Genachowski Still Seeking Net Neutrality Consensus

"I sense Genachowski will make one more attempt, at least, to build consensus before going to a Title II order,” an FCC source said Friday. Talks broke down as an indirect result of reports late Wednesday of the Verizon-Google deal, officials said. Public interest groups, while discussions were occurring elsewhere, met with Genachowski at the FCC Thursday in a previously scheduled meeting.

When the group reconvened in the afternoon, some members of the coalition reopened negotiations on managed services, asking that any agreement give the FCC authority to step in if it found that too much capacity on a carrier’s pipes was given over to managed services instead of broadband. Managed services include IPTV, cable VOIP or other services given priority treatment on a carrier’s network. One FCC official said disagreement over whether wireless had to be included in the rules was also a critical issue that led to the breakup of discussions.

The public interest groups filed an ex parte letter late Friday on the Thursday meeting with Genachowski. They called on Genachowski to set a firm deadline for a vote on reclassification. The groups agree broadly on the “application of rules to wireless networks, ‘managed service’ exceptions, and the harms stemming from schemes for paid prioritization,” the filing said. It argued that reclassification of broadband transmission as a Title II service is a critical next step for the commission. “The Public Interest Representatives expressed serious doubt about the enforceability of any compromise or consensus solution in the absence of clear Title II authority, explaining that the substance of the Commission’s rules and the process used to adopt them are inextricably linked.” The New America Foundation, Center for Democracy & Technology, Consumer Federation of America, Consumers Union, Free Press, Media Access Project, Media and Democracy Coalition, and Public Knowledge were represented at the meeting.

Free Press had previously made prioritization a key issue. Free Press sent a letter to the five commissioners July 28, stressing the importance of the issue to any net neutrality agreement. “Allowing routing-based paid prioritization will lead to a situation where ISPs favor their own vertical content and the content of a very few select industry giants with big brands,” the group said. “Paid prioritization on the open Internet -- which is not yet taking place -- will be a disaster for small businesses and new entrepreneurs hoping to compete with today’s Internet giants."

House Commerce Committee Ranking Member Joe Barton, R-Texas, said the FCC should drop its reclassification plans. “As much as I appreciate Chairman Genachowski’s efforts to bring broad interests together, reclassification of telecommunication services under Title II of the Communications Act remains outside the scope of current law,” Barton said in a written statement. “Internet regulation remains a question for Congress, not the FCC, to decide.”

The end of net neutrality meetings put Genachowski in the difficult position of having to seek a vote soon on reclassification or risk waiting and facing additional opposition, industry and FCC officials watching the talks said. They said waiting much longer to seek a vote gives net neutrality opponents more time to press their case and, should Republicans gain control of the House in the November elections, a more receptive audience on Capitol Hill. But not delivering on promised net neutrality rules wouldn’t be palatable to the White House, a communications lawyer noted.

A vote on a declaratory ruling putting broadband transport under Title II remains possible at the September FCC meeting, but plans for action then haven’t been finalized, a commission official said. A declaratory ruling could be effective once voted on but have a period under which ISPs and carriers would have to meet the rules, the official said. It’s possible the agency’s next meeting, now set for Sept. 16, could be delayed a few weeks to give Genachowski more time to seek an industry compromise and if none is reached call a vote.

"There’s no advantage to waiting now for the vote, if he wants to appear strong, he should just do it,” a communications lawyer with clients who oppose net neutrality rules said of Genachowski. “You have real problems if you do it after the election, because if the Republicans take the House, you have people saying `if you do it we will destroy you.'” The prospect of a declaratory ruling that could circulate around the Labor Day holiday gives Genachowski some leverage to continue to seek industry consensus, FCC officials said.

Several analysts said in reports Friday that odds seem slim an agreement will occur with the collapse of the talks brokered by FCC Chief of Staff Eddie Lazarus. “It now seems that the FCC is painted into a corner. In a burning building. Made of wood,” said Bernstein Research’s Craig Moffett. “While we suspect that this story still has more than a few twists and turns to come, moving forward with Title II looks more than ever to be the likely end game. True, reclassification is perhaps a politically unattractive option … but all the alternatives are now worse."

"The FCC is now in a difficult spot,” telecom gear analyst Lawrence Harris of C.L. King & Co. wrote investors. “If the FCC were to place broadband service providers under Title II, the Commission could incur the wrath of an increasing number of Democratic and Republican members of Congress. If the FCC takes action before the election, a Republican House of Representatives, which could be elected November 2, could overturn the FCC ruling."

"In the aftermath of the FCC’s decision to abandon broadband reregulation negotiations with key industry stakeholders, Chairman Julius Genachowski may be compelled to go forward as early as September with a vote to approve Title II common carrier oversight of internet service,” said Jeff Silva of Medley Global Advisors. “If such a scenario plays out, the FCC will likely face intensified political criticism that could amplify after the midterm elections, as well as high-profile litigation that creates regulatory uncertainty well into 2011.”