Policy

New Balance of ’Net Power

FCC gets ready to abolish rules on ISPs as edge providers such as Facebook, Netflix draw more scrutiny 12/04/2017 8:00 AM Eastern
Protesters gather outside a federal office building in Los Angeles on Nov. 28 to protest plans to roll back the FCC's network neutrality rules.
Credit: Ronen Troy/NeuPhoto/SIPA USA

WASHINGTON — Should the federal government regulate the Internet?

That single, simple question is spawning arguably a more voluminous response from American citizens than any other issue in the history of the Federal Communications Commission.

And yet, for all the attention given net neutrality, from the record number of comments to the commission to John Oliver’s ratings-smashing, FCC site-crashing rant — few beyond the big corporate interests fully understand what network neutrality means.

Advocates for net neutrality rules — operators of social-media platforms, advocacy groups and others — have said bright-line rules are needed to prevent internet-service providers from restricting or controlling web access for business purposes, or perhaps even political ends.

Fans of deregulation, led by Republican FCC chairman Ajit Pai, have said such rules have heretofore not been needed. Their argument: They hurt investment and innovation and are unnecessary because antitrust laws and enforceable pledges of good conduct by ISPs are sufficient protections.

In just 10 days, the FCC will vote on Pai’s sweeping deregulatory order, which essentially abolishes “net neutrality” regulations (still an ambiguous term for most). It’s just the regulator’s latest attempt to figure out how to approach a transformative technology that reaches into every corner of our lives, and to do so based on rules that were originally written in the days of the telegraph.

It will be at least the fourth attempt to get net neutrality right (see timeline), and it reflects the difficulty the FCC faces in using such archaic rules to harness a 21st century platform.

Because the future may have outstripped the FCC’s ability to interpret and reinterpret the will of Congress, factions on both sides are calling for both Republicans and Democrats to pass forward-thinking legislation and provide some badly needed regulatory certainty. On the scorched earth of the Beltway, though, common ground will be hard to find.

New Rules Won’t End the Fight
Despite all the chatter — both sides are launching massive public digital ad campaigns — one thing is clear: the Dec. 14 vote will be the beginning of more protests, lawsuits and a new regulatory view of cable companies, telcos and other ISPs, as well as so-called “edge providers,” websites such as Google, Facebook, Twitter or Netflix, which need ISPs to reach end users.

Pai made it clear that the gatekeeper mantle was shifting from ISPs (under terms set by his predecessor, Democrat Tom Wheeler, in 2015) to edge providers when he accused social-media firms of discriminating on the basis of viewpoint. He said that Twitter, not broadband providers, was a bigger threat to internet openness, and that he was trying to level the playing field.

It’s a fascinating turn of perspective for big cable operators, who once were considered the most lethal monopolies in media during the height of their power in the 1990s, but are now overshadowed in reach by Netflix, Facebook and other edge providers.

Pai’s deregulatory leveling drew many cheers from industry, but it also created a vacuum Congress will need to fill, if lawmakers can stop fighting long enough.

Pai signaled it was high time the government relinquished the rules from the previous administration after a couple of years of common carrier status that he, and those ISPs, say has depressed investment and innovation, but he has also long suggested he would welcome direction from Congress.

After all, Pai’s approach could be undone by the next chairman, whose approach could be undone again depending on the political will and winds. Most agree that the internet has become too central to the life of the country, and world, to be subject to a game of regulatory Ping-Pong.

Republican FCC member Michael O’Rielly suggested that the best course of action for the agency, and what it was doing in the order, was to “put things back the way they were and let Congress decide whether any further actions are justified.”

The “Restoring Internet Freedom” order was overtly billed as a back to the future moment, returning Internet regulation to the pre-Wheeler days of a light regulatory touch. But with the rise of connected Internet of Things (IoT) decvices, net-neutrality activists saw Pai’s plan as turning the keys to that new and expanding broadband kingdom over to ISP gatekeepers.

Title II fans were understandably apoplectic, given that rules explicitly prohibiting blocking, throttling and paid prioritization will be gone, replaced by a regime based on disclosure of network practices.

If an ISP’s practices are deemed anti-competitive, enforcement would be handled by the Justice Department or the Federal Trade Commission, not by the FCC.

ISPs, led by cable giant Comcast, are promising not to block or throttle, but paid prioritization is still very much on the table. Early on, Pai reversed the FCC’s finding that sponsored data plans — which allow providers to charge firms to “sponsor” a subscriber’s data use in specific cases — were likely a violation of net neutrality. The FCC chairman pointed out that such plans reduced prices for consumers, who get to access that content for free, and are a way to differentiate services.

