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Australia – US Court Finds FCC’s Net Neutrality Rules Invalid.

13 February, 2014


Legal News & Analysis – Asia Pacific – Australia – TMT




  • A US appeals court has ruled that “net neutrality” rules prohibiting ISPs from blocking and discriminating in the delivery of content over the internet are invalid.
  • The decision may herald an era where some people or content on the internet are more privileged than others.
  • While the debate on net neutrality has been less prominent in Australia, any developments in the US will be rapidly experienced by Australians accessing US content, even before Australian ISPs consider whether to follow suit.


US Court Holds Net Neutrality Rules Invalid

A US appeals court has recently found that the US Federal Communications Commission’s (FCC) “net neutrality” rules prohibiting internet service providers (ISPs) from blocking and discriminating in the delivery of content over the internet are invalid. The decision by the Court of Appeals for the District of Columbia Circuit in Verizon v FCC No 11-1355 (DC Cir, 2014) is a blow to the US telecommunications regulator’s efforts to implement its “net neutrality” agenda, striking down its attempt to impose a regulatory hurdle on ISPs interfering with, de-prioritising or degrading the delivery of certain content, websites and other services over the internet.1 While the net neutrality debate has yet to gain a great deal of traction in Australia, significant shifts in consumer demands and the telecommunications industry and active monitoring of network management by the Australian Competition and Consumer Commission (ACCC), could bring this issue to a head in the near future.

What Is Net Neutrality?

Net neutrality is the principle that ISPs should treat internet content equally, and deliver content on a nondiscriminatory basis. Net neutrality has arisen out of concerns that ISPs have the technical capability to covertly block or degrade internet traffic to favour their own content or to prioritise the delivery of content for a high price. The FCC and other advocates of net neutrality argue that the principle is fundamental to maintaining an “open” internet: a platform where content can be accessed and shared on a largely free and equivalent basis and a level playing field where innovative start-ups are able to thrive. On the other hand, ISPs are being challenged by the increasing demands on their network capacity and faltering performance caused by bandwidthintensive uses such as downloads of audiovisual content, and are reassessing the viability of “class of service” business models.

The Court’s Decision

The FCC attempted to mandate net neutrality by issuing the “Open Internet Order” in 2010, which purported to prohibit ISPs from blocking lawful content, websites and other services. The order also restricted fixed line ISPs from unreasonably discriminating when transmitting lawful traffic. Verizon challenged the validity of the order on a number of grounds, including that the FCC lacked statutory authority to issue the order and that the order itself was arbitrary and capricious. The Court of Appeals for the District of Columbia Circuit found that, although the FCC has general authority to promulgate rules regulating how ISPs treat internet traffic, it cannot impose rules that contravene express statutory provisions. The court found that the FCC had contravened an express prohibition in the Communications Act 1934 (US) on regulating ISPs as if they were “common carriers” by imposing nondiscrimination and anti-blocking rules (which are common carrier obligations). The decision effectively strikes down two key pillars of the FCC’s net neutrality policy.

Net Neutrality In Australia

Unlike the FCC, neither the ACCC nor the Australian Communications and Media Authority has yet entered the debate on net neutrality in any significant way nor have they implemented any specific rules in relation to net neutrality. However, despite the current lack of regulatory intervention, this issue is likely to attract the focus of regulators in the near future for several reasons. Firstly, similar overwhelming demands on network capacity in Australia have prompted calls for an industry debate about how best to manage traffic.2 Secondly, Australians download a large proportion of internet content from the US, and will experience any flow on effect from tiered internet services. Thirdly, it is already happening in Australia. It is generally acknowledged that Australian network operators at times prioritise time critical data such as voice services over peer-to-peer file sharing traffic as part of their network management practices.

Recent Developments

The ACCC recently expressed concern about the potential for such traffic prioritising capabilities to be used for the purpose of discriminating against competing third party services and noted that it will be monitoring any emerging anti-competitive network management practices. An independent review of communication regulation in Australia conducted in 2012 (the “Convergence Review”) concluded that the ACCC may not have sufficient powers to address “evolving content-specific issues”, including net neutrality. While the Convergence Review recommended that the “ACCC retain its telecommunications-specific powers for the present time”, it suggested that “these powers be reviewed once the NBN is implemented”.3


The End Of Net Neutrality?

The FCC’s policy on net neutrality may have been wounded but it is not yet dead. The FCC Chairman has indicated that the FCC will consider options to appeal the decision.4 In the meantime, ISPs will no doubt be scrambling to see which online services they can make more equal than others.


End Notes:


1 Verizon v Federal Communications Commission No 11-1355 (DC Cir, 2014), 



2 James Hutchinson, ACCC takes aim at internet slowdowns, Australian Financial Review, 12 February 2013 


3 Commonwealth of Australia, Convergence Review Final Report 2012, 29 

<http://www.abc.net.au/mediawatch/transcripts/1339_convergence.pdf >.


4 Brian Fung, Federal appeals court strikes down net neutrality rules, The Washington Post, 14 January 2014 

<http://www.washingtonpost.com/blogs/theswitch/wp/2014/01/14/d-c-circuit-court-strikes-downnetneutrality-rules/ >.


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