On Tuesday, an appeals court overturned Federal Communication Commission rules intended to ensure so-called net neutrality -- the principle that broadband providers should treat all Internet traffic equally. The ruling was very technical, with big companies taking both sides of the issue. The FCC is considering petitioning the Supreme Court to hear the case.
It's unclear if the ruling will hold and, if it does, what it will mean ultimately mean for consumers and businesses. But early views shed light on some potential effects.
Big differences in viewpoints
For now, the big carriers are happy and claim consumers will be better served. In a statement after the ruling, Time Warner Cable (TWC) said that it was "committed to providing its customers the best service possible, including unfettered access to the web content and services of their choice."
In a longer statement, Verizon (VZ) emphasized that it "has been and remains committed to the open Internet" and that the "court’s decision will allow more room for innovation, and consumers will have more choices to determine for themselves how they access and experience the Internet."
The view for consumers is not so sanguine. "I think it's going to mean higher prices and more media concentration," says Ann Bartow, a professor of intellectual property and cyberspace law at the Pace Law School in New York. "I think the people who are already entrenched are positioned to dominate a non-neutral net and will use their size to leverage. It will reduce competition."
There is also a lot of handwringing among smaller tech companies, which are worried they will be at a disadvantage. David Foley is a founder of San Jose, Calif.-based NanoTech Entertainment, which just released its first product, a set-top box for streaming video over the Internet in a 4K ultra-high-definition format. Customers pay $299 for the box and then a monthly $5 fee for subscription video or $2 to $20 for on-demand movies and special events. "You've had examples of ISPs putting caps on specific types of data," Foley said in an interview with CBS MoneyWatch.
It's not that data caps are rare. Quite the contrary. According to GigaOM's count, 64 percent of Americans are covered by a broadband data cap, which means there is only so much traffic that they can receive and send in a given month for what they pay.
The concern of Foley and others is that the broadband carriers will begin to cap the rate at which Internet-based companies such as Google, Facebook, and, yes, NanoTech can send data to consumers. "Comcast, for instance, might allow a Comcast television service to work great and let other services suffer," Foley said.
His company hasn't faced demands for additional payment, but it would be a prime target given that 4K video requires a high rate of data transfer so people can view the programming.
The concern is two-fold. First, in demanding payment for preferential treatment that companies might argue is a bottom-line necessity for them to deliver services, the broadband provider would effectively favor larger companies that could afford to pay. For example, AT&T (T) has already announced a sponsored data program, in which content providers would underwrite the cost of data that would not count against a consumer's monthly data allowance.
If the content companies see prices go up, they eventually will pass those along, either directly or indirectly, to consumers. If they can't, a customer paying for a service like video streaming might suddenly find the app turns slow as molasses during a polar vortex.
Second, many of the broadband providers offer similar services, turning them into competitors. The broadband companies would have a natural advantage in control of how they transmit data to their own customers.
The potential problem isn't limited to consumers; services offered by one business to another, particularly video related, could also find themselves on a "hit list," according to Nick Balletta is CEO of TalkPoint, which provides webcasting and Internet broadcasting for corporate customers. "Broadband providers, which are often monopolies in geographic areas, will be able to pick the winners and losers," he said in an interview with CBS MoneyWatch.
"[Broadband providers are] on both ends of the transaction," Balletta said. "The content providers are paying for content access and transport and the consumers are paying for the egress. They're seeing people make money in the middle and they want their [cut]."
He asked, "Who's to say that they don't go to finance service companies and, it's an extreme example, say you're making all the money on the internet trading stocks and making financial transactions and we need a piece of that. Where will it end?"
According to Ritch Blasi, a telecommunications industry
veteran and senior vice president with consulting firm Comunicano, the
broadband companies, especially those in wireless mobile, do have legitimate
concerns. "If I have a cell site and it's at 95 percent capacity and
someone wants to download from Netflix, I might not be able to do that in
HD," he said.
Broadband providers do need some flexibility in how they manage their networks. Yet concerns about competition and stifling innovation from small companies are real. Internet-based companies have to acknowledge that making liberal use of data communications without shouldering any burden for building and maintaining that network may not be realistic. "Everybody's got to be on the same wavelength on what the justified cost is to deliver that service," Blasi said.
That kind of agreement would require the sort of Kumbaya moment that is difficult to come by in telecommunications and media. Some cable and satellite TV providers have already gotten into fights with television content providers and cut off availability of certain channels, exemplified most recently by DirecTV's dispute with The Weather Channel.
If net neutrality is out the window, such standoffs could happen on the Internet and potentially run in both directions. "What happens if Google decides we're not going to let Verizon customers access Google any more?" asked Balletta.
Muddy waters indeed.
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