After six long months, an appeals court published its long-awaited decision on “net neutrality” on Tuesday. The outcome was a sweeping ruling in favor of FCC rules forbidding Internet providers from using so-called fast lanes or other tactics to favor certain websites over others.
The decision, which came about after a legal challenge by the telecom industries, will affect consumers and companies, big and small. Even though AT&T has already vowed to appeal the ruling to the Supreme Court and opponents of the rules will redouble their pressure on Congress, Tuesday’s ruling means net neutrality is the law of the land for the foreseeable future.
Here are some of the winners and rulers from today’s big decision.
The Winners
FCC Chairman Tom Wheeler
Many were surprised when Wheeler, a former cable industry lobbyist, chose to support full-blown net neutrality rules in 2014. Since then, Wheeler has faced ferocious blowback from his former industry colleagues and Republicans in Washington, who have sought to attack and defund his agency at every turn. The ruling on Tuesday validates Wheeler’s argument that the FCC had the legal power to pass the rules. It also strengthens his hand as he pushes other ambitious agenda items, like set-top box reform, in the home stretch of his term.
Netflix, YouTube, and Facebook
One reason the net neutrality rules are so contentious is because they block Internet broadband providers from collecting a toll from websites to deliver their traffic. Netflix, especially, has complained in the past that ISPs effectively extorted it to keep its shows streaming. The court’s ruling thus lifts a major strategic threat to Netflix (NFLX) and many other sites—including Facebook (FB) and YouTube (GOOG)—that rely on a smooth video flow for their business models.
Consumers
Advocacy groups like Public Knowledge have argued persuasively that net neutrality is good for consumers because the rule allows them the freedom to choose what they want to watch on the Internet and avoid “walled gardens” of content. Consumers themselves, spurred on by comedian John Oliver, also made the case en masse to the FCC. There are some people who genuinely think net neutrality is bad for consumers since it increases government oversight of the Internet, but I’m pretty sure they’re in the minority. As such, we can declare Tuesday’s court decision a win for consumers.
The White House
President Obama waded deep into the debate in late 2014, arguing in favor of strong net neutrality rules. Critics saw this as another example of his alleged penchant for over-extending executive power. The court, however, affirmed the rules, and the reclassification of broadband providers as “common carriers” are clearly within the law.
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The Losers
ISPs and the Cable Industry
Companies like Comcast and Charter, and their trade associations, lobbied fiercely against the rules. They regard net neutrality as an unwelcome government intrusion into how they do business, arguing it is another example of Democrats siding with the tech industry over telecom interests. The rules also deprive them of the chance to earn money by charging the likes of Netflix a toll to reach customers. Net neutrality, which ensures ISPs can’t slowdown certain websites, may also increase the trend of “cord-cutting” in which consumers eliminate pay-TV in favor of online entertainment.
The Mobile Phone Industry
One aspect of the court decision that has not received much attention is that the net neutrality rules apply to mobile Internet as well. In other words, phone carriers cannot stream some websites faster than others. This could spell trouble for the likes of Verizon and T-Mobile (TMUS), which have introduced ambitious marketing campaigns in which consumers can stream certain music and video sites without incurring data charges. This practice, known as “zero rating,” is in a legal grey area as the FCC decides what (if anything) to about it. But the court’s ruling that the agency can make rules in the first place will surely make the phone companies uneasy.
Republicans
Many Republicans in Congress, as well as two FCC Commissioners, pulled out all the stops in an effort to derail the net neutrality rules. Some of the opposition was driven by industry lobbying dollars. But in some cases, it was spurred by a philosophical opposition to federal government oversight of the telecom industry. The fight is far from over. We can expect to see a new wave of bills aimed at overturning the rules or defunding the FCC. Yet, for now, the court ruling undercuts one of Republicans’ strongest arguments: that the net neutrality rules are illegal in the first place.
