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"Net Neutrality" Ruling Opens Door for 2-Tiered Internet Market

The ruling in favor of corporate broadband providers may not only up consumer costs but also cripple start-ups, which may stifle the kind of innovative content that has made the Web an essential service



Flickr/Bonnie Natko

An “open Internet” became endangered this week at a time when the U.S. increasingly relies on Web-based services to deliver everything from education to entertainment. A new court ruling achieved this by opening the doors for U.S. broadband providers to offer speedier delivery of Internet services at a higher price to those who can pay. The decision could limit consumer choices and stifle innovation by favoring huge corporate players over new start-ups.

The ruling by a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit handed victory to Verizon by rejecting the legal framework of the Federal Communications Commission's attempt to regulate the telecom giant and its peers based on net neutrality rules. Such net neutrality, or open Internet, rules aim to prohibit Internet service providers (ISPs) such as Verizon from offering tiered broadband services that would push content providers—such as Netflix or Amazon—to pay more for faster delivery of their content. The rules also prevent ISPs from blocking lawful Internet applications and services.

FCC Chairman Tom Wheeler responded to the court ruling by holding out the possibility of appealing the decision: "We will consider all available options, including those for appeal, to ensure that these networks on which the Internet depends continue to provide a free and open platform for innovation and expression, and operate in the interest of all Americans.”

The D.C. Circuit court ruled in favor of Verizon because of how the FCC had originally classified broadband providers of high-speed Internet as being exempt from "common carrier" regulations. But the FCC can reassert its authority over high-speed Internet services and try again by simply reclassifying the broadband providers, saysSusan Crawford, a professor at the Benjamin N. Cardozo School of Law in New York City and an advocate of net neutrality. "The FCC will need to respond, and my hope is that they will respond by reclassifying this service as a telecommunications service, and then ‘forbearing’ from whatever legacy regulatory steps they want to," Crawford says.

If the FCC does not try to reestablish net neutrality rules, broadband providers would be free to create a two-tiered market that could force content providers to pay extra for ensuring their services get to customers in a timely fashion—whether that content represents streaming video of movies and TV shows, a two-way telemedicine video consultation between patients and doctors or the live-streaming of a professor's lecture.

Paying a higher fee to broadband providers for the fastest delivery of services might not bother corporate giants such as Amazon or Netflix that provide established, hugely popular Internet services. But the two-sided market could strangle fledgling start-ups trying to compete with the corporate giants for online services in education, health, entertainment, shopping, big data or anything else. Start-ups that can't outbid big competitors might see delivery of their Internet services slowed by comparison. "Your kneecaps will be broken along the way to reaching your market," Crawford says.

A possible handicap for U.S. innovation is not the only possible outcome from an end to net neutrality. More than 77 percent of Americans have only one choice for high-speed, high-capacity connections in the form of their local cable monopoly that bundles broadband, along with TV and other services, Crawford says. She fears a two-sided market would basically give broadband providers control over what Internet content people can access by favoring the biggest or favored services.

One borderline test of the FCC's tolerance toward a two-sided market arose just before the January 14 court decision. During the 2014 Consumer Electronics Show, AT&T announced a new mobile Internet plan that would allow content providers to foot the data plan bill for customers, according to Gigaom. A company such as Netflix could theoretically pay AT&T to exempt its video streaming service from exhausting a customer's mobile data allotment—the mobile data usage would instead be taken out of a universal data plan paid for by Netflix.

None of the AT&T mobile data would be prioritized in direct violation of the net neutrality philosophy, but the system would offer AT&T customers an incentive to use online services that had paid for exemptions. The FCC chairman's subsequent "wait and see" attitude toward the AT&T move left room for uncertainty about the FCC's broader willingness to tolerate an Internet without net neutrality, according to the The Washington Post. (Current FCC regulations exempt the wireless industry from net neutrality in any case.)

Growing demand for Internet services will only complicate the ongoing struggle to maintain net neutrality as U.S. broadband providers look for ways to offload the costs of increased Internet traffic. But as Scientific American's editors noted in a 2006 editorial, net neutrality may still be the wisest course at a time when the existing balance of power is tilted so heavily toward a few broadband providers—a situation that leaves room for abuse in the absence of a level playing field.

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