Wheeler Faces Deluge of Net Neutrality Questions

Subcommittee Democrats expressed deep concerns that the FCC may allow paid prioritization agreements. Paid prioritization, according to subcommittee ranking member Anna Eshoo, D-Calif., is “a fundamental departure from the Internet as we know it.” Stakeholders have warred over whether the FCC should reclassify broadband as a Title II telecom service to create stronger net neutrality rules or whether to use Communications Act Section 706, as the FCC has indicated it will do. Eshoo suggested starting with the values required in the rules and cautioned that Title II has potential for “heavy-handed regulation.” Eshoo pressed Wheeler on whether such prioritization agreements should be blocked as a matter of policy.

"We have asked that question in the rulemaking,” Wheeler told Eshoo. “I believe that under Section 706, anything that is anti-competitive or anticonsumer is competitively unreasonable and can and should be blocked, and that becomes the trigger for how you deal with paid prioritization.”

Eshoo also pushed Wheeler on how the agency would handle constraint under Title II. Wheeler replied that nothing in Title II prohibits paid prioritization deals. “You're worrying me by bringing that up first,” Eshoo countered. Wheeler emphasized all the questions the FCC is asking in its NPRM, which he believes will lead “us to the kinds of answers you're asking for today.”

Bipartisan Net Neutrality Alarm

"You don’t have to choose between weak rules and a weak legal case,” committee ranking member Henry Waxman, D-Calif., told Wheeler, recommending the agency rely on Section 706 but use Title II as a regulatory backstop. “I'm opposed to any form of paid prioritization,” Waxman added, recommending “bright lines” against it and that Wheeler develop a “presumption against all paid prioritization” as the agency considers rules. Rep. Doris Matsui, D-Calif., emphasized paid prioritization deals should be banned and said she worried Wheeler’s hands were tied in terms of legal authority. Rep. Diana DeGette, D-Colo., said constituents are bringing up net neutrality.

Republicans, meanwhile, slammed the FCC for considering Title II reclassification at all. Subcommittee Vice Chairman Bob Latta, R-Ohio, cautioned that Title II reclassification would be an “extreme exercise of government overreach” and said that he intends to introduce legislation to address that possibility. Latta Chief of Staff Ryan Walker told us the legislation will focus on Title II rather than Section 706 and that Latta hopes to work in a bipartisan fashion in introducing the bill. Committee Chairman Fred Upton, R-Mich., and Communications Subcommittee Chairman Greg Walden, R-Ore., both slammed the idea of Title II reclassification strongly in their opening statements.

"Our proposal, for which I've taken a lot of heat, is not Title II,” Wheeler reassured Rep. Steve Scalise, R-La., who worried the agency was embarking on reclassification. Waxman’s proposal “is important and worth considering,” Wheeler said, also arguing that net neutrality rules don’t seem to have any “chilling effect” on investment. “I've consistently said there is only one Internet,” Wheeler added. “There’s not a fast Internet and a slow Internet.” No net neutrality protections currently exist, Wheeler stressed, explaining he wanted to follow the road map the U.S. Court of Appeals for the D.C. Circuit gave when vacating the agency’s 2010 net neutrality rules in January. The FCC has tried “not to decide on but to ask” regarding the net neutrality proceeding for now, Wheeler said.

Committee Vice Chairman Marsha Blackburn, R-Tenn., pressed Wheeler on his “feisty term” and whether the FCC will do a cost-benefit analysis of net neutrality rules. “Since President Obama issued Executive Orders 13563 and 13579 in 2011, the Commission has endeavored to act consistently with the cost-benefit analysis principles” in them, Wheeler told Blackburn in a Monday letter. “This includes consideration of quantifiable, monetized costs and benefits associated with a proposed regulatory approach, as well as careful consideration of those costs and benefits that are not as easily quantifiable or monetized.” The net neutrality proceeding will apply those principles and guidelines, Wheeler said. Google and Netflix “come and lobby” the FCC, “pushing the net neutrality rules,” but don’t pay the fees that fund the agency, Blackburn told Wheeler, slamming their “free ride” and asking whether they should “pay their part of the cost.” Wheeler said the decision is out of his hands and for Congress to decide.

"I called them,” Wheeler said when lawmakers asked if he had gone to the White House or the Office of Management and Budget on the question of net neutrality. But the White House has been “assiduous” in maintaining that the FCC is an independent agency, Wheeler said. “Never have I or to my knowledge any one of my staff felt any pressure to decide any issue."

Consolidation Hearings?

Eshoo and Matsui pressed Walden to hold a hearing on the Comcast/Time Warner Cable and AT&T/DirecTV deals announced this year. Given such consolidation, “we feel like we're kind of in the Wild West of the digital economy,” Matsui told Wheeler, asking him to commit to “carefully scrutinize these deals with a focus toward public interest.” Wheeler answered yes, “without hesitation and complete affirmation.”

Wheeler declined to “pre-judge” the record in any of the industry consolidation proposals but told DeGette he “strongly” believes there’s a big difference between the “statutory rigidity” of Justice Department merger and acquisition review and “the broader public interest issues that you've raised that the statute asks the FCC to look at.”

Upton and Walden focused more on what they see as process failures at the FCC. Upton has “serious concerns” with parts of Wheeler’s tenure: “I was disappointed to see some of the process failures that occurred last week (CD May 16 p1). … Let us hope that such incidents of favoritism and selective sharing are isolated and not emblematic of the chairman’s new operating procedure.” The FCC is “heading into rough waters,” Walden warned in his opening statement. Walden also questioned Wheeler on ensuring broadcasters will participate in the agency’s incentive auction, but Wheeler expressed confidence, also saying he “wouldn’t be surprised” if the FCC had already raised $7 billion for FirstNet from other auctions before the incentive auction even happens. Walden said he’s “troubled by the FCC’s seemingly flawed processes,” pointing to a failure to circulate certain net neutrality NPRM drafts to all commissioner offices and the ongoing lack of media ownership quadrennial review report.

"The committee has opined in the past that withholding of a revised draft item from other members of the commission until the eleventh hour precludes the scrutiny and analysis necessary for reasoned decision-making,” Walden said. “It is my hope that these occurrences were anomalies.” Wheeler defended the agency’s attempts at internal process overhaul, citing its task force and progress in implementing the more than 100 recommendations it produced earlier this year.