in New York. As Gigaom’s Jeff John Roberts reported, ISPs like Verizon and Comcast want to charge Netflix and content providers a premium because of the enormous amounts of network traffic they generate.

Neflix and others claim that these broadband providers have retaliated by not upgrading key internet ports, which resulted in bad network service for Netflix and other content providers.

With the new POP in Telx’s NYC2 data center, AMS-IX and Telx said that customers will now have more peering opportunities with organizations not only housed in the NYC2 data center, but also members of the Telx’s NYC1 and NYC3 data centers, which make up “The NYC Trifecta” in Manhattan, the release states.

The announcement also coincides with FCC Chairman Tom Wheeler explaining in a Wired op-ed his case for settling the argument over net neutrality and which Gigaom’s Stacey Higginbotham dissected. Wheeler did not share the specifics of his plan in the Wired piece, but expect to see them emerge soon.

The FCC’s net neutrality proposal is awesome, but has a loophole

FCC Chairman Tom Wheeler has taken the unprecedented and awesome step of using Title II to ensure that the internet remains open and that ISPs cannot discriminate against the type of traffic flowing across their networks. This is a big deal, as I explained earlier, and now that the Chairman has released the details of the FCC’s proposal it’s time to dive in.

If you want the TLDR version, here it is: The FCC has crafted the strongest net neutrality rules I have ever seen. They will cover both wireline and wireless broadband networks. The FCC has also decided that it will keep an eye on peering agreements between “mass market ISPs” and edge providers and has established a general conduct rule that will allow companies and consumers to complain about unreasonable behavior by ISPs on the internet. To do this, it will use both Title II of the 1996 Communication Act and the Sec. 706 authority it has under that same act.

Federal Communications Commission (FCC) headquarters

Federal Communications Commission (FCC) headquarters

Now for the details, where I’ll try to use real-life examples like zero-rating plans for cell phone operators or your Xfinity voice service from Comcast. Or what about those few months when your Netflix service was all screwy because your ISP wanted it to pay more money? The FCC’s rules address all of these services, so read on — it’s your internet, after all.

Bright lines and no blocking

The government is fond of what it calls “bright line” rules. No shades of gray for these folks. For net neutrality we get three types of “bright line” rules that wireline and broadband operators must follow:

  • No blocking
  • No throttling
  • No paid prioritization

This sounds pretty simple, but it gets a bit tricky in practice. For example, this applies to legal content only –no pirated movies — and carriers can argue that they need to block or throttle as part of a network management plan if their network is congested. If they do so, however, they had better be prepared to defend it to the FCC. For example, the FCC came after Verizon over the summer for throttling users of its unlimited plans after they hit a certain data cap. The reason: The carrier couldn’t prove that the decision was about network management as opposed to business.

That same standard applies here. However, zero-rating, where a carrier lets customers listen to a service like Spotify for free on their network (as T-Mobile does) or perhaps lets them use Facebook without it counting against data caps, is okay. Opponents of zero-rating argue that it’s a type of reverse paid prioritization and violates network neutrality, but in a press call, a senior FCC official said the agency would review those calls under the general conduct rule (more on that later).

Even more transparency

FCC Chairman Tom Wheeler

FCC Chairman Tom Wheeler

The transparency provisions of the original Open Internet Order, which was enacted in 2010 and saw most of its provisions struck down by the courts in 2013, actually stayed in place. The new net neutrality proposal adds to those provisions. One way it does that is by adding to the reasonable network management clause, requiring ISPs to justify and defend their network management decisions (as indicated above in the Verizon data throttling example).

Another example is when it comes to managed services that an ISP offers on top of broadband services. For example, your cable provider might offer a voice service or an alarm service on a dedicated network; U-Verse TV is another example of a dedicated service on top of broadband. If ISPs try to degrade regular broadband service to protect their own dedicated services, they will have to disclose that, and it won’t be allowed. This prevents ISPs from prioritizing their own services at the expense of the rest of the internet — something that was utterly left behind in the original net neutrality rules.

