Okay, so it’s not the Federal Communications Commission (FCC) that’s going to tier the internet so much as they’re going to take a hands off approach to Comcast and Netflix’s latest “give me better service than everyone else” plan to charge you more money for slightly better streaming video. People might recall that I mentioned this back in February and cited the general sentiment among Netflix’s competitors as being basically “this is a terrible idea for business.” Since then, Google, Facebook, Amazon, and, ironically, Netflix have all come out in favor of not allowing ISPs like Comcast to charge them more money for an equal level of service.
What did the FCC think of this appeal on the part of actual businesses? According to the Washington Post, not much.
The Federal Communications Commission on Thursday voted in favor of advancing a proposal that could dramatically reshape the way consumers experience the Internet, opening the possibility of Internet service providers charging Web sites for higher-quality delivery of their content to American consumers.
The plan, approved in a three-to-two vote along party lines, could unleash a new economy on the Web where an Internet service provider such as Verizon would charge a Web site such as Netflix for faster video streaming. The proposal would, though, prohibit telecom firms from outright blocking Web sites.
A Party line vote? I can’t imagine which Party voted which way (the Democrats all voted for this) and that’s ironic considering that the current head of the FCC, the man who wants to see a tiered internet be allowed, is actually an Obama appointee and it’s usually the GOP that’s pro-big business. And to sweeten the pot, FCC Chair Tom Wheeler, like former Fed Secretary of the Treasury Timothy Geithner before him, is a former industry insider and was an actual lobbyist for the cable and wireless industry before being nominated to the FCC. I know, likely just a coincidence that he’s for this.
Why should I care? I know, you may be asking yourself that. Well, aside from the more esoteric and possibly completely abstract-to-you idea that business startups deserve to rise and fall on their merits rather than because they’ve been priced out of the market there’s the simple fact that any cost of making deals with ISPs like Comcast for faster internet will be passed straight to you, the consumer. You already pay, what, $50 bucks a month for a decent connection to the web plus you pay your monthly Netflix subscription costs. Well, now Netflix will have to raise prices in order to make up the cost of paying Comcast for “the fast.” So, what if Hulu wants even faster internet than Netflix? Then Netflix has to pay even more to reach parity with Hulu. Then, as a result of all this additional bandwidth demand, Comcast says they have to start charging you more for your internet connection because they have to build out more capacity.
Do you see where I’m going here? This results in a much worse internet and it will become far more expensive to get entertainment without actually having cable which, I’m sure, is just another happy little coincidence for the ISPs.
So now we wait for 120 days to see what the final verdict on all this will be. This is the commenting period for the proposed FCC plan. What will be the result of this if the FCC’s current plan goes through? Well, if you don’t believe me then let’s ask the FCC from the year 2010 what they think of the idea. Here’s what they had to say:
[I]f permitted to deny access, or charge edge providers for prioritized access to end users, broadband providers may have incentives to allow congestion rather than invest in expanding network capacity.
Broadband providers would be expected to set inefficiently high fees to edge providers because they receive the benefits of those fees but are unlikely to fully account for the detrimental impact on edge providers’ ability and incentive to innovate and invest, including the possibility that some edge providers might exit or decline to enter the market… Moreover, fees for access or prioritized access could trigger an “arms race” within a given edge market segment. If one edge provider pays for access or prioritized access to end users, subscribers may tend to favor that provider’s services, and competing edge providers may feel that they must respond by paying, too.
Fees for access or prioritization to end users could reduce the potential profit that an edge provider would expect to earn from developing new offerings, and thereby reduce edge providers’ incentives to invest and innovate. In the rapidly innovating edge sector, moreover, many new entrants are new or small “garage entrepreneurs,” not large and established firms. These emerging providers are particularly sensitive to barriers to innovation and entry, and may have difficulty obtaining financing if their offerings are subject to being blocked or disadvantaged by one or more of the major broadband providers.
If broadband providers can profitably charge edge providers for prioritized access to end users, they will have an incentive to degrade or decline to increase the quality of the service they provide to non-prioritized traffic. This would increase the gap in quality (such as latency in transmission) between prioritized access and non-prioritized access, induce more edge providers to pay for prioritized access, and allow broadband providers to charge higher prices for prioritized access. Even more damaging, broadband providers might withhold or decline to expand capacity in order to “squeeze” non-prioritized traffic, a strategy that would increase the likelihood of network congestion and confront edge providers with a choice between accepting low-quality transmission or paying fees for prioritized access to end users.
tl;dr The FCC from 2010 said that what the current FCC is trying to do would destroy the internet. Go here for more reasons why that’s true.