The Net Neutrality Battle Continues
This past week President Obama weighed in on net neutrality by introducing his plan to make internet service a public utility, which would classify the service under Title II of the Telecommunications Act of 1996. The plan was merely another small development in the saga of net neutrality.
When visiting a website a user, more or less, is sent the website’s contents by their Internet Service Provider (ie. Verizon, Comcast, etc.) via packets and can then view the received content in their browser (ie. Chrome, Internet Explorer, Opera, etc. ). For example, when visiting Google.com, Google receives the request that a user would like to view their page, Google then bundles the website into packets, and sends these packets via the user’s ISP. The ISP, say Comcast for this example, then routes the packets to the user and the website is displayed in the user’s browser. Since 1996, the ISP has been disallowed from inspecting these packets to determine priority; every packet was to be treated the same regardless of content.
However, this year a court ruling struck down net neutrality and allowed ISPs to prioritize packets as they saw fit. For example, if Comcast wanted to slow down or speed up Netflix’s service, such an act was now within their rights. The court decision opened the possibility of content provides, such as Netflix,offering an ISP, like Comcast, a deal to deliver their packets at a faster rate. More commonly, this scenario has been referred to as the “fast lane” which implies the non-negotiated services are traveling via the “slow lane.”
The court ruling caused a national debate on the topic of net neutrality. Although the FCC defended net neutrality in the December 2013 case Verizon Communications Inc. v. Federal Communications Commission, the FCC more recently has been characterized as an opponent of net neutrality. Such a portrayal may stem from comments made by FCC Chairman Tom Wheeler to an audience at Ohio State in December of 2013, prior to the court ruling.
“I think we’re also going to see a two-sided market where Netflix might say ‘well, I’ll pay in order to make sure that you might receive, my subscriber might receive, the best possible transmission of this movie.’ I think we want to let those kinds of things evolve…We’re seeing the market evolve in such a way that there will be variations in pricing. There will be variations in service…We want to observe what happens from that, and we want to make decisions accordingly, but 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.”
Silicon Valley has largely opposed such an opinion with tech companies like Amazon, Dropbox, Ebay, Facebook, Google, Microsoft, Twitter, Yahoo, and countless others co-authoring a letter to the FCC in May.
“Instead of permitting individualized bargaining and discrimination, the Commission’s rules should protect users and Internet companies on both fixed and mobile platforms against blocking, discrimination, and paid prioritization, and should make the market for Internet services more transparent. The rules should provide certainty to all market participants and keep the costs of regulation low.”
In response to such criticism, earlier this month the FCC was rumored to be considering a hybrid approach to net neutrality. The new proposal would divide web traffic into two sections: “wholesale” and “retail.” “Wholesale” traffic would be the traffic from the content provider, such as Netflix, to the ISP, such as Comcast and Verizon, whereas “retail” traffic would be the traffic from the ISP to the user. Under the rumored proposal, “wholesale” traffic would be highly regulated as a utility and “retail” traffic would be less legally scrutinized. Last week, President Obama took a firmer stance on net neutrality stating that the entirety of internet traffic should be regulated as a public utility, similar to electricity and water.
Often, public utility is a designation given to a service that is offered by a monopoly and is essential to daily life. For example, many areas of the country only have one electricity provider due to the cost of infrastructure and the availability of resources. The situational constraints prohibit competition, creating a monopoly on an essential service. As electricity is classified as a public utility, prices and service are highly regulated to ensure availability to consumers. Over the past 20 years, ISPs have similarly gained such control of territory. According to FCC data, 67% of US households have 2 or less choices of Internet Service Providers. The same study shows that 28% of US households only have one choice of service providers.
In order to serve areas lacking sufficient internet coverage, several municipalities have begun to offer their own internet service to their residents. In this model, a consumer would get their internet service from their town or county rather than through a traditional ISP such as Verizon or Comcast. The FCC Chairman has offered praise for municipal broadband stating, “removing restrictions on community broadband can expand high-speed Internet access in underserved areas, spurring economic growth and improvements in government services, while enhancing competition.” Despite endorsing such an approach, the FCC has more recently taken a different avenue to promote expansion into underserved areas. The Connecting America Fund provides subsidies “to accelerate broadband build-out to the 18 million (in 2011) Americans living in rural areas who currently have no access to robust broadband infrastructure.” In August of 2013, AT&T accepted up to $100 million “to deploy broadband to approximately 129,000 locations that lack any fixed broadband service of at least 768 kbps/200 kbp” after declining funds the year prior.
The net neutrality feud is far from over and is sure to continue into next year. While the President has made his opinion clear, the FCC is under no obligation to accommodate as the agency has independent policy making authority. Simply put, the agency is part of the Executive branch, but does not report to a Cabinet secretary, granting the FCC power to make decisions independent of the Executive branch. Short of legislation, the future of the internet is at the mercy of the FCC and Chairman Tom Wheeler.