• Net Neutrality: Will The Internet Still Be Open for Business As Usual?
  • April 6, 2015 | Authors: Dominic S. Liberi; Katherine E. Missimer
  • Law Firm: Obermayer Rebmann Maxwell & Hippel LLP - Philadelphia Office
  • New changes supposedly designed to foster a more “Open Internet” have resulted in something of a national backlash. Although not unexpected, the Federal Communications Commission (the “FCC”) announced approval, on a partisan vote of 3-2, of its intention once again to attempt to regulate Internet activity. A previous attempt by the FCC to regulate the Internet failed in the courts. Not yet released, the Net Neutrality Regulations, are intended to bring about an “open Internet policy” whereby Internet service providers are required to provide consumers with access to all Internet content equally. Aimed at stamping out discrimination against particular providers or specific content, the Net Neutrality Regulations will target a service or content provider’s ability to have its service or content fast-tracked to consumers. How this goal will be accomplished is not yet clear.

    While the FCC has not yet released for public scrutiny the Net Neutrality Regulations it proposes, this article provides a summary what may follow based on the Net Neutrality Regulations announcement, FCC and governmental press releases on the topic and various media reports concerning the subject. Among other things, the Net Neutrality Regulations, inter alia, would appear to prohibit providers from (i) charging a fee to deliver access to particular sites or content sooner than others (“Paid Prioritization”); (ii) blocking certain sites or content absent a fee (“blocking”); and (iii) intentionally slowing Internet service (“bandwidth throttling”).

    Although, as mentioned above, an earlier attempt to reach net neutrality through regulation failed, in this round, when faced with a court challenge of its authority, the FCC successfully argued that the Internet should be treated as a public utility and regulated as such. Deriving authority under Title II of the Federal Communications Act of 1934 (the “Act”), the FCC has now taken the position that the Internet is no different than the telephone service regulated by the Act since its inception in 1934. This regulatory structure converts Internet service providers to “common carriers” under the Act.

    The scope of the new regulations appears quite broad in terms of both coverage and subject matter. Not only will the Net Neutrality Regulations apply to hardline Internet connections, but, for the first time, Net Neutrality Regulations will also govern mobile technologies. However, it should be noted that the Regulations will not prohibit, at least at this stage of implementation, mobile providers from slowing Internet service to consumers as they presently do when wireless networks are congested or a certain threshold in data usage is reached.

    Some unintended consequences of the Net Neutrality Regulations would appear to include: (i) deterring investment by service providers in broadband infrastructure; and (ii) decreasing competition among service providers.

    Opponents also argue that the Net Neutrality Regulations will decrease Internet innovation- why should providers invest in new methods if they cannot fully compete with other providers for consumer business, and if there is uncertainty in the ability to fully capitalize on investments in new Internet technologies.

    The largest concern expressed in reaction to the FCC’s announcement, however, is with regard to the inevitableness of resultant taxes and licensing fees. Although the Internet has long remained an untaxed industry, under the Net Neutrality Regulations, Internet service providers could be required to obtain licenses to continue to provide their current products and services. Similarly, the Net Neutrality Regulations could open the door for a multitude of new federal impositions in the form of excise taxes, fees and fines. Under the Net Neutrality regulatory rationale and scheme, it would seem that Internet service providers could be subject to taxes similar to those assessed against telephone service providers under the Universal Service Fund, as detailed in the Act. Obviously, such taxes and fees would ultimately be passed on to the consumer.

    Industry’s response suggests that the Net Neutrality Regulations will be legally challenged by many of the large Internet service providers as well as others, such as consumer advocates and watchdog groups. Avenues susceptible to challenge include the FCC’s authority to regulate the Internet in the manner proposed, the fact that the Internet has been unregulated since its inception, and the overarching reach of the Net Neutrality Regulations beyond the Internet to both mobile and cable service providers. Many opponents argue that an open Internet already exists and that no regulation is needed to fix something that is not broken. Certain members of Congress have even begun drafting legislation to deal with the Net Neutrality Regulations, although none of these efforts have taken hold as of this time.

    Once the Net Neutrality Regulations are published, we will provide a more comprehensive review of the contents and projected effects thereof. Meanwhile, log in and stay tuned.