What the ‘Net Neutrality’ Decision Means for Hollywood

Good for content, bad for piracy … and while it’s quiet now, there’s a fight on the horizon

A day after the Federal Communications Commission was told to keep its mitts off the internet, Hollywood’s experts and industry leaders tiptoed around what was a qualified win at best for the entertainment industry.
The court decision on Tuesday that barred the FCC from pursuing its net neutrality plans gave internet companies and their content partners a reason to applaud. As a result, companies like Comcast and Verizon can restrict access to their networks at will for the foreseeable future, to the dismay of activists who believe the information pipeline should flow freely for all.
The equation is more complicated for Hollywood’s major studios and television networks. True enough, they are eager to see their premium content get a protected home on the internet, just as it is in theaters, and over TV airwaves.
But the decision could also blow up in Hollywood’s face – especially if Comcast decides to someday turn its proprietary portion of the information superhighway into a toll road, charging rivals for access while speeding its own content along.
And while there’s no love lost between Hollywood and the FCC, the government is also the entertainment industry’s greatest hope for piracy protection.
So it makes sense that Hollywood gave what almost seemed like a coordinated non-response Tuesday, from rival media conglomerates to the Motion Picture Association of America.
“We ain’t commenting – not even on background,” one corporate studio spokesman told TheWrap.
In a way, that would be like bringing up politics at a family gathering.
For others, the issue was just too dense — or not immediate enough a problem — to really stake out an opinion.
"I haven’t even really downloaded what this means right now," said one studio head. "I know it’s important but I’m not focused on it." Another studio chief echoed that sentiment to TheWrap.
“This is being looked at like it’s probably not bad for business,” said an executive for a Comcast rival conglomerate (a roundabout way of saying: this decision is good for business). “The marketplace should be able to figure out what’s good for business and consumers.”
One studio chairman who has watched the issue closely says net neutrality definitely favors premium-content deals with providers like Comcast or Verizon, who can essentially create premium channels for it.
In a statement, Comcast said it was "gratified" by the court’s decision, but also nodded to its own interest in keeping the internet lanes flowing.
"Our primary goal was always to clear our name and reputation," Comcast said. "We have always been focused on serving our customers and delivering the quality open-internet experience consumers want. Comcast remains committed to the FCC’s existing open Internet principles."
But by supporting Comcast’s position, Hollywood may also be biting the hand that protects it from pirates. The commission had been the go-to agency for Hollywood to secure conditions it sought to protect its content, and the decision means that the FCC cannot currently block complex anti-piracy technologies such as deep-packet filtering and broadband shaping.
“What we really wanted the FCC to do was not to interfere with various technologies that we might want to use to make sure our content not pirated,” said the studio chief, who declined to be identified. “The bad news is the FCC was the only body in government that could create regulation around piracy. So now it has orphaned the piracy issue. “
One thing that’s clear: This will become a political fight, since the court explicitly ruled that the FCC had no law upon which to base its presumed authority. That means it’s going to take an act of Congress before anyone can exert any control over the ebb and flow of bandwidth – or deal with the piracy issue. That in turn may stir a legal hornet’s nest regarding copyright issues.
Copyright and fair use have more or less settled on the Internet – for now. Legislation seeking to address piracy is likely to reopen the question of what constitutes fair use, experts say, which will certainly be a protracted and heated battle among a broad swath of activists and industries.
“I’m betwixt and between on what it means,” said the executive. “There are myriad issues that still have to be sorted out.”
That includes whether the FCC will continue to fight for authority, or simply turn the matter over to Congress.
Late Wednesday, FCC general counsel Austin Schlick said in a blog on the commission’s web site said the ruling is still being reviewed; but suggested the agency could still have legal authority to keep the internet open.
“Does the FCC still have a mission in the internet area? Absolutely,” he wrote. He said the decision could affect recommendations in the National Broadband plan intended to speed the availability of broadband and the speed of broadband connections. The Commission must have a sound legal basis for implementing each of these recommendations. We are assessing the implications of yesterday’s decision for each [recommendation],” he said.
Shelly Palmer, a digital media consultant and host of mediaBytes, characterized the Tuesday ruling as a win for internet service providers on a technicality. The net neutrality issue, he said, is “a fight that is yet to be fought.”
The Comcasts and Viacoms of the world are holding all the cards in the meantime.
“The people who own the relationship with the internet service providers are trying to get eminent domain,” Palmer said. “So if they wanted to screw Hulu, they could charge NBC Universal more than they charge themselves – this is really the issue from the entertainment industry’s perspective.”
It hasn’t happened yet, but internet service providers would certainly like to retain the right to do so. Of course, those same service providers will spin it another way, saying they need to manage their pipes for maximum efficiency.
“That’s a euphemism,” Palmer said, “for ‘F— your competitors.’”
Joe Adalian, Daniel Frankel, Dylan Stableford, Ira Teinowitz and Sharon Waxman contributed reporting to this story.