Oh the humanity!

Last week, advocates for an Open Internet were up in arms over a report in the Wall Street Journal indicating FCC chairman Thomas Wheeler was about to solve his Net Neutrality problem by redefining it to mean the exact opposite of its intended goal to keep Internet traffic out of provider-established toll lanes.

Former FCC chairman Michael Powell created the current definition of the Internet as “an information service” that has been repeatedly invalidated by the courts. Today he is the president of the nation’s largest cable industry lobbying group, the NCTA. (Image: Mark Fiore)

“Regulators are proposing new rules on Internet traffic that would allow broadband providers to charge companies a premium for access to their fastest lanes,” said the report, quoting an unnamed source.

Wheeler’s proposal follows the agency’s latest defeat in the courts in its latest effort to define net policy. The D.C. Court of Appeals objects to the FCC’s rule-making powers under the current “light touch” regulatory framework introduced by former FCC chairman Michael Powell. Since the first term of the Bush Administration, the FCC has avoided reclassifying broadband as a “telecommunication service,” which would place it firmly under its regulatory authority. Instead, it has continued to define the Internet as “an information service,” under which there is little precedent to support Net Neutrality rules.

The Wall Street Journal reported Wheeler was planning to introduce a new Net Neutrality policy that would ban blatant attempts to censor or block access to Internet websites, but would allow providers to monetize access to its broadband pipes by giving preferential treatment to traffic from certain content providers. Wheeler’s proposal would allow any company to pay for faster access to customers, so long as providers charged an undefined fair price to all-comers.

Wheeler said the FCC would have the authority to deal with providers unwilling to maintain a level playing field for content companies willing to pay extra, but was much more vague about how the regulator would protect websites unwilling to pay extra for traffic guarantees.

Net Neutrality proponents contend Wheeler’s proposal is exactly what Net Neutrality was supposed to prevent – an Internet toll lane only affordable to deep-pocketed giant corporations. For everyone else, including startups and smaller companies, customers could experience the type of slowdowns Netflix users experienced earlier this year — congestion-related buffering that disappeared almost instantly once Netflix signed a paid contract with Comcast for a more direct connection.

“With this proposal, the FCC is aiding and abetting the largest ISPs in their efforts to destroy the open Internet,” said Free Press CEO Craig Aaron. “Giving ISPs the green light to implement pay-for-priority schemes will be a disaster for startups, nonprofits and everyday Internet users who cannot afford these unnecessary tolls. These users will all be pushed onto the Internet dirt road, while deep-pocketed Internet companies enjoy the benefits of the newly created fast lanes.”

“For technologists and entrepreneurs alike this is a worst-case scenario,” Eric Klinker, chief executive of BitTorrent Inc., a popular Internet technology for people to swap digital movies or other content, told the Wall Street Journal. “Creating a fast lane for those that can afford it is by its very definition discrimination.”

It’s even worse than that for consumer groups like Free Press.

Charging another fee to get content on your broadband connection represents a massive business opportunity for broadband companies. But Free Press’ Craig Aaron says it would be a bad deal for Web companies, especially those that can’t afford to pay more for premium service. National Public Radio’s Morning Edition reports. Apr. 24, 2014 (1:58)
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Providers love the idea of monetizing the use of their Internet pipes. (Image: Mark Fiore)

“This is not Net Neutrality. It’s an insult to those who care about preserving the open Internet to pretend otherwise,” said Aaron. “The FCC had an opportunity to reverse its failures and pursue real Net Neutrality by reclassifying broadband under the law. Instead, in a moment of political cowardice and extreme shortsightedness, it has chosen this convoluted path that won’t protect Internet users.”

Wheeler, a former industry insider that presided over both the wireless and cable industry’s largest lobbying groups had a friendlier reception from his former colleagues.

One top cable executive admitted, “I have to say, I’m pleased.”

The cable industry claims they need to attract more investment to manage upgrades of their broadband networks now coming under strain from the online video revolution.

“Somebody has to pay for this, and if they weren’t going to let companies pay for enhanced transport and delivery…it just seemed like this was going to come back to the consumer,” said the cable executive.

