FCC Republicans Question Need for Net Neutrality Rules

Sen. John McCain, R-Ariz., responded immediately, introducing the Real Stimulus Act of 2009, which would prohibit the FCC from issuing regulations involving the Internet or IP-enabled services except to protect national security, public safety, help federal or state law enforcement or ensure the solvency of the Universal Service Fund. McCain wrote in a Washington Times op-ed piece criticizing the Obama administration that consumers should view the Genachowski rules as “another government power grab” of services that companies provide in a competitive market.

Several officials said the clearest sign of hope that compromise is possible was a statement by Google and Verizon late Wednesday on their policy blogs. The companies agreed that it’s “essential that the Internet remains an unrestricted and open platform -- where people can access any content (so long as it’s legal), as well as the services and applications of their choice.”

The FCC proposes in the notice to add two Internet- openness principles -- about nondiscrimination and transparency -- to the FCC’s four principles from 2005, and to make all six legally binding and subject to the ability of broadband operators to do reasonable network management.

“Right now I don’t believe there is a lot of common ground on substance, but there certainly is on process,” McDowell said in an interview. “Many questions have to be answered thoroughly before we can arrive at consensus on a solution.”

A big question is whether the District of Columbia Circuit’s decision in the Comcast-BitTorrent case, expected to be argued in early 2010, will lead the FCC to conclude that it lacks the power to approve an order codifying and expanding its net neutrality principles, said commission and industry officials.

The FCC’s order allows for an unusually long comment cycle, pushing consideration of a final rule beyond the February deadline for the National Broadband Plan and possibly the court ruling on Comcast. Initial comments are due Jan. 14, replies March 5. Comment deadlines normally are set in relation to publication of an order in the Federal Register, not on specific dates in the order.

McDowell said the long proceeding may “allow us to receive guidance from the court on our legal authority to proceed as may be decided in the Comcast/BitTorrent appeal.”

The FCC also announced Thursday that the commission’s Office of Engineering & Technology will create “an inclusive, open, and transparent process for obtaining the best technical advice and information from a broad range of engineers” on technical matters involved with the neutrality policy.

“An open Internet deserves an open process,” Genachowski said at the meeting. “Accordingly, I fully support this notice, which will launch a fact-based, transparent, and participatory process to develop rules to preserve an open Internet. The notice seeks to identify the hard questions the commission must address as part of this rulemaking, and that the commission must ultimately address based on the facts and the record before it.”

In the first question at a news conference, Genachowski was asked whether principles should also apply to search engines like Google and not just carriers. “The whole proceeding has always been about Internet access providers,” he said. “It’s been about the entry ramp to the Internet. So that’s the status quo. The notice today asks questions about a whole series of ways in which the commission could proceed going forward. But of course we should be very cautious before moving from tacking issues presented by the onramp providers to the Internet itself.”

Genachowski was asked about McCain’s bill and the threat of congressional intervention. “I look forward to working with Congress to getting full input form everyone,” he said. “This is an issue important to the future of the country. There is more than ample room for vigorous discussion.”

McDowell was conciliatory, praising Genachowski “for his graciousness and good faith as well as for the energetic spirit of cooperation he has maintained throughout his brief tenure.” But McDowell sharply disputed the thrust of the notice: “Today we do disagree on substance. I do not share the majority’s view that the Internet is showing breaks and cracks, nor do I believe that the government is the best tool to fix it. I also disagree with the premise that the Commission has the legal authority to regulate Internet network management as proposed.”

McDowell, who attended the International Telecommunications Union’s conference in Geneva this month, warned that the steps the FCC takes will have a far-reaching effect. “After I spoke with regulators from other nations, it became obvious to me that some countries are waiting for the U.S. to assert more government authority over the Internet to help justify an increased state role over Internet management internationally,” he said. “Although we are proceeding with the best of intentions, as we examine the important issues raised in today’s notice, we should keep in mind that our final actions inadvertently could be setting a precedent for some foreign governments with less pure motives to use in justifying stricter Internet regulation. That would be a mistake. Freedom is best served if we promote abundance, collaboration and competition over regulation and rationing. No government has ever succeeded in mandating innovation and investment.”

Baker expressed particular concern about extending net neutrality rules to mobile broadband. “I dissent in part today because, as a threshold matter, I am not convinced that there is a sufficient record to establish that a problem exists that should be addressed by commission rules,” she said. “As I have said previously, we should not adopt regulations to address anecdotes where there is no fact-based evidence that persuasively demonstrates the presence of a problem.”

Baker told us the order that the FCC approved was an improvement over the first draft circulated by Genachowski in early October. “The staff has done a great job and the document reflects real progress,” she said. “There’s a lot of areas of agreement. We all want to have an open Internet. We're looking forward to a healthy debate.”

Baker said: “When we began this process three weeks ago, I was prepared to dissent with respect to this entire initiative. But I am not there today. Although I am not convinced that rules are necessary or useful at this time, I am now equally convinced that it is reasonable to take a step back and ask tough and probing questions about the Internet as it exists today and about where we want it to be tomorrow. And I realize that this is the start of the process.”

Commissioner Michael Copps said the decision was “historic because the commission takes a long stride -- perhaps its longest ever--toward ensuring a free, open and dynamic Internet. I have advocated long and hard for the Commission to establish a mechanism to ensure that consumers have continued access to a vibrant, open Internet -- an Internet that was born on openness, thrived on openness, and depends on openness to realize its going-forward potential. This commission will act, I predict, to maintain that openness.”

