Obama Backs Net Neutrality, Stuns Industry
In a move that has already set off a lobbying firestorm in Washington, D.C., President Obama is calling on the Federal Communications Commission to adopt strong net neutrality rules for both wireline and wireless providers, including Title II regulation of broadband service.
In a prepared statement issued from the White House Monday morning, Obama urged Federal Communications Commission (FCC) Chairman Tom Wheeler to "reclassify" consumer broadband service under Title II of the Communications Act. Such an action, which has been fervently pushed by consumer advocates and Internet content providers like Netflix Inc. (Nasdaq: NFLX) but just as fervently opposed by the cable and telecom industries, would grant the agency much more power over how the companies operate on the Internet.
Specifically, reclassifying ISPs under the Communications Act's Title II regulations would allow the FCC to oversee broadband similar to the way it regulates traditional phone companies. Among other things, Title II gives the FCC substantial power to set rules prohibiting providers from blocking or throttling web traffic, favoring some services over others and charging fees for prioritized "fast lane" service.
Explaining his decision, Obama said "the time has come for the FCC to recognize that broadband service is of the same importance and must carry the same obligations as so many other vital services do." He termed it "a basic acknowledgement of the services ISPs provide to American homes and businesses, and the straightforward obligations necessary to ensure the network works for everyone -- not just one or two companies."
In what might be viewed as a sop to broadband providers, Obama also urged the FCC to forbear from "rate regulation and other provisions less relevant to broadband services." But that will most likely not be nearly enough to make cable and telecom companies happy.
In addition to calling for Title II, Obama said the FCC should extend net neutrality rules to the wireless industry for the first time, a move that will undoubtedly be strongly resisted by mobile carriers. "The rules also have to reflect the way people use the Internet today, which increasingly means on a mobile device," the president said. "I believe the FCC should make these rules fully applicable to mobile broadband as well, while recognizing the special challenges that come with managing wireless networks."
The cable and phone industries immediately slammed the president's move, arguing that Title II would actually have a negative impact on broadband services by freezing investment. They threatened to take the fight against Title II regulations to Congress and the federal courts, as they have done in the past with other net neutrality proposals by the FCC. (See Poll: Net Neutrality Rules Unlikely to Deter Investors.)
"We are stunned the President would abandon the longstanding, bipartisan policy of lightly regulating the Internet and calling for extreme Title II regulation," National Cable & Telecommunications Association (NCTA) President & CEO Michael Powell said in his own prepared statement. "This is truly a matter that belongs in Congress and only Congress should make a policy change of this magnitude… We urge Congress to swiftly exercise leadership of this important issue.”
Verizon Communications Inc. (NYSE: VZ) took a similarly strong stand against Obama's call to action. "Reclassification under Title II, which for the first time would apply 1930s-era utility regulation to the Internet, would be a radical reversal of course that would in and of itself threaten great harm to an open Internet, competition and innovation," the company said on its policy blog. "That course will likely also face strong legal challenges and would likely not stand up in court."
Comcast Corp. (Nasdaq: CMCSA, CMCSK) seconded that motion in its response. "To attempt to impose a full-blown Title II regime now, when the classification of cable broadband has always been as an information service, would reverse nearly a decade of precedent, including findings by the Supreme Court that this classification was proper," the MSO said. "This would be a radical reversal that would harm investment and innovation, as today's immediate stock market reaction demonstrates. And such a radical reversal of consistent contrary precedent should be taken up by the Congress."
Both Verizon and Comcast argued that the FCC should use its existing authority until Section 706 rules to promote greater transparency, prohibit traffic blocking and throttling, ban discrimination and forbid prioritization" of traffic into "fast lanes," as Obama is seeking.
Obama's move comes a week after AT&T Inc. (NYSE: T) CEO Randall Stephenson took the unusual step of meeting personally with FCC Chair Tom Wheeler to urge him not to apply Title II rules for broadband as part of the agency's new Open Internet rules. According to a federal filing, Stephenson's rare personal plea said such a move would "negatively impact" investment in broadband infrastructure and thus run counter to the FCC's determination to make broadband more widely available, at higher speeds.
United States Telecom Association (USTelecom) , the Washington lobby group for telecom service providers, has also been stressing the potential negative impact on investment. In late October, US Telecom issued a report citing a research paper by Anna-Maria Kovacs, visiting scholar with the Georgetown University Center for Business and Public Policy, which said the investment community believes a "heavy-handed regulatory approach" such as broad imposition of Title II status would have a negative impact on future broadband investment.
Not surprisingly, net neutrality proponents, who have been urging the White House and FCC to act, embraced Obama's statement. "The president who promised to take a back seat to no one on net neutrality has finally gotten into the driver's seat," said Free Press President & CEO Craig Aaron in a statement. "And he may have saved the Internet at the moment it was in the greatest jeopardy."
Obama's statement, which comes less than a week after the Republicans gained control of both houses of Congress, will add to the mounting pressure on Wheeler, who has said that he is open to Title II as well as other legal approaches that would strengthen the net neutrality concept. In his own statement Monday, Wheeler said he was "grateful for the input of the president" and promised that the FCC would "incorporate the President's submission into the record." But he didn't say what action he would take. (See Net Neutrality: Latest Proposal Will Make Everybody Unhappy.)
"Like the President, I believe that the Internet must remain an open platform for free expression, innovation, and economic growth," said Wheeler. "We both oppose Internet fast lanes."
— Alan Breznick, Cable/Video Practice Leader, Light Reading