So far neither Wheeler or the FCC has released the draft proposal for Net Neutrality 2.0 and won’t until just before it votes on it next month.

A day after the story leaked, Wheeler wrote a damage control blog post to correct what he called “misinformation” about the proposed rules:

Wheeler is keeping the exact language of his Net Neutrality proposal to himself until just before holding a vote on it.

To be very direct, the proposal would establish that behavior harmful to consumers or competition by limiting the openness of the Internet will not be permitted.

Incorrect accounts have reported that the earlier policies of the Commission have been abandoned. Two points are relevant here:

1. The Court of Appeals made it clear that the FCC could stop harmful conduct if it were found to not be “commercially reasonable.” Acting within the constraints of the Court’s decision, the Notice will propose rules that establish a high bar for what is “commercially reasonable.” In addition, the Notice will seek ideas on other approaches to achieve this important goal consistent with the Court’s decision. The Notice will also observe that the Commission believes it has the authority under Supreme Court precedent to identify behavior that is flatly illegal.
2. It should be noted that even Title II regulation (which many have sought and which remains a clear alternative) only bans “unjust and unreasonable discrimination.”

The allegation that it will result in anti-competitive price increases for consumers is also unfounded. That is exactly what the “commercially unreasonable” test will protect against: harm to competition and consumers stemming from abusive market activity.

But Wheeler ignored one glaring change his proposal would make – permitting providers to monetize the performance of select Internet traffic. Currently, customers choose from a menu of available Internet speeds. Under Wheeler’s definition of Net Neutrality, a provider selling “up to” a certain amount of speed is under no obligation to actually deliver that speed. But that same provider could sell “insurance” to content producers promising certain network packets will have a better chance of reaching the customer on a timely basis, while non-paying content might not. That could make all the difference between a watchable streaming movie and one constantly pausing to “buffer.”

As long as everyone is free to pay Comcast, Time Warner Cable, Verizon and AT&T the same (more or less) for preferred treatment, all is well in Wheeler’s world.

Tim Wu, a law professor at Columbia University, coined the phrase “Net Neutrality.” He discusses how the Federal Communications Commission’s proposed changes could affect the average consumer and it’s not good news. From NPR’s All Things Considered. Apr. 24, 2014 (3:51)
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The New York Times editorial page wasn’t fooled:

Dividing traffic on the Internet into fast and slow lanes is exactly what the Federal Communications Commission would do with its proposed regulations, unveiled this week. And no amount of reassurances about keeping competition alive will change that fact.

[…] In this new world, smaller content providers and start-ups that could not pay for preferential treatment might not be able to compete because their delivery speeds would be much slower. And consumers would have to pay more because any company that agrees to strike deals with phone and cable companies would undoubtedly pass on those costs to their users.

The F.C.C. proposal claims to protect competition by requiring that any deal between a broadband company and a content provider be “commercially reasonable.” But figuring out what is reasonable will be very difficult, and the commission will struggle to enforce that standard. The rules would also prohibit broadband companies from blocking content by, for example, making it impossible for users to access a service like Skype that competes with their own products.

[…] Mr. Wheeler is seeking public comment on this option, but he is not in favor of it. Even though the appeals court has said the F.C.C. has authority to reclassify broadband, the agency has not done so because phone and cable companies, along with their mostly Republican supporters in Congress, strongly oppose it.

Michael J. Copps, a former FCC commissioner confirmed big telecommunications companies are spending millions to lobby for rules that would allow them to tilt the scales in their favor.

Wheeler’s “is a lot closer to what they wanted than what we wanted,” Copps told the New York Times. “It reflects a lot more input from them. The courts did not tell Wheeler to take the road that he is reportedly taking.”

That Wheeler would take an approach that coincidentally follows a model heavily favored by the telecommunications companies he used to represent should come as no surprise. Stop the Cap! repeatedly warned Wheeler’s appointment as FCC chairman would likely lead to disaster for consumers. A lifelong industry lobbyist (and investor) is unlikely to develop a world view that strays too far beyond the industry’s groupthink on telecom policy.

