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One year ago, the FCC majority passed the 2017 Restoring Internet Freedom Order, largely overturning the 2015 Open Internet Order. I consider the 2017 Order the most significant FCC action in a generation. The FCC did a rare thing for an agency—it voluntarily narrowed its authority to regulate a powerful and massive industry.

In addition to returning authority to the Federal Trade Commission and state attorneys general, the 2017 Order restored common-sense regulatory humility, despite the courts blessing the Obama FCC’s unconvincing, expansive interpretation of FCC authority. National policy, codified in law, is that the Internet and Internet services should be “unfettered by Federal or State regulation,” which, if it means anything, means Internet services cannot be regulated as common carriers.

Net neutrality is dead

Net neutrality advocates who want the FCC to have common carriage powers over Internet applications and networking practices were outraged by the approval of the 2017 Order. Joe Kane at R Street has a good roundup of some of the death-of-the-Internet hyperbole from the political class and advocates. Some disturbed net neutrality supporters took it too far, including threats to the lives and families of the Republican commissioners, especially Chairman Pai.

But the 2017 Order hadn’t killed net neutrality. It was already dead. A few hours after the passage of the Restoring Internet Freedom Order, I was on a net neutrality panel in DC for an event about the First Amendment and the Internet. (One of my co-panelists dropped out out of caution because of the credible bomb threat at the FCC that day.) I pointed out at that event that while you wouldn’t know it from the news coverage, the Obama FCC had already killed net neutrality’s core principle—the prohibition against content blocking. The 2015 “net neutrality” Order allowed ISPs to block content. Attributing things to the 2015 Order that it simply doesn’t do is what Commissioner Carr has called the “Title II head fake.” The 2017 Order simply freed ISPs and app companies to invest and innovate without fear of plodding scrutiny and inconclusive findings from a far-off FCC bureau.

Long live net neutrality

The net neutrality movement will live on, however. The main net neutrality proponents aren’t that concerned with ISP content blocking; they want FCC regulation of the Internet companies and new media. It’s no coincidence that most of the prominent net neutrality advocates come out of the media access movement, which urged the FCC’s Fairness Doctrine, equal time laws, and programming mandates for TV and radio broadcasts.

The newer net neutrality coalition, as then-FCC Chairman Wheeler conceded frankly, doesn’t know precisely what Internet regulation would look like. What they do know is that ISPs and Internet companies are operating with inadequate public supervision and government design. 

As Public Knowledge CEO Gene Kimmelman has said, the 2015 Order was about threatening the industry with vague but severe rules: “Legal risk and some ambiguity around what practices will be deemed ‘unreasonably discriminatory’ have been effective tools to instill fear for the last 20 years” for the telecom industry. Title II functions, per Kimmelman, as a “way[] to keep the shadow and the fear of ‘going too far’ hanging over the dominant ISPs.” Internet regulation advocates, he said at the time, “have to have fight after fight over every claim of discrimination, of new service or not.”

So it’s Internet regulation, not strict net neutrality, that is driving the movement. As former Obama administration and FCC adviser Kevin Werbach said last year, “It’s not just broadband providers that are fundamental public utilities, at some level Google is, at some level Facebook is, at some level Amazon is.” 

Fortunately, because of the Restoring Internet Freedom Order, IP networks and apps companies have a few years of regulatory reprieve at a critical time. Net neutrality was invented in 2003 and draws on common carriage principles that cannot be applied sensibly to the various services carried on IP networks. Unlike the “single app” phone network regulated with common carriage, these networks transmit thousands of services and apps–like VoIP, gaming, conferencing, OTT video, IPTV, VoLTE, messaging, and Web–that require various technologies, changing topologies, and different quality-of-service requirements. 5G wireless will only accelerate the service differentiation that is at severe tension with net neutrality norms.

Rather than distract agency staff and the Internet industry with metaphysical debates about “reasonable network” practices, the Trump FCC has prioritized network investment, spectrum access, and rural broadband. Hopefully the next year is like the last.

