Thune

The House and Senate today held back-to-back hearings on the issue of adopting a Republican alternative to the president’s idea of Net Neutrality.

After the president directly addressed his support of strong Net Neutrality protections, FCC chairman Thomas Wheeler indicated he intended to act on the issue next month. Now many Republican legislators have changed their original view that Net Neutrality was “a solution in search of a problem” into a high priority agenda item demanding immediate attention, hoping to cut off Wheeler’s regulatory solution with new legislation.

That came in the form of a proposed new bill to define the principles of Net Neutrality from Sen. John Thune (R-S.D.) and Rep. Fred Upton (R-Mich.).

“By turning the FCC away from a heavy-handed and messy approach to regulating the Internet, this draft protects both consumers who rely on Internet services and innovators who create jobs,” Thune wrote in a statement.

Both hearings were stacked against reclassification of broadband under Title II to assure strong Net Neutrality principles, including three witnesses formerly with the FCC that have moved into industry advocacy jobs.

(Image courtesy: Steve Rhodes)

Former FCC chairman Michael Powell is today America’s top cable lobbyist. Meredith Baker quickly left the FCC in 2011 after voting in favor of the Comcast-NBC merger deal, taking a lucrative position at Comcast before moving on to become the country’s top wireless industry lobbyist. Robert McDowell left the FCC in 2013 to take a job at the same law firm hired by Comcast to successfully challenge the FCC’s authority to fine the cable company over its past speed throttling practices. Today, McDowell’s employer also represents the interests of AT&T and Verizon.

Other witnesses testifying included Dr. Nicol Turner-Lee from the Multicultural, Media, Telecom & Internet Council, which claims to be a civil rights organization but in fact receives the bulk of its funding from corporate interests, including large telecom companies. It often advocates for the corporate agendas of its sponsors, including opposition to Title II reclassification and past support for the failed AT&T-T Mobile merger deal.

Tom Simmons, senior vice president of public policy for small cable operator Midcontinent Communications also appeared, opposing strong Net Neutrality policies. Simmons said that once the company explained Title II reclassification and how it would increase customers’ cable bills, support for Net Neutrality diminished.

Just two witnesses testified on behalf of consumer interests. Gene Kimmelman, president of Public Knowledge strongly advocated for Title II reclassification of broadband and Paul Misener, vice president of Global Public Policy for Amazon.com strongly opposed Internet fast lanes and other traffic manipulation practices.

The New York Times today reported that the Republicans may have an increasingly uphill fight with some of their own traditional supporters to push through legislation Internet activists claim is riddled with company-friendly loopholes.

“The libertarian conservative base is pretty astute at recognizing crony capitalism and understand how campaign finance and corporate influence affects policy,” said David Segal, executive director of Demand Progress, a Net Neutrality advocacy group. “And this is a pretty transparent moment for all that.”

D.C.’s perpetually revolving door keeps on spinning.

A former Republican member of the Federal Communications Commission is calling on the federal agency to stop consideration of strong Net Neutrality rules and defer to a Republican drafted bill that would dramatically weaken Open Internet protections.

Robert McDowell said the FCC should defer to Congress and avoid adopting a “Depression era law designed to regulate phone monopolies” as the foundation for Net Neutrality enforcement.

“While Republicans and Democrats try to work out a deal, FCC Chairman Tom Wheeler should hit the pause button on next month’s vote and let the elected representatives of the American people try to find common ground,” he wrote in a Wall Street Journal op-ed Monday. “At the end of this constitutional process, all sides may be able to claim victory. It’s time to consider a different path — one that leads through Congress — to end the Net Neutrality fiasco. Although the legislative process can be perilous, Congress can provide all sides with a way out.”

McDowell’s comments fall tightly in line with the fierce lobbying campaign against Net Neutrality being run by companies like Comcast and AT&T.

That may not be surprising considering McDowell’s trip through the notorious “D.C. Revolving Door,” where ex-government employees go to work on behalf of the industries they formerly regulated.

McDowell

After retiring from the FCC, McDowell landed a position with the law firm Wiley Rein LLP, a corporate favorite for litigation against government oversight and regulatory public policies. It was Wiley Rein LLP that represented Comcast in 2010, successfully arguing the FCC had no right to oversee Comcast’s Internet service under the Section 706 “information service” framework still at issue today.

