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Crippled net neutrality threatens to unbalance Internet radio competition

fccNet neutrality advocates were bitterly disappointed, if not totally surprised, by today’s ruling against the Federal Communications Commission by a Washington D.C. appeals court. Verizon brought the suit, challenging the net neutrality rules created by the FCC.

“Net neutrality” is a catchphrase for any regulatory framework with a certain philosophical underpinning — specifically, that Internet service providers must allow equal throughput to consumers of all content sources. That means, for example, that Verizon would be disallowed from selling faster delivery speed to a high bidder, and throttling back others. YouTube cannot have a delivery advantage over Vimeo; the two sites compete on the basis of business models and product features. It is easy to imagine how the removal of net neutrality guidelines could affect the online music industry.

Most people believe that Internet innovation is at stake. It is the level playing field which encourages startups. All kinds of virality depend on non-discrimination of content. Pandora doesn’t succeed because it has deeper pockets than Apple’s iTunes Radio. Pandora succeeds because it recognized the market early, created original technology, and distributes smartly. But Apple could probably afford to pay for a bandwidth advantage if it chose to, upsetting meritocratic and startup-friendly competition in the absence of net neutrality rules.

The court’s decision was not a philosophical one. It simply noted that the FCC had earlier declassified the Internet so that it could no longer be regulated as a common carrier, like the telephone industry is. Here’s the key quote: “Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such.”

The FCC’s error is laid at the feet of ex-Commissioner Julius Genachowski, who didn’t plant the net neutrality guidelines in a common-carrier classification that could support them. The court did affirm the FCC’s authority to regulate how Internet service providers deliver content, as long as the rules are grounded in a legal framework.

In light of this double message, the court’s decision might be paraphrased like this: “You classified the Internet wrong. What are you going to do now?”

We’re wondering the same thing.

Brad Hill

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