FCC backs neutrality proposal; Wheeler open to tougher rules


By a 3-2 vote, the FCC has backed chairman Tom Wheeler's neutrality proposal. As previously reported, the proposal doesn't stop ISPs from creating pay-for-priority deals with content providers (fiercely opposed by neutrality supporters), but does seek comment on whether they should be banned.

The proposal also calls for creating an ombudsman to represent the interests of Web users, and for holding ISPs to service minimums. Moreover, it suggests re-evaluating the looser neutrality rules mobile carriers have been subject to.

Notably, Wheeler (no doubt sensitive to the public backlash to his past remarks) stated during the FCC's hearing (live blog) he's open to regulating ISPs as common carriers (something they've strongly opposed). The commission seeks comment on what rules it should use to enforce neutrality.

Initial comments on the proposal can be submitted until July 15, and reply comments until September 10.

Netflix (NFLX -2.5%), which has pushed for tougher neutrality rules even as it agrees to direct peering deals in the near-term to guarantee service quality, is following the market lower. The FCC vote comes as Sandvine reports Netflix has accounted for 34% of North American peak downstream traffic in 2014, up from 32% six months ago.

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Comments (29)
  • investingInvestor
    , contributor
    Comments (2557) | Send Message
     
    We live in interesting times.
    15 May 2014, 12:45 PM Reply Like
  • investingInvestor
    , contributor
    Comments (2557) | Send Message
     
    The evolving situation appears similar to past cases of artificial scarcity.

     

    Does anyone remember before paying for bottled water? Do you remember when restaurants automatically placed water at all seated customers?

     

    Economics and marketing professors and graduate students studied this phenomenon in great detail. Some claimed that bottled air might follow, and paying for parking lots, and paying to enter stores. OF COURSE, they were Chicken Little's...but...wait... high efficiency furnace filters (x10 more expensive), $300 per month parking, Costco and Amazon Prime memberships....you are willing to pay up time after time after time.

     

    The truth is that artificial scarcity costs ISPs a lot of unnecessary CAPEX and OPEX. But...they are already soooo loathed that they cannot resist abusing their customers more and more and more and more and more. If only you were a fly on the wall inside an ISP.
    17 May 2014, 12:22 PM Reply Like
  • Alan1967
    , contributor
    Comments (241) | Send Message
     
    You cannot have a "fast lane" without also having a slow lane.

     

    Small start-up will not be able to pay the extortion fees to get access to the "fast lane", and too many incentives not upgrade the slow lane are there for the monopolies that control our access to the Internet.

     

    Things like NetNeutrality should be put up for a national referendum. This FCC is stack with too many people susceptible to industry lobbyists. And in this case I think it hurts the entire country.
    15 May 2014, 01:25 PM Reply Like
  • DougRk
    , contributor
    Comments (1915) | Send Message
     
    Your argument, which is making the rounds in the media, makes no sense. Do we not have luxury cars and economy cars? First class seats and coach? Fast cars and slow cars? Larges homes and small homes? Luxury <insert product> and low cost <insert product> all coming off the same lines? That is the nature of a free market. The "slow" lane as you put it in the end will have for its use all the infrastructure paid for by the big bandwidth users. That's how, ultimately, the advantages of a better standard of living work down to the masses; not by mandating equality, but allowing disparate products to emerge.

     

    You have it exactly backwards. When and if the FCC calls ISPs common carriers, that's when innovation, investment, and advancement will end, and we'll all be waiting like our vets at VA hospitals.
    15 May 2014, 07:02 PM Reply Like
  • sarichter
    , contributor
    Comments (605) | Send Message
     
    That last comment is the typical stereotype. Government doesn't innovate and is inherently bad. Private sector innovates and is inherently good. I believe it was the government which developed most of the technology that we use today (or the technology in which it is based). Secondly, today's government is run by previous private sector managers or vice versa. Rich people are corrupt period. It doesn't matter what sector they come from or work in!
    15 May 2014, 11:20 PM Reply Like
  • DougRk
    , contributor
    Comments (1915) | Send Message
     
    We may not be as far apart as you think, based on your last two lines. Power corrupts and absolute power corrupts absolutely. We agree. The question is, how do we make power diffuse? By making free markets less free and concentrating power in the hands of government? On its face that is not a good idea.

     

    And no, government has created nothing, ever. How can you call spending tax money and soliciting contracts from private industry an advance credited to government? No, free people seeking to better their own lives creating and expecting a reward that they can keep is how society advances. In every case, with every technology we use, bar none.
    16 May 2014, 12:07 AM Reply Like
  • sarichter
    , contributor
    Comments (605) | Send Message
     
    The problem with 'free markets' is they aren't really free. Private enterprises get larger and more powerful which inevitably kicks the smaller competitors to the curb. Monopolies are what gets free markets into trouble.

