In a major victory for net roots groups, President Barack Obama today announced his support for the strongest possible Net Neutrality protections, asking the Federal Communications Commission to quickly reclassify broadband as a “telecommunications service” subject to oversight and consumer protection regulatory policies that would prohibit paid fast lanes, the blocking or degrading of websites for financial reasons, and more transparency in how Internet Service Providers handle traffic.

“For almost a century, our law has recognized that companies who connect you to the world have special obligations not to exploit the monopoly they enjoy over access in and out of your home or business,” said the president. “That is why a phone call from a customer of one phone company can reliably reach a customer of a different one, and why you will not be penalized solely for calling someone who is using another provider. It is common sense that the same philosophy should guide any service that is based on the transmission of information — whether a phone call, or a packet of data.”

“’Net neutrality’ has been built into the fabric of the Internet since its creation — but it is also a principle that we cannot take for granted,” President Obama added. “We cannot allow Internet Service Providers (ISPs) to restrict the best access or to pick winners and losers in the online marketplace for services and ideas. That is why today, I am asking the Federal Communications Commission (FCC) to answer the call of almost four million public comments, and implement the strongest possible rules to protect Net Neutrality.”

The president’s call will likely force FCC chairman Thomas Wheeler to abandon efforts to reclassify only certain types of Internet traffic under Title 2 regulations while leaving consumers vulnerable to paid fast lanes and other traffic monetizing schemes. Wheeler was rumored to be working on a limited Net Neutrality plan that would protect large online video content distributors like Netflix and Amazon from unfair compensation deals with ISPs. The plan would have given the FCC authority to review agreements between your Internet provider and some of the net’s biggest traffic generators.

President Obama’s statement goes beyond Wheeler’s tolerance for “individualized, differentiated arrangements” that could let cable and phone companies offer compensated “preferred partnership” deals with websites and applications, granting them special treatment or exemptions from speed throttles or usage caps not available to others.

The president’s four principles for a free and open Internet represent “common-sense steps that reflect the Internet you and I use every day, and that some ISPs already observe:”

• No blocking. If a consumer requests access to a website or service, and the content is legal, your ISP should not be permitted to block it. That way, every player — not just those commercially affiliated with an ISP — gets a fair shot at your business;
• No throttling. Nor should ISPs be able to intentionally slow down some content or speed up others — through a process often called “throttling” — based on the type of service or your ISP’s preferences;
• Increased transparency. The connection between consumers and ISPs — the so-called “last mile” — is not the only place some sites might get special treatment. So, I am also asking the FCC to make full use of the transparency authorities the court recently upheld, and if necessary to apply net neutrality rules to points of interconnection between the ISP and the rest of the Internet;
• No paid prioritization. Simply put: No service should be stuck in a “slow lane” because it does not pay a fee. That kind of gatekeeping would undermine the level playing field essential to the Internet’s growth. So, as I have before, I am asking for an explicit ban on paid prioritization and any other restriction that has a similar effect.

The president also expressed a desire to see the same rules applied to mobile networks. That is a significant departure from the policies of the FCC under Wheeler’s predecessor Julius Genachowski, who served as chairman during the Obama Administration’s first term in office. His Net Neutrality policies exempted wireless carriers.

“The rules also have to reflect the way people use the Internet today, which increasingly means on a mobile device,” said the president. “I believe the FCC should make these rules fully applicable to mobile broadband as well, while recognizing the special challenges that come with managing wireless networks.”

[flv]http://www.phillipdampier.com/video/111014_NetNeutrality_Final.mp4[/flv]

President Barack Obama recorded this message supporting strong Net Neutrality protections for the Internet. (1:56)

Republicans in Congress and large telecommunications companies both immediately pounced on the president’s Net Neutrality plans.

Cruz

“Net Neutrality is Obamacare for the Internet,” tweeted Sen. Ted Cruz (R-Tex.) “The Internet should not operate at the speed of government.”

Cruz’s spokeswoman,  Amanda Carpenter, added that Net Neutrality would place the government “in charge of determining pricing, terms of service, and what products can be delivered. Sound like Obamacare much?”

The National Cable and Telecommunications Association expressed surprise over the president’s strong public support for Net Neutrality action.

“We are stunned the President would abandon the longstanding, bipartisan policy of lightly regulating the Internet and call for extreme Title II regulation,” the NCTA wrote. “The cable industry strongly supports an open Internet, is building an open internet, and strongly believes that over-regulating the fastest growing technology in our history will not advance the cause of Internet freedom. There is no dispute about the propriety of transparency rules and bans on discrimination and blocking. But this tectonic shift in national policy, should it be adopted, would create devastating results.”

