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.”

14 comments
Comments feed for this article
December 28, 2010 at 11:22 am
Steven
“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.”
Be careful here. There are substantial fixed costs in providing internet service, so Ramsey pricing considerations may require efficient pricing to depend on both cost- and demand-side parameters. Of course, two-part tariffs may also solve the Ramsey problem without having marginal prices depend on demand-side factors. But whether this works depends on the exact details on how we model consumer heterogeneity and the service providers’ information. So it isn’t obvious that efficient pricing will depend only on cost-factors.
December 28, 2010 at 11:04 pm
jeff
yes i was thinking of two-part tariffs to meet any revenue target (like covering fixed costs.) i will have to think about what conditions are necessary for those to be sufficient.
December 28, 2010 at 12:10 pm
Doc Merlin
This seems designed to protect spammers and botnets.
December 28, 2010 at 4:36 pm
Walt French
Thank you for what is far-and-away the most intelligent summary of the wired broadband rules that I have seen.
But I’ll take issue with “So ‘lighter users subsidizing heavier users’ sounds unfair but its really orthogonal to the principles of efficient network management.”
Agreed, the two are not the same. But unless there are peculiar time-of-day preferences that have many light users packed into one hour per day, while a few heavy users spread out over the other 23, a heavy user is more likely to cause congestion.
Once you get to a large number of users, users’ responses to pricing can get predictable. High-volume (or perhaps, low-latency) usage could be priced at a premium only between 6PM and 10PM to let those who are willing to pay for convenience get a good movie experience or quality VoIP calls, while cost-sensitive users (especially, torrent sites or movie plans that allow 30-day viewing) could be pushed into off-peak hours.
Also, the stochastic nature of networks means it’s unrealistic to think we could set tolls at zero until 100% capacity is reached. Again, time-of-day pricing, even if it charges a premium when the pipes are only 90% full, is realistic.
Finally, I find it interesting that the fixed line ISPs have every incentive to price like a monopoly — most importantly, they “should” maximize profits by raising prices above the competitive marginal cost = marginal price formula. Yet, the FCC neutrality rules do nothing to advance the economically optimal “competitive equivalent” pricing. If you have insights about what it costs an ISP to add an extra line, or to put a marginal GB/sec of capacity into a given neighborhood, it’d be interesting to see the contrasts between fixed and variable costs, versus prices for same. My persona belief is that per the “fairness” criterion, unlimited plans are bad distortions of economics, unless consumers highly value the ability to have spurt usage without paying a penny more ex post.
December 28, 2010 at 11:05 pm
jeff
thanks for your comments. i agree with you about unlimited plans.
December 28, 2010 at 6:05 pm
John 4
“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 is an honest question, but it seems like the cost of a datagram being delivered more slowly than usual is not independent of the content it contains. If you’re streaming Netflix and your movie keeps having to buffer, that is very “costly” – much more costly than if my mail program takes a little longer to download my mail, or to load a random web page. Isn’t this kind of cost relevant to pricing: won’t Netflix want to pay to get “guaranteed’ delivery at the appropriate speed, while other’s won’t want to pay for this?
December 28, 2010 at 7:07 pm
Walt French
No, Netflix should NOT pay for this as they do not want the bandwidth; the Netflix customer is the one who wants the bandwidth.
Look at the whole cost of carriage issue with the cable TV folks and you see how pretty soon the ISPs would be selling our eyeballs to the highest bidders, while we play dumb.
Likewise, if I pay for bits, I don’t want some bits to cost more than others, as having the content originator pay, or to get crappy service from YouTube if I’m paying the same as I do for bits from Pandora.
Customers should pay for reasonable service levels, regardless of the provider.
December 28, 2010 at 11:10 pm
jeff
(probably just echoing walt’s reply but…) if there is some price for uninterrupted service and netflix faces the same price as its customer does then there is no reason to have netflix pay it. at best the outcome would be equivalent: either netflix pays and raises the price of movies accordingly or the viewer pays. but typically it is more efficient to give the viewer the option to pay. (some viewers may be willing to tolerate interruptions if the price is too high.)
