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Court strikes down FCC’s net neutrality rules, agency may appeal

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An appeals court in Washington on Tuesday ruled that the FCC’s “net neutrality” rules, which prevent companies like Verizon(s vz) from favoring some types of internet traffic over others, are invalid. The 81-page ruling, which was decided by a 2-1 vote with one judge dissenting in part, has big implications for content providers, consumers and the future of the internet. (Here is year-by-year timeline of the legal battles).

In a key passage at the start of the ruling, embedded below, the court wrote:

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.

The court’s ruling is a game-changer because it upsets the FCC’s current practice of requiring broadband internet providers to act akin to “common carriers.” In plain English, this means that they have had to behave in a similar way to phone companies and not give special preference to one type of call (or traffic) over another.

Going into the case the FCC’s ability to regulate broadband providers was not clear cut and some speculated the court would reject the Open Internet Order, which defined the FCC’s network neutrality rules entirely. Instead, the court decided the case on technical grounds, ruling the agency had to go back and implement formal common carrier standards if it wanted to make ISPs act like common carriers — meaning the rules are dead for now but could return in the future.

The ruling did, however, preserve the FCC’s current power to require Verizon and other broadband obligations to disclose their activities — in other words, to reveal how they are managing traffic: “Verizon does argue that the disclosure rules are not severable, insisting that if the anti-discrimination and anti-blocking rules fall so too must the disclosure requirements. We disagree […] we are satisfied that the Commission would have adopted the disclosure rules absent the rules we now vacate, which, we agree, operate independently.”

Golden piggy bank

The upshot of Tuesday’s ruling is that it could open the door for internet giants like Verizon and Time Warner to cut deals with large content providers — say Disney or Netflix — to ensure that their web content was delivered faster and more reliably than other sites. This could not only restrict consumer choice but also provide a threat to smaller websites that do not have the resources to pay for any “express lanes” that the broadband providers but choose to create.

The ruling, however, may leave latitude for the FCC to reassert its authority over the broadband providers by rewriting the rules once again (to see how this might shake out, see my colleague Stacey Higginbotham’s take here as well as a viewpoint from Gigaom Research’s Paul Sweeting). FCC Chairman Tom Wheeler also suggested the agency may appeal:

“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,” said Wheeler in a statement. An appeal would go to the Supreme Court.

FCC Commissioners (L to R): Commissioner Ajit Pai, Commissioner Mignon Clyburn, Chairman Tom Wheeler, Commissioner Jessica Rosenworcel and Commissioner Michael O’Rielly
FCC Commissioners (L to R): Commissioner Ajit Pai, Commissioner Mignon Clyburn, Chairman Tom Wheeler, Commissioner Jessica Rosenworcel and Commissioner Michael O’Rielly

In a statement, Verizon suggested that the court decision would not result in significant change:

One thing is for sure: Today’s decision will not change consumers’ ability to access and use the Internet as they do now. The court’s decision will allow more room for innovation, and consumers will have more choices to determine for themselves how they access and experience the Internet. 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. This will not change in light of the court’s decision.

We look forward to working with the FCC and Congress to keep the Internet a hub of innovation without the need for unnecessary new regulations that seek to manage the explosive dynamism of the Internet.

The appeals court itself appeared clearly aware of the heavy policy implications of its decision, noting that those in favor of net neutrality feared that “a broadband provider like Comcast might limit its end-user subscribers’ ability to access the New York Times website if it wanted to spike traffic to its own news website.” But the judges also refer to the remarks of two FCC Commissioners’ who recently opposed the anti-blocking rules on the grounds they might impede innovation.

Net neutrality advocates expressed dismay at the ruling, but suggested the FCC can still take action.

“The court clearly left the FCC authority to do something,” said Harold Feld of Public Knowledge, a net neutrality advocate, by email, adding that Congress could also write new laws to further empower the FCC.

The Internet Association, which represents big Silicon Valley firms like Google, said in a statement:

“The Internet creates new jobs, new technologies, and new ways of communicating around the globe. Its “innovation without permission” ecosystem flows from a decentralized, open architecture that has few barriers to entry. Yet, the continued success of this amazing platform should not be taken for granted.”

The full text of the ruling follows below:

DC Net Neutrality ruling

[protected-iframe id=”9f3fdc7112f00346d0a243f1e587b82b-14960843-34118173″ info=”//” width=”100%” height=”600″ frameborder=”0″ scrolling=”no”]

This post was updated several times over the course of Tuesday morning as events unfolded and more information became available.

Image courtesy of Shutterstock user Kristijan Zontar.

45 Responses to “Court strikes down FCC’s net neutrality rules, agency may appeal”

  1. Brad Totten

    As my wife would say, “Are they stupid or what?”. Likely the last time that broadband providers were redefined was likely back when AOL and NetZero were making money. Broadband providers like AT&T U-verse, Comcast, Century, Qwest, Time Warner and every other cable TV provider provides broadband to the home that carries not only your TV video but Voice and Data as well.

