How Verizon's Lawsuit Could Kill Netflix, YouTube



The nation's second most powerful court is poised to decide whether Internet service will go the way of cable TV, resulting in a system in which users may have to pay extra to receive content from online services such as Netflix, iTunes or YouTube.  

In 2010, the Federal Communications Commission (FCC) issued its Open Internet Order, codifying net neutrality and barring Internet service providers (ISPs) from controlling the data flowing over their networks. Verizon Communications quickly sued the FCC, arguing that the commission had no authority over the Internet.

Verizon filed its lawsuit in the U.S. Court of Appeals for the District of Columbia Circuit, which handles most cases involving federal agencies and, as a result, has the most influence of any appellate court below the U.S. Supreme Court. Oral arguments in the case were heard in September of this year, and the D.C. Circuit court is expected to hand down its decision in the next few months.

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The lawsuit hinges on the thorny question of just how much oversight, if any, the FCC has over broadband networks and ISPs. However, the core issue at hand centers on the question of net neutrality — whether the Internet should be the same for all users, or whether ISPs should have full control over what users can see or do online.

If the court sides with Verizon, how users access the Internet, and what they do online, will be irrevocably affected.

"Anyone who connects to the Internet, in one way or another, will be impacted" by the decision, security analyst McCall Paxton of Indianapolis-based Rook Consulting told Tom's Guide.

What is net neutrality?

The tricky thing about net neutrality, Paxton said, is that it's not an engineering term, but rather a political term that means different things to different people, making it difficult to define consistently.

In simplest terms, net neutrality is about treating everyone on the Internet equally, so that users can access all online content and services from any device and any application without any restrictions or limitations from their fixed-line ISPs.

This isn't a new concept — this is currently the way the Internet works. The FCC's 2010 order simply added rules emphasizing that landline ISPs have to continue providing users with neutral networks. (Mobile data providers have a looser set of rules.)

The rules state, for example, that ISPs cannot block traffic to video-chatting applications in favor of other applications, restrict bandwidth when users access torrent or other peer-to-peer sites or charge extra for streaming content such as Hulu or Pandora.

The appeals court could go many ways with its decision in Verizon v. FCC. The court might choose to strike down some, or all, of the net neutrality rules on the grounds that the FCC lacks authority to impose such rules.

It might also cite legal precedent that suggests the FCC already has the authority, but just hasn't explicitly claimed it, which would reject Verizon's argument. It’s also likely that a decision that favors one side over the other will be appealed to the U.S. Supreme Court.

Regardless of the court decision, said Josh Levy, a director at the Washington, D.C., advocacy group Free Press, it is increasingly becoming clear that if the FCC wants to protect net neutrality, it needs to reclassify broadband and mobile networks as "common carriers." These are public utilities, such as the telephone network, that everyone needs and that can be regulated by the government.

A world without net neutrality

No ISP has said outright what it would do if net neutrality rules were struck down, but it's clear from statements made in the past that some ISPs believe they should have the authority to control how users use the ISPs' networks to access online content.

One scenario envisions that ISPs would offer customers "basic" plans to access common sites and applications, and then package access to other services, such as video streaming or VoIP telephone services such as Skype, as part of more expensive "premium" plans, similar to what currently happens with cable TV networks.

YouTube, and Netflix may become parts of premium Internet services, much in the way HBO and Showtime are considered premium cable channels, Paxton suggested.

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In another scenario, ISPs could tell online businesses that they could pay extra for certain services the ISPs might want to offer them. The ISPs could speed up network connections so that end users load those businesses' sites or services faster. Conversely, those online services who haven't paid extra might experience poor network performance.

The end of net neutrality could also mean that ISPs imposed a bandwidth cap, requiring streaming services to pay more for additional data-transfer speed. Those extra costs would eventually be passed onto the consumer, Paxton said.

These speculative scenarios are not far-fetched. Paxton said that Verizon, AT&T, Comcast and other ISPs have been searching since 2005 for ways to change how they charge companies and users for Internet access.

There have even been instances in which AT&T tried to restrict Apple's FaceTime video-chatting application on its AT&T Wireless cellular data networks, Paxton said, or in which Comcast cut back network speeds for peer-to-peer sites.

"People want to be able to just use the Internet," Paxton said. "They don't want to pay extra for devices or applications."

ISPs have argued that net neutrality is ultimately unfair to end users, because big Web companies such as Yahoo, Netflix, and Google can grow and build up profits, while consumers are left footing the bill for the resulting necessary Internet infrastructure expansion.

Customers, the ISPs argue, should be allowed to pay for just the kind of Internet they want, and not for services and applications they never use.

Providers such as AT&T would like to allocate a certain portion of their networks to streaming video and VoIP, so customers who have purchased those services will get great performance. Taking away net neutrality rules would allow ISPs to roll out these kind of priority services, which would benefit users.

The flip side, of course, is that "regular" Web users could see a degradation in service as their portions of the networks become congested.

During oral arguments in the case, Levy said, Verizon claimed a First Amendment free-speech right to curate what kind of content is transmitted across its broadband networks.

"Verizon believes it should be able to edit the Internet, much like the way a publisher has control over a newspaper," Levy said. 

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