Jocelyn Ezratty – The open and free Internet as we know it may be in for some major changes: “Net Neutrality” may be a thing of the past. The Internet may no longer be a completely cost-free, nondiscriminatory outlet, and the Internet Service Providers (“ISPs”, commonly known as broadband providers) will be the ones who profit from this changing policy.
When we send and receive data via the Internet, we expect the ISPs to do just that, but there’s a catch. ISPs now have the ability to manipulate the way information is passed along. ISPs can program the computers that route information to interfere with flow of data. ISPs can interfere with data flow by charging more for increased-speed, blocking certain data completely, and even by choosing which types of data should receive faster Internet. Inevitably, these tactics will be driven by profits and political viewpoints.
To put into perspective just how much control ISPs have over American life, here are some recent statistics reported by the Federal Communications Commission (“FCC”):
- Between the years of 2010 and 2012, Internet traffic went from the equivalent of 17 billion DVDs worth of data to 36 billion DVDs worth of data per year.
- Private investments in wireless infrastructure are expected to generate $1.2 trillion in economic growth and to create 1.2 million jobs in the next five years.
- By the fifth year anniversary of Apple’s App Store in July 2013, the “App Economy” created 752,000 jobs.
- Americans spent 70 percent more time watching videos online in 2014 than they did in 2010.
As Americans become more dependent upon high-speed and reliable Internet, the ISP industry giants (like Verizon and Time Warner) are increasing their control over the American market.
This begs the question: what’s going on within the U.S. government to protect Internet consumers?
In 2010, the FCC issued an Open Internet Order to increase ISP transparency and to prevent blocking and unreasonable discrimination. However, on January 14, 2014, in Verizon v. FCC, the D.C. Court of Appeals held invalid certain FCC protections aimed to maintain a free and open Internet. The Court invalidated the FCC’s regulations due to inconsistency in the application of the Communications Act and the Telecommunications Act. According to the Court, the FCC improperly classified ISPs as providers of “information services” when ISPs actually provide access to information. Therefore, while the transparency rules under the Open Internet Order of 2010 were upheld, the Court vacated the anti-blocking and anti-unreasonable-discrimination rules.
As a result of the Court’s decision, the ISPs are no longer subject to rules in the Open Internet Order. The FCC is now looking for a new approach to regulate these industry giants who hold the key to economic growth, innovation, competition, and free expression in America.
The FCC launched a Notice and Comment Rulemaking process on May 15, 2014. In the Notice of Proposed Rulemaking, the FCC encourages assistance in combatting incentives that ISPs have in making “net neutrality” a thing of the past. These problematic factors include: the ability to make a profit by charging high fees for a faster Internet, the lack of incentive to improve the quality of free Internet access, and economic incentives to block or disadvantage certain types of data. For example, because Verizon owns RedBox, Verizon has an economic incentive to disadvantage Netflix’s data flow.
When the final rule is promulgated, there will likely be room for the ISPs to take advantage of the changing policy for Internet access. The Court, in Verizon v. FCC,made it clear that the FCC can only ban conduct that is not “commercially reasonable.” Therefore, it is necessary for the FCC to set standards that define how much blocking and discrimination is “commercially reasonable.”
If the final rule allows for unequal treatment based on prices paid, increased Internet fees would obviously impact American consumers. One scenario that may result from a broader regulation of ISPs is that ISPs could repackage Internet service plans to charge companies higher prices for increased speeds. In that scenario, companies like Hulu, CNN.com, and Pandora would pay more for a better product and then pass along the increased costs to its consumers.
Moreover, if the final rule reclassifies ISPs as common carriers under the Communications Act, ISPs will no longer be exempt from state and local taxes. According to a study by the Progressive Policy Institute, the reclassification could add $17 billion in user fees per year. The Internet Tax Freedom Act, if passed, would exempt Internet access from taxation at the state and local levels. Free Press estimates that the Internet Tax Freedom Act, if passed, will limit the impact of new taxes and fees by 75 percent.
Either way, the final FCC rule will likely allow for the ISP industry giants to restructure their business models in a way that makes the Internet, as we know it, less open and free—resulting in an end to “Net Neutrality.” The successes of Internet networks as “engines of economic growth, test beds for innovation services and product, and channels for all forms of speech protected by the First Amendment,” as pronounced by FCC Chairman Wheeler, are in jeopardy. While small businesses, nonprofits, and innovation have flourished in the free Internet market, there will surely be a change in the future of these entities’ development.
