FCC Plans to Allow Online Discrimination

Netflix may have to pay for Internet “fast lanes.”

A Netflix customer looks for a movie on Netflix in Palo Alto, Calif., Tuesday, July 20, 2010. (AP Photo/Paul Sakuma)
Brendan Sasso
Feb. 19, 2014, 1:54 p.m.

The Fed­er­al Com­mu­nic­a­tions Com­mis­sion plans to al­low In­ter­net ser­vice pro­viders to of­fer vary­ing speeds to web­sites in at least some cases, a seni­or agency of­fi­cial told Na­tion­al Journ­al.

The de­cision is a blow to open-In­ter­net ad­voc­ates, who ar­gue that all web­sites should re­ceive equal treat­ment. It could also be bad news for Net­flix, which would be the most ob­vi­ous tar­get for In­ter­net pro­viders that would want to charge spe­cial fees to the data-heavy video site for an In­ter­net “fast lane” to reach users.

FCC Chair­man Tom Wheel­er an­nounced Wed­nes­day he will draft new net-neut­ral­ity reg­u­la­tions in the wake of last month’s fed­er­al Ap­peals Court de­cision strik­ing down the agency’s old rules. But to sur­vive more court chal­lenges, the new rules will likely have to be weak­er than the old re­gime.

The old rules, ad­op­ted in 2010 by Wheel­er’s pre­de­cessor, Ju­li­us Gen­achow­ski, barred In­ter­net pro­viders from block­ing or un­reas­on­ably dis­crim­in­at­ing against web­sites.

The agency hasn’t writ­ten the new rules yet, but Wheel­er said he plans to provide ad­di­tion­al leg­al ra­tionale to en­sure that no web­site is “un­fairly” blocked.

He said he still wants to ful­fill the “goals” of the nondis­crim­in­a­tion rule, but he provided little de­tail on how he could do that without run­ning afoul of last month’s court rul­ing. The FCC chair­man said he plans to de­vel­op a “leg­al stand­ard” and eval­u­ate al­leged vi­ol­a­tions on a “case-by-case basis.” The com­mis­sion will single-out par­tic­u­lar busi­ness prac­tices that it would view with auto­mat­ic skep­ti­cism.

The FCC of­fi­cial said that, based on the court’s rul­ing, the agency will have to al­low a “two-sided mar­ket.” There is cur­rently a one-sided mar­ket — cus­tom­ers pay their In­ter­net pro­viders to reach web­sites. A two-sided mar­ket would mean that web­sites will have to also be­gin pay­ing pro­viders to reach In­ter­net users.

“There are go­ing to be op­por­tun­it­ies for in­di­vidu­al ne­go­ti­ation,” the of­fi­cial said. “Al­low­ing some dif­fer­en­ti­ation, that’s right. But how much — that’s the big ques­tion.”

The court rul­ing did up­hold a broad FCC au­thor­ity to en­cour­age the de­ploy­ment of broad­band and to pro­mote com­pet­i­tion.

The FCC will use that au­thor­ity to pro­hib­it cer­tain forms of dis­crim­in­a­tion. For ex­ample, if a broad­band pro­vider like Com­cast slowed down on­line video sites to try to pres­sure cus­tom­ers to pay for cable tele­vi­sion, the FCC would likely still have au­thor­ity to in­ter­vene to pro­mote com­pet­i­tion.

But a blanket pro­hib­i­tion on In­ter­net dis­crim­in­a­tion ap­pears im­possible un­der the agency’s pro­pos­al.

A dif­fer­ent seni­or FCC of­fi­cial ac­know­ledged that the agency will have to al­low some “flex­ib­il­ity” on the an­ti­discrim­in­a­tion rule, but noted that the old net-neut­ral­ity rules also gave some lee­way to pro­viders. Those rules al­lowed for “reas­on­able net­work man­age­ment,” and per­mit­ted In­ter­net pro­viders to pri­or­it­ize cer­tain ser­vices like video phone ap­plic­a­tions.

Mi­chael Wein­berg, a vice pres­id­ent for con­sumer-ad­vocacy group Pub­lic Know­ledge, said the FCC’s new rules would be “flawed” if they al­lowed In­ter­net pro­viders to charge web­sites for faster ac­cess to users.

“We have been skep­tic­al the en­tire time that they can fash­ion rules that pro­tect an open In­ter­net that com­ply with the [court’s] rul­ing,” Wein­berg said.

Lib­er­al ad­vocacy groups have urged Wheel­er to re­clas­si­fy broad­band pro­viders as “com­mon car­ri­ers” — a move that would likely al­low the agency to re­in­state the old rules in their en­tirety but would prompt a co­lossal fight with con­gres­sion­al Re­pub­lic­ans.

Wheel­er said Wed­nes­day that he will leave the op­tion of re­clas­si­fic­a­tion “on the table” for now.

If In­ter­net pro­viders start char­ging Net­flix mil­lions of dol­lars for fast lanes to de­liv­er HD video, that could mean the video site will ul­ti­mately have to pass those costs on to its users. But in a note to share­hold­ers last month, CEO Reed Hast­ings warned that the site will wage a pub­lic cam­paign against any pro­vider that tries to de­grade its ser­vice.

“Were this dra­coni­an scen­ario to un­fold with some [In­ter­net ser­vice pro­vider], we would vig­or­ously protest and en­cour­age our mem­bers to de­mand the open In­ter­net they are pay­ing their ISP to de­liv­er,” he wrote.

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