Net neutrality is not a topic that is unfamiliar with controversy. And the controversy spreads across various different studies and disciplines—issues can range anywhere in the gamut from Constitutional questions about one’s right to freedom of speech or business concerns that arise due to unequal access to certain companies’ websites, among others. So what exactly is net neutrality? It encompasses the idea that any network traffic ought to be able to move from one place to another without discrimination. Whether the traffic comprises photos, music, videos, or webpages, the bottom line is that the Internet should be a forum to freely and democratically give and receive information.
The Federal Communications Commission (FCC) had been working towards this vision by promulgating its Open Internet Order in December 2010. This set of regulations was intended to prevent broadband Internet service providers from blocking or interfering with traffic on the Web, maintaining more or less a level playing field for all. ((Fed. Commc’ns Comm’n, FCC 10-201, Report and Order in the Matter of Preserving the Open Internet (2010).)) This broader vision was founded on the three pillars of transparency, no blocking, and no unreasonable discrimination. ((Id.)) Yet, industry players have combatted the FCC’s efforts in court, and the courts, themselves, have been chipping away at the regulatory framework the FCC has been trying to create.
The most striking and recent blow came from the US Court of Appeals for the DC Circuit’s decision on January 14, 2014, in favor of Verizon Communications, Inc. (Verizon). The court rejected the FCC’s final rules that required broadband providers to treat all Internet traffic equally. ((Gautham Nagesh & Amol Sharma, Court Tosses Rules of Road for Internet, Wall St. J. (Jan. 14, 2014, 7:52 PM), http://www.wsj.com/articles/SB10001424052702304049704579320500441593462.)) Technically, the court did not rule against net neutrality, per se. Rather, the court ruled against the shaky legal foundations from which the FCC created the Open Internet Order. ((See generally Net Neutrality: What You Need to Know Now, Save the Internet, http://www.savetheinternet.com/net-neutrality-what-you-need-know-now (last visited Feb. 23, 2015).)) Among the various points of the court’s reasoning was the point that the FCC explicitly decided to classify broadband as something distinct from a telecom service, yet applied a rule that would saddle broadband providers with traditional “common carrier” telecom service providers’ obligations. ((Nagesh & Sharma, supra note 3.))
This decision does not bode well for either consumers or smaller, provider-dependent businesses. Starting with a discussion of the latter, businesses that rely on broadband providers’ access to their networks, such as Google, YouTube, and Netflix, may have to reconsider not only their business models but their pricing strategies in order to access consumers. For instance, Netflix accounts for 32% of peak Internet traffic in North America, the most of any content provider. ((Id.)) Though it currently charges $7.99 a month for streaming movies and TV shows, the prospect of this content provider having to pay up to $0.80 per user to the broadband providers equates to a loss of nearly 10% of Netflix’s annual revenue. ((Scott Moritz & Cliff Edwards, Verizon’s Victory over FCC Rules Seen as a Loss for Netflix, Bloomberg Bus. (Jan. 15, 2014, 12:04 PM), http://www.bloomberg.com/news/articles/2014-01-14/verizon-victory-on-net-neutrality-rules-seen-as-loss-for-netflix.))
For consumers, it is very possible that the market will transform into one that provides tiered Internet access, basically delivering the best service to the highest bidder. ((Id.)) This leaves power in the hands of broadband providers to experiment with pricing schemes that shape the market to how they see fit—the highest bidder gets the worm. ((Id.)) This would definitely hurt the prospects of wider accessibility to the Internet, especially by organizations too small or not-for-profits that cannot afford extra fees to deliver material more quickly online. ((Id.))
But in May 2014, Tom Wheeler, the Chairman of the FCC, took an abrupt about-face, vowing to strengthen regulations that uphold equal access to the Internet. And for the past year and well into 2015 as we know it, he has been working on new rules to ensure stringent net neutrality standards, especially after having received the nod from President Obama. ((Steve Lohr, F.C.C. Plans Strong Hand to Regulate the Internet, N.Y. Times (Feb. 4, 2015), http://www.nytimes.com/2015/02/05/technology/fcc-wheeler-net-neutrality.html?ref=business&gwh=596A4DF32DB961B08E408F32B31680DE&gwt=pay&_r=0.)) In fact, Chairman Wheeler has been pushing to make the rules even more stringent than the White House was recommending. For instance, one contentious measure has been the move to reclassify the Internet as a “telecommunications service,” which by default, removes it from the category of an “information service” within Title II of the Communications Act. ((Id.)) Through this move, the FCC has been reasserting its Title II statutory authority, subjecting the Internet to common carrier-like treatment, which necessitates serving the public “indiscriminately” with “just and reasonable prices.” ((Jacob Gershman, FCC Firms Up Legal Grounds for Net Neutrality, Wall St. J. (Feb. 8, 2015, 7:20 PM), http://www.wsj.com/articles/fcc-firms-up-legal-grounds-for-net-neutrality-1423441251; see generally Lohr, supra note 11.))
Looking ahead, there is no doubt that this latest move by the FCC will make its path one filled with lawsuits from broadband providers and the industry at large. Already, Wheeler has been incurring the wrath of the industry, which makes it appear unlikely that the January 2014 court decision has actually put anything to rest. Cable and telecommunications companies have vowed to challenge this approach to regulation, citing it as too “heavy-handed,” and that it will deter investment, innovation, and ultimately work to harm consumers. ((Lohr, supra note 11.)) Further criticism of the FCC’s approach comes in the shape of disdain, citing that broadband companies ought not to be classified as telecom services because what they offer is “more complicated than a ‘dumb pipe’ connection between two users.” ((Gershman,supra note 13.)) Either way, the FCC must know that its road to more stringent regulations in the name of net neutrality will not be without its fair share of obstacles.
Ki Hoon Kim
Latest posts by Ki Hoon Kim (see all)
- The Ongoing Battle for Net Neutrality - February 24, 2015
- FINRA Arbitration: Still Room for Improvement - November 28, 2014
- Principal-Agent Issues in Going Private Transactions - October 3, 2014