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.
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