“Heavily regulating the Internet will lead to slower Internet growth, higher prices for consumers, and the threat of excessive intervention by the government in the working of the Internet,” stated the NCTA release. “This will also have severe and profound implications internationally, as the United States loses the high ground in arguing against greater control of the Internet by foreign governments. There is no substantive justification for this overreach, and no acknowledgment that it is unlawful to prohibit paid prioritization under Title II. We will fight vigorously against efforts to impose this backwards policy.”

Sen. John Thune (R-S.D.) will assume the leadership of the Senate Commerce Committee in January.

The Republican takeover of the U.S. Senate could have profound implications on U.S. telecommunications law as Congress contemplates further deregulation of broadcasting, broadband, and telecom services while curtailing oversight powers at the Federal Communications Commission.

Sen. John Thune (R-S.D.), expected to assume leadership over the Senate Commerce Committee in January, has already signaled interest in revising the 1996 Communications Act, which was built on the premise that deregulation would increase competition in the telecommunications marketplace.

“Our staff has looked at some things we might do in the area of telecommunications reform,” Thune told Capital Journal.” That hasn’t been touched in a long time. A lot has changed. The last time that the telecom sector of the economy was reformed was 1996, and I think in that bill there was one mention of the Internet. So it’s a very different world today.”

Republicans have complained the 1996 Telecom Act is dependent on dividing up services into different regulatory sectors and subjecting them to different regulatory treatment. In the current Net Neutrality debate, for example, a major component of the dispute involves which regulatory sector broadband should be classified under — “an information service” subject to few regulations or oversight or Title 2, a “telecommunications service” that has regulatory protections for consumers who have few choices in service providers.

Republicans have advocated streamlining the rules and eliminating “broad prescriptive rules” that can have “unintended consequences for innovation and investment.” Most analysts read that as a signal Republicans want further deregulation across the telecom industry to remove “uncertainty for innovators.”

Republicans have been particularly hostile towards imposing strong Net Neutrality protections, particularly if it involves reclassification of broadband as a “telecommunications service” under Title 2 of the Communications Act. Most expect Thune and his Republican colleagues will oppose any efforts to enact Net Neutrality policies that open the door for stronger FCC regulatory oversight.

The move to re-examine the Communications Act will result in an enormous stimulation of the economy, if you happen to run a D.C. lobbying firm. Just broaching the subject of revising the nation’s telecommunications laws stimulates political campaign contributions and intensified lobbying efforts. From 1997-2004, telecommunications companies advocating for more deregulation spent more than $44 million in direct soft money and PAC donations — $18 million to Democrats, $27 million to Republicans. During the same period, eight companies and trade groups in the broadcasting, cable and telephone sector collectively spent more than $400 million on lobbying activities alone, according to Common Cause.

Reopening the Telecom Act for revision is expected to generate intense lobbying activity, as Congress contemplates subjects like eliminating or curtailing FCC oversight over broadband, how wireless spectrum is distributed to wireless companies, how many radio and television stations a company can own or control, maintaining or strengthening bans on community broadband networks, oversight of cable television packages, and compensation for broadcast stations vacating frequencies to make room for more cellular networks.

Common Cause notes ordinary citizens had little say over the contents of the ’96 Act and consumer group objections were largely ignored. When the bill was eventually signed into law by President Bill Clinton, its sweeping provisions affected almost every American:

Good times at K Street lobbying firms are ahead

BROADCASTING

1. The 96 Act lifted the limit on how many radio stations one company could own. The cap had been set at 40 stations. It made possible the creation of radio giants like Clear Channel, with more than 1,200 stations, and led to a substantial drop in the number of minority station owners, homogenization of playlists, and less local news. Today, few listeners can tell the difference between radio stations with similar formats, regardless of where they are located.
2. Lifted from 12 the number of local TV stations any one corporation could own, and expanded the limit on audience reach. One company had been allowed to own stations that reached up to a quarter of U.S. TV households. The Act raised that national cap to 35 percent. These changes spurred huge media mergers and greatly increased media concentration. Together, just five companies – Viacom, the parent of CBS, Disney, owner of ABC, FOX-News Corp., Comcast-NBC, and Time Warner now control 75 percent of all prime-time viewing.
3. The Act gave broadcasters, for free, valuable digital TV licenses that could have brought in up to $70 billion to the federal treasury if they had been auctioned off. Broadcasters, who claimed they deserved these free licenses because they serve the public, have largely ignored their public interest obligations, failing to provide substantive local news and public affairs reporting and coverage of congressional, local and state elections. Many television stations have discontinued local news programming altogether or have relied on partnerships with other stations in the same market to produce news programming for them. Most local television stations are now owned by out-of-state conglomerates that control dozens of television stations and now expect to be compensated by viewers watching them on cable or satellite television.
4. The Act reduced broadcasters’ accountability to the public by extending the term of a broadcast license from five to eight years, and made it more difficult for citizens to challenge those license renewals.

