What Is Net Neutrality?

Posted by on April 18th, 2017
April 18th, 2017

Over the past 3 years, net neutrality has been a hot political topic as the Obama and Trump administrations have taken diverging positions. Most recently, with a repeal of 2015 privacy protections, the Trump Administration has signalled a move away from the principle of net neutrality. The new Federal Communications Commission (FCC) chairman, Ajit Pai, who has the power to directly influence net neutrality rule changes, has signalled a similar shift.

So why the heated debate? What is net neutrality? How might the law change? And will it affect how the Internet works? Let’s dig in.

Defining Net Neutrality

Net neutrality is a principle that Internet Service Providers should treat all data similarly, neither hindering availability or performance of content because of its source. Regulations established in 2015 by the FCC state that Internet Service Providers (ISPs) cannot block, impair or favor legal content over their networks, except to optimize network performance.

What content and under what conditions, you might ask? Well, that’s where net neutrality gets fuzzier. The FCC rules only include consumer and small business broadband Internet services. Enterprise service offerings (e.g., VoIP, MPLS), content delivery networks (CDNs) and Internet peering are out of scope of these net neutrality rules.

Current Net Neutrality Law

There are three elements that are important to the current net neutrality rules:

  • Which providers are subject to the rules (who)
  • Which Internet data is and isn’t in scope (what)
  • What the providers are allowed to do with this data (how)

Which Providers are Included?

Net neutrality rules apply to “common carriers,” providers of Broadband Internet Access, defined as “mass market” standardized services sold to residential and small businesses. On February 26, 2015, the FCC reclassified broadband ISPs as “common carriers” under the Communications Act of 1934 (Title II) and Telecommunications Act of 1996 (Section 706); here is a helpful textual summary of the acts. Common carriers as subject to regulation such as the prohibition to “make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services.” This reclassification removed the judicial hurdles that had been raised in previous court challenges and moved regulation from the Federal Trade Commission (FTC) to the FCC.

Which Data is in Scope?

Broadband Internet Access includes fixed and mobile services that enable access to “substantially all Internet endpoints.” This excludes “specialized services” that are “application level” and limited to small parts of the Internet; for example, IoT devices such as e-readers, health monitors and VoIP and IP-Video are out of the scope of net neutrality rules. It also explicitly excludes enterprise service offerings (IP VPNs, MPLS circuits), VPNs, CDNs, premises operators (coffee shops) and Internet exchanges.

In addition, ISPs are explicitly allowed to shape or discriminate traffic to “optimize overall network performance and maintain a consistent quality experience.” This would include security and denial of service protection, filtering unwanted traffic and congestion control that is not based on source, destination, application or service.

What are the Limitations for ISPs?

The FCC rule states that ISPs (“common carriers”) are limited by the following approaches:

  • No Blocking: broadband providers may not block access to legal content, applications, services, or non-harmful devices.
  • No Throttling: broadband providers may not impair or degrade lawful Internet traffic on the basis of content, applications, services, or non-harmful devices.
  • No Paid Prioritization: broadband providers may not favor some lawful Internet traffic over other lawful traffic in exchange for consideration of any kind — in other words, no “fast lanes.” This rule also bans ISPs from prioritizing content and services of their affiliates.

The Origins of Net Neutrality

To understand how we got to this implementation of net neutrality rules, let’s understand how net neutrality has evolved in theory and practice over the past 15 years. Net neutrality is not a concept that has been defined by global Internet bodies and standards boards (e.g. IETF). Rather, the term was coined by Tim Wu in 2003, who described net neutrality as “an Internet that does not favor one application (say, the world wide web), over others (say, email).”

By 2005, net neutrality had evolved into an FCC policy statement that consumers should be allowed to “access lawful Internet content” and “run applications and use services of their choice.” Over the next few years, several disputes and court cases kept the topic on net neutrality on the radar. One high profile dispute erupted in 2007 around the throttling of BitTorrent traffic on Comcast’s network. But given the designation of ISPs as “information services,” the courts found that the FCC principles did not have the force of law.

