Big news yesterday on net neutrality—Verizon and Google announced that they have entered into a joint proposal to “preserve the open Internet and the vibrant and innovative markets it supports, to protect consumers, and to promote continued investment in broadband access.”

Here is our quick analysis, with a deeper review to come over the next few days.

Deal Supports Net Neutrality’s 4 Freedoms, Avoids Some Problems of NPRM

ACT is particularly interested in preserving vibrant and innovative software markets that help drive the Internet economy. We filed comments with the FCC on its Open Internet proceeding, and supported the four principles of network neutrality that already exist, including the newly proposed rule on transparency. However, we also cautioned against what we felt would be some unintended consequences of the proposed non-discrimination principle. In particular, we felt that the FCC’s proposed rules were a harmful form of “prior restraint” on innovative activity, whereas the real concern of any rulemaking should instead be limited to preventing and punishing actual anticompetitive activity.

While we still have some reservations on the Verizon-Google proposal, it’s an improvement on the FCC’s NPRM:

• The proposal’s “Additional Online Services” is a broader category than was the NPRM’s “managed or specialized services” and it appears more permissive, too. That’s a good thing for the development of telemedicine and other services that will require prioritization and quality of service.

• The existing four net neutrality principles ensuring access to applications, content, devices and competition are preserved.

• The proposal appears to allow for different levels of prioritization between types of traffic, something that the NPRM did not permit. While the NPRM took an “all bits are equal” hard line, the proposal says that “all video bits are equal, but all video bits get a higher priority than text bits.” It’s also a concession from Google’s original position, though Eric Schmidt said last week that it has been Google’s position all along.

However, we still have some concerns about prior restraint and the way in which the FCC would implement any legislation based on this proposal:

• Nondiscrimination still applies to online services generally. The presumption is that prioritization is discrimination, unless proven otherwise. As we said in our FCC filing, we believe that the Commission should be focused on anticompetitive conduct in the marketplace—competitor discrimination—, not packet discrimination. The rule prevents Internet providers from charging, but it also prohibits application developers from voluntarily entering into desired arrangements that could benefit application delivery.

• Finally, it should be noted that the proposal advocates for case-by-case enforcement by the FCC, not overarching rulemaking authority. While enforcement rather than overarching industry regulation is preferable, we would prefer greater clarity than what the proposal currently provides.