• World Wrestling Entertainment has stake in rules before court
  • Carriers want rule killed in part for fear of price regulation

Fans will pay as much as $500 to see the red-headed Sheamus defend his title Dec. 13 against Roman Reigns in a World Wrestling Entertainment Inc. match in Boston. At home, they will only need an Internet connection and a $9.99 per month subscription.

That Web revenue is so important to WWE that it’s warning investors that broadband providers could slow its growth by charging extra -- something the U.S. Federal Communications Commission is trying to prevent with "net neutrality" regulations.

Sheamus
Sheamus
Photographer: Steve Haag/Gallo Images via Getty Images

The agency’s lawyers will be in court Friday to defend the rules, designed to protect Web-based businesses such as WWE’s. Cable and telephone-based Internet service providers are suing to get the regulations overturned, saying they stifle innovation and investment. A decision is expected some time next year.

The case “goes to the heart of the FCC’s ability to regulate broadband,” said Paul Gallant, a Washington-based analyst for Guggenheim Securities.

Appeals Court

Friday’s oral arguments at the U.S. Court of Appeals for the District of Columbia Circuit are a milestone in the effort by broadband network providers AT&T Inc., Comcast Corp. and Verizon Communications Inc. to kill the net-neutrality rules adopted in February. They say the regulations already have cast uncertainty upon business practices such as T-Mobile US Inc.’s offering of video that doesn’t count against monthly caps on data consumption.

Web companies and the agency counter that the rules are needed to keep established companies from squelching Internet startups.

In a sign of the wide-ranging impact of the Internet regulations, the number of companies using the term “net neutrality” in annual filings made during the first six months of the year with the Securities and Exchange Commission grew to 76 in 2015 compared with 56 in the preceding year and 42 in 2013.

Service Expansion

Companies adding the term in this year’s filings include interest-rates aggregator Bankrate Inc., broadband for hotels provider RoomLinX Inc., and video gear supplier Harmonic Inc., which said its business could be hurt if the FCC’s rules deter expansion by Internet service providers.

Network providers “have an incentive to use their network infrastructure in a manner adverse to our success,” WWE said in its annual filing with the SEC. “To the extent they provide preferential treatment to their data or otherwise implement discriminatory network management practices, WWE Network could be negatively impacted.”

Web Revenues

The Stamford, Connecticut-based WWE reported $166.2 million in revenue in third quarter -- $36.4 million of it from its online network, which went into operation early last year.

The arguments go before a three-judge panel at the same court that rejected the FCC’s previous attempt to write net-neutrality rules, saying the agency chose the wrong legal framework. In reaction, the agency drew upon its decades-old authority over telephone-service providers as it wrote its new version of the rules, adopted on a 3-2 Democratic-led vote after prodding by President Barack Obama.

Network providers in filings told the court the FCC was wrong to subject a dynamic new service to rules devised decades ago for monopoly telephone providers in a “sweeping bureaucratic power grab.”

Utility-Style

The FCC is subjecting Internet service providers to “heavy-handed, public-utility-style regulation designed for 19th-century railroads and 1930s telephone monopolies,” opponents including the USTelecom trade group for telephone companies including AT&T and Verizon, and the National Cable & Telecommunications Association with members including leading U.S. cable provider Comcast and No. 2 Time Warner Cable Inc. said in their brief to the court.

The broadband companies said they’ve “invested hundreds of billions” in reliance on looser FCC rules.

The FCC told the court it correctly reacted to earlier court defeats by claiming strong authority to reaffirm longstanding policy of preserving the open Internet. The rules safeguard the status quo of Internet openness by barring broadband providers from blocking or degrading consumers’ access to the Internet, and forbidding faster, smoother travel over the Web in return for payment, the agency said in a court filing.

Mobile Internet

In the earlier, rejected version of its rule the FCC largely exempted wireless Internet service; the current rules include mobile Internet, and carriers are asking to court to strike those provisions.

According to Web companies, rule opponents are fighting for the right to “to block or limit access to those voices they decide to disfavor.” Broadband providers “have ample reason to try to control and diminish what Internet users can say and hear online,” rule backers including Twitter Inc. and Yelp Inc. said in a filing.

Others offering support for the FCC’s rules include crafts marketplace Etsy Inc., investors Union Square Ventures LLC, Cogent Communications Holdings Inc., Web video provider Netflix Inc. and Dish Network Corp., which supplies video online.

Opponents include the CTIA-The Wireless Association with members including the four largest U.S. mobile carriers: AT&T, Verizon, T-Mobile and Sprint Corp. Alamo Broadband Inc., a closely held wireless Internet service provider that serves an area near San Antonio, Texas, also is challenging the rules, saying they eliminate its discretion to manage the Internet traffic on its network.

World Wrestling Entertainment, which didn’t file a brief in the court case and didn’t provide further comment, told investors that “court decisions that have the effect of limiting Internet neutrality, could limit the demand for our subscription service and increase our cost of doing business.”

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

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