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Summary:

Here’s the FCC’s current plan to protect network neutrality. It hopes to create a set of rules by the end of the year, and in doing so, could open the door for prioritization of internet traffic.

RIP net neutrality
photo: Gigaom illustration

The Federal Communications Commission doesn’t want companies like Netflix or Viacom to have to pay to get their content to end users of broadband networks, but it doesn’t see a way (or maybe even a reason) to ban the practice. In a call with reporters on Thursday, FCC officials laid out the agency’s thinking on new network neutrality rules and tried to address concerns that the internet as we know it is broken.

The agency’s hope is to have new rules in place by the end of this year, and it plans to release a public document called a Notice of Proposed Rule Making (NPRM) outlining its thinking and asking questions about the new rules. It plans to release this NPRM in three weeks at its May 15 open meeting. Once the documents are released, the public will have a chance to comment on them.

What was once unreasonable discrimination now becomes commercially unreasonable

FCC Chairman Tom Wheeler. Photo by Mark Wilson/Getty Images

FCC Chairman Tom Wheeler. Photo by Mark Wilson/Getty Images

Since some of the content of that document was released Wednesday, the media and public interest groups have been concerned about what the new network neutrality framework would allow — namely, how the agency planned to ensure that ISPs won’t discriminate against the packets flowing across their networks. The answer? The agency will replace the “unreasonable discrimination” clause from the original net neutrality rules that were defeated in court this year with standards associated with “commercial reasonableness.”

It’s a subtle shift, but an important one. When the U.S. Court of Appeals gutted the Open Internet Order that set forth the net neutrality rules in January, it did so on the basis that the agency didn’t use the right justification for its rules. It tried to turn ISPs into common carriers and regulate them that way, but the court declared that the FCC couldn’t put that burden on the ISPs without changing the law or going through regulatory process that was bound to cause a fight.

Instead we get a compromise by which the FCC attempts to honor the original intent of the 2010 Open Internet Order with a new test for discrimination. That test is the “commercial reasonableness” standard. Here’s how the FCC wants to do it.

If the devil is in the details, here are the details

net-neutrality-money-tube
First, the net neutrality rules that were gutted by the courts made a distinction between wireline broadband and wireless broadband. For a history on why, check out this post or this one. The FCC plans to keep those distinctions intact for the new rules. With this understanding, let’s hit the three main topics the FCC plans to cover, saving the most complicated element for last.

Transparency: Both the original and the new Open Internet Order make a provision for transparency, namely that network operators must share how they are managing their network traffic with the consumer. This applied to both wireline and wireless networks, so if your ISP is treating certain traffic differently, it has to tell you. The FCC’s upcoming documents also ask if this transparency could go further.

When asked if the order could require greater transparency about company networks such as how congested they might be or if ISPs are charging for prioritization or access because the market is uncompetitive, an FCC official said, “The answer is yes.” He added that the agency believes that greater transparency will help consumers and the commission determine how the broadband networks are functioning. That’s a pretty exciting promise if the FCC can wrangle that type of data from ISPs. Right now, ISPs view that data as competitive and proprietary.

An AT&T network operations center. How much transparency is enough?

An AT&T network operations center. How much transparency is enough?

Blocking: The courts struck down the original order’s anti-blocking provision that said ISPs on wireline networks couldn’t block lawful traffic and wireless ISPs couldn’t block competing over-the-top calling and texting services. The new FCC documents will make the case that because blocking traffic interrupts the “virtuous cycle” of broadband access — namely that people use broadband because it gives them access to a variety of services, and because broadband access is beneficial, anything that makes people less inclined to use broadband would cause harm.

This new reasoning would allow the FCC to implement a no-blocking position without resorting to calling ISPs common carriers. Another interesting tidbit here is that the FCC plans to ask about establishing a baseline of broadband service and view anything that goes below this baseline as blocking. This might seem esoteric, but in 2007 when Comcast was interfering with the delivery of BitTorrent packets, it argued that it wasn’t actually blocking them. Instead it was delaying delivery so the routers in effect dropped the packets and customers couldn’t access their files.

Photo from Thinkstock/Yogesh_more

Photo from Thinkstock/Yogesh_more

Commercial reasonableness: Here is the heart of last night’s controversy and where the FCC is walking its finest line. The agency wants to ensure that the spirit of network neutrality lives on, but legally it has to use a standard that opens the door to prioritization. The FCC even seems okay with prioritization in certain cases, with an agency official offering up the example of packets coming from a connected heart monitor as a protected class that could be prioritized over other traffic.

