Wednesday, January 15, 2014

Court in America Trashes Net Neutrality and Opens Internet to Preferential Commercial Use via Faster Connections and Differential Pricing

The Open Internet as a myth of the future?

Will Internet go the way of radio -- where federal deregulation has led to a concentration of U.S. radio stations in the hands of just a few companies?

What is the cause of our concern? It is a case decided January 14, 2014, one of the worst (for the people) U.S. court decisions to come out in recent years
 -- one, however, that would probably be affirmed by the predominantly current pro-business majority in the current U.S. Supreme Court (even the intellectual Breyer here is on the wrong side of the equation).

In that just decided case, Verizon v. FCC, the U.S. Court of Appeals for the District of Columbia Circuit has fully trashed the idea of "net neutrality" and a "free and open Internet", by permitting preferential provider treatment of commercial services via faster streaming connections and differential pricing.

This is a very stupid decision because it makes the crux of the holding depend on a "straw man" legal technicality -- discussed in confusing and epic detail and that no layman will understand -- i.e. a determination of whether broadband providers are "common carriers" under the law [a common law legal fiction not employed in Europe and never designed for the Internet], whether those providers are being treated as "per se common carriers" by the FCC even if declared otherwise, and what limitations that brings in terms of regulation.

Providers can now concentrate on the most profitable aspects of their Internet business, the rich companies, companies such as Apple, whose power has become so great that they challenge court authority (only if it is not in their favor).  The United States of Apple? These companies will own your souls.

YOU, the consumer, unless you will be willing to pay much higher premium rates in the future, will have to become content with slower Internet service as compared to the "big boys".

Put differently, total commercialisation of the Internet has arrived, which is precisely the opposite of what the Internet originally was intended to do.

Verizon already tried ten years ago to shamelessly expand its monopolistic powers in Verizon v. FCC, 535 U.S. 467 (2002), and now has finally been successful in this case. Too bad for you, John Q. Citizen.

But perhaps it is all part of the trend whereby mega-companies like Facebook now exist mostly just to commercialise the interests of their users for corporate gain.

In the just decided case, Verizon v. FCC, Judge Tatel, who should know better, wrote for the Appeals court [LawPundit has add the bracketed material]:
"As we explain in this opinion, the Commission [FCC] has established that section 706 of the Telecommunications Act of 1996 [see text, and NTIA] vests it with affirmative authority to enact measures encouraging the deployment of broadband infrastructure. The Commission, we further hold, has reasonably interpreted section 706 to empower it to promulgate rules governing broadband providers’ treatment of Internet traffic, and its justification for the specific rules at issue here — that they will preserve and facilitate the “virtuous circle” of innovation that has driven the explosive growth of the Internet — is reasonable and supported by substantial evidence. That said, even though the Commission has general authority to regulate in this arena, it may not impose requirements that contravene express statutory mandates. Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order."
Here is how the FCC currently (still) describes that Telecommunications Act of 1996 at its website:
"The Telecommunications Act of 1996 is the first major overhaul of telecommunications law in almost 62 years. The goal of this new law is to let anyone enter any communications business -- to let any communications business compete in any market against any other.

The Telecommunications Act of 1996 has the potential to change the way we work, live and learn. It will affect telephone service -- local and long distance, cable programming and other video services, broadcast services and services provided to schools.

The Federal Communications Commission has a tremendous role to play in creating fair rules for this new era of competition." 
Well, that is the world of yesteryear. If big companies are to get preferential provider service, the competition can forget it. No chance. Just look at radio.

Crichter in his comment at the New York Times Bits Blog on the article The Nuts and Bolts of Network Neutrality, hits the reality right on the nose in writing:
"To state the obvious, individual carriers like Verizon have no interest in free flow of information, or promoting growth in the economy overall, and certainly not in offering equal access to content or services from potential competitors. They are interested in profits, period. Though there is some competition in [b]roadband service, it still does not extend to many rural areas, where telecoms or expensive satellite providers have virtual monopolies. And even in more densely populated areas, the model is more oligopoly than free competition. I hope the FCC can work out ways to prevent cream skimming and discrimination that earns the blessing of the courts. DirectTV is NOT a good model for the internet."
We are not against profits. We are against legally created windfall profits, law-based monopolies, and against giving people the golden goose for nothing. Rewarding economies of scale by preferential laws simply leads to larger monopolies, nothing else. Where has the contrary ever happened?

The logical fallacy in the legal reasoning of the Court is its finding that:
"Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order."
The Court has thus taken the legal position that FCC anti-discrimination and anti-blocking rules on Internet providers (ISPs) "impose per se common carrier obligations".

Andrew Raff explains:
"In 2002, the FCC ruled that cable modem service is properly classified as an information service rather than cable service or telecommunications service offering and therefore is not subject to common carrier regulation, but merely to regulation under the Commission's ancillary jurisdiction to regulation communications under Title I of the Act. In re: Inquiry Concerning High-Speed Access to the Internet Over Cable and Other Facilities." [emphasis added]
The Court is now saying that if broadband provision of Internet is not "a common carrier service", then the FCC can not regulate it as it has been regulating, because it is in fact treating Internet service providers as per se common carriers, which the FCC has declared that they are not.

