Testing the Limits of Net Neutrality Rules

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November 24th, 2015

In the past few weeks we’ve seen both a wireless and wireline carrier launch new “zero rating” video streaming services that test the boundaries of the FCC’s net neutrality policy: T-Mobile’s Binge On and Comcast’s Stream TV.

According to published reports, FCC chairman Tom Wheeler has praised Binge On as “highly innovative” and “highly competitive,” while also noting that the Commission will continue to monitor the service under its “general conduct” rule. According to Ars Technica, an FCC spokesperson declined comment on Comcast’s Stream TV, which does not count against the company’s data caps.

The FCC’s reported response to the two services is not too surprising. While they share some similarities, they are also different in key respects. Among the differences that come initially to mind are:

In a blog post, Public Knowledge senior staff attorney John Bergmayer argues that Stream TV is subject to and violates the FCC’s Open Internet order as well as the consent decree Comcast agreed to as part of its NBC Universal acquisition. I’d recommend reading the post in full for anyone wanting a preview of legal arguments to be made in more formal channels by Public Knowledge and others likely to challenge Stream TV before the FCC and the courts.

According to Bergmayer:

Comcast maintains that “Stream TV is a cable streaming service delivered over Comcast’s cable system, not over the Internet.” But Stream TV is being delivered to Comcast broadband customers over their broadband connections, and is accessible on Internet-connected devices (that is, not just through a cable box). From a user’s perspective, it is identical to any other Internet service. Comcast’s argument is that if it offers its service only to Comcast customers and locates the servers that provide Stream TV on its own property, connected to its own network, that this exempts it from the Open Internet rules. This is an absurd position that would permit Comcast to discriminate in favor of any of its own services, and flies in the face of the Open Internet rules…

[I]t does not appear that Stream TV is an IP service like facilities-based VoIP. It is not available standalone; you need a broadband Internet access connection to access it. It is thus readily distinguishable from services like facilities-based VoIP. If Comcast offered Stream TV separately from broadband there would be a better case that it was more like traditional cable TV or a specialized service–but it does not.

Bergmayer also reviews some relevant language from Comcast’s NBC Universal consent decree, including:

“Comcast shall not offer a Specialized Service that is substantially or entirely comprised of Defendants’ affiliated content,” and…”[if] Comcast offers any Specialized Service that makes content from one or more third parties available … [it] shall allow any other comparable Person to be included in a similar Specialized Service on a nondiscriminatory basis.”

In an article in Multichannel News, Jeff Baumgartner previews what may be a core element of Comcast’s legal argument defending Stream TV:

“Stream TV is an in-home IP-cable service delivered over Comcast’s cable network, not over the public Internet,” Comcast said in a statement issued Thursday, the same day it launched Stream TV to its second market – Chicago. “IP-cable is not an ‘over-the-top’ streaming video service. Stream enables customers to enjoy their cable TV service on mobile devices in the home delivered over the managed cable network, without the need for additional equipment, like a traditional set-top-box.”

The FCC does address the idea in rules released in December 2014, which explain that “an entity that delivers cable services via IP is a cable operator to the extent it delivers those services as managed video services over its own facilities and within its footprint…IP-based service provided by a cable operator over its facilities and within its footprint must be regulated as a cable service not only because it is compelled by the statutory definitions; it is also good policy, as it ensures that cable operators will continue to be subject to the pro-competitive, consumer-focused regulations that apply to cable even if they provide their services via IP.”

In his blog post Bergmayer cites language from the Commission’s Open Internet order related to the provision of “Non-Broadband Internet Access Service Data Services.” In my view, a key sentence in that section of the order is “The Commission expressly reserves the authority to take action if a service is, in fact, providing the functional equivalent of broadband Internet access service or is being used to evade the open Internet rules.” On the face of it, I’m inclined to agree with Bergmayer that this appears to be the case with Comcast’s Stream TV, when coupled with its data cap policies and the reality of Comcast’s multifaceted market power in both distribution and content.

And, more generally, I think Bergmayer is correct that “Comcast’s program raises a host of issues under the Open Internet rules, the consent decree, and—most importantly—general principles of competition.”

The fact that Comcast is testing the bounds of the Commission’s new rules is not surprising, given its focus on maximizing shareholder value within a set of interrelated and dynamic markets in which it enjoys substantial market power, but faces significant challenges to its traditional revenue streams and growth prospects. In fact, I view it as helpful that Comcast is moving fairly quickly in this direction, since it is likely to force the FCC and the Courts to revisit yet again the question of how to craft communication policy that serves the public interest in the Internet age.

And, with the Commission having classified broadband access as a Title II service, my hope is that any court review of FCC action responding to Stream TV or similar services will consider substantive policy arguments (e.g., related to competition and the public interest) rather than simply ruling that the Commission cannot impose net neutrality rules absent a Title II classification of broadband access (which seemed to be the central message of the most recent DC Circuit Court ruling).

We are clearly moving into a world where the central element of our once heavily (and often clumsily) siloed communication infrastructure and policy (and arguably our economy and society as a whole) is IP connectivity. Though some believe the FCC has outlived its usefulness in that world, my own preference—at least for now—is that the Commission retain sufficient tools and authority to continue serving as the specialized regulatory agency responsible for setting ground rules that help ensure that the public interest is well served during and after this historic and vitally important transition from yesterday’s communication technology and industry structure to tomorrow’s.

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