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February 24, 2014 | From the blogNewsTechnology

Net Neutrality: What Next?

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Domenic Romano

Founder & Managing Partner

One month after the Washington, D.C. federal appeals court struck down FCC net neutrality rules, FCC Chairman Tom Wheeler has announced that the Commission will not appeal the decision.

Following the Verizon v. FCC ruling, companies are feeling the immediate impact of Internet providers restricting the flow of their online information.  While the FCC gears up to rewrite its rules, lawmakers have drawn their own battle lines in support of net neutrality.  When the dust settles, will your Internet service provider be choosing what you see on the Web?

The FCC and Net Neutrality

Net neutrality” is the belief that all online information should be treated equally.  Proponents argue that the Internet operates most efficiently when its content isn’t tailored to a particular audience.  If net neutrality is strictly enforced, “[t]here would be no roadblocks or shortcuts any of the websites can take to make the end user desire their content more.”

In its efforts to enforce net neutrality, the FCC’s 2010 report on “Preserving the Open Internet” contained three basic rules:

1) Transparency: Broadband Internet service providers (“ISPs”) like Verizon and Comcast were required to “disclose information regarding their network management practices, performance, and the commercial terms” of their services;

2) No Blocking: Providers of fixed broadband services like DSL, cable modem or fixed wireless providers couldn’t block lawful content; and

3) No Unreasonable Discrimination: Fixed broadband providers couldn’t unreasonably discriminate during the transmission of lawful network traffic.

On January 14, 2014, the U.S. Court of Appeals for the D.C. Circuit vacated both the FCC’s anti-blocking and anti-discrimination rules.  The court agreed with Verizon and found the rules “illegally treated [ISPs] as regulated utilities, like telephone companies.”  In other words, ISPs are “information services” providers, not “common carriers” for the purposes of the 1996 Telecommunications Act.  Therefore, the court determined, ISPs are not subject to the same degree of government regulation as telephone lines.

The court did uphold the FCC’s transparency rule, however, supporting the Commission’s “authority to oversee Internet service in ways that encourage competition.”  In an attempt to snatch victory from the jaws of defeat, the FCC has focused on the decision’s support for its regulatory authority.  Rather than appeal the recent decision, the FCC has decided to rewrite their net neutrality rules.

Verizon’s Impact on Web Transparency

The court’s decision has led to concerns that ISPs will discriminate against certain types of web traffic, especially those related to competitor’s services.  The “no blocking” rule prevented ISPs from blocking lawful services.  The FCC determined, for example, that Comcast had impermissibly restricted access to peer-to-peer applications such as BitTorrent when they started affecting the profitability of Comcast’s video-on-demand services.  This determination was later overturned, and the practice of strategically blocking access to certain online information has continued.

Additionally, the invalidation of the “no unreasonable discrimination” rule permits ISPs to discriminate in the quality of services they provide, giving rise to fears that certain online services will be forced to pay higher prices or face Internet speed restrictions.  For example, Netflix, which competes with the cable television services of many ISPs, has been outspoken in favor of net neutrality.  In the one-month period since the D.C. Circuit struck down the FCC’s rules, Netflix’s average prime-time speeds have dropped 14%.  In order to maintain adequate speeds, Netflix may succumb to demands of additional compensation from ISPs—costs that may ultimately be passed down to consumers.  Just today, Netflix “reached an agreement with Comcast to make its service run smoother for the cable company’s customers.”

Part of the court’s rationale for striking down the FCC restrictions was that “consumers . . . have options; they can go to another broadband provider if [their connections] . . . have been degraded.”  Such a charge seems to ignore practical realities.  Many Americans have extremely limited ISP options.  Just days ago, mass media giant Comcast announced its intention to purchase Time Warner Cable in a $45 billion deal, which would result in even fewer options for consumers.

New Hope for Net Neutrality?

In light of the Verizon decision, U.S. Representatives Henry Waxman and Anna Eshoo have introduced the Open Internet Preservation Act, with hopes of reinstating the defunct FCC rules via legislation.  Critics, however, have strongly opposed net neutrality and see FCC regulation as unnecessary and unwarranted government intrusion.

Meanwhile, the FCC has announced its intention to redraft its rules to comply with the court’s ruling.  Section 706 of the Telecommunications Act permits the FCC to “[promote] competition in the telecommunications market” rather than try to classify Internet service as a “telecommunications service.”  The new rules should be formalized by late spring or early summer.

Although the FCC may have lost its courtroom battle, the war for net neutrality is waging on in Washington.  Can customers be forced to spend more money on Internet services to maintain the same quality they previously received?  And who’s tampering with your online experience?

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