Alan Weissberger Regulatory

Net Neutrality Ruling – The Beginning of the End or the End of the Beginning?

In his January 8th speech at the Computer History Musuem (CHM), F.C.C. Chairman Tom Wheeler said we were in the midst of a transition to a “4th Generation Network” which had an “Open Internet” as it’s foundation. The concept of net neutrality– where there are no privileges or added costs or special deals for high bandwidth media/content delivery companies- was clearly implied.

”Not unlike how the radio stations of the 1920s needed to be protected from technical interference, today’s entrepreneurs need to have a fair opportunity to reach their customers over the biggest technological channel of them all—the Internet,” Wheeler said during his prepared remarks at the CHM.

”No one in Silicon Valley needs to be convinced of the importance for innovation and overall societal welfare of our broadband networks. Keeping them open for any and all lawful uses is a major policy imperative.  It is essential in the public interest of our
country that the government, and by government I mean the FCC, have the power to oversee the broadband networks and to intervene to forestall their exploitation by unacceptable acts,” Wheeler added.

That Open Internet policy is now in jeopardy. On January 14th a federal appeals court tossed out the FCC’s Open Internet rules, permitting Internet Service Providers (ISPs) to make deals with streaming media and web content companies (Netflix, Amazon, Apple, or Google) for faster content delivery at a higher price.

The US Court of Appeals for the DC Circuit ruling stated that the FCC’ s Open Internet Order is invalid and that the regulator had overstepped its authority when (in 2010) it classified broadband as an ‘information service,’ not a ‘telecommunications service.’  Having done that, the FCC could not then impose its “anti-discrimination” and “anti-blocking” rules on ISPs, the court ruling stated.

The court stated: “Even though the Commission has general authority to regulate in this arena, it may not impose requirements that contravene express statutory mandates. Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order.”

The FCC had tried to prevent those deals, saying they would give large, rich content/media companies an unfair edge in reaching consumers. But since the Internet is not considered a utility under federal law, the court said, it is not subject to regulations banning such arrangements. That paves the way for ISPs like Verizon to cut a deal with Netflix, Amazon or other content providers for higher speed Internet delivery services.

For consumers, the ruling could usher in an era of tiered Internet service, in which they get some content at full speed while other websites appear slower because their owners chose not to pay up.

According to the NY Times broadband Internet providers (like Verizon) that have spent billions of dollars building their networks, said the ruling confirmed their right to manage their networks as they saw fit.

“Verizon has been and remains committed to the open Internet, which provides consumers with competitive choices and unblocked access to lawful websites and content when, where and how they want,” the company said in a statement. “This will not change in light of the court’s decision.”

Much of the argument over net neutrality has been theoretical. Verizon noted in its court papers that the F.C.C. documented only four examples over six years of purported blocking of Internet content by service providers. The issue came into focus in the agency’s review of the purchase of NBC Universal by Comcast. As a condition of approving the deal, the F.C.C. made Comcast promise that it would abide by the Open Internet rules for seven years, even if the rules were modified by the courts.

Consumer advocates warned that higher costs to content providers could be passed on to the public, and called the ruling a serious blow against the concept of a free and opens Internet. “It leaves consumers at the mercy of a handful of cable and phone providers that can give preferential treatment to the content they profit from,” said Delara Derakhshani, policy counsel for Consumers Union.

“I would not be surprised if business development folks in ISP’s around the country were now looking for ways to partner with content creators,” said Michael Weinberg, acting co-president of Public Knowledge, a consumer advocacy group. The companies’ goal is “to make sure their unpartnered service is bad enough that a paid partnership is attractive.”

“It takes the Internet into completely uncharted territory,” said Tim Wu, a Columbia University law professor who coined the term “net neutrality.”

Mr. Wheeler said the FCC might appeal the ruling. In a statement, he wrote that he was “committed to maintaining our networks as engines for economic growth, test beds for innovative services and products, and channels for all forms of speech protected by the First Amendment.” He added, “We will consider all available options, including those for appeal, to ensure that these networks on which the Internet depends continue to provide a free and open platform for innovation and expression, and operate in the interest of all Americans.”

