Net Bias and the Treatment of 'Mission-Critical' Bits

Abstract

The Internet increasingly provides an alternative distribution medium for video and other types of high value, bandwidth intensive content. Many consumers have become “technology agnostic” about what kind of wireline or wireless medium provides service. However, they expect carriers to offer access anytime, anywhere, via any device and in any distribution format. These early adopters of new technologies and alternatives to “legacy” media have no patience with the concept of “appointment television” that limits access to a specific time, on a particular channel and in a single presentation format. This paper assesses whether and how Internet Service Providers (“ISPs”) can offer service enhancements for particular types of traffic and customers without disadvantaging competitors by punishing content creators, distributors and consumers who reject better than best efforts surcharges. The paper will use the recent paid peering agreement between Netflix and Comcast as a case study. The paper concludes that the Federal Communications Commission (“FCC”) largely lacks jurisdiction to establish anti-discrimination rules so that ISPs will be able to discriminate on price and quality of service with only questionable options for consumer protection.

However, the paper also concludes that network bias does not always serve anticompetitive goals, nor does it always result in an unlevel competitive playing field. The paper identifies instances where a regulatory referee remains necessary to offer timely resolution of disputes about what constitutes fair network bias particularly for the carriage of bandwidth intensive video content.

Keywords: Internet quality of service, discrimination, interconnection, best efforts routing, better than best efforts routing

JEL Classification: K23, L86, L96