Internet groups in tricky position over US net neutrality

February 12, 2015 5:17 pm

Internet groups in tricky position over US net neutrality

Richard Waters in San Francisco

Be careful what you wish for. That is the message for companies such as Google and Facebook as US regulators move ahead with a plan to enshrine the idea of an open internet in regulation.

On the face of it, the big internet companies will have scored a significant victory if the Federal Communication Commission votes, as expected, for its new “net neutrality” rules this month. The regime is intended to make sure broadband and other network providers cannot block or otherwise hold internet services to ransom.

Who could take issue with such a noble purpose? Telecoms regulation is not usually the kind of thing to excite much public interest, but this is a cause that has reverberated widely. Populist campaigns like the one waged over net neutrality, however, do not allow for much in the way of nuance.

The problem comes with the form the rules will take. With heavy nudging from the White House, the FCC has opted to repurpose an authority it was given under an old telecoms law, known as Title II, to make it apply to the internet era.

Like all deeply technical issues that become political footballs, it has not been hard for the rival camps to turn this into opposing talking points. Depending on where you stand, it is either bold action to protect an open internet or inappropriately sweeping, utility-style regulation.

What is indisputable is that the legislation the FCC is relying on was designed for circuit-switched telephone networks in a different age. The only way to adapt it to modern times is to suppress certain parts of Title II and implement it piecemeal. The FCC promises a light touch: in particular, it says it will avoid price regulation or any requirements that might force operators to unbundle their networks.

If history is any guide, a challenge in the courts will follow. There is simply too much at stake for the regulations not to be tested. And, as was the case with the last approach to net neutrality, it is not beyond the courts to reject the FCC’s compromise as unduly arbitrary.

This is where things could become dicey for companies such as Google and Facebook. Who knows how some future FCC would interpret its new Title II powers, or whether a court would order a different implementation of the law. Price regulation of the internet’s interconnection agreements would always be a looming threat.

It is not just the impact in the US itself that is at stake. There is also the question of what message US regulators are about to send to the rest of the world. The risk is that Washington will be seen to be giving a nod of approval to the idea of extending traditional telecoms rate regulations to the internet.

Telecoms operators in Europe have argued strenuously for this in the past. They would like to see internet companies forced to pay more to access customers over their networks. The idea has so far failed to carry the day in the international forums where such issues are debated, but could get a new lease of life if the US is perceived to be sanctioning telecom-style regulation of the internet.

Even under the FCC’s current plans, there is a risk that the informal agreements between internet companies and network providers governing the terms on which they connect could be subjected to closer scrutiny. That is unlikely to be welcomed at the likes of Google, which operates one of the largest global networks for carrying internet traffic.

Some business models that favour the internet companies could also be under threat. Ajit Pai, a Republican commissioner on the FCC, claimed this week that the new rules would bar “zero-rating” arrangements. These are the deals under which mobile companies offer access to certain internet services without charging customers’ data plans — a marketing arrangement that keeps mobile fees low but favours zero-rated services over others.

Facebook has used this model extensively to provide subsidised access to its service in the developing world. If the US is seen to question the idea, international challenges may follow.

It is ironic, then, that the internet companies have little choice but to keep their mouths shut and go along with the Obama administration’s approach to net neutrality regulation. The groundswell of public support — and the strong backing from within their own engineering ranks — makes it hard to take a stand that would make them appear to be against the idea. For better or worse, this is one regulatory bandwagon that now seems unstoppable.

Copyright The Financial Times Limited 2015.


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