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Fast Lanes are Dead: Long Live the Fast Lanes

March 25, 2015, 2:21 p.m.
Eric Abbruzzese, Principal Analyst

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The FCC passed net neutrality regulation using Title II, a strict—and more consumer-friendly—legislative option. Whether nudged in that direction after President Obama “suggested” Title II was the way to go, or the FCC arrived at the final legislature unbiased, is neither here nor there. The regulations are in the final stages of approval, and will be officially active 60 days after being published in the Federal Register. That didn’t stop the lawsuits from coming, however; while it’s likely too early to take seriously any lawsuits (the FCC has all but guaranteed they will be thrown out to be appealed at a later date), there is also plenty of time for Congress to get involved and enact their own changes.

The FCC tried to make their net neutrality legislation simple, by breaking it down into three concise statements:

  1. No Fast Lanes
  2. No Paid Prioritization
  3. No blocking of legal content

It’s never as simple as it seems, though. Those three promises necessitated 400 pages of legalese, which was unreleased leading up to, at the time of, and even for a month after, being voted on. Commissioner Wheeler ensured everyone that the legislation supported these three pillars, and provisions were in place for any unexpected future situations; in fact, one of the strengths of Title II legislation over the earlier-preferred Section 706 is specificity and robustness, something consumers hoped would help ensure those three promises going forward.

A month has passed since the legislation was passed, and companies are already trying to find exploits in the regulations. HBO, Showtime, and Sony have been speaking with ISPs, hoping to leverage a possible loophole to create fast lanes for their OTT video products. This loophole comes down to the definition of “specialized services”, and how traffic for specialized services can be treated differently to other internet traffic. Specialized services are categorized as services that “do not go over the public Internet” and offer “narrow” internet access, which could include IP voice services or remote health devices. These are sometimes known as managed services, as the ISPs are able to manage Quality of Service over the network through bandwidth monitoring and congestion rerouting (and why latency-bound services could be treated differently).  These OTT video companies are trying to exploit this situation by being bundled with ISP offerings, which could then classify these products as specialized services with “narrow” access, and allow for a fast lane to be established.

We predicted this possibility in our Net Neutrality report, before Obama’s announcement and before the FCC outlined their plans: “Strict net neutrality would actually favor ISP-owned video services over third-party services (such as Netflix) because they can provide a QoS guarantee, while service providers such as Netflix would not be able to. ABI Research expects strict net neutrality to put ISPs in a position to significantly extend their managed video services with a wealth of wholesale relationships in order to offer managed quality of service (YouTube, Netflix, and Hulu sold through the operator as a managed QoS portion of a video programming service).”

In this case, it’s HBO, Showtime, and Sony that have (so far) expressed interest in the matter. YouTube, Netflix, and Hulu could follow suit depending on how the situation plays out, along with any other OTT service with a potentially significant user base. One thing to consider is that this move goes against most of what net neutrality stands for, so anyone who tries to join in likely will be labeled “anti-neutrality” by consumers. Most ISPs are already dangerously treading this line, and Netflix has shown its own hesitations as well. Smoother services, at the risk of being labeled-anti-neutrality, could be enticing to those companies.

This situation highlights that, even though the FCC assured us that any current and future neutrality concerns are covered in the legislation, the broadband market is complex and ever-changing. Even with the most all-encompassing and well-written legislation, difficult and unpredictable situations arise. It’s not likely that the FCC will sit idly by while these plans play out, however. If not explicitly banned in the legislation, the FCC could leverage the General Conduct rule to put a stop to it: that is, if they feel it’s necessary. Since it’s generally accepted that these plans go against the intent of net neutrality, the FCC would be remiss not taking action, and passivity could tarnish the public’s faith in the committee going forward. Considering the power the FCC holds under the new regulations, it would be nice to trust the agency to make the appropriate decisions, in line with their philosophies, as new circumstances arise. An unpredictable governing body is dangerous not only to the public’s best interests, but to the companies involved as well.

I'm sure this is just the beginning of more major events regarding net neutrality. Whether it's continued lawsuits, regulation amendments, or entirely new legislation from other bodies, the neutrality space will continue to change. How the wireless market will be affected is a concern as well, and one that has been so far overshadowed by the wired broadband happenings. It all adds up to an interesting, albeit messy and confusing, situation to follow.