FCC Net neutrality update: U.S. Telecoms say reclassification will be ‘crushing’ to industry

In the past few years, the powerful companies that run the Internet have challenged Net neutrality by allowing some content creators to pay a premium for prioritized access and other perks. They claim the money creates an incentive to invest in faster infrastructure; Net neutrality advocates claim it endangers the open Internet we’ve always known up until now.

Updated on 05-01-2015 by Malarie Gokey: Added U.S. telecoms’ attempts to block key parts of the Net neutrality rules. Go to page five for all the info.

After much ado, the FCC finally voted on the issue of Net neutrality on February 26, passing chairman Tom Wheeler’s proposal in a 3-2 vote. Both of the agency’s Democratic Commissioners Jessica Rosenworcel and Mignon Clyburn voted alongside Wheeler to approve the proposal which will reclassify broadband as a utility under Title II of the Communications Act, among other things. The full text of the ruling is now available on the FCC’s website.

“Today, the Commission — once and for all — enacts strong, sustainable rules, grounded in multiple sources of legal authority, to ensure that Americans reap the economic, social, and civic benefits of an Open Internet today and into the future,” The FCC said in a press release. “These new rules are guided by three principles: America’s broadband networks must be fast, fair and open — principles shared by the overwhelming majority of the nearly 4 million commenters who participated in the FCC’s Open Internet proceeding.”

The two Republican Commissioners notably opposed the idea, citing concerns for free market competition and over regulation.

Commissioner Ajit Pai accused the FCC of doing an “about-face,” on the issue of Net neutrality, and placed the blame squarely on the president’s shoulders. “We are flip-flopping for one reason and one reason only: President Obama told us to do so,” Pai said.

For his own part, Wheeler defended the move to reclassify broadband as a utility on the grounds that companies have abused the openness of the Internet before, and they will do it again, if left unchecked.

“No one … should control free and open access to the Internet,” Wheeler said before the voting commenced. “It’s the most powerful and pervasive platform on the planet. The Internet is too important to allow broadband providers to make the rules.”

In addition to placing broadband under the umbrella of Title II, the new Net neutrality rules include mobile carriers in the same boat as traditional Internet Service Providers (ISPs), as well as eliminate Internet fast-lanes and paid prioritization. You can see the whole conversation on the FCC’s website.

For more information on what the new rules will do to ensure that the Internet stays open, go to page four. If you want to know what Title II is and how it relates to Net neutrality, go to the next page.

Here’s what it all means and how it affects you.

Next Page: What is Title II?

What is Title II?

Title II first came into being with the Communications Act, which was passed in 1934 to establish the Federal Communications Commission and end AT&T’s monopoly over customers. Among other things, Title II banned companies from participating in “unjust or unreasonable discrimination” when it came to providing phone services to customers.

Essentially, Title II was created to ensure that no customer would ever be denied the service they requested, so long as they are willing to pay for it. In other words, if you pay for unlimited 4G LTE data, your carrier can’t throttle your data speeds after you’ve used 5GB. To most customers, Title II may seem like common sense, so why are Internet Service Providers (ISPs) and mobile carriers against the reclassification of broadband as a utility?

These companies mainly fear Section 201 of Title II, which would grant the FCC authority to set prices for services. ISPs argue that if the FCC set rates too low, they would be unable to invest in building up their networks, strengthening signals, and adding new, innovative technologies. However, FCC Chairman Tom Wheeler explicitly stated in his proposal that the FCC will not set tariffs or have any control over how much ISPs charge for their services.

Wheeler also overhauled Title II to ensure that any antiquated language from the 81-year-old law is removed or altered to suit the modern needs of today’s Internet regulators. Part of the retrofitting of Title II included deciding which parts of the law are now irrelevant. It turns out that the FCC stripped out more than 700 parts of Title II to make it apply to modern-day needs.

“This is a Title II tailored for the 21st century, and consistent with the ‘light-touch’ regulatory framework that has facilitated the tremendous investment and innovation on the Internet,” the FCC wrote. “We expressly eschew the future use of prescriptive, industry-wide rate regulation.”

The FCC added that it believes the revamped Title II law will ensure that the Internet remains open to consumers without fettering ISPs and carriers with undue regulation.