The D.C. Circuit unanimously ruled, “the Commission failed to tie its assertion of ancillary authority over Comcast’s Internet service to any ‘statutorily mandated responsibility,'” a long-winded way to say that the FCC’s reliance on its limited authority to oversee broadband as an “information service” in reality gave the FCC almost no right of oversight at all.

Ironically, that case is what prompted Internet activists to demand the FCC reclassify broadband as a “telecommunications service” under Title II to give the FCC the authority it needs to oversee broadband providers, exactly what McDowell does not want.

The ruling (emphasis ours):

Turning to ancillary authority, the Court rejected each of the statutory provisions on which the Commission relied.  Relying on a number of Supreme Court precedents, the Court held that “policy statements alone cannot provide the basis for the Commission’s exercise of ancillary authority,” id. at 22, and thus rejected the Commission’s reliance on Section 230(b) and Section 1 of the Communications Act and Section 706 of the Telecommunications Act of 1996.  The Court explained that allowing congressional policy to create “statutorily mandated responsibilities” sufficient to support the exercise of ancillary authority “would virtually free the Commission from its congressional tether.” Id. at 23.  The Court then rejected the remaining statutory provisions that “at least arguably delegate regulatory authority to the Commission,” id. at 16, on a variety of substantive and procedural grounds, including waiver.

Few media sources have bothered to disclose that McDowell’s new employer counts among its current clients two of the biggest Net Neutrality foes in the industry: AT&T and Verizon.

Thune

When Sen. John “Net Neutrality is unjustified” Thune (R-S.D.) and Rep. Fred “Net Neutrality is a solution in search of a problem” Upton (R-Mich.) last week magically became Internet activists ready to solve the Net Neutrality issue with an “unambiguous” bill to “protect Americans” from greedy ISPs, you will pardon me if I am just a tad suspicious.

The two Republicans who champion “less government regulation is better” and “let the marketplace decide for itself”-principles are proposing new legislation that will regulate the conduct of Internet Service Providers, claiming it will tie their hands and prevent the launch of Internet fast lanes and ban traffic degradation.

The two legislators are traveling in a fast lane of their own — hurrying to schedule hearings, mark up a bill, and speed it to the floor for consideration by the end of this month. That’s a marked departure for the U.S. Congress-as-usual, the one that can’t manage to pass virtually anything, much less in a hurry. So where is the fire?

It is at the Federal Communications Commission in Washington, scheduled to vote on its own new Net Neutrality proposal by the end of February. Thune and Upton are hoping to launch a pre-emptive strike against the anticipated strong Open Internet protections the FCC will probably enact on a party line vote. The FCC is likely to pursue a reclassification of broadband away from the lobbyist-lovin’, largely deregulated “information service” it is today towards a “telecommunications service” under Title II of the Communications Act. That represents Comcast’s worst nightmare.

Current FCC rules have allowed traffic shenanigans from ISPs like Comcast that don’t mind slowing their customers’ Netflix experience to a crawl until the streaming company opens its checkbook. The FCC’s anticipated new proposal would strictly forbid any creative end-runs around the concept of paid fast lanes Comcast can get away with today.

The proposed Republican alternative suggests a “third way” compromise only Comcast and AT&T could love. While ostensibly banning intentional interference with Internet traffic, the two legislators include a Grand Canyon-sized loophole in the form of one word you could fly an Airbus A380 through: reasonable

SEC. 13. INTERNET OPENNESS.

(a) OBLIGATIONS OF BROADBAND INTERNET ACCESS SERVICE PROVIDERS.—A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged (1) may not block lawful content, applications, or services, subject to reasonable network management; may not prohibit the use of non-harmful devices, subject to reasonable network management; may not throttle lawful traffic by selectively slowing, speeding, degrading, or enhancing Internet traffic based on source, destination, or content, subject to reasonable network management; may not engage in paid prioritization; and shall publicly disclose accurate and relevant information in plain language regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings, except that a provider is not required to publicly disclose competitively sensitive information or information that could compromise network security or undermine the efficacy of reasonable network management practices.

No ISP has ever declared its own traffic management policies unreasonable, so whatever they do, in their minds, is “reasonable” by definition.

Upton

The proposed bill would keep Net Neutrality far away from the critical Title II foundation it needs — essential armor that will help withstand inevitable court challenges by providers outraged by the government’s attempt to interfere with their free speech rights (at the expense of their customers’ freedom from content-killing traffic slowdowns).

