The Stimulus Package and Network Neutrality

The $7.2 billion set aside to carriers in the recent stimulus bill to aid in broadband construction in underserved areas comes with some serious strings.  Not only does it require carriers to adopt open network provisions and follow the FCC’s legally challenged network neutrality rules, but it also leaves the FCC and NTIA poised to articulate further rules by placing carriers accepting stimulus funds under regulators’ thumbs.

The 2005 network neutrality principles outlined by the FCC are the heart of the hook attached to the stimulus bill.  These principles include four declarations that, on the their own, seem rather toothless.  According to the FCC, consumers are entitled to: (1) access the lawful content of their choice; (2) run applications and services of their choice, subject to the needs of law enforcement; (3) connect to their choice of legal devices that do not harm the network; and (4) competition among network providers, application and service providers, and content providers.  However, last year’s FCC decision in the Comcast dispute may end up demonstrating that these principles, and the FCC as a whole, do have some teeth.  Whether the FCC exceeded its authority in ruling against Comcast is still an issue on appeal and may eventually become the next landmark cyber/telecommunications law decision handed down by the Supreme Court.

What’s interesting about the fourth FCC principle outlined above is that it seems to cut in favor of those against network neutrality.  For instance, Christopher Yoo argues that leaving the issue to the market will lead to the emergence of providers that specialize in particularly high or low bandwidth traffic.  Thus, VoIP, online gaming, and video streaming might be provided by separate BSPs than those that simply provide access to traditional email and websites.  The higher bandwidth services may simply cease to exist under an aggressive form of net neutrality because providers would be unable to allocate the bandwidth necessary to effectively run the programs.

Perhaps what this demonstrates is that the FCC recognizes that articulating proper network neutrality rules is, much like anything, an exercise in balance.  As Timothy Wu points out, there is good and bad discrimination.  Good discrimination is allocating higher bandwidth applications the muscle they need to effectively exist.  Bad discrimination is blocking users’ ability to connect to lawful applications of their choice on the basis that such applications are competitors of another facet of a BSPs enterprise.  The former protects the market for these applications and incentivizes innovation in future technologies.  The latter does the exact opposite by giving BSPs such as Comcast monopolistic powers that serve only their own interests.

Another issue this raises is the FCC’s unclear ancillary jurisdiction.  After the Supreme Court decided National Cable & Telecommunications Association v. Brand X, the FCC was free to label cable internet as an “information service” rather than a “telecommunications service.”  This meant that cable internet providers were not subject to the more invasive regulatory schemes of the 1934 Telecommunications Act and gave the FCC a little more wiggle room under its ancillary jurisdiciton.  But do the strings attached to the broadband stimulus funds make those funds a little less appealing if you’re a BSP?  Would you take the bait if you were a BSP and subject yourself to uncertain future regulation?  The answer will surface in the weeks and months ahead.

Network neutrality proponents are likely feeling confident these days.  The FCC, both houses of Congress, and the President are currently all on their side and we seem to be heading toward a significant policy of net neutrality in the coming months and years.  If we do have neutrality rules, it seems best for them to stem from the FCC and not from Congress.  Technical decisions such as these are better suited for policy makers on the ground.  Yet the Internet’s fate may depend upon the future net neutrality rules that the FCC adopts.  The challenge is to balance the delicate interests and incentives that exist in the marketplace in order to ensure that BSPs, content providers, and end-users all obtain enough of what they want to keep the system running.