The FCC's New Take on Net Neutrality: What You Need to Know

(Bloomberg) -- The Trump administration’s Federal Communications Commission on Thursday officially began the process of unraveling the Open Internet rules passed by the commission under Barack Obama. It voted 2 to 1 to give preliminary approval to a new approach on internet regulation. The FCC’s rules on net neutrality dominated tech policy circles in 2014 and 2015, and 2017 is shaping up to be similar. Here are answers to your basic questions: 

Wait, remind me again, what is net neutrality? The basic idea is that internet service providers shouldn’t be allowed to treat traffic on their networks differently based on the source or type of content. Supporters of net neutrality think that there should be rules to keep, for instance, AT&T from providing preferential treatment to streaming video from DirecTV, which it owns, giving itself an advantage while harming other businesses and their customers. Another example of a violation would be if Verizon slowed down Netflix traffic until the company paid for speedier service. 

What happened today? At its monthly meeting, the FCC voted to accept a proposal by Chairman Ajit Pai entitled “Restoring Internet Freedom.” It’s the first step in the commission’s rule making process — the document Pai presented is called a Notice of Proposed Rulemaking, or NPRM. In the broadest sense, these rules are intended to undo the 2015 rules. Replacing the rules will take awhile. Nine months passed between the time that Tom Wheeler, Obama’s FCC chair, introduced his open internet proposal in 2014 and the vote on the final rules. As Pai said in a speech at the end of April, this is the beginning of the discussion, not the end. 

What did the commissioner think was wrong with the old rules? Pai doesn’t see this as a debate over net neutrality. When he gave a speech outlining his approach in April, he didn’t even use that phrase. His complaint is that the existing rules create a system that, in his words, "gives the FCC a roving mandate to micromanage the internet." Wheeler’s FCC decided to treat broadband service as a utility under Title II of the federal Communications Act, which gave the commission stronger oversight. Pai was on the FCC in 2015 and objected to using Title II. The main goal of his plan is to reverse that decision. 

But what about net neutrality? Instead of laying out a new set of rules, Pai has decided to ask for suggestions about how to structure them. But he does say that there has never been any evidence of a need for net neutrality protections. His plan asks whether it would make sense to have the industry police itself, whether anti-trust regulations would be enough to stem any bad behavior, and whether it even makes sense to automatically assume that harm comes from things like paid prioritization (speeding up traffic from businesses that pay) or throttling (slowing down certain kinds of traffic.) One thing that Pai does explicitly oppose is blocking legal material outright. In any case, the FCC seems prepared either to have no rules at all, or to have significantly weaker ones. 

What has been the impact of the current approach? One big fight among people debating the Wheeler rules (and net neutrality rules in previous incarnations) is how internet regulation impacts investment in broadband. Opponents say the regulations drive investments down, because running a broadband company would be less profitable. In his speech Pai claimed the country’s 12 largest internet providers reduced their domestic capital expenditures by 5.6 percent from 2014 to 2016. Yet the Internet Association, which represents net neutrality advocates like Google, Facebook, and Netflix, said telecom investment among publicly traded companies increased 5.3 percent in 2015 and 2016, compared with 2013 and 2014. 

Most people just pick the set of statistics that fit into their ideology, says Brent Skorup, a research fellow at the Mercatus Center at George Mason University who opposes the Wheeler rules. He says this is the wrong way to think about the issue. If Washington has too much power, he argues, companies that are best at pulling the levers of government will come out ahead. Bigger companies are better at this than smaller companies, and the big internet providers are really big. “It’s not clear to me that Title II will be bad for any companies in particular,” he said. This is a mirror of the argument made by net neutrality advocates, who argue that Google or Netflix have little to lose in a non-neutral web, where they can use their resources to cut deals that smaller competitors can’t. 

What does John Oliver think about Pai’s plan? He’s against it. Many skeptics of net neutrality see Oliver’s televised rants as an illustration of a broader challenge: net neutrality advocates have a big advantage in mobilizing popular support. There are already signs that this fight it going to be nasty. The FCC has claimed that its commenting system was attacked earlier this month, causing it to slow down. It hasn’t provided firm evidence of such an attack, and skeptics say the commission is looking for an excuse to explain why it wasn’t ready to handle the wave of comments flooding in. Meanwhile, media reports have shown evidence casting doubt on the validity of thousands of public comments supporting Pai’s rules. In the end, the only ones who get to vote on the rules are the FCC commissioners — and it’s not clear how, if at all, Pai will be affected by public opinion. 

Does this whole story end with the FCC?  Unlikely. Abigail Slater, general counsel for the Internet Association, questioned whether the FCC is justified in reversing its previous rules, something federal agencies aren’t supposed to do if circumstances haven’t changed significantly. Slater argued that the basic contours of the internet industry are the same now as they were two years ago, and a legal challenge could be justified. “We don’t want to predict the future too much, but if you look at the 2015 order, it was voted out and immediately challenged by opponents of the order,” she said. "We might expect to see the same thing happen here.”
(Updates to reflect Thursday's FCC vote.)

To contact the author of this story: Joshua Brustein in New York at jbrustein@bloomberg.net.

To contact the editor responsible for this story: Andrew Pollack at apollack1@bloomberg.net.