The interconnection rule

Level 3 peering graphic The FCC also took on an incredibly esoteric issue called peering that caused consumers a lot of pain in 2012 and 2013 as the major ISPs and Netflix basically engaged in a trade war in the middle of the internet. ISPs wanted Netflix to pay them to open more doors for Netflix traffic to flow through, while Netflix wanted to build its own doors into the ISPs’ networks the way it had done with so many other ISPs. The ISPs eventually won that fight, because without those doors Netflix couldn’t deliver the bits its customers demanded, and their experience suffered.

Netflix likened ISPs’ behavior to extortion and called for the FCC to make peering a network neutrality issue. And to everyone’s surprise, it now has. This rule will let edge providers complain to the FCC about peering and interconnection deals, and any complaint will go through the enforcement office for the FCC to determine if it is “just and reasonable.”

It’s worth noting that this rule only seeks to investigate interconnection deals between “mass market broadband providers and edge providers.” Smaller ISPs and deals between the likes of Google and Facebook or other companies don’t appear to be included here. The FCC is basing its authority to do this on Title II.

The catch-all general conduct rule

Finally we have the catch-all rule, which seems to be the agency’s way of future-proofing the open internet as much as it can. The proposal would create a general Open Internet conduct standard stating that ISPs cannot harm consumers or edge providers. It’s likely that things like zero-rating and sponsored data plans such as the one that AT&T offers will be adjudicated under the general conduct rule.

While it sounds nice, a concern is that the more things that fall under this vague general conduct rule, the more flexibility the agency will have in determining what a network neutrality violation is. Flexibility can be a good thing, but in the government, it can also change with each administration and the political climate. I am concerned that this could be a loophole, but a senior FCC official objected to that characterization. “We see this as a safety net to catch any issues that are not covered as a bright line rule and to protect against new practices that may discriminate.”

Wheeler’s proposal now will go to each of the four other commissioners, who will presumably add their comments and thoughts before it goes to a vote at the open meeting on February 26.

In an ideal world, the agency would vote on the proposal at that meeting, and if approved it will be entered into the Federal Register soon afterward and become part of the official regulations. At that point, I expect AT&T, Verizon or some other entity will sue. In the meantime, expect exhaustive coverage discussing the legalities of the FCC’s proposal, the various reactions to it and even how it may affect the looming Comcast and Time Warner Cable merger.

Nice! Wheeler steps up with real proposal for net neutrality

FCC Chairman Tom Wheeler on Wednesday unveiled his plans for mandating real network neutrality and preventing ISPs from discriminating against traffic on their pipes in an opinion piece in Wired. While much of the plan was leaked to the press earlier in the week, and the tenor of his network neutrality arguments had been shifting for months, it’s worth looking at how far Wheeler has come.

Hell, it’s important to look at how far the country has come. But first we need the main points of the plan, which were not detailed in the Wired op-ed but should be released later today and appear to be focused on making sure both wireless and wireline broadband will follow the same rules. If you are just tuning in, the regulatory oomph will come from reclassifying broadband as a transport service, not as an information service under Title II of the 1996 Telecommunication Act. This means that ISPs will have to abide by common carrier obligations. But not all of them.

In the Wired op-ed, Wheeler writes:

To preserve incentives for broadband operators to invest in their networks, my proposal will modernize Title II, tailoring it for the 21st century, in order to provide returns necessary to construct competitive networks. For example, there will be no rate regulation, no tariffs, no last-mile unbundling. Over the last 21 years, the wireless industry has invested almost $300 billion under similar rules, proving that modernized Title II regulation can encourage investment and competition.

Congress wisely gave the FCC the power to update its rules to keep pace with innovation. Under that authority my proposal includes a general conduct rule that can be used to stop new and novel threats to the internet.

Wheeler is warning Congress that he has this power (and it’s doubtful that Congress could get it together to take that away) and that all the ISP talk about how regulating broadband will harm investment is a sham. He’s also setting the FCC up to be flexible in the future, which depending on how that rule is written could be helpful or just a bunch of talk aimed at pleasing people. We shall wait and see.

But for the moment, let’s remember that this is a huge step. Back in 2005 when Chairman Michael Powell proposed the Open Internet Principles of transparency and non-discrimination, they were just that, principles — something to strive for. But after an ISP in Wisconsin was caught blocking VoIP calls that interfered with its lucrative landline business and Comcast was caught blocking legal BitTorrent streams, it became clear that ISPs viewed certain types of IP content as threats to their business models.

