US court deals a blow to FCC

OvumA US appeals court ruled on Tuesday that the FCC had overstepped its jurisdiction by ruling against cable operator Comcast in a net neutrality case in 2008. This is a severe setback to FCC chairman Julius Genachowski’s plans for introducing more formal and stringent net neutrality rules. The ruling completely removes any short-term clarity about the rules which will govern network management by fixed and mobile telcos in the US.
The major policy initiative in the telecoms sphere for both President Obama and for Genachowski has been net neutrality. To that end, Genachowski proposed a new set of regulations on the subject in October 2009, followed by a consultation period which ended in January 2010. This activity all proceeded on the assumption that the court would uphold the FCC’s authority to act in this area, so the ruling to the contrary comes as quite a blow.
This is a major setback to the FCC’s net neutrality plan, since it leaves the regulator essentially powerless unless new legislation is passed to give it the specific authority to implement and enforce rules in this area. The FCC will have to immediately perform an impact analysis, set priorities, and determine what the realistic options are for moving forward. However, there are no real quick-fix alternatives.
Regulatory uncertainty to make carriers hesitate
While the FCC and Congress determine the best course of action, the current low level of net neutrality regulation will continue. Although carriers might welcome the lack of intervention for the time being, they will not welcome the lack of medium- to long-term certainty about regulation in this area. Carriers will likely continue to show some restraint in avoiding the most egregious breaches of net neutrality, but they may also feel constrained in their ability to invest in the more nuanced forms of non-neutral behaviour, for fear that the rug may be pulled out from underneath them later on.
Wireless carriers in particular have begun to talk seriously about using traffic-shaping and policy management solutions to deal with some of the worst effects of the explosion in traffic on their networks. But this decision doesn’t necessarily allow them to proceed with any more certainty than before. Wireline carriers keen to pursue new business models for working with content and service providers will also take little comfort from the ruling.

Alternative approaches may be worse for carriers
There are essentially two options available for advocates of net neutrality at this point: appeal the court decision, or pursue a legislative remedy. There is, of course, no guarantee that a court case would be won, and until it reaches the Supreme Court there will be no definitive answer, thus prolonging the regulatory uncertainty. On the other hand, the congressional option is extreme and unpredictable. Congress only has so much time to spend on passing legislation, and with the recent drawn-out fight over healthcare reform, many politicians may be reluctant to pick up another controversial issue so soon.
In addition, previous attempts to pass net neutrality legislation have failed, and have been subject to bitter partisan divisions. If net neutrality legislation were to be passed, there is a good chance that it would be more political and less sophisticated than any solution the FCC might have pursued. The current FCC administration has shown an admirable willingness to investigate issues deeply and take sensible, fact-driven decisions, but there is no guarantee that a congressional solution would emulate those qualities. In the end, the short-term victory presented by the Comcast case may presage a longer-term loss, if Congress (rather than the FCC) is in the driving seat. Comcast may yet wish it hadn’t won this particular battle.