     

    If you can describe how we can diffuse the greed and corruption, please offer up some. There is good in the world, but far more evil (I use that term loosely of course).
    16 May 2014, 09:01 AM Reply Like
  • DougRk
    , contributor
    Comments (1915) | Send Message
     
    I agree that our markets aren't free in so, so many cases. The lobbyists who tweak the law to benefit incumbent players are the prime problem. But the reason they lobby is because govt. has the power to give them an advantage in their market. People power in the form of voting with dollars is the best, albeit not perfect, remedy. There's no perfect solution, but substituting central govt. authority which is unresponsive to the people for "business authority" where people can and do break companies by refusing to buy their products isn't a good idea as we see in spades now.
    16 May 2014, 11:55 AM Reply Like
  • sarichter
    , contributor
    Comments (605) | Send Message
     
    Don't get me wrong, I'm not a die-hard liberal "I love government" person. I'm just not a big fan of how individuals (in power) of the private sector utilize their resources.

     

    I also find it repulsive that our law makers can get into management positions at these large companies or hold large equity interests in them. Talk about a conflict of interest! There should be mandatory retirement for Congress so the country can expunge the oligarchy that has been the problem since the inception.
    16 May 2014, 12:47 PM Reply Like
  • DougRk
    , contributor
    Comments (1915) | Send Message
     
    Agree with all those thoughts. Diffusion of power!
    16 May 2014, 01:14 PM Reply Like
  • thotdoc
    , contributor
    Comments (2000) | Send Message
     
    Poorly written: who should be banned? The content providers?

     

    On another note, we will get what we deserve if we don't raise a ruckus about more of the same thing...money/power walks all the rights and opportunities of the general person.
    15 May 2014, 02:25 PM Reply Like
  • 6269751
    , contributor
    Comments (1575) | Send Message
     
    Notice that only one explicit stock is mentioned. Hint, that's why you should be invested in Netflix. The article goes on to say that you buy it today at a 2.5 % discount. A word to the wise is sufficient.
    15 May 2014, 02:57 PM Reply Like
  • Tschurin
    , contributor
    Comments (381) | Send Message
     
    What do you expect from an FCC chairman who used to be the chief lobbyist for the cable industry. Great appointment, Mr. President.
    Also why do you need a non-voting "ombudsman" to represent the interests of Web users, i.e., aka the public? Isn't that supposed to be whom the FCC itself is representing?
    15 May 2014, 04:54 PM Reply Like
  • DougRk
    , contributor
    Comments (1915) | Send Message
     
    Maybe the ombudsman for Web users should be the dollars web users pay for net service? That's how every other healthy industry works.
    15 May 2014, 07:11 PM Reply Like
  • Tschurin
    , contributor
    Comments (381) | Send Message
     
    The free-market theory you are spouting might make sense in a truly competitive industry. For many Americans, however, video/ISP broadband service is a monopoly or, at best, a duopoly.
    16 May 2014, 11:11 AM Reply Like
  • DougRk
    , contributor
    Comments (1915) | Send Message
     
    There's no reason it has to be this way. Final mile wireless, parallel networks, on and on. If there's money to be made, disruptors appear. But going down the road of making ISPs telcos will lead to stagnation.

     

    The evidence that a completely unregulated 'net for 25 years has led to probably the greatest wealth generating sector ever means nothing?
    16 May 2014, 11:58 AM Reply Like
  • Tschurin
    , contributor
    Comments (381) | Send Message
     
    Once again, you are talking theory [which I partly agree with] when the reality for the public is determined by things like negotiated municipal franchises. Here's a thought: when there are more than three ISP pipes upstream-and-downstream going into a house, deregulate it; for everyone else treat it as a utility.
    16 May 2014, 01:33 PM Reply Like
  • BruceInKY
    , contributor
    Comments (445) | Send Message
     
    Great. More government interference in the marketplace.
    15 May 2014, 05:57 PM Reply Like
  • 6269751
    , contributor
    Comments (1575) | Send Message
     
    Actually you have it 180 deg. off. It was the government who initially enforced network neutrality. They are deciding whether to withdraw the rule.
    16 May 2014, 11:52 AM Reply Like
  • Sakelaris
    , contributor
    Comments (2682) | Send Message
     
    The more I hear of the ISP and cable company arguments, the more it reminds me of a group of schoolyard bullies who have just taken a small kid's lunchbox. They then hide it behind their backs, and pass it around to one another. Each time after handing it off, a bully declares to the small kid, "Lunchbox? I don't have your lunchbox, kid."
    15 May 2014, 11:24 PM Reply Like
  • shoobee
    , contributor
    Comments (4) | Send Message
     
    With all respect, I believe those who deplore "government interference in the marketplace" are viewing this issue incorrectly. First we must decide who the customer is that is using the internet. Is it Netflix? No. It is the guy watching Netfix. Internet traffic is not driven by Netflix but rather by people who use the service. When Comcast charges Netfix for this traffic, Netflix passes that charge on to you, the Netflix subscriber. This is true whether you are a casual user or a rabid one. Whether you stream a little or a lot. Hence the fees on all Netflix users go up whether they use the service a little or a lot. Also, Netflix users end up subsidizing every non-Netflix Internet user. People downloading pirated movies. People moving huge amounts of data around for whatever reason. Etc.

