Court vacates FCC’s Open Internet Order, echoing Klass vs Bell


[Correction added on AT&T sponsored data]

It’s shaping up to be a tough year for network neutrailty.

verizon-faceIn its disposition of Verizon v FCC, the U.S. Court of Appeals for the District of Columbia ruled yesterday that the FCC’s Open Internet Order is mostly null and void. Not because of the substance of the debate – that end-users need to be protected from the incumbent ISPs – but because of a jurisdictional flaw. The case was brought by Verizon, which now that they’ve more or less won, is saying they actually support an open Internet. When you read the policy blog post in question (“Verizon reiterates its commitment to the open Internet“), you have to marvel at Verizon’s capacity for managing self-contradiction.

The court has told the FCC it committed regulatory overreach in issuing its order. In other words, having classified Internet access as a so-called “information service” several years ago, the Commission cannot now prohibit ISPs from either a) creating a 2-tier Internet in which they charge big companies for privileged access, or b) blocking some Web sites on a whim – or, what’s more likely, simply because they wish to kill off any competitor that threatens their business.


Imagine if cabs could charge more for Asian, elderly or female passengers…

The Open Internet Order enshrined the policy principle of network neutrality. The simple way to view that principle is by reference to the idea of common carriage. Keen readers who were around several weeks ago for my initial post on the Part 1 complaint filed by Ben Klass may recall my favorite illustration of common carriage neutrality: the taxi cab. Cabs must charge tariffed rates and take all paying customers on an equal footing. They can’t refuse you if you happen to be female or charge you more if you happen to be East Asian.

Make no mistake: this is a big loss for the FCC. The Open Internet Order, which was published in December 2010, was deeply flawed, but a major piece of work (the 194-page pdf is uploaded here). The US regulator has taken a very different approach to consumer welfare than that of the CRTC. Our so-called net neutrality rules, enshrined in the ITMP framework, were developed not out of a concern with consumer protection, but out of an ill-conceived concern with managing traffic congestion. The FCC, by contrast, has posted a lot of material on its site devoted to explaining and implementing the goal of an open Internet.


To get a sense of the furor this decision has stirred up, here’s a  selection of nine headlines from the last 24 hours (many of which I’ve cribbed from the hard work of the folks at Benton’s Communications-related Headlines: subscribe here)…

Rebuffing F.C.C. in ‘Net Neutrality’ Case, Court Allows Streaming Deals (New York Times)

Obama ‘remains committed’ to neutrality (Hillicon Valley)

The terrible argument the court used to strike down net neutrality (Washington Post)

Verizon’s Net Neutrality Victory Means More Fighting to Come (Bloomberg Business Week)

Net neutrality now rests in the hands of the FCC. I’m worried (GigaOM)

‘Net neutrality’ ruling could be costly for consumers, advocates say (LA Times)

The Net Neutrality Battle Has Been Lost. But now we can finally win the war (Slate)

Net Neutrality Is Dead (Huff Post)

‘A FEMA-level fail’: The law professor who coined ‘net neutrality’ lashes out at the FCC’s legal strategy (Washington Post – interview with Tim Wu)

Naturally the proponents of “free” markets are seeing this as a great development for everyone, including consumers. Oh the bitter irony, given current developments on both sides of the border.

Ralph+de+la+VegaFor one thing, AT&T’s announcement about “sponsored data” on its wireless service is still making news – including commentary that says the carrier has taken a big step toward pushing aside net neutrality in favor of a two-tier system. The deal is that the carrier will now exempt ads certain content streaming to customer phones from counting as part of their data cap, if that content is sponsored by a 3rd party such as an advertiser or employer. But not as a charitable exercise. The exemption will apply only to ads that are sponsored by the advertiser in question. This development has raised legitimate alarm among proponents of the open Internet. Wired, for example, ran a story last week under the headline “AT&T Thumbs Nose at Net Neutrality With ‘Sponsored’ Bandwidth Scheme.” (Photo: AT&T Mobility chief Ralph de la Vega)

If this plan doesn’t sound familiar, it should. It echoes the basic problem with Bell’s Mobile TV service – the one raised in the Part 1 complaint filed by Ben Klass (see my November 24 post). The AT&T move is worse in one respect: it’s an early attempt to encourage development of a “two-sided” broadband market, i.e. one in which the ISP collects payments from both subscribers and firms that are willing and able to cough up extra cash to be delivered on a “fast-lane” connection. That, of course, means the fat cats will get fatter while startups will wither – exactly what will kill off the benefits we’ve come to associate with innovation without permission.

While Bell’s Mobile TV doesn’t directly encourage a two-sided market, it most certainly violates the net neutrality principle that the same kinds of traffic must be treated in the same way. Last week, Bell and a handful of intervenors filed their reply comments to Ben’s original complaint. Ben gets the last word in this procedure, and his final rejoinder will be filed on Monday, January 20. I’ll have more to say about Bell and Ben in the next few days.

duckduckgoFor now, just ponder what life will be like here in Canada if the incumbents are allowed to continue down the path to turning your Internet into a big, messy cable-TV service – which may prevent you from, say, using DuckDuckGo as your search engine of choice because Bell and Rogers are getting paid a fat monthly fee by Google to block all its competitors. Indeed, if things get as bad here as in the States, then it’s perfectly conceivable that Bell might attack competitors like Netflix on wireline broadband as well as on cellular. Bell could, for example, start adding an extra charge to its wireline subscribers’ bills to be able to receive Netflix – unless you’re okay with getting Netflix on the slow platform, with poor latency, and lots of jitter and rebuffering. On top of which Bell might also start billing Netflix for access to its customers, thus bringing the two-sided market concept to Canada.

We may be about to discover that having all these battles to fight is the best opportunity we’ve ever had to resurrect and defend a reasonably neutral and open Internet.