Telecom

The FCC Picks Another Fight Online


FCC Chairman Tom Wheeler testifies before the Communications and Technology Subcommittee on Capitol Hill in Washington on May 20

Photograph by Jim Watson/AFP via Getty Images

FCC Chairman Tom Wheeler testifies before the Communications and Technology Subcommittee on Capitol Hill in Washington on May 20

FCC Chairman Tom Wheeler is diving into another once-obscure corner of Internet regulation that has become a flash point in recent months. He said Friday that the commission will review deals like the controversial one struck between Netflix and Comcast in February, under which Netflix (NFLX) pays for a more direct route from its servers to the tablets and TVs of Comcast (CMCSA) subscribers.

Wheeler says he’s not looking to place blame—just to figure out what exactly is happening. “What we’re doing right now is collecting information, not regulating. We’re looking under the hood,” he said Friday, according to an account in the Hill of the FCC’s monthly meeting.

Since the dawn of the Internet, so-called interconnection deals have remained safely in the universe of things few people cared about. But they suddenly became the subject of passion and confusion in the past several months, as the debate over Internet regulation flared on several fronts. While they are not technically a part of Net neutrality rules—which govern how Internet providers can treat traffic after it has entered their networks—the same themes are in play.

Here’s a quick primer. Content companies such as Netflix want to get information from their servers to the networks of consumer Internet providers. Netflix has traditionally used a third company to make this connection. But it also has the option of connecting through its own content delivery network, cutting out the middleman and dealing with companies such as Cablevision (CVC), Comcast, or Verizon (VZ) directly. The uproar over the Comcast deal came because Netflix agreed to pay for this direct connection. Critics say these payments are a kind of extortion on Comcast’s part. By requiring them, it could strangle services it felt were a threat, or simply suck money from companies that have deep pockets and leave those that don’t to suffer.

The problem with the outrage over the Netflix deal is that it seems to fall short of an epochal shift. Other companies have been making their own content delivery networks, too, as a way to improve the quality of their services. That includes companies such as Apple (AAPL), which probably wouldn’t bite its lip if it felt shaken down, argues Dan Rayburn, an analyst with Frost & Sullivan. “You don’t see the ones who actually have to pay for these deals complaining, other than Netflix,” he wrote last month.

Even Netflix seemed conflicted over the deal. At first it said it was just
trying to help customers
, then changed its tune and began insisting the deals were inappropriate—even as it signed a similar one with Verizon. The about-face confused Brad Hunstable, CEO of Ustream, another streaming video company. He says he’s been paying for interconnect deals with Internet providers for years, and that Netflix had likely reduced its costs with its Comcast deal. Hunstable sees Netflix’s public stance as a negotiating ploy to get better rates. “There’s a lot of misconception out there,” he says.

Many of those pressuring the FCC for investigations have stopped short of saying such agreements are inherently bad. Instead, they say that the secretive nature of the deals could lead to abuse. “While there has been plenty of speculation surrounding what is and is not happening with peering and interconnection, the truth of the matter is that anyone not directly involved with a specific agreement has no way to know if the agreement represents a reasonable agreement between the parties or a degradation of the open internet,” Michael Weinberg, vice president at consumer group Public Knowledge, said in a statement.

Comcast immediately said it would cooperate with the FCC.

Brustein is a writer for Businessweek.com in New York.

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Companies Mentioned

  • NFLX
    (Netflix Inc)
    • $443.25 USD
    • 0.47
    • 0.11%
  • CMCSA
    (Comcast Corp)
    • $55.02 USD
    • -0.84
    • -1.53%
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