How the FCC Plans to Save the Internet By Destroying It: An Explainer

The FCC wants to make good on President Obama’s pledge to make net neutrality into law. It’s just having a very hard time actually doing it.

Net Neutrality is the simple concept that the company that provides you internet access on your phone and at your house should be a utility — like a phone company. It should deliver you the information you ask for at the speed you are promised without playing favorites or blocking or degrading services.

That sounds like a simple enough goal, and it’s an incredibly important goal.

It’s the principle that has allowed innovation on the net — the creation of YouTube and Google and Instagram and Facebook and Pinterest and Wikipedia and countless personal websites — without those companies and organization having to negotiate contracts with and pay tolls to the ISPs that stand between those services and ordinary internet users.

That era is about to come to an end—if the FCC’s latest attempt to save net neutrality is put into place. This proposal will explicitly allow ISPs to create fast and slow lanes on the internet.

In fact, if the FCC isn’t stopped from its proposal, discrimination on the net will become the default, not the exception.

The FCC will kill the internet in order to save it.

Note: This is a long post so here’s the TL;DR.

1) The FCC has a very simple way to create simple, fair and enforceable rules to protect innovation, free speech and commerce. It lacks the courage and (perhaps) political capital to re-grant itself this power.
2) Lacking this power, the FCC is relying on a small loophole given to it by the courts.
3) That loophole requires the FCC to allow Verizon, Comcast and AT&T to create slow and fast lanes.
4) The loophole also allows ISPs have to strike individual deals with sites and apps. The rates for non-slow service can vary hugely. Those services that don’t pay will get relegated to the slow lane.
5) The FCC wants to call this “net neutrality.” It’s nothing of the sort and the proposal needs to be killed. It’s a bargain that will kill innovation on the net.
6) Even if you are a progressive who loves Obama, the best thing you can do is help kill this proposal and show there is political will for real internet protection.

The legal battles and arguments are very complicated. But the conundrum all boils down to a simple problem.

The Bush Administration decided that internet access was a special beast that should be deregulated.

Previous telecommunications systems — most notably the phone system — are regulated as “common carriers”. This means you can call whoever you like; you can use whatever phone you want; and anyone in a service area can sign up at a fair rate.

This designation recognizes that communication systems are too important to be left to the vagaries of profit-be-damned executives and that the operators are in very powerful positions to do harm and extract tolls.

But the Bush administration’s FCC ruled that internet service providers—the companies you pay to get your computers and phones online—weren’t common carriers.

Instead they were “information services,” (think something like Lexis-Nexis or the Bloomberg terminal) which the government has little power to regulate. It’s a non-sensical designation, but the Supreme Court ruled that even if it was dumb and not the best choice, the FCC has the right to re-classify at will.

You can see the oddness most clearly in a case involving mobile phone roaming.

A smaller mobile phone company wanted Verizon to offer roaming access when its subscribers wandered into Verizon territory. Because phone call carriers are regulated as common carriers, the FCC clearly had the power to order Verizon to offer roaming phone calls at very defined, very fair rates that would be offered at the same fair rate to all companies.

But since the FCC had decided that internet access wasn’t special, Verizon sued over mobile data roaming. It said the FCC had no power to require it to offer data roaming, and even if the FCC did have that power, it couldn’t dictate the terms.

In the court’s plain words: “If a carrier is forced to offer service indiscriminately and on general terms, then that carrier is being relegated to common carrier status.”

Put in other terms, the FCC can’t impose net neutrality rules that protect the internet unless ISPs are common carriers.

But the FCC has spent the last 10 years trying to have net neutrality and deregulation. And it’s still trying to do that.

Even as it deregulated ISPs, the Bush FCC issued some faux “rules” in 2005 that required ISPs to let you use the applications, services and devices that you like. These were known as the “Four Freedoms.”

But when the FCC actually tried to enforce these “rules” against Comcast for secretly blocking users who were using peer-to-peer services, the court said the rules had no grounding in law.

So after a couple years of dithering, the Obama FCC tried again in 2011 to regulate what they’d deregulated, relying on some odd authorities found hither and nither in the federal code.

Verizon fought them and this January, a court said the FCC had no power to prohibit ISPs from discriminating or blocking online services and threw out the rules.

But the court gave the FCC a little wiggle room in that data roaming case I mentioned.

It said the FCC could require a provider to offer data roaming agreements, but it could NOT closely control the terms of those offers and they could vary hugely. Because if the FCC did try to control the terms, that would be a common carrier obligation.

So this is what the FCC is going to do for the entire internet.

It’s going to allow ISPs to charge Netflix and YouTube and whomever for fast access. ISPs won’t be able to block services, but it doesn’t have to provide services on a fair basis.

The FCC is going to try to draw up rules that try to make those agreements sort-of-fair, but the strongest those rules can be is holding ISPs to standard called “commercially reasonable”. If it tries to make the rules actually fair, then the FCC has overstepped its authority.

Here’s how a federal court imagined this scenario (.pdf) might be legal and give the FCC a little authority:

Verizon might […] charge an edge provider like Netflix for high-speed, priority access while limiting all other edge providers to a more standard service. In theory, moreover, not only could Verizon negotiate separate agreements with each individual edge provider regarding the level of service provided, but it could also charge similarly-situated edge providers completely different prices for the same service.

And that’s what the FCC is calling Net Neutrality now.

