A federal appeals court upholds net-neutrality rules and compares internet service to utilities

June 14, 2016 12:16 PM

(Bloomberg)—A federal court upheld net-neutrality regulations designed to ensure an open internet, handing a victory to the Obama administration and a defeat to telephone and cable providers.

The Washington-based U.S. Court of Appeals Tuesday acted after a decade of debate over web access that pitted Silicon Valley against companies that provide internet access to homes and businesses. The court likened internet service providers to utilities, saying they “act as neutral, indiscriminate platforms for transmission of speech.”

The ruling is a triumph for the Federal Communications Commission’s Democratic majority that passed the rules last year. It is a win for Alphabet Inc.’s Google, online video provider Netflix Inc. and others who championed the notion of an open internet where internet service providers are prevented from offering speedier lanes to those willing to pay extra for them. In February 2015, Inc., No. 1 in the Internet Retailer 2016 Top 500 Guide, reacted favorably when the FCC adopted net-neutrality rules. "Amazon welcomes action to protect net neutrality—the fundamental openness of the Internet—which has been so beneficial to consumers and innovation," Paul Misener, Amazon vice president of global public policy, said at the time.

“The open internet rules are here to stay,” Pantelis Michalopoulos, an attorney who represented Netflix and Dish Network Corp. in the case, said in an email. “There is no doubt who is the winner: the open internet. The gatekeepers may not block or throttle our information. They may not ask information to pay tolls.”

Challengers including AT&T Inc., Verizon Communications Inc. and Comcast Corp. said the rule would discourage innovation and investment. AT&T said it would appeal to the U.S. Supreme Court.

‘Unfettered access’

The three-judge appellate panel heard arguments on Dec. 4. U.S. Circuit judges David Tatel and Sri Srinivasan voted to uphold the FCC. Judge Stephen Williams dissented, saying the FCC ignored market conditions.

“Today’s ruling is a victory for consumers and innovators who deserve unfettered access to the entire web,” FCC chairman Tom Wheeler, who led the agency to a 3-2 Democratic-led vote to pass the rules, said in an emailed statement. “It ensures the internet remains a platform for unparalleled innovation, free expression and economic growth.”

President Barack Obama backed the rules. Presidential candidate Bernie Sanders in a Tweet said that, “Today’s decision will help ensure we don’t turn over our democracy to the highest bidder.”

“We have always expected this issue to be decided by the Supreme Court, and we look forward to participating in that appeal,” David McAtee, AT&T’s general counsel, said in an emailed statement.

Congressional options

The wireless industry “will pursue judicial and congressional options to ensure a regulatory framework that provides certainty for consumers, investors and innovators,” Meredith Attwell Baker, president of CTIA, a trade group with members including AT&T and Verizon, said in an emailed statement.

The National Cable & Telecommunications Association, with members including top U.S. cable provider Comcast and Charter Communications Inc., said in a statement it was reviewing the decision.

The decision comes as AT&T, Comcast and T-Mobile US Inc. face regulatory scrutiny for offering customers free data for viewing certain web videos, raising concerns as to whether they’re indeed treating all content equally.

The notion behind the FCC measure, that broadband service providers must treat all content the same, had the support of the Obama administration as well as Twitter Inc., the American Civil Liberties Union and other interest groups.

Telephone companies

Two years ago, another three-judge panel that included Tatel rejected the FCC’s earlier effort to implement internet traffic rules in a Verizon-filed case, concluding the regulator had tried to treat broadband service providers as common carriers tantamount to telephone companies after having previously classified them as exempt from that designation.

In 2010, a U.S. court ruled federal regulators lacked authority to censure Comcast for interfering with subscribers’ internet traffic.

The FCC in response wrote rules that in 2014 were again rejected for lack of authority.

The agency tried again with the rules passed last year. This time it said broadband service providers, both mobile and fixed, were indeed common carriers that could be regulated under a 1996 telecommunications act, an assertion disputed in court by the challengers’ attorney Peter Keisler.

Defending the measure before the three-member panel was FCC General Counsel Jonathan Sallet.

The revised measures took effect last year.

The case is USTelecom v. FCC, 15-1063, U.S. Court of Appeals, District of Columbia (Washington).




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