Results tagged “content delivery”

May 11, 2015 11:25 AM

Does the FCC Understand ISP Incentives?

In its recent Net Neutrality/Broadband Reclassification Order, the FCC justifies the need for the Order's pervasive regulations in essentially one statement, "broadband providers (including mobile broadband providers) have the economic incentives and technical ability to engage in practices that . . . harm[] other network providers, edge providers, and end users."  Order ¶ 78.  The Commission's discussion of the ISPs' incentives/ability to harm consumers and other market participants is almost as conclusory.

The FCC appeared focused on a result that required it to presume an uncompetitive broadband market.  Supporting its premise, the FCC relies on citations from its 2010 Order, and some gerrymandered market shares, in which it defines "markets" by arbitrary selections of speed vs. consumer demand substitution.  See, e.g., Order, n. 134.  By ignoring broadband market performance, the Commission not only failed to understand that ISPs were unlikely to be the problem, but the FCC also missed a chance to conduct a more circumspect analysis of whether consumers could truly access the content of their choice online.

The FCC Didn't Consider Broadband Market Performance

The FCC states that, "[b]roadband providers may seek to gain economic advantages by favoring their own or affiliated content over other third-party sources." Order ¶ 82.  The Commission offers less than a handful of specific examples ISPs "act[ing] to harm the open Internet." Order, n. 123.  

Only in the Madison River example, was the ISP clearly seeking to favor its own service (long distance voice termination).  It is worth noting, though, that the reason Madison River had an incentive to favor its circuit switched voice was because--as a rural ILEC--the FCC set Madison River's rates well in excess of cost; so its incentive was created by one FCC regulation and then preempted by another (later) FCC regulation.  

Nonetheless, the best indicator of a market is performing competitively is whether it is responding to consumer demand by adding capacity, or whether it simply raises prices and takes more profits.  Broadband speeds have consistently moved higher, actually following  the Moore's Law trajectory.  And, the Commission notes, broadband capital investment reached levels in 2013 that had previously only been seen during the telecom bubble.  Order ¶ 2.  Moreover, connected devices, bandwidth speeds, and user adoption of streaming services has soared.  Order ¶ 9.    

The FCC Didn't Consider the Evidence on ISP Incentives

The Commission recognizes that, "the growth of online streaming video services has spurred further evolution of the Internet."  Order at ¶ 9.  But, untethered by evidence to the contrary, the FCC leaps to the [wrong] conclusion that, "these video services directly confront the video businesses of the very companies that supply them broadband access to their customers." Id.

Almost a year ago, AT&T Chairman Randall Stephenson, explained why this theory didn't make sense for most ISPs.  In his prepared testimony for the House and Senate Judiciary Committees about the AT&T's proposed acquisition of DirecTV, Stephenson states its motivation to acquire DirecTV is about trying to earn any profit on TV,

Today, 60 cents of every video dollar we earn goes straight to programmers, before we spend a penny to market our service, install a set top box, send a bill, or answer a customer's call. As a result, our video product is, on its own, unprofitable.  
Statement of Randall Stephenson, CEO and President, AT&T Inc., before the House Judiciary Committee, June 24th 2014 at p. 3 (emphasis added).  Thus, the FCC's theory--that ISPs have an incentive to prevent consumers from accessing video content online, because the ISP would prefer to sell them the same content at a loss to the ISP--is simply untenable.

Even if the ISP does earn a profit on video, it would still not have any incentive to discourage their broadband customers from accessing online video content, unless it earns a greater profit from its  video service than from its broadband service.  This is not the case for Comcast, whose broadband revenues and company profits continue to boom, despite continued losses of video subscribers.     

So, if the FCC's theory doesn't even make sense for the Prince of Darkness, then ISPs are unlikely to be the problem.  But, why don't consumers have access to more content over the Internet?

