On Tuesday, January 14, 2014, the Federal Court of Appeals decided Federal Communications Commission v. Independent Telephone & Telecommunication. This decision effectively reversed the FCC’s net neutrality policy. Network operators such as Verizon can now sell faster, lower-latency Internet streaming services to digital content providers, such as Netflix or Hulu. Purchased streaming service will allow for increased speed and service quality compared to free traffic, essentially allowing Internet “express lanes.”
According to the FCC, the Internet is supposed to be free. This belief stems partly from the FCC’s view that the Internet is a utility of such importance—akin to telephone lines and electricity—that it needs to be kept widely usable through close regulation. The FCC thought it had the jurisdiction to enforce that position, but Verizon prevailed in its case by arguing that, while the FCC may have jurisdiction to regulate the Internet, but not to enforce net neutrality.
In the end, consumers may hear grumbling from content providers and see increased prices for services, justified as necessary to prevent interruption or slowdowns. However, the real effect of the court’s decision may be in what we don’t see—the Court of Appeals’ decision will likely make it harder for startup Internet content-streaming companies to get off the ground.
If innovators like Netflix had to pay higher fees for Internet service when they were just beginning, they may never have made it. This is a sad thought to those consumers who today enjoy their services. The Internet has brought tremendous productivity and has become a major entertainment platform. Companies like Netflix, Spotify, and Slacker Radio have rocked their industries, generally to consumer applause.
Verizon argued that it should be able to charge for differentiated services. Verizon and a handful of cable and communications companies have built most of the infrastructure supporting Internet traffic. However, the new environment will favor big companies, perhaps to the detriment of innovators. Verizon and AT&T will tame content-streaming companies’ disruptive influence. But the biggestquestion is whether it will ultimately hamper innovation in content delivery.
Even with these concerns, there could be an upside to this ruling. In its decision, the court upheld the FCC’s authority to promulgate rules relating to broadband services. Thus, should it prove necessary, the FCC could consider alternative rules that would protect consumers by providing for more open access. This is likely the FCC’s next step in what may prove a prolonged war over the neutrality of the ‘net.