The net neutrality rules passed by the Federal Communications Commission (FCC) takes effect on Friday, after the U.S. Court of Appeals of Washington D.C. rejected a request by the Internet industry to block the rules.

Industry groups representing Internet service providers (ISPs), such as the National Cable and Telecommunications Association and the CTIA, have pledged to fight the new rules up to the Supreme Court, but the FCC sees the court ruling as an early win toward maintaining a neutral and open Internet.

"This is a huge victory for Internet consumers and innovators!" says FCC chairman Tom Wheeler, whose first set of net neutrality rules was turned down by the courts early last year. "Starting Friday, there will be a referee on the field to keep the Internet fast, fair and open."

The new rules, which comprise a 400-page document, have two major components. First, the rules prevent ISPs from blocking or throttling certain content and charging content providers with higher fees to prioritize their content along a so-called Internet fast lane. This rule only applies to legal content, which means illegal content, such as copyrighted material distributed through torrent services, may be blocked by ISPs in the future.

For now, consumers are not likely to feel any major effects of the new rules, but some legal experts believe that preventing ISPs from charging content providers with higher prices is bound to lead to loss of innovation. Forbes, which spoke to Soumya Sen and Alok Gupta of the University of Minnesota, says if ISPs do not have the money from content providers to invest in network improvements, they will get it from consumers. Eventually, American Internet users will have to pay higher fees for their Internet for their providers to develop innovations.

Sen and Gupta believe that ISPs will inevitably move to congestion-based pricing in order to open up their networks at peak traffic times, but this will discourage them from actually solving the problem of congestion. It is no different from airlines and hotels charging higher prices during peak season and dropping the costs once off-peak sets in.

"If congestion-based pricing is implemented, then ISPs now have incentives to keep some congestion in the network so they can charge peak prices," Gupta says.

However, there's a silver lining to it all with the use of sponsored data or content, a practice which the FCC says will evaluate on a case-to-case basis.

The second component of the new rules is the reclassification of ISPs as public utilities under Title II of the Communications Act, giving the FCC the authority to regulate ISPs in the same way as the commission regulates telephone companies. The first set of net neutrality rules proposed by Wheeler in 2014 was struck down by the courts after Verizon challenged the FCC's authority to regulate ISPs, which were then classified as information service providers instead of telecommunications companies.

"The case is just beginning and the stakes are high - the U.S. is the world's leader in the deployment and adoption of wireless broadband, due in large measure to decades of light-touch regulation," says Meredith Attwell Baker, president of the CTIA. "The wireless industry seeks to restore that approach so consumers can benefit from competition and innovation, rather than suffer the harmful consequences of the FCC's overreach that would imperil new services and inhibit investment."

Meanwhile, Congress, led by the Republicans, are working to pass a net neutrality bill that would outlaw throttling and paid prioritization while maintaining ISPs status as information service providers. Also, a House subcommittee passed a provision on a must-pass budget bill that aims to cut the FCC's funding by $25 million, thus preventing it from enforcing the rules.

However, both bills are subject for approval by Pres. Barack Obama, who has been vocal about his strong support for the reclassification of ISPs. 

Photo: Free Press | Flickr

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