Net Neutrality Is Dead: The FCC Just Killed the Internet as We Know It!

The Federal Communications Commission just reversed its stance on Net neutrality. What does this mean for companies like Comcast, Time Warner, Verizon, Google, and Netflix, as well as consumers across the country?

Apr 24, 2014 at 4:00PM

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Source: Comcast.com

2014 was already destined to go down as the year the Internet changed forever. Plans for gigantic telecom mergers and Federal Communication Commission regulations being overturned by court rulings were just the opening rounds. The wheels are turning to make this the year that the Internet undergoes a transformation that drastically changes the Net's balance of power. The coming wave looks to restructure relationships between ISPs and consumers, and change the way that information flows through cables and the airways.

Net neutrality was already going down. It was simply a matter of time. Now, in a drastic reversal of position, the FCC will support the rights of ISPs to regulate the speeds with which consumers access different materials on the web, a huge boon for companies like Comcast (NASDAQ:CMCSK), Time Warner Cable (NYSE:TWC), and Verizon. The FCC's rejection of Net neutrality will speed along the death of the Internet as we know it.

Net neutrality is dead
The FCC's new stance on open Internet access comes in reaction to a February appeals court decision that saw Verizon (and companies with similar interests) land a crushing victory in the Net neutrality fight. The decision effectively gives Internet providers the ability to block or regulate content as they see fit. In application, this meant that ISPs could use this power to steer users to their own content stores, or to seek out favorable deals from content providers like Netflix (NASDAQ:NFLX) and Google to ensure that their digital wares reach consumers undeterred. The national argument for Internet as a public utility is dead.

Why isn't this issue going before the Supreme Court?
Given the scope of the case and the stakes involved, the FCC's February announcement that it would not seek to appeal the court's decision was somewhat confusing. If the commission was firm in the convictions it apparently held when presenting its roundabout case for open Internet, the notion of not pushing the issue all the way to the highest court in the land would have seemed absurd. The issue could still land before The Supreme Court, but the federal government will not be the party to argue for open Internet. In fact, the FCC could now find itself defending a position opposite the one it held in the landmark Verizon case.

The implications of the court's decision in the Verizon case make it among the most pressing legal matters facing the country. The argument could be made that nothing will effect U.S. economic development more than the state of the Internet. With the impending rollout of its new position, the FCC has reassessed the fight and joined what looks to be the winning team. ISPs are undoubtedly celebrating.

Google and Netflix lose power
Companies like Comcast and Verizon were already charging the Internet's chief content providers for better access to their consumers. The FCC's new stance effectively ensures that this practice is soundly entrenched and that Internet providers have greater power when the opposing sides of the content coin sit down at the table to negotiate. It also means that prices for Internet content and access are likely to go up across the board.

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Source: Netflix.com

Get ready to pay more for Internet access and content
Consumers won't have to wait to feel the effects of the Internet's massive transformation. Time Warner raised its subscriber prices prior to the completion of its merger with Comcast. Chairman and CEO, Rob Marcus, has made it clear that the company plans to roll out more data cap overage fees and implement tiered data subscriptions.

Elsewhere, Comcast VP David Cohen maintained that most of the elements affecting the price of Internet for customers were beyond the company's control, before also indicating that consumers should not expect their bills to remain constant or increase less rapidly. He also maintained that the deal would ultimately benefit customers and spur innovation. At this point, the only thing that's clear is that subscribers will be paying more at multiple levels.

Content streamers must bow to the gatekeepers 

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Source: YouTube.com

Netflix's recent announcement that it will be raising prices arrived mere days before news of the FCC's radically altered stance on Net neutrality. When combined with Google's YouTube, the two video streaming services account for more than 50% of peak Internet usage in the U.S. The two companies now face a federally codified need to recognize (and attempt to navigate) the demands of the world's telecom titans.

Here comes the new Internet
Netflix coupled news of its price increase with a stark denunciation of the Time Warner-Comcast merger, a somewhat indirect way of ascribing blame for a move that was coming regardless. That said, the streaming company has many valid reasons to oppose the merger, none of which will help it stop what's coming.

The FCC's planned condemnation of Net neutrality provides a great indication that the merger of the country's two largest telecom providers will be approved. Analysts close to the situation already stated that approval of the deal would likely arrive with a reworking of the standards that govern the Internet. The FCC's recent realignment and assumption of a highly pro-ISP position is just the beginning. Welcome to the new Internet. 

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Keith Noonan has no position in any stocks mentioned. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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