It is hard to argue that Google does not prioritize access to content for a price, for example.

Some see the coming Dec. 14 vote on a final order as a SOPA/PIPA moment, a reference to the Internet backlash in 2012 that famously killed a bipartisan online privacy bill, the Stop Online Piracy Act (SOPA)/PROTECT IP Act (PIPA). Passions certainly seem to be running as high around the issue today, but there’s also much more confusion, as both sides claim the position of Internet “freedom” — and define the concept differently.

The debate has already turned ugly. Pro-Title II activists slammed Pai as out to kill the internet and cast him as a lackey for big telcos and cable companies. Then some extreme elements started tweeting death threats to his family, filling Reddit with posts attacking him, and protestors posted signs on his street calling out his children by name and saying their dad was murdering democracy in cold blood.

In May, John Oliver, host of the HBO satirical comedy series Last Week Tonight, had also “joked” that Pai looked like a weed whacker-wielding serial killer.

Several activist groups were quick to condemn the hate speech, saying protestors needed to stick to the issues.

Opponents Marshal Forces
Certainly the web denizens who flew to the command of Oliver the last time around are looking for a reprise of the SOPA/PIPA backlash and will again take to the internet to push back, as they did when they drove millions of comments to the FCC net neutrality docket.

Activists plan to protest at Verizon retail stores this week — Pai is a former lawyer for the telecom — and Evan Greer, campaign director at Worcester, Mass.-based digital-rights advocacy group Fight for the Future, said more than 200,000 calls were generated to Congress within the first 24 hours after the order was announced. “We’ve never seen numbers like this when it wasn’t part of a coordinated day of action,” Greer said.

But the chairman has two solid votes in Republican commissioners Michael O’Reilly and Brendan Carr, a former Pai aide.

Pai’s proposal was sufficiently sweeping that it prompted speculation that it was actually meant to spur action in Congress, where work on a bipartisan bill to clarify just what the FCC’s regulatory authority is has been slow. Those talks were said to be stalled over Democrats’ refusal to back off Title II as the requisite authority; the Republicans being just as dead set against Title II; and the general distrust among the political players in a toxic D.C. atmosphere.

MoffettNathanson principal and senior analyst Craig Moffett said the draft order “went much further than we ever could’ve imagined in not only reversing Title II, but in dismantling virtually all of the important tenets of net neutrality itself.“

But perhaps it should not have been so surprising. The move also squares with Pai’s long-held regulatory philosophy, as well as an approach to regulation proposed by President Donald Trump’s transition team, where the Federal Trade Commission and Justice Department assume authority over areas formerly overseen by the FCC.

Though consistency has not been a particular hallmark, Trump is on the record as saying Title II should be repealed. And Pai has long complained that Title II was the handiwork of former President Barack Obama more so than Wheeler, who initially proposed a non-Title II approach.

Leveling the Field
While some Senate Democrats — notably the beleaguered Al Franken of Minnesota — have been calling for net neutrality regulations to be applied to edge providers like Google and Facebook, Pai has instead leveled the playing field in the other direction.

“Ultimately, it’s hard to clamp down on ISPs while gray-area corporations like Google and Facebook continue to operate with relatively little oversight or restriction,” said Jameson Zimmer, operator of website BroadbandNow, which provides data on ISPs, their plans and prices. Zimmer said he thinks ISPs will take a page from those edge providers.

Pai’s order, to some, felt much like a seminal moment in the history of network regulation. He appeared to make that clear last week, saying it was edge providers like Twitter who were discriminating based on viewpoints, citing conservative ones. He said edge providers were a bigger threat to the open internet than ISPs and talked about the need to level the playing field.

Edge providers, once the garage-startup darlings, have become the power players no longer immune from talk of reigning in that power through government action.

Revelations about how advertisements on social-media platforms were used by Russia to interfere in the 2016 election put an even brighter spotlight on edge provider conduct. But ISPs and others had already been trying to refocus the government’s attention on those power players.

Pai’s sweeping deregulation will put ISPs and edge providers on a similar regulatory footing, free to adopt various models for monetizing their businesses as long as the government does not conclude they are anticompetitive.

That means that any efforts to legislate new rules on how content will be treated will be hard-pressed not to include firms such as Google and Facebook.

They may have started in garages or dormitories, but the combined market capitalization of edge providers dwarfs that of ISPs, and the degree to which the wield power over what web surfers see, in terms of content and advertising, means they will not be able to escape the scrutiny of a Pai FCC.

Former FCC chairman Wheeler’s forward, and fallback, position was that it was ISPs who were the big threat. Even presented with the size and scale of a Google — whose goal is to amass all the information in the world — the argument is that there is little competition for access, while web surfers don’t have to use Google or be on Facebook.