December 29, 2010 at 4:21 pm
Walt French
At the risk of redundundundancy:
When I pay Comcast, SBC or whomever for service, I buy XXX mB/Sec access to an unlimited amount of data.
I am already paying my ISP for the Netflix movies or Sirius radio or Skype videocalls to be delivered to me. There is NO reason for the ISP to complain that Netflix is flooding its network with bits, because the ISP’s customers are merely exercising their rights to receive what they have paid for. If Comcast needs extra $$$ from Level3 to fulfill their contract with their customers, then they signed a deal with their customers that they had no intention of fulfilling, and they are essentially admitting to fraud. If they are actually deliver inferior service to Level3’s bits, they ARE defrauding me of right to receive a stream of data that *I* already paid the ISP for.
This is why, “transparency” is the number one issue.
December 28, 2010 at 8:09 pm
Affiliate Marketing Explained – What You Need To Know To Get It Right « Affiliate Marketing To Create Online Income
[…] customer support . All of these facets are part of the service provider’s responsibility. In order to be an affiliate marketer, a desire to succeed is required, and additionally patience. A lot of […]
December 29, 2010 at 12:30 pm
links for 2010-12-29 | KevinBondelli.com: Youth Vote, Technology, Politics
[…] The FCC Net Neutrality Order « Cheap Talk […]
December 30, 2010 at 12:06 am
Mark D.
If Comcast needs extra $$$ from Level3 to fulfill their contract with their customers, then they signed a deal with their customers that they had no intention of fulfilling, and they are essentially admitting to fraud.
Not even close. What you are suggesting amounts to a “receiver pays” settlement rule, which would mean that large content providers like Netflix could transmit their traffic essentially for free, because charges on the traffic receiver would work back through the settlement system to provide a net subsidy for generators of large amounts of traffic (modulo loop costs).
What actually prevails on the Internet (among sufficiently large carriers) is much closer to a “sender pays” rule. Comcast is simply using its market power to be treated like a carrier in this instance, demanding settlements to carry traffic the rest of the way to its customers.
That doesn’t mean that customers get service for free. For most customers local loop costs far outweigh anything a carrier might collect in traffic settlements. Short of the opposite system where receivers cover the entire costs of transit, there is nothing dishonest about it either. There is no fine print in your phone contract that prohibits your carrier from collecting settlement charges.
All telecommunications systems work this way. Can you call somebody who doesn’t pay their bill? Can they call you? What if their carrier doesn’t pay settlement charges?
What about the postal system? Suppose you rent a post office box capable of receiving an “unlimited” amount of mail. Does that mean that anyone in the world should be able to send you things without paying postage? The postal system could be run that way, but it isn’t, for rather obvious reasons.
December 30, 2010 at 11:05 am
Walt French
@Mark, Netflix does NOT generate traffic, it FULFILLS my demand for its bits.
You apparently know much more about the plumbing than I, but let’s consider what would happen when an individual ISP’s network gets congested internally: as normally expected under IP rules, datagrams get dropped and the requestor repeats the request. Once some sufficiently-high percent of utilization is hit, performance would degrade dramatically. Netflix might have to re-send packets dozens of times, incurring extra costs, simply due to the ISP’s inability to maintain decent service levels.
That’d be great: reward Comcast for failure to adequately provision or maintain its network by increasing charges to people trying to conduct business on the internet.
The obvious problem is that Comcast is claiming to provide unlimited service for a flat fee. As you observe, this pricing is different from its cost structure, and in that sense economically inefficient. If users were to bear an incremental charge consistent with the ISP’s costs, they could opt to avoid the congestion — in the extreme, by choosing an ISP that made a different choice about reliability, price and capacity. These hidden charges — my ISP would raise the cost to Netflix and that would be passed on to me, as well as other ISP’s customers — are the bane of today’s schemes.
May 11, 2014 at 9:06 pm
pserscafeak@gmail.com
It’s very good!I believe everyone will like it.
coach bag factory outlet for women http://www.craftsmanridingmowers.net/css/wzmgzof.asp?tip=3b3b317ffa708f5af722347d8fdae6d7.html