Paid prioritization might be the most discussed topic in the Net Neutrality debate. The problem is that many of the people discussing it do not actually understand it. Paid prioritization is the act of edge providers paying Internet Service Providers (ISPs) for priority delivery over last-mile broadband networks. (For example, Netflix could pay Verizon a fee so high-definition video traffic is given a higher priority over other traffic on Verizon’s network.) However, there is no evidence that paid prioritization is occurring at this time.
Last week, FCC Commissioner Ajit Pai led the “Forum on Internet Regulation” at Texas A&M University’s Bush School of Government and Public Service. One of the panelists, Stewart Youngblood, an Ambassador at the Dallas Entrepreneur Center, said he primarily supports imposing Title II regulation on ISPs because Title II would ban paid prioritization. But this is not actually the case. I do not want to pick on Mr. Youngblood specifically because the view he expressed is a common misconception among Title II advocates. But I do wish to make a point so that this issue is better understood.
Daniel Lyons, a member of FSF’s Board of Academic Advisors, published a helpful article about this topic in July. The semantics of the issue come from Section 202 of Title II which prohibits common carrier telecommunications providers (as ISPs would be classified under Title II but currently are not) from engaging in “unreasonable discrimination.” While Mr. Youngblood and other Title II advocates almost certainly would describe paid prioritization as unreasonable discrimination, Professor Lyons argues that they should not do so:
[Section 202] does not require that the telecommunications provider offer only a single class of service to all people. Rather, it only prohibits discrimination among ‘like’ services – services that a customer may view as ‘functionally equivalent.’ In other words, we need to separate differentiation (offering different products at different prices) from discrimination (offering the same product at different prices).
Because priority delivery is a different product from traditional “best efforts” delivery, it can be provided under Title II so long as the price for such prioritization is the same for all edge providers choosing the same option. In his article, Professor Lyons makes an apt, easily understandable comparison to a modern-day common carrier:
The Postal Service is required to offer first-class delivery to any interested shipper, at the same price. But this does not prohibit it from offering priority delivery or express mail at a premium to those shippers who need their packages delivered more quickly than traditional first-class mail would permit (or to charge less for those willing to accept longer delays).
Just as price differentiation is permitted for mail delivery services, it likely would be permitted under Title II for data delivery services, as long as each delivery service and corresponding price is the same for all takers of the service.
The price differentiation of delivery services allows for data to be delivered to the Internet users who value it the most. With or without Title II regulations, consumer welfare likely would increase if some edge providers offered some forms of paid prioritization that consumers value. At the moment, consumers who do not use applications that require low latency or high bandwidth such as Skype and Netflix, respectively, are subsidizing the consumers who do use them. This is because ISPs sometimes give priority to these types of applications as a means of network management in order to avoid congestion and ensure quality service to their subscribers. But since subscribers are not charged by per megabit use, the low-use subscribers generally are subsidizing the high-use subscribers. Therefore, if edge providers, whose content requires low latency or high bandwidth, paid for the priority delivery, the higher costs they impose could be levied on users of those applications, as opposed to ISPs levying the costs on all consumers.
If ISPs were classified as common carriers under Title II, paid prioritization presumably would not be considered “unreasonable discrimination” if the priority service were offered to all edge providers on the same terms. And more importantly, it is likely that, overall, consumers would benefit from such prioritization because ISPs would increase economic efficiency by responding to consumer demands through price differentiation.