Next page: How will the FCC’s proposal keep the Internet open?

How will the FCC’s proposal keep the Internet open?

Wheeler’s proposal reclassifies ISPs as “common carriers,” and as such, they’ll be subject to the agency’s authority. Previously, the FCC tried what is known as a “light touch” when it came to regulating the Internet, but once broadband is placed under Title II, the agency will be able to use a “heavy touch” when intervention is necessary.

“We anticipate that many disputes that will arise can and should be resolved by the parties without Commission involvement,” the FCC explains in the full text of the new rules. “We encourage parties to resolve disputes through informal discussions and private negotiations, but to the extent these methods are not practical, the Commission will continue to provide backstop mechanisms to address them.”

“We continue to allow parties to file formal and informal complaints, and we will also proactively monitor compliance and take strong enforcement action against parties who violate the open Internet rules,” the agency concluded.

Wheeler will use parts of Title II from the Communications Act and Section 706 of the Telecommunications Act of 1996 to justify the FCC’s new authority over broadband Internet. The proposal would reclassify “broadband Internet access service” – the Internet service Americans buy from cable, phone, and wireless providers — as a telecommunications service under Title II. As such, the FCC can leverage the “just and reasonable” standard set in Title II to prevent unfair Internet practices.

Meanwhile, the Verizon court’s decision that Section 706 “authorizes the FCC to protect the ‘virtuous circle’ of network innovation and infrastructure development” sets a precedent for the FCC to prevent ISPs from initiating practices that would close the Internet or lessen its openness in any way. It’s ironic that the Verizon case, which aimed to eliminate the much less strict Net neutrality rules that existed in the early 2000s, is being used to justify tougher oversight of ISPs now.

In addition to regulating ISPs like Verizon, Time Warner Cable, Comcast, and others, Wheeler’s proposal lumps mobile carriers like T-Mobile, AT&T, Sprint, and Verizon into the same category. For the first time ever, mobile data will be treated just like regular Internet. Essentially, carriers won’t be able to throttle your data anymore, ban services they don’t like or that compete with their own, or theoretically, exempt certain services from data charges.

The FCC decided to include mobile data in its Internet rules now that 55 percent of Internet traffic passes through wireless networks to our phones and tablets. That way, mobile carriers can’t extort users, manipulate their data speeds, or block key services to turn a profit. In other words, you’ll be able to stream Netflix on your iPad without worrying that Verizon will block it to promote its own video-streaming service. Also, competing mobile wallet apps like Google Wallet won’t be banned on your device just because your carrier happens to have a deal with Softcard.

Here are the main rules Wheeler proposed:

• No blocking: Broadband providers can’t block access to “legal content, applications, services, or non-harmful devices.”
• No throttling: Broadband providers can’t slow down or diminish the quality of “lawful Internet traffic” via “content, applications, services, or non-harmful devices.”
• No paid prioritization: Broadband providers can’t give preference to some Internet traffic over other traffic – “in other words, no ‘fast lanes’” the FCC says. The rule also forbids ISPs from showing favoritism toward their affiliates.

Wheeler’s proposal would also create open Internet conduct standards, protect user privacy, assist those with disabilities, increase transparency between ISPs and customers, and ensure that reasonable network management like construction of new lines or towers can’t be used to justify breaking a promise to customers (like unlimited data). Additionally, the FCC gets the authority to address customer complaints and take action when ISPs refuse to do so.

Here’s a breakdown of the sections from Title II that apply:

• Sections 201 and 202 ensure no “unjust or unfair” services
• Section 208, 206, 207, 209, 216, and 217 allow investigations into complaints
• Section 222 protects user privacy
• Section 224 ensures fair access to poles and conduits to increase installation of new broadband networks
• Sections 225 and 255 protect people with disabilities
• Section 254 allows for “universal service fund support for broadband service in the future”

And the parts of Title II that are not applicable to Wheeler’s proposal:

• ISPs won’t be subject to tariffs or any rate approval, unbundling, or utility regulation in general

• ISPs don’t have to contribute to the Universal Service Fund
• The congressional moratorium on Internet taxation applies to broadband, so no new taxes will be levied

Next page: What does this mean for you, mobile carriers, and ISPs?

What does this mean for you, mobile carriers, and ISPs?