The concept of “network management” is Play-Doh in Comcast and AT&T’s hands. It could mean balancing traffic by adding more capacity as needed or implementing a “fair access policy” that rations inadequate capacity. Both could easily be called “reasonable” by them. Customers paying for 25Mbps and getting 6Mbps during the evenings may think otherwise.

But no worries, the Republicans’ plan requires ISPs to disclose exactly how they are undercutting the broadband service you paid good money to receive. They claim that will give you an “informed choice,” except for many Americans, there is no choice.

The FCC’s plan is much more likely to stop to the tricks, traps, and traffic manipulation in whatever form arises now or in the future. It uses well-established precedent that is unlikely to be thrown out by the courts, delivers real oversight desperately needed in the monopoly/duopoly broadband marketplace, and will actually protect consumers.

The Republican alternative primarily protects AT&T, Comcast, and their chances of getting more campaign contributions from their friends in the cable and phone business. In short, it isn’t worth your time, and you should tell your member of Congress it isn’t worth theirs either.

Wheeler

The chairman of the Federal Communications Commission has foreshadowed his revised plan for Net Neutrality will include reclassification of broadband as a utility, allowing the agency to better withstand future legal challenges as it increases its oversight of the Internet.

Tom Wheeler’s latest comments came during this week’s consumer electronics show in Las Vegas. Wheeler stressed he supports reclassification of broadband, away from its current definition as an “information service” subject to Section 706 of the Telecom Act of 1996 (all two broadly written paragraphs of it) towards a traditional “telecommunications service.” Under the Communications Act of 1934, that would place broadband under Title II of the FCC’s mandate. Although at least 100 pages long, Title II has stood the test of time and has withstood corporate lawsuits and challenges for decades.

Section 706 relies almost entirely on competition to resolve disputes by allowing the marketplace to solve problems. The 1996 Telecom Act, signed into law by President Bill Clinton, sought to promote competition and end “barriers to infrastructure investment.” Broadly written with few specifics, large telecom companies have successfully argued in court that nothing in Section 706 gives the FCC the right to interfere with the marketing and development of their Internet services, including the hotly disputed issues of usage caps, speed throttling, and the fight against paid fast lanes and Internet traffic toll booths. In fact, the industry has argued increased involvement by the FCC runs contrary to the goals of Section 706 by deterring private investment.

An executive summary of a report published on the industry-funded Internet Innovation Alliance website wastes no time making that connection, stating it in the first paragraph:

Net neutrality has the potential to distort the parameters built into operator business cases in such a way as to increase the expected risk. And because it distorts the operator investment business decision, net neutrality has the potential to significantly discourage infrastructure investment. This is due to the fact that investments in infrastructure are highly sensitive to expected subscriber revenue. Anything that reduces the expectation of such revenue streams can either delay or curtail such investments.

Unfortunately for consumers, even the chairman of the FCC concedes the broadband marketplace isn’t exactly teeming with the kind of competition Section 706 envisioned to keep the marketplace in check. In fact, Wheeler suggested most Americans live with a broadband duopoly, and often a monopoly when buying Internet access at speeds of 25Mbps or greater. Further industry consolidation is already underway, which further deters new competitors from entering the market.

Net Neutrality critics, the broadband industry, and their allies on Capitol Hill have argued that adopting Title II rules for broadband will saddle ISPs with at least one hundred pages of rules originally written to manage the landline telephone monopoly of the 1930s. Title II allows the FCC to force providers to charge “just and reasonable rates” which they believe opens the door to rate regulation. It also broadly requires providers to act “in the public interest” and unambiguously prohibits companies from making “any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services.”

Both Comcast and Verizon have challenged the FCC’s authority to regulate Internet services using Section 706, and twice the courts have ruled largely in favor of the cable and phone company. Judges have no problem permitting the FCC to enforce policies that encourage competition, which has allowed the FCC some room to insist that whatever providers choose to charge customers or what they do to manage Internet traffic must be fully disclosed. The court in the Verizon case also suggested the FCC has the authority to oversee the relationship between ISPs and content providers also within a framework of promoting competition.

DC Circuit Court

But when the FCC sought to enforce specific policies governing Internet traffic using Section 706, they lost their case in court.

