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.

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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?”

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.

It’s on! FCC plans strong net neutrality for mobile and broadband

The Federal Communications Commission plans to reclassify broadband internet providers so they can’t favor some websites over others, which is the outcome that has been urged by net neutrality advocates, and which would amount to a victory for the open internet.

FCC Chairman Tom Wheeler has yet to release a formal copy of the new rules, which must be circulated to other Commissioners three weeks before a scheduled vote on February 26, but the details have been leaked to the Wall Street Journal. They include a call for so-called Title II reclassification, which would mean a ban on internet “fast lanes”:

A key element of the rule would be a ban on broadband providers blocking, slowing down or speeding up specific websites in exchange for payment, a practice known as paid prioritization, these people say.

Wheeler’s plan to reclassify internet providers is likely to upset ISPs like Verizon, which do not want to be treated like common carriers, but the move had come to seem likely after President Obama last year jolted the net neutrality debate by calling publicly for Title II.

The move will also encompass mobile broadband, which was not covered by former net neutrality rules that were struck down in a major court decision in early 2014, and gave rise to the new proposal.

Another important aspect of the forthcoming rules addresses so-called paid peering arrangements. These involve broadband providers demanding that content providers like Netflix pay to connect their networks directly the ISPs’ networks to ensure their traffic streams are not degraded on the way to consumers — a practice Netflix and others have likened to extortion.

Wheeler’s proposal will reportedly also place peering, which is now unregulated, under Title II:

The proposal would also give the FCC the authority to regulate deals on the back-end portion of the Internet, where broadband providers such as Comcast Corp. and Verizon Communications Inc. pick up traffic from big content companies such as Netflix Inc. and network middlemen like Level 3 Communications Inc. The FCC would decide whether to allow these so-called paid peering deals based on whether it finds them just and reasonable, the standard under Title II.

Today’s leak is sure to touch off a lobbying and public relations tempest ahead of the scheduled February 26 vote. The pushback will come from the cable industry, which has been pushing Republicans in Congress to pass a broadband law that would reduce the FCC’s authority to oversee the internet.

Monday’s leak to the Wall Street Journal is believed to have come from one of the two Republican Commissioners on the FCC. A source close to the agency say Commissioners were recently briefed on the Chairman’s plans.

If the FCC ultimately votes in favor of a proposal that applies Title II classification to both consumer broadband and paid peering, it would be a sea-change from last spring, when Wheeler appeared to be in favor of paid fast lanes.

Does the FCC want to oversee peering deals like Netflix vs. Comcast?

The FCC will soon pass new rules for how ISP’s must handle broadband traffic and, while it’s expected to impose a policy of net neutrality when it comes to consumers, it’s been less clear how the agency will resolve another thorny internet issue: whether network providers can charge content companies to accept their traffic — and throttle their streams if they don’t pay. On Wednesday, a report surfaced that suggested how the issue will play out.

The issue, known in the industry as peering or interconnectedness, became a hot topic last year as Netflix feeds failed across the country, leaving consumers to shout at their screens and wonder who to blame. Big broadband providers like Comcast and Verizon sought to fault Netflix and the content companies, claiming they should have to pay a toll to offset the large volumes of internet traffic they create.

Netflix and traffic management services like Level 3, however, claimed that the ISPs has deliberately degraded their traffic by refusing to carry out low-cost upgrades to key internet ports. Calling the tactic a form of extortion, the content companies have also accused the ISPs of double-dipping — saying the ISP’s already charge consumers to receive the internet, and those charges should include all infrastructure fees on the backend.

Now, a long report from Bloomberg cited a source that claims to know how FCC Chairman Tom Wheeler plans to resolve this grand conflict.

According to the source, Wheeler is prepared to bless those paid peering deals as part of a larger framework of internet rules. But he will reportedly also do so in a way that permits the likes of YouTube or Vimeo to complain if the ISP’s are not being “fair or reasonable” with their agreements. As the report said:

FCC Chairman Tom Wheeler has decided the rules, scheduled for a vote next month, will permit the agreements but include a procedure for companies to ask for agency review, said the person, who asked to remain anonymous because the plan hasn’t been made public.

This pronouncement, however, may be premature.

Blanket ban or case-by-case?

No one will be surprised if the issue of interconnectedness appears in the first draft of the new FCC rules which, under law, must be circulated by Chairman Tom Wheeler to the other FCC Commissioners at least three weeks before a vote. These are expected to go out (and get leaked to the press) on February 5.

Indeed, Wheeler demanded data from the companies last summer, as part of an investigation into the public outrage that occurred over the stuttering Netflix streams.

The big question now is not just whether Wheeler will include peering agreements in a larger framework of rules, but the way in which such arrangements will be overseen.

According to a source familiar with the debate, ISPs are likely reconciled to the fact that their current paid arrangements with Netflix, which are currently unregulated, will come under the nose of the FCC in the future.

As such, they are now pushing to ensure that any enforcement occurs on a case-by-case basis over whether a given deal is “fair and reasonable,” rather than in response to a bright line rule that outlaws the sort of pay-for-service deals the ISP’s forced on Netflix last year.

The Bloomberg report, which does not cite any documents and on which the FCC declined to comment, suggests that Wheeler has decided to go with the case-by-case approach. While this would nominally ensure fair oversight, it would also allow the ISPs, as they have done in the past, to deploy their formidable legal teams to ensure any complaints would take years to resolve. In other words, this could be a case where ISPs are trying to make the best of a bad outcome.

As such, it’s unclear if the report is a bona fide insight into Wheeler’s thinking, or is instead just an opening salvo in what is sure to be a ferocious spin cycle as the day of the FCC vote gets closer.

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.