Addendum: The net neutrality reprieve has not only freed up FCC staff to work on more pressing matters, it’s freed  up my time to write about tech policy areas that the public will benefit from. In November I published a Mercatus working paper and a Wall Street Journal op-ed about flying car policy.

Until recently, I wasn’t familiar with Freedom House’s Freedom on the Net reports. Freedom House has useful recommendations for Internet non-regulation and for protecting freedom of speech. Their Freedom on the Net Reports make an attempt at grading a complex subject: national online freedoms.

However, their latest US report came to my attention. Tech publications like TechCrunch and Internet regulation advocates were trumpeting the report because it touched on net neutrality. Freedom House penalized the US score in the US report because the FCC a few months ago repealed the so-called net neutrality rules from 2015.

The authors of the US report reached a curious conclusion: Internet deregulation means a loss of online freedom. In 2015, the FCC classified Internet services as a “Title II” common carrier service. In 2018, the FCC, reversed course, and shifted Internet services from one of the most-regulated industries in the US to one of least-regulated industries. This 2018 deregulation, according to the Freedom House US report, creates an “obstacle to access” and, while the US is still “free,” regulation repeal moves the US slightly in the direction of “digital authoritarianism.”   Continue reading →

A few states have passed Internet regulations because the Trump FCC, citing a 20 year US policy of leaving the Internet “unfettered by Federal or State regulation,” decided to reverse the Obama FCC’s 2015 decision to regulate the Internet with telephone laws.

Those state laws regulating Internet traffic management practices–which supporters call “net neutrality”–are unlikely to survive lawsuits because the Internet and Internet services are clearly interstate communications and FCC authority dominates. (The California bill also likely violates federal law concerning E-Rate-funded Internet access.) 

However, litigation can take years. In the meantime ISP operators will find they face fewer regulatory headaches if they do exactly what net neutrality supporters believe the laws prohibit: block Internet content. Net neutrality laws in the US don’t apply to ISPs that “edit the Internet.”

The problem for net neutrality supporters is that Internet service providers, like cable TV providers, are protected by the First Amendment. In fact, Internet regulations with a nexus to content are subject to “strict scrutiny,” which typically means regulations are struck down. Even leading net neutrality proponents, like the ACLU and EFF, endorse the view that ISP curation is expressive activity protected by First Amendment.

As I’ve pointed out, these First Amendment concerns were raised during the 2016 litigation and compelled the Obama FCC to clarify that its 2015 “net neutrality” Order allows ISPs to block content. As a pro-net neutrality journalist recently wrote in TechCrunch about the 2015 rules, 

[A] tiny ISP in Texas called Alamo . . . wanted to offer a “family-friendly” edited subset of the internet to its customers.

Funnily enough, this is permitted! And by publicly stating that it has no intention of providing access to “substantially all Internet endpoints,” Alamo would exempt itself from the net neutrality rules! Yes, you read that correctly — an ISP can opt out of the rules by changing its business model. They are . . . essentially voluntary.

The author wrote this to ridicule Judge Kavanaugh, but the joke is clearly not on Kavanuagh.

In fact, under the 2015 Order, filtered Internet service was less regulated than conventional Internet service. Note that the rules were “essentially voluntary”–ISPs could opt out of regulation by filtering content. The perverse incentive of this regulatory asymmetry, whereby the FCC would regulate conventional broadband heavily but not regulate filtered Internet at all, was cited by the Trump FCC as a reason to eliminate the 2015 rules. 

State net neutrality laws basically copy and paste from the 2015 FCC regulations and will have the same problem: Any ISP that forthrightly blocks content it doesn’t wish to transmit–like adult content–and edits the Internet is unregulated.

This looks bad for net neutrality proponents leading the charge, so they often respond that the Internet regulations cover the “functional equivalent” of conventional (heavily regulated) Internet access. Therefore, the story goes, regulators can stop an ISP from filtering because an edited Internet is the functional equivalent of an unedited Internet.

Curiously, the Obama FCC didn’t make this argument in court. The reason the Obama FCC didn’t endorse this “functional equivalent” response is obvious. Let’s play this out: An ISP markets and offers a discounted “clean Internet” package because it knows that many consumers would appreciate it. To bring the ISP back into the regulated category, regulators sue, drag the ISP operators into court, and tell judges that state law compels the operator to transmit adult content.

