The FCC's Net Neutrality Plan: A Vote Against Consumers

The Federal Communications Commission will pass a version of net neutrality today on a 3-2 party line vote. The Democratic commissioners think the compromise plan will keep the Internet open and still gain enough political support to give it teeth.

But the FCC majority deludes itself. This version of net neutrality will effectively let carriers do whatever they want while subjecting businesses and consumers to higher prices without protecting their ability to use the Internet without interference.

FCC Chairman Julius Genachowski's deal framework outlines the following points:

• Broadband providers would be prohibited from blocking lawful traffic.
• Broadband providers would have flexibility in managing network traffic and could charge consumers based on how much data they sent and received.
• There would be "transparency" in how carriers handle and charge for traffic, so consumers and businesses could make "informed choices" in services, whether wired or wireless.
• Other than transparency, wireless would remain unregulated so that the industry could develop and adopt to the growing market.

The underlying problem of the Internet is that carriers, companies, and consumers all want increased benefits without higher costs. However, increased benefit has meant increased traffic and accompanying greater expenses:

• Consumers don't want to pay more for unlimited data, even though their use of the Internet is increasing exponentially;
• Carriers want money for traffic but want to restrict spending on their infrastructure without a tit-for-tat immediate increase in profits;
• Media and Internet companies want necessary investment in Internet infrastructure to come out of someone else's pocket.

Why ISPs hate Web video
Carriers hate this idea, which is why they've tried various ways to restrict consumer use of the Web, including restricting high data volume services like BitTorrent (read that as unauthorized movie downloads that take revenue from the carriers), capping unlimited consumer data use, and charging other carriers to deliver higher amounts of traffic.

The FCC tried to prevent each change, which effectively meant that carriers wouldn't be able to restrict traffic or charge more. So the carriers rebelled. Genachowski and Barack Obama (at least before he was elected) thought net neutrality would keep carriers from becoming gatekeepers that could effectively decide which companies would succeed or fail. But not even the FCC gets a free lunch.

And under this plan, lunch prices could go through the roof. The deal is structured so poorly as to render it worse than doing nothing, if you ask Senator Al Franken. No language prevents wired broadband providers from offering paid prioritization, under which companies or consumers would have to pay more for certain types of traffic.

The FCC's deal: Worse than nothing
That is the carriers' wet dream, because they can discourage Internet delivery of video from effectively competing with their own offerings. Net neutrality proposal does nothing for the part of the business that it is supposed to regulate.

But it gets worse. As Franken noted, a wireless ISP could hinder services that competed with its own:

To use a hypothetical, under this framework, Verizon could initially allow iPad owners access to a streaming Netflix video application over their 3G or LTE network--but then block that same Netflix application the very day that V CAST, Verizon's mobile video on-demand service, becomes available and offers competing content.

The wireless loophole
And there is a further implication that Franken didn't address. How do you define wireless? Over-the-air deliver of broadband to fixed locations is wireless. If a carrier owns Internet hotspots that use Wi-Fi, couldn't that be called wireless? Essentially, that is no different from a cell tower. How much of a wireless link is necessary to fall under wireless Internet access? What if the carrier provides the Wi-Fi router to someone's home? Is that wireless Internet access? Would a bounce off a satellite change an otherwise wired connection to wireless?

Some of these examples are extreme, I know, but that doesn't mean the carriers won't consider them. The wireless industry has already begun to gear up for surcharges for particular Internet services. And the more it can call things wireless, the more ways it has to get around pricing and traffic restrictions.

And then there's politics
All that assumes a working net neutrality plan. Republican lawmakers have indicated their opposition. There will be legal challenges that could leave the FCC powerless and carriers free to do as they wished. The course of net neutrality has actually set up a pair of roads, both of which lead to carrier traffic discrimination.

Just a few days ago, AT&T (T) dropped off about $3,700 of gourmet cupcakes to the FCC as part of its annual "thinking of you guys" round of treats to policymakers and reporters. (Nope, we don't get cupcake deliveries in my office or household.) How nice that AT&T and its rivals now have their own holiday present.

Related:

• Net Neutrality Faces a Political Gauntlet, and the Fall-Out Will Hit Tech Firms
• Why Net Neutrality Means Consumers Should Pay More -- but Won't
• Wireless Carriers Band To Overthrow Credit Card Companies
• Net Neutrality? Good Luck After These Elections
• Networks Versus Google TV -- Just Another Name for Net Neutrality