On Net Neutrality, Comcast Loses — and Wins

The Philadelphia company faces unwanted new regulations — but it gets to set its own prices.


Well, this wasn’t entirely expected.

Sure, FCC Chairman Tom Wheeler was expected to endorse new regulations that would classify the Internet as a utility — and thus preserve them as “open networks” — and that’s exactly what he did in a Wednesday essay for Wired:

Using this authority, I am submitting to my colleagues the strongest open internet protections ever proposed by the FCC. These enforceable, bright-line rules will ban paid prioritization, and the blocking and throttling of lawful content and services. I propose to fully apply—for the first time ever—those bright-line rules to mobile broadband. My proposal assures the rights of internet users to go where they want, when they want, and the rights of innovators to introduce new products without asking anyone’s permission.

What was unexpected? Comcast and other Internet providers seemed OK with it.

Comcast rose as much as 4.6 percent in New York trading, the biggest intraday gain since November 2013. Time Warner Cable jumped as much as 5.2 percent, the most since its proposed $45 billion sale to Comcast was announced almost a year ago. Shares of other cable companies that offer broadband service also gained. Charter Communications Inc. climbed as much as 6.9 percent, while Cablevision Systems Corp. added as much as 3.3 percent.

Wait. What? Wasn’t Comcast opposed to precisely this outcome? Wouldn’t the new regulations stifle innovation? What happened?

What happened is Wheeler made one key concession to Comcast and other Internet providers: The order won’t regulate the prices that those companies charge for their services. And that, apparently, makes a huge difference.

Ars Technica explains how companies like Comcast will be affected:

The ban on blocking, throttling, and paid prioritization is the biggest takeaway.  “Broadband providers may not block access to legal content, applications, services, or non-harmful devices… may not impair or degrade lawful Internet traffic on the basis of content, applications, services, or non-harmful devices… [and] may not favor some lawful Internet traffic over other lawful traffic in exchange for consideration—in other words, no ‘fast lanes.’ This rule also bans ISPs from prioritizing content and services of their affiliates,” the FCC said. The core provisions of Title II banning “unjust and unreasonable practices” will be used to enforce these rules.

In other words, everybody on the Information Superhighway (remember that term?!?!?) will face the same speed limit. Nobody can get their content delivered faster or slower — Comcast and other Internet providers will have to treat all online traffic the same exact way.

The Washington Post adds:

A key part of the Federal Communications Commission’s draft rules would cover the Internet backbone — a crucial part of the Web that’s responsible for ferrying data to your Internet provider, which then turns around and serves that data to you. Without it, you couldn’t get Netflix videos because basically there would be no way for Netflix to get those videos to your Internet provider.

Under FCC Chairman Tom Wheeler’s proposal, the agency would reserve the right to review the behavior of Internet providers in this space. One example includes Comcast’s treatment of Netflix traffic at part of the Internet where the backbone meets Comcast’s network. You may remember that Netflix and Comcast struck a controversial deal last year that has Netflix paying to connect directly with Comcast.

The FCC’s draft net neutrality rule allows any company that feels like it’s been unfairly treated in the middle mile (e.g., Netflix) to file a complaint and have the agency examine what’s going on. In responding to the proposal Wednesday, Netflix said: “If such an oversight process had been in place last year, we certainly would’ve used it when a handful of ISPs opted to hold our members hostage until we paid up.”

The L.A. Times says Wheeler’s announcement could be a bad omen for the still-under-review Comcast-Time Warner merger.

One important clue to how firm a hand the Wheeler FCC will take with ISPs may come from its treatment of the proposed Comcast-Time Warner Cable merger, which would unite the nation’s No. 1 and No. 2 ISPs into an Internet service behemoth. Internet service in the U.S. is almost devoid of effective competition, and the merger would make things much worse. Moreover, Comcast historically has been a major violator of net neutrality practices. If the FCC wants to show that it will be serious about using Title II authority to uphold the public interest, it could start by killing the merger deal.

The full FCC votes on the net neutrality rules February 26th.

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