Net Neutrality Suits: Only The Beginning?

3/24/2015

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So much for the proverbial calm before the storm.

With the moves Monday by the United States Telecom Association (USTelecom) and a small Texas-based ISP, Alamo Broadband, to file lawsuits against the Federal Communications Commission (FCC) 's new Open Internet order, the eerie two-week silence over the Title II rules has been broken. Now the question is: How many other broadband players will pile on in the courts?

As Reuters has reported, the big trade associations representing the cable and wireless industries, National Cable & Telecommunications Association (NCTA) and CTIA , are expected to sue the FCC over the net neutrality rules as well. In one of the juiciest ironies of this saga, FCC Chairman Tom Wheeler spent a considerable amount of time running each group in his previous life as a top telecom lobbyist in Washington. So go figure.

The American Cable Association (ACA) , which represents smaller and independent cable operators, may join the legal action too. In fact, the ACA has already threatened to sue a couple of times because, like the other opponents, it fears the rules will subject broadband providers to common carrier regulations, including rate controls.

All three trade groups had little to say about their intentions today, noting that they are still evaluating their options. In the past, the two cable associations have merely declared that "all options are on the table," with the NCTA seeming to favor an appeal to the Republican-led Congress as its first choice. So it's not yet clear which, if any, of them will join USTelecom in taking legal action.

But what does seem clear is that it will be the various industry trade associations, not the individual broadband providers, that will lead the legal charge against Title II. Unlike the last time the FCC tried to impose net neutrality regulations on the Internet, it's not likely that a big provider like Verizon Communications Inc. (NYSE: VZ) will take on the feds directly in the courts this time despite some fiery rhetoric. (See AT&T, Verizon CFOs Predict Title II Litigation.)

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For more on net neutrality, peruse the broadband content channel here on Light Reading.

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Why is that? Why would the well-endowed US cable and telecom giants leave the policy battle of the century to their small, more obscure trade associations rather than take on the noble cause themselves when many have seemed so raring to fight? Have they lost their nerve?

Nah, not exactly. But they do have good reasons to back off from direct confrontation with the FCC. Most notably, three of the biggest players in the cable and telecom worlds -- Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC) and AT&T Inc. (NYSE: T) -- have major merger deals up for federal approval right now that they can't afford to jeopardize.

Comcast, the nation's largest broadband provider with nearly 22 million high-speed data subscribers particularly has much at stake as it keeps trying to steer its proposed $45 billion purchase of TWC through the federal regulatory thickets. With the FCC's review of the more than one-year-old deal already dragging on longer than anticipated and industry analysts increasingly down on its prospects, Comcast can't afford to raise any more hackles in DC by waging battles over the Commission's rules. (See FCC Stops Clock on Merger Madness.)

That might well explain Comcast Chairman and CEO Brian Roberts's rather tepid public comments about Title II. Discussing the issue on the company's fourth-quarter earnings call last month, Roberts said Comcast will have to "adjust to the specific details" of the rules, He even tried to put a somewhat positive spin on the long-dreaded Title II regs, saying company executives were "heartened there's at least a desire to forbear" from rate regulations by the FCC. (See Comcast Sweats Title II Rules.)

As a result, look for the titanic Title II legal battles of the next couple of years to be waged by industry trade groups, not the big MSOs and telcos. That is, at least until the FCC finally decides on Comcast's proposed takeover of Time Warner Cable and AT&T's parallel purchase of DirecTV Group Inc. (NYSE: DTV). Then, who knows what might break loose?

— Alan Breznick, Cable/Video Practice Leader, Light Reading