Weekly Update

What ‘strong’ net neutrality really means

With the deadline this week for submitting informal comments to the FCC on its renewed push for net neutrality rules hitting this week, Netflix CEO Reed Hastings is out with a blog post calling for what he refers to as a new, “strong” net neutrality regime to replace the FCC’s now-vacated Open Internet Order, or what Hastings is now calling “weak” net neutrality.

Although Hastings does not define what he means precisely by “strong” net neutrality, it’s pretty clear he means for it to include regulation of interconnection — or peering — agreements among network operators– previously considered outside the scope of net neutrality — so that ISPs cannot charge content providers unreasonable “tolls” for access to their networks, as Comcast has lately been portrayed as doing to Netflix:

Without strong net neutrality, big ISPs can demand potentially escalating fees for the interconnection required to deliver high quality service. The big ISPs can make these demands — driving up costs and prices for everyone else — because of their market position. For any given U.S. household, there is often only one or two choices for getting high-speed Internet access and that’s unlikely to change. Furthermore, Internet access is often bundled with other services making it challenging to switch ISPs. It is this lack of consumer choice that leads to the need for strong net neutrality.

Hastings’ comments echoed those posted earlier in the week by Level 3 Communications, a provider of transit service to Netflix, which accused ISPs of “playing chicken” with content providers over interconnection fees.

In response, Comcast issued a statement basically calling B.S. on Hastings’ comments:

The Open Internet rules never were designed to deal with peering and Internet interconnection, which have been an essential part of the growth of the Internet for two decades. Providers like Netflix have always paid for their interconnection to the Internet and have always had ample options to ensure that their customers receive an optimal performance through all ISPs at a fair price. We are happy that Comcast and Netflix were able to reach an amicable, market-based solution to our interconnection issues and believe that our agreement demonstrates the effectiveness of the market as a mechanism to deal with these matters.

As Streaming Media editor Dan Rayburn makes clear in a detailed dissection, there is quite a bit of posturing and special pleading packed into Hastings’ comments, as well as those of Level 3. Both are trying to gain leverage in what are basically business disputes by stoking the threat of regulatory pressure. But that doesn’t mean we aren’t headed for some sort of showdown over whether and how to regulate internet peering. It just may not happen at the FCC

Whether intentionally or not (and I suspect it’s intentional), Hastings is conflating the technical issue of net neutrality with the legal question of whether major ISPs like Comcast are abusing — or could abuse — their effective monopolies on broadband access by charging interconnect fees to content providers.

As it happens, Hastings comments come on the eve of a scheduled hearing by the Senate Judiciary Committee on the proposed Comcast-Time Warner Cable merger. On Wednesday, committee member Senator Al Franken (D-MN) sent a letter to the Justice Department urging the agency to make peering policies a focus of its review of the proposed merger:

First, Comcast’s net neutrality obligations [a condition of the NBC Universal acquisition] expire in January 2018, which raises the question of what happens after that time. Second, the FCC’s net neutrality conditions do not extend to peering arrangements.

I am very concerned that Comcast could use its clout in the broadband market to dictate the content consumers receive and the prices they pay, and these concerns are only intensified by Comcast’s proposal to acquire Time Warner Cable.

What neither Franken nor Hastings provide is any clear sense of what they would have the FCC or Justice Department do about the problem.

I strongly doubt the FCC is going to take on the issue of peering agreements in any systematic way. For one thing, peering is an immensely complex issue that touches many parts of the internet, including many that have no plausible connection net neutrality as such. Writing regulations for it could take years and would likely be subject to years more of court challenges.

Further, if the real problem is a lack of competition, regulating peering arrangements doesn’t really solve the problem. At best it would treat the symptoms.

In any event, net neutrality is not what Netflix is really after. What it wants is protection against potentially anticompetitive behavior by a particular set of ISPs. That may be a reasonable position, but conflating it with net neutrality is both cynical on Netflix’s part and counter-productive for everyone else.

There are real issues of net neutrality that the FCC can and should address, like censorship and content-based discrimination. There are also real issues of competition in the structure of the broadband-access market that ought to be addressed as well. Trying to address one under cloak of the other, however, isn’t likely to solve either.