Verizon Communications (NYSE:VZ) has won a suit against the Federal Communications Commission regarding its ability to charge certain Internet content providers for the amount of bandwidth their services use, Bloomberg reports. On Tuesday, an appeals court in Washington D.C. ruled that the FCC was overstepping its bounds by trying to bar Internet providers from blocking certain kinds of online content or charge the companies that take up the most bandwidth a higher fee. The current rules required Internet providers to give the same high-speed service to all types of Internet traffic equally, but now a court has sent the rules back to the FCC to be rewritten.
FCC Chair Tom Wheeler said per Bloomberg that the agency will appeal the ruling, as it believes that, “These networks on which the Internet depends continue to provide a free and open platform for innovation and expression.” With the rules back on the drawing board, the possibility is now open for Verizon to charge popular companies like Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) for the high amount of traffic they draw.
The FCC believes that such a practice will result in wealthier companies getting more favorable Internet access than start-ups and other small companies. The FCC believes it has to make sure the Internet remains an open place, or else innovation could be stunted and, “The next Google or Facebook might never begin,” the commission said in a statement seen by the Wall Street Journal when the case was heard back in September. Obviously, companies like Netflix aren’t happy about the possibility of being charged for the high traffic they draw. A spokesperson for Netflix who spoke to the Journal said, “consumers pay for high-speed broadband, which is an incredibly lucrative business for the Internet service providers” in order to “get services like Netflix.”
AT&T (NYSE:T) is another wireless carrier looking to challenge the FCC’s net neutrality rules. At the Consumer Electronics Show last week, the carrier introduced a new “sponsored data” plan that will allow content providers to pick up the tab for the data their services use on AT&T’s network. This means using the app or website of a company that uses the sponsored data plan won’t show up on an AT&T customer’s data usage bill. While this may be beneficial for consumers in terms of their monthly bills, it does favor more wealthy companies who can afford to pay for their users’ data.
While the FCC didn’t oppose AT&T’s new initiative outright, it did say it planned to keep a close eye on it. “It is not the sort of thing that should be prohibited out of hand,” Wheeler said last week, per Re/code. “But, again, history instructs us that not all new proposals have been benign. There has to be some ability on the part of government to oversee, to assess, and, if warranted, to intervene.” With Verizon’s court win, AT&T probably has even less to worry about from the regulator.
Is this good for consumers? AT&T’s sponsored data option may sound nice, but it won’t be so great if Netflix ends up having to hike its fees in order to keep providing fast streaming speeds. Forcing Internet companies to pay for taking up too much bandwidth may keep Internet bills lower, but those extra costs will have to go somewhere.
More From Wall St. Cheat Sheet:
- FCC to Keep a Close Eye on AT&T’s New Data Plan
- Verizon’s Video Boom Causes Congestion in Key Cities
- Verizon Is Looking Victorious in Battle Against FCC
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