The new chairman of the Federal Communications Commission, Tom Wheeler, told an audience at Ohio State University that he would support Internet service providers charging streaming video services like Netflix Inc. (NASDAQ:NFLX) a premium for bandwidth. The statement, which Wheeler made during a question-and-answer session following a policy speech as OSU, seems to contradict the FCC’s Open Internet Order, which the FCC passed in 2010 and is currently being challenged in court by Verizon Communications Inc. (NYSE: VZ).
Given Wheeler’s history as a lobbyist for cable and wireless industries, the statement has raised more than a few eyebrows.
“I think we’re also going to see a two-sided market where Netflix might say, ‘well, I’ll pay in order to make sure that you might receive, my subscriber receives, the best possible transmission of this movie,’” Wheeler said. “We want to observe what happens from that, and we want to make decisions accordingly, but I go back to the fact that the marketplace is where these decisions ought to be made, and the functionality of a competitive marketplace dictates the degree of regulation."
The Open Internet Order, however, states that ISPs may not “unreasonably discriminate” against types of traffic.
“For a number of reasons ... a commercial arrangement between a broadband provider and a third party to directly or indirectly favor some traffic over other traffic in the broadband Internet access service connection to a subscriber of the broadband provider (i.e. 'pay for priority') would raise significant cause for concern.”
To be fair, Wheeler also said that stands for “an open Internet” and that he expects a court decision on the rule will affirm the FCC’s previous position.
This didn’t stop several consumer advocacy groups from criticizing the comments and saying that Wheeler needs to clarify his position.
“Allowing ISPs to charge for prioritization would encourage artificial scarcity, depress competition, harm online innovation, and threaten the very existence of the open Internet,” said Craig Aaron and Derek Turner, the CEO and research director, respectively, of Free Press.
Verizon has come at odds with companies like Netflix and YouTube in the past, and has even been accused of not upgrading broadband infrastructure to limit the availability of streaming video.
What do you think about Wheeler’s comments? Should ISPs be allowed to charge streaming video companies like Verizon? Let us know in the comments.