Google and Verizon's net neutrality proposal explained

After a week of rumors hinting at Google and Verizon brokering some sort of net neutrality "deal," the two companies made some waves this afternoon with a hastily-arranged press call during which CEOs Eric Schmidt and Ivan Seidenberg emphatically denied any sort of formal business arrangement and instead put forth what they called a "joint policy proposal" -- seven principles they say will preserve the open internet while allowing network operators the flexibility and freedom to manage their networks.

What's interesting is that the announcement comes just few days after the FCC declared its closed-door net-neutrality meetings with ISPs and other interested parties to be dead -- it's odd for Google and Verizon to claim their new proposal is just an extension of their joint statement in general support of net neutrality from last October when it's very clearly an articulation of a specific plan that was undoubtedly proposed and rejected during those failed meetings.

Now, we don't know for sure what happened, but we've got a theory: the proposal reads to us like Verizon's basically agreeing to trade neutrality on its wired networks for the right to control its wireless network any way it wants -- apart from requiring wireless carriers and ISPs to be "transparent" about network management, none of the neutrality principles that govern wired networks will apply to wireless networks. That's a big deal -- it's pretty obvious that wireless broadband will be the defining access technology for the next generation of devices and services. But you know us, and we don't do hysterics when we can do reasoned analysis instead -- so grab a copy of the official Verizon / Google Legislative Framework Proposal right here and let's break it down step by step, shall we?

So, first things first: Google and Verizon were adamant that this plan is not a formal business deal between their companies -- it's just a policy proposal they're suggesting to the FCC. That said, Verizon's already committed to following the rules of the plan, and Google CEO Eric Schmidt repeatedly said on the call that Google would never pay for prioritized access and Google products would remain on the public internet. That's important, because it sets up check and balances between two companies: if Verizon does something to its network that affects the public internet, Google will be sure to notice, and no one wants an angry Google. Those are just the baseline promises, though, and they only affect Verizon's network. For this to really mean anything, the FCC will have to adopt these rules as law. That's important to remember -- this is just the framework Google and Verizon want, and they're announcing it and agreeing to live by it in the meantime in order to give it some momentum. It's still up the FCC to actually implement the suggestions, which are as follows -- there's actually nine, if you count them all:

Consumer protection. Under the Google / Verizon plan, wired ISPs will be prohibited from blocking any lawful traffic their customers want to send regardless of application or service, and they'll have to allow customers to connect any legal devices that don't harm the network or other users.

Non-discrimination. This is one of the big ones -- it prohibits wired ISPs from discriminating against any traffic or content in a way that harms competition or users. Any sort of traffic prioritization is automatically presumed to violate this rule, but ISPs will be able to argue some exceptions.

Transparency. Google and Verizon are making a big deal out of this one, since it's the only one that applies to wireless networks as well -- ISPs and carriers will have to "disclose accurate and relevant information in plain language" about what their networks are capable of, how they're managing them, and what their plans are. That means if Verizon wants to block BitTorrent on its 3G network (for example), it'll have to come out and say so. The idea is for consumers to know what is and isn't allowed on each network -- that way they can choose ISPs with a full set of facts. We're not sure network management practices will factor into consumer preferences for wireless carriers the same way as devices, speed and reliability do -- in fact, we're pretty sure most people will just ignore them and just pick the phone they want -- but this is apparently all Verizon's willing to give up when it comes to its mobile network.

Network management. This goes hand-in-hand with transparency -- ISPs and carriers are allowed to engage in any "technically sound" network management practices to reduce congestion, ensure security, address harmful traffic, ensure service quality, prioritize general classes of traffic, and simply go about the daily business of operating their networks. These are important carve-outs, and they represent an important compromise: ISPs have to be generally open with their networks, but they're also allowed to manage them in order to provide the best service -- as long as they're transparent about their management practices. Sounds about right to us.

Additional online services. This is a going to be one of the more controversial element of the plan, as far as we can tell. It says that carriers and ISPs can offer other, non-internet services to subscribers, as long as they're "distinguishable in scope and purpose" from regular internet access. That doesn't mean they have to be totally separate -- these other services could make use of internet content -- but customers would have to know the difference. That means Verizon could offer a second network just for certain types of content -- CEO Ivan Seidenberg mentioned 3D as one example -- and charge customers extra. Is this a good idea? We'd find out over time: the plan calls for the FCC to evaluate the effects of alternative networks annually and immediately report if these services threaten the regular internet or have are being used to evade the rest of the net neutrality provisions.

Wireless broadband. Possibly the most important provision of the entire agreement, and the biggest compromise. Under Verizon and Google's plan, wireless networks would be excused from every provision except the transparency requirement. Why? Because of the "unique technical and operational characteristics of wireless networks," of course. Or... perhaps because Google has an interest in allowing Verizon to do whatever it wants with traffic on its Android-dominated wireless network. Either way, it's hard to reconcile the stated need for net neutrality in this agreement with a giant exception for wireless networks, which are quickly becoming the most important networks of all. We'll have to see how the fight over this provision shakes out.

Case-by-case enforcement. An interesting provision that basically guts FCC's power to properly enforce the proposal, as far as we can tell. It says the FCC can enforce the consumer protection and non-discrimination provisions, but it can't make any further rules building on those provisions, and conflicts would be decided using "non-governmental dispute resolution processes" which would take precedence over the FCC. What's more, the maximum fine the FCC could level would be just $2m -- chump change for major carriers.

Regulatory authority. Take with one hand, and give back with another -- this provision restores the FCC's authority to regulate the internet that was taken away by the Comcast case. On a fine level, this splits up authority over access and content -- the FCC has the power to regulate broadband access, but it can't say anything about content.

Broadband access for Americans. This provision basically says the Universal Service Fee most of us pay on our phone bills should be used to build broadband networks in addition to phone lines -- we don't know anyone who disagrees.

So that's the plan -- it's actually more or less the status quo in many ways, if you think about it. But the thing about the status quo is that it's not enshrined as formal policy -- adopting this plan would officially mean that wireless networks aren't subject to net neutrality, and that the FCC would have very little power to change that over time. That's a huge compromise, and it's obviously not one the FCC's taking quietly: in a statement today, an agency commissioner said that the proposal had "many problems," and that it was time to "reassert FCC authority over broadband telecommunications, to guarantee an open Internet now and forever." Sounds to us like the real fight's just about to get started -- and keep in mind, we haven't heard anything substantive from other major players like Comcast, AT&T, Sprint, or T-Mobile yet. Buckle up -- it's gonna get nerdy.