Leland E. Beck at Federal Regulations Advisor in FCC “Net Neutrality” Rules Vacated by U.S. Court of Appeals for D.C. Circuit writes:
"Although the court of appeals spends considerable time affirming the FCC’s authority to regulate under the 1996 Act, the key lies in the distinctions:  the FCC cannot regulate broadband providers as common carriers because the FCC retains its 1980 still-binding decision to classify broadband providers not as providers of “telecommunications services” but instead as providers of “information services,” and the Communications Act expressly provides that “A telecommunications carrier shall be treated as a common carrier under this [Act] only to the extent that it is engaged in providing telecommunications services.”  Therefore, the court needed to determine whether the requirements imposed by the FCC’s Open Internet Order subject broadband providers to common carrier treatment.

Even granted the FCC due Chevron deference, the court had “little hesitation” in deciding that the anti-discrimination and anti-blocking obligation classified, in reality, fixed broadband providers as common carriers under the long history of that status."

But the Telecommunications Act of 1996 does not require that conclusion. Rather, in a case that went to the U.S. Supreme Court, as Raff further writes at
"The Supreme Court affirmed the Commission's ability to make that regulatory classification in National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U.S. 967 (2005). In a 6-3 opinion delivered by Justice Thomas, the Court overturned the Ninth Circuit and ruled that the Commission acted within the scope of its power to make such a regulatory classification and that the classification should be afforded judicial deference."
The Court of Appeals thus held further in the current 2014 Verizon case that the FCC can not rely on ancillary jurisdiction for its net neutrality regulations, so that we have the absolutely absurd situation that the FCC clear up to the Supreme Court was given judicial deference for a far-reaching classification of ISPs as not being common carriers and here is not being given judicial deference for treating them as common carriers nevertheless for purposes of net neutrality, anti-discrimination and anti-blocking. Why the two-faced jurisprudence?

This is law at its worst. If the "net neutrality" rules can be tossed this easily, then the stupid FCC decision not to treat ISPs as common carriers should be equally tossed. Why judicial deference in one case and not the other???

Worse, there is the chance that the FCC will not even appeal the decision, since the new FCC chairman, Tom Wheeler, is on record (WSJ) as being against regulating broadband Internet the way that landline phone systems are regulated.

We thus have the bizarre situation of the virtual destruction of the Internet as we know it today because of an ill-conceived Court of Appeals decision that stinks to heaven in terms of its unnecessarily convoluted legal analysis on a simple question of Internet regulation, which should have removed the legal fictions and have decided the case by finding Internet service providers to be what they are, common carriers, and thus subject to the regulations that apply to them. What we have now is one legal fiction after the next. Terrible jurisprudence. Terrible.

For more detail and analysis, see:

Gautham Nagesh and Brent Kendall at the Wall Street Journal, Business, in Court Tosses Rules of Road for Internet: Federal Regulations on 'Net Neutrality' Are Voided, Clearing Way for New Fees

Micahel Hiltzik at the Los Angeles Times in Net neutrality is dead. Bow to Comcast and Verizon, your overlords

Edward Wyatt at the New York Times - Rebuffing F.C.C. in ‘Net Neutrality’ Case, Court Allows Streaming Deals

Clyde Wayne Crews Jr. at Forbes - Court Rules Against Net Neutrality In Verizon V. FCC

Bits Blog at the New York Times, The Nuts and Bolts of Network Neutrality

Danny Kimball at Antenna, Why Verizon v. FCC Matters for Net Neutrality— and Why It Doesn't writes:
"1. The rules haven't been very effective....

2. Overturning the rules could actually lead to getting better ones."

-- Law Pundit comment: Sorry, Danny, but obtaining "better" rules in the current American political climate is perhaps a Utopian illusion. 
Nicholas Economides, The Telecommunications Act of 1996 and its Impact

Scott Cleland, Chairman, NetCompetition, Why the 1996 Telecom Act’s Unbundling Model is Obsolete, writes:
"The transition to competition that the Telecom Act envisioned has happened, just not the way Congress expected. This means that the 1996 Telecom Act’s transitional purpose is done and that its continued incorrect focus on implementing obsolete competition policies is counterproductive and dysfunctional."

-- Law Pundit comment: Sorry, Scott, but federal regulation of business and the communications industry has the same basis as our criminal laws. People when unregulated abuse the system, in all walks of life. How many real options do many users today have -- or not have -- in obtaining a broadband Internet connection? Everything is dominated by monopolies, and their top services concentrate on cream skimming (as noted by Crichter above). Here is a map of Verizon's cream skimming FIOS service from 2014 Best Internet Service Provider Comparisons and Reviews:
Ben Bajarin writes at Time, Techland, Big Picture, in Living in the Last Mile: How to Improve Rural Internet Access:
"I am part of the 30% of Americans who don't have real broadband access at home. And no, this is not by choice…entirely."
Gerry Smith, Huntington Post, in FCC Finds Rural Internet Access Is Still Lagging   wrote in 2012:
"About 19 million Americans still have no access to high-speed Internet, according to ... [a report of] the Federal Communications Commission.

About 14.5 million of those without access ... live in rural areas, where Internet providers do not offer service because "there is no business case to offer broadband”....
The Telecommunications Act of 1996 tasked the commission with ensuring that broadband is rolled out on a "reasonable and timely" basis to all corners of the country.

But the [FCC] report found this is not happening."
The decision by the Appeals Court will not improve this situation. Quite the contrary, it will allow companies not only to continue to concentrate on the most lucrative sources of revenue, but also to refine even those markets by offering bennies to the biggest customers, the public interest notwithstanding.

In closing, take a look at
Betty Isaacson at the Huffington Post,
Why You Should Be Freaking Out About The End Of Net Neutrality

That could be the future of the Internet.

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