Net neutrality: Apply it to wireless, but let carriers have flexibility in their business models

Phil Goldstein

Tomorrow the FCC will vote on whether to codify new net neutrality rules after months of buildup and debate. Wireless carriers are probably going to get more oversight, and they deserve it after years of failing to provide data usage alerts and being unclear on throttling policies, among other harms to consumers.

In all likelihood, the rules will be approved by a 3-2, party-line vote, with the panel's three Democrats supporting the rules and the two Republicans opposed. The rules are likely going to be challenged in court, perhaps even at the U.S Supreme Court.

I want to sidestep the debate over whether the FCC can legally reclassify broadband, including mobile broadband, as a telecommunications service under Title II of the Telecommunications Act, and instead focus on what these new rules for Internet traffic would mean for wireless carriers if they are approved.

Based on what we know, it seems like the rules could crimp carriers' ability to launch new business models or force carriers to ask the FCC every time they want to try something new. I think wireless carriers need more oversight than they have had, and that wireless customers need more protections than they have been afforded in the past, but I don't think the FCC should be playing traffic cop (no pun intended) with carriers' business models.

Before proceeding, I want to note a major caveat. We don't yet know what the actual, final net neutrality order will say. According to Republican Commissioners Ajit Pai and Michael O'Rielly, Chairman Tom Wheeler's proposed order runs 332 pages. I haven't seen the details and it's unlikely that few outside of the FCC have either. That draft could change. So the following opinions are based on what the FCC has disclosed and what has been reported on the proposed rules so far.

Based on the FCC's fact sheet on Wheeler's proposal, the new rules would have several elements. If you want more details, check out the fact sheet here. I'm in favor of the "no blocking" rule; carriers should not be able to block access to legal content, period. I also don't have a problem in general with the "no throttling" rule; carriers should not be able degrade your stream of Netflix just because it's Netflix. However, I do think throttling should be allowed (more on that below). I also think in general that paid prioritization should be banned, since larger content companies will have the money and muscle to negotiate deals with carriers to speed up their content that smaller companies won't have. That could inhibit new startups that can't pay but might provide better services from gaining traction because their content will be delivered more slowly to consumers.

Here is where things get thorny to me. The FCC will also have a "standard for future conduct," which will be designed to ensure that future Internet practices do not harm consumers or edge content providers. This is the provision I have the biggest issue with. As it stands, it's overly vague. Carriers would apparently have to ask the FCC whether any future mobile data practice meets or fails to meet the standard, and it's unclear how such a process would be adjudicated.

Even net neutrality proponents like the Electronic Frontier Foundation think this "standard for future conduct" thing is a bad idea, in part because it could create a highly litigious environment over business practices: "A 'general conduct rule,' applied on a case-by-case basis with the only touchstone being whether a given practice 'harms' consumers or edge providers, may lead to years of expensive litigation to determine the meaning of 'harm' (for those who can afford to engage in it)," the EFF said in a filing last week.

Moreover, such a rule would put carriers in an unreasonable bind. Future plans that involve zero-rating to exempt certain applications from counting toward a user's data usage, or sponsored data in which a company subsidizes the cost of data content to achieve the same effect, might not be allowed. T-Mobile's Music Freedom, which applies zero-rating to 27 different streaming music services, is a boon for consumers. "Without the ability to offer services that provide unique value to our subscribers, T-Mobile would find it much more difficult to attract customers from our largest competitors," the carrier said in a recent filing.

I wholeheartedly agree. Such innovative plans are the basis for competition in the market. If carriers have to get FCC permission every time they want to launch such a plan, innovation will slow and consumers are likely to suffer as a result. FCC Commissioner Mignon Clyburn reportedly wants to soften the rule to prevent "unreasonable discrimination." I think that would be a better route to take.

The FCC's proposed net neutrality rules would also take a tough stance on what constitutes "reasonable network management." The agency's fact sheet says the network management practice must be "primarily used for and tailored to achieving a legitimate network management--and not commercial--purpose. For example, a provider can't cite reasonable network management to justify reneging on its promise to supply a customer with 'unlimited' data." Under such rules, a carrier could not throttle a user's speeds if they had an unlimited plan just because they were on an unlimited plan.

T-Mobile said the rules should acknowledge that technical network management is "distinct from transparent, legitimate and permissible consumer-driven choices," such as a customer buying a plan for a higher price with no throttling. "These are business plans and practices designed to match consumers with their desired price point and service level, not network management practices done solely for technical reasons, and the Order must acknowledge and preserve this difference," T-Mobile said.

I agree with this line of reasoning. If a customer is willing to pay more to ensure they will never be throttled, I see no problem with that--that's what some users value and what some carriers are willing to provide. Carriers spend billions of dollars on spectrum and networks and need to recoup their investment somehow. T-Mobile, arguably the most consumer-friendly U.S. carrier, acknowledged this last year when it bumped up the price of its unlimited plan without throttling from $70 to $80.

I'm not a shill for the wireless industry. I do not own stock in any individual company. I will not benefit financially no matter how the net neutrality rules come down. I think wireless carriers need to be policed more, but that they should be given the flexibility to decide their business plans without asking the FCC for permission every time they want to change something. --Phil

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