Net Neutrality War -Verizon wins the Battle in US; Regulators holding ground in Brussels

In Jan,14 the DC court has ruled in favor of Verizon and has vacated the anti-discrimination and anti-blocking policies as ruled by FCC in 2010

The Case: Verizon (Appellant) Vs FCC (Appellee)

What was FCC Open Internet Order 2010?

In Dec, 2010, FCC- Federations Communications Commission, issued an order to preserve the free and open internet. Three basic rules were adopted-

1.      Transparency: Fixed and mobile broadband providers must disclose the network management practices, performance characteristics, and terms and conditions of their broadband services

2.      No Blocking: Fixed broadband providers may not block lawful content, applications, services, or non-harmful devices; mobile broadband providers may not block lawful websites, or block applications that compete with their voice or video telephony services; and

3.      No Unreasonable Discrimination. Fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic.

Verizon's appeal against FCC ruling

Verizon challenges the Open Internet Order on several grounds, including that the Commission lacked affirmative statutory authority to promulgate the above mentioned rules.

Jan, 2014-US Court of Appeals Verdict

· The DC court has vacated the FCC's anti-discrimination and anti-blocking policies 

· But it preserved disclosure  and transparency requirements 

Telecom IQ View: What does it mean for Verizon and others CSPs in a larger context on net neutrality debate

· Service Providers vs OTT players- The regulations have so far favored the latter

o Several cases have been registered over the years where Regulators have investigated CSPs for net neutrality violation. These cases mainly revolve around CSP traffic management, throttling, blocking content of OTTs

oWith the Rise of OTT players, Telecom Operators services have been reduced to "Dumb Pipes"

§ OTT content players have had devastating impact on Telecom service providers. In 2013, free social-messaging applications like WhatsApp cost phone providers around the world $32.5 billion in SMS revenues in 2013. This figure is projected to reach $54 billion by 2016 and $86 Billion in 2020.

§ There is not only loss in service revenue but OTT content players (mainly players like YouTube, Skype, Netflix etc.,) are responsible for driving up the network traffic on the Service providers network. Between 2012 and 2017, mobile traffic would grow 13 fold and video would account for 66% of all mobile traffic. This is turning up pressure on Service Operators to increase Capex and invest more on Network Upgrades. 

§ CSPs are struggling to monetize this investment but OTTs are making the most of the ubiquitous network thus adding to CSP’s frustration Regulators so far have been apathetic to the plight of communication service providers

· The court ruling in US , now paves the way for  new dynamics in the OTT-Regulators-Service Provider tussle. Operators for a change, now have a upper hand and potentially can resort to traffic optimization and blocking strategies or could start charging OTT content providers. Interestingly, one month after the ruling by the DC court, Comcast and Netflix announced an agreement  in which Netflix will pay Comcast for faster and more reliable access to Comcast’s subscribers. The market would start witnessing more such agreements.

· It would not be long before the tremors of this ruling would be felt in Europe, wherein leading providers like Telefonica, Vodafone and Orange would start taking European Commission and NRAs to court.