Friday, October 31, 2014

App Providers Should Beware Unintended Consequences of Title II

As much as arcane and esoteric as communications regulatory debates often can be, there is a good reason so much attention gets paid to it. Such rules create the framework that determines who can be in the business, how they can be in the business and to some extent how much money they can make in the business.

There are a few interesting angles to the possible new network neutrality framework the Federal Communications Commission is expected to propose, and a person might be forgiven a bit of uncertainty about whether the proposal will be deemed lawful, whether it is workable and whether the actual outcomes will be as its supporters hope.  

The plan now under consideration would separate broadband into two distinct services, with different rules.

The Internet access business, where ISPs sell connections to the Internet, would be less regulated, using the “information services” framework.

But the “back end” relationships between access ISPs and content providers would be regulated as a common carrier utility service under Title II of the Communications Act.

Some question whether the FCC has authority to regulate in that manner, so any such move would immediately be met with legal challenges. At least in part, that line of reasoning is based on Commission precedent.

The FCC has found, on four separate occasions, that broadband Internet access providers do not offer a common-carrier telecommunications service, and instead offer an integrated information service exempt from common-carrier regulation under Title II, Verizon argues.

Though some support Title II regulation as a way of preventing “paid prioritization” of consumer apps delivered by access ISPs to end users, Title II might ironically create new payments by those same app providers to access ISPs (which would become the functional equivalent of terminating carriers), it would seem.

In other words,  such “back end” regulation under Title II could lead to interconnection tariffs that reflect carrier interconnection principles, namely that imbalances in traffic exchanged trigger payments to the traffic receiving carriers by the traffic delivering carriers.

One of the clear features of network interconnection under Title II are termination payments made to network operators who deliver traffic.

Presumably the FCC already is thinking about how its new rules for interconnection would obviate the traditional traffic-based payments, but how that could be done is not clear.

Also, the new rules would essentially acknowledge that retail ISPS now act as “content delivery networks” for application and content providers.

The irony is that content and app providers have vocally opposed the notion that ISPs act in that manner, in the sense of accelerating content delivery, a service Akamai and other content delivery networks routinely provide.

Still, the new rules would be based on the principle that the key feature of the modern Internet is that it has become a content distribution vehicle.

“We ask the FCC to recognize that technological evolution has led to two distinct relationships in the last mile of the network: the current one, between an ISP and an end user, which is unchanged, plus a “remote delivery” service offered by an ISP to an edge provider...connecting the provider to all of the ISP’s end users,” argued Chris Riley, Mozilla senior policy engineer.
“Edge providers” are app providers, essentially, though the term can include any consumer hosting a server or a backbone network as well.
The idea of bifurcated regulation, essentially categorizing end user retail Internet access as a more lightly regulated information service, while “back end” interconnections between access ISPs and content or app networks would be considered “common carrier” or regulated services, initially was proposed by Mozilla.

Unintended consequences occur all the time. If the FCC bifurcated Title II proposal is adopted, and if it withstands legal challenge, app provider ISPs might wind up paying new sums to access ISPs, even if that was not foreseen.

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