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The principle behind the phrase “net neutrality” is that internet service providers of all kinds should treat data flowing over the open internet equally, without giving preferential treatment to data from one provider or platform. On Tuesday, however, the Federal Communications Commission’s rules governing that kind of behavior were struck down by an appeals court in Washington, D.C. — as reported by Gigaom’s Jeff Roberts — in a case launched by Verizon.

This decision — if it remains unchallenged — raises the possibility that large internet service providers could charge certain companies extra for delivering their content to subscribers, and give preference to the content coming from those who are willing pay them a fee, or have cut some other kind of deal. In effect, the democratized nature of the internet would be replaced by a feudal system in which the ability to reach a consumer would be auctioned off to the highest bidder. As a Bloomberg article described it:

“Proponents, including Web companies, say regulations are needed to keep Internet-service providers from interfering with rival video and other services. Those companies don’t pay today for what’s known as last-mile Web content delivery. The FCC has said that without rules, Internet providers could favor wealthier, established players at the expense of startups, squelching innovation.”

In a Reddit “Ask Me Anything” discussion with Josh Levy of Free Press, law professor and former Obama administration advisor Susan Crawford said the impact of the court decision could be significant and that “high speed internet access is far too important as an essential infrastructure input to our national economy, and to our civic, social, and personal well-being, to leave it solely to a failed market, with no government oversight or fundamental rules of the road.”

A web with tiers for the wealthy

Craig Aaron, who runs an open internet advocacy group called Free Press, said in a statement that as a result of the ruling, “Internet users will be pitted against the biggest phone and cable companies — and in the absence of any oversight, these companies can now block and discriminate against their customers’ communications at will… the biggest broadband providers will race to turn the open and vibrant Web into something that looks like cable TV. They’ll establish fast lanes for the few giant companies that can afford to pay exorbitant tolls and reserve the slow lanes for everyone else.”

In an analysis piece he wrote for Medium, former Wired “Threat Level” editor Ryan Singel detailed the risks in this way:

“If your cable company now wants to slow down Netflix, it can. If it wants to make Skype calls slow, it can. If it wants to make streaming video from its services lightning fast and free from data caps, while slowing down YouTube and counting that data against your monthly allotment, it can do so.”

Sick feeling in my stomach from this net neutrality decision. — danprimack (@danprimack) January 14, 2014

Tim Wu, who more or less coined the term “network neutrality” in a paper he wrote in 2003 while he was a professor at Columbia Law School, explained why internet users should care about the principle in a piece he wrote for Salon in 2006, comparing it to a future in which those with certain cars would get preferential treatment on the highway:

“You might buy a Pontiac instead of a Toyota to get the rush-hour lane, not because the Pontiac is actually a good car. As a result, the nature of competition among car-makers would change. Rather than try to make the best product, they would battle to make deals with highways.”

In an interview with the Washington Post‘s Switch blog, Wu said that the decision leaves the internet “in completely uncharted territory. There’s never been a situation where providers can block whatever they want.”

In an opinion piece for The Guardian, author and open-internet advocate Dan Gillmor said that the potential future for consumers is bleak if providers like Verizon get to offer deals to specific content providers. As he described it: “You and I are the chief losers, because we will pay more and get less than we would have in a more competitive world where we, not the central authorities, make the key decisions about the services and media we want. We won’t know what innovation doesn’t happen, because it won’t be around.”

The FCC over-played its legal hand

As John Herrman at BuzzFeed notes, this isn’t even theoretical any more, since AT&T recently launched something it calls “Sponsored Data,” in which advertisers pick up the charge for getting content to customers. As Herrman puts it: “In the last year, a third, equally insidious but even more subtle scenario has emerged, and today became a much realer possibility. On a less regulated internet, content providers — websites and services — might be able to pay for their users’ data.” Stacey Higginbotham wrote about the potential implications of AT&T’s plan in a recent post.

Upshot on #netneutrality: Court opens way for Verizon to charge Netflix, YouTube for fast lanes. But affirms FCC has broadband authority. — ceciliakang (@ceciliakang) January 14, 2014

As a number of observers have explained — including Jeff in his Gigaom piece — the court’s decision wasn’t based on a belief that net neutrality itself is a bad thing, but a view that the FCC implemented its rules in a legally questionable way. If it wanted to prevent ISPs from giving preferential treatment to certain content providers, the communications regulator could have defined internet service providers as “common carriers,” as it did with telecom companies — but the FCC didn’t do that. As The Verge put it:

“The problem isn’t that the court opposed the FCC’s goals, it’s that unlike older telecommunications providers, ISPs aren’t classified as ‘common carriers’ that must pass information through their networks without preference. By enforcing net neutrality, the court found, the agency was imposing rules that didn’t apply to carriers.”

The FCC could increase its power

Techdirt founder Mike Masnick, who writes often about matters of policy relating to the open internet, said one of the problems with the decision isn’t just that it throws the net neutrality rules out the window — it’s that the court has also given the FCC the opportunity to increase its regulation of the internet as it tries to re-implement those rules, and that could be a very bad thing (Paul Sweeting, one of our Gigaom Research analysts, also took a look at the implications of the appeals court decision).

