The FCC is looking to develop a new legal framework for broadband after its current legal approach was put in doubt when a court overturned an earlier Commission order against Comcast Corp. (Nasdaq: CMCSA, CMCSK) regarding the MSO's earlier treatment of some peer-to-peer Internet traffic. The court thought the FCC's enforcement order had gone too far by relying on its "ancillary authority" over broadband. The court opinion left the door open for the FCC to check its options. (See Net Neutrality Ruling: FCC Loses, Comcast Wins and The National Broadband Plan.)
"We need to reclaim our authority," FCC Commissioner Michael J. Copps said during today's meeting, noting that the Comcast decision puts the Commission's broadband plan "in jeopardy" and "potentially on hold."
The NOI could be followed by a formal rule-making procedure. In the meantime, the inquiry will seek comments on how existing or new legal frameworks can help the FCC reestablish its authority on broadband. It won't look to change the Commission's treatment of content distribution networks and backbone services, since they are already outside the scope of the FCC's authority over broadband. At the start, the NOI will weigh these three options, and ask for comments on other possibilities:
- Title I: This option would maintain the status quo on cable modem service and retain its Title I classification as an information service. On this point, the FCC wants to evaluate whether keeping this classification intact would enable it to reach its policy goals when it comes to elements such as universal service, privacy, access for people with disabilities, and harmful practices by ISPs (the Comcast example).
- Title II: This much stronger option, sometimes called the "nuclear option," would apply all Title II (telecommunications service) provisions to broadband services. The FCC wants to know about the potential consequences of this approach and how it could affect innovation and investment in broadband services.
- "Third Way": This approach, which appears to be the most popular one heading in, is generally modeled on how cellphone services are governed today. This revised approach aims to forebear from enforcement of all of the rules found under the Title II classification. Under the FCC's initial proposal, this Third Way would apply only to the "transmission component" of broadband services, including things such as denial of service, and protection of privacy. And it wouldn’t look to install rate regulations or require MSOs to unbundle their networks. (See Third Way or Third Rail?)
This soft-touch, "bare minimum" approach, some in the Commission hope, will offer "increased predictability" for the broadband industry and avoid a reduction in ongoing infrastructure investment.
It's not known if or when today's action will morph into a full blown rule-making procedure, but the FCC has set a July 15 deadline for initial comments on the NOI, with reply comments due by August 12.
Commissioner Copps is among those who want the FCC to have a much stronger say in how the nation's broadband policies are enforced and want the agency to seek out a stronger, more blanket approach to establish its authority rather than taking things on only when new issues emerge.
"Case-by-case inevitably becomes court case by court case," he said. "It would be death by a thousand cuts."
There haven't been many voices that are calling for a full Title II classification on broadband, and even the Third Way has had its critics.
Sanford C. Bernstein & Co. Inc. analyst Craig Moffett has noted that "forbearance can, in theory, be reversed at any time." Merrill Lynch & Co. Inc. analyst Jessica Reif Cohen thinks those fears are overblown because forbearance is difficult to overturn, noting that the FCC hasn't reversed forbearance in more than 20 years. (See Did the Market Overreact? )
Regardless, some carriers are already squawking that tighter regulations could curb future broadband investments. Earlier this week, AT&T Inc. (NYSE: T) reportedly said it might cut back U-verse-related spending if the FCC went forward with its plan to reclassify broadband.
Comcast has already expressed that it thinks the existing Title II classification is sufficient, but said it's prepared to work with the FCC on a Third Way approach so long as it does not "cast the kind of regulatory cloud that would chill investment and innovation by ISPs."
Free Press , an organization that was front and center in the Comcast-FCC case, thinks the Third Way offers a measured response to helping the Commission get back its broadband mojo.
"Based on their overheated rhetoric, the phone and cable companies would seem to prefer to keep the broken legal framework adopted by the Bush-era FCC rather than consider whether better, sounder options exist. Objecting to merely asking these questions is absurd," said Free Press policy counsel Aparna Sridhar, in a statement.
— Jeff Baumgartner, Site Editor, Light Reading Cable