(Source: Getty Images)
Vote was 3-2 along party lines; final draft eliminates the "fast lane" concept Wheeler suggested in the early drafts

The U.S. Federal Communications Commission (FCC) has voted to ratify a strong new net neutrality framework, which would reclassify cable broadband internet service providers like Comcast Corp. (CMCSA), Time Warner Cable Inc. (TWC), and Verizon Communications Inc. (VZ) as "common carriers" competing the "telecommunication services" market.

I. Why Do We Need Net Neutrality?

The concept of net neutrality is that ISPs should not be able to carry out data discrimination.  Data discrimination is generally defined as blocking or throttling legtimate internet content providers (i.e. websites or internet-delivered services) in order to squeeze out tolls from them.  Such throttling is a major concern for top content providers like Google Inc. (GOOG) or Netflix (NFLX) -- companies that make attractive targets to ISP extortion.

ISP levied fees on the content provider end wouldin effect force the customer to triple pay, first for the cable internet service, then for the content service, and then finally for the surcharges which the content provider would likely pass along to the customer.

Tom Wheeler
FCC Chairman Tom Wheeler talks regulation at CES 2015. [Image Source: Getty Images]

The FCC had previously drafted a net neutrality framework, but was promptly sued by Verizon and others in the case Verizon v. FCC.  That dispute culminated in a federal court battle before the U.S. Court of Appeals for the D.C. Circuit.  The case concluded in Jan. 2014 with the court ruling that the FCC's current net neutrality laws were unenforceable.  That for the time being net neutrality was dead in the U.S. from a regulatory perspective.

In the aftermath of that rejection a number of changes or threats to a competitive cable internet market have emerged, including the proposed $45.2B USD merger of the nation's two largest cable ISPs -- Comcast and Time Warner.  The proposed merger would grant the merged firm local monopolies in many parts of the U.S.

Net Neutrality
The argument for net neutrality is explained here in infographic form. [Image Source: Public Knowledge]

Comcast, meanwhile, has been stepping up its effort to squeeze tolls out of top internet providers.  After throttling its streaming video to antediluvian data rates, Comcast forced Netflix to pay connection fees, which Netflix predictably begrudgingly passed along to customers via price increases on streaming services.

Utilities like Comcast long escaped receiving classification that would require them to comply with FCC regulation. [Image Source: Sterling Davis]

In a blog Comcast expressed "concern" about the new rules, writing:

While we don’t agree that using Title II is necessary, we are encouraged that the Commission has apparently forborne from numerous statutory provisions and cumbersome regulations, which will alleviate some of the most troubling aspects of using Title II.  But we have not yet read the Order as adopted by the Commission, and we are concerned with what some have reported as incomplete legal forbearance in important areas.  So we will need to await release of the Order so we – and everyone else – can review completely all of the actions taken through today’s important vote.  Specifically, after seeing the Order, we’ll have to engage in additional internal scrutiny on what our investment plans with respect to broadband will be going forward.

Comcast, in a feat of doublespeak, claims it's actually net neutrality's biggest backer... if you complete redefine the concept.

II. The Majority in Favor

Thursday's net neutrality vote escaped a potential delay and ultimately was cast 3-2 narrowly along party lines.  The trio of Democratic commissioners sought to cast the new net neutrality rules as a long overdue measure to preserve access to a ubiquitous market service.

Leading the trio of Democratic Commissioners was Wheeler, the 31st commissioner of the FCC.  He characterized the measure as a victory for Democracy and rejected claims that the FCC was going to treat ISPs like "utilities" (the "dumb pipe" argument).  He also rejected the notion that the rules would make ISPs unprofitable, writing:

For over a decade, the Commission has endeavored to protect and promote the open Internet. FCC Chairs and Commissioners, Republican and Democrat alike, have embraced the importance of the open Internet, and the need to protect and promote that openness. Today is the culmination of that effort, as we adopt the strongest possible open Internet protections.
We also ensure that network operators continue to have the incentives they need to invest in their networks. Let me be clear, the FCC will not impose “utility style” regulation. We forbear from sections of Title II that pose a meaningful threat to network investment, and over 700 provisions of the FCC’s rules.  That means no rate regulation, no filing of tariffs, and no network unbundling. During the 22 years that wireless voice has been regulated under a light-touch Title II like we propose today, there has never been concern about the ability of wireless companies to price competitively, flexibly, or quickly, or their ability to achieve a return on their investment.

Joining him in support of the plan was Democratic FCC Commissioner Mignon Clyburne, who has been known to be relatively ISP-friendly and was viewed as a possible "swing vote" in the approval.

