Doug Brake

The Federal Communications Commission’s recent proposal to impose a sweeping new privacy regime on broadband Internet services has sparked debate over whether or to what extent providers should be able to offer discounts in exchange for permission to use consumer data commercially.

Critics decry the concept as “pay-for-privacy” and argue it ought to be banned, even when the data is anonymized. But the truth is prohibiting price differentiation would hurt consumers and slow broadband adoption. This type of price differentiation based on exchange of consumer information is an incredibly common cornerstone of online activity. The gathering of user-information allows many online services to be made available for free. Consumers benefit this arrangement, and many would gladly choose a discount in the context of broadband access as well, even if it doesn’t make the service completely free. Consumers privacy preference vary considerably, but can be placed into three general categories: privacy fundamentalists, who guard their privacy carefully; those unconcerned about their privacy; and the largest group, the privacy pragmatists, who are willing to share their personal data in exchange for benefits. Advocates calling for a ban on financial inducements to share broadband data speak only for the fundamentalists. A prohibition would adversely affect the great majority of U.S. citizens willing to consider the tradeoffs involved in sharing their data, especially when direct savings are involved. These advocates seek to deny consumers choice in the matter, and based on unfounded hypotheticals.

The FCC should recognize that privacy-based discounts clearly have the potential to benefit consumers and refrain from limiting the use of this practice by broadband providers.

[Commentary] Free Press and the like have done their best to paint Sec 706 authority as somehow anti-net neutrality and Title II as the only “real” network neutrality and unfortunately much of the popular media has taken up this view. But just because they have convinced John Oliver does not mean it is established fact that Title II is the only way to get strong net neutrality rules that protect the open Internet. Everyone (Federal Communications Commission Chairman Tom Wheeler included) supports an open Internet whereby, in President Barack Obama’s words, the “next Google or the next Facebook can succeed.” There is no way such a statement can be read as an endorsement of the extreme step to Title II. Vague statements in support of the open Internet have no bearing on the jurisdictional hook the FCC should use.

[Commentary] Internet interconnection usually doesn’t make for big news. At an event hosted by the Congressional Internet Caucus Advisory Committee, David Clark, noted Internet engineer and MIT researcher, presented preliminary results from a joint MIT -- University of California at San Diego study on the causes and locations of congestion within the core of the Internet.

The researchers were cautious and reiterated that their results are preliminary, but the conclusions of their abstract read as follows:

• Our data does not reveal a widespread congestion problem among the US providers.
• Most congestion we see can be attributed to recognized business issues, such as interconnection disputes involving Netflix. These issues are being resolved, if slowly.
• Congestion does not always arise over time, but can come and go essentially overnight as a result of network reconfiguration and decisions by content providers as to how to route content.

There are some key take-aways from this new data.

First, it is worth noting the point made in Dr Clark’s presentation that there are numerous reasons a broadband user could have a frustrating experience with their broadband, and interconnection congestion is only one of them.

More importantly, congestion in the core of the network is rare and where it does occur it is because of real disparities between capacity and demand and not problems with the technology.

One arrangement that likely makes the most economic sense for a service that uses extreme amounts of bandwidth like Netflix would be to directly interconnect with last-mile networks. Direct interconnection would likely lower their costs and certainly improve their customer’s experience. Note that this is exactly what Netflix did.

Below we correct a number of key misunderstandings that continue to persist about proposed network neutrality rules despite Federal Communications Commission Chairman Tom Wheeler’s clarifications.

• Internet “Throttling” -- There is no reason to think that broadband ISPs have any interest in actively slowing Internet traffic, and even less reason to think such a practice would be allowed under the proposed rules. “Pay-to-play” would not be allowed -- no one would have to pay a fee in order to get their content or service to consumers. What would be allowed is “pay-to-improve” -- under these proposed rules, Internet services would only be allowed to get better, not worse.
• Prioritized Content -- Many reports indicate that ISPs will require payment for access to their “fast-lanes” and any type of traffic that gets stuck in the “slow-lane” will suffer. This is inaccurate. The vast majority of Internet traffic will not have a need to be prioritized and will continue to enjoy the current “best efforts” Internet.
• Favoring some traffic means shunting other traffic to the slow lane. The past and present Internet treats all packets the same. Advocates of net neutrality stress, correctly, that differentiated Type of Service, a piece of information within each packet that could enable the network to know what type of application the packet is for, has not been a major element, in practice, of carriage agreements among network operators.
• Consumer Harm. Again, if ISPs were found to be abusing these rules to hurt consumers, the rules would be very clearly designed to give the FCC authority to step in and stop any business practice that would actually hurt consumers or competition.
• Squash Innovation -- The types of prioritization arrangements that would pass muster under a “commercially reasonable” test would be overwhelmingly welfare maximizing, potentially unlocking totally new services.
• The complaint process will be arduous --The Commission would probably want to handle complaints internally. Furthermore, with sharp glare of the media spotlight and millions of consumers concerned about these issues, legitimate grievances will surface very quickly and demand swift resolution.
• Better to go back to Title II -- Rather than accept innovation in the core network, opponents of the rule would like to ban it, returning broadband to Title II classification. Title II classification would necessitate an abandonment of inter-modal competition and force providers into an arcane rate setting process inevitably reducing investment in our networks and the potential for innovative new broadband technologies. Moreover, Title II would likely be worse at protecting consumers from anti-competitive practices than the proposed rule.