[Below is the Introduction and Summary to this latest FSF Perspectives. A PDF version of the complete Perspectives is here.]

 

 

The Open Internet movement began as a means of protecting consumer welfare in cyberspace. The Federal Communications Commission's Internet Policy Statement, first adopted in 2005, emphasized that consumers should have access to the lawful Internet content of their choice, to run applications and use services of their choice, to connect the devices of their choice to the network, and to benefit from competition among broadband and app providers. Then-FCC Chairman Michael Powell introduced these themes at a policy speech in which he emphasized that "empowering consumers" was "critical to unlocking the vast potential of the broadband Internet." Consumer choice originally was, and always should be, the guiding principle for policymakers when determining broadband policy.

 

But a funny thing happened on the path from idea to implementation. The Commission shifted its focus away from consumers and toward edge providers. When President Obama pushed the Commission to reclassify broadband providers as Title II common carriers, he emphasized the need to protect a "level playing field" for edge providers and to reduce barriers for the hypothetical "next Facebook" - themes that are echoed in the Commission's recent net neutrality order. The order emphasizes the risk that broadband providers might interfere anticompetitively in upstream markets for Internet-based content and applications. The Commission explained that rules were necessary because broadband providers have "the economic power to restrict edge-provider traffic and charge for the services they furnish edge providers," which might "reduce the rate of innovation at the edge."

 

While many might assume that, in theory, what's good for Netflix is good for consumers, the reality is more complex. To protect innovation at the edge of the Internet ecosystem, the Commission's sweeping rules reduce the opportunity for consumer-friendly innovation elsewhere, namely by facilities-based broadband providers. Consumers in Chile recently felt the real-world impact of this tradeoff, as that nation's telecommunications regulator applied similar rules to outlaw wireless plans that included free access to selected online services such as Facebook, Wikipedia, or Twitter. These wildly popular plans were aimed at prepaid customers and those with older phones, who could not afford, or otherwise did not want to purchase, a traditional unlimited-access wireless plan. Now, those customers are limited to purchasing a more expensive traditional plan, or none at all. Like the archetypal village in Vietnam, regulators felt they had to destroy consumer choice in order to save it.

 

Thus the Open Internet order allows the FCC to deprive consumers of services they want, in order to protect edge provider markets. Advocates have asked the agency to do just that with regard to two related policy issues: usage-based pricing and zero-rated services. Despite strong arguments that these alternative business models can enhance competition and consumer choice, many net neutrality advocates nevertheless have called for rules prohibiting these practices and limiting consumers to a homogenous "dumb pipe" broadband service. Ominously, the FCC has responded with inquiries targeting AT&T's Sponsored Data and Data Perks, T-Mobile's Binge On, and Comcast's Stream TV programs for further scrutiny. While Chairman Tom Wheeler has stated that these inquiries do not constitute an "investigation" or "an enforcement," they nonetheless are likely to put a damper on Internet providers' efforts to meet evolving consumer demand though zero-rating and sponsored data programs. The Commission's next steps in this inquiry, and its response to advocates' continuing pressure to impose a uniform "dumb pipe" model on the broadband industry, may determine how far the agency will go to sacrifice consumer choice out of fear that consumer preferences may somehow harm Internet-based edge provider companies.