Don't get too excited: Big Telco does not lose on issues as big as network neutrality

The president spoke today in surprisingly strong terms in favor of the Federal Communications Commission closely regulating the neutrality of the Internet by classifying it as a Title II telecommunications service.

But it’s very unlikely the FCC will follow the president’s directive. FCC chairman Tom Wheeler promptly released a statement expressing appreciation to the president, and also writing that the commission is considering a number of options.

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AT&T, Verizon, and Comcast have been in full-court-press mode for months over the coming net neutrality rule-making.

Big Telco will not lose on this issue. There’s just too much at stake.

Unlike AT&T’s proposed acquisition of T-Mobile in 2011 (the acquisition was stopped by the FCC), network neutrality could immediately shut off a revenue stream that is probably already flowing to the carriers.

It’s all about fast lanes

The net neutrality language — “ISPs will not restrict content to users” — is important, but that’s not the big money part of this.

Pay attention to the part about not allowing big telecommunications companies (like AT&T, Verizon, and Comcast) to charge big Internet content companies (like Netflix) extra money to make sure their packets arrive at end users’ screens fastest and most reliably.

The president was explicit on this point: “[ISPs] cannot allow Internet service providers (ISPs) to restrict the best access or to pick winners and losers in the online marketplace for services and ideas.”

If the Internet was regulated under Title II, it would be treated by the government as something like a public utility. The FCC would regulate the service so ISPs couldn’t sell “fast lanes” to Internet companies that can afford it, at the expense of companies that couldn’t. The Internet would cease to be a place governed by free-market rules and would become a place where access was emphasized and access to profits de-emphasized.

The truth is, ISP’s are already selling “fast lanes,” most experts will tell you. The genie is out of the bottle, and it’s a big, fat genie.

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When big, fat genies are involved, Big Telco doesn’t often lose in Washington, D.C. It’s no surprise that companies like AT&T, Verizon, and Comcast has given lots of money over the years to candidates who sit on influential congressional committees.

Chilly political environment

And the telco lobby has no doubt been busy making calls on Capitol Hill this summer and fall as pressure on the FCC has increased to make a final ruling on network neutrality.

Many commentators today seem to be forgetting that Obama and the Democratic Party have just taken a drubbing in the mid-term elections. Obama is a lame duck president. Both houses of Congress are controlled by Republicans for the remainder of his final term.

And perhaps the most powerful Republican of all, Senate majority leader Mitch McConnell, has already been very clear about the Republican’s views on the FCC regulating net neutrality. “The courts have twice struck down ill-advised and unauthorized attempts by the FCC to regulate the Internet,” McConnell and five other Republicans wrote in a letter to FCC chairman Tom Wheeler last May. “Unfortunately you have chosen to have the FCC again undertake a politically corrosive rule-making, relying upon new and untested court-defined powers rather than upon clear Congressional intent and statutory authority.”

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It could scarcely be more clear that McConnell and the Republicans would move in Congress to stop the FCC from placing the Internet under Title II, if the lawsuits filed by telecommunications companies didn’t kill the rule-making in the courts first.

A ‘hybrid’ solution

The chairman is in a tough spot: The vast majority of Americans who filed comments with the FCC on the matter favor net neutrality, while on the other hand Wheeler doesn’t want to threaten the bottom lines of the telecoms and doesn’t want to enter a head-to-head political fight with Republicans. This explains why Wheeler has been looking for a hybrid approach to regulating the Internet.

A draft proposal written by Wheeler was unintentionally or intentionally leaked/floated by the FCC last week. It sketched a plan for a lightly regulated “wholesale” Internet and a heavily regulated “retail” Internet. This comes after a proposed a set of net neutrality rules, issued by the FCC last spring, that would have effectively accepted the existence of Internet fast lanes. That proposal was met with fierce criticism from tech media and consumers.

These proposals won’t satisfy net neutrality proponents — and may not stand up in court. “After months of netroots protests, we learned the FCC began to settle on a ‘hybrid’ proposal that, we fear, is legally unsustainable,” the Electronic Freedom Foundation’s Corynne McSherry writes in the group’s blog today.

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Telcos and the status quo

You can read in the telcos’ reaction statements today that a hybrid approach to regulating the Internet might be acceptable to them.

“Now, with one statement, the White House is telling the FCC to ignore this precedent and to instead impose on the entire Internet — from end to end — onerous government regulation designed in the 1930s for a Bell phone monopoly that no longer exists, not for a 21st century technology,” AT&T’s statement reads.

What the telco and cable companies all uniformly want is a continuance of the status quo. Verizon issued a statement saying the following:

As all major broadband providers and their trade groups have conceded, the FCC already has sufficient authority under Section 706 [of the 1996 Telecommunications Act] to adopt rules that address any practices that threaten harm to consumers or competition, including authority to prohibit ‘paid prioritization.’ For effective, enforceable, legally sustainable net neutrality rules, the Commission should look to Section 706.

I asked former FCC commissioner Michael Copps what he thought about the Republicans’ and Big Telco’s view that classifying the Internet under Title II would invite more legal challenges, he said: “Hogwash.”

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“They want to be running in the open field,” Copps said of the big ISPs. “They’re just rationing a scarcity, and making a bundle of money out of [it],” Copps said.

“They don’t want any regulation at all, and they will fight anything.”