According to Masnick, the telecom companies and ISPs “absolutely want to abuse things to effectively double charge both sides” of the network, and that could cause significant issues for the openness of the global network. But he argues that we “should be equally concerned about the FCC overstepping its bounds and mandate in regulating the internet… because that opens up the opportunity for the FCC to regulate all sorts of aspects of the internet in dangerous ways.”

Stacey looked at the potential downside of this in her post on the impact of Tuesday’s court decision. And if you want a detailed breakdown of what some of the important passages in the appeals court ruling mean, the Wall Street Journal‘s Digits blog has a pretty good overview.

Now the US has struck down the @FCC's #NetNeutrality policy. We can fix this IF we want the Net to stay open and ours http://t.co/GE3xKdgNY8 — David Weinberger (@dweinberger) January 14, 2014

In his interview with the Washington Post, Tim Wu called the FCC’s failure to establish firm legal support for its net neutrality rules a “FEMA-level fail.”

“They blew it on the legal strategy. It’s a big fail. It’s like, FEMA-level fail. Every legal expert told the FCC they’re going to lose this case, and they did… Think of it this way: The FCC is like a battleship, and it has these enormous guns. But it decided to use a water pistol for this particular issue.”

A fundamental change to the open internet

The American Library Association said in a statement that the court’s decision “gives commercial companies the astounding legal authority to block Internet traffic, give preferential treatment to certain Internet services or applications, and steer users to or away from certain web sites based on their own commercial interests.” The association went on to say that:

“This ruling, if it stands, will adversely affect the daily lives of Americans and fundamentally change the open nature of the Internet, where uncensored access to information has been a hallmark of the communication medium since its inception.”

FCC commissioner Jessica Rosenworcel took to Twitter in the wake of the ruling to assert her support for an open internet:

I support an open Internet. My statement on today's DC Circuit decision: http://t.co/j48TiaRlVW. — Jessica Rosenworcel (@JRosenworcel) January 14, 2014

And FCC chairman Tom Wheeler wrote a post for the commission’s blog in which he committed to ensuring that the internet would operate “in the public interest.” Wheeler went on to say that the commission would not disregard “the possibility that exercises of economic power or of ideological preference by dominant network firms will diminish the value of the Internet to some or all segments of our society.”

For its part, Verizon published a statement on its site saying that the court decision means “that the FCC could not impose last century’s common carriage requirements on the Internet,” and that all it wants is the ability to “offer new and innovative services” to its customers. The decision won’t affect consumers’ ability to “access and use the Internet as they do now” the company said. And as Jeff pointed out, the court upheld an FCC rule that requires Verizon and others to disclose what they are doing on their networks, which might help keep them in line somewhat.

“The FCC made a grave mistake when it failed to ground its open Internet rules on solid legal footing" http://t.co/J8fWom0vX5 #NetNeutrality — TimKarr (@TimKarr) January 14, 2014

Open internet proponents have work to do

As for what happens now, the FCC has suggested that it may appeal the decision, but Mike Masnick of Techdirt doesn’t think that’s going to produce an outcome that’s any better than the current situation, saying: “There’s a decent chance that the Supreme Court will take the case — though I’d be very, very surprised if the Supreme Court came to a different ruling. The original FCC rule, while well intentioned, definitely stretched the FCC’s mandate, and it’s no surprise that it’s now been slapped down.”

Free Press and Save The Internet campaign director Tim Karr wrote about the court’s decision at the Huffington Post, and said that those who are in favor of a free and open internet need to take action to protect it or have it taken over by providers like Verizon (Free Press has an online petition you can sign).

“Verizon has put its cards on the table. Under its preferred scenario, the open Internet no longer exists. Whatever the outcome of this court case, we need to fight to protect the open Internet — and stop Verizon’s vision from becoming reality.”

In her Reddit AMA, Susan Crawford — who was co-leader of the FCC’s transition team before President Obama took office — was asked whether there was anything good that came out of the decision, and she said yes: “The house of cards has fallen. Pretending to deregulate with one hand while regulating (Open Internet Rules) with the other is not going to work.” She also compared the internet and regulation to a sidewalk:

“The sidewalk should be treated as a regulated service – neutral, nondiscriminatory, serving everyone in the country – just like the telephone. That treatment of telephone wires, by the way, gave us the commercial Internet. It was born of that nondiscriminatory policy. No regulation, no Internet.”

In a Twitter discussion about the topic on Tuesday night, venture investor Marc Andreessen said that the net neutrality issue is complicated by the fact that new networking technologies require large-scale investment (we’ve also collected more of Andreessen’s thoughts on the issue in a separate post).

@om In ideal universe I want both net neutrality + fast growing investment in existing&new networks. Not obvious to me how to square circle. — Marc Andreessen (@pmarca) January 15, 2014