The FCC’s Net Neutrality Proposal: Why It Stinks and How It Could Affect You

By the end of this year, the Internet as you know it could change for the worse.

Under new rules proposed by the FCC, Internet service providers such as Comcast and Time Warner Cable could ask your favorite sites to pay for special treatment. Companies that refuse, or who can’t afford to pay, could be stuck with slower speeds or more congestion compared to companies in the fast lane. The next Netflix or YouTube could still exist as it does today, but without enough extra capital to pay the gatekeepers, it could be at an inherent disadvantage to incumbent services or services with deep pockets.

Put another way, the FCC plans to take an axe to net neutrality, the idea that all websites and services should be treated fairly.

Blocking vs. Throttling vs. Express Lanes

FCC Chairman Tom Wheeler says the press has got it all wrong, that the proposed rules will actually “restore the concepts of Net neutrality,” and that anti-competitive behavior won’t be allowed.

It’s an impressive bit of PR spin, straight from someone who used to be a cable and wireless industry lobbyist. Wheeler’s concept of net neutrality is focused on prohibiting straight-up blocking or discrimination. Essentially, he’s saying we won’t see the doomsday scenario of having paywalls thrown in front of certain sites or services. And that’s great, but it’s not the real danger here. The actual threat, in which companies get to pay for better service than they’re getting now, is much more insidious.

Let’s say you pay $35 per month for speeds of 10 Mbps, which is on the low end of what you’d want for streaming video. The proposed rules could let you to get faster speeds on sites like Netflix and YouTube for the same $35 per month, but only if those sites paid your service provider to be in the fast lane. You’d still get speeds of 10 Mbps for everything else–hence, no discrimination–but maybe you’d get 30 Mbps from services that are paying the toll.

If this scenario played out, service providers would surely promote it as a wonderful development for subscribers. What’s not to like about faster speeds at no extra charge? (AT&T recently pulled a similar tactic on the wireless side, allowing apps and services to pay for their users’ data consumption while calling it “an exciting new opportunity” for customers.)

How the Proposed Rules Could Affect You

The problem is that service providers would have little incentive to improve their baseline speeds for non-paying services, and lots of incentive to improve speeds for those in the fast lane. Over time, the gap in speeds would increase, to the point that new services would have a tough time competing without paying the gatekeepers. And while you may not pay directly for those fast lane speeds, participating services may be inclined to pass their costs along, ensuring that you’d shoulder the financial burden one way or another.

In the near term, the biggest risk is to online video. Services such as Netflix, Amazon, Hulu and YouTube will feel the pressure to pay up if they want to stay competitive with one another. But in the future, many other emerging services would have to deal with the shakedown, from cloud gaming to virtual reality to things we haven’t even dreamed of yet.

Those potential services may require lots of bandwidth, and there’s definitely a reasonable discussion to be had about how service providers should manage the traffic. As GigaOm’s Stacey Higginbotham points out, that’s exactly what the FCC could be doing. Instead, the FCC seems content to let service providers take the lead, deciding which emerging services live or die based on whether they can pay the toll.

What Happens Now

The above scenarios are all realistic, according to the advocacy groups I’ve spoken to, but it’s important to note that the rules aren’t set in stone and they’re not even public yet. All we have to go on right now are statements from FCC officials, who say the proposal will allow Internet providers to negotiate directly with web companies on providing more than just the baseline level of service.

The finer details will be hashed out in the coming months, starting on May 15, when the proposed rules become public. It’s still unclear, for instance, exactly what the FCC means when it says service providers must act in a “commercially reasonable” manner, and how the FCC would take action against “unreasonable” behavior. (Is it reasonable, for instance, for fast lanes to exist if they’re open to any company? Because it would still favor the ones with the deepest pockets.)

In any case, the sparks are about to fly. Advocacy groups will likely launch petitions and protests, arguing that toll-based fast lanes will stifle innovation. Supporters of the proposal will likely argue that it’s a fair, free market solution (ignoring the fact that there’s a shortage of competition in the wired broadband market, so many users will have no alternatives if toll roads become a reality). So far, it’s unclear whether large tech companies will protest a potential shakedown or embrace their incumbent status.