Genachowski Takes Wraps Off Planned Net Neutrality Rulemaking

One new principle would ban discrimination against Internet content and applications, while allowing some network management, and the other would require providers to fully disclose their network-management practices, Genachowski said. “The FCC must be a smart cop on the beat, preserving a free and open Internet.”

“This is not about government regulation of the Internet,” Genachowski said. “It’s about fair rules of the road for companies that control access to the Internet. We will do as much as we need to do, and no more, to ensure that the Internet remains an unfettered platform for competition, creativity, and entrepreneurial activity.” He said “unduly detailed rules that attempted to address every possible assault on openness … would become outdated quickly.” But “the fact that the Internet is evolving rapidly does not mean we can, or should, abandon the underlying values fostered by an open network, or the important goal of setting rules of the road to protect the free and open Internet,” the chairman said.

The six principles would apply to the Internet “however accessed,” Genachowski said. But how they apply “may differ depending on the access platform or technology,” he said. The chairman said he will soon circulate proposed rules to the other commissioners and will schedule a vote on a notice of proposed rulemaking at the commission’s as yet unscheduled October meeting. The notice will include “detailed questions” on how the principles apply to mobile broadband, Genachowski said. The FCC’s path isn’t “predetermined,” he said. The commission plans to hold public workshops and use a new Web site -- www.openinternet.gov -- to collect public input, he added. Genachowski didn’t take questions from his audience or speak with reporters.

FCC Republicans Robert McDowell and Meredith Baker took off the gloves, putting out a joint statement expressing strong concerns about the proposal, which they learned Friday afternoon would be made public. The order appears likely to prompt the first big fight among the current commissioners.

“Although we have not been given any draft or summary of proposed net neutrality rules, it is clear from the Chairman’s statements that they will be monumental in their scope,” the statement said. “In the meantime, we are concerned that both factual and legal conclusions may have been drawn before the process has begun. Nonetheless, we look forward to reviewing any and all compelling evidence that may be developed in the record that illustrates the palpable harms that many allege.”

In the most critical statement either Republican has made since Genachowski became chairman, McDowell and Baker warned that the proposal “would appear to be a reversal of decades of precedent and of the Clinton-Gore Administration’s bipartisan policy to allow a diverse assortment of technical experts, rather than politicians and bureaucrats, working in loosely knit non-governmental organizations to make such engineering decisions.”

The two suggested that the announcement’s timing was linked to the commission’s filing of its legal brief Monday in the appeal of last year’s Comcast-BitTorrent decision. “Today’s speech appears to admit that the Commission did not have enforceable rules at the time” of the order, they said.

McDowell said in an interview he didn’t want to prejudge the broadband plan. But he expressed disappointment that he had not been told of the announcement until late Friday afternoon, which he said raised process concerns. The proposed rulemaking “muddies the waters,” he said. “What is the broadband plan going to say now that this came out first?” McDowell asked. “Whether it’s the broadband plan or anything else related, the question now becomes whether the net neutrality NPRM will dominate and drive all of the discussions.”

Commissioner Michael Copps expressed support for Genachowski’s “bold statement” on network neutrality. “Broadband users should be able to use any device or application they want, to reach any legal content they wish, using any broadband technology, so long as they don’t cause harm to the network,” Copps said. “Some rules of the road and a venue for enforcing them are required to make this vision reality. This is why I have long advocated an enforceable principle of non-discrimination, ensuring that product and service providers understand the difference between advancing and short-circuiting Internet Freedom.”

NTIA Administrator Larry Strickling also praised Genachowski’s proposal. “As NTIA recognized when adopting rules for our Broadband Technology Opportunities Program, the success of the Internet has been due in large part to its openness, which encourages innovation, investment, and access,” he said. “Our experience with the broadband grants program can help inform this discussion, and we look forward to working with the FCC to preserve a free and open Internet to benefit American businesses and consumers.”

Nondiscrimination means a company “cannot block or degrade lawful traffic over their networks” or “disfavor an Internet service just because it competes with a similar service,” Genachowski said in his speech. But that “will not prevent broadband providers from reasonably managing their networks” to handle network congestion and security, he said. And managed services “different than traditional broadband Internet access” may be beneficial in “limited circumstances,” he said. “Such services can supplement -- but must not supplant -- free and open Internet access.”

Genachowski cited “some clear examples of deviations from the Internet’s historical openness. “We're seeing the breaks and cracks emerge.” Without naming names, he said “certain” providers have blocked access to VoIP applications, degraded performance of lawful P2P software and denied users access to political content. The chairman blamed “limited competition” in broadband, the economic incentives of providers that also sell phone and video service, and increased concerns about network congestion.

