Regulating the web: what’s at stake in FCC net neutrality vote

The FCC’s vote is unlikely to end the controversy over net neutrality. Reuters

On Thursday the Federal Communications Commission is scheduled to vote on new open internet access regulations, often referred to as net neutrality rules.

The nitty gritty details have yet to be disclosed, although the FCC is expected to propose regulating internet providers like public utilities. Nonetheless, the rules, if passed, will do little to resolve the major problem: the laws governing the internet were written in the early 20th century, decades before the companies that dominate the internet like Google and YouTube even existed. The only solution is a complete rewrite of the 80-year-old Communications Act – unfortunately a fool’s errand in today’s Washington.

In principle, the proposed regulations would limit the ability of broadband access providers such as Comcast and Time Warner, as well as wireless carriers like Verizon and AT&T, to throttle lawful internet content and services on their networks or offer a fee-based fast lane. A majority of FCC members believe that these rules are necessary due to the limited number of broadband access providers, so they’re likely to pass in one form or another.

Little broadband competition

Most people in this country have access to at most two broadband providers. This lack of competition gives those providers control over consumers’ access to internet services and content – as well as internet companies’ access to those same consumers.

Most broadband providers are also cable and telephone suppliers and offer services that compete with those internet companies. For example, Netflix competes with cable companies’ various programming offerings, such as on-demand programming and streaming video services. There is an obvious incentive for the broadband provider to degrade or block Netflix service. Alternatively, the provider could extract additional payment not to do so.

Other ways a provider could possibly discriminate against specific services would include delivering some services at higher speeds than others (prioritization) or not counting some services against the content provider’s data caps. This discrimination could favor the provider’s services or the broadband company could charge a fee to discriminate in its favor.

Will Wheeler’s proposal get thumbs up from his colleagues? Reuters

Hamstrung at the FCC

The FCC has long been concerned about this issue, but its ability to address it has been restricted by the laws that give the FCC its authority over these services. The FCC was created by the Communications Act of 1934. The last major rewrite of that law was the Telecommunications Act of 1996.

Together, these acts set out the FCC’s authority over various communications industries and limits what regulations it can impose. These limits vary depending on how a particular service is classified. Broadcasting, cable, telecommunications and information services are each treated differently.

Major sections of the FCC’s first network neutrality rules were struck down last year by a federal court of appeals. The key issue was not the wisdom of the rules, adopted in 2010, but the authority of the FCC to implement them.

The FCC had classified broadband providers as “information services” rather than “telecommunications services.” Information services are subject to limited regulation. In contrast, telecommunication services are subject to substantial regulation under Title II of the Communications Act.

No right to discriminate

Title II was originally designed in the original 1934 act to regulate AT&T when it was a monopoly telephone company. Companies regulated under Title II are treated as common carriers, which means they have no right to discriminate between content carried over their conduits. Also, permitted under common carrier rules are rate regulation, quality of service requirements and requirements to serve all people.

The court held that the key net neutrality rules passed by the FCC impermissibly imposed common-carrier regulations on broadband access providers, even though they were not classified as such. Those rules prohibited broadband providers from blocking lawful content, applications and services, or from unreasonably discriminating in transmitting lawful network traffic,

Although details of the rules that will be voted on this week have not yet been revealed to the public, FCC Chairman Tom Wheeler has made it clear that they include reclassifying broadband access as a telecommunications service, making it subject to common-carrier regulations.

There is speculation that wireless data services (smartphones and tablets) will also be reclassified and that some regulation of interconnection services will be included. The latter is necessary to prevent slowing down specific services by providing inadequate interconnection. For example, last year Netflix customers were experiencing slow download speeds on their internet connections. These were addressed by Netflix negotiating special connection (peering) arrangements with Comcast, Verizon and the rest.

FCC vote is just the beginning

Net neutrality opponents argue that applying common-carrier regulation to ISPs will increase costs and stifle innovation without providing any real benefit. The degree to which that is true depends in part on exactly which common carrier regulations will be applied. This will determine just how burdensome the regulations will be.

The vote on Thursday will only be the beginning. Regardless of the exact details, there is no doubt that the regulations will be challenged in court. There is also the possibility that Congress may step in and pass net neutrality regulation limiting the FCC’s authority to impose its own rules or creating a different set of them. In general, Democrats, who are the majority on the FCC, favor net neutrality, while Republicans, the majority in both houses of Congress, oppose it. Regardless, the issue will not be settled for years.

Ultimately, the net neutrality controversy is reflective of a larger problem. The FCC is forced to regulate 21st-century technology with 20th-century law. The last major rewrite of the Communications Act was pre-broadband, long before Facebook and YouTube even existed. Even Google was a year away. The long-term solution is a complete rewrite of the Communications Act, but that appears unlikely anytime soon.

Click here to read Scott Wallsten’s argument against imposing new regulations.