Federal Communications Commission Chairman Ajit Pai's plan to toss out rules that prevent Internet service providers (ISPs) from blocking or throttling traffic and selling Internet fast lanes is at the center of a public firestorm over net neutrality.
While much of the regulatory framework governing network neutrality involves dry technocratic language about classifying broadband under either Title I or Title II of the Communications Act, the prospect of an ISP throttling someone's Neftlix (NFLX) - Get Report or YouTube streams resonates. Large ISPs such as Comcast (CMCSA) - Get Report and AT&T (T) - Get Report have said they do not plan to block or throttle accounts.
The proposed rules landed on the FCC web site Wednesday, and will face a vote by Pai and the other FCC commissioners on Dec. 14 (Pai and his supporters hold a majority so it's very likely the rules will pass). In place of an outright ban on blocking traffic and other anti-consumer activity, Pai favors a "transparency rule" that requires a broadband provider to disclose whenever it blocks or throttles content, or gives priority to certain traffic.
In addition, the Federal Trade Commission (FTC) would replace the FCC as the lead cop in determining whether a provider's actions were anti-competitive or anti-consumer. And Pai is also eliminating an open-ended "general conduct" rule that allowed the FCC to take action if it deemed an ISP to be harming consumers or companies that do business online.
Pai said the rules established by former FCC Chairman Tom Wheeler would inhibit innovation, and that the FTC's enforcement would take place only if an ISP actually did harm.
But former Wheeler adviser Gigi Sohn suggested that the FTC cannot do this enforcement job as well as the FCC.
"The FTC doesn't have expertise on how to manage networks," Sohn said. "That's what net neutrality is all about."
While Wheeler's rules sought to prevent carriers from blocking traffic in the first place, the FTC would have the authority to impose penalties only after a violation had occurred. "They are only going to be able to enforce a handful of cases, after the fact," Sohn added. "For a small company who is in the slow lane, that can mean the difference between survival and non-survival."
By issuing such a dramatic rewrite of the rules, Steptoe & Johnson LLP lawyer Pantelis Michalopoulos said, Pai is courting legal challenges.
"This is too abrupt a turn from the [FCC's existing] Open Internet rule, which increases the vulnerability of the Commission's action," said Michalopoulos, who has previously represented Internet industry groups in net neutrality litigation. "If the FCC had instead chosen different rules that are lighter than the ones currently in place, such an action would have been a little less vulnerable."
The FTC says that it has launched more than 500 cases involving consumer privacy and security. The cases range from spam and telemarketing to spyware, in off-line and online environments including social media, advertising technology and mobile communications.
"The FTC stands ready to protect broadband subscribers from anticompetitive, unfair, or deceptive acts and practices just as we protect consumers in the rest of the Internet ecosystem," acting Chairman Maureen Ohlhausen said in a statement on Tuesday.
However, FTC Commissioner Terrell McSweeny told the House Judiciary Committee earlier this month that the group's "backward-looking consumer protection and antitrust enforcement" cannot provide the same safeguards as the FCC's bright-line rules.
"While it is true that the FTC possesses a great deal of expertise in the areas of antitrust and consumer protection, it does not possess specialized subject-matter expertise in telecommunications, data network management practices, or in detecting instances of data discrimination," she said. "That expertise is housed at the FCC."
The FTC's antitrust tools are designed to protect and promote competition, McSweeny told the Judiciary Committee, while the broadband industry is mostly consolidated. "The majority of American consumers have little or no choice when it comes to wireline broadband," she said.
Pai's proposed rules went "much further than we ever could've imagined" in "dismantling virtually all of the important tenets of Net Neutrality itself," Craig Moffett and Michael Moffett of MoffettNathanson LLC wrote in a report on Wednesday.
"Under the proposed rules, broadband service providers would not only be given the right to charge higher rates for prioritization -- a controversial but arguably reasonable freedom that would enable a great many new services, particularly in health care -- but even to selectively degrade certain services at their own discretion," the analysts noted.
The move could push Congress to act. "[Y]esterday's reversal of Title II is so drastic that a conspiracy theorist would argue that it was specifically architected to create a crisis that Congress would feel compelled to address," Moffett and Moffett suggested.
Ultimately, Pai argues that bad publicity is a better tool than Wheeler's rules. "History demonstrates that public attention, not heavy-handed Commission regulation, has been most effective in deterring ISP threats to openness and bringing about resolution of the rare incidents that arise," his document states.
Bad publicity may also prove to be an effective deterrent for ISP regulations.
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Editors' pick: Originally published Nov. 22.