Commissioner Mignon Clyburn pointed to problems she had faced as the publisher of The Coastal Times, a weekly newspaper in South Carolina that she eventually had to close after finding that she couldn’t compete with larger news media outlets. “An open Internet is, perhaps as much as anything else, the great equalizer,” she said. “It allows people with innovative ideas to succeed on the merit of those ideas. It also provides a voice to those who often are not afforded one.”

The notice runs 64 pages. It includes the proposed rules, which run only two pages. “Perhaps this is a reflection of the need for precision in such a complex topic, and of collegiality among the commissioners,” a source said. “But given that the chairman wanted ‘high level’ rules, it is interesting that the proposed rules are only two pages long.”

“With today’s Notice, we seek public input on draft rules to preserve an open Internet -- the next step in an ongoing and longstanding effort at the Commission,” the document says. It said the commission has “considered the issue of Internet openness in a wide variety of contexts and proceedings, including: a unanimous policy statement, a notice of inquiry on broadband industry practices, public comment on several petitions for rulemaking, conditions associated with significant communications industry mergers, the rules for a major spectrum auction, and specific enforcement actions against particular parties,”

In examining the issue, “the Commission has provided abundant opportunities for public participation, including through public hearings and requests for written comment, which have generated over 100,000 pages of input in approximately 40,000 filings from interested companies, organizations, and individuals,” the notice said.

Making the case for FCC authority, the notice cites the Comcast case that’s in the appeals court. “Consistent with the Comcast Network Management Practices Order, we may exercise jurisdiction under the Act to regulate the network practices of facilities-based broadband Internet access service providers,” the document says. “We have ancillary jurisdiction over matters not directly addressed in the Act when the subject matter falls within the agency’s general statutory grant of jurisdiction and the regulation is ‘reasonably ancillary to the effective performance of the Commission’s various responsibilities.'”

“We thought Chairman Genachowski set a cautiously positive tone for wireless and wireline carriers,” Paul Gallant of Washington Research Group said in a research note. “He said the final net neutrality rules -- and the way they are enforced -- will be sensitive to carrier needs to manage network congestion and experiment with new business models. On several occasions, Genachowski stressed his recognition of the importance of carriers continuing to have incentives to upgrade their broadband networks and to earn a return on those investments.” Gallant said Genachowski also recognized that wireless carriers “have unique technological constraints and different regulatory histories, which will be taken into account” in the development of rules.

“The proposed rules clearly would constrain telco, cable, and wireless broadband providers,” Stifel Nicolaus said in a research note. “However, in an apparent concession to the Bells, FCC officials noted that the Commission would seek comment on whether the rules should apply to parties beyond broadband Internet access providers, which could include Internet application and content providers.”

AT&T praised Genachowski for his approach. “Over the past several weeks, we and many others have expressed concern that the FCC’s original NPRM, as reported, would be significantly at odds with these objectives,” the company said. “Today’s action by the FCC has allayed a number of our concerns, and while there are crucial issues remaining, we are encouraged by the Commission’s action. In particular, we appreciate that Chairman Genachowski has demonstrated that he is open to the industry’s concerns and willing to address those he feels have merit.”

Google said: “There’s been a lot of noise out there, but let’s review what’s at stake: The Internet was built and has thrived as an open platform, where individuals and entrepreneurs -- not network owners -- can connect and interact, choose marketplace winners and losers, and create new services and content on a level playing field. No one seems to disagree with that fundamental proposition. This new proceeding is aimed at opening a national dialogue on how best to protect that unique environment. For our part, we fully support the adoption of ‘rules of the road’ to ensure that the broadband on-ramps to the Net remain open and robust.”

The vote was cheered by net neutrality proponents in Congress, mostly Democrats who have long supported legislation or FCC action. The commission must consider all voices and run an open rulemaking, said a letter to Genachowski from House Commerce Committee Chairman Henry Waxman, D-Calif., and Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va. “We have each, in the past, voiced our support for policies that protect consumers and promote an open Internet. Our positions have not changed.” Separately, Waxman said neutrality is the “defining issue of the digital age,” and the public and industry will benefit from a public policy debate.

NTIA Administrator Larry Strickling said the administration welcomes a debate and is “committed to preserving an open Internet.” Most comments were consistent with a barrage of statements leading up to the vote.

“Today’s vote was the first step toward establishing enforceable protections for consumers accessing the Internet,” said Markham Erickson, executive director of the Open Internet Coalition. “We have cleared the first hurdle in this process, and are on the road towards creating a framework that promotes innovation and consumer choice on the Internet.”

“I understand there is a regulatory revival climate in Washington under the Obama Administration, but the FCC’s launch of a rulemaking proceeding to adopt new Internet regulations stands out as an example of a proposed regulation in search of a problem that will then search for a solution to address the non-problem,” said Randolph May, the Free State Foundation’s president. “At the FCC meeting, there was absolutely no evidence presented by the FCC’s staff of any market failure or pattern of marketplace abuses.”

“We agree wireless is different, and believe that whatever the case may be for applying rules to other platforms, applying these rules to mobile wireless broadband services during a period of dynamic innovation and change in the wireless ecosystem could have significant unintended consequences,” CTIA said. “The imposition of net neutrality rules will degrade the value of unencumbered licenses purchased in the most recent auctions and threaten the integrity of the auction process. The FCC considered ‘openness’ requirements in the 700 MHz auction and chose to apply those requirements to a single block of spectrum. To extend that requirement, and more, now would raise serious legal issues and threaten the integrity of future auctions.”