    The way I see it, they are all common carriers as they all provide access to the PSTN cloud and I can buy phone services from them, bundled with my internet access.

    Update how they are defined to reflect what they really are, “Common Carriers”.

  2. Over 100 years ago when Ma Bell built the telephone system they did it as a virtual monopoly. They has to accept government regulation. Eventually regulators broke up that monopoly.

    Yes, phone companies built most of the fiber cables to make the Internet work. But they had many competitors. It was done with private capital. It is not regulated. If it was, your 14 year old couldn’t drool in his bedroom over porno.

    If you want an open cost effective powerful Internet, leave these folks alone. If you don’t, talk to your 14 year old.

  3. matt-middendorf-142

    I believe this will very possibly open up real innovative investments in how people get internet. Not from the current set of carriers, but from company’s like Google, Netflix, and Amazon.

    Google is already rolling out true fiber connections in test cities (as opposed to hybrid copper/fiber connections like U-Verse). This will only serve to motivate the tech giants to invest more money into reaching the folks they serve (i.e. create jobs).

  4. B Franklin X

    Freedom of communication must be served as a public utility or allow it to be choked out once and for all. But public utilities are rarely efficient. The Invisible Hand is faster to the switch but is coin operated. Asking Comcat&tizon to not toll the roads is anathema. But who else would man the networks? This is why there are no privately owned sewers.

    An answer is needed and quickly but a wiser person than i must provide it.

  5. Nit: the appeal might go the Supreme Court eventually, but most likely the FCC would ask for en banc rehearing (i.e. all 11 judges of DC circuit instead of 3 would hear the case).

  6. Here is my take: yesterday, like today, you buy bandwidth from your cable/telco/wireless/sat provider. You can use that bandwidth anyway you like and should expect to get what you paid for (6Mbps = 6Mbps). You should not expect 10Mbps if you didn’t pay for it. Reasonable stuff.

    What this says, and what AT&T already announced, is that they may provision you with 10Mbps for Disney or Yahoo or provided that Disney or Yahoo or PAYS AT&T to do that. It’s not that big a deal. You still get what you paid for (and if you don’t you have multiple remedies) and can go anywhere you want. Disney gets what they pay for – likely an incremental 4Mbps to AT&T subscribers with some giant wholesale discount and your experience will be incrementally more enjoyable.

    People pay to skip ski lift lines, ship via FedEx and so forth.

    Yes, if there is further concentration (Charter/TWC for instance), there could be issues, but the FCC and the FTC come in….

  7. Finally common sense begins to emerge.
    Over the past 15 years teleone companies have invested $Billions of private capital to develop unregulated networks to go along with losing regulated telephone networks. They have been successful because the public liked what the offered.

    Then comes people like Clyburn, on her daddy’s coat tails to tell us, “You didn’t build that!”

    Honey, we built it. Tell us how you got your job. No, you didn’t build that.

  8. This is what happens when the commission is made up of folks who have less knowledge of how technology works than a 10 year old. This will result in the US dropping further in the internet speed rankings internationally; and, we invented the internet. The comments on other sites suggest “if you don’t like your provider, switch”. That comment just means you are stupid. The reason companies have been allowed to throttle is two-fold; there is no competition (where there is, collusion exists, it is just coincidence that Time Warner and cable vision have the exact same prices for internet access, wake up dopes), second, government oversight is bought and paid for by the aforementioned companies (or they are just that naive about competition and how far our internet speeds have fallen in comparison with countries like Romania, yes Romania (twice as fast)). What has f-ing happened is the equivalent of buying a car with wheels, the car company then pays someone to remove the wheels (technology investments to slow down or throttle), then they charge you to buy back the wheels, then they further charge for the labor to put them back on.

    • Wow. You really are an idiot.

      1st, the Commission had nothing to do with this decision, the courts did and those folks you generally want to be knowledgeable about the law and not technology.

      2nd, the decision was as it should have been. The FCC’s Open Internet Order was overly broad, in essence forcing business entities they did not define as common carriers to operate as such. All the FCC has to do is go back and define ISP as common carriers and then define and formal common carrier standards. In other words, genius, all ISP’s would have to deliver a minimum standard. That’s a good thing.

      As for the US speed rankings who gives a flying rats ass? It’s the innovation that I care about. You could have the fastest network if no one is on it.

      Your baseless assumption that there is collusion is irrelevant and idiotic as is your claim that govt oversight is bought and paid for. If there are NO COMMON STANDARDS to which an ISP must abide HOW IN THE NAME OF FRAK IS THERE ANY GOVERNMENT OVERSIGHT?

      You literally (yes LITERALLY) have ZERO CLUE of what you are talking about.

