Internet Metering Coming to the US?

Yesterday, the Federal Communications Commission (FCC) released its latest plan on regulating the Internet to assure Net Neutrality. The plan, among other things, would allow Internet providers to  charge users and content providers for their usage.

As described in FCC Chairman Julius Genachowski's statement (see PDF here):

"The proposed framework also recognizes that broadband providers must have the ability and investment incentives to build out and run their networks. Universal high-speed Internet access is a vital national goal that will require very substantial private sector investment in our 21st century digital infrastructure. For our global competitiveness, and to harness the opportunities of broadband for all Americans, we want world-leading broadband networks in the United States that are both the freest and the fastest in the world."

"To this end, broadband providers need meaningful flexibility to manage their networks -- for example, to deal with traffic that’s harmful to the network or unwanted by users, and to address the effects of congestion. Reasonable network management is an important part of the proposal, recognizing that what is reasonable will take account of the network technology and architecture involved."

"Our work has also demonstrated the importance of business innovation to promote network investment and efficient use of networks, including measures to match price to cost such as usage-based pricing."

In exchange for getting to charge for usage, Internet providers will not be able to block  "lawful content, apps, services, and the connection of non-harmful devices to the network" and there would be no central authority, public or private, who could "have the power to pick which ideas or companies win or lose on the Internet." The FCC would also place a bar on unreasonable discrimination in transmitting lawful network traffic.

Getting a governmental green light on charging for usage and managing traffic on their networks has been a high priority for Internet providers. For instance, there is a major dispute going on between Comcast and Level 3 Communications this past month that will likely be impacted by yesterday's announcement. First, however, a little background.

Level 3, an Internet operator, announced in early November a deal with content provider Netflix to provide streaming video functionality and support.

Part of the Level 3's press release stated that:

"As a result of the deal, Level 3 has accelerated plans to further invest in its CDN [content delivery network] capacity. Level 3 will double its storage capacity and add 2.9 Terabits per second (Tbps) of globally available CDN capacity, which is in addition to the 1.65 Tbps that was deployed in the third quarter of 2010."

Netflix, which allows a person to watch movies and TV over the Net, soon afterwards announced that it was introducing a new stream-online option to Americans for only $7.99 per month, which is what it already does in Canada. Even before this new option, Netflix was said to account for 20% of the US Internet peak evening time traffic.

This past Monday, Level 3 charged that Comcast was going to hit it with a "toll" when Comcast users accessed Netflix. As stated in the Level 3 press release:

"On November 19, 2010, Comcast informed Level 3 that, for the first time, it will demand a recurring fee from Level 3 to transmit Internet online movies and other content to Comcast’s customers who request such content. By taking this action, Comcast is effectively putting up a toll booth at the borders of its broadband Internet access network, enabling it to unilaterally decide how much to charge for content which competes with its own cable TV and Xfinity delivered content. This action by Comcast threatens the open Internet and is a clear abuse of the dominant control that Comcast exerts in broadband access markets as the nation’s largest cable provider."

"On November 22, after being informed by Comcast that its demand for payment was ‘take it or leave it,’ Level 3 agreed to the terms, under protest, in order to ensure customers did not experience any disruptions."

"Level 3 believes Comcast’s current position violates the spirit and letter of the FCC’s proposed Internet Policy principles and other regulations and statutes, as well as Comcast’s previous public statements about favoring an open Internet."

Comcast, of course, fired back, sending a letter to the FCC, which said:

"... despite Level 3's effort to portray its dispute with Comcast as being about an 'open Internet,' it is nothing but a good old-fashioned commercial peering dispute, the kind that Level 3 has found itself in before. Notwithstanding Level 3's claims, this is not about online video, it is not about "paid prioritization,' it does not involve putting 'toll booths' on the Internet, and it is not about net neutrality. Indeed, if anything, it is Level 3 that is seeking 'non-neutral' treatment that would favor its network traffic over those of all its competitors. "

"The dispute between Comcast and Level 3 relates to how Level 3 wants Comcast (and presumably other networks) to treat their new influx of CDN traffic, but it has nothing whatsoever to do with any content, application, or service that Level 3 is transmitting. This concerns only the vast increase in the amount of traffic Level 3 told Comcast that it wants to send to Comcast's network on a 'peering' basis. Given that this will throw traffic between the two networks grossly out of balance, and in keeping with long-established settlement practices on the Internet backbone, Comcast has asked Level 3 to enter into commercial negotiations to achieve a solution that accounts for this new and significant traffic imbalance.

"Despite Level 3's complaints, Comcast is neither resisting carrying Internet video traffic nor imposing new 'tolls' on Internet video traffic. The simple fact is that Comcast terminates huge amounts of online video traffic to our high-speed Internet customers, most of it pursuant to longstanding, mutually acceptable commercial arrangements we have in place with the leading CDN companies. Our customers get access to all the online video they want, along with any other Internet content, application, or service they choose -- regardless of its source. And, regardless of how this dispute turns out, that will continue to be the case."

Level 3 fired back once more, claiming that:

"The fundamental issue is not whether Comcast sends more traffic to Level 3 or whether Level 3 sends more traffic to Comcast. Both Level 3 and Comcast are responding to the requests of Comcast’s subscribers, who want to be free to see and use the full suite of content and applications that are available on the Internet today and in the future. Level 3 wants to assure that freedom is preserved."

"Instead, the fundamental issue is whether Comcast, as the largest cable company in the country with absolute control over access to its cable TV and broadband access subscribers, has the right to unilaterally set a ‘price’ for that access that effectively discriminates against competitors of Comcast’s cable and Xfinity content."

The exchange of press releases and letters pretty much sum up the on-going debate about whether free and unfettered access to the Internet should be allowed, or whether those sending or consuming more bandwidth should be made to pay for it.

I am not an expert in this arena, but I think Comcast now has the upper hand in this dispute given what the FCC is now saying. The only area I can see the FCC intervening is whether Comcast's charges are deemed as being so high as to effectively discriminate against the content Level 3 is providing, i.e., the price is anti-consumer or anti-competitive in nature. That is going to be hard to show, I believe.

I have no doubts, however, that given the FCC's plan yesterday that proposals to meter customer as well as content provider Internet usage, such as that tried by Time Warner Cable last year, will emerge from most of the major US Internet providers in a matter of weeks. Time Warner got stopped when it hit a political backlash - I don't see that happening in the new Congress. 

I hope I am wrong, but I think the days of getting all the content you want over the Internet at a fixed price are soon to be only a memory.

The Internet is dead!! Long live the Internet!!