Broadband Cable Association of Pennsylvania

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May 12, 2014

The head of the Federal Communications Commission is revising proposed rules for regulating broadband Internet, including offering assurances that the agency won't allow companies to segregate Web traffic into fast and slow lanes. The new language by FCC Chairman Tom Wheeler to be circulated as early as Monday is an attempt to address criticism of his proposal unveiled last month that would ban broadband providers from blocking or slowing down websites but allow them to strike deals in which content companies could pay them for faster delivery of Web content to customers.

The plan has drawn criticism from a wide range of players in the technology world, including Google Inc., Netflix Inc. and dozens of prominent tech investors, who say that such deals will inherently segregate the Internet into fast and slow lanes. In the new draft, Mr. Wheeler is sticking to the same basic approach but will include language that would make clear that the FCC will scrutinize the deals to make sure that the broadband providers don't unfairly put nonpaying companies' content at a disadvantage, according to an agency official. The official said the draft would also seek comment on whether such agreements, called "paid prioritization," should be banned outright, and look to prohibit the big broadband companies, such as Comcast Corp. and AT&T Inc., from doing deals with some content companies on terms that they aren't offering to others.

Mr. Wheeler's language will also invite comments on whether broadband Internet service should be considered a public utility, which would subject it to greater regulation. The FCC has so far not reclassified broadband as a utility, and providers have fiercely opposed such a move, saying it would cause innovation and investment to collapse. The redrafting reflects the challenge Mr. Wheeler faces as he pushes forward with a vote Thursday on the plan that would then open the proposal to public comment. The chairman, agency officials said, is trying to address the backlash to his initial proposal while sticking to what he thinks will be the fastest course of action. "The new draft clearly reflects the public input the commission has received," one of the FCC officials said, noting that the proposal seeks specific comment on the benefits of reclassifying broadband as a utility. "The draft is explicit that the goal is to find the best approach to ensure the Internet remains open and prevent any practices that threaten it."

But Mr. Wheeler's modifications aren't likely to mollify critics of the plan, especially those who are calling for a purely neutral Internet in which all traffic is treated the same. Last week two of the five FCC commissioners, Democrat Jessica Rosenworcel and Republican Ajit Pai, called for Mr. Wheeler to delay Thursday's vote, which would open the proposal to public comment, in light of the backlash. Perhaps the boldest change is Mr. Wheeler's willingness to broach the topic of reclassification. Those who argue for it say that it is the surest way to achieve pure "net neutrality," the notion that the Internet's pipes should be equally open to all. Without it, they say, the FCC's authority isn't strong enough to prevent the paid deals. The FCC also plans to seek comment on two other net neutrality proposals offered by the Mozilla Foundation and Columbia Law Professor Tim Wu, who coined the term "net neutrality."

Telecom lawyers believe Mr. Wheeler is using the threat of reclassification to discourage broadband providers from attempting arrangements that would run afoul of his rules. However, the broadband providers have successfully challenged the FCC's last two attempts at enforcing net neutrality in court, most recently in January. Reclassification would probably also result in a court fight, leaving the status quo until it is settled. Mr. Wheeler argues that there are no rules to prevent broadband providers from blocking or slowing down websites under the current regulatory framework. His strategy is to allow the deals while relying on the FCC's regulatory hand to make sure they are fair. "I won't allow some companies to force Internet users into a slow lane so that others with special privileges can have superior service," Mr. Wheeler wrote to Google and other companies.

Net-neutrality advocates worry that Mr. Wheeler's approach may work while he remains in office, but a different commission could let enforcement wither. To assuage such concerns, Mr. Wheeler's latest draft rules will include new language on protecting consumers and innovators such as Web companies that rely on the broadband pipe. One possibility is approving proposed language that requires broadband providers to give all users access to "fast and robust service." However, such wording could prompt another legal challenge. Mr. Wheeler's updated draft would also propose a new ombudsman position with "significant enforcement authority" to advocate on behalf of startups, according to one of the officials. The goal would be to ensure all parties have access to the FCC's process for resolving disputes.

