Uncommon Wisdom

Dec 28 2010   3:02PM GMT

The FCC net neutrality order and murky pay-for-priority issues

Tom Nolle Tom Nolle Profile: Tom Nolle

I had a chance to review the full text of the FCC’s Net Neutrality Order (number 10-201 if you’re into the FCC’s numbering system). And while there were no real surprises in the material versus the commentary that was provided in the public meeting, I’m still concerned that the FCC hasn’t created a solid legal foundation for the order, which means that it would be at risk in an appeal.

There are plenty of people on both sides of the issue who say they might appeal the matter, but in truth, it takes some financial resources to fund an appeal process if you’re earnest about getting results. The FCC, as I’ve noted in the past, is holding open the docket on reclassifying broadband under Title II, perhaps to threaten the ISPs (with pockets deep enough to appeal).

Another tactic that the text might reveal is the Commission’s statement that a lot of the key issues like what constitutes traffic management are to be addressed on a case-by-case basis rather than through meticulous details in the order. That means that anyone who wants to dispute something will either have to file for a declaratory ruling or wait to get zapped by the FCC and then make their case—either to the FCC or on appeal.

One thing that seems clear from the order is the policy of the FCC on pay-for-priority systems. What I gather is that such systems would be fine with the FCC if they were initiated by the consumer, but not if they were sold to content providers like Google. What seems to be shaping up here is that if the consumer has a choice to pay for priority handling and that choice is explicit, then it’s probably OK for the content provider to collect the money and pay on the user’s behalf.

If the content provider pays for priority, the issue is a bit murkier. As I noted above, the provider could probably act as a payment agent or intermediary. The FCC also stopped short of saying that there were no conditions under which a provider could pay. That suggests to me that it might allow the content provider to “pay” for premium handling in a bundled content service. The key point here seems to be that if the consumer isn’t paying anything for content (i.e. free Hulu vs. paid Hulu or Netflix), then the prioritization would clearly be paid by the content provider and would clearly be linked with “Internet content” as opposed to being a “specialized service”.

This is the area where appeals to the net neutrality order seem the most likely. An ISP that has no specific content strategy could well offer streaming video players an opportunity to obtain special handling for premium service, as well as offering the consumer subscription premium options. If competitors with their own channelized TV offerings didn’t like this (which they likely would not) then they might appeal to the FCC. Or the ISP that wanted to do the prioritizing might apply for a declaratory ruling. In either case, if the FCC doesn’t go along with the operator on the issue, there’s always the Court of Appeals — and there the uncertainties begin.

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