TELECOMMUNICATIONS

1. The 1996 Act preserved telephone monopoly control of their networks, allowing them to refuse new entrants who depend on telco infrastructure to sell their services.
2. The Act was designed to promote increased competition but also allowed major telephone companies to refuse to compete outside of their home territories. It also allowed Bell operating companies to buy each other, resulting in just two remaining major operators — AT&T and Verizon.

CABLE

1. The ’96 Act stripped away the ability of local franchising authorities and the FCC to maintain oversight of cable television rates. Immediately after the ’96 Act took effect, rate increases accelerated.
2. The Act permitted the FCC to ease cable-broadcast cross-ownership rules. As cable systems increased the number of channels, the broadcast networks aggressively expanded their ownership of cable networks with the largest audiences. In the past, large cable operators like Time Warner, TCI, Cablevision and Comcast owned most cable networks. Broadcast networks acquired much of their ownership interests. Ninety percent of the top 50 cable stations are owned by the same parent companies that own the broadcast networks, challenging the notion that cable is any real source of competition.

“Those who advocated the Telecommunications Act of 1996 promised more competition and diversity, but the opposite happened,” said Common Cause president Chellie Pingree back in 1995. “Citizens, excluded from the process when the Act was negotiated in Congress, must have a seat at the table as Congress proposes to revisit this law.”

Above all, the legacy of the 1996 Telecom Act was massive consolidation across almost every sector.

Over ten years, the legislation was supposed to save consumers $550 billion, including $333 billion in lower long-distance rates, $32 billion in lower local phone rates, and $78 billion in lower cable bills. But most of those savings never materialized. Indeed, Sen. John McCain (R-Ariz.), who opposed the legislation, noted in 2003: “From January 1996 to the present, the consumer price index has risen 17.4 percent … Cable rates are up 47.2 percent. Local phone rates are up 23.2 percent.”

Advocates of deregulation also promised the Act would create 1.4 million jobs and increase the nation’s Gross Domestic Product by as much as $2 trillion. Both proved wrong. Consolidation meant the loss of at least 500,000 “redundant” jobs between 2001-2003 alone, and companies that became indebted in the frenzy of mergers and acquisitions ended up losing more than $2 trillion in the speculative frenzy, conflicts of interest, and police-free zone of the deregulated telecom marketplace.

The consolidation has also drastically reduced the number of independent voices speaking, writing, and broadcasting to the American people. Today, just a handful of corporations control most radio and TV stations, newspapers, cable systems, movie studios, and concert ticketing and facilities.

The law also stripped away oversight of the broadband industry which faces little competition and has no incentive to push for service-enhancing upgrades, costing America’s leadership in broadband and challenging the digital economy. What few controls the FCC still has are now in the crosshairs of large telecom companies like AT&T, Comcast, and Verizon.

All are lobbying against institutionalized Net Neutrality, oppose community broadband competition, regulated minimum speed standards, and service oversight. AT&T and Verizon are lobbying to dismantle the rural telephone network in favor of their much more lucrative wireless networks.

Consumers Union predicted the outcome of the 1996 Telecom Act back in 2000, when it suggested a duopoly would eventually exist for most Americans, one dedicated primarily to telephone services (AT&T and Verizon Wireless’ mobile networks) and the other to video and broadband (cable). The publisher of Consumers Reports also accurately predicted neither the telephone or the cable company would compete head to head with other telephone or cable companies, and High Speed Internet would be largely controlled by cable networks using a closed, proprietary network not open to competitors.

Analysts suggest a 2015 Telecom Act would largely exist to further cement the status quo by prohibiting federal and state governments from regulating provider conduct and allowing the marketplace a free hand to determine minimum standards governing speeds, network performance, and pricing.

In fact, the most radical idea Thune has tentatively proposed for consideration in a revisit of the Act is his “Local Choice” concept to unbundle broadcast TV channels from all-encompassing cable television packages. His proposal would allow consumers to opt out of subscribing to one or more local broadcast television stations now bundled into cable television packages.

The majority of 3.7 million comments received by the FCC advocate strong and unambiguous Net Neutrality protections for the Internet, but that seems to have had little impact on FCC chairman Thomas Wheeler, who is laying the groundwork for a hybrid Net Neutrality Frankenplan that would marginally protect deep pocketed content producers while leaving few, if any, protections for consumers.

