On net neutrality, Internet providers are betrayed by one of their own

[RoadWarrior]

When President Obama picked Tom Wheeler to lead the Federal Communications Commission in May 2013, our headline was, “Uh-oh: AT&T and Comcast are ecstatic about the FCC’s new chairman.”

They’re not happy anymore, especially not after Wheeler yesterday all but confirmed at the Consumer Electronics Show (CES) that he will propose reclassifying Internet providers as common carriers in order to impose net neutrality rules. This would expose broadband to some of the FCC’s strongest powers contained in Title II of the Communications Act, usually reserved for wireline phone service.

Yet it seemed in 2013 that Internet providers had every reason to be pleased: Wheeler formerly led the biggest trade associations representing the cable and wireless industries. Wheeler was CEO of the National Cable Television Association (NCTA) from 1979 to 1984 and CEO of the Cellular Telecommunications & Internet Association (CTIA) from 1992 to 2004.

Wheeler’s first stab at net neutrality in May 2014 didn't cause much concern in the industry, which under that proposal would have remained a lightly regulated “information service” and been free to charge Web services for priority access to consumers. But the proposal was widely condemned by consumers and various advocacy groups. Eventually, Obama called on Wheeler to go with Title II for both fixed Internet service and mobile, and it appears Wheeler will do just that.

If he does, Wheeler would show that Washington’s revolving door doesn’t always guarantee that regulators do the bidding of the regulated. Former FCC Chairman Michael Powell, who made sure that ISPs would face little regulation, now leads the NCTA and has repeatedly called on Wheeler to avoid using Title II. Former FCC Commissioner and current CTIA CEO Meredith Attwell Baker has also lobbied against such a move.

There were signs shortly after Wheeler’s swearing-in that he might not hold the same views as the current heads of the cable and wireless trade groups he used to lead. For one thing, he hired prominent consumer advocate Gigi Sohn as his Special Counsel for External Affairs. Wheeler admires Abraham Lincoln's “team of rivals” approach, and for the past year and a half, Sohn has been instrumental in laying groundwork for a likely Title II reclassification, according to an article in The Hill yesterday.

Wheeler has also repeatedly pointed to his past as a venture capitalist and entrepreneur, saying he learned from experience that networks must be open to spur innovation.

Yup, Verizon's mad

Title II’s utility-style rules have long been applied to the traditional telephone system, but the rules Internet providers face likely won’t be as strict. Obama urged the FCC to forbear from imposing rate regulation and similar restrictions. But the FCC would use Title II to prevent ISPs from blocking or throttling Web services or prioritizing services in exchange for payment.

Wheeler will circulate proposed rules to fellow commissioners on February 5 and hold a vote on February 26, he said yesterday. We contacted the major ISPs and telecommunications industry groups today, and their reactions were predictably negative.

Verizon's statement said, “Verizon supports the open Internet. To apply 1930s-era utility regulation to the Internet under Title II reclassification, would be a radical reversal for what has been an open, competitive and innovative Internet economy. Such an approach would be particularly harmful to wireless broadband, which unlike traditional voice services, developed free of legacy Title II regulations. Effective and enforceable net neutrality rules can be sustained through Section 706 [of the Telecommunications Act], and we continue to believe that this the best approach for innovators and consumers alike.”

Verizon has only itself to blame, since it sued the FCC over its previous net neutrality rules that used a Section 706 approach. Verizon's victory in that lawsuit backfired because the judges ruled that the FCC had tried to impose per se common carrier obligations—which it can't do unless it declares that broadband is a common carrier service.

At CES, Wheeler hinted that he wants to craft broadband rules based on the ones that apply to cellular voice, which is a common carrier service but doesn’t face rate regulation. Mobile voice’s common carrier status was established in section 332 of the Communications Act, which Wheeler helped negotiate as head of the CTIA 20 years ago. A framework like this one could apply to fixed and mobile broadband, establishing requirements for reasonable rates and practices, a prohibition against unjust or unreasonable discrimination in rates and practices, and a complaint process.

Baker, the CTIA CEO, called this approach wrongheaded and in opposition to Congress’s intent.

"CTIA and its member companies want, and continue to support, an open Internet,” she said in a statement provided to Ars. “However, comparisons to mobile voice are misplaced. While Congress created a regulatory regime for mobile voice under Section 332 and Title II, Congress also created a separate regulatory regime—explicitly outside Title II—for other services like mobile broadband. The FCC cannot now re-write the Act or re-write history. Section 332 was a tool to deregulate mobile voice. The Chairman cannot now use that same language to extend regulation and government intrusion where it has explicitly been excluded by Congress. As the courts have made clear, a properly-crafted Section 706 approach could withstand judicial scrutiny and not run afoul of Congress' explicit directive under Section 332. We hope that the Chairman will craft a Section 706 solution that we can all support."

Cox, a cable company, is similarly upset. "Without increased government intervention, the Internet has been extraordinarily successful and most customers have access to multiple broadband providers and unprecedented speeds," the company told Ars. "Cox has increased speeds 1000 percent in the last 13 years, doubled speeds this year and started delivering Gigabit service to homes this month. Customers choose us because we provide a superior online experience that includes access to all legal sites and full transparency about how we manage our network. A regulatory overreach is simply not required to ensure this continues."

Comcast did not provide a new statement but pointed to its previous opposition to Title II for broadband.

The NCTA (now called the National Cable & Telecommunications Association) declined comment. We have not received comments from AT&T, CenturyLink, Charter, Time Warner Cable, or Cablevision.

Small Internet providers aren't fully behind Wheeler, either

Wheeler told the CES audience that while big ISPs generally oppose Title II, “smaller ISPs, like the rural carriers, competitive ISPs, have all come in and said, 'we like Title II, we hope you’ll do Title II.’”

Wheeler seems to have exaggerated when he said “all” smaller ISPs support Title II. The American Cable Association, which represents more than 900 small and medium-sized providers, told Ars that “common carrier rules for telephone service crafted in 1934 should not be applied to the hyper-competitive broadband Internet market in 2015. A Title II regulatory regime will cut off investment and end up doing more harm than good."

A group that advocates on behalf of rural broadband providers reacted more positively to Wheeler’s statement, but wants more details. Known as NTCA—The Rural Broadband Association, the group told Ars that it “has long advocated for sensible, right-sized rules of the road that will continue to protect consumers, promote competition and ensure universal service as we transition into a broadband-focused world. Steps such as those reportedly being considered by FCC Chairman Tom Wheeler could help advance such goals, but it's important that those rules are thoughtfully crafted to solve problems where they actually exist and avoid creating new problems or complicating other problems still to be solved. Striking the right balance in terms of regulation and avoiding unintended consequences will be essential in this exercise, and we hope that any rules ultimately developed—by whatever legal theory—carefully thread these needles.” The statement was attributed to Rural Broadband Association Senior VP of Policy Michael Romano.

The Competitive Carriers Association (CCA), which lobbies for regional and rural wireless providers, was noncommittal. “Like many things, the devil is in the details. Our carrier members will judge the final rules on the ability to manage their wireless networks and compete in the marketplace,” association CEO Steven Berry said. “Rather than speculate on the details, we look forward to seeing how the FCC addresses these competitive concerns and look forward to our continued work to promote competition.”

The Rural Wireless Association is wary: "RWA and its members support an open Internet," the group said. "While RWA members have developed procedures to comply with the Commission’s 2010 rules, RWA is concerned that engaging in a similar endeavor to comply with new and/or more stringent rules would be costly and further strain rural carriers’ limited resources."