Verizon Wins Appeal Against FCC's Open-Internet Regulations

Tuesday, 14 Jan 2014 03:03 PM

 

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Verizon Communications Inc. won its challenge to U.S. open-Internet rules as an appeals court said the Federal Communications Commission overreached in barring broadband providers from slowing or blocking selected Web traffic.

The U.S. Court of Appeals in Washington today sent the rules back to the FCC, which may attempt to rewrite them.

The rules required companies that provide high-speed Internet service over wires to treat all traffic equally. With the regulation voided, companies such as Netflix Inc. and Amazon.com Inc. could face new charges for the fastest connections.

U.S. Circuit Judge David Tatel wrote for a three-judge panel that FCC tried to regulate Verizon and other broadband companies under the wrong legal framework.

“Given that the commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the commission from nonetheless regulating them as such,” Tatel wrote.

The FCC will consider appealing today’s decision, Chairman Tom Wheeler said in an e-mailed statement. 

‘Open Platforms’

The agency will ensure “that these networks on which the Internet depends continue to provide a free and open platform for innovation and expression,” Wheeler, a Democrat, said.

The FCC rule, approved on a Democratic-led 3-to-2 vote in 2010, left more freedom for wireless providers.

The rule attracted criticism from the left and right ends of the political spectrum. Open-Internet advocates said it didn’t go far enough, and cited the lighter regulation of increasingly popular mobile services. Republicans, including members of Congress, called the rule an unjustified power grab.

The FCC passed the rule after the appeals court decided the agency lacked authority to censure Comcast Corp. for interfering with subscribers’ Internet traffic. That sent the FCC on a search for a legal justification, and the agency concluded it could rely on its broad power over communications.

Whether that foundation was adequate was a primary question in the case decided today by a three-judge panel that included circuit judges Laurence Silberman and Judith Rogers.

Rival Services

Proponents, including Web companies, say regulations are needed to keep Internet-service providers from interfering with rival video and other services. Those companies don’t pay today for what’s known as last-mile Web content delivery.

The FCC has said that without rules, Internet providers could favor wealthier, established players at the expense of startups, squelching innovation.

Verizon, based in New York, told the appeals court on Sept. 9 that the FCC’s rules may make it more difficult to manage increasing network traffic, and would damp investment in more Internet capacity.

Verizon wants a “two-sided market” involving payment for Internet service by subscribers and by companies who want to reach them, Helgi Walker, a lawyer for Verizon, told the appeals panel.

“I’m authorized to state from my client today that but for these rules we would be exploring those types of arrangements,” said Walker, then with Wiley Rein LLP.

Oral arguments lasted almost two hours, three times longer than scheduled, reflecting both the stakes and the complexity of the issue.

© Copyright 2014 Bloomberg News. All rights reserved.

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