Internet Pay for Priority Sure to Raise Prices on Streaming Services

internetWhen federal appeals courts put down “Net-neutrality” rules designed to prevent providers from discriminating against specific types of data flow to their customers, they also established grounds for providers to place price premiums on certain types of web traffic. Currently, the Federal Communications Commission is proposing to allow for such a move. A “pay-for-priority” policy regarding data streaming on the internet is sure to raise costs and affect prices of streaming services such as Netflix and costs of search engines to ensure their data is delivered at the quickest speeds.

The move, inevitably, will affect consumers as operating costs for companies streaming data goes up. The days of free email, web sharing, and the like may be numbered. This is, in any case, an absolute worst-case scenario. However, end-users are leery of what or how many of those doors are being opened.

FCC Chairman Tom Wheeler, though, has sought to dispel such rumors regarding the proposed rules, which will be made available to the public in a few weeks. Consumers, however, are not convinced. Luxury services such as Netflix will most likely be the first to go up but there is no reason to assume rate hikes or imposed fees will stop at those sorts of services.

One of the most fundamental rules of business is that as costs of operating go up, so does the price of the service being rendered. “Pay-for-priority” on the Internet is sure to raise the service rate of streaming, as data exchange becomes more of a commodity than an unalienable right to access and deliver information.

Consumer worries do not stop there. One backlash to the proposal most skeptics are concerned about is the negative impact it will have on startups, while existing services will, in effect, corner the market. Here, an information monopoly scenario comes into play because newer, smaller companies will not be able to compete in a market where larger more established companies have the “right-of-way” because they are able to pay the virtual toll. Fears abound this will stifle Internet innovation in the US.

Another large concern will be that of the power it grants to service providers or the FCC to regulate what types of information is being shared under the guise of public service or corporate policy.

In turn, FCC spokespeople say the rules will prohibit providers from blocking or discriminating online content, and claim that deals struck with companies like Netflix or Skype will be reviewed in a case-by-case scenario. The so-called “baseline” rule is said to ensure that providers will not commit “commercially unreasonable” practices but it is not clear what that actually entails.

FCC Chairman Tom Wheeler, though, has sought to dispel such rumors regarding the proposed rules, which will be made available to the public in a few weeks. Consumers, however, are not convinced.

European Parliament has already voted to stop Internet providers from charging for priority, which outraged telecommunication companies.  The proposed law will be up for European Union approval this fall.

The Obama administration has long been a proponent of open Internet, so the decision of the FCC to allow the measure is something of a shock on that account. FCC Chairman Tom Wheeler is a long time Obama loyalist and even raised hundreds of thousands of dollars for Obama’s two presidential campaigns as a lobbyist for the cable and wireless industry.

The move creates the impression the FCC is bowing to the will and political clout of giants like AT&T and Verizon, in that a move for Net-neutrality would have called for a reclassification of broadband as a telecommunications service because of February’s decision by the Federal Court of Appeals. Instead of going head to head with the providers, the FCC has opted to regulate based on their Section 706 authority, choosing to monitor blocking or discrimination case by case as opposed to a general ruling.

Since not all cases are likely to be refused or even reviewed, and since the precedent for such discrimination has been established by the proposed rules, a pay-for-priority scenario seems inevitable, pending a public approval process. A pay for priority market is sure to raise prices of streaming services, if not directly on the end-user, on advertising space or for data streamed through the Internet by those sites. In any case, the market is most likely to take care of itself, in the long-term, because companies like Yahoo!, Google, Facebook, Netflix, Microsoft, and YouTube could, in a far-off scenario, back or generate their own service provider or a provider offering neutrality should they get held over a proverbial barrel for too long by current providers. In such an event, a provider wishing to discriminate against what is flowing or who gets priority, would no longer be needed or used.

By Joseph Porter


ABC News
New York Times 




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