Open Internet Rules Unlevel the Web Playing Field

The Federal Communications Commission (FCC) is proposing new open Internet rules that will allow broadband providers to charge companies a premium for access to faster transmissions.

The new rules will effectively create a fast lane and slow lane on the net.

According to reports in the New York Times and the Wall Street Journal, the FCC plans to allow Internet service providers to sell a faster route to content companies that are willing to pay higher fees.

The rules contradict the concept of net neutrality, which is the principle that all web traffic should be treated equally, with all Internet users equally able to see any content they choose and no content providers discriminated against in providing their offerings to consumers.

The FCC's previous rules on net neutrality were thrown out by the U.S. Court of Appeals for the District of Columbia Circuit in January, saying that the rules put Internet service providers into the same category as public utilities and as such, the rules violated previous FCC rules that stated Internet links were not to be governed by the same regulations as electric or telephone services.

In that ruling, the court did affirm that the FCC had authority to regulate broadband, a move that gave the agency new legal ground to bring back non-discrimination and no-blocking regulations for Internet service providers.

That issue was brought into the spotlight by a battle between the video streaming service Netflix, Inc., and cable company Comcast Corp. Under conditions placed on its 2011 merger with NBC Universal, Comcast is the only Internet provider still bound by the earlier FCC net neutrality rules through 2018.

As for the current rules being proposed, FCC Chairman Tom Wheeler said Wednesday that the agency would consider draft open Internet or net neutrality rules at its agency meeting on May 15.

Later the same day he responded to criticism of the plans.

"There are reports that the FCC is gutting the Open Internet rule," he said in a statement. "They are flat out wrong. Tomorrow we will circulate to the Commission a new Open Internet proposal that will restore the concepts of net neutrality consistent with the court's ruling in January. There is no 'turnaround in policy.' The same rules will apply to all Internet content. As with the original Open Internet rules, and consistent with the court's decision, behavior that harms consumers or competition will not be permitted."

On Thursday, Wheeler took to the FCC's blog to set the record straight and note exactly what the proposal will entail:

"To be clear, this is what the Notice will propose: That all ISPs must transparently disclose to their subscribers and users all relevant information as to the policies that govern their network; That no legal content may be blocked; and That ISPs may not act in a commercially unreasonable manner to harm the Internet, including favoring the traffic from an affiliated entity."

After the loss in the appeals court in January, the agency did its homework and in February issued a fact sheet on Internet Growth and Investment, which included the following data:

Both within the network and at its edges, where companies use the network to deliver goods and services, investment and innovation have flourished under the Open Internet rules.****

• Venture capital financing of "Internet-specific" businesses has doubled in the past four years, from $3.5 billion in 2009 to $7.1 billion in 2013 (National Venture Capital Assoc.)
• Venture capital financing of the telecommunications industry has risen from $582 million in 2009 to $643 million in 2013 (National Venture Capital Assoc.)
• Broadband capital expenditures have risen steadily, from $64 billion in 2009 to $68 billion in 2012 (U.S Telecom)
• The Progressive Policy Institute identified the telecommunications/cable industry as one of its "Investment Heroes of 2013," investing $50.5 billion in 2013
• Traffic on the Internet has more than doubled from the equivalent of 17 billion DVDs worth of data per year in 2010 to 36 billion DVDs per year in 2012 (U.S. Telecom)

Mobile investment in particular has grown during that time.

• Annual investment in U.S. wireless networks grew more than 40% between 2009 and 2012, from $21 billion to $30 billion, and exceeds investment by the major oil and gas or auto companies (White House Office of Science and Technology)
• A total of $8.33 billion has been raised since 2007 on mobile media ventures (SNL Kagan Media Trends)
• Private investment in wireless infrastructure over the next 5 years will generate $1.2 trillion in economic growth and create 1.2 million jobs (PCIA)

Whole new product markets have blossomed, and the app market has exploded.

• The number of tablet users in the United States has increased from 2.6 million in the second quarter of 2010 to almost 70 million by the end of 2012. Overall app use in 2013 posted 115% year-over-year growth (SNL Kagan Media Trends)
• Over 20 independent non-carrier mobile apps stores offered over 3.5 million apps for 14 different operating systems by 2012 (CTIA)
• The Wall Street Journal reported in March 2013 that app sales were approaching $25 billion
• The "App Economy" had created 752,000 jobs in the U.S. as of July 2013, the fifth anniversary of Apple's App Store (Michael Mandel, Progressive Policy Institute

Finally, we have seen tremendous growth in the online video market.

• The number of hours Americans spend watching video over the Internet has grown 70% since June 2010 (Nielsen)
• Revenues from online video services grew by 175% between 2010-2012, from $1.86 billion to $5.12 billion (SNL Kagan)
• Real-time streaming of entertainment in prime time grew from 42.7% of downloads in 2010 to 67% by Sept. 2013 (Sandvine Global Internet Phenomena Report)