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Court strikes down FCC ‘net neutrality’ rule

January 15, 2013 By Cecilia Kang

A federal appeals court Tuesday struck down a far-reaching government effort to protect competition on the Web, allowing Internet providers to sell faster download speeds to the highest corporate bidder — even if access to other Web sites slows to a crawl.

Ultimately, the ruling may limit consumer choices on the Internet, critics warned. Deep-pocketed, entrenched companies such as Google, Netflix and Facebook could buy better access to American businesses and homes, while new or less affluent rivals could see their content load more slowly.

The decision is “alarming for all Internet users,” said Harvey Anderson, senior vice president of legal affairs for Mozilla, the nonprofit organization that created the Firefox Web browser. “Essential protections for user choice and online innovation are gone.”

Consumer advocates warned that if control of the Internet were to become concentrated in the hands of a few giant Internet providers, such as Time Warner Cable or Verizon, those firms could become gatekeepers of political speech and other content online.

“We’ve had a number of examples of how money is equated with speech. And money drives the political system,” said Gene Kimmelman, the director of the Internet Freedom and Human Rights Project at the New America Foundation. “This decision opens the door now for the companies that control the money on the Internet to drive what Web sites, what news and information is available at what price and to whom.”

The ruling by the three-judge panel at the U.S. Court of Appeals for the District of Columbia Circuit took aim at the “net neutrality” rule that had required broadband companies to treat all Internet content equally.

When it was approved three years ago by the Federal Communications Commission, the regulation prompted a firestorm of protest from Republican lawmakers and from high-speed Internet providers, which said they needed more flexibility with their business models.

Those companies argued that consumers could ultimately benefit from lower monthly bills if Web firms were willing to pick up some cost of delivering the Internet to homes and businesses.

“It’s ironic that the big winner coming out of the court’s decision could end up being one person who wasn’t a litigant — the consumer,” said Michael K. Powell, president of the National Cable & Telecommunications Association and a former FCC chairman. “By rejecting part of the FCC’s rule, the court removed a major barrier to the continued evolution of diverse business models.”

Analysts say the net-neutrality rule was thrown out largely because of a technicality. In the court’s 63-page opinion, the judges said the FCC overstepped its authority when it passed the regulation. The court said that the agency has the power to regulate utilities such as telephone service but that because the FCC categorized the Internet as an information service, its authority to pass rules for the Web is more limited.

FCC Chairman Tom Wheeler, who was sworn in late last year, said in a statement that he is considering “all available options, including those for appeal.”

He noted that the court did not completely strip the FCC’s overall authority to regulate broadband providers. “I am committed to maintaining our networks as engines for economic growth, test beds for innovative services and products, and channels for all forms of speech protected by the First Amendment,” Wheeler said.

But some consumer advocates question whether Wheeler will be inclined to launch a major effort to reinstate net-neutrality rules. They note that before coming to the FCC, Wheeler had been the head of major lobbying organizations for the cable and wireless industries.

Wheeler recently has indicated some support for allowing wireless firms such as AT&T Wireless and T-Mobile to offer priority service to Web companies for a fee. Under the FCC’s net-neutrality rule, broadband companies could not speed up traffic for preferred Web sites. But more flexibility was given to wireless carriers, which were banned only from blocking Web sites outright.

AT&T announced last week that it will begin sponsored data plans that would allow a company such as Twitter to pick up consumers’ data costs when they use its social network. Such arrangements could spur more use by Twitter’s customers but may also make it harder for small start-ups that want to compete with Twitter to get discovered.

Verizon, which provides both wireless services and high-speed Internet to homes through its Fios fiber-optic network, had sued the FCC to overturn the net-neutrality rule. The company has told the court that it wants to explore similar arrangements as the one announced by AT&T.

But in a statement, the firm said it will not substantially change the experience of its Internet service customers.

“One thing is for sure: Today’s decision will not change consumers’ ability to access and use the Internet as they do now,” said Randal Milch, Verizon’s executive vice president of public policy.

Democratic lawmakers and regulators called on Wheeler to fight the court decision. Sen. Edward J. Markey (Mass.) vowed to introduce legislation that would protect net-neutrality rules at the FCC.

“Without prompt corrective action by the Commission to reclassify broadband, this awful ruling will serve as a sorry memorial to the corporate abrogation of free speech,” Democratic former FCC commissioner Michael Copps said in a statement.

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