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Comcast wins court victory against FCC

Court rules that FCC can't require 'net neutrality'

NEW YORK -- Cable giant Comcast Corp. and other broadband service providers won a court battle against the FCC on the issue of "net neutrality" Tuesday, but the war is far from over.

The FCC has taken the stance that it has the authority to require high-speed Internet service providers to give equal treatment to all Web traffic on their networks -- as it did a few years ago when Web users complained that Comcast was throttling transfer speeds for peer-to-peer file-sharing service BitTorrent. Comcast later gave up measures cited by the FCC, but still challenged the agency's power to interfere.

A federal appeals court's three-judge panel in Washington, D.C., on Tuesday unanimously agreed that the FCC had no authority to do so, tossing out an Aug. 2008 cease and desist order against Comcast.

The decision is a near-term win for broadband providers and a loss for FCC chairman Julius Genachowski and the Obama Administration, both of which favor net neutrality. The ruling could potentially help entertainment companies, whose content has been pirated online, but especially reps of independent content producers, such as IFTA, have spoken out in favor of net neutrality, fearing that cable giants like Comcast could become gate-keepers of desirable content -- a concern also raised in the regulatory review process for Comcast's plan to buy a majority stake in NBC Universal.

An FCC spokeswoman said the agency "is firmly committed to promoting an open Internet and to policies that will bring the enormous benefits of broadband to all Americans" and stated that the court decision was simply a rebuke of the former FCC leadership's approach. "But the court in no way disagreed with the importance of preserving a free and open Internet; nor did it close the door to other methods for achieving this important end," the FCC spokeswoman said.

Sena Fitzmaurice, vp of government communications for Comcast, said the cable giant was "gratified" by the court's decision. "Comcast remains committed to the FCC's existing open Internet principles, and we will continue to work constructively with this FCC as it determines how best to increase broadband adoption and preserve an open and vibrant Internet," she added.

"We've not heard the last of this issue, but for now, it would appear to be a positive for entertainment companies as this ruling focuses on Comcast's monitoring of BitTorrent file sharing, which could imply Comcast was trying to monitor and slow the piracy of content," said Miller Tabak analyst David Joyce.

The Open Internet Coalition raised concerns about moves to stifle the openness of the Web. "Today's D.C. Circuit decision in Comcast creates a dangerous situation, one where the health and openness of the Internet is being held hostage by the behavior of the major telco and cable providers," said executive director Markham Erickson.

One option for the FCC now is to expand its authority by reclassifying high-speed Internet service as pretty much a phone service to gain regulatory oversight in what some critics have called "the nuclear option."

The agency can also request the necessary regulatory authority from Congress or suggest Congress itself pass net neutrality legislation.

Sanford C. Bernstein analyst Craig Moffett warned that a reclassification of broadband services "would result in radical downsizing" of cable and telecom firms' broadband investment plans "to account for the enormous regulatory uncertainty it would introduce." This downside risk "far, far outweighs the risk of net neutrality alone, and, as such, it is entirely unclear whether today's ruling should be judged as a "win" for Comcast (and, by extension, other carriers)."

Such a move would likely lead to a court challenge from broadband providers and more debate. "It would be highly controversial," said Charles Zielinski, an attorney at law firm Bryan Cave who used to work at the FCC. "Whatever the FCC does next, this issue will take a long time -- at least a year, but more likely longer."

The FCC spokeswoman tried to ease fears of controversial moves by the agency. She vowed that the current leadership would rest its policies, "all of which will be designed to foster innovation and investment while protecting and empowering consumers, on a solid legal foundation."