Wheeler may actually believe his policies represent the best way forward for the telecommunications industry he now oversees. A lot of supporters of Zeppelin Luftschiffbau used to believe blimps were the future of aviation, until May 6, 1937 when the Hindenburg burst into flames and crashed in Lakehurst, N.J.

[flv]http://www.phillipdampier.com/video/Fiore Goodbye Net Neutrality Hello Gilded Age Internet 2-14.flv[/flv]

Mark Fiore uses animation in his editorial cartoon explaining the demise of Net Neutrality and the beginning of the Internet’s Gilded Age. (1:53)

Netflix has agreed to compensate Comcast in return for assurances that the cable company’s subscribers would no longer be caught in the middle of a dispute between Comcast and one of Netflix’s content distributors.

The multi-year agreement between the two companies will bring Netflix direct access to Comcast’s broadband network with a Service Level Agreement that will guarantee streaming stability for customers who have loudly complained about Netflix’s deteriorating performance.

The controversial arrangement has probably established a precedent for other large Internet Service Providers likely to seek compensation to handle Netflix traffic. As of this evening, both AT&T and Verizon have already acknowledged they are negotiating with Netflix for similar arrangements.

Caught in the middle of the dispute are Comcast customers paying for a reliable Internet connection and getting slowing connections and re-buffering problems while attempting to watch Netflix content during peak usage times.

One side accuses Comcast of violating Net Neutrality while the other blames Netflix for dumping enormous Internet traffic on Internet Service Providers without compensation for network upgrades. Also in the crossfire is Cogent, a third-party company delivering Netflix content to Comcast’s front door.

How Netflix Distributes Its Streaming Movies and TV Shows

Netflix has traditionally avoided owning the “pipes” that distribute movies and TV shows to paying customers. Instead, it usually contracts with “transit providers” to send content from Netflix headquarters on to “content distribution networks (CDN)” that manage video streaming. A Netflix video may pass through a number of connections on a variety of independently owned networks before it arrives at the front door of your Internet Service Provider. Companies like Comcast handle “the last mile” of the journey that began at Netflix and ends at your computer or television set.

Netflix does not rely on just one transit provider to handle its traffic. Level 3, Cogent, and XO Communications all reportedly serve in that capacity, depending on where traffic is headed. The same is true for the CDN’s Netflix contracts with to regionally stream content to each subscriber.

Netflix determines how to handle your streaming movie request behind the scenes, selecting a CDN that is close to you and capable of delivering the most stable streaming experience at that moment. If you are a Comcast or Verizon customer, Netflix often selects Cogent to handle its content. Cogent is also well known for its relatively low cost.

If you are served by Cablevision, Frontier, or certain other providers like Google Fiber, Netflix will instead direct your streaming request to a CDN located within your provider’s own network. These “Open Connect” boxes store Netflix content in a type of cache and can stream it to customers directly without sending video packets across multiple third-party networks. Theoretically, Open Connect offers an efficient and stable way of distributing Netflix content to customers. It also saves Netflix money and in return, it costs the ISP nothing — Netflix pays for the equipment and service.

Cogent vs. Big Telecom

Netflix and YouTube together are now estimated to cover 50 percent of all video traffic on the Internet, and that traffic is growing. Cogent dutifully passes that video content along to Internet Service Providers like Verizon and Comcast that have customers waiting to watch. But it is a two-way street. Any outbound traffic from customers could also be forwarded to Cogent to send on. Traditionally, both sides have managed the traffic by gradually increasing the bandwidth and speed of their connections to one-another. But as Netflix traffic grows and grows, companies like Comcast and Verizon believe they are being saddled with the costs to upgrade their networks in ways that are out of proportion to the traffic they send in the other direction. ISPs often grumble about the cost but keep on upgrading to keep paying customers happy. Verizon and Comcast are suspected of dragging their feet on those upgrades in an effort to win compensation.

Verizon and Comcast argue they should be paid by content producers responsible for generating tons of Internet traffic to help cover the cost of upgrades. Instead, Netflix offered its Open Connect boxes, which keep Netflix traffic within an ISPs own network, reducing the necessity of constantly upgrading connections with other transit providers. Verizon and Comcast don’t want Netflix’s solution — they want cold hard cash.