Although Net Neutrality critics contend the FCC has plenty of authority to enforce Net Neutrality under Section 706, in reality the FCC’s hands are tied as soon as they attempt to implement anti-blocking and anti-traffic discrimination rules.

The court found that the FCC cannot impose new rules under Section 706 that are covered by other provisions of the Communications Act.

So what does that mean, exactly?

Michael Powell, former FCC chairman, is now the chief lobbyist for the National Cable & Telecommunications Association. (Photo courtesy: NCTA)

In 2002, former FCC chairman Michael Powell (who serves today as the cable industry’s chief lobbyist) presided over the agency’s decision to classify broadband not as a telecommunications service but an “information service provider” subject to Title I oversight. Whether he realized it or not, that decision meant broadband providers would be exempt from common carrier obligations as long as they remained subject to Title I rules.

When the FCC sought to write rules requiring ISPs not block, slow or discriminate against certain Internet traffic, the court ruled they overstepped into “common carrier”-style regulations like those that originally prohibited phone companies from blocking phone calls or preventing another phone company from connecting calls to and from AT&T’s network.

If the FCC wanted to enforce rules that mimic “common carrier” regulations, the court ruled the FCC needed to demonstrate it had the regulatory authority or risk further embarrassing defeats in the courtroom. The FCC’s transparency rules requiring ISPs to disclose their rates and network management policies survived Verizon’s court challenge because the court found that policy promoted competition and did not trespass on regulations written under Title II.

The writing on the wall could not be clearer: If you want Net Neutrality to survive inevitable court challenges, you need to reclassify broadband as a telecommunications service under Title II of the Communications Act.

Major ISPs won’t hear of it however and have launched an expensive media blitz claiming that reclassification would subject them to 100 pages of regulations written for the rotary dial era. Broadband, they say, would be regulated like a 1934 landline. Some have suggested the costs of complying with the new regulations would lead to significant rate increases as well. Many Republicans in Congress want the FCC to wait until they can introduce and pass a Net Neutrality policy of their own, one that will likely heavily tilt in favor of providers. Such a bill would likely face a presidential veto.

Suggestions the FCC would voluntarily not impose outdated or irrelevant sections of Title II on the broadband industry didn’t soothe providers or their supporters. Republican FCC commissioners are also cold to the concept of reclassification.

O’Rielly

“Title II includes a host of arcane provisions,” said FCC commissioner Michael O’Rielly in a meeting in May 2014. “The idea that the commission can magically impose or sprinkle just the right amount of Title II on broadband providers is giving the commission more credit than it ever deserves.”

Providers were cautiously optimistic in 2014 they could navigate around strong Net Neutrality enforcement with the help of their lobbyists and suggestions that an industry-regulator compromise was possible. Early indications that a watered-down version of Net Neutrality was on the way came after a trial balloon was floated by Wheeler last year. Under his original concept, paid fast lanes and other network management and traffic manipulation would be allowed if it did not create undue burdens on other Internet traffic.

Net activists loudly protested Wheeler’s vision of Net Neutrality was a sellout. Wheeler’s vision was permanently laid to rest after last November when President Barack Obama suddenly announced his support for strong and unambiguous Net Neutrality protections (and reclassifying broadband as a Title II telecommunications service), No FCC chairman would likely challenge policies directly advocated by the president that nominated him.

Obama spoke, Thomas Wheeler listened. Wheeler’s revised Net Neutrality plan is likely to arrive on the desks of his fellow commissioners no later than Feb. 5, scheduled for a vote on Feb. 26. It’s a safe bet the two Republicans will oppose the proposal and the three Democrats will support it. But chairman Wheeler also listens to Congress and made it clear he doesn’t have a problem deferring to them if they feel it necessary.

“Clearly, we’re going to come out with what I hope will be the gold standard,” Wheeler told the audience in Las Vegas. “If Congress wants to come in and then say, we want to make sure that this approach doesn’t get screwed up by some crazy chairman that comes in, [those are] legitimate issues.”

If that doesn’t work, the industry plans to take care of the Net Neutrality regulation problem itself. Hours after any Net Neutrality policy successfully gets approved, AT&T has promised to challenge it in court.

