SEMA News—July 2015

INTERNET
By Joe Dysart

Score One For The Little Guy

Your Internet Just Got Fairer

New FCC regulations restored net neutrality—equal access to the Internet. As a result, a giant competitor cannot cut a special deal with a broadband provider to block the transmission of a website that was created by a much smaller competitor.

As of June 2015, telecommunications and cable companies were knocked back on their heels when new government regulations took effect prohibiting those companies from allowing some company websites to download faster than others. The move restores what has commonly become known as net neutrality—or equal access to the Internet.

For businesses, the new rules issued by the Federal Communications Commission (FCC) ensure that their competitors cannot cut special deals with telcos and cable companies to give preferential download treatment to their websites and web properties. Put another way: A giant company that uses a lot of video to promote its brand can no longer cut a deal with a broadband provider to ensure that its video downloads quicker than, say, the promotional video a much smaller company uploads
to YouTube.

The new rules also mean that the same telcos and cable companies cannot block the downloads of websites they disagree with politically, nor can they block the downloads of websites they perceive to be fierce competitors. For example: A giant competitor cannot cut a special deal with a broadband provider to block the transmission of a website that was created by a much smaller competitor.

The FCC’s move cheered a number of onlookers, including the President of the United States. The FCC decision will protect innovation and create a level playing field for the next generation of entrepreneurs, President Barack Obama said in a statement.

“More than 4 million people wrote in to the FCC—overwhelmingly in support of a free and fair Internet,” Obama wrote. “So to all the people who participated in this conversation, I have a simple message: Thank you.”

Matt Wood agreed. He is policy director for Free Press (www.freepress.net), a consumer advocacy group.

“The FCC has restored the principle of common carriage for Internet access, the most vital two-way communications platform of our time,” Wood said.

Not surprisingly, the telcos and cable companies are not doing cartwheels over the decision. In April, they responded via their industry association, the U.S. Telecom Association, with a lawsuit.

“In challenging the legality of the FCC’s Open Internet order, U.S. Telecom believes the FCC used the wrong approach to implementing net neutrality standards,” said Walter McCormick, the association’s president. Essentially, the FCC order is “arbitrary and capricious, and violates federal law,” he said.

	For businesses, the new rules issued by the FCC ensure that their competitors cannot cut special deals with telcos and cable companies to give preferential download treatment to their websites and web properties.

Industry watchers predict U.S. Telecom’s lawsuit could take years to wind its way through the judicial system, but the FCC rules reign supreme in the interim. Specifically, the new playing field—which takes effect June 12—prohibits broadband providers from blocking any content deemed lawful, including similarly legal web apps and services.

The new rules also prohibit broadband providers from “throttling,” a tactic some broadband providers have used to slow traffic from heavy users of the Internet, such as companies and individuals who transmit and/or receive extremely large loads of video. The new rules also prohibit users from cutting special deals with broadband providers to speed up the transmission of their web content.

Last year, for example, streaming movie company Netflix cut a deal with Comcast—one of the largest Internet service providers in the United States—to receive preferential, premium download treatment from Comcast. The deal raised eyebrows for a number of reasons, including the fact that terms and details of the agreement were kept secret by both Comcast and Netflix. Under the new FCC rules, that deal becomes illegal June 12.

The FCC was able to issue the new rules only after some sophisticated legal maneuvering. Essentially, the agency did so by reclassifying broadband providers as telecommunications services. The move—officially rendered with the FCC’s “Open Internet Order”—instantly brought telcos and cable companies under the jurisdiction of the FCC (www.fcc.gov/document/fcc-releases-open-internet-order). The move essentially reclassified broadband providers as public utilities and made them subject to the Title II Communications Act of 1934, which was revised by Congress in 1996.

To say that broadband providers and their proponents are still fuming over what the FCC has wrought would be an understatement.

“Only action by Congress can fix the damage and uncertainty this FCC order has inflicted on the Internet,” said U.S. Senator John Thune (R-South Dakota).

For years, many telcos and cable companies have insisted that net neutrality is an idyllic, unrealistic dream that is divorced from the forces of everyday capitalism. The Internet, they maintained, is not an all-you-can-eat buffet in which a company such as Netflix can hog 30% of daily Internet bandwidth and not expect to pay a premium for such unusual and extremely profitable access. They say that the market—and not regulators—should shape who pays what.

Besides their lawsuit, broadband providers are also looking to their champions in Congress to undo the FCC’s legal maneuvering.

“Ironically, this order will likely do nothing to address the fairness issues raised by Democrats and Internet activists,” said House Rep. Marsha Blackburn (Tennessee-R), a longtime broadband supporter who has introduced a bill to undo the FCC’s order. “Rather, under the guise of keeping the Internet ‘free and open,’ they simply advocated for an approach that allows Big Brother to step into the shoes of service providers.”

Blackburn is also skeptical of some language in the FCC’s order, which gives the agency latitude to decide the finer points of broadband transmission and access on a case-by-case basis.

“What they’re trying to do is set up a scheme whereby they can pick winners and losers,” Blackburn said. “The government will regulate rates, create its own fast lanes, control the placement of content and raise fees and taxes.”

Counters Free Press’s Wood: “This is not a government takeover of the Internet or an onerous utility-style regulation. Any claims that these rules create new taxes or harm investment have been completely debunked. The FCC’s overall approach is the right one: Apply Title II to protect the free and open Internet and prevent a few powerful broadband providers from becoming gatekeepers. These rules are an all-too-rare example of Washington actually working for the people—responding to a massive public outcry to protect Internet users and keep powerful corporations in check. Title II is the correct, common-sense path to providing real Net Neutrality protections under the law.”

So far, it’s too early to determine which side will prevail in the courts—or in Congress—but one thing is certain: A lot of rich lawyers contracted by the broadband providers are about to get a lot richer.

Joe Dysart is an Internet speaker and business consultant
based in Manhattan.
joe@joedysart.com
www.joedysart.com