How to Broker a Net Neutrality Deal: Take It To the Back Room

The fight over whether the FCC will control broadband service by instituting "net neutrality" has been angry and bitter. Now the FCC is apparently brokering a compromise with carriers. A back room deal always smells odious, but in this case, it may be necessary to get anything done.

The main reason the FCC wants to revisit the 2002 decision to deregulate Internet access is net neutrality. Telcos and cable companies wanted to charge providers of such services as video streaming and hosted applications extra to use their networks, even though consumers pay flat rates for Internet access on their end. Essentially, the carriers said, "We know we're charging consumers for unlimited Internet use, but we expected them and the service providers to be reasonable in how much they wanted." It's like a restaurant with an all-you-can-eat buffet wanted a premium price for the visiting sumo team.

At the same time, the Internet companies claimed that carriers simply want to double-dip revenue, with both their own customers and the information services collectively providing double payment for traffic.

Although the carriers have large data networks, they can carry only so much traffic. According to some estimates, the number of people using the Internet has jumped more than 100-fold in 15 years. Cisco (CSCO) estimates that by 2014, Internet traffic growth will be 18 percent in the U.S. Given 40 percent growth estimated worldwide, that may seem like nothing, but it translates into traffic doubling roughly every four years.

So how to slow down growth with an economically scarce good? The carriers could charge tiered pricing for consumers, like Comcast and others have tried, but people scream and legislators threaten action. Charge the service providers, and they scream and the legislators still threaten action.

I'm not naive enough to call the carriers victims -- far from it. However, this is not a situation with a clear good guy on one side and bad guy on the other. The information services don't want to spend more money, even if the demand was reasonable.

The game badly needs a referee, and the FCC is the only likely candidate. But to do so, the commission has to be able to ask each side to present solid data to support its side. That data is proprietary, and the companies won't agree to make it available for broad public consumption -- and both sides have big bank accounts and many lawyers on hand to keep things tied up in court.

That's why the FCC needs to work out a compromise behind closed doors. Negotiations out of the public eye cause concern, and rightly so. But what do you do if having discussions in public end up with all parties putting their backs up and nothing getting done? Sometimes a little logrolling goes a long way. Will the results be perfect? Absolutely not. But they will likely be practical.

Related:

• Net Neutrality Doesn't Go Far Enough To Rescue the Internet
• Carriers Hate Net Neutrality Because They Want to Double-Dip Revenue
• FCC Plan To Regulate Broadband Is -- *Gasp* -- Good For Internet Business