FCC net neu­tral­ity rules take ef­fect

Now ‘there will be a ref­eree ... to keep the In­ter­net fast, fair and open,’ chair­man says.

Los Angeles Times - - BUSINESS - By Jim Puz­zanghera

WASH­ING­TON — With a sim­ple dec­la­ra­tion on its web­site, the Fed­eral Com­mu­ni­ca­tions Com­mis­sion launched a new era of In­ter­net over­sight by tout­ing that its tough reg­u­la­tions for on­line traf­fic were now in place.

The so-called net neu­tral­ity rules, de­signed to en­sure the free flow of In­ter­net data, took ef­fect Fri­day af­ter fed­eral judges de­clined for now to stop them.

FCC Chair­man Tom Wheeler said that, start­ing Fri­day, “there will be a ref­eree on the field to keep the In­ter­net fast, fair and open.”

To prove that point, the agency’s on­line form for com­plaints about In­ter­net ser­vice was up­dated to give con­sumers the op­tion of choos­ing net neu­tral­ity along with billing, pri­vacy, speed and other is­sues.

Av­er­age In­ter­net users ini­tially won’t no­tice much of a dif­fer­ence af­ter the rules took ef­fect, but the change has al­ready re­ver­ber­ated through the on­line ecosys-

tem. Broad­band net­work own­ers are scram­bling to come to grips with the reg­u­la­tions ap­proved in Fe­bru­ary.

Com­pa­nies, for in­stance, have been mov­ing quickly to strike agree­ments cov­er­ing key in­ter­con­nec­tion points — how they pass along one an­other’s traf­fic — on the net­work be­fore the Fed­eral Com­mu­ni­ca­tions Com­mis­sion gains new author­ity over those deals un­der the new rules.

Mean­while, de­spite con­cerns that the reg­u­la­tions would chill deal-mak­ing and in­vest­ment, Char­ter Com­mu­ni­ca­tions Inc. Chief Ex­ec­u­tive Tom Rut­ledge told FCC Chair­man Tom Wheeler that such a prospect “has not al­tered Char­ter’s ap­proach of in­vest­ing sig­nif­i­cantly in its net­work,” ac­cord­ing to a reg­u­la­tory fil­ing.

Last month, Char­ter struck a $56.7-bil­lion deal to buy Time Warner Ca­ble Inc.

“The fears about a lack of in­vest­ment were over­stated,” said Tim Karr, se­nior direc­tor of strat­egy at Free Press, a public in­ter­est group that sup­ported the tough rules.

“The net neu­tral­ity rules should bring a de­gree of cer­tainty to th­ese types of busi­ness deals,” he said. “It sets the rules for the play­ing field.”

But broad­band providers said the In­ter­net is en­ter­ing a pe­riod of great un­cer­tainty.

The providers, such as AT&T Inc., along with in­dus­try trade groups, said they sup­port the cen­tral premise of net neu­tral­ity — that the In­ter­net should re­main open and that con­tent should flow unhindered by the car­ri­ers.

But they have gone to court to try to over­turn the way in which the FCC has de­cided to en­force those rules: by re­clas­si­fy­ing broad­band as util­ity-like ser­vice sub­ject to po­ten­tially oner­ous reg­u­la­tion.

On Thurs­day, a three­judge panel of the U.S. Court of Ap­peals for the Dis­trict of Columbia Cir­cuit de­nied pe- titions for a tem­po­rary stay made in sep­a­rate law­suits by AT&T Inc. and other op­po­nents of the rules.

The de­ci­sion doesn’t end the lit­i­ga­tion. The court said it would ex­pe­dite law­suits that threaten to leave the reg­u­la­tory land­scape un­set­tled for months if not years.

“None of the in­dus­try play­ers have a firm idea ex­actly what sort of reg­u­la­tory en­vi­ron­ment they’ll be fac­ing,” said Doug Brake, a tele­com pol­icy an­a­lyst with the In­for­ma­tion Tech­nol­ogy and In­no­va­tion Foun­da­tion, which op­posed the FCC’s ap­proach.

Since the Clin­ton ad­min­is­tra­tion in the 1990s, the FCC has only lightly reg­u­lated the In­ter­net, he said. The con­tro­ver­sial new ap­proach, passed on a party line vote in Fe­bru­ary by the Demo­cratic-con­trolled agency, is a big shift away from that, Brake said.

The reg­u­la­tions, pro­posed by Wheeler and pub­licly backed by Pres­i­dent Obama, pro­hibit broad­band providers from block­ing, slow­ing or sell­ing faster de­liv­ery of legal con­tent f low­ing through their net­works to con­sumers.

Twice be­fore, courts have thwarted the FCC’s ef­forts to es­tab­lish net neu­tral­ity rules. This time, the FCC clas­si­fied high-speed In­ter­net as a telecom­mu­ni­ca­tions ser­vice, sub­ject­ing it to util­ity-like over­sight and giv­ing the agency more en­force­ment author­ity.

Wheeler has promised a light-handed ap­proach, and the rules ex­empt broad­band providers from rate reg­u­la­tion and other more oner­ous pro­vi­sions that ap­ply to con­ven­tional phone ser­vice.

“No price reg­u­la­tion means con­sumer rev­enues for [In­ter­net ser­vice providers] should be the same the day af­ter the or­der takes ef­fect as they were the day be­fore,” Wheeler said when the agency ap­proved the rules. “It is th­ese rev­enues that pro­vide the stim­u­lus for in­vest­ment.”

But com­pa­nies have com­plained that the door is open for tougher reg­u­la­tion and warn that will hin­der in- vest­ment in ex­panded net­works.

Hal Singer, a se­nior fel­low at the Pro­gres­sive Pol­icy In­sti­tute, a cen­trist Wash­ing­ton think tank, es­ti­mated in a study re­leased last month that broad­band providers will re­duce their an­nual in­vest­ments 5% to 12% from last year’s $77-bil­lion level be­cause of the con­cerns about fu­ture reg­u­la­tion.

“Th­ese guys are scared of what’s go­ing to hap­pen,” Singer said.

Repub­li­cans have sided with the broad­band providers.

Both Repub­li­can FCC com­mis­sion­ers, Michael O’Rielly and Ajit Pai, voted against the new rules.

“The fight against the com­mis­sion’s rules ... has only just be­gun be­cause un­less erad­i­cated, they will ul­ti­mately harm the foun­da­tions of the In­ter­net and limit its pos­si­bil­i­ties,” O’Rielly said.

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