Conflict of Interest

Some network engineers cannot understand all the controversy about Comcast’s arrangement with Netflix. Some believe Netflix is simply shifting traffic away from third-party Cogent to Comcast directly, presumably at a cost savings. They suggest customers will be happy that streaming quality is restored and Netflix also wins a guaranteed level of performance they never had with Cogent.

But that argument does not explain why Netflix was compelled to make a financial arrangement with Comcast. The two companies have been in negotiations on the subject of traffic compensation for months. Many industry observers believe those talks went nowhere until Netflix customers began complaining about the increasing network slowdowns. Some even dropped their Netflix subscriptions over the issue.

Netflix CEO Reed Hastings admitted he made a deal with Comcast to restore customer confidence in Netflix and end subscriber frustration. It was also increasingly clear Comcast was in no hurry to improve things on its own, despite the fact its own customers were the ones most directly affected.

So why wouldn’t Comcast (or Verizon or Time Warner Cable) take Netflix up on its offer of free Open Connect boxes that would reasonably solve streaming problems without forcing anyone to spend a fortune on upgrades? Simply put, all three companies are direct competitors of Netflix. Helping Netflix offer a top quality streaming experience is not in the best interests of Comcast (or others) that are facing potential cord-cutting customer losses in their subscription video businesses. Verizon has partnered with Redbox to deliver streamed video, Comcast operates Streampix, its own online streaming service, and Time Warner Cable offers a variety of on-demand and streamed video content for its cable TV subscribers. None of these services have suffered from traffic congestion issues.

ISP Payday

What About Net Neutrality? What About Paying Customers?

With Net Neutrality tossed out by the courts, there is little any regulator can do to resolve disputes until Net Neutrality can be properly enforced under a stronger regulatory framework. Some argue the congestion issues creating the problems with Netflix are not a true violation of Net Neutrality in any event because providers are not artificially prioritizing traffic.

They are simply not keeping up with upgrades that just so happen to directly impact a competitor while leaving their own services unscathed.

Providers also seem characteristically unconcerned about complaining customers, passing blame for the problem on to Netflix. Besides, they remind you, paying for an Internet connection alone does not entitle you to any guarantee of performance.

The Dam Breaks

With this week’s agreement between Comcast and Netflix, both AT&T and Verizon wasted no time admitting they are both seeking compensation from Netflix as well. Other providers are likely to follow.

Netflix warned investors that paid agreements with ISPs could adversely affect its earnings due to increased costs. Although stopping short of suggesting price increases for Netflix customers could come as a result, Wall Street wasted no time worrying about the financial impact of deals like the one between Netflix and Comcast.

The Wall Street Journal reported the momentum appears to be shifting in favor of large Internet providers like Comcast and AT&T and away from content producers.

Janney Capital analyst Tony Wible suggested Comcast’s toll booth could create a barrier for other content producers if the cable company asks for significant compensation.

“Although there is no prioritization benefit [from the deal], we suspect that the exchange of money for resolution/performance could (if large) effectively limit competition,” said Wible. “In essence, Netflix could be trading [profit] margins for subscribers. Few others can match Netflix’s [spending budget to acquire content] without incurring massive losses. The competition may now have to cope with additional fees that sway their willingness to compete if they do not already have a large subscriber base.”

In other words, a new Internet startup could face hard questions from investors about how it intends to cover ISP demands for compensation in return for a suitable connection to reach customers. A large venture like Netflix has enough resources to handle those costs and negotiate for a better deal while a smaller startup may not.

[flv]http://www.phillipdampier.com/video/WSJ Netflix Comcast Agreement 2-24-14.flv[/flv]

Netflix has signed a deal with Comcast to ensure smooth streaming, in what is being called a landmark agreement. Wall Street Journal reporter Shalini Ramachandran explains the agreement. (3:39)

Again with the domination and control thing.

Dr. John Malone is wasting no time reacquainting the cable industry with the kinds of classic power plays he used while running Tele-Communications, Inc. (TCI), then America’s largest and most powerful cable operator. Malone’s latest salvo: proposing new broadband pricing schemes that run afoul of Net Neutrality by charging consumers higher broadband prices if they watch online video services like Netflix.

