- In 2018, the FCC ruled to repeal the net neutrality law, allowing large ISPs to effectively regulate internet traffic by restricting, metering or even blocking some content sources.
- In response to the FCC’s decision, California crafted its own set of net neutrality rules – a decision that was opposed by large ISPs but prevailed in the appeals court in January 2022.
- In July 2021, President Joe Biden signed an executive order that encouraged the return of net neutrality, which, in combination with the Californian precedent, gives hope to the supporters of open internet.
- This article is for business owners who want to understand the concept of net neutrality, its legal development and the implications for small businesses.
California’s answer to the FCC’s 2018 repeal of the Open Internet Order (OIO), often referred to as “net neutrality,” survived an appeals court hearing on Jan. 28, 2022, restoring the concept of net neutrality in the Golden State. The survival of California’s net neutrality rules in SB 822 recall the battle over the nationwide repeal by the FCC a few years ago – but what does it mean for small businesses, and how has the internet changed since the FCC reversed the OIO?
If you’re trying to wrap your head around the topic and its developments, here’s some background on how net neutrality came to be, what the internet was like before net neutrality, how the approach to net neutrality changed over time, and what the state of the internet is today.
Background on the fight over net neutrality
In 2018, the FCC ruled to repeal the OIO, which was adopted in 2015 and classified broadband as a telecommunications service rather than an information source. The new Restoring Internet Freedom Order reversed the classification and established the internet as a Title I (“information”) common carrier, effectively repealing what many refer to as net neutrality and giving large internet service providers (ISPs) an immense regulatory power.
However, California opposed the cross-state imposition of the ruling and defended its own set of net neutrality rules, also known as SB 822 – the law that was backed up by the decision of the Ninth Circuit Court of Appeals in January, setting a precedent that allows for state-by-state net neutrality laws.
Defenders of net neutrality believed that the FCC’s 2018 decision threatened free speech and competition by pushing certain content to the fast lane, banishing other content to the slow lane and blocking content at will. Meanwhile, supporters of the FCC’s decision believed a lighter-touch approach to the regulation made it easier for large companies to innovate and for small internet providers to expand their reach in rural and underserved communities.
The Californian net neutrality rules made it unlawful for Californian ISPs to block, degrade or impair internet traffic, receive money for prioritizing certain sources, or interfere with a user’s ability to access the internet. While the local law was unsurprisingly challenged by national ISPs like AT&T, Comcast, and Verizon, the appeals court’s ruling halted their efforts. The decision creates an opportunity for other states to adopt net neutrality legislation of their own.
The internet before net neutrality
“Net neutrality” is a casual term for the OIO. The aim of the OIO was to make sure ISPs enable access to all content and applications regardless of their source, without favoring or blocking a particular product or website.
If you’re wondering why the OIO didn’t pass earlier, it’s because the FCC didn’t have jurisdiction over ISPs. To pass the OIO, the FCC had to reclassify ISPs as common carriers under Title II, as a public utility like water, electricity, and sewage. That action also brought them under the purview of the FCC and allowed for greater regulation to maintain net neutrality.
While this regulation of broadband to ensure the free flow of data had been previously considered, it was historically dismissed by Republicans and Democrats alike. For instance, in the Telecommunications Act of 1996, President Bill Clinton and Congress made a distinction between lightly regulated “information services” such as ISPs and heavily regulated “telecommunications services” such as phone carriers. They explained the rationale for this distinction by stating that “internet and other interactive computer services have flourished, to the benefit of all Americans, with a minimum of government regulation.”
This past decision was often cited by the supporters of the 2018 OIO repeal as a reason to deregulate the actions of ISPs. FCC Chairman Ajit Pai often pointed to the 20 years preceding significant FCC oversight and the success of startups founded during that time as proof that no additional regulation was actually needed. Supporters of the FCC’s move reportedly referred to the OIO as a solution to a problem that hadn’t existed.
The birth of net neutrality
The desire for increased FCC regulation over ISPs was not born overnight. In 2007, Comcast was accused of (and subsequently found guilty of) throttling, or deliberately restricting, BitTorrent traffic. Two nonprofit organizations, Free Press and Public Knowledge, filed a complaint with the FCC, claiming that by throttling service, Comcast violated the 2005 guidelines set forth by the FCC.
