FCC Net Neutrality Talks Collapse in Wake of Google-Verizon Deal

"We have called off this round of stakeholder discussions,” Lazarus said. “It has been productive on several fronts, but has not generated a robust framework to preserve the openness and freedom of the Internet -- one that drives innovation, investment, free speech, and consumer choice. All options remain on the table as we continue to seek broad input on this vital issue.” The FCC is not expected to try to reignite discussions, one source said.

Meetings were ongoing Thursday and had been expected to pick up again Friday, before they came to the abrupt end noted by the mid-afternoon Lazarus statement. Public interest groups, meanwhile, blasted reports of an agreement between Verizon and Google, even before it was confirmed. Questions about the Verizon-Google deal and the FCC talks dominated a press conference with FCC Chairman Julius Genachowski after Thursday morning’s FCC meeting.

The Verizon-Google agreement could provide the bare outlines of legislation Congress could then take up, said FCC and industry officials, who noted that Google and Verizon haven’t negotiated an actual prioritization agreement, but a set of principles that could then be submitted to Congress and could take pressure off the FCC to act on broadband reclassification.

The agreement takes wireless off the table, which has been a key Verizon objective, FCC and industry officials said. One source said the FCC could not agree to not including wireless. The terms of the Verizon-Google agreement, according to FCC sources, include a rebuttable presumption that prioritization is discriminatory, similar to what was being negotiated in the FCC meetings. Both agreements -- Google-Verizon and the one being brokered by the FCC -- offered a slightly different approach on the definition of managed services. Officials disagreed on which approach is more narrow.

Google and Verizon have had little to say for the record. Both denied reports in The New York Times that companies, like YouTube, owned by Google, could end up paying extra to ensure that its content receives priority on Verizon’s network.

"I am, I have been, I will be firmly committed to preserving the freedom and openness of the Internet,” Genachowski said at a press conference, held before Lazarus announced that talks had fallen apart. “What we're in now is a snapshot in a process that we launched last October with a public notice.” The FCC has held hundreds of meetings with all interested parties and made public thousands of comments, he said. “We're consulting now, through staff, with a very broad degree of stakeholders,” he said. “We're exploring every process that we can to achieve the goal. … The goal is preserving a free and open Internet for consumers and entrepreneurs.”

Genachowski downplayed the significance of the industry meetings, the subject of repeated questions from reporters. “There are many recurring meetings,” he said. Genachowski declined to offer any comments on the Google-Verizon reports until an announcement is made. “Any arrangement that doesn’t preserve the freedom and openness of the Internet will be unacceptable,” he said.

Verizon Executive Vice President Tom Tauke issued a statement on the breakdown of the talks at the commission. “As in any policy debate, there needs to be a balance, which means that all participants should work to find common ground,” he said. “We will continue to work with the FCC, Congress and all interested parties to find a solution that ensures that: (1) the Internet remains open and provides consumers with the web experiences they want, and (2) investment remains robust, so that broadband is the premiere platform for innovation for the next decade."

"We are disappointed that the net neutrality talks convened by the FCC have broken down,” said James Cicconi, senior executive vice president of AT&T. “Over recent months, we have negotiated in good faith to bridge differences in our common goal of preserving the open Internet. To that end, we put a number of significant concessions on the table and, despite today’s setback, remain convinced that a consensus solution can be achieved. Moreover, we believe a consensus solution is vital if we are to ensure continued investment and job creation in the Internet space."

"We welcome the FCC’s decision to end its backroom meetings, said Free Press Research Director Derek Turner. “Phones have been ringing off the hook and e-mail inboxes overflowing at the FCC, as an outraged public learned about the closed-door deal-making and saw the biggest players trying to carve up the Internet for themselves. We're relieved to see that the FCC now apparently finds dangerous side deals from companies like Verizon and Google to be distasteful and unproductive. Now the FCC must match the chairman’s words with decisive actions."

Public Knowledge President Gigi Sohn was pleased the talks had ended. “We were concerned about the negotiations because they were largely restricted to the biggest industry players,” she said. “The FCC now can use the comments and public views submitted to it as a basis for its decisions, as the Commission should have done all along.

"We applaud Chairman Genachowski for reaching out to a variety of stakeholders to try and achieve consensus on targeted legislation on network neutrality,” said the Open Internet Coalition, one of the participants in the discussions. “While that now appears unlikely, we will continue to work with the Chairman and other Commissioners to adopt Internet openness rules to protect consumers and innovation."

