FCC Declares War on Broadband
The FCC said it's pursuing a revised legal framework -- a "Third Way" -- for reclassifying its authority on the broadband. That would allow the agency to keep its ambitious National Broadband Plan moving forward while also addressing major concerns about how its authority over broadband was being siphoned away after it lost an important case with Comcast Corp. (Nasdaq: CMCSA, CMCSK) over Internet network management policies. (See Net Neutrality Ruling: FCC Loses, Comcast Wins and The National Broadband Plan.)
The FCC is now looking to reclassify broadband in a way that keeps its Title I (information service) authority on broadband going, but also looks to sprinkle in some elements of a stronger Title II (telecommunications) regime that could see some rules typically applied to common carriers fall on ISPs, as well. However, the FCC's proposal doesn't apply a full-on Title II assault on broadband -- sometimes referred to a "nuclear option" -- but will instead take a significantly lighter touch on how common carrier rules could be enforced on ISPs.
Under the proposal, the provisions sought for the revised Title II classification for broadband would apply only to the "transmission component" of those services, covering items such as denial of service, the protection of confidential information, and making sure ISPs ensure that services and equipment is accessible to people with disabilities, "unless not reasonably achievable."
At this juncture of the "Third Way" proposal and its specific treatment of a Title II classification, it wouldn't mandate that MSOs provide access to third-party ISPs or regulate rates.
As proposed, the "information" components of broadband, meanwhile, would still exist under the existing Title I designation.
A word of caution
But in a note issued today, Sanford C. Bernstein & Co. Inc. analyst Craig Moffett questioned the FCC's plan to forbear, or not enforce, most of the existing Title II regulations on broadband. "Forbearance can, in theory, be reversed at any time," making it "unclear" how long it that stance would be maintained.
Moffett noted earlier that it would be easy for the FCC to "go nuclear" and pursue Title II authority on broadband, but warned that it would likewise expose the Commission to big risks and legal challenges trying to make it stick. (See Title II's Nuclear Fallout .)
So instead it appears that the FCC is keeping its nukes stockpiled for now, but will still apply some traditional warfare tactics to maintain and expand some of its authority on broadband, but only to a certain degree.
Cable stocks get smacked
The FCC's proposed lighter touch on Title II still delivered a blow to cable stocks on Thursday, with Comcast shares down about 6 percent, Time Warner Cable Inc. (NYSE: TWC) down almost 8 percent, Cablevision Systems Corp. (NYSE: CVC) down more than 9 percent, and Mediacom Communications Corp. down almost 10 percent in midday trading.
Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) were fairing a bit better, with both down a bit more than 4 percent on a day in which most of the market was getting creamed anyway.
Comcast SVP of government communications Sena Fitzmaurice issued a statement this morning, noting that the MSO still believes that the existing Title II classification of broadband is sufficient.
"While we are disappointed with the inclination not to lean in favor of Title I regulation, we are prepared to work constructively with the Commission to determine whether there is a 'third way' approach that allows the Commission to take limited but effective measures to preserve an open Internet and implement critical features of the National Broadband Plan, but does not cast the kind of regulatory cloud that would chill investment and innovation by ISPs."
National Cable & Telecommunications Association (NCTA) president and CEO Kyle McSlarrow offered a similar reaction, adding that "any Title II approach is still fraught with legal uncertainty and practical consequences which pose real risks to our ability to provide the high-quality and innovative broadband services that our customers expect, thus undermining the very investment and innovation goals we share with chairman Genachowski and upon which the National Broadband Plan depends."
Charter Communications Inc. president and CEO Mike Lovett commented on it during his company's first-quarter conference call, noting that the MSO keeps an active dialogue with the FCC but warned that new broadband regulations "may stifle investment in Internet infrastructure." (See Charter Revs Up Wideband, SDV Rollouts .)
Cablevision president and COO Tom Rutledge also commented on his company's earnings call, and was somewhat sympathetic to the FCC's position on the matter.
"Here in our operation we've offered over 100-Megabit capacity to our entire customer base, so we don't think there's a real problem, but we do have some sympathy for the objectives that chairman Genachowski and the FCC have in ensuring that the Internet continues to function well," he said.
— Jeff Baumgartner, Site Editor, Light Reading Cable