     

    This is unfair. It allows Comcast to earn more cash by getting other businesses to raise money for them, instead of directly charging their own customers more for the actual traffic they themselves cause. Furthermore it distorts the marketplace, and puts new smaller businesses and start ups at a disadvantage. It's anticompetitive.

     

    Maybe I can come up with an analogy that might be persuasive. Instead of the internet and data, let's consider traffic and roads. The more cars that are using our highways, the more money our government needs to maintain the roads. If Ford is selling more cars than anyone else, should the Government levy a tax just on Ford? Of course not. It would distort the marketplace. Instead, road maintenance is paid for by fuel taxes. So the people who drive the most, pay the most to maintain the roads. This way the cost is borne by the actual user, not by some third party company. The internet should be the same.

     

    The government does not interfere in the way service providers charge their customers. If Comcast wants to charge by the quantity of data a user streams into his house, Comcast can do that. But if Comcast wants to hide its fees from its users by charging content providers instead of content watchers, that distorts the market, is anticompetitive, and ultimately causes inequities in which customers actually pay for the amount of traffic all internet users are responsible for.

     

    The government should enforce net neutrality. People should be charged directly for the bandwidth that they use. And probably the government should declare the internet a utility. It's not like people have much choice in service providers anyway.

     

    Eric S.
    Tennessee
    16 May 2014, 12:25 AM Reply Like
  • JohnBinTN
    , contributor
    Comments (4442) | Send Message
     
    In things like roads, if there are constant traffic jams, there's a good chance they'll add lanes, or an alternate route. Your solution is just to put toll lanes of varying severity on the small number of lanes that exist.

     

    Build out the capacity to handle the traffic so it is not an issue. Making some people pay more for an inadequate system is bad. Bandwidth metering is bad.
    16 May 2014, 01:03 AM Reply Like
  • DougRk
    , contributor
    Comments (1915) | Send Message
     
    "First we must decide who the customer is that is using the internet. Is it Netflix? No. It is the guy watching Netfix"

     

    This is a classic misread of the market which gives cover for govt. stepping in to "protect" the final, end consumer. But in a free system, we expect a middleman, Netflix, to manage things for us. In turn Netflix earns a profit. Netflix demands efficiency to make their profit bigger, which benefits all.
    16 May 2014, 12:01 PM Reply Like
  • DougRk
    , contributor
    Comments (1915) | Send Message
     
    "Your solution is just to put toll lanes of varying severity on the small number of lanes that exist."

     

    Unless revenue is raised, there's no money for more bandwidth. Blithely saying "build out the capacity" doesn't take into account that unless there's a reward waiting, it won't happen.
    16 May 2014, 12:02 PM Reply Like
  • JohnBinTN
    , contributor
    Comments (4442) | Send Message
     
    I've looked at the financials of the major ISP's, and they are not hurting for cash to build out their network capacities.

     

    Tiered speeds I can see (I pay for the higher of two available speeds that our small ISP provides). I don't like the idea of metering, though. Unlimited data such that cell providers are offering now (x-amount of data at 3 or 4g speed, then after that speed is reduced for the remainder of the cycle) would be okay, I guess.

     

    I'm just not a fan of data limits.
    16 May 2014, 01:12 PM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (13557) | Send Message
     
    The US trails all Asia in Internet bandwidth and speed save China and North Korea and is and will suffer from it. We definitely need to insure high speed bandwidth at reasonable prices or we will be the Flintstones in the age of the Jetsons. It's not about government or no government. It's not about the right to make profit and innovation. The innovation already exists. The profit already exists and is shared by preferential treatment of a few carriers. Face it, we are behind and paying more than anyone else for sub-par service. Oligopolies are equally as bad as government simply because they are usually complementary to a rigged, corrupt government.
    16 May 2014, 03:24 AM Reply Like
  • DougRk
    , contributor
    Comments (1915) | Send Message
     
    @moon, I trust that distribution is more efficient without govt. dictates. Afterall, if someone is making money off the best implementation of bandwidth and network topology, you can bet it's done well.
    16 May 2014, 12:07 PM Reply Like
  • Sakelaris
    , contributor
    Comments (2682) | Send Message
     
    I recall that as this issue gained attention over the last year or so there were some posts on Seeking Alpha from investors who were either short Netflix or long on one of the ISPs predicting problems for Netflix and bragging about how the ISPs would soon be able to harm Netflix.

     

    Now if one industry can harm another by developing a superior product at a lower consumer cost, that's fine. If, on the other hand, they hope to harm a competitor by using monopoly pricing power over a fiber that goes through our private property easements, that is NOT okay.
    16 May 2014, 01:48 PM Reply Like
  • 6269751
    , contributor
    Comments (1575) | Send Message
     
    The boat has been sailing along fine with government (FCC) enforcement. It is an interesting irony that the FCC probably didn't have the authority to do this in the first place. So maybe that's why it worked, because like a business it was doing something that it could just barely get away with.
    16 May 2014, 02:39 PM Reply Like
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