Traditional Linear Content Owners Don't Have the Same Incentives As ISPs

Even though the three largest streaming video providers (Amazon, Hulu, and Netflix) have expanded their content through original programming, and consumers have embraced online streaming video, the fact is that consumers still don't have access to that many more online programming choices than they did in 2010.  If you compare the most popular streaming sites in 2011, with what's available today, the only significant new entrants are Sling TV and HBO Now.  Unfortunately, cord-cutting is more of a media headline than a consumer phenomenon.

At times, the FCC has seemed to (sort of) recognize the problem. A little over a year ago, Chairman Wheeler was telling broadcasters that he was looking out for them with strong net neutrality protections, and that they should embrace Internet distribution of their programming.  Except for the few broadcast channels that are part of the Sling TV package, the Chairman's speech fell on deaf ears.  Chairman Wheeler didn't seem to appreciate that--because the FCC ensures the broadcasters fat margins on retransmission fees (much like Madison River's terminating access margins)--they have no incentive to expand output!  

Similarly, Chairman Wheeler understood that the linear content market had failed last summer, when he asked the CEO of TWC to resolve disputes between TWC's regional sports network (RSN), which carries the Los Angeles Dodgers, and other MVPDs serving the Dodger's home television market.  Because of pricing disputes, when Chairman Wheeler wrote to TWC, a large majority of Dodgers' fans--4 months into the 2014 baseball season--could still not watch the team on TV.

Chairman Wheeler probably thought he understood TWC's incentives pretty well--the company had a merger with Comcast pending before the Commission--when he asked TWC to respond in a competitive manner to consumer demand.  But, RSNs have powerful economic incentives to restrict output.  Thus, Chairman Wheeler was, again, mistaken about incentives.  TWC's merger with Comcast has come and gone, but 70% of the Los Angeles viewing market still cannot watch the Dodgers on TV or online.   
 
A Question of Incentives

As of Friday, Chairman Wheeler was [still] telling cable ISPs they should "overcome their temptations" to favor their TV businesses over their broadband Internet services.   Meanwhile, in an L.A. Times article yesterday, broadcast programmers candidly noted that, despite using public spectrum to distribute their content, they plan to favor even more of their own content over third party sources.  Perhaps the Chairman was talking to the wrong group?    

By now, you probably understand that I think the FCC would have been wise to spend some time thinking about whether the industries it regulates have incentives that are aligned with consumer welfare.  Had the FCC thought about it, they probably didn't need to impose such pervasive regulations on ISPs.  Likewise, if the FCC's rules are distorting the incentives of traditional TV programmers, then the FCC should eliminate these rules, also. 

On the other hand, what if traditional linear programmers simply like their FCC incentives more than those of the competitive broadband Internet, and are simply in "harvest" mode (restricting output/raising prices in the face of a slow decline in demand)?  Broadcasters aren't (usually) ISPs, so who will police them? 

Certainly not the FCC.  But, to be fair, neither have the DoJ or the FTC looked into the matter.  However, some parties are looking out for consumers . . . and the answer may surprise you.  We'll discuss further in the next post. 






 

December 19, 2014 12:22 PM

The Netflix/Comcast Dispute Pt. 2: Was Netflix Surprised?

As we mentioned yesterday, Section 5 of the FTC Act prohibits companies from engaging in "unfair or deceptive acts or practices."  A lot of the FTC's inquiry focuses how a reasonable consumer would expect to be treated.  Today we'll look at Netflix's contention that, as an OVD, Comcast has an incentive to discriminate against it.  We'll also look at whether Netflix, when it changed its manner of distribution to customers of large ISPs (i.e., most U.S. customers) in 2013, observed ordinary distribution practices for providers of video streaming service.  

If Netflix seems to be the victim of a discriminatory refusal by Comcast to continue to provide uncompensated inbound capacity to Netflix's transit providers (notwithstanding the parties agreed-upon limits of settlement-free capacity), then it couldn't have expected congestion would affect its service. Similarly, if Netflix used normal industry practices for distributing streaming video service, then it could not have foreseen that its service would fail to meet reasonable consumer expectations--and could not have been expected to disclose to these consumers that their grade of service would be below "normal."  

