Today, a federal appeals court will start hearing a case that Verizon has brought against the Federal Communications Commission over "net neutrality." What the judges decide could have a lasting effect on the balance of power between internet companies, like Google and Facebook, and internet providers, like Verizon and Comcast. It could also have a big impact on the way the internet is both monetized and regulated.
This has been a long, drawn-out battle between the FCC and Verizon — but one that might be moving to its endgame.
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It's the principle that all data on the internet is created equal, and that internet service providers like Verizon and Comcast, as well as the organizations that regulate them, should not be allowed to discriminate or charge differently based on user, content, site, platform, etc.
Under today's net neutrality rules, the FCC is allowed to prevent the Verizons and Comcasts of the world from giving priority to certain internet services or adjusting fees and speeds for certain sites.
Wait, why does this sound so familiar?
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In 2010, the same court heard a similar case. Comcast won that complaint against the FCC for the right to restrict the file-sharing program BitTorrent. In fact, as BloombergBusinessWeek's Joshua Brustein points out, "a major question before the judges today is why this case should be any different" than the 2010 ruling.
So what is different about this case?
After the 2010 ruling, the commission came up with a set of rules, known as Open Internet Order, that restrict internet providers from blocking lawful traffic, and require them to be open about the way they manage their networks. Fixed-line services like Verizon's FiOS are also restricted from "unreasonable discrimination" that slows or degrades traffic for certain users.
In effect, the Open Internet Order codified the FCC's position, but many of the same questions from 2010 linger.
How did Verizon respond?
That the FCC is overstepping its boundaries.
According to Verizon, decisions about how it controls traffic on its network should be protected by the First Amendment — the same way a newspaper's publisher's decisions about what to print are protected. The idea is that Verizon, like a newspaper publisher, is transmitting information, and should, therefore, be able to use "editorial discretion," as the company calls it.
What do they have to gain by exerting "editorial discretion"?
Cash money. More people have internet access than ever, which is great for carriers. But there's one downside: Subscriber growth is starting to peak, which means profits will eventually start leveling off. Providers are ginning up new ways to generate profits, and charging extra from firms that use the most capacity is one way to do that.
Can we get an example?
Look at Netflix. The streaming video service accounts for about a third of all North American internet traffic every night. Verizon would love to be able to charge it for that.
What does Netflix say?
As a Netflix spokesman explained to The Wall Street Journal, "Consumers pay for high-speed broadband, which is an incredibly lucrative business for the internet providers," in order to "get services like Netflix."
What is the FCC's argument?
That it does have the authority — and the responsibility — to foster innovation on the internet. The FCC argues that if internet providers charge web publishers for using capacity, they'll stunt innovation. If providers discriminate, "the next Google or Facebook might never begin," the agency said in a court filing.
The FCC also contends that is has a similar authority to speed up the development of telecommunications. The FCC's supporters point out that if Verizon can charge companies for better access and more capacity, the provider actually has an incentive to slow the development of broadband capacity.
So who has the advantage?
Most observers say that given this particular court's previous position and leanings, Verizon has the advantage. Brustein says:
In addition to the Comcast decision, the court has ruled several times to restrict the commission’s power. When this case landed there, many observers saw that fact alone as a major victory for Verizon. [Bloomberg BusinessWeek]
However, the FCC did receive a big assist in May when the Supreme Court ruled that regulatory agencies should be allowed discretion over their jurisdictions. David Kaut, a telecommunications regulatory analyst, told The New York Times at the time, "This case just gave the FCC’s argument a lot more weight."
What happens next?
The ruling could be delivered as early as two months from now. But that might not end the battle. Katy Bachman for AdWeek writes:
If the court strikes down the rules, the FCC would have to either appeal or bank on Congress giving it new authority. The court could also just send the FCC back to the drawing boards to craft better rules.
One way or another, Congress may ultimately get involved. There's been a lot of talk on the Hill about revisiting the nation's communications laws, which are gathering mold as technology races ahead. Even if Congress does, it won't happen quickly. [AdWeek]
