The notion of equality on the Internet may sound reasonable, but net neutrality, as defined by the Federal Communications Commission (FCC), is instead an attack on private-sector business models.  Proponents of net neutrality want the online world to be forced “open” at the expense of successful Internet providers, but fail to recognize the many tradeoffs to “openness,” such as increased spam, fewer privacy controls, slower service, and, perhaps most importantly, decreased incentives for investment and innovation.

In 2002, the FCC decided to treat cable modem service as an “information service” under Title I of the Telecommunications Act of 1996.  This decision allowed for a light regulatory touch over the Internet, which permitted the flexibility for growth and expansion.  On September 6, 2007, the Department of Justice (DOJ) reaffirmed this light touch approach to the Internet, filing comments to the FCC on net neutrality, stating “Whether or not the same type of differentiated products and services will develop on the Internet should be determined by market forces, not regulatory intervention.”  Furthermore, DOJ made it clear that it would continue to oversee and enforce any anticompetitive conduct to ensure a competitive marketplace.

However, the FCC ignored DOJ’s 2007 recommendations on regulating the Internet and tried to control the ability of an Internet Service Provider (ISP) to manage its peer-to-peer traffic.   In April 2010, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit Court) vacated the FCC’s attempt to sanction the ISP when it came up with a solution to manage traffic on its network.  Ultimately, the ISP and the peer-to-peer community resolved the issue by developing alternative solutions that advanced traffic management techniques to everyone’s benefit.  This agreement is a prime example of how conflicts on the Internet should be resolved.

Following its court defeat, the FCC began the process of promulgating new rules for net neutrality.  Using Title II of the 1996 Communications Act, the FCC tried broadening its authority to regulate the Internet by deeming it as a “common carrier,” much like old-fashioned wireline telephone services.  When Congress objected to this determination, the FCC backed away.

On December 21, 2010, having failed to achieve consensus on deeming the Internet a “common carrier, the FCC voted along party lines to institute net neutrality rules in the Report and Order on Preserving the Open Internet (Report and Order) without including any reference to Title II.  The Democratic commissioners voted in favor and the Republican commissioners voted against the Report and Order.  The Report and Order included three rules for an Open Internet: transparency, no blocking, and no unreasonable discrimination.

On September 30, 2011, Verizon Communications appealed the FCC’s Report and Order in the D.C. Circuit Court.  Verizon Senior Vice President and Deputy General Counsel Michael E. Glover stated, “Verizon is fully committed to an open Internet. We are deeply concerned by the FCC’s assertion of broad authority to impose potentially sweeping and unneeded regulations on broadband networks and services and on the Internet itself.  We believe this assertion of authority is inconsistent with the statute and will create uncertainty for the communications industry, innovators, investors and consumers.”

On November 20, 2011, the Open Internet Order rules became final.  Because of the uncertainty created by the Report and Order, these new regulations will significantly affect the ability of Internet providers to adopt new technology and adapt to the ever-changing needs of subscribers.    The D.C. Circuit Court began hearing oral arguments in Verizon’s case against the FCC’s Open Internet rules on September 9, 2013.  A decision from the judges is expected either later this year or early next year. 

Should the court strike down the Open Internet Order, proponents of net neutrality are prepared to introduce legislation that would, among other provisions, allow the FCC to redefine the Internet as a Title II telecommunications network regulated under the Telecommunications Act of 1996.  That would place even stricter controls over Internet providers and subject them to common carrier regulations, further hampering their ability to bring new innovations to the marketplace.