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Web content providers like Netflix Inc. may be facing higher cost of business, thanks a court ruling this week.

Web business costs may rise after court ruling

by Michael C.W. Murphy
Jan 16, 2014

It may soon become more costly to run businesses that use more than their fair share of Internet bandwidth, thanks to a ruling in a federal appellate court Tuesday.

The U.S. Court of Appeals in Washington, D.C., ruled that the Federal Communications Commission does not have the power to “treat all Internet traffic the same regardless of the source.” That means that Internet service providers such as Verizon Communications Inc., one of the companies that brought the case, could effectively charge customers different rates based on what websites they access. They also can charge businesses a premium for taking up more bandwidth.

The chairman of the FCC, Tom Wheeler, released a statement after the ruling, affirming his own position on what is often referred to as “net neutrality.” “The FCC also is not going to abandon its responsibility to oversee that broadband networks operate in the public interest,” Wheeler said.

Video-streaming sites and account for half of broadband usage in America, according to a study recently released by Sandvine Inc., a broadband network solutions company.

YouTube is a free website owned by Google Inc. that has recently started to experiment with paid-for content. Netflix Inc. is a website where users can watch television shows and movies for a fixed monthly fee.

While the ruling theoretically allows Internet providers to modify how they charge customers, Verizon has said it is committed to an “open Internet.” In a statement, Randal Milch, Verizon’s executive vice president and general counsel, said: “One thing is for sure: Today’s decision will not change consumers’ ability to access and use the Internet as they do now.”

Verizon declined to answer questions on whether its charging structure would change for media providers. Some businesses are already nervous about the future. Nick Balletta, the CEO of TalkPoint Holdings LLC, a business-to-business webcasting service, said in an email, “If you are in the content business and you use the Internet for delivery, you should not be neutral about this ruling.”

“There is going to be a new normal on the net, and we don’t really know what it is yet. Rest assured, prices for content services on the Internet are going up, and stock prices are going down,” Balletta added.

The FCC has not said whether it will appeal the federal court’s ruling. If it were to appeal, the case would be sent to the U.S. Supreme Court for consideration.