Can a network provider treat its customers differently, based on the content of their communications?

The question is not hypothetical.  Consider the following:

  • Comcast, a major cable ISP, concedes that it limits customers’ capacity when they attempt to access certain file-sharing programs.  These include a service used for movie distribution, a potential competitor to Comcast’s cable TV business.
  • Verizon, a wireless phone provider, hinders the transmission of political text messages based solely on their content; it reconsiders, but reserves the right to do the same again in the future.
  • Two major ISPs announce they see nothing wrong with delivering the content of certain websites at faster speeds than others, in exchange for premium payments.
  • Three major wireless carriers limit text messages that customers need for accessing a technology that provides a competing voice service.
  • AT&T signals that it may begin inspecting its customers’ Internet communications in search of copyright violations.
  • Wireless carriers routinely limit the services subscribers can access over their handsets, allowing those acceptable to the carrier and blocking those that compete.

Can They Do That?

Back in the Era of Big, Black Telephones, each of the above actions would have been illegal.  The phone company was simply not allowed to base service decisions on who a subscriber talked to, or on what they said.

From 1935, when the Communications Act took effect, until the mid-1970s, the telephone and telegraph companies held the special status of common carriers.  As such, they could charge only rates that the FCC or the states approved, had to give similar treatment to similar customers, and had to keep the content of communications secret, even from themselves.  In exchange, their rates were set to assure a reasonable profit.  Phone service was pretty good; but some components, particularly long-distance calling, cost a lot more than they do today.

Two developments brought this era to an end.

One was a 1979 FCC decision called "Computer II."  Although the public Internet was still a decade away, engineers had begun interconnecting computers over telephone lines.  The FCC’s problem was how to regulate the new combination of computing and communications.  The elegant solution embodied in Computer II was based on a sharp distinction between the pure transport of information, which remained common carriage, and the creation or modification of information, which the FCC forbore from regulating.  An example from the times:  A telephone subscriber could call an automated service to obtain a weather forecast for any city in the world.  Under Computer II, provision of the weather information was not regulated, but its transport over the phone lines was, just like any other call.  To make sure the phone company did not leverage its ownership of the lines into an information monopoly, the FCC set strict conditions on its entry into businesses that create or modify information.

The phone companies (they become plural in 1984, with the break-up of AT&T) never liked the restrictions of Computer II.  In the 1986 "Computer III" decision, they persuaded the FCC to let them into the information business over their own networks.  In return, they promised to offer their competitors access to the same internal network functionality they used themselves.  The competitors say the phone companies dragged their feet in providing that access, and sometimes misled subscribers into believing that only they could provide services that in fact were also available from competitors.  But all of that is now moot.  In the last few years the FCC has dropped all of the Computer II/III restrictions as to broadband, thus allowing the phone companies to provide information services over their lines while still locking out competitors.

The second key development that undid the old common carrier regime was the emergence of MCI, which in the 1960s set out to compete with AT&T in providing long-distance service over selected, high-traffic routes.  Even then seeing the handwriting on the wall, AT&T dispatched battalions of lawyers to keep MCI from connecting its customers to AT&T’s local phone lines.  But the battalions failed.  MCI flourished.  And once its role as a long-distance competitor was secure, other providers rushed into the market.  With competition in place, the FCC dropped most of the common carrier restrictions on long-distance providers, allowing them to set their own rates and treat their customers pretty much any way they wanted.  A provider that abused the flexibility, the theory went, would lose business to others who charged less and took better care of the customers.

When U.S. cellular service began in 1982, the FCC set up a minimally competitive market and put that, too, outside the traditional common carrier regime.  Within the past few years, the FCC has similarly declared most forms of broadband Internet delivery — DSL, cable, broadband-over-power-line, and wireless — to be non-common-carriage.  The reasoning varies a little for the different platforms, but in all cases relies on the offerings being competitive.

The Current Controversy

Fast-forward to the present.  One small, seemingly innocuous step at a time, the FCC has allowed the same wireless and broadband companies both to create content and to transport it — yet has exempted them from the old rules on uniform rates and non-discrimination.

