Who will pay for the communications infrastructure of the 21st century? Will it be broadband consumers, big content providers, or some combination of the two? In its Open Internet Order released last week, the Federal Communications Commission (FCC ) sided with Big Content and stuck broadband consumers with the full tab.
Before the FCC’s order, there were two possible ways by which Big Content—think Netflix or Amazon or YouTube—could contribute to the recovery of infrastructure costs by Internet service providers (ISPs). Content providers offering real-time applications (which for the most part do not yet exist) could pay for special handling of their packets or “priority delivery.” Alternatively, online video providers could pay ISPs a fee for interconnection.
By reclassifying ISPs as public utilities, however, the FCC has foreclosed both forms of contribution. Paid priority has been banned (see para. 19), snuffing out the market for real-time applications in its infancy. And interconnection arrangements will be regulated under Title II’s “just and reasonable” standard (see para. 29), which could mean anything, including Big Content paying only the ISP’s incremental cost of adding interconnection capacity (see para. 200). If Netflix has its way, that nebulous standard could mean free interconnection for the largest content providers.
Zero contribution is great news for Big Content. Indeed, Netflix’s stock price is up nearly $100 (a 25% increase) since President Obama came out in favor of public-utility regulations in November of 2014.
Things have drastically changed for the Internet after the Federal Communications Commission passed the new rules cheered by President Obama. But how will these changes impact you?
Obama promises the new rules will “even out” the playing field. Opponents warn about new taxes. But who’s right and how do we get to the bottom of it? Maybe these 10 important facts about the FCC’s Net Neutrality rules may help you decide.
1- Obama’s Net Neutrality Means Fewer Choices, Less Freedom
To Obama, net neutrality means not allowing consumers to choose what they want to spend their money on. To the FCC and the President, web site operators should never have the option of spending more money to ensure that content gets delivered as promised. Obama’s net neutrality ensures certain services and applications are limited simply because start-ups and small business may hurt if they cannot compete “mano a mano” with the big dogs.
By ensuring the standards are low to everybody, the new net neutrality rules do not give you access to better services if you’re willing to pay for it.
2- New Rules Reclassify Broadband
FCC Chairman Tom Wheeler had one goal in mind: reclassify the Internet by categorizing it as a telecom service instead of referring to it as an information service.
That is not just a sign of Wheeler’s unfamiliarity with what the Internet provides to consumers, it’s also a clear sign of what the new rules are all about: government control over the Internet. By reclassifying the Internet, the government is able to exert more control over it.
3- What We Have Now Is (Sorta) Net Neutrality
Exceptions exist, but as it stands, cable and wireless companies do not discriminate when it comes to similar types of web traffic. Broadband providers don’t use their technology to block or deliberately slow the exchange of data either. But to regulators, things are not right until government is involved. As a result, rules were put in place to restrain broadband providers even further. To gather support for the new rules, regulators claimed major companies were interested in manipulating the network. The fear mongering was so strong that support for the FCC rules became widespread.
4- Rules Will Thwart Innovation
Yet again, the government wants to fix a problem that doesn’t exist. According to the Obama administration and the FCC, it is necessary to regulate internet service providers so that they don’t interfere with people’s access to the web. The claim immediately prompts one to ask: Who is being denied access to the web?
In the past twenty years, access to the internet has only become more widespread and service today is far faster for many people — including “ordinary” people — than it was twenty years ago, or even ten years ago. Today, broadband in Europe, where the internet is more tightly regulated, has less reach than it has in the United States.
The administration’s plan is rather innocuously called “net neutrality,” but in fact it has nothing at all to do with neutrality and is just a scheme to vastly increase the federal government’s control over the internet.
What is Net Neutrality?
We don’t know the details of the plan because the FCC refuses to let the taxpayers see the 300-page proposal before the FCC votes on it today. But, we do know a few things.
Currently, ISPs are regulated by the FCC, but as an “information service” under the less restrictive rules of so-called Title I. But now, the FCC wants to regulate ISPs as utilities under the far more restrictive Title II restrictions. For a clue as to how cutting edge this idea is, remember this switch to Title II regulation would put ISPs into the same regulatory regime as Ma Bell under the Communications Act of 1934.
So what does this mean for the FCC in practice? According to FCC Commissioner Ajit Pai, “It gives the FCC the power to micromanage virtually every aspect of how the Internet works.” More specifically, Gordon Crovitz at the Wall Street Journal writes:
[With Net Netruality,] bureaucrats can review the fairness of Google’s search results, Facebook’s news feeds and news sites’ links to one another and to advertisers. BlackBerry is already lobbying the FCC to force Apple and Netflix to offer apps for BlackBerry’s unpopular phones. Bureaucrats will oversee peering, content-delivery networks and other parts of the interconnected network that enables everything from Netflix and YouTube to security drones and online surgery.
The administration insists these measures are necessary because — even though there is no evidence that this has actually happened — it is possible that at some point in the future, internet service providers could restrict some content and apps on the internet. Thus, we are told, control of content should be handed over to the federal government to ensure that internet service providers are “neutral” when it comes to deciding what is on the internet and what is not.
Can Goods Be Allocated in a “Neutral” Way?
The problem is that there is no such thing as “neutral” allocation of resources, whether done by government or the marketplace.
Unfortunately, big businesses too often think about how the government can help their bottom line instead of what’s best for the little guy. As a result of a well-orchestrated media campaign, the FCC is on the cusp of reclassifying ISPs under Title II of the Communications Act to enact net neutrality so Big Internet doesn’t have to pay its share of traffic. Ultimately, the change would empower the government to regulate the business models of private ISPs, chaining the Internet to one-size-fits all solutions for millions of customers with different needs.
Internet giants love to scaremonger the public into believing that a world without net neutrality would lead to customers being charged different data plans for the amount of internet they use, much like cell phone companies currently do. The problem with this argument is that we already live in this world, and it is largely not the case. Most Internet subscribers pay a monthly fee that entitles them to as much data as they desire, and that will likely not change anytime soon.