Net Neutrality 2011: What Storms May Come
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When the Federal Communications Commission passed its first binding network neutrality rules earlier this month, it brought a sort of closure to a long-running, raucous debate that had left nearly all participants exasperated, if not exhausted.
But one would be hard pressed to find an observer who really thinks the FCC's Dec. 21 order will be the final word in the net neutrality debate. So what happens next?
FCC Chairman Julius Genachowski billed the rules as a compromise that would establish some baseline prohibitions against service providers blocking lawful content on their networks, while shielding them from the heavy-handed regulatory oversight cable and phone companies had long fought against.
And indeed, some of the longtime foes of net neutrality rules, including AT&T, Comcast and the National Cable and Telecommunications Association, issued statements describing the plan as less than ideal, but far better than some earlier, more aggressive proposals.
NCTA President and CEO Kyle McSlarrow, long a leading voice of opposition to net neutrality, called Genachowski's plan a "workable compromise," but at the same time registered his agreement with the two Republican FCC commissioners, Robert McDowell and Meredith Attwell Baker, who offered emphatic dissents as the order passed by a three-to-two vote. McDowell and Baker both argued that the current, deregulated Internet is working well, and that the very rare instances when an ISP has been found to be unfairly blocking content on its network, consumer outrage has welled up and the practice has been curbed without government intervention.
"Our consistent view has been that the current 'openness' of the broadband marketplace can be preserved while simultaneously fostering the innovation and massive private investment needed to ensure the future growth and vitality of the Internet," McSlarrow said last week.
"While we agree entirely with Commissioners McDowell and Baker that new regulation is not necessary to accomplish that goal, it has been clear for some time that there were three votes at the commission for rules that would go much farther than those adopted today. Thus, the question before us has been whether rules could be drafted in a manner that avoids a raft of unintended consequences and that preserves broadband providers' ability to innovate and invest in a marketplace that justly represents a great American success story," he added.
There was no such hint of compromise or resignation to be found in the newly emboldened congressional Republicans. Rep. Fred Upton (Mich.) campaigned for and won the chairmanship of the powerful Energy and Commerce Committee in the next session on a hard-line platform pledging to lead the charge to repeal President Obama's health care reform, fight efforts at the Environmental Protection Agency to implement new energy rules and to rein in what he sees as a rogue agency at the FCC.
"The FCC's hostile actions toward innovation, investment and job creation cannot be allowed to stand," Upton said of the vote, stressing the tepid nature of the endorsements of NCTA and others. "Despite FCC claims that these are just rules of the road that everyone agrees with, anyone can recognize that what the commission claims to be statements of broad industry support are really cries of 'uncle' resulting from threats of even more onerous regulation."
Upton and the leaders of the Energy and Commerce Committee's Subcommittee on Communications and Technology have pledged to launch a campaign to strike down the FCC's net neutrality order early in the new session. That will entail Genachowski being called before a hostile committee for some tense oversight hearings, and being asked to respond to questions justifying the decision and the legal basis for new rules. Incoming subcommittee Chairman Greg Walden said that "we plan to look at all legislative options for reversing the decision."
The GOP members have pointed to the Congressional Review Act, a 1996 law that provides a mechanism for Congress to overturn agency regulations through a joint resolution, as an avenue for striking down the rules. But even through that path, which can circumvent some procedural blocks, both chambers would have to approve the resolution voiding the FCC order, and it would still be subject to presidential veto.
That would mean tougher sledding in the Senate, where the Democrats held their majority. Should a resolution make it to the president's desk, the prospect of a veto would loom large. Obama heralded the FCC's action as "an important component of our overall strategy to advance American innovation, economic growth and job creation."
"As a candidate for president, I pledged to preserve the freedom and openness that have allowed the Internet to become a transformative and powerful platform for speech and expression," Obama said in a statement. "That's a pledge I'll continue to keep as president. As technology and the market continue to evolve at a rapid pace, my administration will remain vigilant and see to it that innovation is allowed to flourish, that consumers are protected from abuse, and that the democratic spirit of the Internet remains intact."
Of course, in one of the enduring fissures of the net neutrality debate, many Republicans have argued that new regulations in the name of Internet freedom will have the perverse effect of curtailing investment and innovation in the networks, needlessly stifling a dynamic and fast-growing sector of the economy. Sen. Kay Bailey Hutchison (R-Texas) has introduced an amendment that would bar the FCC from using public funding to enforce any net neutrality rules.
While Congress promises to be a lively theater for public debate over the merit and legitimacy of the FCC's action, a more serious challenge to the new rules could come in the courts. After all, the FCC has been moving forward with its net neutrality work in the shadow of an April court ruling that held that it lacked the authority to punish Comcast for secretly blocking traffic on its network.
That 2008 order had relied on an Internet policy statement the FCC had approved three years earlier, and the agency's lawyers argued that the agency possessed implied, or ancillary, authority over broadband providers under communications law, even though there are no net neutrality laws on the books. The court disagreed, vacating the Comcast order.
For a time the FCC considered reclassifying broadband service to a different designation under the Communications Act in a move to shore up its authority, but service providers and a majority of members of Congress protested the move, ultimately persuading Genachowski to back down.
So the FCC passed its net neutrality rules with broadband service under the same legal designation that the court had rejected. While Genachowski and his legal team argued that the voluminous record they compiled in the run-up to the vote forms the basis for a new and stronger legal defense, many observers expect that the court challenges are inevitable.
Both Republican commissioners have predicted that the new rules will ultimately be struck down, along the same lines as the Comcast case.
While many critics of expanded FCC regulation over broadband providers have at least feigned support of the action (while notably reserving final judgment until they can thoroughly review the 194-page report and order), Verizon took a more hostile view. Tom Tauke, a former congressman and the telecommunications giant's top lobbyist, said the company is "deeply concerned" by the order, calling it an "assertion of authority without solid statutory underpinnings."
While no industry group has yet initiated a legal challenge, analysts say it's only a matter of time. Rebecca Arbogast of Stifel Nicolaus, a former bureau chief at the FCC, said that while congressional Republicans will have a hard time winning enough Democrats over to their side to overturn the rules and skirt a presidential veto, "litigation prospects will depend on the strength of the FCC's order, the parties that are challenging it, and the court that hears the case."
Dan Brenner, a partner at the global law firm Hogan Lovells, who also served at the FCC as well as a stint heading up regulatory and legal affairs at NCTA, put it a different way.
"We're in the third inning of net neutrality," Brenner said. "From here it's going to leave the FCC and move to the courts with some oversight in Congress."