Appeals Court Strikes Down FCC's Net Neutrality Rules


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For the past few years, Verizon has been in a bitter battle with the FCC over the Commission's enforcement of net neutrality rules. The case made its way all the way to the Washington D.C. Court of Appeals where both sides argued for whether or not the Commission could enforce the rules.

The Washington D.C. Circuit Court of Appeals issued its anticipated ruling today in Verizon v. FCC with Verizon being named the victor in a 2-1 decision. The decision guts the FCC's Open Internet Order - a set of rules that intended to prevent ISPs from discriminating against certain types of traffic. For example, Verizon wouldn't be able to give preference to Redbox over Netflix under the FCC's rules. With those rules gutted, Verizon and other ISPs now have free reign to either slow down transfer speeds for competitors or make those competitors pay for speedy access to customers.

Wow, that sounds pretty horrible. Why did the appeals court rule in favor of something that seems so anti-consumer? Well, it's kind of the FCC's fault. While the ruling holds that the FCC has general authority over how ISPs treat Internet traffic, the courts say that the Commission didn't provide a compelling enough reason to justify its authority over specific instances.

Here's the relevant bit of the decision:

As we explain in this opinion, the Commission has established that section 706 of the Telecommunications Act of 1996 vests it with affirmative authority to enact measures encouraging the deployment of broadband infrastructure. The Commission, we further hold, has reasonably interpreted section 706 to empower it to promulgate rules governing broadband providers’ treatment of Internet traffic, and its justification for the specific rules at issue here—that they will preserve and facilitate the “virtuous circle” of innovation that has driven the explosive growth of the Internet—is reasonable and supported by substantial evidence. That said, 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.

So, where does this leave us - the Internet consumers that will be most affected by this? Well, there are two ways this can now go. Either the FCC can appeal to the Supreme Court, or they can just let this fight go. For the former, the Supreme Court would likely either refuse to hear it or rule in favor of Verizon again considering the current makeup of the court.

As for the latter, it's not like the rules were stopping ISPs from introducing programs that violates the net neutrality philosophy. During CES last week, AT&T announced Sponsored Data - a new plan that allows content providers to pay for their customers' data. In essence, AT&T is letting the big guys pay to win while small businesses will be forced to compete at a major disadvantage.

With the FCC's net neutrality rules being gutted like this, it's really only a matter of time before all of the major ISPs introduce something similar to sponsored data. For you to reliably enjoy Netflix on Time Warner Cable, Netflix will now have to pay Time Warner for faster access to your home. This will in turn force Netflix to raise its prices. It would also negatively impact small businesses and startups that rely on streaming to deliver content as they wouldn't be able to afford the fees. This would negatively impact innovation and competition as only the established players could afford the gatekeeper fees.

In the end, all of the above is merely speculation until we know how the FCC is going to progress from here. The net neutrality rules were put into place by former FCC Chairman Julius Genachowski. His successor, Tom Wheeler, was a former lobbyist for the telecom industry so the chances of him appealing the decision are slim to none. Still, miracles can happen as Wheeler supported and helped set up an agreement that lets Americans unlock their phones after their contract has expired.

UPDATE: FCC Chairman Tom Wheeler has issued the following statement in regards to today's ruling:

“The D.C. Circuit has correctly held that ‘Section 706 . . . vests [the Commission] with affirmative authority to enact measures encouraging the deployment of broadband infrastructure’ and therefore may ‘promulgate rules governing broadband providers’ treatment of Internet traffic.’ I am 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. 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.”

[h/t: Ars Technica] Image via Wikimedia Commons