Get Ready to Rumble; FCC Launches Net Neutrality Rollback

Here’s how high tension is already running over the Federal Communications Commission’s proposal to undo it’s own net neutrality order: At Thursday’s open meeting where the commission voted 2-1 to proceed with the first phase of the rollback, with security on high alert over online threats aimed at commissioners, security personnel “manhandled” long-time Capitol Hill reporter John Donnelly and removed him from the building for approaching commissioner Michael O’Reilly in a hallway and attempting to ask him a question outside of an official press conference.

FCC Commissioner Mignon Clyburn

Tensions are only likely to get higher as the proposal moves forward. This week’s vote kicks off at least a three-month period of pubic comments, during which the commission can expect to be deluged with input, ranging from the substantive to he hysterical. Democrats on Capitol Hill, meanwhile, are vowing “all out war” to prevent any rollback.

Democratic commissioner Mignon Clyburn used Thursday’s public meeting as a platform to denounce the proposal and to call on members of the public to challenge the rollback in court, a tactic many legal experts say would stand a reasonable chance of success, given that the commission’s abrupt reversal on rules implemented just two years ago could well meet the legal definition of the sort of “arbitrary” and “capricious” actions federal agencies are supposed to avoid.

There’s also the possibility that Clyburn herself will leave the FCC at the end of June, when her current term expires, which would leave the already depleted commission one commissioner shy of the quorum needed to give any of its actions the force of law. Efforts to fill the by-then three vacant seats on the panel could well set off a major battle between the White House and Democrats on the Hill, which given the current chaos in Washington (Nostrovia!) could drag on indefinitely.

All of which is to say, we’re a long way from any formal rollback of the rules taking effect. Between now and then, though, we’re likely to hear a lot of overheated rhetoric and exaggerated claims from all sides of the debate.

As with the first time around, much of the public debate will focus on the alleged dangers of introducing “fast lanes” and “slow lanes” on consumer broadband connections or the blocking or throttling of disfavored content by ISPs.

For the streaming industry, however, the most substantive of the proposed changes would be the elimination of the current regulations’ “general conduct” standard for reviewing possible violations of open internet principles not covered under the rules.

That somewhat nebulous concept was introduced by previous FCC chairman Tom Wheeler to give the agency the authority to review interconnection agreements between edge providers and last-mile ISPs without issuing formal rules governing those arrangements, which were still evolving at the time.

That effort was in someways the linchpin of the entire previous rulemaking, including Wheeler’s decision to reclassify broadband access as a Title II telecommunications service. Whereas rules prohibiting blocking and throttling likely could have been sustained under the FCC’s existing authority without reclassification, asserting authority over interconnection arrangements could only be sustained if internet access was brought fully under FCC jurisdiction, with its public interest standard. Legally, that could only happen if internet access were formally classified as a telecommunications service under Title II of the Communications Act.

For all the sturm und drang over fast lanes and slow lanes, the number of confirmed cases of content-based throttling of consumer bandwidth is very small. Prioritization of favored content via zero-rating is increasingly common, and in some cases paid for, but it’s not clear that providing consumers with what amounts to free bandwidth qualifies as the sort of consumer harm that the FCC could or would prohibit, even under Title II.

Interconnection arrangements, however, were the source of fierce and genuine disputes between streaming services like Netflix and ISPs like Comcast, Verizon, and AT&T.

You could argue, as many do, that the government should stay out of such disputes and let market forces sort out the arrangements. But you can’t argue that interconnection arrangements aren’t directly material to the business of streaming. For better or worse, rolling back Title II would likely end the FCC’s jurisdiction over those arrangements, which could well rekindle the peering wars.

 

The Net Neutrality Paradox

One of the more unfortunate wrinkles in the long debate leading up to the Federal Communications Commission’s 2015 Open Internet Order, better known as net neutrality, was its increasingly commercial focus. There were important civil liberties issues at stake, to say nothing of the interplay of engineering and regulation of critical infrastructure and the private ownership of public goods. But much of the public debate boiled down to an argument over streaming — Netflix streaming in particular.

