Verizon's Net Neutrality Victory Means More Fighting to Come

For a small but passionate group of tech-minded policy wonks, the legal battle over net neutrality is the preeminent Internet issue of the year. A federal appeals court on Tuesday invalidated the rules set by the U.S. Federal Communications Commission, but did so in such a way that guarantees the action won’t stop in January.

Net neutrality means that the companies controlling the infrastructure of the Internet can’t treat different kinds of Web activity differently. The FCC’s 2010 Open Internet Order (PDF) set out rules for Internet providers that said as much. Verizon Communications quickly sued, saying the FCC doesn’t have the authority to regulate the Internet. While Verizon won, the ruling is based on a technicality: The court found that broadband providers aren’t “common carriers,” like telephone companies, and cannot be regulated as such under the law. The FCC retains the underlying power that Verizon wanted to strip away, and the commission has hinted in the past that it could choose simply to change the companies’ classifications.

“What has happened here is this makes things more of a mess than ever,” says Harold Feld of Public Knowledge, an advocacy group that sided with the FCC in the case.

Since he took over at FCC chairman late last year, Tom Wheeler’s every word has been scrutinized for signs as to how he might approach this issue. A former industry lobbyist, Wheeler has said things in the last few months that have given everyone reason for hope and fear. He has explicitly supported the open Internet rules while saying he is open to new business models, including so-called two-sided markets, hinting at a model by which content companies could pay for some kind of special treatment. He took a wait-and-see attitude when AT&T announced a sponsored data plan that would allow companies to pay to have their services not count against their customers’ data plans.

We’re reaching the end of the tea-leaf-reading era. Barring a successful appeal to the U.S. Supreme Court, Wheeler’s commission will need to rewrite its regulations, taking into account both the new legal landscape and its chairman’s own priorities. In a way, Wheeler comes out the winner here, says Roslyn Layton of the American Enterprise Institute’s Center for Internet, Communications, and Technology Policy, a critic of net neutrality rules. “What he wants to do is change the game,” Layton said in a conference call with reporters on Monday. “If I’m the new chairman, I don’t want the day-old bread. I want to make my own imprimatur.”

In the long run, the case could substantially change the economics of the Internet. But neither side of the debate expects to see sweeping changes immediately. Critics of net neutrality rules are primarily concerned about overly powerful federal regulators using broad authority to regulate the Internet. But several analysts in AEI’s conference call admitted there wasn’t anything very offensive about the Open Internet Rules themselves and said they didn’t expect Wheeler’s commission to do much they’d oppose with its new power.

Groups such as Public Knowledge and the net neutrality advocate Free Press, meanwhile, see deals such as AT&T’s sponsored data plan as the seeds of a troublesome move to choke off competition. “The biggest broadband providers will race to turn the open and vibrant Web into something that looks like cable TV,” says Free Press Chief Executive Officer and President Craig Aaron. “They’ll establish fast lanes for the few giant companies that can afford to pay exorbitant tolls and reserve the slow lanes for everyone else.”

Don’t expect Internet service providers to, say, cut off Netflix until it coughs up millions soon, though. Even without specific net neutrality rules, the commission could still choose to go after blatantly anti-competitive behavior.

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