Net neutrality is back. It never really went away, but healthcare and the economy pushed it off the front page--until yesterday. On Tuesday, a federal appeals court ruled the FCC lacks the authority to interfere with how broadband Internet providers treat traffic that flows over their networks. The FCC had adopted a Four Freedoms set of principles around net neutrality in 2005 that were aimed to ensure broadband customers have (more than four) basic freedoms, including the right to use the services, devices, and programs of their choice over their connections. Actually a bit similar to the landmark CarterPhone decision, but I digress.
Yesterday's ruling was the outcome of an action the FCC took against Comcast after Free Press urged the commission to stop Comcast's practice of throttling "peer-to-peer traffic". This traffic is often associated with BitTorrent, a popular service used for unlawful downloading of movies and other pirated content. Comcast insisted the actions were a traffic management practice designed to ensure network capacity for all of its customers. The FCC disagreed, and felt Comcast abused its role as a service provider by inspecting data packets and routing traffic based on content rather than address or destination. Comcast stopped the practice as the FCC ordered, but appealed the FCCs jurisdiction over the matter to the circuit court.
The court's decision opens up several issues. First, there is the issue of net neutrality--do Internet service providers have the right to discriminate based on the various types or destinations of Internet traffic? Are ISPs subject to regulation and if so by which organization?
The issue is exacerbated by Comcast's intent to acquire a majority stake in NBC Universal--if Comcast is in the business of providing television programming and cable TV service, would it not be incented to block alternative Internet programming sources such as Hulu or Netflix's movie streaming? (for more, see Gary Audin's blog from yesterday).
Does the FCC have authority over broadband? Evidently not, but this is a complex one because the FCC's original role was largely based on the monopolies of railroads and grain elevators. The FCC was created in the 1934 Communications Act with two fundamental responsibilities; spectrum allocation and regulation of Interstate Common Carriers. The FCC does not have jurisdiction over local carriers as they fall under the purview of local public utilities commissions (PUCs). The FCC was given regulatory rights because interstate communications (in 1934) was an essential service monopoly.
As with so many IP related issues, the technology today does not fit nicely in these dated structures. Today, the broadband connection is used for a variety of services including telephone, television, and many other forms of communication such as news and email. Virtually everything the Internet provides was in some way federally regulated or protected in their prior forms. The IP connection gets us to the Internet--which is certainly interstate, but not a common carrier subject to regulation. The monopoly part is only sometimes a monopoly, as is the local part. The FCC will either need to reclassify Internet services as a Common Carrier (which it hasn't) or look to Congress for formal expansion of its role.
The Obama Administration is generally in favor of net neutrality, so obviously the GOP isn't. Last October, John McCain sponsored in the Senate the Internet Freedom Act designed to restrict the FCC as the court did yesterday. The proposed bill said the FCC "shall not propose, promulgate, or issue any regulations regarding the Internet or IP enabled services."
The "freedom" part refers to the carriers being free to set traffic policies and practices. This is the inverse of the freedom protections in the First Amendment that restricts infringement of freedom of speech, press, and religion.
A net neutrality bill called the Interent Freedom Preservation Act of 2009 was introduced in the House by Democatic Rep. Ed Markey. This bill makes it illegal for companies to discriminate traffic types or destinations.
Net neutrality is the big one, but the ruling questions many other FCC initiatives including its recently released National Broadband Plan. The FCC knows the PSTN's days are numbered and has taken proactive steps regarding the design of its (broadband) replacement. Then there is the Universal Service Fund (USF), a federal subsidy program funded by consumer phone bills. It subsidizes phone service for low-income households and in rural areas. FCC Chairman Julius Genachowski wants to update the USF to subsidize broadband communications. Clearly the FCC believes not only that broadband is the future of communications, but that its charter is part of that future.
If the FCC can't slap fines on Comcast, who can? In this case, perhaps the Federal Trade Commission should be involved. If Comcast offered/sold unlimited Internet services and did not tell customers that unlimited does not apply to peer-to-peer traffic, then its services are misleading. The FCC seems confused about its and the FTC's role in other areas too. The FCC recently investigated Apple for blocking the Google Voice application from its Appstore, and also investigated the market impact of cell phone exclusives with carriers. These appear to be trade-related topics.
Comcast may be happy about the verdict, but probably not ecstatic, as the decision doesn't address the conflict-of-interest issue regarding its proposed acquisition of NBC Universal. Not to mention Comcast's recent acquisition of New Global Telecom, a major wholesaler of hosted VoIP services.
The court effectively said Comcast is free to prioritize traffic types and destinations as it sees fit. This could mean blocking competitive services. Though it is unlikely Comcast or any other service provider will be too quick or obvious about routing changes, as laws do change when abuses occur. The court's ruling is only its interpretation of FCC powers through current legislation.
Jen Howard of the FCC said "Today's court decision invalidated the prior commission's approach to preserving an open Internet, but the court in no way disagreed with the importance of preserving a free and open Internet. Nor did it close the door to other methods for achieving this important end." The new frontier of the Internet is forcing new conversations on old topics. Pre-switch days, calls were routed by live operators who frequently imposed their preferences on routing requests. In fact, one of the first telephone switches was designed by an undertaker (Strowger) frustrated by a local operator that routed prospects to her husband, a competitor.
The voice networks and the FCC both evolved over the numerous realities and assumptions of a very different world. The FCC will likely move forward with a new angle to ensure net neutrality. That new angle could be another appeal, Congressional influence, or by reclassifying Internet as a common carrier. But it's no longer about just net neutrality, now it will include a much broader discussion around the FCC's role, and universal deployment of broadband.
Dave Michels is a regular contributor and blogs exclusively about telecom at www.pindropsoup.com.