That was due in no small part to the efforts of Netflix founder and CEO, Reed Hastings, who made himself and his company the poster-children of the net neutrality cause by loudly proclaiming Netflix’s oppression at the hands of ISPs looking to impose interconnection fees on the streaming service.

Although net neutrality proponents eagerly embraced Netflix’s cause and Hastings’ pubic advocacy they worked to color the issue as essentially a commercial dispute between different types of service providers, which, paradoxically, is actually an argument against what the FCC did. Disputes between buyers and sellers are not really the FCC’s bailiwick; that’s more a matter for the Federal Trade Commission and the antitrust division of the Justice Department. Read More »

Netflix Ponders Life Without Net Neutrality

Netflix CEO Reed Hastings did as much as anyone to shape the Federal Communications Commission’s net neutrality rules. CEO Reed Hastings’ aggressive public lobbying for what he termed “strong” net neutrality, after Comcast and AT&T successfully forced Netflix to pay for access to their last-mile networks, was largely responsible for putting interconnection arrangements between ISPs and edge providers at the center of the debate and helped persuade former FCC chairman Tom Wheeler to push through reclassification of broadband access as a Title II telecommunications service, which gave the commission jurisdiction over those deals.

Yet, as Republicans in Congress and on the commission sharpen their knives to disembowel Wheeler’s hard-won rules Netflix says it no longer needs the protection.

“Weakening of US net neutrality laws, should that occur, is unlikely to materially affect our domestic margins or service quality because we are now popular enough with consumers to keep our relationships with ISPs stable,” Hastings said in his Q4 letter to shareholders this week.

Translation: we’re too big now even for Comcast to push around, a point Comcast itself obliquely acknowledged in November by integrating Netflix into its flagship X1 set-top box. Read More »

America Exits The World

For all intents and purposes, Donald J. Trump will assume the presidency in January with no discernable policy agenda. Apart from a few signature flights of fancy, such as building a wall along 1,500 miles of southern border and rounding up 11 million immigrants for summary deportation, his policy pronouncements consisted largely of an ever-shifting farrago of ignorance, indifference, truculence, and personal animus boiled down into 140-character outbursts. As a general matter, we simply do not know what the Trump administration might do.

trumpGiven the enormity his election represents, speculating on the fallout for any particular industry could seem petty, if not beside the point entirely. But for what it’s worth, the media and technology industries may be among the first to feel the impact.

As a near-term matter, Trump said on the campaign trail that he would block AT&T’s pending merger with Time Warner and would look to undo already done media mergers, including Comcast’s acquisition of NBCUniversal. Setting aside the question of whether the Justice Department would have legal grounds to do either (and the perhaps more interesting question of whether a Trump Justice Department would feel constrained by established law and precedent), Trump’s rhetoric could cast a pall over M&A activity, just as the media industry seems poised for another round of it in the wake of AT&T-Time Warner. Read More »

X1 Marks the Spot for Comcast

Comcast and Netflix this week confirmed an agreement to incorporate Netflix’s streaming service into Comcast’s X1 video platform, signalling a dramatic shift in what has long been a contentious relationship between the companies.

“Comcast and Netflix have reached an agreement to incorporate Netflix into X1, providing seamless access to the great content offered by both companies,” the two said in a joint statement given to Recode.  “We have much work to do before the service will be available to consumers later this year. We’ll provide more details at that time.”

netflix_blockThat’s a far cry from a few years ago when Netflix CEO Reed Hastings was working overtime to turn Comcast into public enemy number one in the net neutrality fight and Comcast was imposing interconnection fees on Netflix for access to its last-mile network.

But the shift is more likely the result of a change in circumstances than a change of heart. Read More »

Court to ISPs: You Really Are Just Dumb Pipes

Back when the clamor began to reclassify broadband access as a Title II telecommunications service, in the wake of the DC Circuit Court’s ruling overturning the Federal Communications Commission’s effort to impose net neutrality rules under its Title I authority, there was a lot of grumbling among Verizon’s peers that the telco should have left bad enough alone instead of challenging the commission’s 2010 rules in court.