The Wall Street Journal reported late last week that Wheeler is considering a “hybrid” approach, separating broadband into two distinct services:

• Retail Broadband, sold to consumers, would continue as a broadly deregulated service, allowing ISPs to set prices and policies with little, if any, oversight. Wheeler’s plan would allow providers to freely implement usage-based pricing, establish paid fast lanes at the request of customers, and permit ISPs to continue exempting preferred content from usage pricing while charging customers extra to access content from “non-preferred partners;”
• Wholesale Broadband, the connection between your ISP and content producers, would be reclassified under Title II and subject to common carrier regulations, which would allow the FCC to police deals between your provider and services like Netflix.

Wheeler’s proposal would offer significant protection to wealthy content producers like Netflix, Amazon.com, broadcasters and Hollywood studios, but would leave consumers completely exposed to providers’ pricing tricks, usage caps/consumption billing, and paid fast lanes that could leave unpaid content vulnerable to network deterioration, especially during peak usage times.

Large telecommunications companies argue that deregulation promotes broadband investment and expansion to create world-class service. But years of statistics and comparisons with other countries suggest deregulation has not inspired sufficient competition to keep prices in check and force regular network upgrades. In fact, competition is much more robust at the wholesale level, while the majority of retail consumers have a choice of just one or two providers that receive almost no oversight. Those providers are now exercising their market power to further monetize broadband usage to boost profits and raise prices.

Wheeler’s proposal would ignore the wishes of more than three million Americans that want comprehensive Net Neutrality protections, as well as those of President Barack Obama, who has called for a ban on paid fast lanes. A senior White House official signaled Thursday the administration has concerns about Wheeler’s proposal, noting “the president has made it abundantly clear that any outcome must protect net neutrality and ban paid prioritization—and has called for all necessary steps to safeguard an open Internet.”

“This Frankenstein proposal is no treat for Internet users, and they shouldn’t be tricked,” consumer group Free Press CEO Craig Aaron said in a statement. “No matter how you dress it up, any rules that don’t clearly restore the agency’s authority and prevent specialized fast lanes and paid prioritization aren’t real Net Neutrality.”

Broadband providers don’t like Wheeler’s plan either. Verizon last week sent comments to the FCC warning any attempt to reclassify broadband under Title II “could not withstand judicial review.” Others, including the industry-backed U.S. Telecom Association, promised swift legal action against Wheeler’s proposal.

Aaron believes the last thing broadband needs is another “hybrid” plan.

“The FCC has already tried twice before to invent new classifications on the fly instead of clear rules grounded in the law,” Aaron said. “And twice their efforts have been rejected. This flimsy fabrication will be no different. And this approach will only serve to squander the political support of millions and millions of Americans who have weighed in at the agency asking for strong rules that will stand up in court.”

The Federal Trade Commission today filed a lawsuit against AT&T for its practice of subjecting grandfathered unlimited data customers to speed throttles that dramatically cut speeds up to 90 percent after customers use more than 3GB of data on AT&T’s 3G network or 5GB on its 4G network. Thus far, according to the FTC, AT&T has throttled at least 3.5 million unique customers a total of more than 25 million times.

The FTC’s complaint alleges that the company failed to adequately disclose to its customers on unlimited data plans that, if they reach a certain amount of data use in a given billing cycle, AT&T reduces – or “throttles” – their data speeds to the point that many common mobile phone applications – like web browsing, GPS navigation and watching streaming video –  become difficult or nearly impossible to use.

“AT&T promised its customers ‘unlimited’ data, and in many instances, it has failed to deliver on that promise,” said FTC Chairwoman Edith Ramirez. “The issue here is simple: ‘unlimited’ means unlimited.”

FCC chairman Thomas Wheeler publicly complained about Verizon’s plans to start a similar throttling program on its wireless network, questioning the fairness of cutting speeds for certain customers while exempting others. Both Verizon and AT&T have claimed speed throttles are part of a fair usage policy that allows all customers to share its wireless resources. Broadband providers have often painted a picture of a “bandwidth hog” taking a disproportionate share of network resources away from other customers, but there is no evidence heavier users are creating conflicts for other users, especially as wireless carriers encourage customers to use more data.

From AT&Ts website

The logic of rationing Internet use for unlimited customers while providing unlimited access to those willing to pay usage-based charges escaped the FTC, which is what brought the suit.

According to the FTC’s complaint, AT&T’s marketing materials emphasized the “unlimited” amount of data that would be available to consumers who signed up for its unlimited plans. The complaint alleges that, even as unlimited plan consumers renewed their contracts, the company still failed to inform them of the throttling program. When customers canceled their contracts after being throttled, AT&T charged those customers early termination fees, which typically amount to hundreds of dollars.

