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Title II's Nuclear Fallout

2:00 PM -- Should the Federal Communications Commission (FCC) "go nuclear" and pursue Title II (common carrier) authority over broadband services, the Commission faces "small" procedural hurdles to do so, but would likewise invite big legal challenges and risks in trying to make it stick.

That's according to Sanford C. Bernstein & Co. Inc. analyst Craig Moffett, who published a report today that covers the FCC's options in more detail as it considers what to do next after an appeals court vacated an earlier FCC order tied to Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s traffic management policies, and put the Commission's authority to impose network neutrality rules into question. (See Net Neutrality Ruling: FCC Loses, Comcast Wins and Did Comcast Really Win?)

The FCC has not tipped its hand on what it will do next, but Moffett thinks two of its plausible options -- request that authority from Congress, or ask Congress to introduce net neutrality legislation -- don't "seem particularly appealing." Which means the FCC could explore the so-called nuclear option and claim authority under Title II. (See Policy Watch: Will the FCC Declare War? )

Getting that process underway would be easy. "Procedurally, the hurdles to reclassification are small," Moffett writes, noting that such reclassification would require a simple 3-2 majority vote of the five Commissioners, along with a report and order or declaratory ruling proposing the legal and factual basis for such a reclassification.

He suspects, however, that the FCC, should it take that route, would first issue a Notice of Inquiry or Notice of Proposed Rule Making "in light of the inevitable legal challenge reclassification would invite."

Moffett also warns that a Title II move could cause MSOs and carriers to curtail broadband investments. "How could a carrier make capital investments that in many cases have a return profile that stretches over fifteen to twenty years if the regulatory framework offered visibility over only the next few years?" he asks, noting later that even Google (Nasdaq: GOOG) could get roped into Title II regulation if reclassification did not preclude prioritization of things like Web searches.

If carriers indeed decided to tighten their purse strings in the wake of a Title II reclassification, it would ironically go against the grain of the aims of the FCC's proposed National Broadband Plan, which is attempting to take on a pro-investment posture.

And there are other risks the Commission would have to consider before pressing the Big Red Button. "If the FCC tries to reclassify and is overturned in the Courts, the FCC's standing could be severely compromised," he said.

— Jeff Baumgartner, Site Editor, Light Reading Cable

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