However, it will seek to avoid the obvious examples of Netflix having to pay an ISP to see its traffic priorititzed over another content provider’s. It will do this using the standards the FCC set forth in a 2011 cell phone roaming order that has been tested in court. As part of that order, which dictated that mobile carriers have an obligation to offer roaming agreements to other such providers on “commercially reasonable” terms, the agency created a class of behaviors that were commercially unreasonable.

  • Does this practice have an impact on future and present competition?
  • How does vertical integration affect any deals and what is the impact on unaffiliated companies?
  • What is the impact on consumers, their free exercise of speech and on civic engagement?
  • Are the parties acting in good faith? For example is the ISP involved in a good faith negotiation?
  • Are there technical characteristics that would shed light on an ISP practice that is harmful?
  • Are there industry practices that can shed light on what is reasonable?
  • And finally, a catch all that asks if there are any other factors that should be considered that would contribute to the totality of the facts?
FCC Commissioners (L to R): Commissioner Ajit Pai, Commissioner Mignon Clyburn, Chairman Tom Wheeler, Commissioner Jessica Rosenworcel and Commissioner Michael O’Rielly (Source: FCC)

FCC Commissioners (L to R): Commissioner Ajit Pai, Commissioner Mignon Clyburn, Chairman Tom Wheeler, Commissioner Jessica Rosenworcel and Commissioner Michael O’Rielly (Source: FCC)

Of course, one challenge with this format is that it requires an ISP to behave badly before the FCC can act. The agency said it will be on the lookout for such violations, it will accept formal complains and that it will accept informal complaints. Once a problem is registered the FCC the agency will ask about how it should handle the complaint, and whether a time limit should be imposed for a resolution.

Finally, the official acknowledged that the agency asks in its documents if there is ever a reason for a flat prohibition against certain behaviors even if an ISP isn’t a common carrier. The agency would have to make the case that paid prioritization is such a consumer or industry harm that it should be prohibited altogether. But based on the thinking and attention devoted to the commercial unreasonableness standard, as well as the heart rate monitor example, it feels like the FCC isn’t keen to walk this path.

So these are the topics and questions on which the FCC will vote on May 15 and, if approved, pass for public comment. At that point the agency typically offers a 30 or 90-day comment period.

So get ready, internet: the FCC does want to know your stance on this issue.

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  1. I don’t understand why toll roads are necessary on highways that have a relatively tiny amount of traffic? That seems like a scam to wring more money out of hostages (i.e., people that have zero practical alternatives). Am I way off base Stacey?

    What’s the best way to affect change here? How do we get broadband internet classified as a utility?

  2. Philip Sheldrake Thursday, April 24, 2014

    Thanks for this summary Stacey. While I’m a European sitting in London right now delighted with the recent European Parliament ruling (www.bbc.co.uk/news/technology-26865869), as an Internet user I remain concerned at the inability to enshrine a founding principle of the Internet in US law.

    It’s ironic that a country renowned for its capitalist successes risks implicit endorsement of Soviet Union style ZiL lanes (http://eulr.co/ZiLlane2).

  3. “…the agency believes that greater transparency will help consumers and the commission determine how the broadband networks are functioning. ”

    In a country where supreme court justices can’t wrap their heads around how Aereo’s relatively straightforward technology works, I think it’s pretty disingenuous to say that transparency on how traffic is managed in switches will help consumers understand anything.

    Transparency is also meaningless when you don’t have any other options – Verizon or ATT tells you “we’re going to slow down all packets from websites that don’t pay us extra” is meaningless if consumers can’t take their business elsewhere, or the competition does the same thing.

    and you can be sure that transparency will consist of long, complicated fine print, which will be as read and understandable as most EULAs are.

    What’s even more pathetic about this whole issue is that the switches that direct traffic to the last mile have a lot more switching capacity than necessary. The only reason any packets have to be throttled is to justify extortion. It’s the ISP’s version of protection: pay us, or we can’t guarantee the timely delivery of your data.

    Wheeler is a tool of the ISPs, and he’s incredibly condescending and insulting if he thinks anyone other than ISPs will believe any of his claims.

    1. Very Well Said -Thank You

    2. You hit all the nails on all the heads.

  4. In fact, there has always been prioritization of Internet traffic. A CDN or transit network gets higher priority access to an ISP’s customers by buying more and larger ports into that ISP network. A content provider gets higher priority access to those customers by buying more and larger ports from a high quality colocation, CDN or transit network, rather than from a cut-rate operation with over-subscribed capacity. Very large companies like Apple, Google, and now Netflix, bypass these intermediary networks, and buy their own ports directly into the ISP.

