Net Neutrality Rules to Be Decided After November Elections

The new public notice poses questions on what have emerged, according to most observers, as the most contentious issues in negotiations over a net neutrality agreement: Managed services and unique problems faced by wireless providers. Other commissioners were given the notice Wednesday shortly before it was made public. Comments are due 55 days after the notice is published in the Federal Register, replies 25 days later.

"As we've seen, the issues are complex, and the details matter,” Genachowski said in a written statement. “Even a proposal for enforceable rules can be flawed in its specifics and risk undermining the fundamental goal of preserving the open Internet,” he said. “The information received through this inquiry, along with the record developed to date, will help complete our efforts to establish an enforceable framework to preserve Internet freedom and openness.” Genachowski said differences among various sides have narrowed: “We have made progress over the last year -- but we still have work to do.”

Commissioner Robert McDowell, an opponent of reclassification and of the FCC’s net neutrality proposal, questioned whether asking additional questions will be helpful. “Thus far, the record has revealed nothing that requires intervention by the government,” he said. “The Internet has been open since its inception and is the greatest deregulatory success story of all time. While I do not object to an opportunity for further public comment, I doubt any new factual revelations will come to light that would justify Internet regulation.”

"It is prudent for the chairman to act in a judicious and careful manner before moving forward with something as significant as Title II reclassification or net neutrality rules,” said Commissioner Meredith Baker, who also opposes both FCC proposals. “I remain hopeful that industry groups across all sectors of the Internet will succeed in achieving a consensus path forward for Congress and the commission that preserves an open Internet and guarantees future investment, innovation and opportunities across networks, applications and devices."

The Sept. 23 meeting will likely have votes on three items with an overarching focus on consumer device and public safety issues, as had been expected (CD Aug 26 p1), agency officials said. They said a white spaces order is expected to circulate before midnight Thursday, the “white-copy deadline” for items for the meeting, as well as items on wireless 911 location accuracy and the E-Rate program. An FCC spokeswoman declined to comment on what items will be on the agenda.

There appear to be “three general areas of concern” to “maintain the investment promoting benefits” of what the notice called “specialized” services “while protecting the Internet’s openness.” One concern is that net neutrality rules could be less effective if providers “offer specialized services that are substantially similar to, but do not technically meet the definition of, broadband Internet access service.”

A second concern is that carriers would neglect the build out of the rest of their networks to add to their capacity to offer managed services. “If this occurs, and particularly if one or more specialized services serve as substitutes for the delivery of content, applications, and services over broadband Internet access service, the open Internet may wither as an open platform for competition, innovation, and free expression.” A third concern is that providers would be able to engage in “anti-competitive conduct with respect to specialized services,” especially those that offer content, applications, or services “or if they enter into business arrangements with third-party content, application, or service providers concerning specialized service offerings."

"These concerns, particularly the second and third, may be exacerbated by worries that due to limited choice among broadband Internet access service providers, consumers may not be able to effectively exercise their preferences for broadband Internet access service (or content, applications, or services available through broadband Internet access service) over specialized services,” the notice said.

The notice also asks for general advice on “how, to what extent, and when” the net neutrality rules should apply to wireless. FCC officials have made clear that Genachowski is not prepared to give wireless a complete pass. A number of recent developments led the agency to believe it should ask for questions, the notice said. “Mobile broadband providers such as AT&T Mobility and Leap Wireless (Cricket) have recently introduced pricing plans that charge different prices based on the amount of data a customer uses,” it said. “The emergence of these new business models may reduce mobile broadband providers’ incentives to employ more restrictive network management practices that could run afoul of open Internet principles. Additionally, Verizon and Google issued a proposal for open Internet legislation that would exclude wireless, except for proposed transparency requirements.” The notice seeks advice on transparency and “what disclosure requirements are appropriate to ensure that consumers and content, application, service, and device providers can make informed choices regarding use of mobile broadband networks,” devices and “the ability of new technologies and business models to facilitate non-harmful attachment of third-party devices to mobile wireless networks,” and on how to “maximize consumer choice, innovation, and freedom of expression in the mobile application space, while ensuring continued private investment and competition in mobile wireless broadband services."

"It’s probably the smartest move at this point,” said Washington Research Group analyst Paul Gallant. “It keeps the FCC out of the election storyline this fall without foreclosing any options that Genachowski has had all along, including Title II."

The length of the comment period confirms that there will be no classification decision made until later this year, Stifel Nicolaus said in a research report. “The FCC sets out a number of possible approaches, some of which would likely be welcome to the Bells and cable, such as a reliance on disclosure and the suggestion that the presence of several competing wireless apps stores may be sufficient to mitigate concerns about anti-competitive effects,” Stifel said. “Other options would be anathema to the providers, such as limiting specialized service offerings or requiring broadband providers to expand network capacity on the public internet regardless of what specialized services they offer.” The analyst firm highlighted the reference to AT&T and Cricket’s recent pricing plans, which offer capacity tiering. “Rather than calling these into question, the notice cites this development as a factor that could reduce the need for mobile operators to employ more restrictive network management practices that could run afoul of net neutrality principles,” the note said. “This confirms our view that the agency is likely to give the carriers, or at least wireless operators, lots of running room on experimenting with capacity and other price tiering, so long as some protections to avoid consumer sticker shock are built in."

