FCC Loses Broadband Authority, But May Get the Last Laugh

Last Updated Dec 21, 2010 10:54 AM EST

There's been an ongoing battle over so-called net neutrality. Now a federal appeals court, ruling in favor of Comcast (CCW), has said that the Federal Communications Commission does not have the authority to regulate broadband providers. It's a victory for carriers in what has become a battle over profits, not over freedom of speech or individual rights, and who will most control the Internet for profit. But the FCC may get the last laugh -- and even more control over broadband providers than it asserts today.

The unanimous decision of a three-judge appeals court battle was in a case in which the FCC had ordered Comcast to not slow traffic from person-to-person file sharing sites like BitTorrent. Although there wasn't an official rule in place that gave the agency control over how carriers ran their networks, the commissioners argued that they had the right anyway, as Nate Anderson at Ars Technica:

When the complaints against Comcast first surfaced, they noted that the company was violating the FCC's "Internet Policy Statement" drafted in 2005. That statement provided "four freedoms" to Internet users, including freedom from traffic discrimination apart from reasonable network management. The FCC decided that Comcast's actions had not been "reasonable network management," but Comcast took to the agency to court, arguing that the FCC had no right to regulate its network management practices at all.
Apparently not, according to the court. Although the FCC framed the Comcast case as an issue of communication freedom -- and I agree that this is an implication -- from the corporate view, what's going on is a fight over money. Warning: sarcasm ahead.

Carriers, who complain about the cost of traffic, say that they want to be able to charge different rates for different types of use and make some reasonable profit instead of going broke. Then companies like Google (GOOG) that use the Internet to deliver services to customers want no control by the carriers that might restrict their ability to use other people's money to rack up profits.

Where the monetary hammer will strike is on the head of the consumer. Consider how much many people pay for access to communications -- cell phone, maybe landline, cable or satellite. Depending on the plans, that can add up to hundreds a month. It comes out of the limited amount that consumers are willing to spend, and that's one reason why so many people are unwilling to pay for most content and service online. Consumers already pay through the nose.

However, they've also shown that they're capable of virtual consumption at a rate few ever expected. Carriers of all stripes have run around, waving their hands in the air, and screaming that they can't afford the massive amounts of bandwidth that people hog. Just because they spent their money, they think they should use what they paid for?

On the other side are the content companies that fear being forced to cough up money to the carriers for high bandwidth traffic like popular video downloading. They know that the carriers are perfectly capable of arm-twisting. Expect the wrestling match to heat up now.

The extended upshot of all this, however, is that FCC plans for net neutrality are now officially on the shoals, as may be the national broadband plan. The agency does have some options. It can appeal the decision to a full panel of the Court of Appeals. It could try going directly to the Supreme Court. The FCC could see if Congress and the Obama Administration would be willing to extend its powers, as broadband issues are big at the moment. The latter is unlikely, given what else politicians have on their plates.

Or, ironically, the FCC could reclassify broadband as a telecommunications service, treating Internet access companies as it would telephone providers, which would put carriers like Comcast even more under the FCC's thumb. My bet is on the latter, and if that is the case, Comcast may quickly start kicking itself for every getting into a position where this could happen. And that could be one of the best things for growth of the Internet that could happen.

Image: RGBStock.com user Abyla, site standard license.

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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.