This argument would receive a chilly reception in court. More likely is that state regulators, in order to preserve some authority to regulate the Internet, will simply concede that filtered Internet drops out of regulation, like the Obama FCC did.

As one telecom scholar wrote in a Harvard Law publication years ago, “net neutrality” is dead in the US unless there’s a legal revolution in the courts. Section 230 of the Telecom Act encourages ISPs to filter content and the First Amendment protects ISP curation of the Internet. State law can’t change that. The open Internet has been a net positive for society. However, state net neutrality laws may have the unintended effect of encouraging ISPs to filter. This is not news if you follow the debate closely, but rank-and-file net neutrality advocates have no idea. The top fear of leading net neutrality advocates is not ISP filtering, it’s the prospect that the Internet–the most powerful media distributor in history–will escape the regulatory state.

The Internet is a great tool for women’s empowerment, because it gives us the freedom to better our lives in ways that previously far more limited. Today, the FCC’s Restoring Internet Freedom Order helped the Internet become even freer.

There is a lot of misinformation and scare tactics about the previous administration’s so-called “net neutrality” rules. But the Obama-era Open Internet Order regulations were not neutral at all. Rather, they ham-handedly forced Internet Service Providers (ISPs) into a Depression-era regulatory classification known as a Title II common carrier. This would have slowed Internet dynamism, and with it, opportunities for women.

Today’s deregulatory move by the FCC reverses that decision, which will allow more ISPs to enter the market. More players in the market make Internet service better, faster, cheaper, and more wildly available. This is especially good for women who have especially benefited from the increased connectivity and flexibility that the Internet has provided.

Continue reading →

Lawmakers frequently hear impressive-sounding stats about net neutrality like “83% of voters support keeping FCC’s net neutrality rules.” This 83% number (and similar “75% of Republicans support the rules”) is based on a survey from the Program for Public Consultation released in December 2017, right before the FCC voted to repeal the 2015 Internet regulations.

These numbers should be treated with skepticism. This survey generates these high approval numbers by asking about net neutrality “rules” found nowhere in the 2015 Open Internet Order. The released survey does not ask about the substance of the Order, like the Title II classification, government price controls online, or the FCC’s newly-created authority to approve of and disapprove of new Internet services.

Here’s how the survey frames the issue:

Under the current regulations, ISPs are required to:   

provide customers access to all websites on the internet.   

provide equal access to all websites without giving any websites faster or slower download speeds.  

The survey then essentially asks the participant if they favor these “regulations.” The nearly 400-page Order is long and complex and I’m guessing the survey creators lacked expertise in this area because this is a serious misinterpretation of the Order. This framing is how net neutrality advocates discuss the issue, but the Obama FCC’s interpretations of the 2015 Order look nothing like these survey questions. Exaggeration and misinformation is common when discussing net neutrality and unfortunately these pollsters contributed to it. (The Washington Post Fact Checker column recently assigned “Three Pinocchios” to similar net neutrality advocate claims.)

Let’s break down these rules ostensibly found in the 2015 Order.

“ISPs are required to provide customers access to all websites on the internet”

This is wrong. The Obama FCC was quite clear in the 2015 Order and during litigation that ISPs are free to filter the Internet and block websites. From the oral arguments:

FCC lawyer: “If [ISPs] want to curate the Internet…that would drop them out of the definition of Broadband Internet Access Service.”
Judge Williams: “They have that option under the Order?”
FCC lawyer: “Absolutely, your Honor. …If they filter the Internet and don’t provide access to all or substantially all endpoints, then…the rules don’t apply to them.”

As a result, the judges who upheld the Order said, “The Order…specifies that an ISP remains ‘free to offer ‘edited’ services’ without becoming subject to the rule’s requirements.”

Further, in the 1996 Telecom Act, Congress gave Internet access providers legal protection in order to encourage them to block lewd and “objectionable content.” Today, many ISPs offer family-friendly Internet access that blocks, say, pornographic and violent content. An FCC Order cannot and did not rewrite the Telecom Act and cannot require “access to all websites on the internet.”