So what do all these rules mean for you, the customer? Although Wheeler’s plan is the most powerful and decisive action we’ve seen the FCC take so far, it isn’t a cure-all for the Internet’s problems.

There’s good news, bad news, and confusing news to glean from the FCC’s rundown of Wheeler’s proposal. Luckily, the new rules guarantee that ISPs can’t throttle, block, or play favorites with the apps and services you pay for on your plan. That means AT&T, Verizon, Sprint, and T-Mobile can’t throttle your data speeds. So if you paid for unlimited 4G LTE data, you should always get unlimited 4G LTE data.

However, there’s one big reason why that’s not such a big deal for mobile users: Most carriers don’t even offer unlimited data plans anymore.

Those of you (read, most of you) who have limited data plans with caps won’t see much of a difference at all. Once you’ve hit the data cap you paid for, your speeds will be throttled. Still, carriers can’t cut back on your data speeds before you hit your limit, so as long as you buy the right amount of data for your needs, you shouldn’t have to worry about slower data speeds.

When it comes to home Internet, throttling wasn’t typically an issue, but some services like Netflix did experience severe slowdowns. In order to get those speeds restored, or to prevent ISPs from blocking the site entirely, Netflix had to pay boatloads of money to the ISPs.

The new rules will also eliminate Netflix’s woes, thanks to the elimination of paid-prioritization and the promise that the quality of specific services can’t be degraded on the ISPs’ whims. Essentially, your Netflix stream will be as smooth, high-resolution, and fast as the Internet speed you paid for promises, and that’s a good thing.

Additionally, ISPs and carriers won’t be able to block some apps, services, or sites from their platform in favor of a competing service. That means that Google Wallet may finally roam free across carriers. It’s been blocked multiple times by carriers who wanted to promote Softcard instead. This will not only help boost mobile payments, but also give users access to any app they want to download, even if it’s a competitor of the one their carrier backs.

Following that same logic, AT&T’s “Sponsored Data” program that allows apps to pay the carrier, and thereby subsidize the data these apps use, will also be eliminated. Theoretically, doing so will increase competition and allow new apps to become big hits.

T-Mobile Music Freedom, which lets users stream music from popular apps like Spotify without tapping into their data, should also fall under the banned promotions section of this Net neutrality proposal, but an FCC spokesperson told the Verge that Music Freedom may not violate the rules. The spokesperson said the agency will examine this kind of service on a “case-by-case basis,” so if T-Mobile doesn’t restrict who can and cannot join, this money-saving service may be here to stay, which could actually be good news for consumers.

Now for the bad and the confusing news. The worst part of the FCC’s plan is that it states that no unbundling will be allowed. This more or less ensures that there’s no way for competitive broadband companies to startup without investing massive amounts of money in fiber connections like Google is doing. The result? Customers’ choices in ISPs and carriers will still be just as limited and awful as they are now. And since there’s no increase in competition, the big wigs like TWC and Comcast will continue to charge an arm and a leg for broadband Internet.

The proposal also seems to leave a lot to interpretation. For example, Wheeler says lawful content, services, and sites can’t be blocked or throttled, but the definition of what constitutes lawful traffic is subject to interpretation. What if an ISP falsely accuses a site, or an entire protocol like BitTorrent, of copyright infringement? Can it then throttle or block it unjustly?

Then there’s the general conduct rule, which vaguely says the FCC can combat threats to the open Internet on its own. What constitutes a threat, though?

Lastly, there’s the question of how the FCC will modernize Title II. Will too many parts of the rule be stripped out? How effective will the reworked version be in ensuring that the Internet stays open?

The FCC finally released the full text of the ruling, along with comments from all the FCC members who voted on the proposal. The 400-page document addressed many of the issues mentioned above, though only real-world application will truly tell us how effective the rules are. Many of our big concerns will be addressed on a “case by case basis,” as both Wheeler and the proposal’s wording are fond of repeating.

Also, the inevitable court cases and political discuss that will follow will no doubt unearth concerns and expose these questions. We’ll update this post as we learn more.

Next page: What challenges does the proposal face?

What challenges does the proposal face?