Mr. Wheeler's insistence that his strategy would preserve an open Internet, without previously offering much insight into how, has been a source of disquiet within his agency. Of the five-member commission, both Republicans are against any form of net neutrality rules, which they view as unnecessary. Commission observers will be watching the reaction of the two Democrats, Ms. Rosenworcel and Mignon Clyburn, to Mr. Wheeler's new language. "There is a wide feeling on the eighth floor that this is a debacle and I think people would like to see a change of course," said another FCC official. "We may not agree on the course, but we agree the road we're on is to disaster." Wall Street Journal Discussing net neutrality can induce narcolepsy, says a New York Times columnist

Tom Wheeler's future memoir could be titled, with double-entendre, "The Tech Industry Is Revolting." Some 100 companies, including all the biggies—Microsoft, Amazon, Facebook, Yahoo, Google, Netflix—jointly signed a letter this week denouncing his net-neutrality proposal, which no one has seen.

The usual net-neut lobby groups were already shrilly opposed. Thousands of emails from an overly excited public have poured into his agency, the Federal Communications Commission, of which Mr. Wheeler is the chairman. Even one of his fellow Democrats on the commission has called for his plan to be shelved before next week's meeting. Mr. Wheeler has neglected the wisdom of the ages and woken up the sleeping dog.

Since 2004, the government's efforts to impose regulation on the Internet have been consistently mired in political stalemate and litigation. Five bills have been defeated in Congress since 2004. Twice the D.C. Circuit Court of Appeals threw out attempts to impose net-neut rules by administrative fiat. With each passing year in which no rules have been in force, more ridiculous have become net-neut warnings about the impending "death of the Internet" at the hands of big business. In that time, the Internet has thrived. This happy equilibrium is in danger. Mr. Wheeler's latest attempt to codify the net-neut principle to make the president's backers happy, but without damaging the Web, was leaked prematurely to the press, which chose to characterize his plan as allowing broadband operators to charge big content providers for a "fast lane" on the Internet.

Metaphors will be the death of us. If Netflix is paying for a fast lane, somebody else will be stuck in a slow lane. The net-neut gods are in an uproar. Yet the truth by now is that the public is adequately protected by firm expectations that Web carriers will give us unfiltered, undegraded access to every kind of Web content. What would actually result from Mr. Wheeler's rule would likely be more deals like a recent one between Netflix and Comcast, in which a small amount of Netflix's money is used to relieve congestion on Comcast's system for the benefit of all users, including Netflix's competitors.

With the dogs yapping, the danger now is overkill. Those who believe Mr. Wheeler's failure to enact a legally viable net-neut rule would be tantamount to deregulation haven't fully reckoned with the D.C. Circuit Court opinion in January. That decision virtually invites the FCC to do as many net-neut crazies wish, and invoke its dormant authority under common-carrier rules dating from the 1930s. As Randolph May, a net-neut critic and head of the Free State Foundation, puts it, this "get tough" approach would impose on the Internet a "regime devised early in the last century to regulate POTS, or 'plain old telephone service.' "

This is doubly worrisome amid other signs the regulatory mind in Washington is closing. Sprint's new Japanese owner has been trying to persuade regulators that a merger of the Nos. 3 and 4 wireless carriers would not only advance mobile competition but would allow Sprint to develop a wireless alternative to fixed broadband from cable companies. No dice. A regulatory establishment almost entirely oblivious to the promising convergence of fixed and mobile is quashing the idea without giving it a chance.

What happens next? If Mr. Wheeler crumbles and joins a Democratic majority on the five-person commission in favor of utility-style regulation, sell your cable, phone company and Internet stocks. Most of all, sell your Netflix, since no company would stand to benefit more from investment in faster broadband that won't be taking place if old-style telephone regulation is imposed on Internet providers. Yet there's a more hopeful possibility. Mr. Wheeler will go back to the drawing board. Democrats and Republicans on the commission will be at loggerheads. Nothing will happen. The salutary decade-old stalemate will remain as sturdy as ever and broadband investment will continue to take place. This would be our bet but it's not a lock. Wall Street Journal

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