Does Comcast Have an Incentive to Discriminate Against Netflix?

Demonstrating the "incentive/ability to discriminate/exclude" is an essential allegation for any complainant to establish as part of a credible theory of unilateral harm to competition by a dominant firm.  In its Petition to Deny the Comcast-TWC Merger, Netflix attempts to satisfy this element by reciting general statements by the DoJ and FCC to justify settlement conditions in prior mergers.  Netflix recites theoretical statements that an integrated MVPD/ISP (i.e., Comcast) "may" have the incentive discriminate against an OVD.  Netflix seems to be hoping the Commission will assume that it is that hypothetical OVD/discrimination target; and, given that Comcast ("Satan's ISP®") is involved, it's doubtful the FCC will question Netflix's implied victimization.
 
Netflix Service Is a Complement to MVPD Service.  Netflix never directly says that it has been the target of discrimination by Comcast.  Even if we assume that Comcast would--irrationally, according to this GigaOm analysis--favor its lower margin service over its higher margin service (to which Netflix is critical), there is no evidence that Netflix's streaming video service is a substitute for Comcast's subscription video service. 

Instead, all available evidence suggests the contrary--that Netflix offers a complementary service.  Netflix's CEO has said as much, as have the cable companies and satellite companies that want to make Netflix accessible on their set-top boxes, and the large ISPs that offer "free" Netflix service as a marketing tool to attract new customers to their higher tiered services. 

Thus, it is unlikely that Comcast would intentionally degrade such an important complementary service as Netflix, because any devaluation of a complementary service damages the value of the other complementary component (Comcast).  Moreover, if Netflix believed that it was the target of anticompetitive tactics by Comcast, it would not have waited for a merger before complaining to--or filing a complaint with--the FCC or the DoJ. 

Did Netflix Use Reasonable Methods to Deliver Streaming Videos?

Since various parts of the FTC's unfair or deceptive analysis focus on practices that a "reasonable" person might consider unfair or misleading, let's try to get an idea of how other online streaming content is delivered--as the quality of other similar services informs consumers' reasonable expectations regarding online streaming video quality.  Since Netflix's customers noticed that Netflix's congestion-affected service was below their expectations, let's look at how other providers of online streaming video distribute the quality consumers expect of "streaming video service" generally.     

WWE Network.  The same week that Netflix announced its direct interconnection agreement with Comcast, the WWE (World Wrestling Entertainment) launched the WWE Network--a 24/7 online channel broadcast in 720 HD.  Moreover, because the WWE was, for many years, the largest consistent source of MVPD pay-per-view revenues, it would seem that the cable companies would not want to see this content successfully migrate from the MPVD platform to the Internet.

The WWE Network has received generally good reviews with respect to its streaming performance; and no complaints of ISP discrimination have surfaced.  The WWE Network is delivered through a partnership with MLB Advanced Media.  MLBAM, in turn, uses the Akamai and Level 3 CDNs. 

Free Porn.  As the Tony award winning musical, Avenue Q, reminds us (and the FCC is well aware), "[t]he Internet is for porn."   When you stop smirking, consider that many estimate that the volume of adult site traffic is comparable to Netflix's share of Internet traffic. See here, and here.  Moreover, like the WWE Network, the migration of adult videos to the Internet has hurt cable companies' PPV revenues.     
 
Mind Geek is the largest of all streaming adult video providers; its CTO says the company is one of the top 5 consumers of Internet bandwidth in the world.  Mind Geek uses "two of the largest CDNs in the world" to carry its traffic--not that much different from the way Netflix distributed videos (when it cared about congestion).

