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Charles Rex Arbogast/Associated Press Justice Antonin Scalia
The Federal Communications Commission’s high-profile attempt to defend its net neutrality rules against a court challenge got major support on Monday from the Supreme Court, which ruled in a separate case that regulatory agencies should usually be granted deference in interpreting their own jurisdictions.
In a 6-to-3 decision, Justice Antonin Scalia wrote that in cases where Congress has left ambiguous the outlines of a regulatory agency’s jurisdiction, “the court must defer to the administering agency’s construction of the statute so long as it is permissible.”
That has big implications for Verizon v. F.C.C., in which Verizon challenged the F.C.C.’s Open Internet Order, its rules on net neutrality. Those rules said that an Internet service provider must treat all traffic on its system roughly equally, not giving priority to any one type of data or application as it moves through the provider’s Internet pipes.
The net neutrality case is pending before the United States Court of Appeals for the District of Columbia Circuit. The appeals court was expected to hear arguments in that case this spring, but deferred the case until next fall. Court watchers have speculated that the delay may have been spurred by anticipation of Monday’s decision in Arlington v. F.C.C., No. 11-1545.
“This case just gave the F.C.C.’s argument a lot more weight,” said David Kaut, a telecommunications regulatory analyst at Stifel, Nicolaus Company in Washington. Mr. Kaut cautioned, however, that the differing facts of the two cases made it uncertain whether the precedent in the Arlington case was sufficient to validate the F.C.C.’s argument that it has authority to regulate Internet service providers.
Edward S. McFadden, a Verizon spokesman, said the company did not “anticipate that today’s decision in Arlington v. F.C.C. will have any effect on our appeal” in the net neutrality case.
That decision will be parsed for months, particularly because in explaining his reasoning, Justice Scalia constructed a hypothetical example that sounded very much like the Verizon net neutrality case.
Using two options of how Congress might have written a telecommunications law, Justice Scalia asked under which of those options the F.C.C. could legitimately claim jurisdiction over Internet service providers.
The answer, he said, was both.
“The question in every case is, simply, whether the statutory text forecloses the agency’s assertion of authority, or not,” he wrote.
The precedent applied by Justice Scalia in the Arlington case was Chevron U.S.A. v. Natural Resources Defense Council, in which the court held that courts must defer to an agency’s interpretation of its statutory jurisdiction unless it exceeds the specific bounds set by Congress.
How that applies to the Verizon case remains uncertain, however, because of a previous decision by the District of Columbia Circuit itself, in Comcast v. F.C.C. In that case, which involved a net neutrality enforcement proceeding, the circuit court said that the F.C.C. did not have authority over Comcast’s Internet service, because it was not ancillary to the authority laid out by Congress in the Communications Act.
Cellphone carriers have generally met net neutrality proposals with varying levels of hostility, but Verizon and MetroPCS have been particularly belligerent: in 2011, they sued to overturn the FCC’s then-newly adopted Open Internet rules. Since then, the two have consistently argued in court against the rules, which they’ve said undermine the freedom to run their networks as they see fit. But as T-Mobile finalizes its merger with MetroPCS, it’s decided it doesn’t want an old lawsuit to come with its new spectrum. In a court statement filed today, T-Mobile has moved to dismiss its appeals claim.
T-Mobile’s decision to back out doesn’t mean the suit is over. Verizon will continue its litigation, though the court document indicates that it knows about the move and will make no attempt to stop it. And the Open Internet rules themselves haven’t stopped companies from pushing the boundaries of what constitutes blocking the competition. ATT has maintained that it was in the right to block FaceTime over its network, and Comcast started favoring its own Xfinity TV app even after the rules took effect. But for now, Verizon is alone among US carriers in its legal challenge.
Charles Rex Arbogast/Associated Press Justice Antonin Scalia
The Federal Communications Commission’s high-profile attempt to defend its net neutrality rules against a court challenge got major support on Monday from the Supreme Court, which ruled in a separate case that regulatory agencies should usually be granted deference in interpreting their own jurisdictions.
