Stay on Top of Emerging Technology Trends Get updates impacting your industry from our GigaOm Research Community

In discarding out a huge chunk of the network neutrality rules that the Federal Communications Commission put into place in December, 2010, the U.S. Court of Appeals in Washington has thrown the way the internet works into turmoil: Instead of treating all traffic flowing over their broadband pipes equally, internet service providers can now start making deals that could prioritize some content over other traffic. And based on the options facing the FCC and the FCC Chairman Tom Wheeler’s previous statements, I think there is a credible threat that a double-sided market for bandwidth will emerge.

As my colleague Jeff Roberts explained in his post discussing the legal ruling from the court earlier today, this is not a complete loss for the FCC because the courts actually give it a chance to change the way it had implemented the Open Internet Order that until now governed network neutrality. But for the consumer, it’s an almost certain loss given the statements that Wheeler has made about network neutrality — namely that he wants to look at it on a case by case basis.

Two paths to fixing the hole the courts found in the Open Internet Order

The court determined that the FCC does have the authority to implement network neutrality rules, which was a big question surrounding the Open Internet Order. However, the court also ruled that the FCC applied a standard to ISPs that the agency wasn’t legally able to impose.

Importantly, the court also gave the agency a chance to fix that through its ruling as opposed to having to go back to Congress and get a change in the laws (although Congress could act if it found the political will to do so). The primary question, however, is whether the FCC will try to apply some kind of official common carrier status, and whether it will act now or after a violation has occurred.

“The court gave the FCC an opportunity to try again,” said Blair Levin, a former FCC chief of staff and currently the chair of Gig.U. “So now the question facing the FCC is whether it tries in the context of a new proceeding … or whether they want to wait for someone to start blocking and then take the case, and use that to establish a precedent.”

Levin believes Wheeler has signaled that he plans to see what happens if the carriers implement a two-sided market for broadband pricing. Based on Wheeler’s comments in Silicon Valley last week, that belief isn’t unfounded.

At that event the chairman said:

Second, I support common law-like approaches to discerning the difference between appropriate and inappropriate broadband network conduct. In other words, the very general principles found in the Open Internet Order should be reduced to justiciable practices on the basis of facts arising from specific circumstances.

And if his willingness to let AT&T test out its sponsored data plan on the wireless side is any indication, plus his earlier comments on the possibility of a two-sided market for broadband where a content provider and the consumer pay, then he’s probably willing to see what happens if the network neutrality rules do go away.

One might argue that given the providers’ ongoing obligation to tell the consumer what it is doing with their traffic — the court left these disclosure rules in place — this isn’t a huge loss for consumers. But believe me: it will be.

Meanwhile, Wheeler has put out a statement that also mentions the hope of an FCC appeal, saying:

“The D.C. Circuit has correctly held that ‘Section 706 . . . vests [the Commission] with affirmative authority to enact measures encouraging the deployment of broadband infrastructure’ and therefore may ‘promulgate rules governing broadband providers’ treatment of Internet traffic.’ I am committed to maintaining our networks as engines for economic growth, test beds for innovative services and products, and channels for all forms of speech protected by the First Amendment. We will consider all available options, including those for appeal, to ensure that these networks on which the Internet depends continue to provide a free and open platform for innovation and expression, and operate in the interest of all Americans.”

That doesn’t really indicate what the Chairman plans to do, which isn’t surprising since the agency will have to consider all of its options. However, with this ruling, it’s possible, and even likely, that absent a strong signal from the FCC that it’s opposed to experimenting on wireline networks, we’ll see an ISP attempt some type of plan that will let a content provider pay for prioritization or perhaps an exemption for a data cap. My hunch is such a plan would come from Verizon or AT&T.

And it’s equally possible that if the ISPs disclose how this market will operate and make it available to all comers, the FCC might find it acceptable. So what we’d end up with is probably closer to the network neutrality rules that were implemented on wireless networks, where outright blocking of select applications was forbidden, but carriers were free manage their networks as they see fit. I hope I’m wrong.