    In all of above arrangements, the size of the port crudely controls the priority of their traffic across the network. More sensible net neutrality regulations will open the door to more fine grained controls for everyone, so that small content providers will have access to the same kind of service that Apple, Google, Netflix, etc., are now able to obtain via physical peering. The large players will still have an advantage due to volume discounts, but there will not be the discontinuity of having to operate your own network to enter into agreements with ISP’s.

    1. Tim, you need to distinguish choice and costs available in the WAN (core) and the MAN (last mile). The former is competitive. The latter is not. The economics of the former approximate to $0.0000004 (extrapolated from a 2-year old OECD study) per minute of voice traffic, while the latter are at $0.001 (based on current termination rates). Google’s fiber pricing in KS is closer to the WAN model than the current duopolistic MAN model; somewhere around $0.00001; or even add even another decimal place depending on the nature and volume of traffic.

      So the arbitrage can and should be able to be closed between the MAN and WAN with the right interconnection policy. What people need to understand is that the internet developed from several interconnection policies in the 1980s-1990s that few expected would ever result in something called the internet; in other words, an unintended consequence. These include:
      -Dial-1
      -Part 15 (aka Wifi)
      -Computer II
      -Cellular A/B roaming/interconnect extended to PCS
      -Pole attachments (and even, perversely, must carry)

      Of course let’s not forget the most recent interconnection event, albeit a market driven one based on or enabled by several of the above govt mandated ones, namely Steve Jobs forcing AT&T to accept equal access to Wifi for Apple’s iOS which resulted in the app ecosystem and smartphone booms of the past 7 years, but also affording end-users choice to offload 70% of their traffic to better networks to improve their experience and stimulate their usage.

      Hopefully these are the factual issues that get entered into the record as the FCC deliberates NN, interconnect and IP Transtition. Because they are all related due to cause and effect and the law of unintended consequences.
      Michael

      1. Thanks for great detail. I think it’s hard to compare the cost of maintaining connectivity to 100,000’s in-home terminations with the cost of long haul fiber among a handful of facilities.

        The telcos have a miserable record of innovation, so we shouldn’t let them own the keys to the kingdom. But, right now, Google and Facebook combined are worth more than ATT, Verizon and Comcast combined. So, I don’t see any evidence that they are exploiting their near monopoly positions. In fact, I can see exactly why there will be little investment in improving our networks.

        1. Tim, excellent points. Google fiber has already shown us that by approaching the model with WAN side scale and driving marginal cost down at each horizontal layer and vertical boundary point the decimal places in the MAN can move farther to the right and the cloud can envelop the edge. Imagine a world with lots of fiber and hetnets in the last couple hundred feet/yards offering infinite service provider and end-user choice.

          Unfortunately, the IP stack does not contain settlements and therefore lacks price signals. That’s why we’re stuck in an IPv4 past; no incentives to upgrade even though everyone would win. Even worse, bill and keep is non-generative and actually contributes to concentration of market power. Imagine how much more efficient the networks would run and what new services might develop if we had jumbo grams and packets. The public “internet” market needs price signals to coordinate investment, not balkanized and unrelated private/hybrid enterprise nets, advertising monopolies, and lower layer peering of the edge access providers to sustain and grow itself across all layers and boundary points.

          Which is why we actually need “balanced settlements” to clear supply and demand forces both north-south (between app/content and infrastructure) and east-west (between networks, managed service/app providers, and private institutional players of variable size and value). Not the 2-sided revenue takings the monopoly edge access providers are proposing. Whether these balanced settlements come in the form of exchanges or APIs or some clearinghouse solutions remains to be seen. But they will result in entirely new business models, revenue streams and demand segments being untapped across 4 major trends already underway: 4K VoD, 2-way HD collaboration, seamless mobile BB, and IoT.

          The challenge for stakeholders is to see that these develop rapidly, universally, and inexpensively. And yet regulators are stuck solving yesterday’s problems. 4 or 6 or 10 megabits/second in rural markets? Should be 100 within 3 years! WAN/MAN demarc closer to the core (what Comcast has done with Netflix)? It should be all the way to the edge! Even in rural markets; not just 4 or 12 or 19 points nationwide as the edge access monopolies want.

