Immediate Change to ISPs’ Data Policies Seen Unlikely Post-Net Neutrality Ruling

ISPs “aren’t going to make immediate changes because they first want to see what the FCC is going to do,” said Cathy Sloan, vice president-government affairs for the Computer & Communications Industry Association, which is in favor of net neutrality. “You wouldn’t want to commit to any new ways of doing business or new deals unless you were pretty sure that it made sense from both the regulatory and public relations standpoints.” CCIA members, which include ISPs and high-technology companies, “have to care what consumers think and they have to care what the media is going to say about what they're doing,” she said. “I certainly haven’t heard from any of our members that they're going to be doing anything different."

"For now, everyone is going to tread lightly for fear that if they don’t, they risk inflaming a sensitive situation,” said MoffettNathanson analyst Craig Moffett. “No one wants to see [FCC Chairman Tom Wheeler] start to seriously entertain reclassification, so they don’t want to provide any ammunition. Everyone’s also waiting to see if he'll appeal the ruling.” The ISPs are also unlikely to “go out and start blocking anybody,” said Stifel Nicolaus analyst David Kaut. “They all said they wouldn’t, and it would be a real problem if they did. It’s more about what they can do to reap further benefit from their broadband networks.” A Verizon spokesman referred us to the telco’s original statement on its case against the FCC, saying it “speaks for itself -- nothing is changing for consumers.” Verizon said in its original statement that the ruling “will not change consumers’ ability to access and use the Internet as they do now.” AT&T also referred us to its original statement on the ruling. A Sprint spokeswoman said the carrier “has always supported an open Internet for its customers, and the developers and device manufacturers with which it partners, and we do not anticipate changing that support because of the court’s ruling."

The Center for Democracy & Technology doesn’t “expect to see some huge overnight change,” said General Counsel David Sohn. “The real risk is a more gradual evolution towards a less open Internet, that carriers will start experimenting with different types of arrangements that are not the same as what the Internet’s open tradition has been.” Stopping gradual change at the start is important, because CDT believes it will be “a lot harder for policymakers to reverse that after the fact,” he said.

The larger ISPs may be waiting to change policies until a later date if the FCC lacks net neutrality rules and once heightened scrutiny after the court decision recedes from public consciousness, said National Hispanic Media Coalition General Counsel Jessica Gonzalez. Citing the decision, Gonzalez said that at oral argument Verizon said it would explore preferential-traffic deals absent FCC net neutrality rules. “It’s in their business interest” to pursue such arrangements, she said of Verizon. “ISPs would be smart to play it cool” and “abide by net neutrality and not piss anyone off, until they're in the clear again, and make these kind of deals that Verizon alluded to in the oral argument” in September at the D.C. Circuit (CD Sept 10 p1), she said.

Small and mid-sized operators and telcos don’t have enough leverage with major Web companies to sign deals to have websites pay them for faster transmission speeds or other preferential arrangements, to get content to ISP customers better than other traffic, said their associations. Blocking or slowing content delivery to ISP customers also seems unlikely, said executives at the American Cable Association, Independent Telephone and Telecommunications Alliance (ITTA) and NTCA. NCTA and USTelecom, which declined to comment for this story, said when the D.C. Circuit decision was released that their members, which had supported Internet openness, will continue to do so.

Web Players’ Perspective

Some Web players want to test preferential traffic arrangements with ISPs, while others favor FCC reclassification of broadband as a Title II common-carrier service, said CEO Marty Lafferty of the Distributed Computing Industry Association, with members including BitTorrent and Skype, but not parent Microsoft, and Verizon. The tests some DCIA members want would be for an ISP to give a Web provider the option to pay for more reliable and faster service, he said. “We are far from having a consensus view” at DCIA, said Lafferty: “We have parties on both extremes,” with some favoring reclassification and others preferring paid preferential traffic pacts. FCC reclassification is unlikely, ISP associations have said (CD Jan 17 p1).

The Internet Association backs “enforceable rules that ensure an open Internet, free from government control or discriminatory, anticompetitive actions by gatekeepers,” said CEO Michael Beckerman in a written statement Jan. 14 (http://bit.ly/KGAfRu). He said the group will work with the FCC and on Capitol Hill “to protect Internet freedom, foster innovation and economic growth, and empower users.” Amazon, Google, Netflix and Yahoo, among the association’s members, other Internet companies and the association had no comment for this story.

