[opendtv] Court Tosses FCC's 'Net Neutrality' Rules
- From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Wed, 15 Jan 2014 07:10:46 -0500
Bad news Bert. The MVPDs and Congloms just got another powerful arrow in their
quiver to control Internet cannibalism of their current business models. Looks
like data caps and/or tiered pricing for broadband are on their way. The
questions now are who is going to pay, and how much?
Answer: the consumer always pays...
Regards
Craig
http://online.wsj.com/news/articles/SB10001424052702304049704579320500441593462?mod=Business_newsreel_4
Court Tosses FCC's 'Net Neutrality' Rules
Decision Clears Way for New Fees on Web's Heavy Bandwidth Users
By GAUTHAM NAGESH and BRENT KENDALL
Updated Jan. 14, 2014 7:52 p.m. ET
WASHINGTON—A U.S. appeals court on Tuesday threw out federal rules requiring
broadband providers to treat all Internet traffic equally, raising the prospect
that bandwidth-hungry websites like Netflix Inc. might have to pay tolls to
ensure quality service.
The ruling was a blow to the Obama administration, which has pushed the idea of
"net neutrality." And it sharpened the struggle by the nation's big
entertainment and telecommunications companies to shape the regulation of
broadband, now a vital pipeline for tens of millions of Americans to view video
and other media.
For consumers, the ruling could usher in an era of tiered Internet service, in
which they get some content at full speed while other websites appear slower
because their owners chose not to pay up.
"It takes the Internet into completely uncharted territory," said Tim Wu, a
Columbia University law professor who coined the
Deciding a lawsuit brought by Verizon, a three-judge panel of the U.S. Court of
Appeals for the District of Columbia Circuit struck down the rules. The court
said the FCC saddled broadband providers with the same sorts of obligations as
traditional "common carrier" telecommunications services, such as landline
phone systems, even though the commission had explicitly decided not to
classify broadband as a telecom service.Adopted in 2010, the Federal
Communications Commission rules said that companies like Verizon Communications
Inc. and Comcast Corp. had to treat all similar content on their networks
equally, whether it was a YouTube video or a home video posted on a personal
website.
"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," Judge David Tatel wrote for the court.
Though the FCC said it might appeal, the ruling for now means Internet-service
providers are free to experiment with new types of pricing arrangements, such
as charging content companies like Google Inc. or Netflix higher fees to
deliver Internet traffic faster. Or, they could choose to degrade the quality
of certain online content unless its creators were willing to pay up.
Netflix and Google declined to comment.
Tony Wible, an analyst at Janney Capital Markets, said Internet companies would
mount a fight to avoid paying new fees, but he said it was inevitable that over
time some of the burden of paying for Internet infrastructure to handle bulging
traffic would shift to content providers or consumers in the form of
usage-based billing.
"You need to put forth an economic model to finance that investment," he said.
"The question is over the price point and who is going to set it. The ruling
also poses a dilemma for the FCC and President Barack Obama, who has pushed for
equal treatment of Internet traffic going back to his first presidential
campaign.
Supporters of net neutrality had urged Mr. Obama's first FCC chairman, Julius
Genachowski, to reclassify broadband as a telecom service. But the commission
balked in the face of strong Republican opposition, a decision that ultimately
weakened its legal position.
"In the Internet's infancy, the commission made the right decision to leave it
free from the interference of government regulators. Today's ruling vacates the
commission's attempt to go back on this policy and to smother the Internet with
rules designed for the monopoly telephone network," House Energy and Commerce
Chairman Fred Upton (R., Mich.) and Rep. Greg Walden (R., Ore.) said in a
statement.The current FCC chairman, Tom Wheeler, has said he is against
regulating broadband Internet in the same manner of the landline phone system.
Such regulation could expose broadband providers to a panoply of new federal
rules on pricing and service—which critics say would lead to excessive control
of the industry by Washington.
The ruling left some room for FCC action by finding the agency had the
authority to police broadband use, albeit not through the method it used in
2010. Bolstered by that finding, Mr. Wheeler's FCC could choose to bring
enforcement actions on a case-by-case basis against companies that act in an
allegedly anticompetitive manner.
Mr. Wheeler suggested as much in a speech last week. He said "history instructs
us that not all new proposals have been benign" and said the government
retained the ability to intervene if companies were abusing their market power.
On Tuesday, he issued a statement saying he was "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."
The FCC also could weigh in on the issue when it considers cable-industry
mergers, by imposing conditions on big players. Speculation that a wave of
cable mergers is in the offing has been fueled in recent months by Charter
Communications Inc's pursuit of Time Warner Cable Inc.
Silicon Valley companies criticized the ruling and called on Washington to
respond. Telecom companies "are now in a position to not only make considerable
sums of money but, in many ways, they are one of the most important arbiters of
culture and speech and what is or isn't going to be on the Internet," said Eric
Klinker, chief executive of BitTorrent Inc., a website that allows people to
swap digital movies.
If Tuesday's ruling stands, it could throw a wrench into the business models of
Netflix, Google and others, potentially raising prices for consumers.
Netflix accounts for 32% of peak Internet traffic in North America, the most of
any content provider, according to Sandvine, a broadband-services company. That
has made Netflix a target for some cable-industry executives, who have argued
the company should be subsidizing the costs of delivering its service to
consumers.
In an interview last summer, Charter Communications Chief Executive Tom
Rutledge noted that all broadband capacity was "paid for by the consumer," but
"you could argue that it would be more efficient for consumers if the people
who are taking the bandwidth for a product were paying for the bandwidth in
some fair and proportional way."
A Charter spokesman declined to comment on the ruling.
Netflix's business model assumes it will need to make large investments to
acquire the rights to TV shows and movies that it offers and also factors in
some costs related to moving data efficiently on the Internet's backbone. But a
new fee charged by Internet providers, if it were sizable, could dent the
company's profit or force it to raise prices for consumers.
The spotlight also is on Google, whose YouTube site accounts for 19% of peak
Web traffic, and other major streaming-video sites.
Both are part of the Internet Association, a coalition of Web companies that
supports the approach taken by the FCC. The association's president, Michael
Beckerman, said Tuesday that the group supported an open Internet free from
"discriminatory, anticompetitive actions by gatekeepers."
Verizon and other Internet-service providers said the ruling would have little
impact on the way consumers 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," said Verizon Executive Vice President Randal Milch.
Comcast had agreed to abide by the FCC's open Internet rules for seven years as
part of a deal to win regulatory approval for its purchase of a controlling
stake in media company NBCUniversal from General Electric Co.
"We remain comfortable with that commitment because we have not—and will
not—block our customers' ability to access lawful Internet content,
applications or services," said Comcast Executive Vice President David L. Cohen
in a statement.
—Ryan Knutson contributed to this article.
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