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Net Neutrality Rules take Effect

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Samuel J. Frederick
Foster Swift Business & Corporate Law News
March 27, 2015

The Federal Communications Commission (FCC) passed new rules regarding broadband Internet service regulation in February this year. The concept is referred to as “Net Neutrality”. The ruling appears to frame the Internet into two spheres: (1) the content of the Internet (“content providers”) and (2) the infrastructure delivering access to the Internet (“broadband providers”). The FCC net neutrality rules regulate the broadband providers that deliver access to the Internet.

What is Net Neutrality?

Net Neutrality is the concept that broadband providers, such as AT&T, Verizon and Comcast, may not slow the delivery of certain Internet content over the content of others. All internet content will continue to be delivered at the same speed. The FCC net neutrality rules prohibit broadband providers from charging content providers a premium if they want their content delivered at high speeds and further prohibits broadband providers from slowing the delivery speed of content if the content provider refuses to pay a premium fee.

The FCC rules were designed to treat all of the user’s internet traffic the same. When a user accesses content on the web – such as through a Google search – some of the content may not be slowed in its delivery to the user because a premium rate was not paid to the broadband providers.

A simple analogy is that net neutrality is like the speed limit for the interstate, but in this case it keeps the same speed for all content delivery on the internet. The rules do not allow broadband providers to make some traffic go slower because it hasn’t paid a premium fee.

The content providers, such as Google, Netflix, YouTube and Amazon, make the argument that users have already paid - through monthly subscriptions – a fee to broadband providers (AT&T, Verizon and Comcast) to access the Internet. Broadband providers, the argument goes, shouldn’t slow down the delivery of content just so they can charge an extra fee to speed up the delivery.

What is the immediate Effect of Net Neutrality?

The immediate effect of net neutrality is that broadband providers – many of whom have invested billions of dollars in their networks – will be regulated as public utilities moving forward. As the WSJ reported, the ruling reflects “an evolution from regulators treating the Internet as a technological innovation that needed to be nurtured to a powerful commercial venue with rival constituencies that need to be balanced.” [1]

Former FCC Chief of Staff Blair Levin explained the dilemma facing broadband providers: “The blessing and the curse for the cable industry and the telcos is they have an infrastructure which is absolutely critical to the economy, to education, to health care—far beyond the original use for which they built those networks. The good news is everybody needs it. The bad news is when everybody needs it, the government plays a role.”

While all of the specifics of the new rules have not yet been made public, there are general known ways that regulation will impact the Internet space. Companies that provide Internet service will not be able to freely manage Internet traffic as they have in the past. Although service providers have not provided increased speeds for certain sites over others, they have historically required sites responsible for heavy amounts of traffic to subsidize the investment in the back-end equipment used to transmit this traffic.

Where is Net Neutrality going?

New players, such as municipalities, will be entering into broadband provider space by building out the infrastructure to deliver access to the Internet. In a separate February ruling, FCC commissioners approved a 3-2 partisan vote petition from two communities — Chattanooga, Tenn., and Wilson, N.C. — that want to expand their municipal broadband networks. Tennessee and North Carolina are 2 of 19 states that have laws restricting communities from building or expanding broadband networks that compete with established providers.

In an industry as rapidly evolving as the Internet, we understand that it’s critical that businesses are not only aware of regulatory developments, but that they firmly grasp how these regulations impact their legal and operational strategies. Foster Swift’s experienced technology and telecommunications counsel have worked closely and successfully with content providers, telecommunications companies, industry associations, municipalities, and internet service providers on all aspects of content and infrastructure, including on issues related to state and federal regulations. Please contact a member of our legal team today to discuss how your operations net out in the Net neutrality age.

[1] Wall Street Journal (WSJ)