Degrading Net Neutrality In Plain Sight

When the FCC passed the Open Internet Order in December 2010, which put in place regulatory strictures for network neutrality, a number of public interest groups raised the alarm over potential loopholes internet service providers could exploit to get around the spirit of the rules. Andrew Jay Schwartzman of the Media Access Project said the rules “foreshadow years of uncertainty and regulatory confusion, which those carriers will use to their advantage.” Craig Aaron of Free Press said they “don't do enough to stop the phone and cable companies from dividing the Internet into fast and slow lanes, and they fail to protect wireless users from discrimination.”

It's looking like they were prescient on this one. In the last month, two internet service providers have proposed new plans that, while they appear to technically comport with the FCC's Open Internet Order, nonetheless threaten the principles undergirding net neutrality.

Outside The Xbox

On March 23, Comcast quietly announced that usage of their soon-to-be-released XFINITY streaming video service for Microsoft's Xbox 360 console will not count against the 250 gigabyte cap the ISP puts on monthly data usage for residential customers.

Per Comcast's FAQ page on XFINITY TV:

Q: Will XFINITY On Demand content a customer views via the Xbox 360 go against their bandwidth cap?

A: No, since the content is being delivered over our private IP network and not the public Internet, it does not count against a customer's bandwidth cap. and the XFINITY TV app stream content over the public Internet and count toward the customer's bandwidth cap.

What Comcast is doing by offering this streaming video all-you-can-eat buffet through their private network is prioritizing their own content. Think of it this way: if you're a Comcast subscriber and you want to watch a movie online but are worried about bumping up against the monthly data cap, you're incentivized to watch that movie via XFINITY on your Xbox, rather than through “public internet” providers like Netflix. It has less to do with consumer choice than it does with which services Comcast favors.

The FCC says companies like Comcast that provide “broadband Internet access service” shouldn't use that service to prioritize their own content (or enter into financial arrangements with outside content developers to favor their content) because it's wildly anti-competitive. What's at issue, though, is how the FCC defines “broadband Internet access service.”

The FCC order's definition of “broadband Internet access service” specifically excludes “content delivery network services,” which is what Comcast is using to deliver their streaming video to the Xbox. To borrow from the late Sen. Ted Stevens, if you think of the internet as a tube, then content delivery networks are smaller tubes within that tube devoted exclusively to providing specific services. There's a techno-wonky debate over whether content delivery networks should count as part of “the internet,” but since the FCC says no (at least from the regulatory viewpoint), Comcast can argue that they're still in compliance with the Open Internet Order.

Consumer advocacy groups like Public Knowledge say Comcast is violating the “spirit of net neutrality” by transforming “the competitive online video marketplace into a two-tiered world, where its own online video doesn't have to play by the same rules as everyone else's.”

Mobile App Claptrap

Towards the end of February, AT&T told the Wall Street Journal that they were working on a plan to start charging developers of data-intensive mobile apps for the traffic AT&T users racked up while using their products, and not count that traffic towards the users' monthly data caps. So that means, theoretically, unlimited Netflix movies on your mobile device, with all the costs pushed off onto Netflix. A big win for consumers, right? Not so much...

The move would, in effect, favor the traffic from mobile app developers that agree to pay AT&T's traffic fee. If you want to watch HD videos on your iPad but are nervous about surpassing the data limit and getting smacked with overage fees, you're going to use the video streaming apps that don't count towards the limit -- the ones that paid AT&T. Smaller app developers that wouldn't be able to pay AT&T would find the deck stacked against them, giving the established, deep-pocketed developers an outsized competitive advantage. That threatens innovation, and app developers are likely to push off the added costs of AT&T's traffic fees onto customers.

But from the regulatory standpoint, there doesn't seem to be much that would stand in the way of AT&T's proposal. The Open Internet Order's warning against prioritizing third-party content, noted above, does not apply to mobile broadband providers. The FCC gave mobile broadband far more leeway than fixed broadband, arguing that the agency should “proceed incrementally with respect to mobile broadband,” and “better understand how the mobile broadband market is developing before determining whether adjustments to this framework are necessary.”

Curiously enough, AT&T's plan could be scuttled by their own shareholders. In early February the Securities and Exchange Commission informed AT&T that they could no longer block shareholder votes on proposals requesting that the company adhere to net neutrality principles. AT&T shareholders will have the chance to vote on a net neutrality proposal at the annual stockholder meeting on April 27. That proposal (and the AT&T board's strong recommendation against it) can be viewed here.