A federal appeals court on Tuesday struck down a key part of a Federal Communications Commission (FCC) order that would have prevented large communications companies from entering into special deals with content providers. Now it's possible for a broadband Internet provider like Verizon to offer superior access to an entertainment service such as Netflix (a so-called "fast lane") to those who can afford to pay more for the privilege.
The FCC's Communications Act—usually referred to as Net Neutrality—was aimed at preventing a bifurcation of the Internet in which the rich would have faster and more reliable access to desirable services. There's just one problem, a panel of three judges from the District of Columbia Circuit court ruled this week: Though the FCC does have jurisdiction over broadband Internet, it cannot limit the ability of providers to offer new services to customers.
"The Commission had failed to cite any statutory authority that would justify its order compelling a broadband provider to adhere to open network management practices," the ruling notes. "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."
According to Verizon, which had appealed the FCC order, this ruling in no way harms consumers.
"Today's decision will not change consumers' ability to access and use the Internet as they do now," Verizon general counsel Randal Milch noted in a statement. "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 that 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."
The FCC says it is considering an appeal. Its original order described three rules that broadband providers must follow: They cannot block access to any legal content or service, cannot favor one site's traffic over another, and must communicate transparently about their efforts to prevent Internet traffic bottlenecks for users. This week's ruling effectively strikes down the second of those three provisions.
For broadband providers like Verizon, this ruling means that they can begin charging users more for the most popular and traffic-heavy services such as Netflix, in effect creating a tax or toll that would sit on top of the direct cost of those services. That additional cost could be paid by users, the content providers, or some combination of both.
While it's possible that this ruling won't have an entirely negative effect, the likely outcome is that smaller, more innovative companies will get shut out of markets in which richer, established players can simply pay to ensure that their own services get special treatment. This is the anti-competitive and anti-consumer future the FCC was trying to prevent.