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Business Impact

Five Loopholes That Could Undermine Net Neutrality

“Open Internet” rules are on the verge of being approved in the U.S., but crucial details remain unclear.

The government’s Internet rules will shape the online services that emerge in the coming years.

After years of struggle, U.S. advocates of “net neutrality” are likely to declare victory on Thursday, when the Federal Communications Commission is expected to approve sweeping new rules meant to foster an open Internet. But people who have closely studied the FCC’s proposal see at least five areas with major potential for loopholes or unintended consequences.

At issue is a proposal by FCC chairman Tom Wheeler to reclassify broadband Internet connectivity as a telecom service rather than as an information service. This reclassification, at least in theory, provides the FCC with more power to prevent cable and telecom companies from misusing their power as Internet service providers.

Wheeler has been portraying this new regulatory approach as a way to ensure that broadband networks are “fast, fair, and open.” His stated goals include preventing Internet carriers from blocking or throttling legal content. Also off-limits, he says, would be any arrangements where Internet carriers favored certain traffic in return for extra payments. All these goals are consistent with net neutrality: a belief that Internet carriers shouldn’t discriminate in the ways they treat various types of content.

Barbara van Schewick, a Stanford law professor who specializes in Internet policy issues, thinks Wheeler’s proposal doesn’t go far enough. Full details of his plan haven’t been released yet, but in a 26-page analysis released last week, she ticks off a series of concerns about Wheeler’s proposal.

First, she asks if the FCC’s anti-throttling ban will apply only to discriminatory treatment against specific applications (for example, penalizing Netflix while treating Hulu or Amazon more favorably) or against entire classes of applications (for example, penalizing movie-streaming applications while favoring photo and text-based sites). Van Schewick thinks both types of discrimination should be banned, but the FCC’s language has been unclear.

Second, she wonders how the FCC will view arrangements in which Internet customers can visit certain sites without having their bandwidth consumption being counted against monthly usage targets. Such arrangements, known as “zero rating,” are popular in some non-U.S. markets as a way of helping sites attract more traffic (see “Facebook and Google Create Walled Gardens for Web Newcomers Overseas” and “The Right Way to Fix the Internet”), but von Schewick worries that they fly in the face of net-neutrality considerations. The FCC’s stance on such arrangements has been hard to decipher.

Third, van Schewick worries that the FCC gives Internet carriers too much leeway to discriminate against certain applications in the name of “network management.” The FCC’s exact language on this is likely to be a flashpoint. ISPs argue that they need freedom to rebalance loads when congestion arises. The FCC says it wants to allow “just and reasonable” network management—a term so vague that efforts to enforce that standard are likely to invite court challenges.

Fourth, van Schewick wants the FCC to clarify that ISPs “can’t use practices related to interconnection to evade the FCC’s network neutrality rules.” This is likely to be especially thorny because content travels throughout the Internet via an ever-changing assortment of pathways—many of which involve ad hoc arrangements that shunt data along transmission lines owned by a wide variety of players. Sometimes this interconnection is done for free; sometimes payments are involved.

There’s been very little regulation of the interconnection market to date. As a dispute last year between Comcast and Netflix showed, the deeper one digs into the specifics of interconnection arrangements, the more challenging it becomes to reconcile different parties’ timelines, accounting systems, and load-management data. Furthermore, Wheeler has said that the FCC doesn’t want to begin regulating prices in the Internet-delivery business. It’s hard to see how the FCC could take an active interest in interconnection deals without looking deeply into pricing, too.

A fifth potential problem: Wheeler and the FCC haven’t spelled out how the new regime would monitor Internet traffic for evidence of violations. One time-tested approach is for Internet carriers to publish regular reports that document their traffic-handling patterns. But former FCC chairman Reed Hundt argues that such after-the-fact reporting can’t generate insights fast enough for regulators to keep up.

Hundt hopes the FCC encourages a “bring your own enforcement” system in which customers use FCC-validated apps to document any abnormalities that might merit regulatory attention. Hundt is hardly a disinterested party: he’s an advisor to Adaptive Spectrum & Signal Alignment, which makes the CloudCheck Internet speed-monitoring app. But Hundt argues that if the FCC really wants an open Internet, it should make sure that customers can spot aberrations quickly.

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