Net Neutrality Decision: What You Need to Know

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(Bloomberg) Comedian John Oliver and the millions of people he unleashed on the FCC last summer have gotten what they wanted: a reclassification of Internet service as a public utility aimed at preventing providers from blocking, slowing, or speeding up certain content.

The 3-to-2 Federal Communications Commission vote largely enshrines current practices of the major providers, such as Comcast, AT&T, and Verizon Communications, and as such probably won’t hold any immediate effects for the average consumer. It does, however, prevent a tiered Internet where companies and content providers can pay for speedy access to customers.

“If this goes well, consumers will not notice a difference,” says Christopher Mitchell, an official with the Institute for Local Self-Reliance, an advocacy group for community development that supported the net neutrality proposal. Mitchell says the FCC rules are aimed at “preventing things from getting worse.”

The debate in Washington is largely about regulation and big business, as well as the interplay of government and technology investment, with direct implications on the future ease and cost of your Web-surfing at home. And of course, the debate is far from over, with behemoths like Comcast and Verizon likely to challenge the changes, both in Congress and in federal court. (Bloomberg View columnist Noah Feldman wrote about how ISPs will probably turn to the First Amendment to advance their argument in court.)

ISPs have argued the new rules also mean heavier regulation—potentially even on government oversight of prices—and may have unintended consequences in the market. The FCC has said repeatedly it has no interest in regulating prices or forcing companies to share their access into homes with rivals. That’s little consolation to investors, according to BTIG analyst Rich Greenfield, who’s said the new regulatory uncertainty is likely to depress share prices across the industry.

There’s also the prospect that the FCC’s role in the industry will lead to less capital spending and slow both infrastructure expansion and the growth of broadband speeds. The industry says its top download speeds have doubled in recent years—without the FCC’s involvement—and that government interference could hinder progress. The companies also argue that Americans enjoy faster Internet speeds and better prices than do consumers in most of the world. The rules begin “a costly and destructive era of government micromanagement that will discourage private investment in new networks and slow down the breakneck innovation that is the soul of the Internet today,” Broadband for America, an industry group, said in a statement. 

Net neutrality is also not a magic bullet that will spur a flood of new players into the broadband market, such as the small effort Google has been making with its high-speed fiber service, or a dramatic reduction in prices. Nor will the rules prevent ISPs from selling various branded packages, with higher Internet speeds the more you pay.

Internet providers say the reclassification of broadband service could also lead to a flurry of new state and federal fees like those attached to mobile phone and natural gas service. Will you now pay a new user fee for home broadband purchased from Comcast or AT&T? A report(PDF) in December from the Progressive Policy Institute, a Washington think tank, argued that this outcome is inevitable and calculated a jump in annual bills from $8 in Delaware to as much as $148 in parts of Alaska, based on the current prices and fees.

All that is hypothetical, given the long road to implementation and the many lawyers rushing to this dispute. For now, Netflix and Hulu will stream as usual, and the monthly bill won’t be any higher or lower because of the FCC’s action. Netflix will explore a new complaint process to have the FCC investigate the terms of access contracts in which the company pays Verizon and Comcast fees to carry its traffic. Those deals must be “just and reasonable” under the net neutrality rules. Netflix spokeswoman Anne Marie Squeo said on Thursday that the company will review the language of the new FCC regulations and decide whether to present its current arrangements with the ISPs for an agency review.

Amid all the rhetoric from both sides, it’s interesting to note that one sizable broadband seller, Long Island-based Cablevision Systems, isn’t fazed by the ruling. “The idea of more regulation is never great for us,” Chief Executive Officer James Dolan said on Wednesday during an earnings call. “But to be honest, we don’t really see … any real effect on our business. So therefore, we’re sort of neutral.”

Millions of Americans are the same—at least for now.

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