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FCC Net Vote Fallout: Uncertainty, Litigation

27 Feb, 2015 By: Erik Gruenwedel

Net neutrality proponents may laud the Federal Communications Commission’s Feb. 26 vote in favor of reclassifying the Internet as a telecommunications utility, but the aftermath is anything but rosy or clear.

Major Internet Service Providers such as Comcast, Verizon, AT&T, Time Warner Cable and others, which now face increased federal regulation operating and marketing the nation’s broadband channels, say they continue to dissect the more than 300 pages encompassing the ruling.

Indeed, the FCC vote prohibits ISPs from interfering with third-party content distribution through throttling or tiered access.

Comcast, in a statement from David Cohen, EVP and chief diversity officer, said the cabler was disappointed the FCC chose reclassifying the Internet as a telecommunications entity under Title II of the Communications Act of 1934. He said the move was certain to lead to “ years of litigation and regulatory uncertainty,” in addition to possibly harming investment and innovation.

Cohen said Comcast would have preferred the FCC adopt Section 706 of the Telecommunications Act of 1996, an updated version of the Communications Act that enables the government to regulate broadband infrastructure versus providers.

“We fully embrace the open Internet principles that have been laid out by President Obama and [FCC] Chairman [Tom] Wheeler and that now have been adopted by the FCC.  We just don’t believe statutory provisions designed for the telephone industry and adopted when Franklin D. Roosevelt was president should be stretched to govern the 21st century Internet,” Cohen wrote.

AT&T CEO Randall Stephenson earlier this month in a fiscal call bluntly stated that should Title II be imposed, “there would be litigation.”

"We have now, under the president's urging with the FCC, moved from pursuing a free and open Internet to regulating the Internet end to end," Stephenson said.

Former FCC chairman Michael Powell, now head of the cable industry’s top lobbying group, indicated it was “highly likely” it would file a lawsuit in response.

Verizon, whose lawsuit helped end the FCC’s previous net neutrality provisions in 2014, has long suggested litigation hell would greet renewed regulatory efforts.

In a “typewritten” statement dated “Feb. 26, 1934,” and intended to mock the FCC’s embrace of what it considers “antiquated” legislation, Verizon called the vote a “Net” loss for innovation.

The telecom said the FCC chose to interfere with the way the commercial Internet has operated successfully since its inception. It said any changes to the status quo, if at all, should only be done after careful analysis, full transparency, and with Congressional approval.

“It is likely that history will judge today’s actions as misguided,” Verizon said.

Stanford Law professor Barbara van Schewick, an expert on net neutrality, said the FCC's decision to reclassify Internet service as a common carrier under Title II of the Communications Act puts the rules on a solid legal foundation.

"By coupling reclassification with forbearance, the FCC has adopted a light regulatory touch that preserves Internet service providers' incentives to invest," van Schewick said.

Meanwhile, it remains to be seen how the ruling affects Netflix’s peering agreements with select ISPs to ensure smoother broadband distribution of video content.

“We are going to review the language in the FCC order and decide the next steps,” Netflix spokesperson Anne Marie Squeo said in an email.

Michael Pachter, senior analyst with Wedbush Securities in Los Angeles, believes the courts will enjoin the FCC for overstepping its authority.

“ISPs are going to sue and should win,” he said.



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