Ninth Circuit Screws Up the Internet
Writer and venture capitalist J. William Gurley explores the dangerous ramifications of a little-noticed decision by - of course - the ever-screwy U.S. Ninth Circuit Court of Appeals. That decision, issued Oct. 6 in the case of Brand X Internet v. the Federal Communications Commission, "has the potential to delay the progress of the Internet in the United States by certainly years and potentially decades," says Gurley. "Through its actions, the 9th Circuit has 'invited' the 50 independent and natural bureaucratic state-based public utility commissions directly into the fold of the Internet."

The case deals with whether cable lines that deliver Internet service can be considered a "telecommunications service" or not – a crucial distinction because Congress and the FCC allow states to regulate "telecommunications services," but bar them from regulating or taxing "information services." The Ninth Circuit Court of Appeals declared it had the power to ignore the FCC.

The potentially devastating impact, according to Gurley:

Apply regulation to the world of the Internet, and you lay the foundation for things such as e-mail taxation, instant-messaging taxation, VoIP taxation, per-minute fees, bandwidth monitoring and controlled pricing. And once again, read "increased" pricing at something like 5 percent per year. Requiring Internet service companies to interact with 50 different state agencies every time they tie their shoe will undoubtedly add costs and complexities to their lives, which will in turn result in higher costs and slower innovation and deployment. California consumers, already accustomed to paying the highest gas prices in the country, will quickly enjoy the highest Internet fees as well.

Even if Congress moves to restore the moratorium on Internet access taxes, that doesn't guarantee government won't find a way to tax it anyway.