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Predicting Wheeler: Where will the new FCC chairman fall on net neutrality?

On some Tuesday or Friday in the coming months the D.C. Circuit Court of Appeals will issue an opinion on network neutrality — the idea that ISPs can’t discriminate on packets traversing their networks. Already many analysts are anticipating a whole or partial setback for the FCC-issued Open Internet Order that codifies the idea of net neutrality. So now, analysts have moved on to ask “What will Wheeler do?”

Tom Wheeler, is the man of the hour when it comes to the question of net neutrality. As a former lobbyist for both the cable and cellular industry he has had close ties to companies that would like to see the Open Internet Order overturned. His statements on the topic have been vague when it comes to the need for an open internet, and so far he has given some truly worrisome answers about congestion or pricing models for the internet. From an interview in Variety (hat tip to Slate):

“I am a firm believer in the market. I think we’re also going to see a two-sided market where Netflix might say, ‘Well, I’ll pay to make sure that my subscriber receives the best possible transmission of this movie.’ I think we want to let those kinds of things evolve, and we want to observe what happens from that and we want to make decisions accordingly. I go back to the fact that the marketplace is where these decisions ought to be made, and the functionality of a competitive marketplace dictates the degree of regulation.”

This scenario is exactly what network neutrality is supposed to prevent, although Wheeler’s quote is actually a response to a question about the need for usage-based broadband pricing. Wheeler later clarified his stance on open networks claiming that he supports the FCC’s order. A few weeks back during an introductory briefing, I asked Wheeler how he might respond if the court determined the FCC didn’t have the authority to implement network neutrality rules and he gave the same generic response that he has so far given — namely that he’s in favor of competitive networks that keep the users and network providers in mind. I bet he also likes puppies.

But now, as the courts are presumably nearing an opinion the question is what will Wheeler do. Part of this will depend on what the court decides, but the options are pretty much appeal or ask lawmakers for some legislative as opposed to regulatory solution. While some legislators are angling to reopen legislation on the telecommunications industry, that’s a long process. As for an appeal, we’re back to that WWWD question.

As for what’s at stake, here’s a Stifel Nicolaus analysis:

Although the court could still surprise, the above scenario would be a victory for Verizon, whose counsel said the company would be pursuing paid prioritization deals but for the Open Internet rules, which discourage discriminatory fixed broadband treatment of legal Internet services, applications, content, and non-harmful devices, subject to reasonable network management. We believe Verizon and other telco and cable providers could gain new latitude to seek new premium deals with Internet edge/content companies. We note Comcast (CMCSA) will remain bound by the rules and related provisions under NBCU merger conditions until 2018 even if the FCC loses.

We believe the impact on Internet edge/content companies (e.g., NFLX, GOOG, AMZN, DIS, CBS, FOXA) would be particularly complex, given individual business plans and broader market ripple effects. We believe some might actually view the ruling as an opportunity to strike broadband deals that improve their service or customers’ experience, if so, and they’re successful, others might feel pressure to do likewise, giving the telco/cable broadband providers leverage, including potentially in broadcast retransmission-consent negotiations.

That would be a brave new world for the internet, although one we might be heading toward anyhow, as more businesses and services rely on these pipes. Silicon Valley should be paying more attention to this issue, given that what’s at stake here could be a slow and sustained chipping away at their business model (and underlying ethos) by a very patient and legislatively savvy communications industry.

Those applications and services built by Silicon Valley companies are not divorced from the underlying infrastructure, much like all the corporate campuses aren’t divorced from the people and infrastructure surrounding them. And the people who control the infrastructure are the ones who will ultimately win.

17 Responses to “Predicting Wheeler: Where will the new FCC chairman fall on net neutrality?”

  1. Michael Elling

    Net neutrality is a fiction; invented well after the original confluence of open access policies of the 1980-90s which led to the communications explosion known as the internet or web. What we need is open or equal access in layers 1-2 in the last mile. We also need balanced (not the so called two-sided) settlement systems so that the “core” can pay for or subsidize edge access; ie telework, telemedicine, teleeduction, etc… The demand for HD collaborative solutions is at the core, not the edge. Mobility further compounds the fact that demand is no longer fixed at the edge for any provider. Balanced settlements are the only way to clear supply and demand horizontally across networks east-west and vertically between applications and infrastructure north-south.

    The past 30 years shows that equal access or mandated interconnect such as dial-1 (long-distance/wan), A/B roaming extended to PCS (cellular), must carry (cable), Computer 2 (internet), and 802.11/wifi leads to competition and pricing which reflects marginal cost. The problem with today’s model is high, average costs that result from a vertically integrated service provider model. Open access and balanced settlements are what the Chairman should focus on establishing. Right now we have closed access in the last mile, are moving to bill and keep (and on top of that arbitrary two-sided revenue “takings” by the monopolies), and are moving to a system of monopoly and balkanized interconnection (Verizon would like to have just 12 nationwide!) which will set us back decades on a relative and absolute basis.

