Net neutrality rewritten: Will next generation of innovators have a chance?

The FCC's new rules governing the Internet’s broadband networks are being hailed by many in the telecom and cable industry – and not so much by net neutrality proponents.

Mark Von Holden/Verizon/AP/File
Verizon technicians install new Verizon Fios fiber optic cables underground in New York, Dec. 2012. Broadband carriers like Comcast and Verizon control much of America’s hard-wired networks.

After years of lobbying lawmakers and battling regulations in court, US telecom and cable gatekeepers will finally be allowed to create an exclusive Internet fast lane and charge additional tolls, the Federal Communications Commission has announced.

The regulatory agency is unveiling new rules Thursday that govern the Internet’s broadband networks, after federal courts limited their ability to enforce the principle known as “net neutrality.” This principle calls for all information traveling along the Internet’s wires to be treated the same – an idea that has governed the Internet from its birth.

The era-changing new rules will still require broadband carriers like Comcast and Verizon, which control much of America’s hard-wired networks, to provide a base-line level of service for all websites and online offerings.

But these rules will also allow them, for the first time, to enter into individual negotiations with bigger content providers, offering companies like Netflix and Amazon, which stream videos and take up large swaths of bandwidth in the system, a faster path to customers for a fee.

Broadband providers will “need to act in a commercially reasonable manner subject to review on a case-by-case basis,” the FCC said in a statement Wednesday. As it prepares to take a final vote on the proposed new rules at its May 15 meeting, the federal agency will be seeking public advice on the base-line level of service to be required, as well as the parameters of the “commercially reasonable” standard to be put in place.

The new rules were hailed by many in the telecom and cable industry.

“To paraphrase a reaction, it’s ‘about freakin’ time!’ ” e-mails Larry Freedman, a telecom regulations expert at Edwards Wildman Palmer in Washington and a former telecom network CEO. “As someone who has taken the operational and financial risk to build a network, it strikes me as fundamental fairness that another company, who wants to use an Internet network to provide their own services for a fee, should provide some compensation for the basic network infrastructure that makes their services, and revenues, possible – particularly if they wish to have upgraded services.”

In January, a federal court struck down the FCC’s “Open Internet Order,” which barred Internet service providers like Verizon or Comcast from blocking lawful website content or otherwise giving high-speed priority to sites of their choosing. This came after a similar ruling in 2010.

For advocates of net neutrality, the new rules will have profound social and economic implications, stifling the Internet’s openness and giving enormous gatekeeping power to broadband providers.

“The problem with creating a discriminatory network is that it’s going to raise prices to the point where only the established players, only the big dogs, are going to stay in,” says Aram Sinnreich, author of “The Piracy Crusade: How the Music Industry's War on Sharing Destroys Markets and Erodes Civil Liberties.” “And the free-for-all, low-barrier-to-entry level playing field for the last 20 years, which has allowed hundreds if not thousands of new brands to emerge and new companies to create new markets for consumers – that’s going to go bye-bye.”

FCC Chairman Tom Wheeler rejects the claim, however. Those who say the rules of net neutrality have been gutted are “flat out wrong,” he said.

“There is no ‘turnaround in policy.’ The same rules will apply to all Internet content,” Mr. Wheeler said in a statement Wednesday. “As with the original Open Internet rules, and consistent with the court's decision, behavior that harms consumers or competition will not be permitted.”

But the court’s decision in January rejected the FCC’s power to enforce net neutrality. It cited the agency’s definition of broadband in 2002 as an “information” service, rather than a “telecommunications” service – a designation that the industry lobbied hard for, because telecommunications services face much stricter regulations.

“Allowing higher charges for faster speeds is consistent with a policy of attracting more investment to the most important network in America and improving broadband for all users,” George Foote, a utility policy expert at the international law firm Dorsey & Whitney, told the Associated Press. “The technology that will deploy for the higher-price lanes and the technology that follows to duplicate it will accelerate better networks for all users. The FCC approach can work."

According to critics, the argument that the industry needs to find new revenues to invest in their networks holds little weight, because it’s an industry already awash in cash.

“The broadband carriers want to make more money for doing what they already do,” wrote Tim Wu, the professor at Columbia Law School in Manhattan who developed the concept of net neutrality and coined the term, in a New Yorker post Thursday. “Never mind that American carriers already charge some of the world’s highest prices, around sixty dollars or more per month for broadband, a service that costs less than five dollars to provide. To put it mildly, the cable and telephone companies don’t need more money.”

But the crucial issue, net neutrality proponents say, is that the industry’s near-exclusive control of the Internet’s infrastructure puts it in a powerful position. As gatekeepers of the Internet, they play a key role in nearly every part of modern life, from business and personal communications to entertainment and social networking.

“There are all kinds of ways that, once you give a company that power to discriminate between who’s going to reach their customers quickly and efficiently and who isn’t, those powers can be abused,” says Mr. Sinnreich, who is also a digital media expert at Rutgers University in New Brunswick, N.J.

But aside from companies’ enormous place of power, the economic impact could be to stifle the next generation of innovators.

“All the innovative start-ups that have the best new ideas are going to be priced out of the marketplace,” Sinnreich says. “It’s possible now that the Internet in 2034 is going to look exactly like the Internet in 2014, in terms of who the big players are. Whereas there’s no way in 1994 that we could have predicted what it would look like today.”

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