Erosion of Net Neutrality Triggered by Verizon Ruling

The D.C. Circuit Court of Appeals recently overturned the FCC’s imposed regulations for net neutrality; however, it also provided a silver lining that permits the FCC to regulate broadband carriers to promote competition. Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014). In addition to these recent developments, Comcast has recently acquired Time Warner Cable, capturing over 40% of the broadband market. This puts the FCC in a position to either appeal the decision of the appellate court or to allege anti-trust concerns with the size of Comcast in order to impose stronger net neutrality requirements on it. Appeal is the best course of action because it can potentially restore the FCC’s prior regulations. Extending current regulations on Comcast is a poor alternative for two reasons.

First, imposing regulations will take time. The Comcast-Time-Warner merger is still a work in progress, but any means of net neutral enforcement are on hold while the FCC considers new methods to regulate net neutrality. In the interim period between these events, Comcast has already struck a deal with Netflix, requiring Netflix to pay a “toll” for a guarantee of reliable, high-speed service. This is likely only the first of several deals to be made. It also is the first step in eroding equal access for all, and limits reliable access to those that can afford it. An appeal of the decision, however, could include a stay over many of the issues at hand and prevent further deals until the Supreme Court issues a ruling.

Second, imposing regulations on Comcast as a condition of its merger will further hinder competition. Forcing net neutral regulations on Comcast likely comes with the condition that the regulations are in effect so long as Comcast has a sizeable market share. Certain companies already have to pay Comcast for reliable access to its services. Some of the same companies have also considered breaking into the broadband market (Verizon, Google, etc.). Despite paying for service, these companies still enjoy some of the neutral regulations imposed on Comcast and are introduced with a dilemma. Google Fiber, for example, can choose to cease expansion and reap the benefit of neutral regulations at the cost of not expanding in the broadband market. Conversely, it may continue to expand only to have Comcast’s neutral regulations lifted (once the market is deemed competitive enough). This would allow Comcast to potentially leverage deeper fees for service and hinder access to Google’s services to prevent competition. These are the alternatives that broadband providers must contend with, and the regulations of Comcast do nothing to regulate any other company that may later dominate the field.

Overall, the best alternative will be for the FCC to appeal the current appellate court ruling in Verizon v. FCC. If the Supreme Court rules unfavorably, the FCC will still be left with the alternative to go back to the drawing board on permissible net neutrality regulations. Appealing the decision will also give the FCC more time to consider alternative regulations, while defending the current ones. In the meantime, however, net neutrality will be continually under attack.