Prioritizing the Net

Net neutrality has been making headlines for the past few months, and rightly so. It is an issue in which the wrong outcome will not only have a massive chilling effect on innovation in the technology sector, it will also have a negative impact on creators of all types, as well as on the internet community as a whole. Unfortunately, net neutrality is among the most misunderstood issues facing the United States right now.

Media commentators, for instance, have led the public to believe that net neutrality is tied to the unethical actions of cable companies even though the scope of this new legislation does not cover that.  To add to the confusion, those opposing net neutrality have made the claim that it’s about “treating all bits equally”, and that the ability of the largest edge providers to build massive content delivery networks poses a new challenge to the internet.  Net neutrality only applies to the so called “last mile” of the internet where internet service providers like Comcast and Time Warner connect a service from edge providers like Spotify, YouTube, and basically every other website or app to the end user, you and me. In a truly neutral or open internet, ISPs would not have the ability to discriminate against certain edge providers by making deals to provide better service to other edge providers. So while the larger edge providers do have the ability to enhance their service, this occurs before the “last mile”, and is not a violation of net neutrality, but rather a result of the competitive free market that is established by an open internet.

Background

We are currently faced with a situation in which the prioritization that would threaten net neutrality would be permissible under the law. This comes as a direct result of the decision by the D.C. Circuit court of appeals. The issue, however, goes back much farther than that.

It used to be the case that most Americans accessed the internet via dial-up. Because dial-up connected users through phone lines, it, like telephone services, was classified as a common carrier under Title II of the Communications Act of 1934. Soon broadband, which, according to a 2013 study by the Pew Research Group, is now used by 70% of American internet users¹, became the prevalent, and eventually primary means of internet connection. At this point the Federal Communications Commission was faced with a choice: classify broadband internet access as a common carrier and regulate it under Title II, or name it an information service and put it under the far less stringent regulatory framework of §706 of the Telecommunications Act of 1996.

Following the 2005 decision in National Cable & Telecommunications Association et al. v. Brand X Internet Services, which reaffirmed the principal of judicial deference to the relevant government agency first established by Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., the FCC’s authority was confirmed to decide how internet services were to be regulated (with the provision that the decision had to be well defended). Internet services were officially reclassified as information services and regulated under §706. At the same time a non-binding set of principles was established to help promote net neutrality.

In 2007, Free Press and Public Knowledge filed a complaint claiming that Comcast had been interfering with BitTorrent by slowing their upload speed and blocking content. In response, the FCC placed restrictions on Comcast, which Comcast promptly appealed. In 2010, the D.C. Circuit Court of Appeals found that the FCC had not adequately justified its authority to impose these regulations and lifted them. In response to this ruling, the FCC released its 2010 Open Internet Order, a legally enforceable order based on three rules, a transparency rule applied to both fixed and mobile providers, a no blocking of lawful content rule, and no unreasonable discrimination in the transmission of network traffic, the latter two only being applied to fixed providers. Shortly afterwards Verizon sued, claiming that by imposing these rules the FCC had exceeded its congressionally authorized authority.

Paid Prioritization or Payola

In January of 2014, the D.C. Circuit Court of Appeals made a ruling in Verizon Communications Inc. v. Federal Communications Commission, confirming the commission’s authority to impose a transparency rule, but vacating both the no blocking and no unreasonable discrimination rule.

The FCC, now under the leadership of Chairman Tom Wheeler, went back to the drawing board and in May issued a notice of proposed rulemaking on net neutrality rules. In the notice the FCC suggested maintaining the rather flimsy transparency rule it had establshed in 2010, instituting a modified no blocking rule, and replacing the no unreasonable discrimination rule with a commerical reasonableness standard.

The element of these proposed rules that presents the greatest threat to internet openness, is found in the commercial reasonableness standard. The proposed standard, which would be judged on a highly innefficient case-by-case basis, allows  “broadband providers to serve customers and carry traffic on an individually negotiated basis”.²

Such negotiations create a system of paid prioritization in which the top edge users receive faster connections from ISPs in exchange for either direct payment to the ISP or an indirect benefit that the ISP receives from the deal. While the large edge providers enjoy the “fast lane” of the internet, smaller edge providers, including just about every app startup, will be relegated to the “slow lane”. Paid prioritization essentially creates a system of internet payola.

A prime example of paid prioritization can be seen in T-Mobile’s recently announced Music Freedom service, which exempts from data caps those music streaming services that it has made deals with. While this may seems to be a wonderful service from the consumer’s point of view, it actually presents a great threat to innovation. Assuming that other mobile and fixed broadband providers institute a similar plan, which, under the proposed rules, is very likely, it will be nearly impossible for any streaming startup to gain traction as few, if any consumers will opt for a service that contributes to their data cap over one that doesn’t. Eventually paid prioritization will expand beyond music services, and once the top services in a given area establish themselves with ISPs it will be all but impossible for any startup in that area to succeed regardless of any superior features it may possess. Further, paid prioritization will completely remove musicians from the conversation about which service is the best as any musician looking to build a career will essentially be forced to make their content available on the ISP’s preferred service. Refusing to do so would almost certainly condemn an artist to obscurity.

It is important to note that all prioritization deals will be subject to commercial reasonableness standards that the FCC plans to establish. If we trust that Wheeler and the rest of the commissioners will in fact do their best to promote an open internet, it is entirely possible that paid prioritization will not have such a significant impact. That being said, the FCC’s reliance on §706 opens their rules to interpretation. If a more conservative administration replaces the Obama administration, they could choose to take a much looser regulatory position, thereby allowing full-blown prioritization.

A Way Forward

While the FCC’s proposed rules do represent the extent of their authority under §706, the fate of net neutrality is far from sealed. Instead of relying on §706, the FCC should utilize the authority granted to them by the Brand X decision and reclassify both fixed and mobile broadband service as common carriers and regulate them under Title II. Doing so would give them much greater regulatory authority, and would allow them to ban paid prioritization outright.

While reclassifying may appear to be a no-brainer, unfortunate political circumstances have put the FCC in a tough spot. If the proposed rules go into effect, it is very likely that House Republicans will introduce a bill to repeal them, but given the rather loose regulations established under these rules, it will almost certainly fail to gain the traction needed to pass. Reclassifying to Title II, however, would receive much stronger opposition, and a bill opposing reclassification would have a greater chance of passing. Additionally, reclassification would turn net neutrality into a significant issue in the upcoming mid-term elections, likely to the detriment of incumbent Democrats. If Republicans controlled both the House and Senate, it is likely that they would possess the supermajority needed to pass a bill repealing the FCC’s Title II authority, and ISPs would be left with virtually no regulations.

Fortunately, the fight for reclassification is not yet lost. As part of the notice, the FCC opened a period for public comments on net neutrality. The initial commenting period runs until July 15, and will be followed by a period reply comments ending on September 10. This comment period presents musicians, and creators of all types with the opportunity to tell Congress, and the FCC how vital net neutrality is to their continued success. It is imperative that all creators take full advantage of this for the future of net neutrality may depend on it.

By Griffin Davis

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