FCC -- commissioner Clyburne
Commissioner Mignon Clyburn (D) [Image Source: The Post and Courier]

She wrote that much was at stake in the rules vote, interestingly writing that lack of regulation could ultimately lead not only to higher consumer service costs, but also to state-sponsored content censorship at the ISP level.  She writes:

I believe the Framers would be pleased to see these principles embodied in a platform that has become such an important part of our lives.  I also believe that they never envisioned a government that would include the input and leadership of women, people of color, and immigrants, or that there would be such an open process that would enable more than four million citizens to have a direct conversation with their government. They would be extremely amazed, I venture to say, because even we are amazed.

So here we are, 224 years later, at a pivotal fork in the road, poised to preserve those very same virtues of a democratic society – free speech, freedom of religion, a free press, freedom of assembly and a functioning free market.

As we look around the world we see foreign governments blocking access to websites including social media -- in sum, curtailing free speech.  There are countries where it is routine for governments, not the consumer, to determine the type of websites and content that can be accessed by its citizens. I am proud to be able to say that we are not among them.

Absent the rules we adopt today, however, any Internet Service Provider (ISP) has the liberty to do just that.  They would be free to block, throttle, favor or discriminate against traffic or extract tolls from any user for any reason or for no reason at all.  

Democratic Commissioner Jessica Rosenworcel also voted for the proposed rules.  She kept her statement brief, emphasizing that the new rules were a reflection of the more than 4 million comments the FCC received from the public -- including all manner of businesses -- during the review of the original rules draft proposed by Chairman Wheeler.  

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

She writes:

Our Internet economy is the envy of the world.  We invented it.  The applications economy began here—on our shores.  The broadband below us and the airwaves all around us deliver its collective might to our homes and businesses in communities across the country.  What produced this dynamic engine of entrepreneurship and experimentation is a foundation of openness.  Sustaining what has made us innovative, fierce, and creative should not be a choice—it should be an obligation.

This is a big deal.  What is also a big deal is 4 million voices.  Four million Americans wrote this agency to make known their ideas, thoughts, and deeply-held opinions about Internet openness.  They lit up our phone lines, clogged our e-mail in-boxes, and jammed our online comment system.  That might be messy, but whatever our disagreements on network neutrality are, I hope we can agree that’s democracy in action and something we can all support.  

While she expressed concerns about the chairman's original "fast lane", "slow lane" style proposal, she had no apparent reservations about the finished product which eliminated those constructs.

III. The Minority in Opposition

Republican commissioners, meanwhile, for better or worse sought to make net neutrality regulation synonymous with President Barack Obama, due to his support of a reclassification-based plan.  They claimed the Obama administration was sneaking the plan past review and would use the new rules to micromanage ISPs and cripple them financially.  One of the opposing pair of Republican Commissioners even went as far as to imply net neutrality was a socialist construct.

Republican commissioner Commissioner Ajit Pai voted against the proposed rules.

Ajit Pai
Commissioner Ajit Pai (R) [Image Source:]

In a statement released on Monday he attacked the transparency of the rulemaking process, and argued that the vote should be delayed to give the public more time inspect the rules.  He commented:

Over the past few weeks, it has become clear that the American people are growing increasingly concerned about government regulation of the Internet and that they want the Commission to disclose the plan. Indeed, an independent survey last week found that 79% of Americans favored releasing the plan prior to any FCC vote.

Transparency and good process shouldn’t be a partisan issue. In 2003, for example, Democratic Commissioners Michael Copps and Jonathan Adelstein called for a delay of the vote on reforming the Commission’s media ownership rules and a public airing of the Commission’s proposal. Their words then echo now: "A public airing would make for better policies. It would make for better buy-in from the American people."

We similarly urge our colleagues to join us and allow the American people to review the proposed Internet regulations before we hold a vote. To do anything less puts at risk the Internet and all of the benefits it brings to the American people.

In another release he cited public opinion statistics as indicating that Americans oppose some principles of what he calls "President Obama's plan to regulate the Internet."  In a memo on the reasons for his opposition, he implies that net neutrality is a socialist scheme and that it prevents "innovative" ISP profit taking.  He writes:
  • The plan curtails the ability of broadband providers to offer innovative service plans. For example, the rules jeopardize the future of T-Mobile’s Music Freedom program.
  • The plan also explicitly calls into question usage-based pricing. This means that broadband subscribers who use less data could end up subsidizing subscribers who use more data.
The bid to delay the vote was ultimately blocked by the majority.