  2. Based on Wheeler’s background it is unlikely Wheeler will act in public interest or favor Net Neutrality. The current FCC may lean towards the “dark-side-interests” namely the so-called competitive interests. Let us see what kind of referee Wheeler is?

  3. TooTallTech

    Some of the comments on here show a clear fundamental lack of understanding of network packet-switched technologies.

    To oversimplify matters, there are two types of network switches- wire-speed and “intelligently overprovisioned”.

    Wire-speed switches are capable of funneling transmissions on all available ports at the rated speed – for example, if you have a 48 port 1Gb switch, the backplane of the switch is at least 96Gb – capable of routing 1Gb full-duplex to each port.

    “Intelligently overprovisioned” switches don’t have a backplane capable of handling full duplex simultaneously on all ports. For example, a 48 port 1Gb switch may only have a 48Gb backplane, meaning that it can’t give 1Gb upstream and downstream to all ports similtaneously. This is where intelligent software, such as Cisco IOS software embedded into their switches, comes into play and enforces “quality of service” rules. Different types of traffic are categorized in important – typically, voice and network management data get higher priority than streaming video, which in turn may get higher priority than email. Depending on how advanced the switch is, it may make these determinations based on source/destination (i.e. “it’s coming from Netflix”), on port number transmission (i.e. “it’s coming on port 80, it must be web traffic”), or even application protocol (i.e. “it’s BitTorrent” or “it’s FTP”). This creates a first bottleneck, and unfortunately these types of switches are much more prevalent than wire-speed the closer you get to the network edge, i.e. your home.

    Now, this is further complicated by the fact that uplinks between switches are rarely as fast as the aggregate backplane – two switches of 96Gb capacity may be uplinked by 2-4 10Gb cables, for instance, so while the clients themselves can communicate with each other at wirespeed, the switch can’t communicate with the next switch in the chain faster than 40-80Gb (at full duplex). This means that if all the clients on your local network switch on your home’s service provider network are trying to access at once (i.e. all the kids come home from school at once and turn on Netflix), then you’re trying to push 96Gb through 40Gb pipe – which can’t happen, so the network “intelligently” (though sometimes the intelligence can be questioned) throttles speeds and queues transmissions.

    In theory, your internet provider should be capping your internet speed through programming on your modem to ensure that the number of users in your neighborhood can’t oversaturate the uplinks. In practice, however, every provider always wants to be the one offering the most speed, even if their networks aren’t ready. So, if a new broadband provider moves into a new neighborhood that Provider A has traditionally held, Provider A raises their speeds to their customers, even if Provider A’s underlying network in the area isn’t upgraded for the capacity to handle those speeds simultaneously to all customers.

    Now, enter “net neutrality.” Suggesting that your neighbor should pay more and you should pay less because you don’t use Netflix and they do is absurd. You both pay for a pipe, presumably with comparable speed ratings. Just because you use your internet less doesn’t mean they should pay more. What you’re essentially advocating is going back to the dark ages and paying by the hour or by the gigabyte transferred. While that would be great for someone that uses the internet very little, it’d be horrible for consumers overall. Realize that the latest iPhone software update was 1.3GB in size. Realize that nearly everything, from Blu-Ray players to “smart” kitchen appliances are now connected to the internet, and many times are silently downloading updates to their software. Turning the internet into a consumption utility is an expensive proposition for the consumer – as evidenced by the fact that TMobile is the only mobile provider that saw real growth last quarter, because they offer unlimited everything, and that’s what consumers crave. They want predictable costs, not one that slides based on arbitrary usage caps.

    Turning the internet into a toll road where consumers or corporations can pay to have “right of way” is essentially condoning class warfare, where a “rich” company like Netflix can dominate and smaller startup businesses will never be able to afford to get off the ground. Imagine if YouTube, when it first started, was burdened by not being able to get bandwidth on the internet over “premium” paying companies. It never would’ve blown up the way it did, it never would’ve been bought by Google, and those clever guys that thought up a great website would never have made their money. You have to remember that almost all of the major tech companies started small in a garage somewhere… and if you’re going to start trying to charge them for pulling their car out of the garage, they may simply never start building the car. Think about that.

    In short – there are many reasons for internet slowdown, there are many things a network may do right or wrong in managing network traffic and equipping the right hardware to do so. However, the answer is NOT to end “net neutrality”, it’s NOT to allow the internet to be dominated by big spenders at the expense of innovation.

