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The Courts Address Network Neutrality Regulations

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The concept of “net neutrality” has been a subject of vigorous discussion and debate in early 2014 following the D.C. Circuit’s January decision in Verizon v. Federal Communications Commission (January 14, 2014) No. 11-1355. Net neutrality refers to a presumption that Internet service providers (“ISPs”) will not discriminate against certain types of data. Currently, end users of the Internet may pay different rates depending on how fast their service is at the furthest downstream points, what Verizon referred to as “last-mile” transmission lines. Since 2010, however, the Federal Communications Commission (“FCC”) enforced certain “Network Neutrality rules” to ensure a relatively even playing field further upstream. See Open Internet Order, 25 F.C.C.R. 17905.

The reason for the FCC rules was due to the fear “that broadband providers might prevent their end-user subscribers from accessing certain [providers of content] altogether, or might degrade the quality of their end-user subscribers’ access to certain [] providers, either as a means of favoring their own competing content or services or to enable them to collect fees from certain [] providers. Thus, for example, a broadband provider like Comcast might limit its end-user subscribers’ ability to access the New York Times website if it wanted to spike traffic to its own news website, or it might degrade the quality of the connection to a search website like Bing if a competitor like Google paid for prioritized access.” Id., slip opn. at 6.

Through the Network Neutrality rules, the FCC sought to treat ISPs the same as “common carriers” under statutes dating back to the 1930s that prohibited such carriers from discriminating against certain types of content. Id. at 46. For example, a phone company cannot discriminate against certain types of calls and cannot refuse to list certain numbers in its phone books while printing others. The FCC reasoned that ISPs made information available to the public in a similar fashion and thus should be similarly regulated.

Verizon challenged the Network Neutrality rules contained in the Open Internet Order because it viewed the rules as an overbroad form of bureaucratic micro-management that would prevent it from innovating and competing with other ISPs. Because the FCC had previously classified ISPs not as common carriers, but in the Network Neutrality rules was essentially treating them as such, the Verizon court struck down the rules insofar as they addressed discrimination and blocking. “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. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order.” Id. at 4.

The court did, however, leave undisturbed the FCC’s power to require ISPs to disclose how they manage Internet traffic. The court also agreed that the FCC has the power to regulate Internet service in a general sense, and left the door open for the FCC to draft specific rules addressing the classification issue that would pass judicial scrutiny and allow the FCC to re-impose net neutrality requirements.

Whether and how Network Neutrality regulations will come to pass remains to be seen. There are many proponents of net neutrality – after all, the idea that information should be “equally” available over the Internet is one that has broad appeal and support. However, others disagree with what they see as overly restrictive regulation of the Internet that might actually prevent service providers from being able to differentiate their services from one another and, therefore, would unfairly restrict them from being able to compete. Opponents of net neutrality also feel that any net neutrality rules could be a slippery slope toward more intrusive government regulation of the Internet.

The Court of Appeals’ decision is already leaving big ripples. Just a few days ago, Netflix agreed to pay Comcast to ensure that its content flows quickly to Comcast customers, not in small part in reaction to Verizon. By some estimates, Netflix streaming accounts for up to 31% of total Internet traffic to homes in the United States. Apple was also recently reported to be in similar discussions with Comcast that would allow its content to flow quickly, thereby giving Apple an advantage over companies whose content flows slower.

Net neutrality faces an uncertain future. The FCC recently stated it will not appeal Verizon, but instead will regulate anti-competitive behavior on the Internet on a “case by case basis.” Along these lines, the FCC is reportedly drawing up new net neutrality regulations that it hopes will survive challenge in the courts. The issue of net neutrality is, in some sense, an issue of the limits of technology – as faster broadband becomes more generally available, concerns about the relative speed of one type of content over another may fade. Nevertheless, at least for the near future, net neutrality will remain a hot-button topic in the area of IP law and more specifically, Internet law.