Internet Access: Luxury or Lifeblood? New FCC Ruling Provides Definitive Answer

During the past quarter century, the explosion in communications, information, entertainment, and mobile services has been nothing short of staggering. Today, few of us can imagine what life would be like without the myriad of services and programming that we access routinely on our computers, televisions, and mobile devices. Yet this brave new world has been a hornet’s nest for the regulators tasked with establishing appropriate controls on service provisioning.

If you think of Internet access as a luxury item, then you’d expect regulators to make sure that everyone could afford “basic” service and be willing to pay extra for premium capacity – a la cable TV. If you share the Obama administration’s argument that the Internet is an essential service in the 21st century, then you’d expect regulators to treat Internet Service Providers (ISPs) more like electric utilities or phone companies.

On February 26, 2015, the FCC came down on the side of “essential service” and opted to classify ISPs as common carriers under Title II of the Communications Act of 1934. This treatment will subject all broadband carriers to more stringent regulation. Key provisions of the ruling include:

• ISP operations will be “transparent” to the regulators with respect to the underlying economics of provisioning service and the operational tools and protocols used in network administration.
• ISPs cannot block or throttle any lawful Internet content.
• ISPs cannot negotiate special deals with content providers to ensure smooth delivery of their offerings (a.k.a., “paid prioritization”).
• The FCC will regulate the means through which content providers connect to broadband services. They’ll hear complaints and take enforcement action should fees be deemed unjust or unreasonable.

The FCC has a long-standing policy to preserve and promote a public Internet in which there is equal access and non-discriminatory treatment for all lawful usage. It protects consumer rights to unfettered access to legally sanctioned content, applications, and services. It encourages open competition among network providers, application and service providers, and content providers.

As public utilities (“common carriers”), ISPs will provide broadband capacity to consumers at rates that are consistent with the cost to provide service. They may institute usage-based pricing to assess higher fees to those who consume the most bandwidth. But they won’t exercise any control over how consumers use that capacity. And they won’t be permitted to give an “edge” to any provider that seeks to connect with their subscribers.

The FCC’s detractors are quick to point out that an “open Internet” comes at a cost. Bandwidth-hungry applications such as streaming video have been growing at an exponential rate. Someone has to pick up the tab for the cost of network expansion. If ISPs were given latitude to negotiate with application and content providers, they’d have the means to offload a portion of the network upgrade costs onto the folks who generate content instead of lay it all off on consumers.

ISPs also need a means to prioritize content delivery to ensure appropriate quality of service. Streaming video and interactive games require better performance than email delivery and web browsing. Consumers will not be served by an Internet that treats all data packets equally without regard to source or application.

As for concerns about stifling competition, ISPs point to the cable market in which innovation and a profusion of channels have come to the fore even though cable operators have the latitude to filter the content to which consumers have access. The benefits to consumers can outweigh any losses associated with a gatekeeping function.

While this issue may be tied up in the courts for years to come, the call for developing strong economic models to capture the true cost of provisioning service remains. Billing constructs and the associated administrative systems must contemplate usage-based pricing at the consumer level. Consumers need to be educated about changes in billing and why they’re necessary. And, of course, providers must be prepared for increased scrutiny over network administration to ensure that they support open access while maintaining the quality of service.