“ISPs are required to provide equal access to all websites without giving any websites faster or slower download speeds”

Again, wrong. There is no “equal access to all websites” mandate (see above). Further, the 2015 Order allows ISPs to prioritize certain Internet traffic because preventing prioritization online would break Internet services.

This myth–that net neutrality rules require ISPs to be dumb pipes, treating all bits the same–has been circulated for years but is derided by networks experts. MIT computer scientist and early Internet developer David Clark colorfully dismissed this idea as “happy little bunny rabbit dreams.” He pointed out that prioritization has been built into Internet protocols for years and “[t]he network is not neutral and never has been.” 

Other experts, such as tech entrepreneur and investor Mark Cuban and President Obama’s former chief technology officer Aneesh Chopra, have observed that the need for Internet “fast lanes” as Internet services grow more diverse. Further, the nature of interconnection agreements and content delivery networks mean that some websites pay for and receive better service than others.

This is not to say the Order is toothless. It authorizes government price controls and invents a vague “general conduct standard” that gives the agency broad authority to reject, favor, and restrict new Internet services. The survey, however, declined to ask members of the public about the substance of the 2015 rules and instead asked about support for net neutrality slogans that have only a tenuous relationship with the actual rules.

“Net neutrality” has always been about giving the FCC, the US media regulator, vast authority to regulate the Internet. In doing so, the 2015 Order rejects the 20-year policy of the United States, codified in law, that the Internet and Internet services should be “unfettered by Federal or State regulation.” The US tech and telecom sector thrived before 2015 and the 2017 repeal of the 2015 rules will reinstate, fortunately, that light-touch regulatory regime.

Internet regulation advocates lost their fight at the FCC, which voted in December 2017 to rescind the 2015 Open Internet Order. Regulation advocates have now taken their “net neutrality” regulations to the states.

Some state officials–via procurement contracts, executive order, or legislation–are attempting to monitor and regulate traffic management techniques and Internet service provider business models in the name of net neutrality. No one, apparently, told these officials that government-mandated net neutrality principles are dead in the US.

As the litigation over the 2015 rules showed, our national laissez faire policy towards the Internet and our First Amendment guts any attempt to enforce net neutrality. Recall that the 1996 amendments to the Communications Act announce a clear national policy about the Internet: Continue reading →

Last week the FCC commissioners voted to restructure the agency and create an Office of Economics and Analytics. Hopefully the new Office will give some rigor to the “public interest standard” that guides most FCC decisions. It’s important the FCC formally inject economics in to public interest determinations, perhaps much like the Australian telecom regulator’s “total welfare standard,” which is basically a social welfare calculation plus consideration of “broader social impacts.”

In contrast, the existing “standard” has several components and subcomponents (some of them contradictory) depending on the circumstances; that is, it’s no standard at all. As the first general counsel of the Federal Radio Commission, Louis Caldwell, said of the public interest standard, it means

as little as any phrase that the drafters of the Act could have used and still comply with the constitutional requirement that there be some standard to guide the administrative wisdom of the licensing authority.

Unfortunately, this means public interest determinations are largely shielded from serious court scrutiny. As Judge Posner said of the standard in Schurz Communications v. FCC,

So nebulous a mandate invests the Commission with an enormous discretion and correspondingly limits the practical scope of responsible judicial review.

Posner colorfully characterized FCC public interest analysis in that case:

The Commission’s majority opinion … is long, but much of it consists of boilerplate, the recitation of the multitudinous parties’ multifarious contentions, and self-congratulatory rhetoric about how careful and thoughtful and measured and balanced the majority has been in evaluating those contentions and carrying out its responsibilities. Stripped of verbiage, the opinion, like a Persian cat with its fur shaved, is alarmingly pale and thin.

Every party who does significant work before the FCC has agreed with Judge Posner’s sentiments at one time or another.

Which brings us to the Office of Economics and Analytics. Cost-benefit analysis has its limits, but economic rigor is increasingly important as the FCC turns its attention away from media regulation and towards spectrum assignment and broadband subsidies.