However ISPs treat traffic, “it’s very important to all the stakeholders, and we can see it going in a lot of directions,” said Lafferty of possible broadband provider behavior post-Verizon v. FCC. DCIA members that want reclassification are startups with investors concerned about the lack of rules, he said. “The one guiding principle that we believe we can get traction on among our members” is that Internet traffic delivery and content should be separately owned, which “resolves conflict of interest issues or concerns that have cropped up recently,” said Lafferty: “It doesn’t get rejected out of hand” when he brings it up, and “some people see that as a relief.”

The D.C. Circuit ruling gives ISPs “more flexibility with respect to their arrangements with edge providers,” said Micah Caldwell, vice president-regulatory affairs for mid-sized telco association ITTA. “It’s expected that any steps they take will be consistent with consumer demand,” she said of any traffic arrangements ISPs may eventually pursue. She personally doesn’t expect blocking of ISP subscriber access to any website or slowing of traffic that lacks deals with content providers, although faster speeds for sites with deals could happen. “It all comes down to what consumers want, and doing things that make the Internet experience better for them as well,” said Caldwell. ITTA members include CenturyLink and Frontier Communications, both of which declined to comment. Windstream is “still reviewing the ruling, so it would be premature to speculate,” a spokesman said.

Status Quo or Shifting Battleground?

One reason to expect the ISP status quo for now is that “people are really hot” about net neutrality “and the FCC is watching them closely,” said Gonzalez of NHMC, which backs Title II reclassification. “Notwithstanding the flowery embrace and PR of most of the Internet service providers that I've seen” of Internet openness, “we know what their true intentions are when they're really pressed in court,” she said. That there were net neutrality violations after the FCC’s 2005 guidelines to ISPs means more violations are possible now, said Gonzalez.

Media Institute President Patrick Maines said statements from NCTA and Verizon that “from the consumer’s perspective, things will go on as they did before the Circuit Court’s decision” are “entirely believable.” He cited “the mutuality of interests between the networks and the ISPs, and the history that was made between them even before the net neutrality regulations were enacted.” Telcos have “long operated in a manner consistent” with FCC “Internet freedoms,” said USTelecom CEO Walter McCormick Jan. 14 (http://bit.ly/KGGXGU). “Nothing about today’s decision changes that.” The cable industry “has always embraced the principles of an open Internet and the Court decision will not change that,” said NCTA CEO Michael Powell on Jan. 14 (http://bit.ly/1in3aZJ). “Neither the adoption” of the 2010 net neutrality order, “nor its partial repeal, has led or will lead to significant changes in how ISPs manage their networks,” he said.

NTCA members, “all small businesses serving very small markets,” have “limited market power” to change broadband policies and sign deals with websites, said Michael Romano, senior vice president-policy. Such telcos “would be hard pressed to have a lot of bargaining power with some of the big application providers of the world,” he said. A small number of customers using a lot of bandwidth is an issue NTCA members face, with some of the telcos technically able to bill broadband subscribers for how much data they consume but not having started to do so, said Romano. Big U.S. telcos now may look to change their “business practices,” as did AT&T with its Sponsored Data plan for wireless, which began shortly before the D.C. Circuit ruling (CD Jan 9 p2), he said. “A number of members will watch to see how that plays out” in the wider telecom industry, Romano said, saying he expects NTCA members “to continue to do business as they do today, because it’s the best experience for their customers."

ACA members never considered charging websites for preferential treatment, and have faced what they contend is discrimination by websites wanting to charge them for access by customers for content such as ESPN, said Vice President-Government Affairs Ross Lieberman. “In their businesses, they're the payers, not the payees -- they're the ones being discriminated against,” he said of ACA members. “They're more concerned about the edge providers charging them fees in order for their customers to access websites.” Smaller operators aren’t “sitting and thinking of how they are going to somehow change their business practices as a result” of the court decision, he said. “I don’t think Silicon Valley has anything to worry about when it comes to a small cable provider providing service in rural America."

The “real battleground” is shifting from net neutrality to the application of usage-based pricing models, Moffett said. Wheeler has indicated a willingness to let the wireless carriers experiment with new pricing models like tiered data plans and AT&T’s Sponsored Data plan, he said. “The real question now is whether there will be a significant hue and cry if carriers start to move in the direction of usage-based pricing and whether some ISPs will decide that usage-based pricing on its face is anti-competitive,” Moffett said.

The D.C. Circuit ruling means “there is nothing standing in the way now” for wireline telcos to adopt tiered data or other usage-based plans, Kaut said. “Of course, they're going to be careful that these don’t have what the FCC perceives to be an anti-competitive or anti-consumer effect, since that could stoke the fire for the FCC to react.” It will also be interesting to see how programs like AT&T’s Sponsored Data plan “goes over in terms of all the companies whose data doesn’t get the fast lane,” Sloan said.(jmake@warren-news.com),