A federal appeals court on Monday expressed skepticism of the Federal Communications Commission’s Internet access rules, an encouraging sign for broadband providers eager to escape regulation that forces them to deliver all Web content equally.
In two hours of oral arguments, three judges on the U.S. Court of Appeals for the District of Columbia Circuit grilled an FCC lawyer on the agency’s legal basis for creating its “net neutrality” rules in 2010. The regulation bars cable and telecom carriers from blocking any Web site, even when such content competes with their own Internet businesses.
The rules also strongly discourage the creation of “fast lanes” for Web sites willing to pay more for VIP delivery of their content into homes. Such deals would have allowed Verizon Communications, for example, to charge Netflix extra for faster delivery of its streaming videos.
The high-stakes case has drawn wide interest from telecom firms that have fought against strong regulations over their broadband businesses. Verizon sued the FCC soon after the rules were created and argued in court Monday that the regulator overstepped its authority by imposing phone-era rules, known as “common carrier” policies, on the broadband Internet industry.
The decision by the court could also determine the future of the FCC as a regulator of the Internet economy. The agency has said that it had the authority to create and enforce its net-neutrality rules, though analysts say the law that codifies the FCC’s mandate does not clearly delineate its powers over broadband services.
If the judges rule against the FCC, the agency could see its powers curtailed.
“The way it played out today underlines the fact that the court very much wants to be deferential to the FCC but is limited because of the way the FCC classifies broadband,” said Jennifer Yeh, a policy counsel at consumer advocacy group Free Press. “The court can only defer so much.”
At times, two judges on the three-member panel appeared to agree with Verizon’s criticism of a portion of the net-neutrality rules that prevent a broadband provider from striking fast-lane deals with Web sites.
Verizon attorney Helgi Walker told the judges that the rules hinder new investment in networks. She said telecom and cable companies want to explore partnerships with Web sites that could bring in new revenue
“But for these rules, we could be pursuing those types of commercial arrangements,” she said. “My client wants freedom to explore that.”
Critics warn that such deals would trickle down to consumers with potentially higher costs and a dizzying array of bills for Web access. What if ESPN paid Comcast to deliver exclusive content over the Internet for a higher fee to broadband customers? What if a social network paid a broadband provider for better quality of delivery of its site over that of a competitor?
Former FCC chairman Julius Genachowski, who authored the rules, warned that such deals would hinder start-ups trying to compete against the largest, most established Web companies.
The net-neutrality rules, which were developed as broadband exploded in popularity, were strongly supported by the Obama administration. Internet companies such as Google, Facebook and Yahoo also backed the FCC’s policies, saying consumers should have unfettered access to their Web sites.
Analysts said the judges will take months to issue a final opinion, but comments by judges made during the oral arguments appeared favorable for telecom and cable firms. The FCC’s net-neutrality rules don’t apply to wireless firms.
Some analysts predicted that the three judge-panel would probably weaken some portions of the regulation but keep rules that prevent the outright blocking of Web sites.
“We left tending to suspect the D.C. Circuit could be headed toward a divided ruling that dilutes but not necessarily eviscerates open Internet rules,” said Jeffrey Silva, an analyst at Medley Global Advisors.
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