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Reclassification, the route preferred by net neutrality backers, to be also examined

In a 3-2 vote along party lines, the trio of Democratic commissioners moved forward to discuss a set of proposed net neutrality rules this Thursday. This setup a public screening period of four months, in which the public sector -- including citizens and corporate interests on all sides of the issue -- can express their concerns to the U.S. Federal Communications Commission (FCC).  Congress will then go ahead in drafting a final rule and voting on whether to adopt it.
 
I. FCC Narrowly Decides to Advance Discussion of Controversial Net Neutrality Rules Draft
 
One of the most contentious debates is whether internet connections should be regulated to be "dumb pipes".  Under such rules service providers would not necessarily be banned from metered connections or data caps, but they would be banned from any sort of data discrimination, prioritizing data from some sources over others.  Internet service providers (ISPs), meanwhile, want to be free to charge fees -- both from websites that provide content such as videos, news, and photos, as well as from consumers who access that content.
 
internet cables
Net neutrality is a crucial challenge face the U.S. internet services market.
[Image Source: VentureBurn]

The ISPs argue this is the definition of a "free market at work".  But critics contend that in many regions there is a monopoly on service.  Furthermore, they point to telecoms efforts to prevent competition at a regional scale by paying off politicians to put legal procedures in place to stymie new development such as independent providers and municipal Wi-Fi.  
 
Such efforts have been highly effective in preserving regional monopolies in some regions.  Critics also point to seemingly collusive deals between potential competitors like Comcast Corp. (CMCSA) and Verizon Communications Inc. (VZ).
 
The new net neutrality rules are a bit odd in that they permit ISPs to accept money for "reasonable" content promotion partnerships, so long as that deal is between two parties that do not share ownership.  The proposal's author -- lobbyist-turned-FCC Chairman Thomas ("Tom") Wheeler -- claims this is about allowing companies like Google Inc. (GOOG) to pay extra to make their services fast, not about allowing companies like Comcast to act in such a way as to make the speed of those who don't pay slow.

Tom Wheeler at conference
FCC Chairman Tom Wheeler listens to comments at a press conference to announce his success at pushing his net neutrality plan to the discussion phase. [Image Source: Getty Images]
 
However, where things get dangerously ambiguous is when it comes to deciding how slow average connections have to be in order to make things "unfair".  So far the FCC has failed to put forth such a clear set of guidelines.  Further the proposal does not make it clear what to do if an ISP promotes content from providers co-owned by its largest institutional shareholders.
 
For those reasons the proposal was blasted by net neutrality activists.  The proposal has also been opposed by a number of top internet and software firms, including many of the tech industry's top players in Congressional lobbying.  Google (#3 in lobbying), Microsoft Corp. (MSFT) (#4), Facebook, Inc. (FB) (#5), Amazon.com, Inc. (AMZN) (#11) all oppose the proposal.
 
II. Commissioner Rosenworcel Surprises With Support
 
Commissioner Mignon L. Clyburn -- a Democrat-appointed commissioner -- was largely expected to side with Mr. Wheeler, in defiance of net neutrality activists and their corporate allies.  But the support of the younger Democratic commissioner, Jessica Rosenworcel, was more of a surprise.

Jessica Rosenworcel
FCC Comissioner Jessica Rosenworcel (D) [Image Source: Politico]

At a Chief Officers of State Library Agencies meeting on May 7, she stated [PDF]:

I have real concerns about FCC Chairman Wheeler’s proposal on network neutrality—which is before the agency right now.  While I recognize the urgency to move ahead and develop rules with dispatch, I think the greater urgency comes in giving the American public opportunity to speak right now, before we head down this road.

I believe that rushing headlong into a rulemaking next week fails to respect the public response to his proposal... Some big things are before the FCC right now. They affect the future of technology— and the future of libraries.

Ostensibly she voted to move the proposal ahead given that at this stage it's just a solicitation of public comment.  It's unclear whether the review process was lengthened at all, as she suggested.
 
But one clear bone to the plan's critics is that the feedback period will also request comments on the alternative scheme favored by most net neutrality critics -- reclassification.  That proposal would involve reclassifying broadband ISPs and possibly wireless (data) service providers (WSPs) as "common carriers".  
 
The FCC had initially put ISPs and WSPs in a separate class to try to avoid stifling the growth of such businesses.  But with deployment now ubiquitous, a serious question emerges of why landline telephone firms have to play by one set of rules and regulations, while internet companies face a more ambiguous rule-free state.
 
Reclassification is a route that judges with the U.S. Court of Appeals for the D.C. Circuit suggested was the only valid route to legal net neutrality rules.  The court concluded that regulating ISPs and WSPs under their current classification would be illegal and discriminatory, as while the FCC does have Congressional authorization under the The Communications Act of 1934 [PDF] and Telecommunications Act of 1996 (see: 47 U.S.C. § 151) to...

(2) to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation;

...it only has the right to do so with common carriers, as the FCC's regulatory powers, by law, appear to be restricted to common carriers.
 
III. Without Reclassification, Current Rules May be Doomed, no Matter What the Concessions Added
 
Whether the current proposal could survive depends on whether the divided Democratic coalition in Congress could come behind it and apply political pressure to Commissioner Rosenworcel to pass it.  Alternatively, those who support it among Congressional Democrats could try to reach out to allies on the right and sell them on the proposal's concessions in terms of allowing fast lanes.
 
In some ways it's surprising that there's not more support from net neutrality critics (e.g. those backed by ISP money), given the level of concessions in the proposed rules.  However, ISPs have largely opined that they would rather see no rules at all, and feel that even the weakened version of the net neutrality was too much.  This sentiment is echoed in the vote of the two Republican commissioners who opposed seeking public comment on the draft.

Tom Wheeler
Despite the small victory of convincing his fellow Democratic commissioners to discuss his plan, FCC Chairman Tom Wheeler will face a tougher challenge convincing them to accept the controversial scheme. [Image Source: Reuters]

There seems to be solidarity currently in the message of ISPs and their Republican supporters in Congress to Chairman Wheeler -- we told you to kill net neutrality, not maim it.
 
Either way, it should be interesting how this evolves over the next few months.
 
With net neutrality already rejected twice by the courts over the classification issue, it seems almost suicidal from a regulatory perspective to float another set of rules without reclassification.  But that's currently Chairman Wheeler's chief proposed course of action.  To defend that approach -- even with the concessions he's tossing to ISPs -- he'll need to act as a serious salesman and beat off angry net neutrality supporters.

Sources: FCC [1], [2; PDF], Reuters





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