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January 14, 2014

No Clear Cut Winner From DC Circuit Net Neutrality Decision

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As an early opponent of network neutrality regulations, it’s tempting for me to characterize as a victory today’s DC Circuit Court decision throwing out some of the FCC’s network neutrality rules, and indeed it is a victory—in part, and for now. It’s true that the court threw out the onerous rule on anti-discrimination, while also tossing out a symbolic anti-blocking rule that market proponents understand was completely unnecessary.

But the Court agreed with the FCC on its authority to regulate broadband services in other ways, which means Verizon lost on its core assertion that the FCC had no statutory authority to regulate broadband networks. This is underscored by new FCC Chairman Tom Wheeler’s reaction to the decision. Everyone spins the results of important court decisions such as this, but the early social media reaction that “Verizon won and the FCC lost” was an uninformed oversimplification.

The big surprise to today's decision is that it was not a slam-dunk win for Verizon. Most observers expected Verizon to succeed with its argument that the FCC had no statutory authority to regulate. At best it was a partial victory.

At least for now, ISPs are free to experiment with new business models without being deterred by the fear of breaking the vacated anti-discrimination rule, and that’s a very good thing. For example, there is nothing now standing in the way of ISPs to introduce their own versions of AT&T’s announced Sponsored Data program. And the court has indicated that, so long as broadband networks are not classified as a telecommunications service, a rule or regulation that would depend on common carrier regulation is outside the scope of the FCC's authority, which is also good.

The anti-corporate net neutrality ideologues are now, predictably, calling for the FCC to trigger its own nuclear option and reclassify broadband networks under its Title 2 Telecommunications Services authority, which means ISPs would be regulated just as the old AT&T monopoly was regulated under laws that date back to 1936. Here's a good explanation of what that would mean [PDF]. Reclassification would be a worst case scenario for broadband investment and innovation.

For now, I cling to the hope that Chairman Wheeler means it when he says that the FCC will take action under its broadband regulatory authority only “if something appears to go wrong in a material, not a trivial, way. . . .“

But that's the problem with regulatory power. Maybe he will, or maybe he (or the next chairman) won't. Importantly, companies don't invest billions of dollars in new infrastructure based on someone's hope that a regulator won't regulate.

It's interesting how often court decisions do not bring the certainty for which we hope.

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