Wheeler’s proposal was voted on February 26, at which point it passed in a 3-2 vote, with the agency’s two Democrats siding with the chairman on the issue. The new rules will go into effect 30 days after they’re published on the Federal Register, which may take a few weeks. However, even though the new Net neutrality rules passed the FCC, they still face serious threats from carriers, ISPs, and even Congress itself.

May 2: U.S. telecoms say reclassifying broadband will be ‘crushing’ to the industry

In addition to all the lawsuits the FCC faces over its new Net neutrality rules, it will also run up against requests from the industry to change the new rules voluntarily, Reuters reports. The first such requests came in  the form of a series of filings from the U.S. Telecom Association, CTIA-The Wireless Association, National Cable and Telecommunications Association, the American Cable Association, AT&T, CenturyLink, and the Wireless Internet Service Providers Association.

The industry organizations agreed to let most of the rules stand, including no paid prioritization, content blocking, or noticeable slowdowns in Internet speeds, but argued against the reclassification of broadband as a utility and the new mandate that prevents ISPs from “unreasonably interfering” with customers’ access to the Internet. The filings claim that these two tenants of the ruling will be “crushing” to the industry as a whole and hurt small providers in particular.

AT&T executives claimed that they’d lose about $400 million in lost revenue if the company has to discontinue its marketing and revise its procedures to suit the more stringent privacy protection requirements the FCC’s rules place on broadband providers. Of course, it’s somewhat difficult to prove AT&T’s assertions true or false, as the FCC has yet to reveal what the new requirements are for privacy.

The FCC will likely deny these requests, as it prepares for upcoming legal battles. The agency recently requested a transfer of the pending cases to the U.S. Court of Appeals for the District of Columbia Circuit, which previously ruled that the FCC has the authority to set Internet regulations.

April 30: Wheeler accuses Congress of trying to cripple the agency

Congress started a hearing called the “FCC Reauthorization: Improving Commission Transparency,” during which FCC Chariman Wheeler was called in to testify on the issue of Net neutrality. The House Commerce Committee’s Communications and Technology subcommittee asked Wheeler to discuss a republican proposal to add more requirements to the FCC’s decision process and the process by which the FCC arrived at the new Net neutrality rules.

A Republican bill that was proposed by Rep. Adam Kinzinger (R-IL) would require the FCC to publish of drafts of new rules, orders, and reports before the commissioners have had a chance to vote on them. Wheeler argued that this proposal makes no sense, saying that the current rules, which were made by Congress years ago, exist for one reason: to ensure that the FCC can make decisions quickly and not get bogged down in bureaucracy.

“It won’t take much for a legion of lawyers to pore over the text of an order and file comments arguing that new issues are raised by its paragraphs, sentences, words, perhaps even punctuation,” Wheeler stated. “This means the Commission would be faced with litigation risk unless it addressed the comments received on the draft order. This would result in the production of a new draft order, which in turn could lead to another public comment period—and another if a new draft order were released in response to subsequent public comment.”

“The end result: the threat of a never-ending story that prevents the Commission from acting — or forces it to accept undue legal risk of reversal if it ever does,” Wheeler concluded. “This potential for extreme delay undermines the Commission’s efficiency without enhancing its expertise. And it does so at the cost of the consumers and businesses that rely on Commission decisions.”

Wheeler accused Congress of trying to cripple the FCC’s authority and its ability to pass new rules in a timely manner. He also argued that since many proposals change over time and some reports contain allegations against companies that have yet to be investigated, it makes no sense for all FCC conversations to go public immediately after they’re sent to individual commissioners. You can read his full testimony here.

April: Lawsuits start and Congress moves for a fast-track repeal

In mid-April, Republican members of Congress who are against the Net neutrality rules, moved to gain a fast-track repeal of the FCC’s new rules, reports Ars Technica. Rep. Doug Collins (R-Ga.) and 14 more Republican proposed a “Resolution of Disapproval,”  which would take advantage of Congress’s ability to speed up the legislative process under the Congressional Review Act to eliminate the Net neutrality rules.

The repeal would only need a simple Senate majority, meaning that Congress would not need the full support of Democratic Senators to remove the FCC’s new rules. Of course, even if the Republicans manage to pull it off, any repeal of the Net neutrality rules that President Obama supports would undoubtedly be vetoed by the White House.

