Pai, who was nominated to the FCC by Pres. Barack Obama and confirmed by the Senate in 2012, follows the Republican party line that cutting regulations will encourage internet and telecom companies to invest in communications infrastructure and new services. On Friday he circulated a plan to waive for five years FCC enhanced transparency reporting requirements for ISPs with no more than 250,000 subscribers. If passed this would neuter the part of the 2015 ruling that as of last month requires small ISPs to submit information to the agency and consumers about data caps, fees and speeds. The 2015 order had given those businesses a temporary waiver that expired in December—large ISPs still have to provide that info.
Public dialogue on net neutrality is often more political than technical—but the technical aspects are crucial to understanding exactly what the Open Internet Order controls, and what it does not. Today’s internet is a lot different than it was even a decade ago, with new complexities that demand a fresh look at how the information coursing through its networks should be managed, regardless of whether this is done by the FCC or the businesses that run those networks.
State of the Internet
The idea that all data should be treated equally dates back to the internet’s early days, when nearly all traffic traveled across the same 12 core networks provided by AT&T and other ISPs. These networks formed what became known as the internet backbone, connecting most Web sites and content providers with AOL, Earthlink and thousands of other consumer access networks that served up Web pages to PC users. The ISPs that owned the core networks exchanged data traffic without charging one another fees—speed and quality of access were limited by the technology’s capabilities, as opposed to business arrangements.
The internet landscape, however, has changed dramatically since the days when AOL was bulk-mailing millions of free CDs in a campaign to get people to try the information superhighway. Mergers and acquisitions among ISPs and telecommunications companies consolidated the market, enabling them to offer far more than internet service. Global telecommunications conglomerates such as Comcast and AT&T are now more accurately known as broadband service providers—as opposed to simply ISPs—because they bundle internet access with cable television, phone services and in some cases content they produce themselves.
By 2009 fewer than 150 companies (think: Netflix, Google and Facebook) were generating half of all internet traffic, much of it large files carrying video. By May 2014 just 30 companies created more than half of all prime-time internet traffic in the U.S., according to Craig Labovitz, co-founder and CEO of Deepfield, a company that monitors and analyzes internet use. Labovitz provided this information to a 2014 hearing of the House Judiciary Committee Subcommittee on Regulatory Reform, Commercial and Antitrust Law, convened to scrutinize Comcast’s proposed merger with Time Warner Cable.
Netflix, Google and other high-volume multimedia content providers have more recently begun to connect directly with the companies—including Comcast and Verizon—that provide broadband service to consumers. This bypasses the internet backbone all together. Netflix, for example, stores a portion of its video on servers (called open connect appliances) co-located within Comcast’s ISP network, which is not part of the internet backbone. This helps speed the delivery of Netflix movies and shows to Comcast customers, because the content does not have to hop from one interconnected network to the next on the public internet. The company’s subscription-video service consumes about one third of all internet bandwidth during peak hours.
Neutrality Mirage
The Open Internet Order that former FCC Chairman Tom Wheeler championed, however, covers only part of the internet. The order forbids broadband providers to try speeding, slowing or blocking internet content once it is on their networks en route to consumers. But the regulation does not cover traffic traveling outside those ISP networks. A 2014 conflict between Netflix and Comcast illustrates the Open Internet Order’s limitations. In February of that year the companies cut a deal under which Netflix could send video directly from its network to Comcast’s, eliminating the need for Netflix’s data to pass through intermediary networks that slow content en route to Comcast subscribers.
The problem arose when Comcast, which had to upgrade its network to accommodate the deluge of streaming video traffic, wanted to charge Netflix for access to the content server in Comcast’s network. Netflix balked at the fees—such interconnections in the past have not required payment. Then Netflix began to get complaints from customers who noticed their programs were not streaming as smoothly as they once did. Netflix ultimately agreed to pay, and the poor streaming quality improved. Such disputes between content companies and broadband providers have become more commonplace worldwide in recent years.
The misconception that all data pass through the network the same way stems from a concept of the internet as it existed in 1995, when one accessed the Web with a PC and phone line, says Christopher Yoo, a professor of law, communication and information science at the University of Pennsylvania Law School. “One of the downsides of network neutrality is it tries to make all data travel in the same way,” Yoo explains. “The reality is that video is different from voice, which is different from e-mail, which is different from Web browsing.”
What to Expect from Pai
One issue that is related to net neutrality—and is near the top of Pai’s agenda—is what, if anything, to do about so-called “zero rating” data practices. This involves service providers seeking to count certain content against customers’ data caps, but exempting other content. Verizon, for example, does not count the data used by its “NFL Mobile from Verizon” app—which streams bandwidth-hogging live games—against its customers’ monthly data usage. “That doesn’t constitute blocking or degrading, but it does mean favorable relationships between content providers and internet service providers,” says Jim Speta, a professor at Northwestern University’s Pritzker School of Law. “In the absence of any regulation, I think you’ll see a lot more of those types of business arrangements.”
Earlier this month the FCC, under then-Chairman Tom Wheeler, issued a report suggesting zero rating practices violate the Open Internet Order. He cited AT&T as an example. The “Data Free TV” feature on AT&T’s DIRECTV app lets broadband consumers who also subscribe to direct broadcast satellite service from DIRECTV—an AT&T subsidiary—view unlimited video content. The point here is AT&T could be seen as discriminating against content providers that compete with DIRECTV, because competitors’ video would count against customers’ data caps. Pai, who voted to approve AT&T’s 2015 acquisition of DIRECTV, accused Wheeler’s report of “casting doubt on the legality of free data offerings—offerings that are popular among consumers precisely because they allow more access to online music, videos, and other content free of charge.”
A Pai-led FCC will likely overturn the Open Internet Order, although that process could take several months to a year. The bigger question is whether the FCC would replace that rule with some other measure, or avoid regulation altogether. “I’m hopeful that the FCC won’t be defanged entirely, and that even without the Open Internet Order the agency will still act against anticompetitive behavior among the large internet companies,” Speta says. Both Speta and Yoo agree that a broader focus on whether companies are competing fairly from one end of the internet to the other would get users much closer to real net neutrality.