The "Next Netflix." Every smaller streaming site that I looked at, and which discussed their Internet transit partners, used more transit networks than Netflix.  Many providers that focus on hosting video streaming also offer multiple "CDN-style" server sites at multiple points within major ISP service territories.  See, e.g., Rackspace (9 transit networks & 219 edge locations) and AdultHost.com, which "ensure[s] congestion free" content delivery by: 1) sending packets over the "least congested" route (vs. shortest, like BGP), 2) uses at least 7 different Internet transit networks.    

So, it seems unlikely that Comcast tried to degrade Netflix's traffic by deliberately allowing its transit providers' interconnection points to congest.  Similarly, it doesn't seem like Netflix even used the same standards of distribution that a free porn monopoly provides viewers.  Thus, it was plausible that Netflix knew its customers in Comcast's territory were in for a prolonged period of substandard service.  In the next post, we'll look at the possible implications under the FTC Act. 


***Relevant Facts***

Here is a brief recitation of the relevant facts for purposes of our discussion.  Unless otherwise cited, the facts are taken from the Declaration of Ken Florance http://apps.fcc.gov/ecfs/document/view?id=7521825167 , Netflix's Vice President of Content Delivery, submitted in support of Netflix's Petition to Deny the Comcast-TWC Merger (FCC Docket No. 14-57).

For most of the history of Netflix's streaming video delivery service, Netflix believes that Comcast has required Netflix's third party vendors to pay an additional fee to cover some (or all) of the cost of Netflix-specific capacity augmentation at interconnection points.  Netflix describes 3 instances between 2009 and 2010 where it believes CDNs needed to purchase additional capacity to alleviate congestion issues. Florance Declaration ¶¶ 29-41.

Netflix acknowledges that the volume of its traffic does increase demand for ISP-bound capacity at its vendors' points of interconnection with Comcast.  Moreover, these costs are incremental and specific to the particular point of exchange between Netflix's Internet transit vendor and the ISP.  Florance Declaration at ¶ 46. 

When its traffic was carried on third party CDN networks, Netflix was aware of the costs being incurred on its behalf, but "in the short term Netflix was insulated from a sudden price increase." Florance Declaration at ¶ 39.  While Netflix was using CDNs, its performance over cable systems seemed uniformly better than even on the most advanced telco systems.  http://techblog.netflix.com/2011/01/netflix-performance-on-top-isp-networks.html

While its service was good using 3rd party CDNs, Netflix explains that, "[a]fter the Akamai, Limelight, and Level 3 CDN congestion episodes [2009-2010], Netflix began transitioning its traffic from CDNs (all of whom, we believed, were paying Comcast's new terminating access fee) to transit providers in our continued effort to avoid terminating access fees."  Florance Declaration at ¶ 40.  (dates in brackets added).  Thus, in February, 2012, Netflix signed an agreement with Cogent for Internet transit service.  Cogent began transitioning traffic to Netflix in August 2012.  Florance Declaration ¶ 41.

Based on customer complaints about service quality, Netflix's service deteriorated immediately upon switching to Cogent transit and progressively deteriorated over the next year. Florance, at ¶ 51.  However, beginning in October 2013, Netflix reports a very high level of customer dissatisfaction and cancellations, due to "Netflix's inability to do anything to change the situation."  Florance ¶ 52 (emphasis added).


 
Continue reading The Netflix/Comcast Dispute Pt. 2: Was Netflix Surprised?
December 18, 2014 4:31 PM

The Netflix/Comcast Dispute: Interconnection "Principles" vs. Consumer Rights?

[Note: This is the first post, in a series, in which we'll look at the Netflix/Cogent/Comcast congestion episode from earlier this year.  The focus will be on understanding this event from a different perspective than most of us may have thought about it before.  This series looks further into the question I raised in my last post which is: are existing laws--adequately enforced--sufficient to protect consumers?  For purposes of readability, the full citation of relevant facts has been placed at the end of this post.]

