The FCC Has More Important Things to Worry About Than Netflix

Last week, FCC Chairman Tom Wheeler announced that the FCC would begin “looking under the hood” of private “paid-peering” deals between Netflix and Verizon, and Netflix and Comcast to determine who is responsible for reportedly slow connection speeds.

But any new FCC rules or drawn-out inquiries–if they harmfully restrict interconnection agreements–will limit the ways Internet Service Providers can differentiate themselves and offer consumers more services. The FCC should instead spend its time working to create more broadband competitors.

THE FCC SHOULD INSTEAD WORK TO CREATE MORE BROADBAND COMPETITORS.

With net neutrality’s formal demise earlier this year, tech and telecom companies have been jockeying for the public’s affinity, perhaps hoping to influence the Federal Communications Commission as it drafts new Internet rules. Leading up to the FCC’s entry into these peering deals, the battle for influence had gotten so heated that Verizon issued Netflix a cease-and-desist letter for purportedly misleading customers and blaming Verizon for buffering video.

Google Fiber’s director of network engineering also entered the fracas, explaining in a company blog post that Google would not charge Netflix for sending video traffic to Google Fiber customers. The announcement was almost certainly a jab at other ISPs for making Netflix pay for interconnection with paid peering deals. While these agreements are private contracts, for disputed reasons the larger ISPs are generally making Netflix pay while the smaller ISPs are often allowing Netflix to interconnect for free.

Google Fiber is a large-scale infrastructure experiment that’s jolting the telecom industry, the tech literati, and politicos. It’s helping make once-sleepy debates about local rights-of-way, easements, and utility poles more salient. It is vital to recognize that Google Fiber is only able to challenge existing ISPs and business models because state and local governments got out of Google’s way.

If the takeaway from Google Fiber’s free-interconnection announcement is the urgent need for FCC oversight of peering arrangements, it would start regulators down the path of another goose chase when, in fact, it is not a net neutrality question.

The consensus view of net neutrality experts, including the current FCC chairman, is that peering between ISPs and content companies like Netflix isn’t a net neutrality issue. The 2010 FCC expressly exempted peering and interconnection from net neutrality rules. The global Internet comprises thousands of servers and networks that dynamically sort and send traffic to customer-facing ISPs in non-neutral–but beneficial–ways. Because interconnection is more competitive than residential broadband service, net neutrality is traditionally understood to affect only the “last mile” connection between an ISP and a customer. Many advocates and some companies believe interconnection–despite years of business practice to the contrary–should be free, in the name of Internet openness.

FCC OVERSIGHT OF “PEERING” ARRANGEMENTS WOULD START REGULATORS DOWN THE PATH OF ANOTHER NET NEUTRALITY-LIKE GOOSE CHASE.

Google is in a unique position in that it is both a small (but expanding) ISP and—as the owner of YouTube—a large video content producer. Does its pledge for free interconnection arise from a desire to create an industry norm and reduce YouTube operating costs or a sincere commitment to Internet openness? It’s probably a bit of both, but it doesn’t matter. Deciphering Google’s “true” motivations for giving Netflix a break on interconnection fees can lead policy astray.

Perhaps, as some observers suggest, Google sees its interests aligning more with Netflix than with ISPs because the two companies’ video streaming dominates downstream Internet traffic in the United States. No other companies, presumably, would benefit more from an industry norm or regulation making interconnection free.

But that conclusion misses the point. Google Fiber and other broadband projects often make business sense only when cities eliminate delays and redundant or unnecessary rules. Google is increasing awareness of these burdens. The company is working with dozens of cities to reduce regulatory obligations and streamline City Hall approvals to replicate its success in Kansas City, for example.

GOOGLE FIBER IS ONLY AROUND TO CHALLENGE EXISTING ISPS AND BUSINESS MODELS BECAUSE STATE AND LOCAL GOVERNMENTS GOT OUT OF GOOGLE’S WAY.

Whether paid peering makes business sense or not is based on highly specific facts. FCC oversight would be laborious and counterproductive considering how well the paid peering has worked—unregulated—for years. The path forward should be permitting ISP expansion and entry.

The federal court striking down the FCC’s net neutrality rules gave the FCC regulatory tools to enable more broadband competition. Rather than attempt to meddle in peering agreements, the FCC should turn its focus to pressuring states and localities into fast-tracking new, commercial broadband rollouts. Competitors should battle in neighborhoods with competing services, truckrolls, and speeds, not engage in paper warfare in courts and at the FCC.