With no jurisdiction to enforce net neutrality principles, the FCC formulated the Open Internet Order of 2010. This order required all ISPs to maintain “transparency” in network management practices and forbade fixed, but not mobile, ISPs from “blocking” or “unreasonable discrimination” that slows services. Again the FCC regulatory authority was rebuffed, this time in the 2014 Verizon v FCC ruling. Coupled with high-profile peering disputes between Netflix and ISPs, these court rulings set the stage for a new set of net neutrality rules adopted in 2015 and in force today.

Why It’s Controversial

Net neutrality is controversial. The controversy involves views on the power of market participants (ISPs, content providers, consumers), money, new service innovation and regulatory effectiveness. Here’s a quick rundown on some of the important dimensions in the debate:

Market power: Do ISPs have the market power to set prices or favor their own content?

With recent vertical and horizontal integration in the broadband market (e.g. Comcast/NBC Universal, AT&T/Time Warner, Verizon/AOL/Yahoo, Charter/Time Warner Cable, CenturyLink/Level 3), net neutrality proponents believe that ISPs will be able to charge content providers for rights to preferred access on their networks. They also fear that ISPs might favor their own content companies and ad networks or block access to content during contract disputes. Net neutrality opponents typically cite that ISPs are subject to significant competition, which constrains their ability to set prices for access. In addition, opponents find that major content creators are large themselves (e.g. Amazon, Netflix, Apple, Microsoft), capable of negotiating deals in their own interests.

Investment dollars: How should market participants pay for infrastructure investments?

Proponents believe that customers will foot the bill in higher content costs, paid by content creators, that will end up as the profits of the ISPs. Opponents find that ISPs need to earn revenue to fund further infrastructure investments, increasing network capacity and performance; moreover, net neutrality blocks a potentially important revenue stream.

Innovation: Will net neutrality spur or thwart innovation?

Net neutrality proponents state that small startups, apps and public services would find it difficult to compete with large content creators to pay for preferential access, putting their services at a relative disadvantage. Opponents tend to believe that large content creators already have the upper hand in deploying CDNs, that this is ultimately beneficial for customers, and that net neutrality would impede on potential innovation (e.g. zero-rated data consumption) offered by ISPs.

Regulatory effectiveness: Should the government regulate the Internet or can ISPs self-regulate effectively?

Proponents argue that ISPs have not been capable of self-regulation in the past, pointing to disputes with Netflix and Bittorrent as examples of when net neutrality principles were violated. Opponents state that there was little discrimination before net neutrality rules were in place, deeming them unnecessary, unduly complex and making comparisons to the heavily regulated voice telecommunications market.

Want to read more on why net neutrality rules are a good or bad idea? Here are excellent references from U Penn, the Atlantic and the Washington Post.

What’s Likely to Happen?

Given current law, any changes to net neutrality rules would need to start with the FCC or with Congress. The FCC has broad latitude as an independent agency to interpret regulations. President Trump appointed Ajit Pai as FCC Commissioner in January, raising expectations that net neutrality rules, and perhaps the FCC regulatory purview over Broadband Internet Access, will be changed.

One scenario is that the FCC proposes new rules on net neutrality, a long process that could take months or years of public hearings. Rather than going through a lengthy review process, one point of compromise could be the establishment of guidelines rather than the current ban on ISP practices.

A second scenario is new legislation in Congress that changes the common carrier provisions (and hence, the FCC’s jurisdiction). This legislation, however, would need to have support from Democratic senators or risk filibuster. The chance of that happening in Congress appears slim, as the net neutrality rules are over a year old and not subject to the same rollback provisions as the recently repealed Internet privacy rules.

The third scenario is judicial. Net neutrality rules rely on the FCC’s ability to regulate ISPs as common carriers. If a challenge to the previous ruling, affirming the ability to regulate, were to wind its way through the courts and the ruling were overturned, net neutrality rules would cease to be enforceable by the FCC.

Over the coming weeks and months, we’ll keep you updated as this debate unfolds.

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