February 20, 2014 2:38 PMdecision 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.