The FTC alleges that AT&T, despite its unequivocal promises of unlimited data, began throttling data speeds in 2011 for its unlimited data plan customers after they used as little as 2 gigabytes of data in a billing period. According to the complaint, the throttling program has been severe, often resulting in speed reductions of 80 to 90 percent for affected users.

According to the FTC’s complaint, consumers in AT&T focus groups strongly objected to the idea of a throttling program and felt “unlimited should mean unlimited.” AT&T documents also showed that the company received thousands of complaints about the slow data speeds under the throttling program. Some consumers quoted the definition of the word “unlimited,” while others called AT&T’s throttling program a “bait and switch.” Many consumers also complained about the effect the throttling program had on their ability to use GPS navigation, watch streaming videos, listen to streaming music and browse the web.

The complaint charges that AT&T violated the FTC Act by changing the terms of customers’ unlimited data plans while those customers were still under contract, and by failing to adequately disclose the nature of the throttling program to consumers who renewed their unlimited data plans.

FTC staff worked closely on this matter with the staff of the Federal Communications Commission.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Northern District of California, San Francisco Division.

The Federal Communications Commission announced Friday it will postpone an important spectrum auction until 2016 after broadcasters filed suit against the regulator challenging its proposed format.

The FCC wants your free, over-the-air television dial to be a lot smaller with a deal that will pay broadcasters to sign-off their channels for good to benefit the wireless industry. Remaining stations will be moved to VHF channels 2-13 and UHF channels 14-30. The spectrum covering UHF channels 31-51 would likely then be sold in pieces to major wireless carriers including AT&T, Verizon Wireless, Sprint, and/or T-Mobile.

To entice broadcasters to voluntarily switch off their transmitters, the FCC has designed a spectrum auction that would provide tens of millions in proceeds to smaller stations and up to $570 million for a UHF station in Los Angeles to get off the air. Technically, stations giving up their channels don’t have to sign-off — they can move to low/lower-powered broadcasting, share channel space with another television station on a digital subchannel, or move to cable television exclusively.

To sell stations on the deal, FCC Chairman Tom Wheeler hired Greenhill, a Wall Street investment bank, to prepare a presentation sent to every eligible television station in the country, encouraging them to sell their channels for some eye-popping proceeds:

(These numbers refer to full-power stations; in some markets there are also Class A stations, low-power stations that meet certain programming requirements. The estimated value of their spectrum is lower.)

Source: The FCC

There is so much money to be made buying and selling the public airwaves — at least twice as much as broadcasters originally anticipated– spectrum speculators have also jumped on board, snapping up low power television station construction permits and existing stations with hopes of selling them off the air in return for millions in compensation. Wireless customers are effectively footing the bill for the auction as wireless companies bid for the additional spectrum. Television stations will receive 85% of the proceeds, the FCC will keep 15%.

Major network-affiliated or owned stations in major cities are unlikely to take the deal. But in medium and smaller-sized markets where conglomerates own and operate most television stations, there is a greater chance some will be closed down, moved to a lower channel, or transferred to a digital sub-channel of a co-owned-and-operated station in the same city. The most  likely targets for shutdown will be independent, CW and MyNetworkTV affiliates. In smaller cities, multiple network affiliates owned by one company could be combined, relinquishing one or more channels in return for tens of millions in cash compensation.

In Los Angeles, the stakes are especially high with auction prices estimated at up to $570 million for a high-powered UHF station like KDOC-TV.

“There is some real money to be had,” Bert Ellis, chief executive of Ellis Communications, which owns KDOC-TV, told the Wall Street Journal. “I think every broadcaster should take a very close look at this.”

Estimates show at least 80 significant U.S. cities will likely lose one or more channels, especially when the bid price well exceeds the value of an independent, ethnic or religious station. Many of these will go dark, move to cable or a less desirable lower power VHF channel, or sign an agreement with a remaining station to carry its programming on a sub-channel.

The National Association of Broadcasters filed suit against the FCC’s auction in August. The NAB wants the FCC to guarantee that stations that wish to stay on the air will not have their coverage area reduced or forced to pay to move to a new channel number assigned by the FCC as the regulator “repacks” a much smaller UHF band.

“We’ve said from day one, if stations want to volunteer to go out of business, that’s their prerogative. But for those stations that choose to remain in business, they should be held harmless,” NAB spokesman Dennis Wharton said.

The spectrum auction is designed to address the wireless industry’s claim of a spectrum crisis, warning that if more frequencies are not found, wireless users will eventually see their service degraded.