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Comcast/Netflix Deal Adds Twist to Neutrality Regs

26 Feb, 2014 By: Doug McPherson

WASHINGTON – Last month, a federal appeals court invalidated the Federal Communication Commission’s (FCC) 2010 net neutrality rules that prohibited Internet providers from prioritizing content. Last week, the FCC said it was moving forward with a plan to stop broadband carriers from blocking or degrading traffic.

Then on Sunday, the Wall Street Journal reported that Netflix agreed to pay Comcast to ensure that its movies and TV shows stream more quickly, something analysts say is the latest evidence of a shift in the balance of power in favor of Internet service providers and the likelihood of rising prices for consumers.

Wayne Friedman, a writer with MediaPost News, writes, “What has not been determined is whether the Comcast-Netflix deal violates the FCC’s ‘net neutrality’ rules where all content providers should get equal and free access to consumers.”

Friedman adds, “By having a direct connection to its consumers, Netflix eliminates middlemen that control and carry traffic to Comcast. No financial details were disclosed, but reports suggest the deal could be worth several million dollars.”

Netflix has 33 million U.S. subscribers, and analysts say at times it can account for nearly 30 percent of all U.S. broadband traffic. Some analysts now worry that other content providers will need to make similar deals with broadband providers.

Timothy Lee, a media writer with the Washington Post, says the change represents a fundamental shift in power in the Internet economy that threatens to undermine the competitive market structure that has served Internet users so well for the past two decades.

Lee adds the deal will also transform the debate over net neutrality regulation.

“Officially, Comcast’s deal with Netflix is about interconnection, not traffic discrimination,” Lee writes. “But it’s hard to see a practical difference between this deal and the kind of tiered access that network neutrality advocates have long feared. Network neutrality advocates are going to have to go back to the drawing board.”

At this point, Lee says the FCC doesn’t have any good options. “Regulating the terms of interconnection would be a difficult, error-prone process,” he writes. “Trying to reverse the decade-old mergers that allowed America’s broadband market to become so concentrated in the first place would be even more so. But the growing power of residential broadband providers will put growing pressure on the FCC to do something to prevent the abuse of that power.”

FCC Chairman Tom Wheeler said last week that preserving the Internet “as an open platform for innovation and expression, while providing certainty and predictability in the marketplace, is an important responsibility of this agency” and that the agency will consider how to “ensure that edge providers are not unfairly blocked, explicitly or implicitly, from reaching consumers, as well as ensuring that consumers can continue to access any lawful content and services they choose.”

The previous neutrality rules, which were passed by a 3-2 vote in 2010, prohibited all broadband providers from blocking or degrading content. The former rules also prohibited wireline – but not wireless – providers from engaging in unreasonable discrimination.

After the court struck down the neutrality rules, broadband advocates called on the FCC to reclassify broadband as a telecommunications service, which is regulated under Title II of the Telecommunications Act. Wheeler said last week that the agency isn’t ruling out doing so. But for now, the FCC will proceed under a different provision of the Telecommunications Act – Section 706 – that authorizes the FCC to promote broadband deployment.

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