In a 6-to-3 decision, Justice Antonin Scalia wrote that in cases where Congress has left ambiguous the outlines of a regulatory agency’s jurisdiction, “the court must defer to the administering agency’s construction of the statute so long as it is permissible.”
That has big implications for Verizon v. F.C.C., in which Verizon challenged the F.C.C.’s Open Internet Order, its rules on net neutrality. Those rules said that an Internet service provider must treat all traffic on its system roughly equally, not giving priority to any one type of data or application as it moves through the provider’s Internet pipes.
The net neutrality case is pending before the United States Court of Appeals for the District of Columbia Circuit. The appeals court was expected to hear arguments in that case this spring, but deferred the case until next fall. Court watchers have speculated that the delay may have been spurred by anticipation of Monday’s decision in Arlington v. F.C.C., No. 11-1545.
“This case just gave the F.C.C.’s argument a lot more weight,” said David Kaut, a telecommunications regulatory analyst at Stifel, Nicolaus Company in Washington. Mr. Kaut cautioned, however, that the differing facts of the two cases made it uncertain whether the precedent in the Arlington case was sufficient to validate the F.C.C.’s argument that it has authority to regulate Internet service providers.
Edward S. McFadden, a Verizon spokesman, said the company did not “anticipate that today’s decision in Arlington v. F.C.C. will have any effect on our appeal” in the net neutrality case.
That decision will be parsed for months, particularly because in explaining his reasoning, Justice Scalia constructed a hypothetical example that sounded very much like the Verizon net neutrality case.
Using two options of how Congress might have written a telecommunications law, Justice Scalia asked under which of those options the F.C.C. could legitimately claim jurisdiction over Internet service providers.
The answer, he said, was both.
“The question in every case is, simply, whether the statutory text forecloses the agency’s assertion of authority, or not,” he wrote.
The precedent applied by Justice Scalia in the Arlington case was Chevron U.S.A. v. Natural Resources Defense Council, in which the court held that courts must defer to an agency’s interpretation of its statutory jurisdiction unless it exceeds the specific bounds set by Congress.
How that applies to the Verizon case remains uncertain, however, because of a previous decision by the District of Columbia Circuit itself, in Comcast v. F.C.C. In that case, which involved a net neutrality enforcement proceeding, the circuit court said that the F.C.C. did not have authority over Comcast’s Internet service, because it was not ancillary to the authority laid out by Congress in the Communications Act.
Charles Rex Arbogast/Associated Press Justice Antonin Scalia
The Federal Communications Commission’s high-profile attempt to defend its net neutrality rules against a court challenge got major support on Monday from the Supreme Court, which ruled in a separate case that regulatory agencies should usually be granted deference in interpreting their own jurisdictions.
In a 6-to-3 decision, Justice Antonin Scalia wrote that in cases where Congress has left ambiguous the outlines of a regulatory agency’s jurisdiction, “the court must defer to the administering agency’s construction of the statute so long as it is permissible.”
That has big implications for Verizon v. F.C.C., in which Verizon challenged the F.C.C.’s Open Internet Order, its rules on net neutrality. Those rules said that an Internet service provider must treat all traffic on its system roughly equally, not giving priority to any one type of data or application as it moves through the provider’s Internet pipes.
The net neutrality case is pending before the United States Court of Appeals for the District of Columbia Circuit. The appeals court was expected to hear arguments in that case this spring, but deferred the case until next fall. Court watchers have speculated that the delay may have been spurred by anticipation of Monday’s decision in Arlington v. F.C.C., No. 11-1545.
“This case just gave the F.C.C.’s argument a lot more weight,” said David Kaut, a telecommunications regulatory analyst at Stifel, Nicolaus Company in Washington. Mr. Kaut cautioned, however, that the differing facts of the two cases made it uncertain whether the precedent in the Arlington case was sufficient to validate the F.C.C.’s argument that it has authority to regulate Internet service providers.
