FCC considers new net neutrality rules

The battle for streaming content seems to be heating up. Amazon is planning a partnership with HBO; Yahoo is looking for TV shows, and Aereo is pulling network TV out of the air and offering it online. Now, the Federal Communications Commission is considering new rules on how the Internet is accessed.

The Wall Street Journal had this story by Gautham Nagesh:

Regulators are proposing new rules on Internet traffic that would allow broadband providers to charge companies a premium for access to their fastest lanes.

The Federal Communications Commission plans to put forth its new rules on Thursday. The proposal marks the FCC’s third attempt at enforcing “net neutrality”—the concept that all Internet traffic should be treated equally.

Developed by FCC Chairman Tom Wheeler, the proposal is an effort to prevent broadband Internet providers such as Comcast Corp., Verizon Communications Inc., and Time Warner Cable from blocking or slowing down individual websites served up to the consumer. The idea is that consumers should be able to access whatever content they choose, not the content chosen by the broadband provider.

But it would also allow providers to give preferential treatment to traffic from some content providers, as long as such arrangements are available on “commercially reasonable” terms for all interested content companies. Whether the terms are commercially reasonable would be decided by the FCC on a case-by-case basis.

This latest plan is likely to be viewed as an effort to find a middle ground, as the FCC has been caught between its promise to keep the Internet open and broadband providers’ desire to explore new business models in a fast-changing marketplace. It likely won’t satisfy everyone, however. Some advocates of an open Internet argue that preferential treatment for some content companies inevitably will result in discriminatory treatment for others.

Todd Shields detailed for Bloomberg which large companies are likely going to have to pay more for faster connections:

Connection agreements like one Netflix Inc. struck with leading cable provider Comcast Corp. (CMCSA) in February aren’t considered to be among issues to be addressed by open-Internet rules, Wheeler said at a March 31 news conference. Netflix agreed to pay Comcast millions of dollars annually for more-direct connections that ensure improved speed and reliability for its video service.

Netflix Chief Executive Officer Reed Hastings in March criticized Comcast, Verizon Communications Inc. (VZ) and others for trying to charge online TV providers to deliver shows over their networks. Hastings called for rules that would prevent Internet service providers from extracting a toll to deliver shows such as “House of Cards” over their networks.

Time’s Sam Gustin ran a story that said people are angered by the new rules:

The proposed rules, which are being circulated among the five FCC commissioners, come three months after a federal court struck down the agency’s 2010 Open Internet Order. After details of the proposal leaked out Wednesday evening, net neutrality advocates reacted with anger, with some claiming the new rules threaten the Internet’s traditionally free and open culture.

Under the FCC’s new plan, Internet service providers like Comcast and AT&T “would be required to offer a baseline level of service to their subscribers,” according to a FCC spokesperson. The companies would also be prohibited from blocking or discriminating against online content, but they would be allowed to strike special deals with Internet companies like Netflix or Skype for preferential treatment, as long as they acted in a “commercially reasonable manner subject to review on a case-by-case basis.”

Net neutrality advocates argue that Internet startups might not be able to afford to pay for such special treatment, potentially stifling innovation on the Internet, which has spawned one of the greatest periods of technological development in U.S. history, generating hundreds of billions of dollars in economic growth.

“The FCC is inviting ISPs to pick winners and losers online,” Michael Weinberg, vice president at Public Knowledge, a D.C.-based consumer advocacy group, said in a statement. “This is not net neutrality. This standard allows ISPs to impose a new price of entry for innovation on the Internet.”

Net neutrality was enshrined in the FCC’s 2010 Open Internet order, which required Internet service providers to be transparent about how they handle network congestion, prohibited them from blocking traffic such as Skype or Netflix on wired networks, and barred them from discriminating against such services by putting them into an Internet “slow lane” in order to benefit their own competing services.

The New York Times story by Ravi Somaiya showed that it’s possible paying more for broadband may not matter since content is king with Amazon and HBO striking a deal worth $300 million:

Amazon will stream a selection of HBO series, mini-series and original movies as part of its Prime subscription service, the latest alliance between technology and entertainment companies trying to capture viewers who are moving online.

The deal, announced on Wednesday, deepens the commitment of Amazon and its chief, Jeffrey P. Bezos, to the tough but potentially lucrative television market, while escalating its competition with Netflix and other competitors offering programming over the Internet.

Beginning May 21, Amazon Prime members will have access to older HBO shows like “The Sopranos” and “The Wire,” and mini-series like “Band of Brothers” and “Angels in America.” Some seasons of current series, like “True Blood,” will also be available.

It is the first time HBO is making its licensed content available to online consumers outside of the traditional pay TV business.

It’s no secret that content is the wave of the future and that every company with an online presence is vying to win viewers online and on their mobile devices. The new FCC rules could be a huge barrier to start-ups and other small businesses. Are we simply cementing the companies that will succeed in the future by giving them faster access? Amazon can certainly afford it, but what about the next Mark Zuckerberg?