    • You are spot on. The end of net neutrality means less innovation – only companies with well established business models and customer bases will be able to afford the tolls. Startups offering new services will have yet another barrier to entry.

      What if there was such a fee structure in place when Google first launch their web search service? Maybe incumbents like Yahoo, altavista, etc would have already been paying the necessary tax so that their website would come up on end-users web browsers. This is an extreme case, of course (it’s unlikely that a site would end up being completely blocked due to competitors paying more, especially in the case of a text based service like search – but what about video…? The next Netflix or Youtube might not ever get off the ground because their service requires too much bandwidth and they just can’t afford the on-ramp charges.

      What ISPs (the telcos and cable companies) want to see happen is this:
      net neutrality ends and then they are able to reverse auction bandwidth to the highest content bidders (similar to how Google sells ads). The ISPs will then have a routing algorith within their network that will then prioritize accordingly. If Netflix pays more than Amazon, then, in a conflict situation, Comcast/ATT/Verizon/etc will then prioritize the Netflix content over the Amazon content. Amazon video users will be the hourglass and service disruptions while Netflix users will receive their video interruption free.

      The key thing here is that this new revenue stream exists on the bandwidth the ISPs ALREADY HAVE. It is even possible that this model will almost incentivize the ISPs to not provide more bandwidth. Relative scarcity drives up prices (for example, in an increasingly fragmented TV market, the price bid by networks for programs with guaranteed viewers like high profile sporting events like the Super Bowl and baseball World Series is headed increasingly higher.)

      If net neutrality falls by the wayside, then we will see the US lead in internet startups begin to seriously weaken and the dynamic internet we currently have begin to stagnate. Conversely, the telcos and cable companies will make windfall profits as they further monetize their local monopolies. We will be shifting revenue and profits from dynamic startups who are responsible for key innovations in tech to companies that protect the status quo and fight change at every opportunity (the telcos and cable cos). Sound like a good deal….? For anyone happy with the amount of innovation, customer service, and offerings from their phone or cable company, it would be – but then, most consumers do not typically rate any of these companies high in any of those categories.

    • netdebunker

      All of you freemium fans seem to overlook the fact that the internet is already choking on video. That’s why I’ve pointed out that connection speed doesn’t matter – the bottleneck happens somewhere else, that is not adequately built out. You simply can’t have the TV entertainment industry doing an end-run-around on everyone’s internet. Video will choke it off… and then they will want it to move 4K via the new h.265. Don’t be surprised. The process of choking on video is going exponential, and if you don’t want video users to pay for the expansion of this, then you will be paying for it alone.

      Congrats, you’re building the next global free tv transmission network one month at a time -with your internet bills. Get ready to start paying much, much more.

      Net neutrality is a Trojan Horse for the entertainment industry. Wake up and smell the coffee.

  4. Chet Heath

    There is an argument here for “Isochrony” (the concept of continuous availability of bandwidth) for over-runnable tasks, where the operation might break if data does not arrive downstream in time. It would seem that this is a higher level of service that a subscriber may pay extra for. Optionally!
    Not the data supplier – but the data receiver should pay: the user who gets the benefit. Those who pay for it can get priority transfers, just like we do on post mail and overnight shipping. Those who do not opt for the higher level of service would pay less, but would be required to have a higher inventory of prior transfers locally to keep an over-runnable task continuously available.

  5. netdebunker

    I pay for a 25/25Mbps FIOS internet connection in my home, and am not a Netflix subscriber. Quite often I get to see the internet slow to a crawl during the peak video viewing times- the lunch hour and evenings.

    Because of the concept of net neutrality, it turns out I am subsidizing the people who are bring it to it’s knees. I get slowed down, but am not watching movies. I pay for a fast connection, but quite often the bandwidth isn’t always there.

    It’s obvious that as all the TV concerns migrate to the internet, they are getting free transmission costs because of people like me. Net neutrality is the new TV subsidy. It’s a farce, and should be throttled, so the rest of us can get what we’ve paid for. Otherwise, the internet will simply choke and actually move backwards in it’s utility.

    People should be concerned that they will be paying the transmission costs of a freeloading entertainment industry. Let the entertainment company shareholders build their own delivery systems from Hollywood to the curbside. They can pay for the first 2500 miles, and the last mile as well.

    • Chet Heath

      I agree – those who consume priority in data transfer should pay for it – effectively subsidizing their victims: those who do not pay as much and get slowed down due to a lower priority. See my next comment. This is no different than paying more for overnight mail versus 2-day priority, versus book rate at the Post Office. Those who pay more get priority and those who pay less should have lower expectations.

