Net Neutrality: Will It Protect Consumers or Hurt Businesses?

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The proponents of net neutrality believe that all individuals and companies should have equal access to the Internet, and that service providers should not be allowed to block their customers from using services offered by rival companies. Not surprisingly, some wireless service providers, including Verizon, have a different opinion.

The Federal Communications Commission recently weighed in on this issue with a proposed set of rules that some think are too restrictive while others argue are too lax.

As this battle keeps intensifying, MetroPCS this week echoed Verizon by arguing in court that the FCC is grabbing too much control over wireless Internet access. Meanwhile, a newly proposed law called the Internet Freedom, Broadband Protection, and Consumer Protection Act of 2011 — filed this week in the U.S. Senate — takes a directly opposite tack, introducing strong measures such as “reasonable rates” for consumers.

What’s the issue?
Lawsuits filed by Verizon last week and MetroPCS this week are based on the notion that new regulations passed by the FCC in December will snuff out innovation and thwart providers in efforts to build out new services like 4G wireless.

At the other end of the philosophical spectrum, advocates of the so-called “free” or “open” Internet contend that carriers shouldn’t be permitted to block or slow competing services such as Skype or Netflix, and that charging end users and Web sites extra fees for premium network services amounts to “discrimination.”

The new court actions by Verizon and MetroPCS both challenge the FCC’s jurisdiction in imposing the new set of net neutrality rules.

“We believe this assertion of authority goes well beyond any authority provided by Congress, and creates uncertainty for the communications industry, innovators, investors, and consumers,” Verizon said in a statement.

What if Congress sets new net neutrality rules?
Yet if Congress forges the rules instead, will fixed and wireless broadband providers really gain the greater leeway they want? The answer depends on what kinds of stipulations actually make their way into law.

Legislation brought in the U.S. Senate this week by Sen. Maria Cantwell (Democrat-Washington), would impose even stricter limitations on carriers than the FCC’s new “open Internet” order.

The new law would require providers to offer standalone Internet access to the public at “reasonable rates,” for example.

If passed, the bill would also let consumers file complaints with either the FCC or in federal district court if they think their provider has violated its net neutrality responsibilities.

“If we let telecom oligarchs control access to the Internet, consumers will lose,” Sen. Cantwell said in a statement.  “My bill returns the broadband cop back to the beat, and creates the same set of obligations regardless of how consumers get their broadband.”

The new law would also ban “pay for priority agreements” that require producers of applications, content or services to pay broadband providers for “prioritized delivery” of their IP (Internet protocol) packets.

As some see it, though, the Democrat’s newly proposed legislation faces an uphill battle in the House of Representatives, where the opposing Republican Party now constitutes the majority.

How realistic is open Internet access, anyway?
In theory, at least, most people probably applaud the concept of equal Internet access for all. Yet some have questioned how Internet speed and service quality are supposed to improve if broadband providers and their investors aren’t allowed sufficient financial incentives.

For instance, what would motivate a wireless carrier to pour money into new LTE or WiMax towers if it couldn’t recoup its investment, and then turn a profit?

MetroPCS Chairman and CEO Roger D. Linquist openly admits that his company’s lawsuit was prompted by criticisms from consumer advocacy groups about the proposed new rate plan for MetroPCS’ 4G network.

Under MetroPCS’s new rate schedule, users who want to move to 4G services will pay $55 or $60 per month, as opposed to only $40 for a basic plan.

Are MetroPCS and Comcast already breaking the rules?
Some critics also contend, though, that MetroPCS is already violating the FCC’s new net neutrality rules by blocking services such as Skype’s voice over IP (VoIP).

Similarly, Level  3, the new streaming video partner for Netflix, has alleged to the FCC that Comcast raised its prices for delivering online video to home subscribers just after Level 3 took over the Netflix gig from its rival Akamai.

This is hardly the first time that Comcast has come under FCC scrutiny. Last spring, for example, the company managed to gain a court decision overturning previous sanctions by the FCC for blocking file sharing between Comcast subscribers.

There have been no hints so far of any net neutrality violations by Verizon. Earlier this month, though, Verizon wrote a letter to the FCC defending Comcast against Level 3’s complaints.

According to Verizon’s letter, the dispute between Comcast and Level 3 does not involve any net neutrality violations. Instead, it’s merely a “run-of-the-mill negotiation over the terms of a peering arrangement.”

FCC’s net neutrality rule does state, in part, that “To the extent that a content, application, or service provider could avoid being blocked only by paying a fee, charging such a fee would not be permissible under these rules.”

Yet the letter from Ian Dillner, Verizon’s VP of federal regulatory affairs, argues that the FCC has also “concluded that ‘content delivery network services…hosting or data storage services, or Internet backbone services,’ among other things, are outside the scope of its new rules.”

How do the FCC’s rules differ from an earlier proposal by Verizon/Google?
Ironically, the net neutrality rules that Verizon is now suing to repeal are really quite similar to a “suggested legislative framework” for net neutrality that Verizon and Google put together last year.

However, a few major differences do stand out. For example, the Verizon/Google proposal, prohibitions against blocking competing applications apply only to fixed broadband services. In contrast, under the FCC’s open Internet order, these bans extend to wireless broadband, too.

Also under the Verizon/Google requirements, carriers would be permitted to offer specialized or “managed” services – which might include “traffic prioritization,” for instance — which are “distinguishable in scope and purpose from broadband Internet access services.”

The FCC would then publish an annual report on the effects of these services, making an immediate report only if it finds “at any time that these services threaten the meaningful availability of broadband Internet services or have been devised or promoted in a manner designed to evade these consumer protections.”

In contrast, the slightly more stringent FCC rule entitles the agency to “closely monitor specialized services and their effects on broadband service to ensure, through all available mechanisms, that they supplement but do not supplant the open Internet.”

Most importantly, though, Verizon wants Congress, rather than the FCC, to be in charge of forging any rules on net neutrality.

In its statement last week, Verizon said that it is “deeply concerned by the FCC’s assertion of broad authority for sweeping new regulation of broadband networks and the Internet itself.”




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