A January 15th NY Times editorial called the ruling “a disappointing Internet decision.” 

“If this ruling stands, broadband providers would be free to strike deals with companies like Netflix and Apple to pay to have their movies, software and other data streamed to customers faster than or ahead of other content. Such deals would hurt smaller businesses or start-ups that cannot afford to pay for preferential treatment.”

“Ideally, Congress would pass a law prohibiting broadband companies from discriminating or blocking content, but that is unlikely to happen given industry opposition. That’s why it’s important for the commission to reclassify broadband as a telecommunications service.”

Craig Aaron of Free Press told PBS he was very much against the court ruling.

“I really think this court decision puts at risk so much of what we love about the Internet. With these rules being invalidated, it really leaves consumers at the mercy of phone and cable companies, who are now free to block websites if they want to, interfere with traffic, favor certain sites and services over other sites and services. And I think that’s bad news for the average Internet user, that the agency that is supposed to be protecting them has been told it has no oversight of the most important communications network of the 21st century.”

But not everyone dissented. Former F.C.C. Commissioner Robert M. McDowell (who voted against adopting the Open Internet rules in 2010) told the WSJ: “The Internet was working beautifully before these rules were implemented. It will thrive even more now that they have been struck down. In the meantime, ample laws already exist to protect consumers should market failures occur.”

CNET is attempting to gauge public perceptions of the new network neutrality rules by conducting a poll:  “How concerned are you about Net neutrality? The FCC’s Net Neutrality rules got wiped out in a court ruling, leaving some people unimpressed and others predicting Internet Armageddon.” You can read all about it and cast your vote here 

Stay tuned for a follow up article that will preview the F.C.C.’s January 30th open commission meeting, which will cover topics described in this meeting announcement.

Those issues will be contrasted with the policy agenda Mr. Wheeler described during his January 8th CHM speech.

Author Alan Weissberger

By Alan Weissberger

Alan Weissberger is a renowned researcher in the telecommunications field. Having consulted for telcos, equipment manufacturers, semiconductor companies, large end users, venture capitalists and market research firms, we are fortunate to have his critical eye examining new technologies.

3 replies on “Net Neutrality Ruling – The Beginning of the End or the End of the Beginning?”

Thanks Alan for summarizing what is going with this ruling and for bringing in the varied points of view in this piece. Will this be the end of the Internet as we know it? Will it mean the “cablelization” of the Internet with different tiering and packages, as depicted in this Huffington Post, post :

and discussed in this column in yesterday’s Wall Street Journal:

Will it hurt new companies or producers of content that don’t have the money to pay to play, as some suggest?

Or, as former FCC Commissioner McDowell suggests, are there already enough protections in the form of anti-trust and other regulations that will protect consumers?

Prior to the rules that were just struck down by the court, the FCC, under FCC Chairman Powell, had created guidelines to ensure that broadband providers would respect the four freedoms of the Internet.

Those guidelines seemed to work pretty well….

Ken, I think the ruling will shut out any start-ups that attempt to compete with the big media/on-line streaming companies, e.g. Netflix, Google (YouTube), Amazon & Apple.
I also think that consumers of those services will be paying higher bills as the content providers will be forced to pay more to ISPs for high speed Internet content delivery.
The deals between ISPs & content companies will probably be hush-hushed/secret and not disclosed so competitors will be left in the dark.

It will be interesting to see the impact on small businesses and producers of content. I definitely could see a scenario where services that were “free” might have to start charging the producers of content or raising their prices.

Having said that, the long-term impact is that it will reduce the amount of “noise” in the system and maybe the quality (a very subjective term) content will float to the surface.

It might also be an impetus for the SocialMesh network concept described by Devabhaktuni Srikrishna and Rajeev Krishnamoorthy in this video, whereby an alternate path is created by the endpoints:

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