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The FCC’s net neutrality proposal is awesome, but has a loophole

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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.

12 Responses to “The FCC’s net neutrality proposal is awesome, but has a loophole”

  1. Fabio Cecin

    LOL at the idea that Title II regulation for the Internet is the same as the Internet censorship going on in China. By that logic, existing Title II for regular phones has landed a lot of phone users in political jail?

    LOL at the idea that Netflix doesn’t give “financial compensation” for their traffic. So they’re jacking into the Internet for free, as well as all their customers? LOL, LOL, LOL.

    LOL at the idea that “expensive international phone calls” have anything to do with “regulation,” instead of being a legacy concept gathering “business dust” for decades, accumulating taxes, fees and legacy princing. Now people are going to claim SMS (a zero-cost service) is expensive (in many parts of the world) because of “regulation”? No; thanks to the “free market,” people will pay the highest price for SMS, calls, etc. that the oligopoly can get away with charging.

    Huge amounts of dumb coupled with the standard FUD (“you will regret it!”, etc.)

  2. Stacey, you seem to have more information on the “strongest possible rules” that are still “light touch” somehow than the general public has. Did the FCC leak you the entire 8 page list of rules as well as the 332 pages of explanation, or are you relying on open and public information? One of the concerning aspects in this process is its complete lack of transparency.

    Apparently (per G. Nagesh’s WSJ article) the White House has dictated these rules to a puppet FCC chairman whose role is rather like that of the Queen of England, a figurehead who does the smiling and waving while the prime minister runs the country.

    I agree that there’s a huge loophole in the rules, as their primary purpose is to enrich Netflix and other Democratic Party contributors at the expense of consumers and broadband providers.

    I also find it fascinating that Cedar Falls Utilities, the firm that the President touted as an ideal example of how to run a broadband network, objects to the application of Title II to broadband networks. And I also disagree with your impression of “mass market”. In this context, it means any firm that holds itself out to the general public, not just the big ISPs that bloggers love to hate.

    The loophole that I see will become apparent after the rules are passed and we begin to see shuffling in the Internet industry. You’re not going to like it.

  3. stuart brainerd

    Ask China and other oppressive regimes how well Internet regulation works. In a free society I would rahethr have Comcast make rules about Internet usage than the government – at least then if I don’t like the options available I can either negotiate a different class of service or find another carrier. As others have mentioned, it is virtually impossible for a broadband carrier to distinguish between legal services and illegal services, and for obvious legal reasons they don’t want to be in the business of discriminating between the two at the level of vewing content. And with widespread use of TLS encryption, this is at times impossible to do. Which means that the carriers have to adopt broader and more blunt methods to block certain types of traffic that do matter (DDOS, obivous peer to peer traffic).

    And then there is Netflix, poor Netflix which iis pushing out nearly 33% of all Internet traffic. They don’t think they have to give any financial compensation to the carriers to carry all their traffic? Seriously? And the government wants to take the side of Netflix? Obviously there is a significant infrastructure cost in carrying this volume of traffic, who then pays? The answer is that this forces a cost shift from the light users, casual email and browser users, who are not scarfing down a ton of Internet tnaffic, and who pay the same flat motnhly all you can eat fee as those who are gorging on VOD. This then pushes the carriers to adopt metered usage pricing to add some sanity to the equation.

    I still see it as amazing that a single international phone call can be so heavily regulated and expensive, yet you can watch an entire season of Breaking Bad for no incremental cost. Is this the kind of regulation you all want?

    Then you want unbundling of services and no prioritization? So if Comcast or other carrier wants to introduce a voice service that rides on top of their broadband service, and of course voice traffic needs priorlitization, then this is not legal or has to be unbundled so as to give all other possible service providers equal access? This makes no sense.

    No wonder Verizon wants to dump their wireline business and migrate to the lesser regulation wireless domain…

    • There is one major flaw in your entire argument. You have to have choices. Currently where I live… There are none. I have 1 choice. Period. So untik that whole “free market” thing actually works to benefit me with some healthy competition, nothing will matter.

        • Fred Goldstein

          No, it’s very common to have only one provider, and the FCC’s subsidy system (Connect America Fund) is geared to ensure that subsidies only go to one provider, and that there be no subsidies if there is an unsubsidized competitor. It’s a plan to ensure monopolies.
          But NN applied to the Internet is still wrong. It should only be applied to the wire (like Computer II), so that there would be ISPs competing to use monopoly wire. Trying to run the Internet like the phone network guarantees failure.

    • Excuse me? You do realise that every network carrier has always been looking at all network traffic since the eighties right?

      That’s how they deal with things like DOS attacks and viruses.

      The rule isn’t “they can’t do it”, it’s “why would they bother”

  4. Daniel Harip

    The biggest loophole of all is barely mentioned in your article, and never mentioned in the media. “this applies to legal content only”. What is “legal content”? Where is that defined? The internet is a global communications network that has allowed unprecedented sharing of information. What the FCC is actually doing here is trying to regulate the internet and the content that you and I can see. What happens when they pass a law saying comment that are critical of the government are illegal? Or reading content from a country the government deems “bad”? Or any other way you can imagine. This one line will allow the government to regulate what we see and hear over the internet. Why doesn’t a legal group take a look at that? While everyone worries their Netflix will buffer we are about to give up more of our free speech rights by supporting this nonsense.