Though Verizon won the case, largely on technical legal grounds, it poked a hornet’s next that threatened the far-greater sting of reclassification. But now that the same DC Circuit Court has handed down its ruling on reclassification and the FCC’s revised net neutrality rules, many of those grumbling last time are probably wishing they’d followed their own advice.

FCC_buildingNot only did the FCC win the case this time around, but the court majority’s opinion delivers a series of roundhouse blows to most of the ISPs’ claims about the value of their services, if not yet to their market valuations.

In essence, the court concluded that as service providers, ISPs add almost no value beyond basic connectivity. And that goes for wireless as well as fixed-broadband providers.

Apart from their objections on procedural grounds to the FCC’s rulemaking, the ISPs and their trade associations argued they could not fairly be classified as utility-style telecommunications providers because the services they offer consumers include a range of complex, value-adding information-processing functions, such as email, online storage, content caching and DNS lookup. Read More »

Zero Tolerance

As the FCC awaits the fate of its open internet order (a.k.a. net neutrality) in the D.C. Circuit Court of Appeals, language that could have mooted much of the legal case by limiting the commission’s authority to regulate internet access was stripped at the last minute from the 2000-page omnibus spending bill unveiled by congressional leaders Tuesday night to keep the government running into 2016.

The removal of the rider was a blow to ISPs, which had lobbied to keep the language in the spending bill, but net neutrality advocates have found plenty of other things to complain about lately regarding the behavior of ISPs. Top of the charts: the growing number of streaming services ISPs are selectively exempting from data caps.

FCC_buildingIn just the past three months:

  • T-Mobile introduced its Binge On plan, which allows mobile users to stream video from roughly two-dozen “partner” services, including Netflix, HBO Now, Sling TV, MLB.tv, Showtime and Starz, without those bits counting against a subscriber’s data cap;
  • Comcast launched Stream TV in a handful of markets, a live and on-demand streaming service that, unlike Netflix, for instance will not count against Comcast subscribers’ data caps where those are in place (as no doubt they soon will be everywhere);
  • Verizon launched Go90, its in-house streaming service for which data usage is “sponsored” by advertisers and therefore isn’t counted toward the user’s data cap;
  • AT&T hinted broadly that it, too, will launch a mobile streaming service that, like Verizon’s Go90, would be “sponsored” by someone other than the user.

Read More »

The FCC’s Imperfect Path To Increased Video Competition

The conditions the Federal Communications Commission has attached to its approval of AT&T’s merger with DirecTV are being met with a predictably mixed response. Some groups, such as Comptel, a Washington-based lobbying group representing Netflix, Amazon, Cogent Communications, Level 3 and other network operators and service providers, praised the FCC for requiring AT&T to disclose details of its network interconnection deals. Others, such as Free Press, blasted the conditions for not going “nearly far enough” to address the problem of pay-TV consolidation.

Here’s what we know, from a statement issued Wednesday by FCC chairman Tom Wheeler:

An order recommending that the AT&T/DirecTV transaction be approved with conditions has circulated to the Commissioners. The proposed order outlines Federal Communications Commission (FCC) Chairman Tom Wheeler gestures at the FCC Net Neutrality hearinga number of conditions that will directly benefit consumers by bringing more competition to the broadband marketplace. If the conditions are approved by my colleagues, 12.5 million customer locations will have access to a competitive high-speed fiber connection. This additional build-out is about 10 times the size of AT&T’s current fiber-to-the-premise deployment, increases the entire nation’s residential fiber build by more than 40 percent, and more than triples the number of metropolitan areas AT&T has announced plans to serve.

In addition, the conditions will build on the Open Internet Order already in effect, addressing two merger-specific issues. First, in order to prevent discrimination against online video competition, AT&T will not be permitted to exclude affiliated video services and content from data caps on its fixed broadband connections. Second, in order to bring greater transparency to interconnection practices, the company will be required to submit all completed interconnection agreements to the Commission, along with regular reports on network performance.

Importantly, we will require an independent officer to help ensure compliance with these and other proposed conditions. These strong measures will protect consumers, expand high-speed broadband availability, and increase competition.

