News & Politics

Federal Court Says OK for FCC to Regulate Internet Like a Utility

In an important decision on net neutrality, a federal court ruled that the FCC could regulate the internet as if it were an old-style utility rather than an information service. This opens the door for unprecedented and massive interference by government in the way internet service providers maintain the internet and service customers.

The case was the latest attempt by the FCC to change the rules governing the internet. Previous attempts had been met with defeat in the courts that ruled that the FCC didn’t have the statutory authority to regulate net neutrality.

The FCC had previously regulated the internet under Title I of the 1934 Communications Act. But now being able to regulate the net under Title II of the Act gives the FCC the authority to treat the internet and ISPs as old-style utilities like landline phone companies under a regulatory model written in 1934.

Hit and Run’s Peter Suderman explains the implications of the decision:

That move was designed to give the FCC the legal authority to implement strict rules around net neutrality, which would govern how ISP can manage and design traffic flow across their networks. The basic principle of net neutrality is that all internet traffic should be treated equally, which supporters argue is necessary in order to avoid internet fast lanes that discriminate against certain types of traffic.

But in practice what it ends up doing is limiting how internet companies can manage their networks, while giving the FCC a huge amount of discretionary authority over online innovation. Net neutrality rules typically have carve outs for “reasonable” network management, but what that inevitably is that the FCC ends up deciding what is and isn’t reasonable on a case-by-case basis. So any time internet companies are planning to put in place new network functionality, they have to consider the possibility that the FCC will nix it as unreasonable.

It’s effectively a system that requires ISPs to ask the FCC for permission to improve their networks. And the end result is that there’s a chilling effect on ISP innovation , and that the FCC turns in a powerful chokepoint that has substantial, relatively unchecked power over what sorts of innovations are allowed.

Net neutrality has long been a priority some of the Obama administration’s most active supporters, with groups like MoveOn pushing the issue, and in turn it has also been a priority for the administration. In 2008, Obama campaigned on implementing the policy, and during the president’s first term, the agency attempted to implement net neutrality rules, with then-Chairman Julius Genachowski declaring that the agency “must be a smart cop on the beat preserving a free and open Internet.” But the agency was repeatedly rebuked by the courts, which said that the FCC lacked statutory authority to regulate net neutrality.

That’s where Title II comes in. The FCC has much more authority to regulate services under Title II than under Title I, and net neutrality advocates have long argued that the surest way for the FCC to claim authority to regulate net neutrality is through a wholesale shift in the way the agency classifies internet service.

What’s unique about this debate is that both sides have a point. ISPs should not have the power to slow down or block services and websites, especially when you consider that politics could be a motivation. On the other hand, if the government becomes heavily involved in regulating the internet, as the FCC plans to be, the kinds of innovation and efficiency that we see in the delivery of services today will disappear. The net will become slower, less free, and more expensive as fees and taxes on ISPs will be passed on to consumers.

This is a massive power grab by the FCC that, if the court agrees with them, would make them the most powerful independent agency in government. Trillions of dollars are at stake in this legal battle that will almost certainly end up in the Supreme Court.

When it does, who is sitting in the White House will have a big say in who is sitting on the court.