The worst excesses of FCC regulation are in the past where, for instance, one broadcaster’s staff in 1989 “was required to review 14,000 pages of records to compile information for one [FCC] interrogatory alone out of 299.” Or when, say, FCC staff had to sift through and consider 60,000 TV and radio “fairness” complaints in 1970. These regulatory excesses were corrected by economists (namely, Ronald Coase’s recommendation that spectrum licenses be auctioned, rather than given away for free by the FCC after a broadcast “beauty contest” hearing), but history shows that FCC proceedings spiral out of control without the agency intending it.

Since Congress gave such a nebulous standard, the FCC is always at risk of regressing. Look no further than the FCC’s meaningless “Internet conduct standard” from its 2015 Open Internet Order. This “net neutrality” regulation is a throwback to the bad old days, an unpredictable conduct standard that–like the Fairness Doctrine–would constantly draw the FCC into social policy activism and distract companies with interminable FCC investigations and unknowable compliance requirements.

In the OIO’s mercifully short life, we saw glimpses of the disputes that would’ve distracted the agency and regulated companies. For instance, prominent net neutrality supporters had wildly different views about whether a common practice, “zero rating” of IP content, by T-Mobile violated the Internet conduct standard. Chairman Tom Wheeler initially called it “highly innovative and highly competitive” while Harvard professor Susan Crawford said it was “dangerous” and “malignant” and should be outlawed “immediately.” The nearly year-long FCC investigations into zero rating and the equivocal report sent a clear, chilling message to ISPs and app companies: 20 years of permissionless innovation for the Internet was long enough. Submit your new technologies and business plans to us or face the consequences.

Fortunately, by rescinding the 2015 Order and creating the new economics Office, Chairman Pai and his Republican colleagues are improving the outlook for the development of the Internet. Hopefully the Office will make social welfare calculations a critical part of the public interest standard.

In 2015 after White House pressure, the FCC decided to take the radical step of classifying “broadband Internet access service” as a heavily-regulated Title II service. Title II was created for the AT&T long-distance monopoly and telegraph network and “promoting innovation and competition” is not its purpose. It’s ill-suited for the modern Internet, where hundreds of ISPs and tech companies are experimenting with new technologies and topologies.

Commissioner Brendan Carr was gracious enough to speak with Chris Koopman and me in a Mercatus podcast last week about his decision to vote to reverse the Title II classification. The podcast can be found at the Mercatus website. One highlight from Commissioner Carr:

Congress had a fork in the road. …In 1996, Congress made a decision that we’re going to head down the Title I route [for the Internet]. That decision has been one of the greatest public policy decisions that we’ve ever seen. That’s what led to the massive investment in the Internet. Over a trillion dollars invested. Consumers were protected. Innovators were free to innovate. Unfortunately, two years ago the Commission departed from that framework and moved into a very different heavy-handed regulatory world, the Title II approach.

Along those lines, in my recent ex parte meeting with Chairman Pai’s office, I pointed to an interesting 2002 study in the Review of Economics and Statistics from MIT Press about the stifling effects of Title II regulation:

[E]xisting economics scholarship suggests that a permissioned approach to new services, like that proposed in the [2015] Open Internet Order, inhibits innovation and new services in telecommunications. As a result of an FCC decision and a subsequent court decision in the late 1990s, for 18 to 30 months, depending on the firm, [Title II] carriers were deregulated and did not have to submit new offerings to the FCC for review. After the court decision, the FCC required carriers to file retroactive plans for services introduced after deregulation.

This turn of events allowed economist James Preiger to analyze and compare the rate of new services deployment in the regulated period and the brief deregulated period. Preiger found that “some otherwise profitable services are not financially viable under” the permissioned regime. Critically, the number of services carriers deployed “during the [deregulated] interim is 60%-99% larger than the model predicts they would have created” when preapproval was required. Finally, Preiger found that firms would have introduced 62% more services during the entire study period if there was no permissioned regime. This is suggestive evidence that the Order’s “Mother, May I?” approach will significantly harm the Internet services market.