And when FCC Chairman Kevin Martin, who was more of a friend to the Bells than a staunch supporter of the consumer, censured Comcast for its behavior, the debate over how to ensure ISPs didn’t abuse their power bubbled up into a real debate over how to handle network neutrality. But even then, the idea of regulating ISPs under Title II was not a topic that people would bring up. It was far easier to talk about and then go through a grueling debate to try to enshrine those original Open Internet Principles into some type of new regulation, than go to Title II.

That would be insane and a political non-starter. So then-Chairman Julius Genachowski decided to make net neutrality his big fight. He began holding hearings and talking up freedom, glory and the sanctity of the internet — but he ultimately caved before the ISPs and Google and gave us a watered-down version of net neutrality that split wireline and wireless and ultimately ended up failing in court — ironically, thanks to the lawsuit that Comcast had filed against the FCC after Kevin Martin censured it for blocking BitTorrent.

But while Genachowski was backing down, talk of Title II was bubbling up. After the courts had threatened the FCC’s authority in the Comcast ruling, people began looking for bigger guns to bring to the fight, and Title II was a nuclear bomb. When Genachowski’s weak net neutrality compromise was gutted by the courts and Wheeler was left to pick up the mess, his initial play was to patch it up and move on to his real agenda. But the activist and consumer interest was so high that he couldn’t.

So Wheeler, who has proven himself a man with far more integrity than the last commissioner, has taken up the job of sifting through the history of the internet, listened to the players and recognized that if we want to continue with the internet we have and expect it to behave the same way in the future, then we really do need network neutrality — real network neutrality. And the only way to get it appears to be to pull out that nuclear bomb. So he’s doing it.

That takes a lot of guts and a keen understanding of the U.S. market. I may not agree with everything in this proposal, but after almost a decade of covering broadband, I know that this proposal will change things. It won’t be the end of the world for ISPs, although it may cause a little short-term pain for some. It should be neutral for larger tech companies, which already have plenty of other advantages thanks to network effects. Smaller companies should benefit. And most importantly, it will be good for the consumer, who is, after all, who the government is there to protect.

Competition could cost US ISPs $24B a year, says report

With rumors of Verizon seeking to sell a significant chunk of its wireline assets and as the government continues its review of Comcast’s attempt to take over Time Warner Cable, which could lead to further consolidation in the broadband market, a new report out from a U.K. research firm has some shocking news for U.S. ISPs. Point Topic, which gathers worldwide data on broadband prices, said that if the U.S. market were truly competitive, its ISPs would lose $2 billion in revenue a month. Currently, U.S. customers spend $5.27 billion a month based on Point Topic’s report.

The report is mostly a thought exercise instead of a reaction to a definitive policy change, but it does make a compelling argument that U.S. consumers pay the price for the current broadband duopoly we have in most markets. It also noted that the U.S. is no longer the largest broadband market — that distinction now belongs to China, which is what the analyst is comparing the U.S. market against.

The report makes the assumption that this competition would come in the form of the government forcing ISPs to open up their networks by making them sell access to their pipes for a regulated price, as well as from competing municipal broadband networks. Open broadband networks exist in other parts of the world such as as in the Netherlands, where Amsterdam’s fiber network is open to any provider, or in the U.K, where the government forced open the networks and set some pricing.

Point Topic acknowledges that no one in the U.S. is discussing forcing open networks at the moment. Even Google, which had talked about opening up its network at the beginning of its fiber journey quickly backed off that positioning as it built out its networks. But competition is coming, even if it isn’t as drastic as the regulatory opening up that came in the U.K., which is what Point Topic used to get its numbers.

[blockquote person=”” attribution=””]If we drop the tariffs to $173.76, $43.14 and $8.63 per month which is equivalent to the UK, then we see a drop of over $2 billion a month in subscription revenue. Whether the industry in the US could bear this is questionable but it seems, at the moment, likely that some version of increased competition will drive prices down in the next five years.

