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FCC Approves Historic, Troubling Net Neutrality Rules

After an extensive and sometimes contentious public and politcal debate, the Federal Communications Commission (FCC) voted February 26, with a 3 to 2 split along party lines, in favor of new regulations intended to preserve Net neutrality. The vote is seen as a win both for the Obama administration and a large Net roots activist campaign that has been pushing for this outcome for several years.

Under the new rules, which go into effect in 60 days, the FCC will treat Internet service providers (ISPs) as utilities, and use its FCC regulatory authority to prevent ISPs from, among other things, charging companies and Web sites a fee for priority handling of digital data.

Wondering how all this came about? It started back in 2003, when Columbia Law School Professor Timoth Wu coined the phrase “network neutrality” to describe a policy goal of preventing discrimination among various types of applications and the transmission of data online. Twelve years and many debates later, the toughest government regulations were just approved.

Verizon Is Not Amused

The wireless service provider issued a scathing response to the FCC vote in a blog post on its Web site. The post entitled “FCC’s ‘Throwback Thursday’ Move Imposes 1930s Rules on the Internet,” was written entirely in Morse Code. Yes, you read that right: Morse Code — those little dots and dashes invented many decades ago to transport encrypted messages. Verizon also provided a link to a PDF version of the post for those of us less able to read Morse Code. However, even the standard English version was presented in a blurred, old-fashioned typewriter font, again making the point that the FCC’s “new” rules are based on incredibly outdated technology.

“The FCC today chose to change the way the commercial Internet has operated since its creation,” according to Verizon. “Changing a platform that has been so successful should be done, if at all, only after careful policy analysis, full transparency, and by the legislature, which is constitutionally charged with determining policy. As a result, it is likely that history will judge today’s actions as misguided.”

Just in Time for ‘House of Cards’

At its core, the action by the FCC will serve to maintain the status quo, as it will prevent large ISPs like AT&T, Time-Warner, Verizon, and Comcast from slowing down or even blocking certain types of data from flowing across their wires, or from demanding a premium to prioritize Internet traffic.

We contacted Aksay Sharma, an analyst with Gartner Inc., who told us that the FCC action is good news for online movie viewers. “Consumers of OTT (over the top) services should benefit as no traffic prioritization should occur,” he said.

The threat of premium prices for the delivery of content from companies like Netflix — which can account for upwards of 40 percent of the Internet’s traffic on a weekend night — was one of the driving forces behind the popular support for strong Net neutrality protection. Other companies that will likely benefit from these rules include Amazon Instant Video, HBO Go, and Hulu.

Over the past couple of years, the FCC has received more comments from the public in support of Net neutrality than the commission has received on any other issue. Over 4 million people wrote, called, or e-mailed the commission to urge adoption of stronger rules. President Barack Obama’s public support for Net neutrality was widely viewed as helping to persuade FCC Chairman Tom Wheeler to put his support behind the utility regulation model. In fact, the new regulations are already being dubbed by some in the press as ObamaNet, with comparisons being made to ObamaCare — another deeply divisive example of stepped up government regulation.

Long-Term Implications

The FCC’s vote is not the end of the debate. The rules are undoubtedly going to be challenged in federal court by a variety of well-funded plaintiffs. The FCC has made previous attempts at regulating Internet services and, each time, has been rebuffed by the federal courts.

There is also some uncertainty as to whether the classification of ISPs as utilities will affect the growth and development of the Internet, either in terms of business models or actual infrastructure.

“This is going to be interesting as CSPs (communications services providers) may feel disincentivized in becoming just a ‘bit-pipe.’ However, CSPs that have innovative services that they can differentiate on can become an OTT themselves,” Sharma said.

Among the innovations that Sharma suggested might be lucrative for CSPs grappling with Net neutrality are things like WebRTC (Web real-time communications) with UCaaS (unified communications-as-a-service), or possibly updated video services of their own.

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