          Consider these 3 perspectives:
          1) the current net neutrality is actually a farcical debate over a contrived notion by those who misconstrue history and the true commercial and policy origins of the internet (namely, dial-1 equal access and Computer II). People do not understand that low marginal cost in the competitive WAN, flat-rate dial-up and relatively small traffic streams (to voice and private data networks) were the basis of settlement free peering of IP networks.
          2) all major communication booms over the past 30 years have been a result of public or private interconnection policies or standards somewhere in layers 1-4 across WAN/MAN/LAN boundaries. Steve Jobs forcing AT&T to accept layer 2 offload in the device was a competitive market solution that itself rested on 2 other principles of equal access from the 1980s-90s: A/B/PCS cellular interconnect and wifi (Part 15). These in turn rested on the above two equal access provisions. So, themselves all connected in a series of cause and effect and unintended results. Therefore very few people today even comprehend the causality and have difficulty imagining, let alone articulating, a path forward.
          3) originating and terminating settlements as set by the market (and not distorted by govt and/or monopoly (one and the same) interference and bias) actually clear marginal demand consistently, especially with continually and rapidly changing and depreciating supply (both opex and capex).

          None of these are intuitive and actually run counter to the biases held in the current debates, which is why there is so much confusion. I actually believe the Chairman understands these issues much better than most. But even he has his blind spots and biases and is calling for the industry to provide concrete data and business models to objectify the discussion. I don’t see that occurring at present.

  5. If “net neutrality” is all about making sure little guys are not locked out by the big content providers, why are all the big content providers, e.g., Netflix, Google such vocal supporters of it? Are they just being fair minded?

    1. Google makes its money from Adwords ads. Most of these ads come from tiny little businesses. So it’s in Google’s interest to keep net traffic flowing wild and free.

  6. dieuvens Henrisme Friday, April 25, 2014

    why that happend

  7. My stance is that this telecom shill Wheeler is already practicing his crony good will as newly installed FCC dickhead! Reasonableness is the loophole and everyone will use it and the courts will ensure long drawn out mediation and the crap service we have now will only degrade if we arent agreeing to be gouged MORE by the monopoly service providers.

    The rest is frivolous window dressing and I tell you one thing now … Google has had a silver platter bajillion dollar money making opportunity dropped into their lap if they decide to expand their ISP service to ANY corner of this country!

    I long and jones for the day when I can 1 gbs from Google and tell the cable bitchez to FRAK OFF!

    1. Muhammad Islam Ric Friday, April 25, 2014

      Seriously, Google Fiber needs to be everywhere and soon.

  8. the one precept that is constant is one coined by a famous detective “WHEN ITS OBVIOUS WHY LOOK BEYOND THE OBVIOUS”? …(arthur conan doyle) throught his alter ego Sir Sherlock Holmes…no need to look beyond the obvious
    1) who does this cleary benefit? 2) who are they talking about? 3) are they using the word “FAIR”?
    one has to be learey of those who take a long time to explain the OBVIOUS .
    SPOILER ALERT… SPOILER ALERT…SPOILER ALERT

    EVERYONE PAYS TO BE ON THE INTERNET!!! I …EVERYONE PAYS TO BE ON THE INTERNET!!!

    that includes netflix aereo and anyone else …(obvious)
    verizon (2 billion a week) comcast (the ones that matter) to rulemakers also know as contributors (obvious)
    somehow are not being treated fairly???? (obvious)
    eventhougt everyone pays to be on the internet we now according to the (FCC) need
    “TRAFFIC SEGEGRATION” obviously only to them PRESIDENT OBAMA YOUR BETTER THEN THAT THEY THINK YOU AND ALL OF US ARE STUPID (OBVIOUSLY)

  9. If I’ll qualify my comment by saying a own and operate a relatively small internet service, we service areas where the big companies won’t. The FCC needs to stay out of the internet, they are trying to fix a problem that doesn’t exist. Government involvement will only lead to fees and taxes that will be passed on to the users. Classify broadband as utility will guarantee high prices, just to cover the additional goverment bureaucracy and will move the companies into a pay for usage model as the cell data is now. I think a lot of people think that getting the FCC involved and net neutrality means they will get to keep downloading all the movies and music they want from file sharing sites. Just remember the courts over rule the FCC so those nasty little copyright violation notices will get worse, most isp’s have 3 or 4 strike rule and are very lenient now because they police themselves, but now you will be inviting the goverment in to take over that part also. So consider, 1 strike and you have to agree to a year of having your internet monitored just to get it turned back on, and now since the goverment is involved you can’t just switch internet companies to get out of it because it is shared in a FCC database.
    We do limit the number of connections a user can have to bittorent, and is disclosed as part of our users agreement, the amount of data doesn’t bother us, but to may connections can flood our equipment in some of our remote areas. Upgrading these areas is just not feasible, we don’t make any money in these anyway. If I am told we can’t do this anymore I will just have to stop serving these areas which I would hate to do.

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