Read More »

FCC Unloads, Releases 313-page Report and Order on Net Neutrality

The full text of the FCC’s open internet order has now been released, along with 305 additional pages of exegetical elaboration and 79 pages of formal dissents from the two Republican commissioners.

ppcommissioners-nov-2013-webFrom an OTT perspective, there isn’t much in the full text that wasn’t already known from what the FCC released last month when it voted to approve the rules: The order’s “bright-line” rules against blocking, throttling and paid prioritization do not apply to commercial interconnection arrangements. However, the FCC will consider complaints regarding those arrangements and will take (unspecified) enforcement action if an ISP’s behavior is determined to violate the order’s “general conduct standard,” prohibiting actions that “unreasonably” interfere with or damage consumers or edge providers. Read More »

Finger-pointing over interconnection

When a consumer’s OTT video stream starts rebuffering, or suffers packet losses resulting in degraded quality, it’s often hard to know where to direct blame. The problem is typically caused by congestion somewhere between the content’s originating server and the consumer’s receiving device. But exactly where in the chain of transit that congestion is occurring, and more importantly who is responsible and why, can be difficult even for engineers — and virtually impossible for consumers — to ascertain.

045448280-maclean-d-deshler-m-baldwinBack when it appeared the FCC was poised to classify interconnection arrangements between last-mile ISPs and third-party transit and content providers as a new, distinct type of Title II service the question of liability for congestion in the chain of transit suddenly became urgent for those involved in wholesale traffic exchanges. Read More »

Net Neutrality: Interconnection Covered, But Not By ‘Bright Line’ Rules

After a flurry of last-minute lobbying and internal debate the FCC ultimately backed off its plan to define interconnection arrangements between ISPs and third-party content and applications providers as distinct service separate from last-mile internet access service in its Open Internet order, which it approved today by a 3-2 party line vote. But the commission asserted its authority under Title II of the Communications Act to hear complaints and take appropriate enforcement action if it determines that specific interconnection practices by ISPs are not “just and reasonable.”

ppcommissioners-nov-2013-webThe decision to drop the separate classification of the service that ISPs make available to edge providers marks an apparent shift from the proposal outlined in the Feb. 4 fact sheet released by FCC chairman Tom Wheeler, which referred to interconnection and last-mile service separately. But it eliminates the potential legal problem for the commission’s authority to review interconnection arrangements that separate classification could have created. Read More »

For OTT providers, ‘strong’ Net Neutrality may be losing its strength

Don’t look now OTT fans but the net neutrality rules expected to be enacted Thursday by the FCC may turn out to be not as OTT-friendly as it originally appeared they would be.

FCC Commissioner Mignon Clyburn

FCC Commissioner Mignon Clyburn

When FCC chairman Tom Wheeler unveiled his “fact sheet” on the upcoming rules on Feb. 4, it looked as if the commission was poised to adopt the “strong” version of net neutrality pushed by Netflix and others. According to the fact sheet, the rules would treat interconnection arrangements between ISPs and third-party edge providers as a Title II service subject to the same “just and reasonable” standard that will apply to ISPs’ management of their last-mile networks. Read More »

The next OTT battleground: Zero-rating

The FCC this week is expected to approve on a party-line vote chairman Tom Wheeler’s long-gestating plan to impose new net neutrality rules by reclassifying internet access as a telecommunications service under Title II of the Communications Act, setting in motion a process by which the world will finally get to see the full text of the 308-page Memorandum and Order and begin fighting — almost certainly in court — over its particulars.

TMO1-1149_Baracuda_ALL_R13_03-03One thing that apparently will not be in the order, however, is any bright-line rule banning so-called “zero-rated” data plans offered by wireless operators and ISPs under which particular applications are not counted toward a user’s monthly data cap. Read More »

Net neutrality disconnection?

As ISPs, both large and small, gear up to sue the FCC over its forthcoming net neutrality order, even strong supporters of net neutrality have begun pointing to potential legal problems with the proposal outlined by FCC chairman Tom Wheeler earlier this month. One of biggest we-can-haz-net-neutralitypotential problems, as far as OTT providers are concerned, was flagged by Free Press policy director Matthew Wood. Read More »