[flv]http://www.phillipdampier.com/video/Fox Business News Net Neutrality Wheeler 1-8-15.flv[/flv]

Free Press CEO Craig Aaron appeared on Fox Business News to discuss Tom Wheeler’s evolving position on Net Neutrality. (3:54)

AT&T CEO Randall Stephenson’s public hissy fit against the Obama Administration’s sudden backbone on Net Neutrality may complicate AT&T’s plans to win approval of its merger with DirecTV. forcing AT&T to retract threats to suspend fiber buildouts if the administration moves forward with its efforts to ban Internet fast lanes.

Hours after Stephenson told investors AT&T wouldn’t continue with plans to bring U-verse with GigaPower fiber broadband to more cities as long as Net Neutrality was on the agenda, the FCC requested clarification about exactly what AT&T and its CEO was planning. More importantly, it noted responses would become part of the record in its consideration of AT&T’s proposed acquisition of the satellite television provider. The regulator could not send a clearer message that Stephenson’s statements could affect the company’s $48.5 billion merger deal.

AT&T responded – four days after the FCC’s deadline – in a three-page letter with a heavily redacted attachment that basically told the Commission it misunderstood AT&T’s true intentions:

The premise of the Commission’s November 14 Letter is incorrect. AT&T is not limiting our FTTP deployment to 2 million homes. To the contrary, AT&T still plans to complete the major initiative we announced in April to expand our ultra-fast GigaPower fiber network in 25 major metropolitan areas nationwide, including 21 new major metropolitan areas. In addition, as AT&T has described to the Commission in this proceeding, the synergies created by our DIRECTV transaction will allow us to extend our GigaPower service to at least 2 million additional customer locations, beyond those announced in April, within four years after close.

Although AT&T is willing to say it will deliver improved broadband to at least “15 million customer locations, mostly in rural areas,” it is also continuing its fiber shell game with the FCC by not specifying exactly how many of those customers will receive fiber broadband, how many will receive an incremental speed upgrade to their existing U-verse fiber/copper service, or not get fiber at all. AT&T routinely promises upgrades using a mix of technologies “such as” fiber to the home and fixed wireless, part of AT&T’s broader agenda to abandon its rural landline service and force customers to a much costlier and less reliable wireless data connection. It isn’t willing to tell the public who will win fiber upgrades and who will be forced off DSL in favor of AT&T’s enormously profitable wireless service.

Your right to know… undelivered. AT&T redacted information about its specific fiber plans.

Fun Fact: AT&T is cutting its investment in network upgrades by $3 billion in 2015 and plans a budget of $18 billion for capex investments across the entire company in 2015 — almost three times less than what AT&T is ready to spend just to acquire DirecTV.

The FCC was provided a market-by-market breakdown of how many customers currently get U-verse over AT&T’s fiber/copper “fiber to the neighborhood” network and those already getting fiber straight to the home. But this does not tell the FCC how many homes and businesses AT&T intends to wire for GigaPower — its gigabit speed network that requires fiber to the premises. Indeed, AT&T would only disclose how many homes and businesses it plans to provide with traditional U-verse using a combination of fiber and copper wiring — an inferior technology not capable of the speeds AT&T repeatedly touts in its press releases.

That has all the makings of an AT&T Fiber Snow Job only Buffalo could love.

AT&T also complained about the Obama Administration’s efforts to spoil AT&T’s fast lane Money Party:

At the same time, President Obama’s proposal in early November to regulate the entire Internet under rules from the 1930s injects significant uncertainty into the economics underlying our investment decisions. While we have reiterated that we will stand by the commitments described above, this uncertainty makes it prudent to pause consideration of any further investments – beyond those discussed above – to bring advanced broadband networks to even more customer locations, including additional upgrades of existing DSL and IPDSL lines, that might be feasible in the future under a more stable and predictable regulatory regime. To be clear, AT&T has not stated that the President’s proposal would render all of these locations unprofitable. Rather, AT&T simply cannot evaluate additional investment beyond its existing commitments until the regulatory treatment of broadband service is clarified.

AT&T’s too-cute-by-half ‘1930s era regulation’ talking point, also echoed by its financially tethered minions in the dollar-a-holler sock-puppet sector, suggests the Obama Administration is seeking to regulate AT&T as a monopoly provider. Except the Obama Administration is proposing nothing of the sort. The FCC should give AT&T’s comments the same weight it should give its fiber commitments — treat them as suspect at best. As we’ve written repeatedly, AT&T’s fabulous fiber future looks splendid on paper, but without evidence of spending sufficient to pay for it, AT&T’s piece of work should be filed under fiction.