Net Neutrality Rules Justified by the Record, Order States
The record shows a growing threat to the Internet if the FCC failed to impose net neutrality rules, according to the text of the order, which the commission released late last week. The FCC approved the order Dec. 21, over the strong dissents of Commissioners Robert McDowell and Meredith Baker (CD Dec 22 p1), who questioned whether the Internet is at risk. In a series of footnotes, the order rebuts arguments made by the two Republicans in their dissents.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
The dangers “are not speculative or merely theoretical,” the order said. The order cites the two major complaints resolved by the FCC, in the Comcast case and the 2005 Madison River order. The order also points to news accounts in which Cox acknowledged that it “had managed the traffic of P2P services,” a class-action settlement by RCN in which it agreed to cease “P2P Network Management Practices,” and a 2008 Max Planck Institute study, which “revealed significant blocking of BitTorrent applications.”
"There have been additional allegations of blocking, slowing, or degrading P2P traffic,” the order said. “We do not determine in this Order whether any of these practices violated open Internet principles, but we note that they have raised concerns among edge providers and end users, particularly regarding lack of transparency."
One footnote cites the Goolsbee Study, which “provides empirical evidence that cable providers have acted in the past on anticompetitive incentives to foreclose rivals.” The footnote says this contradicts complaints by Baker in her dissent “that we rely on ’speculative harms alone’ or have failed to adduce ‘empirical evidence.'” Another footnote says that contrary to McDowell’s and Baker’s statements, neither the Department of Justice nor the FTC “has concluded that the broadband market is competitive or that open Internet rules are unnecessary.”
The order lists three primary reasons why the Internet is at risk without the rules approved last week. The first reflects the changing nature of the Internet, with telephone and cable companies now the dominant ISPs. “Edge providers over broadband increasingly offer actual or potential competitive alternatives to broadband providers’ own voice and video services, which generate substantial profits,” the order said. The order lists the challenge provided by VoIP providers and video aggregators, including Netflix, Hulu, YouTube and iTunes. “By interfering with the transmission of third parties’ Internet-based services or raising the cost of online delivery for particular edge providers, telephone and cable companies can make those services less attractive to subscribers in comparison to their own offerings,” the FCC said.
"Second, broadband providers may have incentives to increase revenues by charging edge providers, who already pay for their own connections to the Internet, for access or prioritized access to end users,” the order asserts. The order cites complaints made in various filings by Free Press, Google, Vonage and others. Verizon and other commenters argue that customers can change ISPs if they're unhappy with carrier practices, the order said: “But many end users may have limited choice among broadband providers.” Others argue that carriers could use profits from prioritization charges to lower the cost of service. “No broadband provider has stated in this proceeding that it actually would use any revenue from edge provider charges to offset subscriber charges,” the order counters.
Third, providers that turn a profit by charging edge providers for prioritized access “will have an incentive to degrade or decline to increase the quality of the service they provide to non-prioritized traffic,” the order said. This in turn would “increase the gap in quality (such as latency in transmission) between prioritized access and non-prioritized access, induce more edge providers to pay for prioritized access, and allow broadband providers to charge higher prices for prioritized access."
The order also offers 35 paragraphs on the FCC’s authority to adopt the rules. As expected, the FCC stresses its broad authorities under Section 706(a) of the Telecommunications Act. The section of the act “provides the Commission a specific delegation of legislative authority to promote the deployment of advanced services, including by means of the open Internet rules adopted today,” the order states. The FCC authority under the section is “generally consistent with -- albeit narrower than -- the understanding of ancillary jurisdiction under which this Commission operated for decades before the Comcast decision.”