      And your car analogy is just incredibly stupid. Please do us all a favor and sign off the internet. You are too stupid to use it.

      • miguel villanueva

        he he he nice spin your a real skeptic! but the guy you just call out but you don’t question your own state sponsored religion & a hypocrite just like AT&T Verizon who violate the law oh who advocate the constitution but then brake the law but cherry pick convenience when they choose ooh! really! just lips service to science don’t believe in god! oh but the guy above is skeptical his not rational now hear your self sponsoring the Comcast AT&T & Verizon new state sponsored religion?? the state sponsored version of history their science their laws their profits their monopoly! he he he! the ultimate threat to the state sponsor is challenge the historical events especially when their recent! AT&T Verizon all have back doors open for monolithic hemongy of the control freaks in the U.S empire! so do us a favor why don’t you sign off or do PR stunts like bill gates helping Africans citizens that he care’s! becuz if spelling is your logic to appeal to some people’s ignorance to draw alway the attention from the point & debate here & trying to make him look foolish is just weak lame?? its effective to eyes minds uneducated audience but not to me! your skewing the debate intentionally the tactic herd mentality typical of American & works only in America! lol!

      • I’ve met Tim Berners-Lee, and you’re no Tim Berners-Lee. Actually, he DID NOT invent the Internet, we did. Tim invented the World Wide Web, including HTML, which is a highly simplified offspring of SGML.

    • Pk, you are exactly right.

      Much more effective than what the FCC has been doing, would be a law to make it illegal for a telco to snoop into the packets it is carrying. You correctly mention all the technological investments the telcos have had to purchase just to let them snoop and (they hope) differentially price. That equipment slows down traffic, and I would assert it should make the telcos strictly liable for ANY illegal material that gets transmitted. If they don’t want to be liable for every single transfer of child porn, then they ought not to be allowed to “snoop” what’s being transmitted. Again, it costs a lot of money to do, and it accomplishes nothing whatsoever that is good for us, the users of the Internet, in fact it slows things down.

      If they want to differentially price, it should be strictly on performance! Lowest Latency, guaranteed priority bandwidth, high guaranteed throughput, whatever: everyone gets the same deal, and you get what you pay for. That, it seems to me, is the best form of NN, and the only thing it restricts businesses (the telcos) from doing is being evil and onerous.

  9. David Potter

    One answer might be for internet companies to form their own internet provider services; effectively bypassing Verizon, AT&T, and everyone else who lobbied for this.

  10. galeal zino

    I am a NN advocate but am fine with this because I don’t believe the FCC could effectively regulate it, even if they wanted to.

    Best case, it would be massive waste of money. Worst case, it would be waste of money and have unintended consequences that resulted in even less NN than we have today.

    Believe only the free market and true open competition could effectively result in NN.

    Am I in the minority with this view?

    • The free market results in collusion amongst the big guys or the big guys buying out the little guys trying to do good.

      The free market never works without regulation. What needs to be done is broadband declared a necessity like electricity and other utilities, and subject to regulation.

    • That’s the issue. There is no true free market or competition in the broadband space in the USA. Most regions are served only by one or two providers at most. It’s an oligopoly in the best case scenario, so there is no incentive for providers not to discriminate or provide better service.

    • You don’t really have a free market when most cities grant franchise rights to a limited number of cable carriers to deliver the bits to your house and then accept political donations directly, and in the form of indirect investments (paying for new parks, etc.)

      I’d love it if this wasn’t the case, but this is the regulatory world we live in.

    • Largesse

      The US economy isn’t a “free market” – it’s “the rich get richer.” I don’t think the FCC can stop corporate behemoths from unfairly crushing their competition, but I REALLY don’t think the behemoths can police themselves.

      • burkhartonline

        The rich get richer because they keep doing what makes them rich. The poor get poorer because they keep doing what makes them poor. It’s all about choices, and the rich should not be demonized because they make better choices.

        • CallMeBC

          Gawd, what a scary, head-up-butt view of reality. The rich were usually born rich, and get richer because of their ability to influence politicians and elections, while the poor tend to be born poor and have to deal with the already rich making hoarding money and influence. There are few real “choices” being made that separate out the poor from the rich.

          • RiseFromRags

            A quick list of 4 highly successful people who were born poor, or at least main-stream middle class.
            * Steve Jobs
            * Bill Gates (who is working very hard to give his money away before he dies)
            * Barrack Obamma (I despise him, but he still makes my point)
            * Ross Perot

            Yeah, being born rich helps. But it is far from the only way to do well.

  11. AlanSchtweetz

    If I understand the ruling, the FCC’s loss of the case is because they applied “Common Carrier” regulations when broadband is NOT classified as a common carrier.

    That suggests they could reclassify broadband as a “common carrier” and net neutrality law would then apply.

    We need a follow up article explaining the meaning of “common carrier” to know if this is indeed the case.