How Net Neutrality Could Throttle Small ISPs

The brouhaha over Net neutrality gained traction in 2007 when cable giant Comcast was accused of throttling back the network speeds of customers using P2P services such as bit torrent to download content. Initially, Comcast denied the action but then admitted slowing down access. The Federal Communications Commission won a ruling allowing it to order Comcast to stop the practice, and the company did -- and then it sued the FCC. The court last week essentially said that the FCC did not have the authority to penalize Comcast for adjusting network speeds based on customers' usage.

Some have suggested that the workaround to the ruling is for the FCC to reclassify Internet access as "telecommunications services" rather than "information services." That would give the FCC a clearer path to regulating providers of high-speed Internet access.

However, while such power might crack down on large ISPs and prevent them from penalizing users of various types of content and services, it might actually backfire, by preventing more citizens from getting broadband access in the first place. Furthermore, the customers who do get service may consequently suffer poor quality due to the traffic load on the network.

Comments filed to the FCC by Laurence Brett Glass, a sole proprietor of Lariat, a wireless Internet service provider in Albany County, Wyo., exemplify how the proposed National Broadband Plan (NBP), released in March, could adversely affect small ISPs. Lariat serves 28,000 customers.

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"Unfortunately, the rules in the present NPRM [Notice of Proposed Rulemaking] would prohibit Lariat's most popular and consumer-friendly residential rate plans, raising prices to consumers. The rules would also hinder Lariat's ability to maintain good quality of service over the limited amount of cluttered, unlicensed spectrum available to it. By increasing costs, they would also limit Lariat's ability to deploy new service to currently unserved and underserved areas, hampering competition and limiting consumers' broadband choices."

However, Austin Schlick, FCC general counsel, wrote on his blog that just the opposite could happen if the FCC can't gain authority over ISPs. He noted that the Comcast decision may affect a significant portion of the NBP, including "recommendations aimed at accelerating broadband access and adoption in rural America; connecting low-income Americans, Native American communities, and Americans with disabilities; supporting robust use of broadband by small businesses to drive productivity, growth and ongoing innovation; lowering barriers that hinder broadband deployment; strengthening public safety communications; cybersecurity; consumer protection, including transparency and disclosure; and consumer privacy."

Glass' comments to the FCC largely refute what Schlick suggests. For example, he contends that the new rules would prohibit innovative rate plans but do nothing to counteract anticompetitive "special access" charges, which drive Lariat's wholesale cost of Internet bandwidth to upward of $100 per Mbps per month. Still, Lariat is able to offer a $30 monthly service by buying asymmetrical bandwidth, which is less expensive than symmetrical bandwidth, to provision residential services. It ensures the traffic is asymmetrical by contractually prohibiting the operation of servers -- including P2P nodes -- on those connections. "Business class" connections, on which servers are allowed, are also available, though at higher cost.