Edward S. McFadden, a Verizon spokesman, said the company did not “anticipate that today’s decision in Arlington v. F.C.C. will have any effect on our appeal” in the net neutrality case.
That decision will be parsed for months, particularly because in explaining his reasoning, Justice Scalia constructed a hypothetical example that sounded very much like the Verizon net neutrality case.
Using two options of how Congress might have written a telecommunications law, Justice Scalia asked under which of those options the F.C.C. could legitimately claim jurisdiction over Internet service providers.
The answer, he said, was both.
“The question in every case is, simply, whether the statutory text forecloses the agency’s assertion of authority, or not,” he wrote.
The precedent applied by Justice Scalia in the Arlington case was Chevron U.S.A. v. Natural Resources Defense Council, in which the court held that courts must defer to an agency’s interpretation of its statutory jurisdiction unless it exceeds the specific bounds set by Congress.
How that applies to the Verizon case remains uncertain, however, because of a previous decision by the District of Columbia Circuit itself, in Comcast v. F.C.C. In that case, which involved a net neutrality enforcement proceeding, the circuit court said that the F.C.C. did not have authority over Comcast’s Internet service, because it was not ancillary to the authority laid out by Congress in the Communications Act.
The net-neutrality rules now in place reinforce the Internet’s original design principle: that all traffic is carried equally and without any special charges beyond those of transmission. Among other things, the rules are a pricing truce for the Internet; without them, we can expect a fight that will serve no one’s interests and will ultimately stick consumers with Internet bills that rise with the same speed as cable television’s.
Unfortunately, like American Presidents who hope to avoid the politics of the Middle East, the F.C.C. may ultimately have no choice but to get involved in this fight. But one very important thing has changed since last time. Cable operators like Time Warner and Comcast, if they think carefully, should come to understand that they now need a net-neutrality rule more than anyone.
Ask a cable operator what makes its life miserable, and the answer is immediate and obvious: programming fees. Such fees have roughly doubled over the past decade during a period of near-flat inflation and economic stagnation. Sports is the most outrageous example: what ESPN charges cable operators keeps growing, and is now approaching five dollars per customer. The actual cost of providing the entire Internet to cable customers, which is something like a few dollars a month, is less than that. It is a lose-lose situation for nearly everyone (except athletes). The real victims are consumers, especially low-income consumers, who ultimately foot all the bills but cannot control the costs.
If programming costs are the worst thing in cable, the best part of the business is selling broadband. Cable broadband, which costs almost nothing to provide once the infrastructure is built, has little real competition, and operators can charge between forty and sixty dollars for the product, yielding margins that analyst Craig Moffitt describes as “comically profitable.” Margins greater than ninety per cent are a sweet business no matter what you’re doing, and what cable operators have to realize is how crucial net neutrality is to making those margins possible.
An important aspect of the Internet’s original design is that many prices were set at zero—what have been called zero-price rules. The price to join the network is zero. The price that users and sites pay to reach others is zero: a blogger doesn’t need to pay to reach Comcast’s customers. And the price that big Web sites charge broadband operators to carry their content is also zero. It’s a subtle point, but these three zeros are a large part of what makes the Internet what it is. If net neutrality goes away, so does the agreement to freeze prices at zero.
What net neutrality means in practice for cable operators is that they don’t have to deal with rising programming costs in broadband. Cable operators pay Disney good money to carry ABC as a cable channel. But when a cable customer watches ABC shows over the Internet, using Hulu Plus or Amazon, the operator pays nothing. When they go to the ABC Web site, they also pay nothing. Rather, the consumer deals with the content provider directly, by watching ads or paying Amazon. The result: cable doesn’t have to pass on costs that it cannot control.