Thankfully, this FCC has incorporated economic scholarship into its Restoring Internet Freedom Order and will undo the costly Title II classification for Internet services.

It’s becoming clearer why, for six years out of eight, Obama’s appointed FCC chairmen resisted regulating the Internet with Title II of the 1934 Communications Act. Chairman Wheeler famously did not want to go that legal route. It was only after President Obama and the White House called on the FCC in late 2014 to use Title II that Chairman Wheeler relented. If anything, the hastily-drafted 2015 Open Internet rules provide a new incentive to ISPs to curate the Internet in ways they didn’t want to before. 

The 2016 court decision upholding the rules was a Pyrrhic victory for the net neutrality movement. In short, the decision revealed that the 2015 Open Internet Order provides no meaningful net neutrality protections–it allows ISPs to block and throttle content. As the judges who upheld the Order said, “The Order…specifies that an ISP remains ‘free to offer ‘edited’ services’ without becoming subject to the rule’s requirements.” 

The 2014 White House pressure didn’t occur in a vacuum. It occurred immediately after Democratic losses in the November 2014 midterms. As Public Knowledge president Gene Kimmelman tells it, President Obama needed to give progressives “a clean victory for us to show that we are standing up for our principles.” The slapdash legal finessing that followed was presaged by President Obama’s November 2014 national address urging Title II classification of the Internet, which cites the wrong communications law on the Obama White House website to this day.

The FCC staff did their best with what they were given but the resulting Order was aimed at political symbolism and acquiring jurisdiction to regulate the Internet, not meaningful “net neutrality” protections. As internal FCC emails produced in a Senate majority report show, Wheeler’s reversal that week caught the non-partisan career FCC staff off guard. Literally overnight FCC staff had to scrap the “hybrid” (non-Title II) order they’d been carefully drafting for weeks and scrape together a legal justification for using Title II. This meant calling in advocates to enhance the record and dubious citations to the economics literature. Former FCC chief economist, Prof. Michael Katz, whose work was cited in the Order, later stated to Forbes that he suspected the “FCC cited my papers as an inside joke, because they know how much I think net neutrality is a bad idea.” 

Applying 1934 telegraph and telephone laws to the Internet was always going to have unintended consequences, but the politically-driven Order increasingly looks like an own-goal, even to supporters. Former FCC chief technologist, Jon Peha, who supports Title II classification of ISPs almost immediately raised the alarm that the Order offered “massive loopholes” to ISPs that could make the rules irrelevant. This was made clear when the FCC attorney defending the Order in court acknowledged that ISPs are free to block and filter content and escape the Open Internet regulations and Title II. These concessions from the FCC surprised even AT&T VP Hank Hultquist:

Wow. ISPs are not only free to engage in content-based blocking, they can even create the long-dreaded fast and slow lanes so long as they make their intentions sufficiently clear to customers.

So the Open Internet Order not only permits the net neutrality “nightmare scenario,” it provides an incentive to ISPs to curate the Internet. Despite the activist PR surrounding the Order, so-called “fast lanes”–like carrier-provided VoIP, VoLTE, and IPTV–have existed for years and the FCC rules allow them.  The Order permits ISP blocking, throttling, and “fast lanes”–what remains of “net neutrality”?

Prof. Susan Crawford presciently warned in 2005: 

I have lost faith in our ability to write about code in words, and I’m confident that any attempt at writing down network neutrality will be so qualified, gutted, eviscerated, and emptied that it will end up being worse than useless.

Aside from some religious ISPs, ISPs don’t want to filter Internet content. But the Obama FCC, via the “net neutrality” rules, gives them a new incentive: the Order deregulates ISPs that filter. ISPs will fight the rules because they want to continue to offer their conventional Internet service without submitting to the Title II baggage. This is why ISPs favor scrapping the Order–not only is it the FCC’s first claim to regulate Internet access, if the rules are not repealed, ISPs will be compelled to make difficult decisions about their business models and technologies in the future.