In my last post, I started to look at whether the protracted congestion--and associated consumer service disruptions--caused by the recent Netflix/Cogent/Comcast interconnection dispute indicated that the traditional voluntary agreement structure of the Internet was broken, or whether existing laws might not be enough to prevent protracted consumer disruption.  In a recent article, Prof. Susan Crawford, an advocate for all things Net Neutrality, also highlights the frustrations of customers caught in the middle of the Netflix/Cogent/Comcast dispute,

No federal, state, or local government exercises any oversight over this handful of interconnection points. No Better Business Bureau watches over how your requests for data are being treated.
Prof. Crawford is right to question why consumers got stuck with the short end of this wholesale dispute.  But, I disagree with Prof. Crawford's assumption that new laws--specific to the issue Netflix and Cogent blame for the protracted congestion--are needed. 

As noted in the last post, more specific contracts, and quicker enforcement by wholesale partners are one way to prevent extended periods of consumer frustration.  Similarly, there are also existing laws designed to protect consumers from intentional, or knowing, actions of third parties that prevent consumers from receiving services they believe they are purchasing.

The FTC has expressed concern that it will lose jurisdiction over Net Neutrality-related matters if the FCC decides to reclassify broadband as a Title II service (the FTC Act specifically exempts "common carriers").  Even though I was aware the FTC had asserted jurisdiction to handle Net Neutrality complaints, I didn't really think about the how important the FTC could be. . . until I started looking really closely at the Netflix/Cogent/Comcast congestion episode from earlier this year.   

"It's About the Principle"

When Netflix filed its Petition to Deny the Comcast-TWC merger  in August, I was interested in learning the circumstances that led to Netflix's direct interconnection agreement with Comcast.  I expected to see a pretty basic recitation of how Comcast kept unreasonably increasing interconnection prices, thereby forcing Netflix into lower quality interconnection arrangements.  

Instead, though, the brief spends a lot of time establishing that Netflix's principle--of not paying the ISP any portion of the costs of delivering its content to its customers--was the exclusive factor it relied upon in choosing vendors to deliver its customers' traffic.  The absence of any comparison of various input prices/vendor alternatives available to Netflix seemed odd.  The notion that Netflix was defending a not-purely-economic principle seemed odder still. 

The antitrust analytical framework (which was the ostensible basis for Netflix's opposition to the Comcast-TWC merger) recognizes economic efficiency, and not any unique firm-specific view of how an industry should work.  Yet, Netflix has never indicated that its decisions were based on immediate cost/price effects.  It has even clarified that the costs being imposed by the ISPs are not significant, nor has it raised prices for customers served by the offending ISPs.  See, e.g., this blog post.  Level 3 made the same argument in 2010--that it's not the cost, it's the principle. See this Ars Technica article.   

Prof. Susan Crawford, in the article mentioned above, also observes:

The FCC will find that the money amounts involved in these deals are low at the moment. It's the naked threat posed to the future that is the problem. . . .
The "naked threat posed to the future" may or may not be cause for concern, but--if this threat does not limit the immediate ability of a firm to deliver service--can a firm's reaction to such a threat excuse its performance under its customer contracts?  

It's possible that, for many months at least, Comcast customers (and those of certain other ISPs) were paying for service that Netflix knew to be substandard.  If Netflix failed to take any action to provide the grade of service for which its customers were paying, or to let prospective customers know they would be receiving degraded service for an indeterminate period, then it's possible that enforcement of existing laws might prevent future consumer abuses.    

The Federal Trade Commission Act

Section 5 of the FTC Act prohibits "unfair or deceptive acts or practices" that affect commerce.  An act or practice may be found to be unfair where it "causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition."  See, FTC "Unfairness Statement."  The FTC is likely to find an act or practice to be deceptive if "there is a representation, omission or practice that is likely to mislead the consumer acting reasonably in the circumstances, to the consumer's detriment." FTC Deception Statement

The standards for unfairness and deception are independent of each other. While a specific act or practice may be both unfair and deceptive, the FTC may find a violation of Section 5 if the act or practice is either unfair or deceptive.

