Charging Netflix at issue in open-Internet case

Associated PressJanuary 19, 2014 

Internet Neutrality

In this Dec. 3, 2009 file photo, a sign outside the Comcast Center, left, is shown in Philadelphia. On Jan. 14, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit affirmed that the FCC had authority to create open-access rules. But in a setback for the Obama administration's goal of Internet openness, the court ruled that the FCC failed to establish that its 2010 regulations don't overreach. Under so-called net neutrality rules adopted in 2010 by the Federal Communications Commission, wired broadband providers such as Comcast, Time Warner Cable and Verizon were barred from prioritizing some types of Internet traffic over others.

MATT ROURKE — AP FILE PHOTO

— Will broadband providers start charging Internet services such as Netflix to deliver the massive amounts of data that streaming video and other content require?

A court ruling last week gives providers such as Comcast, Time Warner Cable and Verizon more flexibility to do that, even though immediate changes are unlikely.

Technically, providers have always been allowed to charge Netflix, Google and others for priority treatment. But the so-called net neutrality rules adopted by the FCC in 2010 discouraged the practice, and any attempt to do it would likely have faced a challenge from the agency.

In striking down those rules Tuesday, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit lifted any uncertainty and removed any constraints broadband providers might have felt.

Services such as Netflix already pay their broadband providers to send data from their systems. What’s in question is whether they’ll also have to pay their subscribers’ providers for delivery of the data.

Netflix’s stock fell more than 2 percent the day after the ruling was announced out of concern that if the company may someday have to pay their subscribers’ broadband providers, thereby leaving the company with less money to license content. Investors also worried that Netflix might pass along any new costs to subscribers in the form of fee increases.

Netflix had no comment last week.

Evolving flexibility

Few people expect immediate changes to the way people access entertainment, news and other online content. That’s because major cable providers already have pledged not to block or hinder legal websites and other content.

The regulatory dispute comes down to both sides trying to avert constraints on what they’re allowed to do in the future.

Public advocacy groups pushed for regulations to ensure that the Internet remains open in the years to come, so that consumers could continue to enjoy the Internet without limitations. They want to ensure that startups and nonprofits have as much of a chance to reach an audience as established companies such as Google.

Broadband providers prefer the flexibility of evolving as the Internet evolves. They want to be able to experiment with business models, including the creation of special charges for priority treatment. Even if providers don’t intentionally slow traffic from content companies that choose not to pay, the effect would be the same if their rivals get faster delivery to consumers by paying.

The appeals court affirmed that the FCC had authority to create open-access rules, but it ruled that the FCC failed to establish that its 2010 regulations don’t overreach.

The judges said those regulations treated all Internet service providers as common carriers – a general term for airlines, utilities and other transporters of people or goods for the general public on regular routes at set rates. But the court said the FCC itself already had classified broadband providers as exempt from treatment as common carriers, which set up a legal contradiction.

FCC Chairman Tom Wheeler said the commission will now consider its options, including an appeal.

Redrafting of rules possible

The FCC also could draft new rules or reclassify broadband providers, or Congress could change the 1996 telecommunications law that gave the commission different authority depending on whether a company was a common carrier or not.

Verizon, which filed the case against the FCC, said that it remained committed to an open Internet and that last week’s court decision “will not change consumers’ ability to access and use the Internet as they do now.”

But Verizon also said the decision “will allow more room for innovation, and consumers will have more choices to determine for themselves how they access and experience the Internet.”

Those innovations and choices could one day include tolls on Netflix and other services.

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