Short Net Neutrality Update

Today’s post is going to be rather short.  There is one particularly big piece of news today: Comcast’s deal with Netflix allowing for Netflix to have direct access to Comcast’s network (http://gizmodo.com/report-netflix-agrees-to-pay-comcast-for-access-to-bro-1529115565?rev=1393178465&utm_campaign=socialflow_gizmodo_facebook&utm_source=gizmodo_facebook&utm_medium=socialflow).  There’s even some talk that Verizon has a similar deal with Netflix in the works (http://www.cnbc.com/id/101439383).  I’d be remiss to not mention this deal, because this deal makes any future attempts at Net Neutrality unlikely to succeed.

Here is the nature of the deal.  Netflix originally contracted with other companies referred to as backbone providers) to provide the necessary bandwidth for their streaming service to the Internet Service Providers (ISPs, like Comcast and Verizon).  Now, Netflix will pay Comcast to receive direct access to Comcast’s network.

How this affects consumers is an open question (though it’s a fair guess that Netflix’s higher overhead costs will get passed to subscribers).  The FCC’s ability to impose some kind of net neutrality scheme, in contrast, suddenly appears to be much more limited.  The net neutrality debate revolved primarily around the idea of “tiered access”, or charging different entities different prices (often depending on bandwidth usage).  The ISPs argued that higher bandwidth services should pay more due to the expense of providing bandwidth, while net neutrality supporters worry that the practice could become discriminatory (with ISPs favoring certain content that aligns with their business or political interests) or create barriers to entry for new web services (there’s an interesting blog post on Google’s Public Policy blog about this debate: http://googlepublicpolicy.blogspot.com/search/label/Net%20Neutrality?updated-max=2007-08-30T16%3A58%3A00-04%3A00&max-results=20).  The issue, as pointed out in a Washington Post article from yesterday (http://www.washingtonpost.com/blogs/the-switch/wp/2014/02/23/comcasts-deal-with-netflix-makes-network-neutrality-obsolete/) is that Netflix’s deal highly resembles the kinds of tiered pricing arrangements net neutrality regulations were supposed to prevent.  As the article points out, Netflix’s traffic will now arrive through its own pipe.  Other major service providers might seek the same deal, which essentially segregates their traffic from each other.  Previously, the traffic would arrive through one of the backbone providers as one giant chunk of traffic.  It is much easier to determine if everyone is getting the same benefit from that giant chunk of traffic.  It is harder to make that same determination when everyone has their own direct pipe.  Also, as the Post article points out, net neutrality regulations potentially require the FCC to wade into contractual agreements and pricing arrangements.  This could result in some messy regulation.

For what it’s worth, the FCC has proposed new net neutrality regulations (http://news.cnet.com/8301-13578_3-57619113-38/fcc-to-rewrite-net-neutrality-rules/).  So far, FCC Commissioner Tom Wheeler opted against common carrier regulations and will instead have the FCC re-write the Open Internet order.  Whether this new Open Internet Order has any appreciable effect on internet regulation is unclear.

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