In the next post, we'll look at what happened and whether Netflix's 2013 change in the way it delivered content to the country's largest ISPs seemed reasonably calculated to efficiently deliver content to customers, or, if not, whether it seemed designed to promote another goal.  


***Relevant Facts***

Here is a brief recitation of the relevant facts for purposes of our discussion.  Unless otherwise cited, the facts are taken from the Declaration of Ken Florance  , Netflix's Vice President of Content Delivery, submitted in support of Netflix's Petition to Deny the Comcast-TWC Merger (FCC Docket No. 14-57).

For most of the history of Netflix's streaming video delivery service, Netflix believes that Comcast has required Netflix's third party vendors to pay an additional fee to cover some (or all) of the cost of Netflix-specific capacity augmentation at interconnection points.  Netflix describes 3 instances between 2009 and 2010 where it believes CDNs needed to purchase additional capacity to alleviate congestion issues. Florance Declaration ¶¶ 29-41.

Netflix acknowledges that the volume of its traffic does increase demand for ISP-bound capacity at its vendors' points of interconnection with Comcast.  Moreover, these costs are incremental and specific to the particular point of exchange between Netflix's Internet transit vendor and the ISP.  Florance Declaration at ¶ 46.  

When its traffic was carried on third party CDN networks, Netflix was aware of the costs being incurred on its behalf, but "in the short term Netflix was insulated from a sudden price increase." Florance Declaration at ¶ 39.  While Netflix was using CDNs, its performance over cable systems seemed uniformly better than even on the most advanced telco systems. 

While its service was good using 3rd party CDNs, Netflix explains that, "[a]fter the Akamai, Limelight, and Level 3 CDN congestion episodes [2009-2010], Netflix began transitioning its traffic from CDNs (all of whom, we believed, were paying Comcast's new terminating access fee) to transit providers in our continued effort to avoid terminating access fees."  Florance Declaration at ¶ 40.  (dates in brackets added).  Thus, in February, 2012, Netflix signed an agreement with Cogent for Internet transit service.  Cogent began transitioning traffic to Netflix in August 2012.  Florance Declaration ¶ 41.

Based on customer complaints about service quality, Netflix's service deteriorated immediately upon switching to Cogent transit and progressively deteriorated over the next year. Florance, at ¶ 51.  However, beginning in October 2013, Netflix reports a very high level of customer dissatisfaction and cancellations, due to "Netflix's inability to do anything to change the situation."  Florance ¶ 52 (emphasis added).    



Continue reading The Netflix/Comcast Dispute: Interconnection "Principles" vs. Consumer Rights?
February 20, 2014 2:38 PM

3 Reasons Why A Net Neutrality Rulemaking Is A Waste of Time

I was hoping that the Chairman would resist the temptation to open a new net neutrality rulemaking after last month's D.C. Circuit decision overturning most of the FCC's 2010 Open Internet Rules--but he didn't.  The Open Internet Rules were unnecessary when they were adopted, but more importantly, they were a waste of a significant part of Chairman Genachowski's tenure.  

The FCC already has to deal with the devilishly-complex, two stage spectrum incentive auction/reverse-auction.  Similarly, the Commission is already lagging the market in considering what regulatory modifications may be appropriate for consumers in an "all-IP" world.  The Commission is also likely to spend considerable time and resources reviewing the proposed Comcast-Time Warner Cable merger

If the FCC really thought about whether net neutrality rules are even useful, much less necessary, it would quickly conclude that the "terminating access" theory (underpinning the arguments of net neutrality advocates) should probably be left back in the MFJ--where it came from.  Making rules to thwart hypothetical problems is--at best--a distracting waste of time.  But, when the putative rules will affect services that don't presently exist, the danger of real harm becomes much more likely.

Why are net neutrality rules unnecessary, and even potentially harmful to the productivity of the Internet?

