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Ruling Could Wreck Internet With New Fees and Slowed Sites, Opponents Fear

Aaron Pressman
The Exchange
Former FCC chairman Julius Genachowski

A pending U.S. Appeals Court decision has the potential to sink the Internet into a morass of new fees, blocked content and back-room deals if it disagrees with current regulations, a prominent free speech and online policy expert is warning.

Marvin Ammori, a fellow at the New America Foundation think tank, says the U.S. Court of Appeals for the District of Columbia is all but certain to strike down federal rules passed in 2011 to protect so-called net neutrality. The rules, adopted by the Federal Communications Commission, prohibit telecommunications and cable firms that sell broadband Internet connections from establishing different guidelines for dealing with certain websites and online services. The effort was led by then FCC chairman Julius Genachowski, who resigned in March, 2013.

Internet users are currently free to reach any site or sign up for any service without extra charges from their broadband provider. And while the sites pay for their own Internet connections, they pay nothing extra to reach customers. That has enabled once tiny start-ups like Facebook (FB), Google (GOOG) and eBay (EBAY) to get online, attract millions of users and thrive, regardless of the desires of the companies that own the Internet connections to consumers.

But some of the companies that own the lines to end users, such as Verizon Communications (VZ) and AT&T (T), have discussed openly the notion of charging popular websites fees in return for reaching customers. Sites that paid extra might get speedier connections to users, while those that didn’t pay to play might find their content slowed to a crawl or even blocked.

“Web and mobile companies will live or die not on the merits of their technology and design, but on the deals they can strike with AT&T, Verizon, Comcast (CMCSA), and others,” Ammori wrote in an article on Wired’s web site. “This means large phone and cable companies will be able to ‘shakedown’ startups and established companies in every sector, requiring payment for reliable service.” For example, Netflix (NFLX) and Hulu compete with cable companies’ own television offerings.

“Wait, it gets even worse,” Ammori wrote. “Pricing isn’t even a necessary forcing factor. Once the court voids the nondiscrimination rule, AT&T, Verizon, and Comcast will be able to deliver some sites and services more quickly and reliably than others for any reason. Whim. Envy. Ignorance. Competition. Vengeance. Whatever. Or, no reason at all.”

Worst of both worlds

At oral arguments in September for the case, questioning from the three judges signaled to most observers that the FCC was likely to lose. The agency was overruled in an earlier attempt to preserve net neutrality in a 2010 decision by the same court.

The phone companies have been outspoken in their desire to start charging new Internet fees. "For a Google or a Yahoo (YHOO) [the owner of Yahoo Finance] or a Vonage or anybody to expect to use these pipes for free is nuts," then AT&T CEO Ed Whitacre told Businessweek back in 2005.

At September’s oral argument, a lawyer for Verizon admitted: “I’m authorized to state from my client today that, but for these rules, we would be exploring those types of arrangements.”

Columbia Law School professor Tim Wu has a different nightmare scenario if the court throw out the rules, one that he believes will hurt cable companies as well as consumers. At the moment, cable companies must pay television programmers huge sums to carry popular channels -- $5 per subscriber per month for ESPN, for example. Without the FCC’s neutrality rules, popular sites could start demanding carriage fees as well, Wu wrote in a recent essay on the New Yorker’s website.

"A battle royale over Internet programming and termination fees would ultimately be terrible for consumers; the Internet would start to get both worse and more expensive," Wu wrote.

"The net-neutrality rule continues to provide a kind of subsidy to smaller speakers and startups, from bloggers to Quora and Wikipedia," he added. "The Internet would look a lot different if these kinds of players had to pay cable before reaching their customers. It would start to look a lot more like cable TV, and few things could really be worse than that."

A decision is expected any day.