Back in the aughts, cable operators hated the idea of net neutrality because they hoped to charge then-rich firms like Yahoo extra cash to reach their customers (in telecom jargon, a “termination fee”). But that was when the Internet companies were far weaker. Times have changed, and firms like Google and Facebook now hold serious bargaining power. You can’t expect to provide a decent Internet service that doesn’t include Facebook and Google. And so, instead of being able to charge Google to reach its customers, cable operators, absent net neutrality, may have to pay programming fees to Google. In other words, Google might very well become the next ESPN, and the whole nightmare will start again.
Admittedly, it is hard to know exactly how things would work out if the zero-price rules are abandoned. Cable still has serious market power, and might, on balance, be able to charge more than it gets charged. But if you’re a cable operator, why take that bet when you’re already sitting on giant profit margins? Why risk the best business going? Beyond cable operators, a battle royale over Internet programming and termination fees would ultimately be terrible for consumers; the Internet would start to get both worse and more expensive.
Think of it this way: net neutrality, which sets all these prices at zero, is effectively a grand truce between the big app firms and the infrastructure providers. It eliminates an unnecessary middleman: consumers deal directly with content vendors and app firms. That’s a much healthier market dynamic than one driven by hidden, passed-on costs. If cable TV isn’t a good enough example, consider the dysfunction of the health-care industry, where consumers never see what they are paying for. That’s what the present rule avoids.
Finally, and most importantly for the public, the net-neutrality rule continues to provide a kind of subsidy to smaller speakers and startups, from bloggers to Quora and Wikipedia. The Internet would look a lot different if these kinds of players had to pay cable before reaching their customers. It would start to look a lot more like cable TV, and few things could really be worse than that.
Wheeler and the other members of the Federal Communications Commission will be very tempted to try and avoid and ignore net neutrality during Obama’s second term. If, magically, the rules aren’t struck down, they will have that luxury. But if the rules are struck down, avoiding the problem may lead to a replication of the horrors of the cable-television market. There’s trouble brewing; facing it is both the Commission’s responsibility and its destiny.
Tim Wu, @superwuster on Twitter, is a professor at Columbia Law School and the author of “The Master Switch.”
Photograph by Andrew Harrer/Bloomberg/Getty
Today a court filing made it known that MetroPCS has dropped its lawsuit against the Federal Communications Commission (FCC) regarding net neutrality. The comes following MetroPCS’ acquisition by T-Mobile, a company that had not been part of the legal proceeding.
Verizon, and until recently, MetroPCS contend that government rules regarding network neutrality – the requirement that all data served by an ISP must be treated as equal – is unconstitutional, arbitrary, and outside the bounds of the FCC’s authority.
Proponents of net neutrality – supporters of which include Google, Twitter, and Facebook – argue that the practice ensures that free speech can persist; if an ISP can slow content of a certain variety, it can unilaterally block its customers from having unfettered access to the Internet.
This has commercial and political implications. Some ISPs are also content-producers. This means that they would have a material interest in boosting their content, perhaps by speeding its delivery, and slowing that of their content-competitors.
Even more, the decision by an ISP to slow, speed, or block certain forms of content online is tantamount to having an unelected censor in place; in many locations there might be but a single ISP that can provide broadband, granting that firm a natural monopoly over the local population; to then grant that company the authority over what that population can read, view, and say, is troubling.
For a much longer dive in Verizon’s arguments, and a common sense grappling with their worth, head here.
The loss of MetroPCS is unlikely to deter Verizon. But it has lost an ally, publicly, and that cannot do anything but lessen its momentum.
Top Image Credit: Eric Hauser
Today a court filing made it known that MetroPCS has dropped its lawsuit against the Federal Communications Commission (FCC) regarding net neutrality. The comes following MetroPCS’ acquisition by T-Mobile, a company that had not been part of the legal proceeding.