      • Valentine North

        The ISP is promising you a 25MB/s rate, if you don’t get that rate, then you can blame the streaming site if they don’t have the capacity for it (highly unlikely) or the ISP for selling you something they don’t have. ISP’s regularly oversell their service. Your connection, at peak levels will most likely be less than 2.5, not 25 MB/s.

        @Chet Heath
        Don’t blame fellow customers. You’ll never find an ISP that gives their customers bandwidth over what they paid for. Less sure, more never. Problem is, internet is in no way similar to the mail service. You set a customers bandwidth limit to a number, then it stays at that number, never going down or up because of snow storms or good tail winds.

        ISP’s already have enough power that they oversell their bandwidth many times more. Allowing them to control what they deliver will give them even more, and none of it good for consumers.

        You could compare the ISP with the storm drain system in a town. During regular rains, only a small percentage of it gets used, but during a rainy season it will be working at 100%. Most ISP’s right now are shallow ditches running along the roads.

        • netdebunker

          Net Neutrality is the new TV subsidy. This is what is really going on. If you read the statistics of video growth on the internet you will know that video is the big problem. GigaOm recently had an article citing the peak video moments of the day where the internet becomes close to breaking down. It’s indisputable.

          I don’t love the ISP’s, but moving the paid TV model to the internet is going to kill it. It’s obvious that net neutrality is the new tv subsidy. HD streams run from continuous 5 to about 10 Mbps.

          • paddypatpat

            I doubt that the 25Mbps rate is promised to be that fast all the time. Rather, it’s more likely to be a cap on your rate; that you’ll get up to that fast. Usually, business accounts different from residential connections in that the 25Mbps that they buy is a dedicated portion of the pipe between them and the ISP. Residential plans tend to not provide a dedicated portion of the pipe. Instead you share it with others and in return it costs a lot less than the business plans.

            With this in mind, I don’t think you’re subsidising those naughty video streamers chocking up the system. Really, I’m not convinced this has anything to do with net neutrality. Rather, it’s how the ISP sell you access to their system.

            An example of video services stamping on net neutrality are when a service (lets say Youtube) doesn’t count towards any monthly bandwidth total you might have access to. This means that in effect that website has “free” bandwidth yet any other services (say Vimeo) are counted within the limit. Thus the playing field isn’t fair and net neutrality is broken.

            If net neutrality didn’t exist when the internet first started, you’d still be buying CDs from Sony rather than mp3s from a multitude of places.
            Any price that it costs to protect net neutrality will be cheaper than what it costs you in services that operate outside of those boundaries. Net neutrality is excellent for the consumer.

            • netdebunker

              I don’t know or care where the bottlenecking is happening… AWS, Level3, or Verizon. Net neutrality is the new Tv subsidy. It’s a bandwidth grab on the part of the entertainment industry. I don’t feel like paying for that crap all over again – as I’ve spent plenty on cable over the years. Let those who hog the bandwidth pay for the bandwidth. No one rides for free. Net neutrality is a mirage.

    • Net neutrality isn’t just about making companies like Netflix pay more. If the net neutrality rules are struck down, it will give the ISPs permission to tamper with internet traffic any way they see fit.

      Maybe you want to watch a news video on CNN, but it just keeps buffering even though it’s not at a peak usage time. Oops, CNN didn’t pay to have their data given priority, so the ISP is intentionally slowing down access to their site.

      Maybe you want to make a Skype call, but can’t because the ISP has decided that it’s only going to allow Skype during certain hours of the day.

      Or maybe you want to play an online game like World of Warcraft, but you have to pay your ISP an extra $10 a month for the privilege.

      Don’t think that ISPs will pull crap like this? I direct your attention to the fact that Comcast was caught red-handed, interfering with BitTorrent transfers. You’re probably thinking “So what? BitTorrent is just used for downloading illegal stuff anyway.” Well, besides the fact that BitTorrent has plenty of legal uses, the point is that if they can mess with one application that they don’t like, they can mess with ANY application that sends data through their networks.

    • netdebunker clearly does not have a basic understanding of the internet. All of us pay for access fees to the internet, including the entertainment industry, which likely costs many thousands to millions of dollars annually for them. This is far from a free ride. Losing network neutrality would be equivalent to no longer allowing cars manufactured by Ford to drive up to the posted speed limit. If this situation were to occur exactly how much control would most consumers have to buy a different car, especially if the rules change with every contract negotiation. Essentially, competition would be moved from the services that are carried on the internet to contract negotiations. Consumer choice would be significantly limited in this situation, just look at the cable TV industry if you want an example.

      Even if net neutrality were removed this does not exactly solve your slowness issue. You cannot easily related net neutrality with the speed of your service. There are too many assumptions in your argument and your ‘I don’t care’ attitude seems pretty clear that it was not well thought out.