Malone, increasing his influence over Charter Communications before launching the next wave of cable company consolidation, implied the industry is hurting from the lack of power and dominance it used to enjoy when it had an unfettered, territorial monopoly back in the 1980s. Malone told an audience at the annual shareholder meeting of Liberty Global he advocates getting the industry’s mojo back by returning to “value creation” pricing models — code language for new ways to charge customers higher prices or add-on fees.

Malone sees raising prices for Internet service key to bringing the industry back to the golden profits it used to enjoy selling television subscriptions, even as customers faced massive rate increases that doubled, tripled, or even quintupled rates for certain services.

Malone’s assessment of the eight current largest cable operators wiring the country: Snow White (Comcast) and the Seven Dwarfs (Everyone Else). The disorganized agendas of various cable operators are troublesome to Malone, who wants the industry to act in lock step with a unified, cooperating voice. Consumer groups call this kind of friendly cooperation “collusion.”

Malone also thinks it is time to discard reliance on cable television to bring home the revenue and profits Wall Street expects. The industry should instead turn its earning attention to broadband, a product few Americans can live without. Malone believes the cable industry is not only positioned to control content distributed on its TV Everywhere online video platform for authenticated cable subscribers, but also have a say in competing content from Netflix, among others, which are totally reliant on the broadband pipes provided by ISPs.

With Netflix consuming a growing percentage of cable broadband resources, and possibly contributing to cable TV cord cutting, Malone does not advocate crushing its competition. Instead, he wants a piece of the action. How? By demanding online video providers pay for using cable broadband infrastructure. Consumers also face surcharges on their broadband accounts if they watch online video services like Netflix, Amazon, YouTube and other over-the-top-video. Malone also advocates the implementation of Internet Overcharging schemes like consumption billing and usage caps.

Malone’s “world of the future,” is, in reality, not much different from AT&T’s 2005 proclamation that use of AT&T’s broadband pipes should come at a cost to content producers.

Then-CEO Ed Whitacre’s public statements fueled support for Net Neutrality, which forbids broadband providers from traffic discrimination techniques like charging extra for certain content or artificially degrading service for producers who refuse to pay.

Malone’s incendiary ideas may be letting too much of the cat out of the bag, say some observers worried Malone’s rhetoric will remind people he was once labeled “the Darth Vader of Cable.” His statements could attract unnecessary attention that could be used to organize opposition.

Last week, the Wall Street Journal reported that broadband providers and content producers were already secretly cutting deals to exchange bandwidth for money without the public scrutiny Malone’s comments will generate.

The newspaper reports some of the biggest Net Neutrality proponents around, particularly Google, are quietly paying millions to large cable companies to guarantee their content reaches customers as quickly and smoothly as possible.

Among the top recipients: Comcast, which collects $25-30 million a year and Time Warner Cable, which nets “tens of millions of dollars” from Google, Microsoft, and Facebook.

The payments are buried in the murky world of “interconnection agreements” governing the backbone pipes carrying huge amounts of web traffic from popular websites and those owned by large telecom providers. Originally, content and broadband providers agreed to peering arrangements that would trade traffic without payment to each other. But as bandwidth-heavy online video began to turn those shared connections into lopsided floods of movies and TV shows headed into subscriber homes against a trickle of content coming back from broadband customers, the cable and phone companies began crying foul.

Netflix has so far navigated around paying Internet Service Providers directly to support their video content. Instead, it is building its own specialized content distribution network intended for ISPs to more effectively and efficiently deliver high bandwidth video. Connections to the Netflix network are free of charge to participating providers, but many ISPs are demanding to be paid.

Some content providers are fearful if they don’t pay, the free “peering” links will become hopelessly overcongested and slow web pages and services to a crawl.

For Verizon customers, that may have already happened as Netflix streams began stuttering and buffering earlier this month.

