You can find it here, thanks to a reader Elisa for hunting it down. The core is paragraphs 43-112 (starting on page 27) which lay out the new rules. I will give some excerpts and my own commentary.

The regulations break down into 4 categories: transparency, no blocking, no unreasonable discrimination, and reasonable network management. Transparency is what it sounds like: providers are required to maintain and make available data on how they are managing their networks. The blocking and discrimination rules are the most important and the ones I will focus on.

No Blocking.

A person engaged in the provision of fixed broadband Internet access service, insofar as such person is so engaged, shall not block lawful content, applications, services, or non- harmful devices, subject to reasonable network management. (paragraph 63)

This is the clearest statement in the entire document. (Many phrases are qualified by the “reasonable network management” toss-off.  In the abstract that could be a troubling grey area, but it is pretty well clarified in later sections and appears to be mostly benign, although see one exception I discuss below.)  The no-blocking rule is elaborated in various ways:  providers cannot restrict users from connecting compatible devices to the network, degrading particular content or devices is equivalent to blocking and not permitted, and especially noteworthy:

Some concerns have been expressed that broadband providers may seek to charge edge providers simply for delivering traffic to or carrying traffic from the broadband provider’s end-user customers. To the extent that a content, application, or service provider could avoid being blocked only by paying a fee, charging such a fee would not be permissible under these rules. (paragraph 67)

No Unreasonable Discrimination

A person engaged in the provision of fixed broadband Internet access service, insofar as such person is so engaged, shall not unreasonably discriminate in transmitting lawful network traffic over a consumer’s broadband Internet access service. Reasonable network management shall not constitute unreasonable discrimination.

This rule is heavily qualified in the paragraphs that follow.  Here is my framework for reading these.  There are three typical ways a provider would discriminate:  differentially pricing various services (i.e. you pay differently whether you are accessing Facebook or YouTube), differentially pricing by quantity (i.e. the first MB costs more or less than the last), or differentially pricing by bandwidth (i.e. holding fixed the quantity you pay more if you want it sent to you faster, for example by watching HD video.)

The rules seem to consider some of these forms of discrimination unreasonable but others reasonable.  The clearest prohibition is against the first form of discrimination, by data type.

For a number of reasons, including those discussed above in Part II.B, 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. (paragraph 76)

Such a ban is clearly dictated by economic efficiency.  The cost of transmitting a datagram is independent of the content it contains and therefore efficient pricing should treat all content equally on a per-datagram basis.  This principle is the hardest to dispute and the FCC has correspondingly taken the clearest stand on it.

As for quantity-based discrimination:

We are, of course, always concerned about anti-consumer or anticompetitive practices, and we remain so here. However, prohibiting tiered or usage-based pricing and requiring all subscribers to pay the same amount for broadband service, regardless of the performance or usage of the service, would force lighter end users of the network to subsidize heavier end users. It would also foreclose practices that may appropriately align incentives to encourage efficient use of networks. The framework we adopt today does not prevent broadband providers from asking subscribers who use the network less to pay less, and subscribers who use the network more to pay more.  (paragraph 72)

So tiered service by quantity is permitted.  Note that the wording given above is off the mark in terms of what efficiency dictates.  It is not quantity per se that should be priced but rather congestion.  A toll-road is a useful metaphor.  From the point of view of efficiency, the purpose of a toll is to convey to drivers the social cost of their use of the road.  When drivers must pay this social cost, they are induced to make the efficient decision whether to use the road by comparing it to their their private benefit.

The social cost is zero when traffic is flowing freely (no congestion) because they don’t slow anybody else down. So tolls should be zero during these periods.  Tolls are positive only when the road is utilized at capacity and additional drivers reduce the value of the road to others.

So “lighter users subsidizing heavier users” sounds unfair but its really orthogonal to the principles of efficient network management.  In an efficiently priced network the off-peak users are subsidized by the peak-users regardless of their total amount of usage.  And this is how it should be not because of anything having to do with fairness but because of incentives for efficient usage.

