Bloomberg News

For Web Users, FCC Proposal Raises Specter of Unequal Internet

April 26, 2014

Specter of Unequal Internet

The guidelines would let broadband providers such as AT&T Inc. charge content companies additional fees for preferential, faster routes to people in their homes. Photographer: Hoang Dinh Nam/AFP via Getty Images

Your Netflix bill might rise. You may have to switch Internet providers to get faster YouTube videos. Or, you may miss out on the next big thing on the Web.

Those are some of the concerns that consumer advocates are raising about U.S. Federal Communications Commission Chairman Tom Wheeler’s proposal this week for new rules for Internet traffic. The worry is that the changes would force consumers to pay higher fees to access certain kinds of information.

The guidelines would let broadband providers such as AT&T Inc. (T:US) charge content companies additional fees for preferential, faster routes to people in their homes. For example, Hulu LLC could pay to have better streaming of the latest episode of “The Daily Show With Jon Stewart.” The FCC is being swept up in an intensifying argument between the creators and distributors over how Internet traffic is managed and paid for. Caught in the middle are the consumers.

“This plan doesn’t bode well for consumers,” Delara Derakhshani, policy counsel for Consumers Union, a nonprofit advocacy group, said in a statement. “It could create a tiered Internet where consumers either pay more for content and speed, or get left behind with fewer choices.”

To understand what Wheeler is proposing, it’s useful to know how Internet traffic works today. All Web companies, whether Google Inc. or a small startup, pay for their data to be carried onto the Internet. Various companies called transit providers, such as Level 3 Communications Inc. (LVLT:US), route the traffic across the Internet’s backbone to broadband services like Comcast Corp. (CMCSA:US), which then deliver the content into people’s homes.

Netflix, Comcast

Some big content companies also pay broadband providers like Comcast for closer connections in what are called interconnection agreements. Netflix Inc. (NFLX:US), for example, agreed in February to pay Comcast for closer routes to its servers.

The new guidelines would address the next leg of the network, letting broadband providers such as AT&T charge content companies like Netflix additional fees for faster routes to people in their homes -- the “last mile” of connection that cable and phone companies own.

Wheeler said in a blog post yesterday that the agency could bar practices found not to be commercially reasonable. Critics including consumer advocates and some Democratic lawmakers said the upshot would be fast lanes for those who can pay, and slow lanes for others who wouldn’t have an equal chance to thrive on the Web.

‘Discriminatory Behavior’

That’s particularly controversial because home users typically only have one connection to the Internet, giving providers like Comcast a high degree of power that “could lead to discriminatory behavior,” said Sarah J. Morris, a senior policy adviser for New America Foundation, a nonprofit, nonpartisan group in Washington. Such a dynamic would strike at the heart of net neutrality -- the idea that all Internet traffic should be treated equally.

“What makes this controversial is that providers like Comcast have what’s called ‘gatekeeper’ status,” Morris said in an interview. As it acquired NBCUniversal in 2011, Comcast agreed to abide by the FCC’s net-neutrality rules until 2018.

The FCC has tried before to impose rules on Internet providers to ensure that they couldn’t charge for special treatment of content. The agency was blocked by a U.S. appeals court, which ordered the FCC to revise its net neutrality rules in a recent case brought by phone carrier Verizon Communications Inc. The court said the agency overstepped its bounds.

‘Unfounded’ Allegations

The latest proposed rules are still far from a done deal. Wheeler is already facing pushback from lawmakers who say the plan favors large companies and from consumer groups concerned that the days of an open Internet may be over.

Wheeler, in his blog post, said there has been “a great deal of misinformation” about his proposal. He said that behavior that would hurt consumers or competition wouldn’t be allowed.

“The allegation that it will result in anticompetitive price increases for consumers is also unfounded,” he wrote.

The man credited with inventing the World Wide Web disagrees. The proposal threatens to reduce competition, innovation and cooperation, according to British computer scientist Tim Berners-Lee.

“The FCC seems to be taking the U.S. in a retrograde step, allowing for a market which will pander to large companies that can negotiate between each other, which will have a devastating effect on small companies,” Berners-Lee said in an interview last week at the NETMundial conference in Sao Paulo. “It’s going to be a pain for Netflix, but it’s going to be even more of a pain for anyone who wants to compete with Netflix.”

To contact the reporter on this story: Edmund Lee in New York at elee310@bloomberg.net

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net Crayton Harrison


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Companies Mentioned

  • T
    (AT&T Inc)
    • $33.54 USD
    • 0.03
    • 0.09%
  • LVLT
    (Level 3 Communications Inc)
    • $48.42 USD
    • 0.15
    • 0.31%
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