By Kate Tummarello - 01/01/14 10:30 AM EST
The Obama administration and telecom companies are bracing for a major court ruling that could abolish net neutrality.
The D.C. Circuit Court of Appeals is expected to rule soon on whether the Federal Communications Commission has the authority to require Internet providers to treat all Web traffic the same.
A decision against the rules would be a blow to President Obama, who made net neutrality a campaign pledge in 2008. It would also erase one of the central achievements of former FCC Chairman Julius Genachowski.
The most controversial of the net-neutrality provision bans Internet providers from “unreasonably discriminating” against lawful websites and services with slower load speeds.
A ruling against that provision would demolish a cornerstone of net neutrality by allowing Internet providers to charge content companies for preferential treatment. Verizon, for instance, could charge Netflix so that its subscribers could load video content more quickly.
Matt Wood, policy director at Free Press, said the oral argument in the case made clear that the non-discrimination provision is “in the crosshairs.”
“It sounded like at least two of the three judges were ready to strike down the nondiscriminatory provision,” Wood said.
The net-neutrality rules also require Internet providers to be transparent about how they manage Internet traffic while banning them from blocking lawful websites and services.
The FCC says the rules fall under the agency’s authority to promote investment in broadband and argues that mandate includes protecting an open Internet.
Public interest groups warn allowing Internet providers to charge for better access would harm consumers and limit innovation.
The content companies are “going to bear that cost somehow,” whether through less investment in content or higher prices, said Michael Weinberg, vice president at Public Knowledge.
He said letting content providers pay for faster speeds would also give them an unfair advantage over smaller firms.
“[It] makes it harder for the next Netflix to compete” Weinberg said.
Opponents of the net neutrality rules argue the FCC is stifling innovation by meddling in the marketplace.
The agency “needs to adopt a more flexible standard that allows for network discrimination in cases where there’s no harm to consumers,” said Ryan Radia, the associate director of technology studies at the Competitive Enterprise Institute.
Radia said a decision in favor of the rules would empower the FCC “to police business activity on the Internet across a variety of areas.”
Experts are split on how broad the court’s ruling is likely to be.
Berin Szoka, president of tech policy at the think tank TechFreedom, said the court would have to strike down all of the net-neutrality rules if it decides the FCC has no statutory authority over Internet providers.
But Paul Gallant, a telecom policy analyst at Guggenheim Partners, said the court is unlikely to wipe out the FCC's authority over Internet providers. He said the judges could "send the decision back to the FCC" to have the agency "rewrite the order in a more [Internet provider]-friendly way."
If that happens, the agency would "have a hard decision to make," Gallant said.
New FCC chief Tom Wheeler has "left all the options on the table," including reclassifying Internet providers at the agency, so they could be more clearly regulated, Gallant said.
Wheeler caused a stir in December when he signaled openness to a "two-sided" market, where Internet providers could charge content providers for better access.
After some observers questioned Wheeler’s commitment to net neutrality, he declared himself “a strong supporter of the open Internet rules, full stop.”
“The rules were written in such a way as to envision opportunities for innovation and experimentation, and to impose on them a balance between protecting the open Internet, protection consumers, and stimulating innovation,” Wheeler said last month at a House Energy and Commerce Committee hearing.
Gallant said the FCC has "a very long history" of overseeing two-sided markets in the phone industry. "It's not like this is unchartered territory."
If the appeals court strikes down the net-neutrality rules, the FCC could ask Congress for explicit authority to regulate Internet providers.
In December, the leaders of the House Energy and Commerce Committee announced a multi-year effort to rewrite the Communications Act, which outlines the FCC’s authority.
With no net neutrality rules on the books, “you could certainly see pressure building on Congress to make sure there’s someone to protect [users] online,” Weinberg said.