(Disclosure: I run a startup called Contextly that provides content recommendations to publishers at the end of stories. We serve millions upon millions of images a day and pay substantial money for our bandwidth. I can’t imagine having to sign contracts with ISPs around the country just to make sure these images load quickly. This would kill our business.)

This proposal is a mess.

First of all, it allows each ISP to negotiate individualized and secret contracts with any internet service. That’s awful enough, but even worse, there don’t even have to be any standard terms.

So if you are a startup that streams daily news clips to users, if you want fast service you’ll have to negotiate individually with AT&T, Verizon Wireless, Comcast, TimeWarner, Sprint, etc. And they’ll each try to figure how much they can squeeze out of you.

That’s not hand-wringing. Verizon told the court they’d be doing this if they could. AT&T has floated proposals to create fast and slow lanes for apps. And Comcast is notorious for messing with internet traffic in secret and devious ways.

So what happens if a giant ISP demands unfair terms that there’s no way your startup could pay?

Well, you then get to hire a lawyer and some expensive experts and file a complaint with the FCC. Meanwhile your videos hardly load on mobile and your users start abandoning you.

When you do finally win a year or two later, Verizon will then challenge the win, arguing that in this case the FCC was overstepping its bounds and that it was treating Verizon as a common carrier. Regardless if Verizon wins or not, your company is in the deadpool.

As for companies like Netflix, their cost of operations will go up since they will be paying for bandwidth twice. And the cost you pay for Netflix is going to go up, too.

The FCC is calling this “net neutrality”. It’s going to say it will protect innovation from extortion on a case-by-case basis.

Meanwhile, since there’s hardly any competition in broadband, Verizon and Comcast and AT&T will divide up their networks into slow and fast lanes — keeping the slow lanes slow.

Like a mafia protection racket, they are going to extract a nice percentage from internet services like YouTube and Facebook and get a de facto veto over innovative companies like What’s App. “That’s a cool show you made there HBO with Game of Thrones. It’d be a pity if people could only watch it at 320p.”

That’s not net neutrality. It’s the opposite of net neutrality.

Even worse, it creates perverse incentives for ISPs to keep most of their network slow and congested so that every service that wants to thrive will have to pay to get decent service.

We’ve already seen this happen.

Comcast effectively throttled Netflix in the last few months, refusing to open a decent size port into its network — even though its customers were screaming to watch shows online. It wasn’t that Netflix was filling Comcast’s network with unwanted traffic.

Comcast users were requesting videos and Comcast intentionally screwed their own customers by throttling the pipe between them and Netflix in order to make Netflix pony up double for bandwidth.

If there had been any competition for broadband service— where it was really possible for its customers to switch ISPs, Comcast would have been scrambling to help its customers watch videos quickly.

Instead, it gave its customers crappy service for months and let Netflix see what would happen if it didn’t pay the toll. Which Netflix eventually did. And the FCC refused to even say Boo.

That’s what a monopolist looks like. That’s why common carrier rules were invented. And the FCC’s new fake net neutrality rules will only make this worse.

The simplest fix is to simply re-impose common carrier rules. All that takes is 3 out of 5 FCC commissioners to vote to do so and the FCC has those votes today.

Everyone knows their internet service should work like a utility. You pay Comcast or AT&T a certain amount of money per month and you get a level of service and you get to watch Netflix or upload videos and play World of Warcraft or whatever it is you like to do on the internet. At least in theory.

Unfortunately, Comcast and AT&T are powerful and profitable, and they do not want to be utilities. Being a utility is boring. A utility’s profit margins, while solid, don’t compare to that of a Google or a Facebook or a Netflix. And because AT&T and Verizon and Comcast are the necessary pipes between you and those services, they’d like to get paid double.

They can charge Netflix and Google big tariffs to get to “their” customers. Or even better, they can launch their own video services, which will flow to your house through special tubes that are as fast as a slip-and-slide and uncrowded with other traffic. And Netflix? It will crawl and time out and stutter unless Netflix pays alot for faster access. At least, that’s the telecom’s executives’ dream.

And to make that dream possible, these companies donate heavily to politicians — and they’ve managed to convince lots of Republicans that the idea of prohibiting ISPs from slowing down Netflix amounts to “regulating” the internet.

That’s a ridiculous argument, akin to say that the FCC’s requirement that the phone company allow you to call whichever plumber you want is regulating the plumbing industry.

Simply put, the FCC is too scared of the big telecoms to do the simple thing and reclassify your ISP as a common carrier. (The midterms are coming up.)

So instead, the FCC is taking some small slivers of regulatory hope from recent court rulings, trying to create some semblance of control over ISPs and claiming victory.

It’s time for this FCC charade to stop.

There’s only one way to get real rules to protect the most innovative communications platform ever built and it’s simple as hell. It just requires courage on the part of the FCC and outrage on the part of those of us who live on and love the net.

There’s something ironic about opposing the FCC on these rules by raising a ruckus — by flooding them with comments; by expressing your outrage online and to your representatives.

You’ll be their best friend. There’s still hope in policy circles that the FCC wants to do the right thing, but it’s just scared to.

Our job is to make it clear, like the net did with SOPA, that doing the right thing—creating real net neutrality rules—is the only option for the FCC.

We have to make it clear that destroying the internet in order to save it is not an option, and we can’t and won’t let that happen.

Photo Credit: Roborito, CC licensed