What to Expect From the New Net Neutrality Rules

[qi:105] Creating a formalized set of rules around net neutrality and applying them to all networks, a process announced today by Federal Communications Commission Chairman Julius Genachowski, isn’t as threatening a proposition as the major ISPs would have you believe. But the principles of net neutrality, basically allowing any device, any lawful application and any type of traffic to run over networks, won’t affect some of the high-profile consumer issues such as metered broadband or handset exclusivity. So if this doesn’t mean the iPhone will be available on Verizon (s vz), or that Time Warner Cable (s twc) can’t come in and charge customers big bucks for barely broadband, what does it mean?

With the announcement of two new broad policy statements, and the effort to apply all of the broadband policy statements to wired and wireless networks, the FCC hopes to do three things: create a bulletproof set of rules by which it can arbitrate in a quick and efficient manner disputes over traffic blocking and shaping that periodically come up; create one Internet from a regulatory perspective, not one defined by the methods of access technology (which is important because wireless may turn out to be the optimal choice for delivering universal broadband to rural areas); and move the regulatory debate from controlling the fine points of broadband access to ensuring that the Internet remains a platform for innovative ideas and services. As part of that, we stop worrying as much about who has broadband, and make sure that those who have it can do what they want with it regardless of their provider. As Genachowski said in his remarks:

A second reason involves the economic incentives of broadband providers. The great majority of companies that operate our nation’s broadband pipes rely upon revenue from selling phone service, cable TV subscriptions, or both. These services increasingly compete with voice and video products provided over the Internet. The net result is that broadband providers’ rational bottom-line interests may diverge from the broad interests of consumers in competition and choice.

Formalizing these policies is a big win for companies such as Netflix (s nflx), Google (s goog), Skype (s ebay) and Apple (s aapl), which are seeking ways to deliver potentially disruptive and bandwidth-heavy applications into the home. It’s also great for startups that are building businesses on the web. Video and VoIP providers will be the largest beneficiaries of such a move at first because ISPs have actively tried to block those services to protect their own voice and video products. As the FCC initiates the hearings to formalize these policies, ISPs will argue, with video especially, that the traffic loads that video and VoIP put on the network can overload capacity and degrade service for all. Comcast argued this when it defended its decision to block P2P packets last year.

However,  allocating network capacity to meet demand is a real issues for carriers, requiring both constant investment in the infrastructure as well as network management. Genachowski tried to address that capacity issue in his proposal, calling for ISPs to adhere to “reasonable network management” policies. His second principle demanded that those policies be transparent to the user — something we called for in our “Broadband Bill of Rights” last year. For an example of such transparent network management, check out Comcast’s filing with the FCC talking about its network management practices in the wake of the P2P throttling fiasco.

While several organizations representing ISPs have sent out statements applauding the recognition that there’s a need for network management (as well as the FCC’s “data-driven approach” to the proposed hearings), they still question the overall need to “regulate the Internet.” In a panel discussion following Genachowski’s speech, Verizon’s David Young, vice president of Federal Regulatory Affairs, said that the Internet had so far risen to the challenge of providing innovative services without regulation. However, not only is the Internet already regulated in several ways, there is also a big problem in a lack of clear policies.

So far, most network neutrality violations require a technically savvy citizen to become aware that an ISP is blocking a service and complain to the FCC, which then waits to investigate and deliver some sort of redress. It took more than a year for the Comcast P2P blocking issue to be settled — a time frame that could mean the death of a startup. That’s why these proposed rules will benefit startups as well, and why it tilts the balance of power from access to applications. To get a clearer picture of how a formal rule-making and defined net neutrality rules may help, here’s a quick list of stories where access to applications were threatened on a variety of networks.