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Federal Internet Law & Policy
An Educational Project
OI Notes
 Dont be a FOOL; The Law is Not DIY

 

Virtuous Circle

"According to the Commission, such rules encourage broadband deployment because they “preserve and facilitate the ‘virtuous circle’ of innovation that has driven the explosive growth of the Internet.” Verizon, 740 F.3d at 628. Under the Commission’s “virtuous circle” theory, “Internet openness . . . spurs investment and development by edge providers, which leads to increased end-user demand for broadband access, which leads to increased investment in broadband network infrastructure and technologies, which in turns leads to further innovation and development by edge providers.” Id. at 634. Reviewing the record, we concluded that the Commission’s “finding that Internet openness fosters . . . edge-provider innovation . . . was . . . reasonable and grounded in substantial evidence” and that the Commission had “more than adequately supported and explained its conclusion that edge-provider innovation leads to the expansion and improvement of broadband infrastructure.” Id. at 644." [USTA v. FCC Slip 17 DC Cir. 2015] 

See CSTB, Realizing the Info Future p. 30-31 1994 (" the Internet has given rise to a phenomenon in which services of all kinds spring up suddenly on the network without anyone directing or managing their development....Such spontaneous generation of unforeseen yet enormously popular services—which is encouraged by the Internet as a distributed information and communications system—is a constant source of pleasant surprise today and heralds future potential as we move into an era of truly interactive information via the NII.")

Incentives

"For example, the Commission noted that “broadband providers like AT & T and Time Warner have acknowledged that online video aggregators such as Netflix and Hulu compete directly with their own core video subscription service,” id. (internal quotation marks omitted), and that, even absent direct competition, “[b]roadband providers . . . have powerful incentives to accept fees from edge providers, either in return for excluding their competitors or for granting them prioritized access to end users,” id. at 645–46." [USTA v. FCC Slip 18 DC Cir. 2015]

Ability to Discriminate

"We also determined that the Commission had “adequately supported and explained its conclusion that, absent rules such as those set forth in the [2010 Open Internet Order], broadband providers represent[ed] a threat to Internet openness and could act in ways that would ultimately inhibit the speed and extent of future broadband deployment.” Id. at 645. For example, the Commission noted that “broadband providers like AT & T and Time Warner have acknowledged that online video aggregators such as Netflix and Hulu compete directly with their own core video subscription service,” id. (internal quotation marks omitted), and that, even absent direct competition, “[b]roadband providers . . . have powerful incentives to accept fees from edge providers, either in return for excluding their competitors or for granting them prioritized access to end users,” id. at 645–46. Importantly, moreover, the Commission found that “broadband providers have the technical . . . ability to impose such restrictions,” noting that there was “little dispute that broadband providers have the technological ability to distinguish between and discriminate against certain types of Internet traffic.” Id. at 646. The Commission also “convincingly detailed how broadband providers’ [gatekeeper] position in the market gives them the economic power to restrict edge-provider traffic and charge for the services they furnish edge providers.” Id. Although the providers’ gatekeeper position would have brought them little benefit if end users could have easily switched providers, “we [saw] no basis for questioning the Commission’s conclusion that end users [were] unlikely to react in this fashion.” Id. The Commission “detailed . . . thoroughly . . . the costs of switching,” and found that “many end users may have no option to switch, or at least face very limited options.” Id. at 647" [USTA v. FCC Slip 18 DC Cir. 2015] 

Switching

"Although the providers’ gatekeeper position would have brought them little benefit if end users could have easily switched providers, “we [saw] no basis for questioning the Commission’s conclusion that end users [were] unlikely to react in this fashion.” Id. The Commission “detailed . . . thoroughly . . . the costs of switching,” and found that “many end users may have no option to switch, or at least face very limited options.” Id. at 647." [USTA v. FCC Slip 18 DC Cir. 2015] 

Verizon v. FCC, 740 F.3d 623, 646 (D.C. Cir. 2014) ("[I]f end users could immediately respond to any given broadband provider's attempt to impose restrictions on edge providers by switching broadband providers, this gatekeeper power might well disappear. . .. For example, a broadband provider like Comcast would be unable to threaten Netflix that it would slow Netflix traffic if all Comcast subscribers would then immediately switch to a competing broadband provider. But we see no basis for questioning the Commission's conclusion that end users are unlikely to react in this fashion. ")

2015 Open Internet Order, 30 FCC Rcd at 5694-95, ¶ 205 (“consumers’ ability to respond to unjust or unreasonable broadband provider practices is limited by switching costs.”);

Application of Charter Communications, Inc., Time Warner Cable Inc., and Advance/Newhouse Partnership for Consent to Assign or Transfer Control of Licenses and Authorizations, MB Dkt. 15-149, Memorandum Opinion and Order ¶ 111 (2016), https://apps.fcc.gov/edocs_public/attachmatch/FCC-16-59A1.pdf (noting in the interconnection disputes between Comcast and Netflix, and Time Warner Cable and Netflix, which resulted in significant congestion, consumers did switch from their BIAS providers)

In the Matter of Preserving the Open Internet Broadband Industry Practices, GN Docket No. 09-191, WC Docket No. 07-52, Report and Order, 25 FCC Red 17905, 17924-25 ,-r  34 (2010) (the "Open  Internet Order") (explaining that consumers face significant switching costs when changing broadband providers, including "early termination fees; the inconvenience of ordering, installing, and set­ up, and associated deposits or fees; the possible difficulty returning the earlier broadband provider's equipment and the cost of replacing incompatible customer-owned equipment; the risk of temporarily losing service; the risk of problems learning how to use the new service; and the possible loss of a provider-specific  email address or website.")

Broadband Decisions: What Drives Consumers to Switch – or Stick With – Their Broadband Internet Provider, FCC Working Paper (Dec. 2010), https://apps.fcc.gov/edocs_public/attachmatch/DOC-303264A1.pdf (“a minority of home broadband subscribers switched service providers. The survey also found that there are things that inhibit users from switching service, such as the need to pay set-up fees for new service and the basic hassle of making a switch”)

Prepared Remarks of FCC Chairman Tom Wheeler, “The Facts and Future of Broadband competition” at 4 (Step. 4, 2014), https://apps.fcc.gov/edocs_public/attachmatch/DOC-329161A1.pdf (“Counting the number of choices the consumer has on the day before their Internet service is installed does not measure their competitive alternatives the day after. Once consumers choose a ISP, they face high switching costs that include early-termination fees, and equipment rental fees. And, if those disincentives to competition weren’t enough, the media is full of stories of consumers’ struggles to get ISPs to allow them to drop service.”);

Presentation on Some Competitive Effects of the Comcast-TWC Transaction, DISH Network Corporation, Slide 11 (Jan. 8, 2015) ("Comcast is almost like the Hotel California of broadband; Almost nobody can leave Comcast today. Comcast cites its fear of departing broadband subscribers as a deterrent on foreclosures: '[S]ignificant majorities of broadband subscribers likely would switch ISPs if their provider blocked or degraded access to edge provider content." Opposition at 203.  The Netflix incident shows that Comcast need not fear.");

Presentation on Some Competitive Effects of the Comcast-TWC Transaction, DISH Network Corporation, Slide 13 (Jan. 8, 2015) ("A Real World Example of Blocking and Degradation - the Netflix incident… Consumers went from being able to access Netflix  content at 720p to 'nearly VHS' quality; according to the GSG Survey, Comcast's church should have increased as a result.");

 

 

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