The disclosure principle won’t require the release of subscribers’ personal information or anything that might undermine network security, Genachowski said, “and there will be a mechanism to protect competitively sensitive data.” Last year’s blocking of P2P traffic by “a cable broadband provider” showed the need for a sixth principle, he said. Finding out about this kind of action shouldn’t depend on a subscriber who’s affected going to the media, he said. “We cannot afford to rely on happenstance for consumers, businesses, and policymakers to learn about changes to the basic functioning of the Internet.”

The FCC probably will adopt final rules next year, and they'll probably be challenged in court, Stifel Nicolaus said in a note Monday. “We note there is substantial uncertainty over the agency’s legal authority to regulate broadband providers in light of the FCC’s prior classification of the service as a Title I service, which is generally less regulated.”

Washington Research Group analyst Paul Gallant said coverage of the announcement over the weekend suggested “a range of potential negative consequences” for major carriers. “The new rules inevitably will create some uncertainty because they will formalize and deepen FCC regulation of broadband service, but in general we believe the carrier impact is likely to be fairly limited,” he wrote. “The main reason is that the FCC is likely to give wireless and cable operators reasonable leeway to manage traffic flow due to their shared last-mile bandwidth.”

New rules could be adopted before a decision is reached on Comcast’s appeal of last year’s FCC order rejecting the company’s network management practices, Rick Whitt, Google’s Washington telecom and media counsel, said on an Open Internet Coalition conference call. A decision by the U.S. Court of Appeals for the District of Columbia Circuit isn’t expected until spring, he said. He played down any connection between that case and the FCC’s rulemaking, emphasizing that the Comcast case is about the process that the FCC used to find the company had committed neutrality abuses. The goal of the new FCC rulemaking is to strengthen and clarify the FCC’s policies, said Public Knowledge President Gigi Sohn.

Free Press would still welcome neutrality legislation, said Policy Director Ben Scott. He said laws and regulation aren’t mutually exclusive. “The benefit of legislation is it’s permanently in the statute until repealed by the Congress.” Regulation is easier to undo, Scott said. If the appeals court ends up stripping the FCC of its authority to regulate net management, legislation might be the only option, he said.

Hill Democrats Salute

Leading Democrats on Capitol Hill endorsed Genachowski’s policy initiative, while Republicans balked. House Speaker Nancy Pelosi, D-Calif., said the proceeding “will ensure the Internet continues to be an engine of innovation.” Longtime House telecom leader Ed Markey of Massachusetts, who introduced a bill (HR-458) in July on net neutrality, praised Genachowski’s announcement as a “significant step towards preserving the free and open” Internet. Markey said FCC rules would be a “key complement” to his bill, endorsed last week by Commerce Committee Chairman Henry Waxman, D-Calif.

“We've waited too long for the Commission to recognize the critical importance of keeping the Internet free and open, to protect consumers and continue to spur innovation and growth,” said Rep. Anna Eshoo, D-Calif., who co-sponsored HR-3458. The legislation would promote Internet freedom, Eshoo said, saying the FCC now follows an “unenforceable set of policy objectives: Network operators cannot prevent users from accessing the lawful Internet content, applications, and services of their choice, nor can they prohibit users from attaching non-harmful devices to the network.” Sen. Byron Dorgan, D-N.D., also praised Genachowski’s policy announcement.

“This is a very positive step” by Genachowski, House Communications Subcommittee Chairman Rick Boucher of Virginia told us Monday. Adding the principles Genachowski has proposed “is entirely appropriate,” he said. Separately, Boucher said he has been conducting negotiations between broadband providers and net neutrality advocates to try to find common ground that could pave the way for input to Genachowski’s rulemaking or action in Congress. “We have made progress but we are not at a conclusion yet.” Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., applauded Genachowski’s announcement as a “good first step toward protecting consumers’ rights and the integrity of a free and open Internet.”

But key Republicans want to block the FCC, fearing that new net neutrality rules could inhibit industry growth. The Senate Commerce Committee’s top Republican, Kay Bailey Hutchison of Texas, Monday introduced an amendment to an Interior Department appropriations bill (HR 2996) that would prohibit the FCC from expending funds to develop and implement new regulatory mandates. The amendment, likely to be deemed non-germane because Interior does not oversee the FCC’s budget, was endorsed by Senate Republicans John Ensign of Nevada, Sam Brownback of Kansas, David Vitter of Louisiana, Jim DeMint of South Carolina and John Thune of South Dakota, all members of the Commerce Committee. HR 2996 is scheduled for a vote Tuesday. Public Knowledge said it was disappointed with the amendment and hoped the Senate would defeat it.

