For several years, net neutrality has been a major issue among consumer groups, startup companies, and many others who value the open nature of the internet. In the early days of the internet, internet service providers (ISPs) relayed data between websites and users indiscriminately, operating as a mere conduit. In the last few years, however, ISPs have developed the ability to monitor the traffic moving through their networks far more closely. Further, the same technology that allows ISPs to offer tiered upload and download speeds (at different prices) to customers can be repurposed to control the speed at which customers are allowed to access the internet. ISPs can speed up — or slow down — traffic headed to certain websites, both to manage network congestion and, more importantly, to create another revenue stream.

This could work in one of two ways. On one hand, ISPs could begin charging internet companies (such as Google, Netflix, Hulu, etc.) for granting preferential access to its users, earning the ISP extra cash while creating a barrier to entry to possible competitors. On the other hand, ISPs could begin charging their customers additional fees to use specific services. This would make internet access more costly to end users, while the ISPs could also exert significant pressure on those internet companies. Though no ISP has begun either of these practices on a wide scale, the possibility has led to calls for the Federal Communications Commission (FCC) to issue rules prohibiting these practices.

In 2010, the FCC issued an “Open Internet Order” effectively prohibiting broadband providers from engaging in preferential internet traffic treatment. The ISPs immediately challenged the order on numerous grounds, most of which are rooted in the FCC’s organic statute. Effectively, they argued that the FCC did not have the authority to issue the order. The D.C. Circuit struck down the 2010 order because the FCC failed to cite any law that allowed it to issue the order. The FCC re-issued a similar order citing to § 706 of the Telecommunications Act (codified at 47 U.S.C. § 1302) which allowed the FCC to issue regulations to foster “advanced telecommunications.”

Last week, the D.C. Circuit Court of Appeals struck down the FCC’s net neutrality rules for a second time. This time, Verizon had challenged the regulations because they effectively made broadband service providers “common carriers,” a different category of service provider under the Telecommunications Act. Thus, the court found, the FCC had once again exceeded its authority in issuing the rule.

So far, the biggest hurdles to net neutrality in the U.S. have been administrative law issues. The sides are not wrestling with whether enforced net neutrality is wise, but rather where the bounds of FCC authority lie. The FCC may make a third try at the rule, hoping to creatively craft a rule that will survive judicial review. More likely however, it will either take an act of Congress, or such widespread consumer outrage that the ISPs feel their hand is forced.

–Parker Hancock

FCC Image – Greg Elin

Broadband Image – Gavin St. Ours

One Response to Net Neutrality Rules Hit Another Wall

  1. Bradlee Edmondson says:

    If the ISPs start going down this road, it will be interesting to watch the clash of the titans:
    http://www.theverge.com/2014/1/22/5335626/netflix-will-provoke-customer-action-if-isps-violate-net-neutrality