Cogent, which supplies Verizon with a considerable amount of Netflix traffic, immediately pointed the finger at the phone company for artificially degrading the Netflix viewing experience. Verizon promptly shot back:

Cogent is not compliant with one of the basic and long-standing requirements for most settlement-free peering arrangements: that traffic between the providers be roughly in balance. When the traffic loads are not symmetric, the provider with the heavier load typically pays the other for transit. This isn’t a story about Netflix, or about Verizon “letting” anybody’s traffic deteriorate. This is a fairly boring story about a bandwidth provider that is unhappy that they are out of balance and will have to make alternative arrangements for capacity enhancements, just like any other interconnecting ISP.

Cable giants like Malone see the battle as one the cable industry will have a hard time losing, because it is the only technology present in most communities that can handle the traffic and the growing demand for faster speeds.

Cable operators think content companies have a license to print money, especially since their success is built partly on broadband networks they don’t own or pay for delivering content to customers. At the same time, content companies fear they could be forced out of business if the cable industry decides to give itself preferential treatment.

[flv width=”504″ height=”300″]http://www.phillipdampier.com/video/WSJ Paying ISPs to Move Content 6-20-13.flv[/flv]

Reporters from The Wall Street Journal discuss the secret payment arrangements between content producers and some of America’s largest ISPs. (4 minutes)

AT&T says government regulations have hampered the company’s plans to roll out faster broadband networks to areas where consumers and businesses want faster speeds.

Now that Google has gotten permission to roll out its gigabit fiber network only to neighborhoods that show an interest in the service, AT&T says it should be allowed to operate the same way.

CEO Randall Stephenson told investors at a J.P. Morgan investor conference in Boston that AT&T would like to build fiber networks, but government requirements that it offer the service universally across the communities it serves has made such networks financially unprofitable. Eliminating those rules would create a new incentive for fiber upgrades in areas that want them.

“I think you are going to see that begin to manifest itself around the United States, and in not just AT&T and Google,” Stephenson said. “You will see others doing this because the demand for really high-speed broadband via gigabit-type fiber-based solutions on a targeted basis is going to be very, very high.”

AT&T says Google has already changed how future broadband networks are deployed — only to areas where there is enough demand for the service. Google’s entry into Kansas City came with a pre-registration procedure that allowed the company to gauge demand for its fiber network. The neighborhoods expressing the most interest were given priority during the network buildout. Google also won the right to entirely bypass neighborhoods where an insufficient number of residents expressed interest in the service.

Stephenson

Traditionally, cable and phone companies constructing networks like FiOS, U-verse, and similar fiber deployments are required to offer service throughout each community. The only general exception relates to sparsely populated or very high cost areas that have an insufficient number of potential customers, making return on investment difficult. Google can bypass even the most densely populated sections of downtown Kansas City if there is insufficient demand for its service. Cable and phone providers who attempted this in the past would have been accused of “redlining” — singling out only the most lucrative, affluent service areas while bypassing low-income neighborhoods.

Now AT&T hopes Google has established a precedent it can use to cherry-pick network upgrades of its own.

“The key is being able to do it in places where you know there is going to be high demand and people willing to pay the premium for those type services,” Stephenson said, predicting in some parts of Austin, AT&T could achieve a 35 percent market share for its promised fiber network.

Stephenson also suggested an unlikely new source of money to finance fiber upgrades — content producers and applications developers who need faster networks to support sales of their online products and services. That would shift the economics of faster broadband to an entire new model — broadband providers may decide their current networks are fast enough and might avoid upgrading them without some financial compensation from the websites and content producers customers visit.

Wireless Industry: We’re running out of spectrum!
Wireless Industry: We’ve got plenty to room for unlimited ESPN!

America is on the verge of a wireless traffic data jam so bad, it could bring America to its knees.

Or not.

Stop the Cap! notices with some interest that while wireless carriers continue to sound the alarm about a spectrum crisis so serious it necessitates further compressing the UHF television dial and forces other spectrum users to become closer neighbors, the same giant phone companies warning of impending doom are negotiating with online video producers to offer customers “toll-free,” all-you-cat-eat streaming video of major sports events that won’t count against your usage allowance.