That Google and Verizon would even seriously consider a side deal at the same time as talks at the FCC on net neutrality pointed up the hurdles to reaching consensus among the six participating executives, said industry officials watching the gatherings closely but not attending. They said failure to reach a deal at a lengthy meeting held Saturday, especially on wireless issues where rule proponents and opponents remained far apart (CD Aug 3 p1), showed the shortfalls behind Genachowski’s quest for consensus.

One hurdle to the talks was that the FCC itself “is a stakeholder in this and has made a very public position on this issue, and so has the president,” said Research Director Derek Turner of Free Press, which wants net neutrality rules for wireless. “In this case, you either have rules that apply to wireless, or you don’t, and there really isn’t any room for a middle ground,” he said. Carriers don’t want such rules, while for companies like Skype, which sent an executive to the talks, “their entire business plan is built on them being freely and openly available to all mobile Internet users,” Turner said.

Some meeting participants had expressed frustration at the gap between the sides, and all industry participants met separately from FCC officials during Saturday’s gathering, industry officials said. Among those they said have signaled their frustration was Verizon Executive Vice President Tom Tauke, while NCTA President Kyle McSlarrow continued to be upbeat because consensus on wireline issues looked possible. Frustration with lack of consensus may have played a role in the Google-Verizon deal, “but Verizon as you know also has a business relationship with Google that is very important to them going forward” and that likely played a role, too, said an industry lobbyist. Others agreed.

Renewed speculation of a Google-Verizon deal surfaced earlier this week (CD Aug 4 p9) and meeting participants likely were aware of them, industry officials said. The two companies’ deal doesn’t completely eliminate the possibility of reaching a deal at the FCC, they said. “Verizon and Google have supposedly been speaking to each other for many months now, which is not surprising given that they have very intertwined business interests,” Turner said. “Given the chairman’s past statements about this is all one Internet and the rules should apply to wireless … maybe they hope to avoid any regulations on the mobile platform."

"Our sense is a Verizon-Google agreement in itself would not provide enough substantive network neutrality safeguards or political cover for FCC Chairman Genachowski to back off reclassification,” Stifel Nicolaus said in a research note Thursday. “But it could still be helpful to the chairman’s search for a middle ground if it creates some momentum or at least buys him some time. The risk is that the Google-Verizon deal will fracture alliances, breaking down the talks."

One key problem that immediately arises is that “voluntary deals among corporations are no substitute for sound laws and regulations,” Sascha Meinrath, director of the New America Foundation’s Open Technology Initiative, told us. “Gentlemen’s agreements are exactly what the Robber Barons utilized in the late 19th century to carve up industry to their own benefit. Today, Google and Verizon are threatening to do the same to our virtual spaces in an agreement that is both to their own benefit, first and foremost, and unenforceable should things go awry. Meanwhile, due to the FCC’s failure to lead on these issues, companies are running amok and, in essence, creating their own rules of the road. One of the worst outcomes could be that the FCC would actually adopt these 21st century Robber Barons’ ideas as their own -- which would create a telecommunications environment that is toxic to new innovation and consumer protection."

Google “has lost its halo” in the eyes of the public interest community in agreeing to the deal with Verizon, said Public Interest Legal Director Harold Feld. “Google is underestimating the impact to the public of losing their halo like this,” Feld said. “I think we're already starting to see, at least through the technorati that follow this, a ‘I can’t believe Google is selling us out’ reaction."

"The potential deal between two broadband behemoths underscores the need for the FCC to act quickly to protect the free and open Internet,” said Rep. Ed Markey, D-Mass. “In the absence of such action, it’s increasingly clear that cozy cooperation between communications colossi will reign on the Internet. No one should be surprised that such companies will seek to slant the playing field in their favor, a result that will stifle the next generation of Internet innovators and short-circuit the economic benefits needed to power our economy in the 21st century.” Other lawmakers were reluctant to weigh in because the deal was still unconfirmed. “As a strong advocate for an open Internet, I am very interested in any agreement on net neutrality,” said House Communications Subcommittee Ranking Member Cliff Stearns, R-Fla. “However, since Google denies that there is an agreement, I am refraining from any comment until I actually see it."

"Congressional stalemate is making a legislative solution look increasingly unlikely in the near term,” said Senate Communications Subcommittee Chairman John Kerry, D-Mass. “As a result, Chairman Genachowski is now moving forward along a regulatory path. While this is an imperfect solution, it’s his only real option to maintain the proper role of government oversight in communications.” Kerry believes that “all regulatory options should remain on the table,” he said. “I hope that over time we can carve out a bipartisan compromise that preserves and promotes an open, ubiquitous, inclusive Internet infrastructure between Title II and an unregulated network.” For Dish, “now that the negotiations are over, it is critical that the commission pursue its proposed reclassification to protect the open Internet,” Deputy General Counsel Jeff Blum said.