Court Strikes Down Net Neutrality, Netflix

Verizon argued it has the right to throttle competing services or charge more for them.

A U.S. court of appeals has ruled that the Federal Communications Commission (FCC) does not have the authority to prevent broadband providers from blocking content from competitors, and has thrown into doubt the FCC’s ability to regulate the Internet at all.

In a ruling issued Jan. 14, a three-judge panel of the U.S. Court of Appeals for Washington D.C. agreed with Verizon Communications that the net neutrality rules created by the Federal Communications Commission (FCC) in 2010 were invalid because the FCC didn’t have the authority to enforce them.

The FCC issued net neutrality rules in an effort to prevent telcos such as Verizon and Comcast Communications Corp., which own the wires that connect most homes and businesses to the Internet, from using their control of the physical networks to the unfair advantage of their Video-on-Demand (VoD) and other content services.

The regulations stemmed from complaints from Netflix Corp. and other content-only service providers that carriers were impeding their services by throttling the bandwidth available to providers that competed with their own similar services. Comcast admitted in 2008 and again in 2010 that it had restricted the bandwidth available to Netflix and other services that compete with its own Xfinity content service, but claimed it did so as part of its normal effort to manage its networks to optimize performance.

If regulations protecting net neutrality were eliminated, Verizon, Comcast and other carriers could prioritize traffic for their own services while slowing or charging extra fees to transport content from competing services.

Comcast and Verizon have both denied throttling Netflix or other services since then, but have been accused almost continuously of doing so by customers, often even on their own customer-support forums.

Verizon’s suit argued that throttling certain types of traffic at certain times when the network was heavy is a normal part of network management, and that carriers are better equipped and better able to manage the flow of packets through a network than agencies of the federal government are to regulate policies governing those decisions.

Verizon’s key argument, however, was that, while Congress gave the FCC authority to regulate broadband providers in language within the Telecommunications Act of 1996, the FCC itself had defined broadband as an information service, not a telecommunications service. The FCC is empowered to regulate the wires, networks and functions that allow communication over those wires. Its ability to regulate information services is far more limited (or, in the contention of some carriers, nonexistent).

Since the FCC itself classified broadband as beyond most of its regulatory power, the appeals court judges concluded, it also decided its ability to regulate competition among information services should be similarly restricted. “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,” the court’s decision read.

The FCC could get around that by reconsidering its position on the difference between broadband services and telecommunications, which fall under common carriage rules that require a level playing field. It is likely to face as much opposition to making that change as it did in trying to assert its right to regulate the Internet in the first place, according to a Washington Post story quoting John Bergmayer, a senior staff attorney at Public Knowledge, which backs net neutrality.

“The reclassification is politically tricky but legally clear,” Bergmayer said. “The other question involves lawyers arguing for hours about what is and isn’t common carriage. That’s politically easier, but legally more difficult.”

FCC Chairman Tom Wheeler has spoken out publicly in support of the FCC’s ability to limit anti-competitive behavior in the Internet service business, opposing Republican officials arguing the opposite opinion. Following the ruling, Wheeler told the Wall Street Journal that the FCC would consider appealing the decision. “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,” he said.

 

Image: Shutterstock.com/ Bastian Weltjen

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