Equal Rights for Bytes? DC Circuit’s Net Neutrality Decision Will Impact Content Providers

ImageBy Megan Haslach

Just days before the 30th anniversary of Sony Corp. v. Universal Studios, the Supreme Court granted cert on a case involving TV startup Aereo where they will have the opportunity to revisit that landmark case upholding Betamax owners’ right to tape television programs for viewing at a later time. Aereo, a company that captures TV broadcasts and then provides them to subscribers to watch whenever they choose, has been embroiled in a bitter battle with a number of film studios over its business model. Aereo characterizes that model as the sort of “time-shifting” the Court approved of in the Betamax case.  The studios, on the other hand, call it a “public performance” constituting copyright infringement. Notably, Aereo has won in every lower court, and the company welcomes the chance to be heard by the highest court. One last favorable decision may well bring a definitive, nationwide end to their long legal battle.

However, Aereo did not celebrate for long; just four days after the Supreme Court issued its writ of certiorari in the Aereo case, the Court of Appeals for the D.C. Circuit also issued a landmark decision on January 15, 2014, overturning several of the Federal Communication Commission’s (FCC) key net neutrality rules. These rules included anti-blocking provisions, which prevented ISPs and all other communications providers from blocking customers from competitors’ websites or any other legal websites. The anti-discrimination rule, enacted to prohibit ISPs from blocking or discriminating when transmitting lawful content, was also struck down. For example, these rules prevented service providers from intentionally throttling bandwidth when customers were accessing sites that require a large amount of data to be transferred, such as Netflix or other streaming video sites.

Though the D.C. Circuit’s decision does not signal a permanent end to net neutrality, the FCC now must go back to the drawing board and craft new rules in this area. In the meantime, the D.C. court’s decision could have a huge effect on companies like Aereo, Netflix, or Hulu, who have created businesses around the ability to easily and inexpensively provide streaming content to subscribers. Absent the FCC’s anti-blocking and anti-discrimination rules, it is now far easier for service providers like Comcast or Verizon to charge content providers more for the ability to deliver massive amounts of data to consumers streaming such content. Though the service providers have always had the ability to do this, most did not want to justify their decision in a challenge by the FCC, so they have largely implemented neutral pricing structures. Without the threat of such a challenge, however, these targeted price hikes could make it much more difficult for consumers wanting to receive media content from the Internet rather than traditional service providers like Comcast or Time Warner.

Though consumers will likely not feel any immediate changes to Internet streaming services, the Jan. 15 ruling may already be scaring investors; Netflix saw its stock prices fall more than 2% on Jan. 16. While cable giant Comcast is unable to implement pricing changes on content providers until 2018, due to terms agreed upon when they purchased NBCUniversal, other ISPs like AT&T are already working on plans to extract fees from providers in order to avoid fee caps. Meanwhile, FCC chairman Tom Wheeler has already vowed to draft new rules to protect net neutrality in light of the D.C. Circuit’s decision, making it clear that the battle between ISPs, content providers and government regulators is far from over.

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