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Chairman Wheeler endorsed both two-sided markets and net neutrality. There seems to be a conflict.
Yesterday, new FCC Chairman Tom Wheeler delivered his first formal public address. After a prepared speech that explained his regulatory approach, he moved to a Q&A session. In that session, he appeared to endorse the opposite of net neutrality: allowing ISPs to charge websites and services in order to reach that ISP’s subscribers. 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. What is going on here?
Chairman Wheeler was asked about “data hogs” and if it was reasonable for people who value the internet more to pay more for access (which, of course, already happens) (video here, question starts at around 34:10). At first, he talked about how the market was evolving:
“I think that we’re seeing the market evolve in such a way that there will be variations in pricing, there will be variations in service and, as I said, I’m a firm believer in the market.”
But then he started talking about two-sided markets:
“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 might receive, the best possible transmission of this movie.’ I think we want to let those kinds of things evolve …”
This is, of course, exactly the type of market that net neutrality is designed to prevent. ISPs should not be allowed to charge some websites or services extra just so those websites and services actually work. 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.
Finally, Chairman Wheeler’s response talked about the importance of watching what happens:
“… and we want to observe what happens from that and then 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 that the functionality of a competitive marketplace dictates the degree of regulation.”
Which, as far as it goes, makes sense. If you are regulating a market it is important to observe and make decisions based on those observations. This is especially important if you think, as Chairman Wheeler asserted in his speech, that regulation should be influenced by the amount of competition in the market.
Unfortunately, up until now the FCC has been largely uninterested in making those observations. For years, Public Knowledge and our allies have been asking the FCC to collect the most basic possible information about data caps but have been met with silence. Similarly, the structure of things that influence the practical functionality of the network, such as interconnection agreements, remain highly opaque.
In light of this, it is time for Chairman Wheeler to clarify his position. His remarks could possibly be interepreted as endorsing CDNs instead of net neutrality violations. If so, he needs to make it clear that he does not support ISPs charging to access their subscribers. More importantly, he claims to support an open internet – but what does that mean to him? If his “open internet” allows ISPs to charge websites and services to access subscribers, he may need to find another term. Why shouldn’t we be worried about ISPs charging websites and services in order to make those sites and services work correctly? If we should be concerned, what is the FCC doing to prevent such a market from developing?
And regardless of the answers to those questions, when is the FCC going to start doing the observing that is so important to decisionmaking? When will it start asking questions about data caps and other practices that influence key regulatory decisions?
These are important questions that need to be answered soon. If Chairman Wheeler’s version of net neutrality is different from everyone else’s version of net neutrality, we need to know that sooner rather than later.