There is reporting suggesting that the Trump FCC may move to eliminate the FCC’s complex Title II regulations for the Internet and restore the FTC’s ability to police anticompetitve and deceptive practices online. This is obviously welcome news. These reports also suggest that FCC Chairman Pai and the FTC will require ISPs add open Internet principles to their terms of service, that is, no unreasonable blocking or throttling of content and no paid priority. These principles have always been imprecise because federal law allows ISPs to block objectionable content if they wish (like pornography or violent websites) and because ISPs have a First Amendment right to curate their services.

Whatever the exact wording, there shouldn’t be a per se ban of paid priority. Whatever policy develops should limit anticompetitive paid priority, not all paid priority. Paid prioritization is simply a form of consideration payment, which is economists’ term for when upstream producers pay downstream retailers or distributors for special treatment. There’s economics literature on consideration payments and it’s an accepted business practice in many other industries. Further, consideration payments often benefit small providers and niche customers. Some small and large companies with interactive IP services might be willing to pay for end-to-end service reliability.

The Open Internet Order’s paid priority ban has always been short sighted because it attempts to preserve the Internet as it existed circa 2002. It resembles the FCC’s unfounded insistence for decades that subscription TV (ie, how the vast majority of Americans consume TV today) was against “the public interest.” Like the defunct subscription TV ban, the paid priority ban is an economics-free policy that will hinder new services. 

Despite what late-night talk show hosts might say, “fast lanes” on the Internet are here and will continue. “Fast lanes” have always been permitted because, as Obama’s US CTO Aneesh Chopra noted, some emerging IP services need special treatment. Priority transmission was built into Internet protocols years ago and the OIO doesn’t ban data prioritization; it bans BIAS providers from charging “edge providers” a fee for priority.

The notion that there’s a level playing field online needing preservation is a fantasy. Non-real-time services like Netflix streaming, YouTube, Facebook pages, and major websites can mostly be “cached” on servers scattered around the US. Major web companies have their own form of paid prioritization–they spend millions annually, including large payments to ISPs, on transit agreements, CDNs, and interconnection in order to avoid congested Internet links.

The problem with a blanket paid priority ban is that it biases the evolution of the Internet in favor of these cache-able services and against real-time or interactive services like teleconferencing, live TV, and gaming. Caching doesn’t work for these services because there’s nothing to cache beforehand. 

When would paid prioritization make sense? Most likely a specialized service for dedicated users that requires end-to-end reliability. 

I’ll use a plausible example to illustrate the benefits of consideration payments online–a telepresence service for deaf people. As Martin Geddes described, a decade ago the government in Wales developed such a service. The service architects discovered that a well-functioning service had quality characteristics not supplied by ISPs. ISPs and video chat apps like Skype optimize their networks, video codecs, and services for non-deaf people (ie, most customers) and prioritize consistent audio quality over video quality. While that’s useful for most people, deaf people need basically the opposite optimization because they need to perceive subtle hand and finger motions. The typical app that prioritizes audio, not video, doesn’t work for them.

But high-def real-time video quality requires upstream and downstream capacity reservation and end-to-end reliability. This is not cheap to provide. An ISP, in this illustration, has three options–charge the telepresence provider, charge deaf customers a premium, or spread the costs across all customers. The paid priority ban means ISPs can only charge customers for increased costs. This paid priority ban unnecessarily limits the potential for such services since there may be companies or nonprofits willing to subsidize such a service.

It’s a specialized example but illustrates the idiosyncratic technical requirements needed for many real-time services. In fact, real-time services are the next big challenge in the Internet’s evolution. As streaming media expert Dan Rayburn noted, “traditional one-way live streaming is being disrupted by the demand for interactive engagement.”  Large and small edge companies are increasingly looking for low-latency video solutions. Today, a typical “live” event is broadcast online to viewers with a 15- to 45-second delay. This latency limits or kills the potential for interactive online streaming services like online talk shows, pet cams, online auctions, videogaming, and online classrooms.

If the FTC takes back oversight of ISPs and the Internet it should, as with any industry, permit any business practice that complies with competition law and consumer protection law. The agency should disregard the unfounded belief that consideration payments online (“paid priority”) are always harmful.