In principle, an aggrieved customer can simply change providers.  In practice, though, that is not always a practical option.  Many parts of the country offer only one broadband provider, if that; many more have only two.  That may change over the next several years; but in the meantime, a customer dissatisfied with his broadband provider may have limited alternatives.  A wireless customer typically has more choices, but many are tied into a long-term contract by expensive early termination fees.  (The FCC has promised to look into this.)

Non-carrier companies that offer service over the Internet, including some in competition with the carriers, have asked the FCC to impose a requirement of "network neutrality."  Although less demanding than the old common carrier rules, this step would prohibit networks from discriminating among users in certain respects.

After batting off the neutrality requests for a few years, the FCC ten months ago launched a leisurely proceeding to gather information on whether a problem exists, whether new regulations are necessary to combat it, whether the FCC has jurisdiction to impose such regulations, and how various alternative regulatory approaches might affect broadband deployment and other public interest issues.  Given the very broad range of policy questions raised, concrete action is unlikely before the next decade.

The FCC has taken a partial step in the meantime with an "Internet Policy Statement" that assures consumers access to lawful content, free choice of applications and services, the ability to connect their own hardware, and the benefits of competition among providers.  But the document has a number of shortcomings:  it is sparse on specifics, has no enforceable rules, and does not squarely address the abuses that are beginning to emerge.

The public is impatient.  So far, the neutrality inquiry has drawn over 28,000 comments.  Many cite one or more of the incidents listed above; nearly all paraphrase the slogan, "Keep the Internet free!"  More come in every day.

In a belated follow-up, the FCC recently requested public comment on three filings that raise important policy issues:

  • A coalition of eight public interest groups asked the FCC to rule that text messaging is subject to the old common-carrier non-discrimination rules.  Among other things, this would prohibit a carrier from refusing to handle a message based on its content, or because the transmitting party is a competitor.  The filing cites Verizon’s denial of easy-to-use "short codes" for a political message, and several wireless carriers’ doing the same for messages that would otherwise enable wireless subscribers to use a competing service.  Comments are due on February 13; reply comments on March 14.  The FCC public notice is available here.
  • A coalition of six public interest groups and two law professors makes a credible claim that Comcast deliberately blocked file-sharing traffic between users — a service that can be used to deliver video in competition with Comcast’s cable TV service.  The coalition alleges that Comcast sent users forged packets, each constructed to appear that it came from the another user and requesting an end to the communication.  We expect this kind of behavior from hackers, the coalition says, but not from the ISPs that take our money every month.  The coalition asks the FCC to clarify that intentionally degrading a targeted Internet application violates the FCC’s Internet Policy Statement, described above.  Comments are due on February 13; reply comments on February 28.  The public notice is here.
  • A company that distributes lawful, high-quality video over the Internet claims to be a victim of intentional degradation of service by Comcast, and possibly other broadband providers as well.  The company suspects Comcast of deliberately slowing its performance so as to hinder it in competing with traditional cable TV providers (such as Comcast).  The company asks the FCC to go beyond the generalizations in the Internet Policy Statement, and to adopt rules that specifically bar a network operator from discriminating against particular Internet applications, content, or technologies.  Comments are due on February 13; reply comments on February 28.  The public notice is here.

Why Does This Matter?

Before the Internet, no one could reach a wide audience without first persuading a publisher or broadcaster to carry the message.  The Internet changed that.  Now you, and I, and anyone barely able to type can all bring our views to every IP-connected computer in the world.  Of course there is no guarantee that anyone will pay attention.  Each of us has to compete for eyes and ears with every other would-be speaker on the planet.  But to try, we no longer need the approval of am expensively suited executive in New York or Los Angeles.

The actions of ISPs and wireless carriers now threaten that newly won freedom.

A year ago, when the FCC first announced its proceeding on network neutrality, the ISPs scoffed.  No new policy was needed, they insisted, because there had been no claims of discrimination.  The FCC was trying to solve a problem that did not exist.

That argument no longer works.  The three pleadings above make a persuasive case that some ISPs and wireless carriers are attempting to abuse their control over customers’ access in order to stifle legitimate competition and possibly to shape political discourse.  The 28,000 comments filed so far on neutrality issues point to a level of public outrage that the FCC cannot long ignore.