The FCC responded by trying to enforce the order via a censure and stated that Comcast’s methods violated federal policy. In 2010, Comcast took the FCC to court to fight the ruling, claiming that the FCC did not have adequate jurisdiction over ISPs and therefore couldn’t enforce rules. The courts sided with Comcast, citing its designation under Title I as the reason the FCC had no grounds.
Following the 2010 ruling, the FCC set out to establish clearer broadband guidelines and published the first draft of the OIO. In 2011, Verizon sued the FCC, claiming it had no legal jurisdiction over an ISP and that the OIO was therefore unlawful.
In 2014, the U.S. Court of Appeals for the D.C. Circuit upheld Verizon’s assertions, stating that the OIO could only apply to common carriers and not to Title I organizations such as broadband providers. However, since the FCC was the organization that designated broadband providers as Title I in the first place, changing that designation was considered to be within its purview.
In 2015, the FCC officially made ISPs a common carrier, or Title II organization, which meant they were subject to the rules of the OIO. The OIO mandated that there be no blocking, throttling or paid prioritization by ISPs.
It’s important to understand this chain of events because in 2018, proponents of net neutrality pointed to incidents like Comcast’s throttling as evidence that more regulation had been necessary and that the OIO had been a reaction to a very real need and not, as detractors often claimed, regulation for regulation’s sake.
What has changed since net neutrality’s repeal?
In 2018, ISPs became free to offer prioritized services to some clients and limit services to others, so long as those decisions were made public. In other words, a major ISP was allowed to offer fast-lane service (at a price) to a large client, like Amazon, and then slow down service for all of Amazon’s competitors.
The caveat of making such deals known publicly did little to assuage the concerns of the pro-neutrality set, as they feared that the details of arrangements like these would have been hidden in the fine print of user agreements that largely went unread. There was also concern that pay-to-play ISP services would make it harder for startup companies to gain a foothold, and that free speech itself could be threatened.
For small business owners already competing against online goliaths, there was trepidation and confusion surrounding this prospect. Initial reports of small business confidence surrounding net neutrality, like the Paychex Small Business Survey, underscored this fact, with 44% of respondents stating they believed the repeal of the OIO would negatively affect business. A matching 44% said they were not sure how these policy changes would affect business, and just 12% of business owners said they felt that the FCC’s move would be beneficial.
Polls of the general public, not just business owners, showed a more stark response; the highly publicized survey by the University of Maryland found that 83% of the 1,077 respondents opposed the new changes.
The Biden administration weighs in on net neutrality
In July 2021, President Joe Biden signed an executive order that encouraged the FCC to restore the net neutrality rules and nominated Chairwoman Jessica Rosenworcel and OIO advocate Gigi Sohn to the FCC’s leadership team. Both previously expressed support for net neutrality and the necessity for the FCC to reestablish federal authority over broadband carriers.
In addition, the Californian net neutrality law sets a precedent for instating local rules for internet regulations. It serves as yet another indicator of the potential shift in associated policies. The fact that the pandemic has widely transformed the internet into a necessity on par with water and electricity – the notion expressed by 76% of American internet users in a Consumer Reports survey – adds another argument for net neutrality and unrestricted access.
Many small businesses in California have already seen the impact of Biden’s order and the local legal precedent. Other states are likely to follow in its footsteps. While it’s hard to establish a clear timeline for the expected change, the move toward net neutrality has clearly begun.
Those who supported the FCC’s ruling, like members of the U.S. Chamber of Commerce, believed very little would change for internet users, and that only major internet companies would be affected (by being forced to pay for the bandwidth they consume). But the return of OIO sentiment suggests that net neutrality may not be dead and buried just yet, and a return to previous policies could be on the way – either federally or state by state.
Time will tell how small businesses will adapt to what may become an even more competitive online landscape, but one thing is certain: Discussions surrounding ISP regulation are not over.
Nadia Reckmann contributed to the writing and reporting in this article.