By Jessica Ertel, Associate Articles Editor
The D.C. Court of Appeals recently turned down federal net neutrality legislation, thus allowing Internet service providers to charge Internet companies fees for faster delivery of Internet content.
Net neutrality legislation requires that broadband providers treat all Internet traffic equally. The Federal Communications Commission also calls this “Internet openness.” The FCC supports an open Internet because without net neutrality legislation, broadband providers might prevent their subscribers from accessing certain websites altogether or degrade the quality of these sites in order to direct Internet traffic towards their own competing services, or to collect fees from these websites.1 The Commission’s purpose in the net neutrality legislation was to prevent broadband providers from blocking or discriminating against certain Internet site providers.
By throwing out net neutrality legislation, the decision opens the door for Internet Services providers to charge fees to companies who want their Internet content to be delivered to consumers more quickly. Internet services providers, such as petitioner Verizon, applaud the ruling, because it means that they can make money off of Internet companies who want the information from their sites delivered “first class.” The Internet companies who deliver streaming content are the ones most distressed by the U.S. Court of Appeals’ decision. Netflix is one such company. The CEO of Netflix, Reed Hastings, responded to the outcome of the case: “Were this draconian scenario to unfold with some [Internet Service Provider], we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver.”2
Big companies such as Netflix would be the ones most hurt by this ruling, and the company estimates that it would potentially be forced to pay as much as 10 percent of its annual revenue to broadband providers.3 This could in turn be pushed onto the consumers in the form of higher prices to access sites like Netflix. Yet such a price increase is unlikely to happen soon, and further, Internet service providers have expressed their commitment to their consumers’ ability to freely access Internet sites.4
In spite of this roadblock for the FCC, it has promised to find other ways to pursue Internet openness. The Appeals Court did find that the FCC had the authority to regulate broadband providers’ treatment of Internet traffic.5 The FCC appears ready for the challenge to find other ways to promote Internet openness.
1Verizon v. F.C.C., 11-1355, 2014 WL 113946, at *2 (D.C. Cir. Jan. 14, 2014).
2 Steven Russolillo, Netflix CEO on Net Neutrality: We Will ‘Vigorously Protest’ a “Draconian Scenario,’Wall St. J. (Jan. 22, 2014), available at http://blogs.wsj.com/moneybeat/2014/01/22/netflix-ceo-on-net-neutrality-we-will-vigorously-protest-a-draconian-scenario/?mod=e2tw.
3 Scott Mortize & Cliff Edwards, Verizon Victory on Net-Neutrality Rules Seen as Loss for Netflix, Bloomberg Law, Jan. 14, 2014, available at http://about.bloomberglaw.com/legal-news/verizon-victory-on-net-neutrality-rules-seen-as-loss-for-netflix.
4 Edward Wyatt, Rebuffing F.C.C. in ‘Net Neutrality’ Case, Court Allows Streaming Deals, N.Y. Times, Jan. 14, 2014, available at http://www.nytimes.com/2014/01/15/technology/appeals-court-rejects-fcc-rules-on-internet-service-providers.html?_r=0(Comcast vice president expressing the company’s commitment to deliver an open Internet to its customers).
5Verizon v. F.C.C., 11-1355, 2014 WL 113946, at *1 (D.C. Cir. Jan. 14, 2014).