Verizon, and until recently, MetroPCS contend that government rules regarding network neutrality – the requirement that all data served by an ISP must be treated as equal – is unconstitutional, arbitrary, and outside the bounds of the FCC’s authority.
Proponents of net neutrality – supporters of which include Google, Twitter, and Facebook – argue that the practice ensures that free speech can persist; if an ISP can slow content of a certain variety, it can unilaterally block its customers from having unfettered access to the Internet.
This has commercial and political implications. Some ISPs are also content-producers. This means that they would have a material interest in boosting their content, perhaps by speeding its delivery, and slowing that of their content-competitors.
Even more, the decision by an ISP to slow, speed, or block certain forms of content online is tantamount to having an unelected censor in place; in many locations there might be but a single ISP that can provide broadband, granting that firm a natural monopoly over the local population; to then grant that company the authority over what that population can read, view, and say, is troubling.
For a much longer dive in Verizon’s arguments, and a common sense grappling with their worth, head here.
The loss of MetroPCS is unlikely to deter Verizon. But it has lost an ally, publicly, and that cannot do anything but lessen its momentum.
Top Image Credit: Eric Hauser
Nov. 29, 2010 at 7:19 PM ET
Comcast made a move during the past several weeks that may threaten Netflix and other video services, according to the New York Times. It levied a “toll” to Netflix’s contracted video delivery service, called Level 3, which the company felt forced to pay in order to “ensure customers did not experience any disruptions.” This brings a new wrinkle to the “network neutrality” debate.
In effect, without charging Netflix or its own cable broadband customers extra, but instead charging the provider of the video stream itself, Comcast gets to test the waters of segregated pricing, the very imbalance that supporters of net neutrality seek to counter. In this instance, Level 3, the contractor that dearly wants Netflix’s business, is forced to pay extra to keep it. Eventually, this could lead to Netflix raising its own prices in order to cover the expenses of its streaming contractors. Neither Netflix or Comcast responded to the New York Times when approached about the matter. (Comcast is in final negotiations to buy NBC Universal; msnbc.com is a joint venture between NBC Universal and Microsoft.)
There isn’t yet a net neutrality law that requires broadband providers to allow any and all traffic to and from their customers’ homes, but for the most part, that’s how landline broadband works. That’s even what Google and Verizon said in their infamous pledge to keep home broadband “neutral” while making cellular wireless data streams a premium domain. They did allow in their proposal for “broadband providers to offer additional, differentiated online services.” But that would, presumably, not come at the cost of boxing out competitors.
The whole thing comes at a tricky time for the cable giant. The NYT points out that, as the FCC and Department of Justice look over Comcast’s bid to buy NBC Universal, one stipulation may be that Comcast must keep its “Internet network open to competitors.” So, to that end, would Comcast, soon to be a joint owner in Hulu Plus, charge their own affiliated video providers the same “toll”?
In a statement clearly aimed at both the Netflix-loving public and the regulators currently deciding the fate of the Comcast-NBC deal, Level 3′s chief legal officer Thomas Stortz said:
Level 3 believes Comcast’s current position violates the spirit and letter of the FCC’s proposed Internet Policy principles and other regulations and statutes, as well as Comcast’s previous public statements about favoring an open Internet. While the network neutrality debate in Washington has focused on what actions a broadband access provider might take to filter, prioritize or manage content requested by its subscribers, Comcast’s decision goes well beyond this. With this action, Comcast is preventing competing content from ever being delivered to Comcast’s subscribers at all, unless Comcast’s unilaterally-determined toll is paid — even though Comcast’s subscribers requested the content. With this action, Comcast demonstrates the risk of a ‘closed’ Internet, where a retail broadband Internet access provider decides whether and how their subscribers interact with content.
What this really shows is that no matter how much campaigning happens for something that guarantees “neutrality,” there will certainly be a million loopholes for broadband providers to test. Even if they ultimately fail, tricks like this can make them some decent money in the meantime.