Broadband Cable Association of Pennsylvania


January 15, 2014

Verizon Communications Inc. won a partial victory Tuesday from a federal appeals court in the long-running fight over how the government regulates broadband Internet providers. But the battle - which could affect consumers' access to a wide variety of websites and services - is far from done, according to telecommunications experts and advocates on both sides of the issue.

Verizon, a leading provider of landline and wireless phone service as well as Internet access, accused the Federal Communications Commission of overreaching in its 2010 "Open Internet" order, which barred broadband providers from discriminating against or blocking any data distributed over their networks - a goal of those advocating a concept also known as network neutrality. Verizon was joined in its fight by conservative and business groups that oppose neutrality rules, such as the Competitive Enterprise Institute. A coalition of Internet companies such as, eBay, and Facebook intervened in support of the FCC, and the widely watched case drew eight friend-of-the-court briefs.

A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit agreed with Verizon, largely because of an FCC decision eight years earlier that classified broadband as an "information service" rather than a "common-carrier" telecommunications service. Verizon said Tuesday that the ruling would not prompt changes in how it manages its broadband networks, which include its FiOS fiber-optic system and DSL service provided over its older copper-wire phone network. "Verizon has been and remains committed to the open Internet, which provides consumers with competitive choices and unblocked access to lawful websites and content when, where, and how they want," it said.

Philadelphia-based Comcast Corp., which had promised to follow the open-Internet rules for seven years in order to win the FCC's 2011 approval for its takeover of NBCUniversal, offered similar assurances. "We remain comfortable with that commitment because we have not - and will not - block our customers' ability to access lawful Internet content, applications, or services," David L. Cohen, Comcast's executive vice president, said in a statement. "Comcast's customers want an open and vibrant Internet, and we are absolutely committed to deliver that experience."

Consumer advocates have long pushed for net-neutrality rules. They argue that without such requirements, broadband providers could give preferential treatment to their own services or those of their affiliates - or could favor data from companies willing to pay more to get their data treated preferentially. For instance, a company such as Comcast could favor NBCUniversal's TV shows or movies while degrading similar content streaming from Netflix, or could demand that Netflix pay extra fees. David Tatel, a judge on the appeals court, acknowledged such risks, writing that "a broadband provider like Comcast might limit its end-user subscribers' ability to access the New York Times website if it wanted to spike traffic to its own news website, or it might degrade the quality of the connection to a search website like Bing if a competitor like Google paid for prioritized access."

But Tatel said the FCC could not impose common-carrier-style regulation on the providers after previously deciding to classify them as more loosely regulated "information services." While holding open the possibility that the FCC might appeal Tuesday's ruling, agency Chairman Tom Wheeler hailed its conclusion that the FCC has broad authority to write rules "governing broadband providers' treatment of Internet traffic," and suggested there might be other ways to make them stick.

Could the agency simply declare that broadband providers are subject to common-carrier regulation? "Under administrative law, an agency can't just arbitrarily change its viewpoint," said Kevin Werbach, a telecommunications expert and professor of legal studies and business ethics at the University of Pennsylvania's Wharton School. "I'm skeptical that the FCC would be able to claim that the marketplace has changed in some dramatic way since 2010." But Werbach, who served at the FCC during the 1990s and advised the Obama administration during its transition, said the appeals court's ruling made it clear that other approaches might be acceptable - such as a finding that certain practices threaten harm to broadband investment. "This decision did not end the net-neutrality fight," Werbach said. Philadelphia Inquirer; more in Washington Post

A federal appellate court decision on Tuesday raises the prospect that Netflix Inc. and other bandwidth-hogging websites may have to pay tolls to broadband providers to ensure quality service, a change that would throw a wrench into their business models and potentially raise prices for consumers. The ruling by the U.S. Court of Appeals for the District of Columbia struck down the Federal Communications Commission's so-called "open Internet" rules that had required equal treatment of Internet traffic and prohibited broadband providers from blocking traffic, favoring certain sites or charging special fees to companies that account for the most traffic.

Streaming-video provider Netflix accounts for 32% of peak Internet traffic in North America, the most of any content provider, according to Sandvine, a broadband services company. That has made Netflix a target for some cable industry executives who have argued the company should be subsidizing the costs of delivering its service to consumers. In an interview last summer, for instance, Charter Communications Inc. Chief Executive Tom Rutledge noted that currently all broadband capacity is "paid for by the consumer" but "you could argue that it would be more efficient for consumers if the people who are taking the bandwidth for a product were paying for the bandwidth in some fair and proportional way."

The implications for Netflix of paying a new content-delivery fee could be significant. The company's finely balanced business model assumes it will make large investments to acquire the rights to TV shows and movies that it offers and factors in some costs related to moving data efficiently on the Internet's backbone. But a new fee charged by Internet providers, if it is sizable, could dent the company's profits or force it to raise prices for consumers. The spotlight is also on Google Inc., whose YouTube site accounts for 19% of peak web traffic at peak hours, and other major streaming video sites. Netflix and Google declined to comment. They are both part of the Internet Association, a coalition of web companies that supports the approach the FCC took with its open Internet rules. "The Internet Association supports enforceable rules that ensure an open Internet, free from government control or discriminatory, anticompetitive actions by gatekeepers," Michael Beckerman, the association's president, said in a statement Tuesday.

The ruling Tuesday left open the door for the FCC to craft rules in a different form that might accomplish its earlier intentions. And the agency also could weigh in on the issue when it considers cable industry mergers, by imposing conditions on big players. Speculation that a wave of cable mergers is in the offing has been fueled in recent months by Charter's pursuit of Time Warner Cable Inc. Tony Wible, an analyst at Janney Capital Markets, said Internet companies will mount a fierce fight to prevent paying new fees, but said it is inevitable that over time some of the burden of paying for Internet infrastructure to handle bulging traffic will shift to content providers or consumers in the form of usage-based billing. "You need to put forth an economic model to finance that investment," he said. "The question is over the price point and who is going to set it," he added. Wall Street Journal

The state Senate Judiciary Committee unanimously passed a bill Tuesday that would ban so-called "revenge porn" - the practice of an ex-boyfriend or ex-girlfriend posting on the Internet compromising, sexual photos taken when the couple were picture-happy paramours.

The bill, sponsored by Sen. Judy Schwank, a Berks County Democrat, would ban the online posting of any photo or video identifying another person who is naked or engaging in a sexual act, without that person's consent. It would not cover the consensual release of such material. Schwank, a co-chairwoman of the General Assembly's womens' health caucus, said she drafted the bill after learning about the growth of the problem in her review of issues, and the difficulty it presents prosecutors under law.

Most sexting legislation, for example, is aimed at protecting minors. Traditional harassment charges apply only after a repeated course of conduct, even though one online post could result in thousands of views. "I believe this is an issue of violence against, primarily, women," Schwank said after Tuesday's vote. "Posting these images has serious consequences for victims. It should, and under this proposal would, have serious consequences for an offender ... It's time for the law to catch up with the technology before it gets way too far ahead of us."

Committee members amended the bill Tuesday to exclude its application in cases involving juveniles that could be prosecuted under Pennsylvania's sexting law, which was enacted in 2012. As amended, the new offense of Intimate Partner Harassment would carry a penalty of up to 5 years in prison and a $10,000 fine in cases involving victims who are minors, and up to 2 years and $5,000 when the victim is an adult. No date has been set for the bill's consideration by the full Senate.