1) Contracts.  The Internet did not become "open" by accident.  With the possible exception of P2P traffic, almost every form of traffic carried on the Internet is delivered pursuant to a contract that specifies a guaranteed level of carriage.  

Think about it.  Websites use a type of "ISP" called a web host, usually a data center connected to multiple backbone providers.  If the website will be serving up a lot of traffic to its customers, the website will frequently use a "content delivery network" (CDN) to ensure that it's traffic is delivered in the fastest manner possible.  Many large Internet backbones (like AT&T, Level 3, and Verizon) also provide CDN services.
 
In fact, most large ISPs also provide significant services (hosting, Internet backbone, CDN, and "cloud services" for large enterprise customers) which depend on the assumption that the consumer's ISP will carry the tendered traffic in a non-discriminatory manner.  Any act of website-specific discrimination by an ISP could easily be detected, will likely put that ISP in violation of its peering contracts, and will invite an avalanche of against the offending ISP. 

The bottom line is that--even if an ISP had the ability and the short-term economic incentive to discriminate against another carrier's Internet traffic--the consequences of the discrimination are neither predictable nor quantifiable.  If economics is to be believed, the ISPs are extracting all the revenue the market will bear--further price increases would only reduce profits.

2) The Success of the Internet of Things Might Depend On Discrimination.  Many were surprised when Google paid $3.2 billion last month to acquire smart thermostat company Nest Labs, but this type of service is a critical part of the "Internet of Things."  An energy utility could realize significant benefits by receiving real-time consumption data from households.  If the energy company could anticipate, and alleviate, peak period demand spikes--perhaps by remotely adjusting appliance demand for those customers willing to participate--the company could reduce its costs for expensive peak capacity. 

The value of telemetry depends on the utility getting timely information from a significant number of households, but no one wants to pay for their air conditioner's bandwidth.  However, your appliances--and the energy provider--can tolerate data service that is too slow or jittery to support a latency-sensitive application (like VoIP).  So, if the bandwidth for appliances was cheap enough, there are probably many "win-win" applications that someone other than the Internet subscriber would be willing to subsidize. 

Likewise, those big software updates and gaming patches could be delivered in a way that is cheaper for both the ISP and the consumer, if the provider or the consumer were offered a time of day/de-prioritization option.  Discrimination isn't bad if it's just an option.  But it's an option that "rules" tend to discourage, if not foreclose.

3) The Consumer Can Always Evade Discrimination.  According to Sandvine's data for both the first and second half of 2013, one of the most significant Internet traffic trends over the last year (for fixed and mobile North American networks) has been the growth of "tunneling" traffic.  Tunneling refers to customers using VPNs to obscure their content when accessing the Internet. 

The VPN encrypts the customer's traffic and routes it to a server which assigns a random, or sometimes shared, IP address.  Thus, all of the customer's Internet traffic originates/terminates through an "anonymous" IP address at a server remote from the customer's home computer.  To the ISP, it simply looks like the customer is sending and receiving a lot of non-destination-specific traffic to a smaller number of IP addresses. 

Prior to concerns over privacy, tunneling was most frequently used by consumers for online banking, and employees working from home to access their company's networks.  Whether tunneling will protect your information from the government is unclear, but the existence (and forecasted) growth in tunneling traffic will serve to protect you from hypothetical fears of discrimination by your ISP--even if P2P is your thing.  

So Why Are New Rules Needed?

If the content providers are protected by contracts, consumers can protect their traffic from ISP inspection through encrypted VPN tunnels, and new consumer benefits can be realized from efficient, permissive discrimination, then it wouldn't seem that there's a whole lot to be gained from a proceeding to add to the remaining disclosure rule.  Given the immense opportunity costs of diluting agency focus at this moment, let's hope the chimerical fears of a few do not capture the public's scarce regulatory resources.  The FCC can best protect the Internet by focusing on the IP transition and bringing more wireless spectrum to market.