The changing fortunes of Net neutrality

Open Internet, broadband market and special arrangements all in play

Network neutrality is a term coined more than a decade ago by Columbia Law professor Tim Wu, and describes an equal-treatment approach to Internet traffic handling. In 2010, I wrote in Network World about the Net neutrality conversation then in progress. Now, during the first few months of 2014, a few interesting things have developed and Net neutrality may be a useful lens through which to consider them.

• In January, a federal court ruled against parts of the FCC’s 2010 Open Internet order, maintaining some but effectively reducing other net neutrality assurances.

• In mid-February, Comcast bid $45 billion to acquire Time Warner Cable, to create a national giant cable television provider (and by extension, home broadband Internet provider).

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• In late February, Netflix and Comcast struck a business arrangement to allow improved Netflix traffic delivery on the Comcast network that so many Netflix customers use. More recently, it has been reported that Netflix entered into a similar deal with Verizon.

• Now, FCC Chairman Tom Wheeler recognizes the mounting concern regarding Net neutrality. In recent days he has committed to clarifying the FCC position on the 2010 Open Internet Order and if and how the provisions apply to broadband Internet providers. Wheeler and the FCC will release a proposal to the public on May 15. 

Let’s look at each of these developments a little more closely, beginning with…

The Weakening of the Open Internet

The January US Court of Appeals ruling on Net neutrality actually maintained the expectation that ISPs should be transparent regarding their traffic handling and special business arrangements in order to avoid opaque anti-competitive practices. The court ruled, however, in a way that may allow broadband providers to charge for expedited services. In 2010, I argued that something like this could be a sensible model. If transparency was maintained, different service levels could reasonably be offered at different prices. In 2014 I find myself a little less persuaded by my 2010 thinking, primarily because…

The Broadband Market is Coalescing

The number of viable options for consumer Internet access to the home is small and shrinking. In many markets, it’s a choice between telephone company Internet access (such as Verizon FiOS) and cable television company Internet access (such as Comcast Xfinity Internet). Certainly, the availability of more options would be better for consumer choice in terms of features and service offerings, and might also provide more pricing pressure.

A merger of two of the largest cable companies in the US to create a behemoth cable TV and broadband Internet company further reduces options. When asked about the impact of a proposed Comcast acquisition of Time Warner Cable, Comcast indicated that it would not be anti-competitive because there is virtually no overlap in the current Comcast and Time Warner markets served. I believe them. The fact that they are not in the same markets means that competition for consumer choice is not being directly reduced by this proposed acquisition. Staying out of each other’s markets probably was not a positive force for consumer choice, but it likely was a good business decision. Still, while a Comcast acquisition of Time Warner Cable may not be anti-competitive strictly speaking, it could be detrimental for consumers in a less direct way. The combined company would serve such a large portion of the home broadband market that it would wield disproportionate leverage with companies who provide bandwidth-heavy online services for home users. That could lead to more …

Charging for Special Arrangements

There are many popular streaming video services, including Apple’s television and movie rental and purchase services through iTunes, Amazon’s Instant Video, Google Play Movies and TV, Hulu, and several others. But none are as popular, and account for as much prime time network traffic, as Netflix.

When you try to stream an episode of House of Cards from Netflix to your home computer or TV using your Comcast or Verizon broadband Internet access, and the connection seems a little bumpy, do you tend to blame Netflix or your home broadband Internet provider? How did you pick?

+ Also on NetworkWorld: Outrage over net neutrality decision heard 'round the Internet +

The broadband Internet providers and Netflix tell different versions of this story, and I’m sure each has a defensible position. But the “solution” they arrived at together seems to be an evolving business model in which Netflix pays broadband providers for network traffic handling that assures a better viewing experience for viewers. This particular arrangement is a fee-based non-transit network peering arrangement rather than an expedited service arrangement. But either way, Netflix is paying the bill. At some point, Netflix customers will have to pay that bill.

Netflix CEO Reed Hastings does not sound like this was the approach he wanted. In a Netflix blog post on March 20, Hastings said: “Without strong net neutrality, big ISPs can demand potentially escalating fees for the interconnection required to deliver high quality service. The big ISPs can make these demands -- driving up costs and prices for everyone else -- because of their market position.”

More recently, rumors have begun to appear that Apple is interested in a different arrangement with broadband providers, but in the same general space. Apple, according to these rumors, wants assured high performance for their video content. Watch this space closely. We may be witnessing the start of a trend.

Broadband Internet providers are corporations with capabilities to sell, and the current and evolving legal and regulatory environment makes it possible for them to sell preferred access (whether through peering or “traffic management”) to video providers such as Netflix (and maybe soon to Apple). Corporations have a responsibility to their shareholders to try to maximize revenue and such arrangements seem consistent with their business model within today’s regulatory environment.

The question that I think is worth considering is whether Net Neutrality is being eroded in a dangerous way, resulting in an environment that is not friendly to start-up innovation and healthy competition. What becomes of the young, upstart company with the fresh new idea and technology? How can they break into the streaming video market? If they can’t afford to pay for the arrangements that Netflix and Apple can pay, their service on the largest home broadband provider networks might not perform well. Netflix and Apple will pay for fast access to your TV, and the upstart company could well look slow by comparison and as a result their business may have a very hard time succeeding. Some might argue that that’s how capitalism works, but I’d argue that a level playing field is a key to preserving a healthy environment that benefits us all. Without it, we all may miss out on the advantages of competition and innovation.

With such concerns mounting…

The FCC gets to make the next move

Many have expressed concern that Net Neutrality protections are being dismantled, but FCC Chairman Wheeler has indicated that this is not the case and promises to say more on May 15. Based on Chairman Wheeler’s recent statements, possibilities range from re-asserting some version of the Open Internet Order, to challenging laws in 20 states banning home broadband competition from municipal broadband services (a move that could bring much needed competition exactly where it is needed), to a more detailed description of permissible commercial arrangements for traffic prioritization.

Interested parties can participate by submitting their comments on proceedings of the FCC, including “Protecting and Promoting the Open Internet” and related upcoming matters.

Deke Kassabian is a senior IT director and technology strategist in higher education. His responsibilities include communications technology planning for data, voice, and video networks serving 50,000 users, and the management and direction of a technical staff of 30 full-time IT professionals. Deke is a frequent speaker at Internet2 and Educause conferences on topics ranging from network design and security on high performance networks to the use of virtual worlds in education. He holds a B.Sc. in Computational Mathematics from Long Island University, and an M.Sc. in Telecommunications Engineering from the University of Rochester, and an Ed.D from the University of Pennsylvania with a dissertation topic involving Massive Open Online Courses (MOOCs). Follow him on Twitter @dkassabian

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