The other Republican Commissioner Michael O'Rielly also voted against the rules.  While he shared Pai's criticisms about transparency and public feedback, he attacked the plan on a slightly different angle.

Michael O'Rielly
Commissioner Michael O'Rielly (R) [Image Source: Flickr/Energy and Commerce Committee]

In a statement he suggests the proposed reclassification of ISPs as a common carrier was what he creatively terms "fauxbearance", which he claims would allow the government to demand ISPs provide access to locations that are financially infeasible to serve.  He also criticizes what he claims is a "copy and paste" effort to roll phone line regulation over into the cable internet space.  He writes in a brief statement:

I am troubled by statements that the Net Neutrality item will grant broad forbearance from Title II, and I feel compelled to respond to these claims. The promised forbearance amounts to fauxbearance. The FCC fact sheet clearly states that the item leaves in place more than a dozen provisions that are central to common carrier regulation. With regulations ranging from rates to privacy to pole attachments copied and pasted onto broadband service, most of Title II will apply right out of the box, with more to come later. Indeed, sections 201 and 202, by themselves, are so broad in scope that they could easily be used as a means to backfill all of the fauxbearance provided from other provisions.

While much attention has been paid to the rate regulation language contained in sections 201(b) and 202(a), I am equally troubled by the implications of section 201(a), which requires common carriers to provide service upon “reasonable request” and empowers the Commission to order carriers “to establish physical connections” and “through routes”. In other words, the Commission could demand that ISPs provide service, including interconnection. Nowhere in the fact sheet does the FCC disavow its intent to do so, so I must consider that it is a real possibility.

Ultimately Commissioners Pai and Rielly saw their complains fall on deaf ears.

IV. How Did We Get Here?

The mounting threats created by ISP consolidation and toll taking created a pressure cooker situation, necessitating an expeditious rewrite of the nation's regulatory strategy.  

The FCC originally had wanted a weaker set of net neutrality rules that allowed some "slow lanes."  But amid negative publicity and vocal objections from internet service corporations like Netflix and Google, Thomas "Tom" E. Wheeler, the lobbyist-turned Chairman of the FCC was forced to revamp his proposal into a stronger, exception-free brand of net neutrality.

The key to making such a strong regulatory framework legal would lie in reclassification.  While new regulation would likely be challenged in court, the D.C. appeals court had already noted in its second ruling on the matter (following an earlier challenge by Comcast in 2010) that regulation would become legal if ISPs were reclassified as common carriers.  That means that future court cases will be forced to consider that legal precedent, greatly improving the new framework's chance of survival.

Cable bundle
The crux of the current net neutrality debate is reclassification of broadband internet service providers as "common carriers". [Image Source: Bounce Energy]

To understand the legal intricacies of reclassification in layman's terms, you must first look at the laws involved.  Status of communication confirms is defined under Title II of the half-century old The Communications Act of 1934 [PDF],and the act that recently revised that law, the Telecommunications Act of 1996.  Under these pieces of legislation passed in 1934 and 1996, Congress has granted the FCC the authority to adopt rules to enforce a "vibrant and competitive free market" in the communications sector.

The law, however, stipulates that only operators in "common carrier" classified communications markets face that regulation, a provision that protects nascent experimental technologies.

Originally when it arose in the 1990s cable internet was a scarce commodity classified as a "Information Services", a market that was not subject to common carrier restrictions.  Most internet connections could potentially be regulated at the time as they were over phone lines -- telecommunications services.

Fiber optics
Today cable internet is a ubiquitous service and a cornerstone of the modern economy.
[Image Source: AllPosters]

But crucially when the days of dialup ended and the era of ubiquitous cable internet services arrived, the status was never changed to reflect the market shift from nascent technology to common carrier.

It's worth noting that the new rules -- like the previous regulatory framework -- due not cover cellular data networks.  So in theory cellular providers will be able to discriminate and exact fees from streaming service providers.  However, the newly ratified reclassification and rules not only create a defensible regulatory strategy, they also arguably set a clock ticking on cellular networks' special status.

net neutrality
Common carrier regulation -- and net neutrality protections with it -- will likely eventually extend to the cellular space. [Image Source: AGBeat]

Like ISPs, cellular providers will likely be reclassified as common carriers in decades to come, a shift which would make the new net neutrality rules virtually ubiquitous.  For now, net neutrality advocates can celebrate a hard fought victory in what will surely continue to be a long and ongoing war.

Sources: FCC [press release], [Chairman Wheeler -- Statement], [Comm. Rielly -- Opposing Statement], Comcast [corporate blog]

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