Net Neutrality Sweep: Everyone's Ticked

Wireline ISPs such as cable and telco providers seem to be the big winners as Federal Communications Commission (FCC) chairman Julius Genachowski announced a long-awaited framework for net neutrality rules that, for the first time, includes the need for usage-based pricing and allows service providers "reasonable" network management rights to handle congestion. (See FCC to Intro 'Open Internet Order')

But response to the chairman's framework is one indication that the deal is not a slam dunk.

The proposal faced immediate opposition from Republican members of the FCC who think the rules are unnecessary, consumer groups who say they don't go far enough, and even Verizon Communications Inc. (NYSE: VZ) -- one of the companies which might benefit most.

Verizon is bashing the proposed framework because it would create permanent rules without addressing the broader need for reform of what Verizon calls "an antiquated communications statute," Tom Tauke, Verizon executive vice president of public affairs, policy, and communications, said in an prepared statement today. Verizon wants the FCC to adopt a two-year sunset provision for any new rules, as suggested earlier this year by Rep. Henry Waxman (D-Calif.), whose proposed net neutrality legislation is the acknowledged foundation for the FCC's current framework.

In his speech this morning, Genachowski claimed the proposed rules, which the FCC will vote on during its Dec. 21 meeting, have already received "broad support from leading Internet and technology companies, founders and investors, consumer and public interest groups, unions and civil rights organizations and broadband providers." And he played up what he called "bipartisan" efforts to develop a net neutrality proposal that both Democrats and Republicans can support, citing his Republican predecessors Michael Powell and Kevin Martin, as well as Waxman as having laid a foundation for the net neutrality framework.

Republican commissioner Robert McDowell immediately claimed Genachowski's proposal is anything but bipartisan.

"Pushing a small group of hand-picked industry players toward a 'choice' between a bad option (Title I Internet regulation) or a worse option (regulating the Internet like a monopoly phone company under Title II) smacks more of coercion than consensus or compromise," McDowell said. "This 'agreement' has been extracted in defiance of not only the courts, but a large, bipartisan majority of Congress as well. Both have admonished the FCC not to reach beyond its statutory powers to regulate Internet access. By choosing this highly interventionist course, the Commission is ignoring the will of the elected representatives of the American people."

A number of public interest groups are complaining the rules stop well short of the open Internet proposals they sought and that President Obama promised, and the other two Democratic members of the FCC, Michael Copps and Mignon Clyburn, are thought to back the idea of bringing broadband services under the umbrella of Title II regulation, which would impose more regulation, says Craig Moffett, senior analyst with Sanford C. Bernstein & Co. Inc. . He noted in a report issued this morning that Genachowski's framework still faces "plenty of hurdles."

"First, the FCC's legal foundation for this approach remains uncertain," Moffett notes. "The D.C. Circuit Court of Appeals specifically challenged the FCC's authority to regulate broadband under a Title I framework, and this order is therefore inevitably going to be challenged."

In addition, any rules are likely to face opposition from newly empowered House Republicans, Moffett notes.

Wireline operators have reason to be encouraged, he adds, because usage-based pricing would give them the ability to raise the cost of their broadband services to those who consume more broadband, particularly those who consume video over broadband, thus offsetting -- to some degree -- revenue lost to cord-cutting.

At the same time, broadband ISPs could create lower-cost tiers to attract lower-income users and thus boost penetration, Moffett notes.

Usage-based pricing was only one of the irritants for the Media Access Project , whose president, Tyrone Brown, said he was "very disappointed" by the initial framework.

"Open Internet rules must include a basis for extending service to those not now covered, full application to wireless, protection against all efforts to block or degrade Internet access, and enforceable rules rather than an ad hoc complaint-based process," Brown said in a prepared statement. "Most importantly, it appears that the Chairman does not contemplate invoking the Commission's 'Title II' authority to ensure that the rules will withstand judicial review. MAP will work with the Commission to achieve these objectives; anything less will be checkmate by the phone and cable companies."

Wireless operators face the same basic rules as their wireline brethren -- transparency requirements and an agreement not to block any lawful traffic -- but Genachowski acknowledged that wireless broadband is still a new area and faces different challenges.

"Under the framework, the FCC would closely monitor the development of the mobile broadband market and be prepared to step in to further address anti-competitive or anti-consumer conduct as appropriate," he said.

— Carol Wilson, Chief Editor, Events, Light Reading

cnwedit 12/5/2012 | 4:17:02 PM
re: Net Neutrality Sweep: Everyone's Ticked

Politically speaking, Obama made Net Neutrality part of his election platform and promised to appoint an FCC chairman who would keep the Internet forever free and open.

Of course that's before the federal courts said the FCC didn't have the authority to punish Comcast for blocking BitTorrent traffic...

DCITDave 12/5/2012 | 4:17:02 PM
re: Net Neutrality Sweep: Everyone's Ticked

I fail to see why the FCC is involved at all. On the one hand, it's not clear they have the legal right to do anything. On the other, any rules they support are going to be based on laws that were written before the Internet was recognized as a legit video distribution platform.

So why are they doing this?

Duh! 12/5/2012 | 4:16:59 PM
re: Net Neutrality Sweep: Everyone's Ticked

Sure, he was trying to compromise on policy.  That's what he's supposed to do.  That's not the point.  You can't compromise on law.  Either they have the authority to make and enforce policy or they don't.   It may be great policy, and the parties might very well agree to stand around holding hands and singing kumbaya.  But if they try to enforce it down the road, they'd better have some better arguments for the Court of Appeal than they did in the Comcast fiasco as to why they have the authority to do so.

Duh! 12/5/2012 | 4:16:59 PM
re: Net Neutrality Sweep: Everyone's Ticked

I'm trying to understand this,  as well.  Last May, the plan was to restore their statutory authority by reclassifying broadband services under Title II, since the Court ruled they don't have authority to regulate under Title I.  Now they've come up with some slightly different policy... but don't seem to be changing anything in order to reclaim statuatory authority to do anything about it.  It's also pretty clear that the incoming Congress  is not inclined to give them any new authority. 

So unless they're hoping that by watering down the policy enough, they can avoid court challenges, I don't quite see what they're trying to accomplish.  It seems to be putting the cart before the horse.

I'll be interested to see the memo from Austin Schlick as to how he thinks this can proceed.

cnwedit 12/5/2012 | 4:16:59 PM
re: Net Neutrality Sweep: Everyone's Ticked

I think Genachowski was trying to find a genuine compromise - the Title II option was literally a step backwards, in terms of regulation, and I suspect there was concern it would impact investment. But not doing anything was apparently not possible after all the sword-rattling of the past year.

Interestingly, he chose a direction very similar to what the Europeans are doing, although they have open access laws on their side.

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