ESPN is in talks with at least one major carrier (AT&T or Verizon Wireless) to subsidize some of the costs of its streamed video content so that customers can watch as much as they want without running into a provider’s usage limit. Both Verizon and AT&T have signaled their interest in allowing content producers to pay for subscribers’ data usage. In fact, they don’t seem to care who pays for the enormous bandwidth consumed by streaming video, so long as someone does.

At a recent investment bank conference Verizon Wireless chief executive Dan Mead explained the next chapter in monetizing data usage will allow the company to rake in more revenue from third parties instead of customers already struggling with high wireless bills.

“We are actively exploring those opportunities and looking at every way to bring value to our customers,” said Mead.

Content producers are increasingly frustrated with the stingy caps on offer at AT&T and Verizon Wireless because customers stop accessing that content once they near their monthly usage limit. One large provider admitted to ESPN that “significant numbers” of customers are already reaching their cap before the end of their billing cycle, after which their online usage plummets to limit the sting of overlimit charges.

Offering “toll-free” data could dramatically increase the use of high bandwidth applications and increase profits at wireless providers based on new fees they could collect from content producers. Customers would still be subject to usage limits for all non-preferred content, a clear violation of Net Neutrality principles.

The buffet is open.

But in case you forgot, wireless carriers won exemption from Net Neutrality, arguing their networks lack the capacity to sustain a Net Neutral Internet experience. These same companies claim without more frequencies to handle the massive, potentially unsustainable amount of wireless traffic, the wireless data apocalypse could be at hand in just a few years. It was also the most-cited reason AT&T and Verizon discontinued their unlimited use data plans.

But unlimiting ESPN video? No problem.

In January 2010, Verizon Wireless was singing a very different tune to the FCC about the need to control and manage high bandwidth applications like the “toll-free” streaming video service ESPN proposes (underlining ours):

Wireless broadband services face technological and operational constraints arising from the need to manage spectrum sharing by a dynamically varying number of mobile users at any time. Thus, unlike, for example, cable broadband networks, where a known and relatively fixed number of subscribers share capacity in a given area, the capacity demand at any given cell site is much more variable as the number and mix of subscribers constantly change in sometimes highly unpredictable ways.

Are wireless carriers now part of the problem?

For example, as a subscriber using a high-bandwidth application such as streaming video moves from range of one cell site to another, the network must immediately provide the needed capacity for that subscriber, while not disrupting other subscribers using that same cell site. Of course, the problem is magnified many times over as multiple subscribers can be moving in and out of range of a cell site at any given moment. Moreover, the available bandwidth can fluctuate due to variations in radio frequency signal strength and quality, which can be affected by changing factors such as weather, traffic, speed, and the nearby presence of interfering devices (e.g., wireless microphones).

These problems compound those resulting from limited spectrum. As the Commission has repeatedly recognized in proclaiming an upcoming spectrum crisis, “as wireless is increasingly used as a platform for broadband communications services, the demand for spectrum bandwidth will likely continue to increase significantly, and spectrum availability may become critical to ensuring further innovation.”

A wireless carrier cannot readily increase capacity once it has exhausted its spectrum capacity. Thus, wireless broadband providers are left to acquire additional spectrum (to the extent available) or take measures that use their existing spectrum as efficiently as possible, which they do through a combination of investing in additional cell sites and network management practices that optimize network usage and address congestion so as to provide consumers with the quality of service they expect.

Regulators need to ask why wireless companies are telling the FCC there is a bandwidth crisis of epic proportions that requires the Commission to exempt them from important Net Neutrality principles while telling investment banks, shareholders and content producers the more traffic the merrier, as long as someone pays. Customers also might ask why their unlimited use data plans were discontinued while carriers seek deals to allow unlimited viewing with their preferred content partners.

What is the real motivation? The Wall Street Journal suggests one:

“Creating a second revenue stream for mobile broadband is the holy grail for wireless operators but collecting fees from content companies would probably make the FCC take a close look into the policy implications,” said Paul Gallant, managing director at Guggenheim Securities. An FCC spokesman declined to comment.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/WSJ ESPN Toll Free Data 5-9-13.flv[/flv]

The Wall Street Journal takes a closer look at a plan to manage an end run around Net Neutrality by allowing preferred content partners to offer streaming video services exempt from your usage cap. (4 minutes)