Net Neutrality

FCC Adopts Tough Net Neutrality Rule in Historic Regulatory Shift

FCC Adopts Tough Net Neutrality Rule in Historic Regulatory Shift

Federal Communications Commission (FCC) Chairman Tom Wheeler gestures at the FCC Net Neutrality hearing in Washington.

Image credit: REUTERS | Yuri Gripas

The Federal Communications Commission has done what no one, including apparently chairman Tom Wheeler, once thought possible when the debate over net neutrality erupted early last year. The commission today took what was once called "the nuclear option'' by reclassifying broadband Internet service providers (ISPs) as "telecommunication services'' subject to regulation similar to the telephone monopolies of the last century. The reclassification gives the commission far greater authority to prevent the companies that own bandwidth from favoring some content providers.

"The Internet is too important to allow broadband providers to make the rules,'' Wheeler said as the commission voted.

The action places ISPs under Title II of the Telecommunications Act, reversing a 2002 FCC decision that classified ISPs under a different section of the law. The FCC's 2010 net neutrality regulation was struck down in January 2014 by a federal court that generally upheld the intent of the rule to prevent ISPs from creating "fast lanes'' for those who can pay more or restricting bandwidth for some companies. The court ruled the FCC was imposing regulations it didn't have the authority to enforce because it had not classified ISPs as utilities.

Verizon, which brought the suit voiding the previous rule, immediately condemned passage of the new rule. "Today's decision by the FCC to encumber broadband Internet services with badly antiquated regulations is a radical step that presages a time of uncertainty for consumers, innovators and investors,'' said Michael E. Glover, Verizon's senior vice president of public policy and government affairs.

A legal challenge to the rule is widely anticipated.

The new rule, which reportedly is more than 300 pages long, which will take effect once it is published in the Federal Register, blocks so-called "fast lanes,'' known more formally as paid prioritization, will forbid ISPs from blocking or slowing of some content in favor of others and will make clear that all lawful content has equally standing.

The rule won't regulate rates, impose tariffs or mandate "last mile unbundling,'' meaning ISPs won't be required to lease out their infrastructure at wholesale rates to competitors.

Proponents claim the tough regulations assure preserve the Internet ideals of entrepreneurial startups having equal footing with the largest Internet content providers.

"Thank you for voting to protect the Internet as an engine for economic opportunity, the likes of which we have never seen,'' said Etsy CEO Chad Dickerson in testimony at the meeting.

Related: Net Neutrality Is Essential to Growing Your Business and Brand

Wheeler, in a widely read op-ed earlier this month, called the new rule "the strongest open Internet protections ever proposed by the FCC.''  He rejected arguments by opponents that tougher regulations will discourage investment in expanded access and service improvement. Wheeler claimed that wireless Internet providers operating under similar rules have invested more than $300 billion in infrastructure over the last two decades, "proving that modernized Title II regulation can encourage investment and competition.''

"My proposal assures the rights of Internet users to go where they want, when they want, and the rights of innovators to introduce new products without asking anyone’s permission,'' Wheeler wrote.

According to an FCC fact sheet, the new rule will apply fewer Title II sections to ISPs than have applied to mobile carriers for the past 20 years.

Among the many twists and turns in the debate the past year has been the transformation of Wheeler from net neutrality villain to champion. Following the 2014 court ruling, Wheeler proposed a rule that would not reclassify ISPs and opened the door for "fast lanes'' affordable to wealthy, established Internet content providers. That sparked a firestorm of opposition, including by Entrepreneur. Wheeler was famously derided by comedian John Oliver as the regulatory equivalent of hiring a dingo as babysitter.

The Oliver screed prompted a tsunami of public comment that was encouraged by numerous Internet companies including Netflix, Twitter, Mozilla and Etsy. An estimated 4 million comments have been filed, with one analysis claiming 99 percent favored stronger regulation of ISPs. A Comcast executive wrote in December to the FCC that "public discourse on open Internet issues has now reached a fever pitch'' and that "emotion and hyperbole are substituting for facts.''  

The most notable public comments in favor of stringent net neutrality regulation has been from President Obama, who released a YouTube video in last November urging the FCC to "take up the strongest possible rules to protect net neutrality.'' The president's strong statements have prompted an investigation by Congressional Republicans into whether he unduly influenced the FCC process.

Related: Loss of Net Neutrality Risks a Less Friendly Internet for Entrepreneurs

The debate over the rules has been pointed, including among entrepreneurs. Mark Cuban, star investor on Shark Tank, has said publicly the new rule will "f*** everything up,'' noting that whatever action this group of FCC commissioners has opted not to take could be reversed by a future commission.

Dickerson, of Etsy, emerged as a leader among advocates for reclassifying ISPs. He made the case strongly in comments to the FCC criticizing Wheeler's original rule proposal, saying Etsy "would never have achieved the success we have today'' under that proposed rule. He praised the rule reclassifying ISPS as a "much stronger legal footing for net neutrality.''

Just this week, Will Carty, manager of public policy for Twitter, wrote a blog post praising reclassification as "critical to American economic aspirations and our nation’s global competitiveness'' with "important implications for freedom of expression.''

The net neutrality debate has created an intriguing paradox. Freewheeling Internet companies, thriving with minimal regulation, perceive tough regulation of ISPs as the only guarantee for a future in which new companies have the same opportunity to innovate and challenge dominant players.

A court challenge to the rule by ISPs is anticipated, if only because they have sued before challenging regulations, but the opposition increasingly seems resigned. Cablevision CEO James Dolan said during an earnings call Wednesday “we don’t see at least what the Chairman has been discussing as having any real effect on our business.” Similarly, an effort in Congress to pass legislation that would preempt the new net neutrality rule was abandoned on the eve of the commission meeting adopting the rule.

Related: Net Neutrality a Big Step Nearer as Congress Republicans Concede Fight

Edition: November 2016

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