This week will be a vital one for the U.S. Internet service provider (ISP) industry as a federal appeals court in Washington D.C. will take up the lawsuit related to the net neutrality rules proposed by the FCC (Federal Communications Commission). On Dec 4, a three-judge bench consisting of Justice David S. Tatel, Stephan F. Williams and Sri Srinivasan will hear oral arguments related to the Net Neutrality proceedings.
On Feb 26, 2015, in a historic decision, the FCC had approved net neutrality rules after a majority voting. The new laws classify high-speed broadband (Internet) as a public utility under Title II of the 1934 Communications Act instead of section 706 of the 1996 Telecom Act. Importantly, the latest regulations will be applicable to both mobile and fixed broadband networks.
The reclassification of Internet called for a radical change in the way the government treats high-speed broadband service and Internet Service Providers (ISP). By way of this, the FCC is poised to gain stronger control over the ISPs now.
Net Neutrality
Net neutrality implies an open-Internet atmosphere which will prohibit ISPs, especially the telecom and cable TV operators, from discriminating against applications. In order to control the flow of bandwidth-consuming applications such as video streaming, the ISPs had been discriminating against several web-based contents and applications. In such scenario, content developers have had to pay heavy sums to ISPs for accelerated data transfer.
The new law, if implemented, will ban common ISP practices such as data traffic blocking, slowing any data traffic and paid prioritization. Notably, paid prioritization is a method through which content developers strike favourable deals with ISPs for quick and smooth transmission of their data traffic. The FCC will closely monitor and put a check on all such deals in the future to ensure a level ground for all. Moreover, the FCC will also supervise interconnection deals, in which content developers pay ISPs to connect to their networks.
Arguments against Net Neutrality
All ISPs, along with several cable and telecommunications industry bodies have vehemently opposed net neutrality. These groups believe that a slight law reformation under section 706 of the 1996 Telecom Act should be enough to enforce net neutrality.
The major argument however stands that the ISPs have to expend several billion dollars to install and upgrade high-speed mobile/fixed broadband network. Disallowing discriminatory pricing policy will significantly reduce their revenues and margins which will in turn result in lower investments in the high-speed broadband sector. Consequently, broadband equipment service providers will suffer (due to lesser investment by ISPs) and jobs will be at stake in the sector.
ISPs Opt for Legal Battle
Major cable multi-service operators, namely, Comcast Corp. CMCSA, Time Warner Cable Inc. TWC, Charter Communications Inc. CHTR along with telecom behemoth Verizon Communications Inc. VZ and several other sector participants have strongly opposed the FCC’s decision. This group has made clear that though they have no objection against the open Internet concept, enforcement of stricter regulations by the government is not acceptable. Notably, in Jan 2014, Verizon had won a federal court case against the FCC's previous set of net neutrality rules.
The Beneficiaries
Content developers and consumer groups are poised to benefit from the net neutrality law implementation. Netflix, Google, Amazon, Hulu and Twitter are some of the companies poised to take advantage from the change. At present, these companies pay special charge to ISPs for speedy transmission of their content. The new rule will significantly alter online access charges of content including video, music, email, photos, social networks and navigational maps for consumers.
The Bottom Line
Telecommunications is a necessary utility. The need for telecom in both rural and urban areas as well as its role in the infrastructural development of an economy is of vital importance. Net neutrality norms may discourage large investments in the telecom sector, but these will cut down the cost of online access for end-users since content providers will no longer have to pay extra fees to ISPs. The federal court will determine whether net neutrality is legally valid and practicable. The fate of the U.S. ISP industry will depend largely on this verdict.
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