Missing out on subscription revenue makes it difficult for the supplier companies. Decreasing revenues are particularly hard to handle when a sector has adjusted to super-normal profits which certainly seems to be the case in the US.[/blockquote]

The thought exercise ends with a pretty damning conclusion — that the lack of competition and subsequent high price for broadband has hindered adoption above and beyond where it should be compared to other wealthy countries where broadband is cheaper.

Want to see broadband’s future? Check out the airline industry

A New Yorker explainer on why the airlines want to make you suffer has been making the social media rounds. It’s an excellent case study in how the airlines have created a miserable experience for passengers so they can build a profitable business based on charging fees for bags, early boarding and better seats. It’s also just like the playbook big broadband companies are using as they make efforts to charge both consumers and the content companies for access to their pipes.

The parallels between the airlines and the goals and arguments of the broadband industry are too similar. For example, from the New Yorker piece we have this section:

[blockquote person=”” attribution=””]The airlines, and some economists, argue that the rise of the fee model is good for travellers. You only pay for what you want, and you can therefore save money if you, for instance, don’t mind sitting in middle seats in the back, waiting in line to board, or bringing your own food. That’s why American Airlines calls its fees program “Your Choice” and suggests that it makes the “travel experience even more convenient, cost-effective, flexible and personalized.”[/blockquote]

Meanwhile, if we go to the arguments made by AT&T back in 2011 when it first capped its DSL broadband service at 150 GB per month, you’ll see a similar argument of people paying for what they use in this article from CNN:

[blockquote person=”” attribution=””]”Our approach is based on customers’ feedback,” said Mark Siegel, spokesman for AT&T. “They told us that the people who use the most should pay more, and they also told us we should make it easy for them to track their usage. We think our approach addresses these concerns.”
[/blockquote]

But as we have argued fairly consistently the danger is that when you start creating these sorts of incentives you also create a reason for the airline or the broadband provider to create a crappy experience so people pay to avoid it. Which is what the New Yorker points out and argues has happened in the airline industry:

[blockquote person=”” attribution=””]The necessity of degrading basic service provides a partial explanation for the fact that, in the past decade, the major airlines have done what they can to make flying basic economy, particularly on longer flights, an intolerable experience. … Bill McGee, a contributing editor to Consumer Reports who worked in the airline industry for many years, studied seat sizes and summarized his findings this way: “The roomiest economy seats you can book on the nation’s four largest airlines are narrower than the tightest economy seats offered in the 1990s.”
[/blockquote]

The New Yorker noted that this behavior on the part of the airlines has led to a combined $31.5 billion in income from fees and ancillary payments, which is the fastest-growing source of income for primary airlines. A source of income that the article points out has grown by 1200 percent since 2007.

While the typical consumer might read this and experience rage, I read this and experienced a moment of hope. This article is a gift to anyone concerned about the potential merger between Comcast and Time Warner Cable — a merger that would decrease broadband competition and also eliminate the last big broadband provider that hasn’t implemented usage based broadband caps that essentially take us down the airline’s road of paying for a better broadband experience.

It is a likewise a gift to people concerned about the Open Internet rules that the Federal Communications Commission is considering — the so-called network neutrality rules — that could lead to content providers having to pay for faster access to the end consumer.

Under such deals, a concern is that sites that don’t pay get left behind and are less able to compete against larger sites who can afford to pay up for faster access, which is the equivalent of the poor traveler who is stuck checking a bag at the gate while all the passengers who booked economy plus seats board before her toting their luggage and take up the overhead bins.

Don’t want to check that bag or sit squished in the middle with nary a bag of peanuts on that four-hour flight? Pay up and just be grateful you get anywhere at all. Don’t want to suffer through 150 GB data caps, pay up for more and hope that whatever site you want to visit does the same to make sure its bits reach you at a decent rate. And yeah, just be grateful that you get to experience the convenience of streaming as opposed to driving to the Blockbuster Video to rent a movie on disc.

So read that article and rage about the airlines, and then turn that rage into something useful by using it to stop the same thing from happening to your broadband internet. Tell your Congressman how you feel about the Comcast and TWC merger and network neutrality.

Regulating peering

One of the most puzzling aspects of the peering disputes that have arisen — principally between Netflix and a handful of the largest ISPs — is how little money appears to be involved.