Newly anointed FCC Chairman Tom Wheeler said this week that it would be okay for Internet service providers to charge Netflix and other companies for a faster lane to consumers. While some think that Wheeler's stance is surprising given that the FCC implemented the Open Internet Order in 2010 to stop ISPs from discriminating against certain types of traffic, anyone who knows Wheeler's past is not in the least bit surprised. Wheeler is a former lobbyist for the cable and wireless industries. When the appointment was announced many were skeptical that Wheeler would uphold the mantra of the FCC when it comes to a free and open internet. Many are saying "I told you so" after his statement this week.
"I am a firm believer in the market," Wheeler said. "I think we’re also going to see a two-sided market where Netflix might say, ‘well, I’ll pay in order to make sure that you might receive, my subscriber receives, the best possible transmission of this movie.’ I think we want to let those kinds of things evolve. We want to observe what happens from that, and we want to make decisions accordingly, but I go back to the fact that the marketplace is where these decisions ought to be made, and the functionality of a competitive marketplace dictates the degree of regulation."
His comments seem to imply that he believes that the Open Internet Order allows for this, but here's what it says about "pay-for-priority" services from ISPs:
"[B]roadband providers that sought to offer pay-for-priority services would have an incentive to limit the quality of service provided to non-prioritized traffic," the rules state. "For a number of reasons... a commercial arrangement between a broadband provider and a third party to directly or indirectly favor some traffic over other traffic in the broadband Internet access service connection to a subscriber of the broadband provider (i.e. 'pay for priority') would raise significant cause for concern. ... [A]s a general matter, it is unlikely that pay for priority would satisfy the 'no unreasonable discrimination' standard."
Ironically enough, Wheeler said, "we stand for an open Internet" before he made those remarks.
Consumer advocacy groups Public Knowledge and Free Press criticized Wheeler's comments almost immediately after he made them.
"[H]e appeared to endorse the opposite of net neutrality: allowing ISPs to charge websites and services in order to reach that ISP’s subscribers," Public Knowledge VP Michael Weinberg wrote. "In other words, giving ISPs the power to pick winners and losers online. This endorsement was all the more unexpected because it followed his explicit endorsement of 'net neutrality' and a speech that touted the FCC's role in protecting the public interest."
"ISPs should not be allowed to charge some websites or services extra just so those websites and services actually work," Weinberg continued. "ISP subscribers are not hostages to be auctioned off to Web services. There are all sorts of reasons for this but, just to pick one, in order for this type of 'fast lane' to make sense there needs to be a 'slow lane' that is bad enough to make someone like Netflix need to pay to get out of it. And just to pick two, this sort of pricing structure works to freeze out new innovation from companies that cannot afford to outbid incumbents.
Free Press CEO Craig Aaron and Research Director Derek Turner also called out Wheeler's mixed message:
"Say Netflix (which, by the way, is already paying a lot to put its content on the network where you can find it) did cut such a deal with Comcast. Netflix would likely then turn around and raise the prices you pay to cover its costs. But there’s no chance Comcast would lower your monthly bill. It would just line its own pockets. So Wheeler’s vaunted 'two-sided market' just means you end up paying Comcast twice."
"Since the existing market for broadband and cable is already so uncompetitive, any company that wants to reach Comcast’s customers is at its mercy. And the next Netflix out there probably couldn’t afford the new tolls, so it would never have a chance to get into the new priority fast lane."
"Allowing ISPs to charge for prioritization would encourage artificial scarcity, depress competition, harm online innovation, and threaten the very existence of the open Internet."
We'll have more on this story as it develops.