To make matters worse, a number of lawsuits have rolled in from industry leaders, all of which seek to derail the FCC’s plan for establishing an open and equal Internet. The United States Telecom Association (USTA), Alamo Broadband, CTIA Wireless Association, National Cable & Telecommunications Association (NCTA), and American Cable Association (ACA) have all filed suit against the FCC.

March: Congress questions Wheeler’s motives

In the middle of March, Wheeler was put before a congressional committee to answer questions regarding the validity of the recent Net neutrality ruling. The Congressmen repeatedly asked Wheeler whether he was influenced by President Barack Obama’s declaration of support for strict Net neutrality rules, and Wheeler repeatedly denied that he’d felt pressured by the White House.

“Here I would like to be clear. There were no secret instructions from the White House,” Wheeler said. “I did not, as CEO of an independent agency, feel obligated to follow the president’s recommendation.”

Wheeler expounded upon the reasoning behind the FCC’s decision, citing the millions of pro-Net neutrality comments he received from the American public.

“I did feel obligated to treat it with respect just as I have with the input I received — both pro and con — from 140 Senators and Representatives,” he said. “Most significantly of all, we heard from nearly four million Americans, who overwhelmingly spoke in favor of preserving a free and open Internet.”

Wheeler also argued that the public’s support of the new rules are the most obvious validation that the FCC did the right thing.

“We made a public proposal, we invited interested parties to comment on our proposal—which they did in record numbers—and then we adopted a final rule based on this record,” he said. “The final result of this year-long process is rules that protect and preserve the open Internet, while promoting continued investment in broadband networks.”

Regardless of his strong statements, Wheeler is unlikely to see opponents of the proposal to soften their position any time soon.

Then, in late March, Commissioner Ajit Pai, one of the party’s representatives in the FCC, asked the House to defund the agency’s effort to enforce the new Net neutrality rules, which further inflamed the debate in the House of Representatives over the new rules.

February: Commissioners try to stall vote

Although it didn’t work, just three days before the vote is set to pass, conservative commissioners Ajit Pai and Michael O’Rielly proposed a postponement of the vote over concerns that Wheeler’s latest proposal wasn’t made publicly available to Americans.

“With the future of the entire Internet at stake, it is imperative that the FCC get this right,” Pai and O’Rielly wrote. “And to do that, we must live up to the highest standards of transparency.”

The pair also expressed their disapproval of many key points, adding that Wheeler and his supporters have mislead the public about what will happen to the Internet if the FCC does reclassify broadband as a utility under Title II. For his own part, Wheeler shot their request to delay the vote any further down in a pair of succinct tweets, one of which is embedded below.

FCC received more than 4 million comments on #OpenInternet during past year that helped shape proposal. It’s time to act.

— Tom Wheeler (@TomWheelerFCC) February 23, 2015

However, the proposal will almost certainly face a lawsuit from ISPs and carriers alike. In fact, now that’s it’s passed various players are threatening legal action. Previous Net neutrality legislation was stripped away in a single court case with Verizon a few years ago, so the threat is real. Additionally, Congress is said to be planning legislation that may interfere with the FCC’s decision. Many congressmen and women from the Republican side of the aisle have already expressed their displeasure over the ruling.

Update log:

Updated on 05-01-2015 by Malarie Gokey: Added FCC Chairman Tom Wheeler’s response to Congress’ attempts to delay future FCC decisions. Go to page five for all the info.

Updated on 04-14-2015 by Malarie Gokey: Added news of Congress seeking fast-track appeal of new rules, it’s quest to defund the FCC, and new lawsuits against the FCC over the new rules. Go to page five for all the info.

Updated on 03-17-2015 by Malarie Gokey: Added news of FCC Chairman Tom Wheeler’s response to Congress’ accusation that President Barack Obama influenced the FCC’s decision. Go to page five for more details.

Updated on 03-12-2015 by Malarie Gokey: Added information from the full 400+ page full text of the FCC’s ruling on Net neutrality.

Updated on 02-26-2015 by Malarie Gokey: Added news that the FCC passed Wheeler’s proposal to reclassify broadband as a utility, updated language of rules, and added news on potential threats to the ruling.

Updated on 02-23-2015 by Malarie Gokey: Added news that two conservative FCC members proposed postponing the February 26 vote. Go to page 5 for all the info.