Pai clearly sees it very differently. Edge providers have gotten a virtual pass, critics have said, because of the veneer of the garage startup hagiography and partly because of powerful edge provider lobbying at a time — over the past eight years — when the web was morphing into the transformative force it has become.

The result has been that while Amazon and Google and Facebook together dwarf the ISPs, Washington has not seemed to catch on, at least from the vantage of the providers.

Putting ISPs and edge providers on the same general regulatory, or deregulatory, footing, as the FCC has done, will make it harder to treat them so differently.

Tom Larsen, senior vice president of government and public relations at MSO Mediacom Communications, expressed what is a general industry frustration with that bifurcated view in an interview for C-SPAN’s The Communicators series. “I tend to look at things very simply,” he told C-SPAN’s Peter Slen. “I follow the money. If you look at who makes the most money out of the internet ecosystem, it is obviously the edge providers.”

Travis LeBlanc, the Wheeler FCC’s Title II enforcer who is now a partner at Washington, D.C., law firm Boies Schiller Flexner LLP, agreed that more regulation of edge providers is in the cards. “Do I think we will reach a point where the U.S. realizes it needs to regulate ISPs as well as very substantial platforms that are virtual pipes [the Googles and Facebooks and Amazons] as opposed to the actual pipes? Yes, we are likely to see that.”

He said the recent hearings around Russian election meddling signal that Washington is gearing up to have that conversation about the degree free-market principles should be able to control the rules around the Internet. He said some edge platforms can communicate with “way more people” than any ISP has access to. But LeBlanc said he would not “begin to suggest” that ISPs and edge providers should get equal regulatory treatment. He said it was more a case of two distinct entities that need to be regulated, but not necessarily with the same rules.

For instance, he said, there are a lot of differences between Facebook and Comcast. First and foremost, he said, no consumer pays a monthly subscription to Facebook. Facebook also only has a window on a user’s online activity, while an ISP has a window into all of a subscriber’s apps and services.

It would be a mistake to assume that Congressional Democrats are simply falling in line behind edge providers and for a continued bifurcated regulatory approach.

A top Hill Democratic aide, speaking not for attribution, said of a cancelled network neutrality hearing where Republicans wanted to hear from the CEOs of Google, Amazon and Facebook, that those companies don’t speak for Democrats. That might be the reason Democrats offered their own list of witnesses that featured smaller players, rather than “a bunch of rich white guys,” he said.

If Republicans and Democrats get serious about net-neutrality legislation — and Republicans have been sounding like they are willing to talk — look for edge providers to be part of the conversation. In the meantime, ISPs will be free to experiment with new business models, as have edge providers, under the presumably watchful eye of the FTC and Justice Department.

TIMELINE: Mileposts on the Road to ‘Restoring Internet Freedom’
1999: FCC chair William Kennard tells the San Francisco Chronicle the government must exercise “vigilant restraint” toward internet regulation.
2000: FCC chair Michael Powell classifies cable modem service as an information service.
2003: Law professor Tim Wu coins the phrase “net neutrality.”
2004: FCC chair Michael Powell introduces his four internet freedoms.
2005: In Brand X decision, the Supreme Court upholds information service classification for cable broadband service; FCC extends classification to phone broadband.
2005: New FCC chairman Kevin Martin essentially codifies Powell’s freedoms as FCC guidance.
2005: AT&T CEO Ed Whitacre signals edge providers are freeloaders on networks that his company built and needs to monetize.
2008: The FCC, with Republican Martin joining Democrats, says Comcast violates guidance by slowing BitTorrent traffic; Comcast appeals.
2010: Comcast sues FCC over BitTorrent decision. FCC loses, with court saying guidelines were unenforceable.
2010: FCC chairman Julius Genachowski strikes a deal with most ISPs over compromise Open Internet rules that are not based on Title II.
2011: Verizon sues FCC over rules.
2014: Court overturns 2010 order, but signals FCC can come up with different approach to regulate the internet.
2014: FCC chairman Tom Wheeler signals a non-Title II “different approach” to reinstating the rules.
2014: President Barack Obama posts an online video saying the FCC should reclassify ISPs under Title II of the Communications Act.
2015: Wheeler says Title II it is.
2016: Title II-based Open Internet order passes; ISPs sue; court upholds FCC’s decision; appealed to Supreme Court.
2017: In April, Pai announces plan to roll back Title II.
2017: FCC circulates November order to both roll back Title II and eliminate most net neutrality rules. Schedules Dec. 14 vote.

SOURCE: Multichannel News research

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