Ilya Marritz covers business for WNYC.
So Verizon Won the Internet Wars—Now What?
Thursday, January 16, 2014
A major court decision this week could reshape the internet in subtle but important ways. Critics believe the court’s move away from “net neutrality” will squeeze free expression and stifle upstart businesses. But New York-based Verizon, the plaintiff in the suit, fought hard for the change. And its victory in court will bolster the company’s business model.
The Verizon Building at 140 West Street stands out from its newer glass-and-metal neighbors. It’s adorned with art deco motifs like exotic birds, and cherubs playing musical instruments. For decades, this was the hub where copper telephone lines converged. It was once known as the Nynex Building, and before that, the New York Telephone Company Building.
Late last year, Verizon sold 40 percent of the tower to a condo developer, and moved its corporate headquarters to a glassy, angular skyscraper in Midtown.
It’s part of a bigger shift from a traditional telephone business to an all-media emporium reaching into the smartphone in your pocket, and popping up on your laptop and TV set.
Over the last decade, Verizon rode the internet to big profits; it made $30 billion last quarter. But there’s a problem: the information superhighway is increasingly clogged, and fairly chaotic.
In court this week, Verizon essentially won the right to direct traffic and collect tolls.
No one knows exactly what the company will do with this power. But it seems likely that internet road hogs– including Youtube, Netflix, and cloud computing services – will be asked to pay more to reach customers at the speeds customers have come to expect.
“Verizon’s gonna hold out the carrot. 'Look! Hey, if you pay us more, we’ll provide you better service, preferential treatment, prioritized traffic,'” said Dave Kaut, a telecom regulatory analyst with Stifel.
The idea of an internet of two or more tiers is troubling to Michael Copps, a former member of the Federal Communications Commission, who is now with Common Cause.
“When you talk about a technology like broadband and the internet that is so open, it was born to be open and born to be unshackled by gatekeepers,” Copps said. “And if we allow another kind of gated internet, a high priced internet to develop, that will be one of the great tragedies of the history of technology and the history of democracy too.”
For now, Verizon seems to have won new powers over how companies send data to customers. But the court on Tuesday also recognized the FCC’s right to regulate broadband.
Analysts say if Verizon cares about preserving its powers, it must proceed cautiously. If the public gets the idea Verizon is censoring content, the government will come under enormous pressure to intervene.