“I am deeply concerned by the direction the FCC appears to be heading,” Hutchison said. “Even during a severe downturn, America has experienced robust investment and innovation in network performance and online content and applications. For that innovation to continue, we must tread lightly when it comes to new regulations,” she said. The “handful of questionable actions in the past on the part of a few companies” were handled swiftly, and there is no need for a “significant regulatory intervention into a vibrant marketplace.”

“If these rules are implemented, the federal government will be involved in the explicit regulation of Internet network operations for the first time,” Ensign said. “The Internet has flourished in large part because of a lack of government interference; I see no need to change that now.” A spokeswoman for House Commerce Committee ranking member Joe Barton of Texas said: “We look forward to seeing the proposal and hope the new chairman will proceed with a transparent and deliberative process in this controversial area.”

House Communications Subcommittee ranking member Cliff Stearns of Florida said he was “concerned” about the net neutrality proposal because potential regulations could discourage investment. Stearns also voiced disappointment that Genachowski “neglected to mention the proposal” at last week’s subcommittee oversight hearing. “It also appears that he failed to give his Republican colleagues on the commission much advance notice of his planned announcement or the opportunity to discuss the underlying issue,” Stearns said. “The Chairman spoke at our hearing of returning data-driven analysis and transparency to the FCC, and his first major announcement appears to fall short of this.”

ISPs Question Regulation

Many broadband service providers said, including through USTelecom and the CTIA, that they worry about unintended consequences. But they added that they're eager for a rulemaking based on facts. Web application developers and public interest groups like Free Press and Public Knowledge called Genachowski’s proposals welcome and overdue.

Verizon shares the goal of preserving an open Internet but questions the need for regulation, Vice President David Young said on a panel at Brookings after the chairman’s speech. “These would represent the first rules ever to apply to the Internet, and I think there’s a concern there could be unintended consequences,” Young said. More information is needed, because “I truly don’t understand what the problem is that we're trying to solve,” he said. “I don’t understand what the barriers to innovation are on the Internet side that need to be fixed by now regulating ISPs for the first time.”

Wireless should be treated differently from wireline because it has unique network-management requirements, Young said. Traffic spikes are more predictable on wireline networks because ISPs know where users are located. Wireless users are mobile and sometimes mass at cell sites that don’t usually face high levels of traffic, he said.

James Cicconi, senior executive vice president at AT&T, said the carrier “has long supported the principle of an open Internet” and was an “early supporter” of the four broadband principles and their application to wired networks. “We are concerned, however, that the FCC appears ready to extend the entire array of net neutrality requirements to what is perhaps the most competitive consumer market in America, wireless services,” Cicconi said. “We have applauded this FCC for emphasizing that its regulatory decisions would be data-driven. We would thus be very disappointed if it has already drawn a conclusion to regulate wireless services despite the absence of any compelling evidence of problems or abuse that would warrant government intervention.”

President Randolph May of the Free State Foundation called Genachowski statement based on “too much regulatory hubris and immodesty.” The chairman “concedes that ‘we cannot know what tomorrow holds for the Internet,’ and ’the Internet is a dynamic network which continues to grow and evolve,'” May said. “But then he presumes that all innovation takes place at the edge of the Internet and, consistent with the strict separation regime his nondiscrimination principle would enforce, should continue to do so. While he says ’this is not about government regulation of the Internet,’ it most certainly is.”

“The FCC risks killing the proverbial Internet Goose that lays the golden eggs,” said NetCompetition.org Chairman Scott Cleland. “The productive basis of the Internet is mutual self interest, unforced cooperation, and inclusive incentives; however, forcing special outcomes for the first time via regulatory fiat could do just the opposite -- it could diverge mutual interests, discourage cooperation, and exclude networks from the Internet freedom to innovate and invest.”

The net neutrality changes proposed by Genachowski are not “esoteric,” Vint Cerf, Google chief Internet evangelist, said on the company’s policy blog. “If consumers had a wide choice of broadband service providers, preserving an open Internet might not be such a critical issue. Unfortunately, the vast majority of Americans have few (if any) choices in selecting a provider. Allowing a handful of broadband carriers to determine what people see and do online would fundamentally undermine the features that have made the Internet such a success, and could permanently compromise the Internet as a platform for the free exchange of information, commerce, and ideas.”

Skype is blocked on “a lot of networks” in the U.S. and abroad, CEO Josh Silverman said on the panel. ISPs’ ability to restrict traffic based on its content sets a “dangerous precedent,” he said. Genachowski’s proposal is an “important step forward” that balances innovation in networks and applications, he said.

The proposal is a “common-sense” approach that will act as an “elixir” for consumer choice, Free Press’ Scott said on the panel. But disagreement should be expected, he said. “In this town, doing things that are common sense is considered bold.”