There is one big problem with this toll-road metaphor when it comes to the Internet however.  The whole point of peak-pricing is to signal to drivers that its costly now to drive.  But when you are downloading content from the Internet things are happening too fast for you to respond to up-to-the-second changes in congestion.  It is just not practical to have prices adjust in real time to changing network conditions as dictated by peak-load pricing.  And without users being able to respond to congestion pricing their purpose would not be served by calculating prices ex post and sending users the bill at the end of the month.

Given this, it could be argued that a reasonable proxy is to charge users by their total usage.  It’s a reasonable approximation that those with greater total usage are also most likely to be imposing greater congestion on others.  And the FCC rules permit this.  (Note that in particular, what is implied by tiered pricing as a proxy for congestion pricing is not a quantity discount but in fact a quantity surcharge. The per-datagram price is larger for heavier users.)

Discrimination by bandwidth is not directly addressed.  It is therefore implicitly allowed because paragraph 73 reads “Differential treatment of traffic that does not discriminate among specific uses of the network or classes of uses is likely reasonable. For example, during periods of congestion a broadband provider could provide more bandwidth to subscribers that have used the network less over some preceding period of time than to heavier users.”

But the following paragraph comes from the section on Network Management.

Network Congestion. Numerous commenters support permitting the use of reasonable network management practices to address the effects of congestion, and we agree that congestion management may be a legitimate network management purpose. For example, broadband providers may need to take reasonable steps to ensure that heavy users do not crowd out others. What constitutes congestion and what measures are reasonable to address it may vary depending on the technology platform for a particular broadband Internet access service. For example, if cable modem subscribers in a particular neighborhood are experiencing congestion, it may be reasonable for a broadband provider to temporarily limit the bandwidth available to individual end users in that neighborhood who are using a substantially disproportionate amount of bandwidth. (paragraph 91)

At face value it gives well-intentioned providers the ability to manage congestion.  But there doesn’t seem to be a clear statement about how this ability can be integrated with pricing.  Can providers sell “managed” service at a discount relative to “premium” service?  One re-assuring passage emphasizes that network management practices must be consistent with the no-discrimination-by-data-type mandate.  So for example, congestion caused by high-bandwidth video must be managed equally whether it was from YouTube or Comcast’s own provided video services.

Finally, the rules permit what’s called “end-user controlled” discrimination, i.e. 2nd degree price-discrimination.  This means that broadband providers are permitted to offer an array of pricing plans from which users select.

Maximizing end-user control is a policy goal Congress recognized in Section 230(b) of the Communications Act, and end-user choice and control are touchstones in evaluating the reasonableness of discrimination.215 As one commenter observes, “letting users choose how they want to use the network enables them to use the Internet in a way that creates more value for them (and for society) than if network providers made this choice,”and “is an important part of the mechanism that produces innovation under uncertainty.”216 Thus, enabling end users to choose among different broadband offerings based on such factors as assured data rates and reliability, or to select quality-of-service enhancements on their own connections for traffic of their choosing, would be unlikely to violate the no unreasonable discrimination rule, provided the broadband provider’s offerings were fully disclosed and were not harmful to competition or end users.

While this paints a too-rosy picture of the consumer-welfare effects of 2nd degree price-discrimination (it typically makes some consumers worse off and can easily make all consumers worse off) it seems hard to imagine how you can allow the kind of tiered pricing already discussed and not allow consumers to choose among plans.

So the FCC is allowing broadband providers to rollout metered service, possibly with quantity premiums, and there is a grey area when it comes to bandwidth restrictions.  These are consistent with, but not implied by efficient pricing, and of course we are putting them in the hands of monopolists, not social planners.  They certainly fall short of what net-neutrality hawks were asking for but it was wishful thinking to imagine that these changes were not coming.

I think that the no-blocking and no unreasonable discrimination rules are the core of net-neutrality as an economic principle and getting these is more than sufficient compensation for tiered pricing.

Final disclaimer:  everything above applies to “fixed broadband providers” like cable or satellite.  The FCC’s approach to mobile broadband can be summarized as “wait-and-see.”

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