Other reaction provided few surprises. Public interest groups that favor net neutrality rules said the time had come for the FCC to act rather than ask more questions. Industry groups and companies welcomed a new battery of questions.

Nothing to Be Gained

"This serves no purpose except to show that the commission is busy,” Research Director Derek Turner of Free Press, a net neutrality rule proponent, told us. “This is turning into the Federal Public Notice Commission,” he said of the FCC. “Their action today in no way precludes them from acting on reclassification at the October meeting, and we strongly urge them to protect consumers by restoring authority as soon as possible. And the discussions on net neutrality essentially are academic discussions until they settle the authority question."

"Recent events prove that giant companies left to regulate themselves will craft rules full of loopholes and exceptions that benefit their own interest, not the public interest,” said Matt Wood, vice president of the Media Access Project. “The commission asks the same questions time and time again about wireless broadband services and specialized services, instead of providing basic answers on the basis of the robust record it already has compiled."

Public Knowledge President Gigi Sohn said Genachowski should move “promptly” on net neutrality. “Nothing in this public notice prevents the FCC from taking prompt action on its Third Way proceeding, which would make certain all Americans have affordable access to broadband, and to make sure it can deal with public safety and other crucial issues that are broader than the narrow issues on which the commission seeks comment,” she said. “We expect the commission will move quickly to set the legal framework for the FCC to oversee broadband Internet access services, with specific rules to protect the open Internet to follow soon after."

"I think the commission understands that pursuing Title II as a strategy may be their preferred method, but it comes with a risk” of being overturned in court or by legislation, American Cable Association President Matt Polka said in an interview. “At the same time, the commission and the chairman I am sure [are] very sensitive to the Google-Verizon framework and sensitive to the fact that the FCC can’t have companies deciding what Internet policy should be,” he added. “The FCC has to be proactive about this, and ultimately maybe the way that’s accomplished is through continuing dialogue."

Rep. Ed Markey, D-Mass., hopes the FCC will quickly finish its “third-way” proceeding “if Congress fails to successfully legislate clarifications this month to the FCC’s authority,” the Commerce Committee member said Wednesday. “Discriminatory fast lanes or tiers that slow down certain content would dim the future of the Internet to the detriment of consumers, competition, job creation and the free-flow of ideas,” he said: Excluding wireless as proposed by Google and Verizon “could widen the digital divide and confuse consumers, who would have different and uneven experiences based solely on how they access the Internet."

The FCC should put off reclassification forever, said Senate Communications Subcommittee Ranking Member John Ensign, R-Nev., praising Genachowski for seeking more feedback on net neutrality. “Many questions certainly remain about whether such government-imposed rules are necessary,” said Ensign. “Considering that net neutrality is the primary reason for the Chairman’s misguided attempt to re-regulate the Internet under heavy-handed monopoly rules, I hope he puts his reclassification plans on the shelf indefinitely. It would be a mistake for the FCC to go down the Title II rabbit hole when it doesn’t even fully understand where it wants to go on net neutrality."

Wireless Called Different

"We are happy the chairman and the commissioners realize that wireless is different,” said CTIA President Steve Largent. “We will continue to work with them to explain why these rules are unnecessary and should not be applied to the wireless ecosystem."

Genachowski’s announcement is “pragmatic and wholly consistent with his commitment to employ a data-driven approach to regulation,” USTelecom President Walter McCormick said. “Since there are no imminent threats to the open and robust Internet that consumers enjoy today, it is prudent for the chairman to make sure that the commission proceeds in a way that is fully-informed, measured and avoids doing any harm to this dynamic sector.” For NCTA, “the public notice issued today raises important and complex issues and we will provide our input,” President Kyle McSlarrow said.

"Good progress has been made” on negotiating net neutrality rules and AT&T is committed to continuing the discussions, AT&T Senior Executive Vice President Jim Cicconi said. “In particular, we feel a path can be found that addresses concerns about Internet openness, while at the same time preserving jobs and protecting needed investment.”

"We are encouraged that the FCC is seeking additional information before acting on the net neutrality issue,” said Verizon Executive Vice President Tom Tauke. “At the same time, it remains clear that whatever action the FCC takes will be clouded by legal uncertainty until the Congress enacts legislation that spells out the authority of the FCC and establishes a broadband policy."

"The FCC’s decision to seek further comment in its Open Internet proceeding before acting is wise, and Chairman Genachowski deserves credit for taking this step,” said Free State Foundation President Randolph May. “While I might disagree with the characterization of the degree to which the issues have been narrowed, it is certainly fair to say that there has been some bridging of previous divides. Seeking further comment on the issues relating to specialized services and wireless platforms can only serve to further clarify the issues and, potentially, bridge differences.”