Obama Calls on FCC to Issue Rules Protecting ‘Net Neutrality’
President Weighs In as Agency Seeks to Finish Regulations
President Barack Obama called on the Federal Communications Commission Monday to declare broadband Internet service a public utility, saying that it is essential to the economy and that the “strongest possible rules” are needed to ensure that the Internet doesn’t become divided into fast and slow lanes.
The president called for the FCC to expand its regulatory authority over the industry, a departure from the years of light regulation that the providers say has enabled them to flourish.
The endorsement of a stronger regulatory approach contributed to a slide in broadband providers’ shares, raised new questions about a proposed merger between Comcast Corp. and Time Warner Cable Inc. and further hardened the political lines on “net neutrality”—the principle that all Internet traffic should be treated equally.
Firefox Vice President Johnathan Nightingale says President Obama's proposal to group broadband providers with phone companies would be a step toward eliminating online ‘discrimination.’
.
Major broadband providers such as AT&T Inc., Verizon Communications Inc. and Comcast swiftly criticized Mr. Obama’s approach and said they didn’t think it would stand up in court, with AT&T explicitly saying it would challenge such rules. Internet companies, including Netflix Inc., cheered the president’s plan, saying it would prevent the providers from demanding payment to reach consumers.
The threat of prolonged litigation adds to pressure on FCC Chairman Tom Wheeler, who is trying to write rules for the Internet that can pass muster with the courts using a telecommunications law that many people believe is outdated.
House Speaker John Boehner (R., Ohio) said Republicans would fight the president’s plan, which he called a “misguided scheme” to regulate the Internet.
Mr. Obama specifically called for the FCC to reclassify broadband Internet access as a utility, and then to ban broadband providers from blocking or slowing down traffic, or striking deals to give some websites special treatment. He also argued that any rules should apply to both mobile and fixed networks, a departure from the FCC’s previous set of net neutrality rules in 2010.
Those rules were thrown out by a federal court in January, and ever since Mr. Wheeler has been trying to craft rules that would both prevent broadband providers from charging websites tolls to reach consumers while also standing up to an inevitable legal challenge. In doing so, he faces strong pressure from net-neutrality supporters and Web companies to enact strong rules, as well as pushback from broadband providers wary of giving the FCC more regulatory power.
Net-neutrality supporters, which include Web companies, activists and academics, argue that without such rules broadband providers would be able to demand payment from Netflix and other firms offering services that consume large amounts of bandwidth. Mr. Obama said the prospect of broadband providers deciding which websites reach consumers is unacceptable and contrary to the nature of the Internet.
“We cannot allow Internet service providers to restrict the best access or to pick winners and losers in the online marketplace for services and ideas,” he said.
Mr. Wheeler has tried to address those concerns by offering rules that would let the FCC police content deals to ensure they aren’t harmful or anticompetitive.
But his assurances have failed to satisfy the net-neutrality camp, which says only a flat ban on paid prioritization would allow a small company to grow into the next Facebook or Google.
The FCC has thus far resisted a flat ban because it is legally risky and could outlaw services aimed at encouraging low-income users to adopt home broadband service. But the issue has become a flash point in the debate, and recent plans floated by the FCC that would ban most but not all paid prioritization further incensed many net-neutrality supporters.
For many such supporters, the only way for the FCC to make its rules stick is for the agency to classify broadband as a telecommunications service under Title II of the Communications Act instead of keeping it as a lightly-regulated information service. Mr. Obama’s endorsement of reclassification was viewed as a major victory for activists and a blow to the broadband industry.
“For a generation, the Internet has been an American success story. Light-touch regulation has encouraged levels of investment unprecedented by any industry and spawned incredible innovation. Today’s action puts all of that at risk—and puts it at risk not to remedy any specific harm that has occurred,” said Jim Cicconi, AT&T senior executive vice president.
Comcast executive vice president David L. Cohen said the move would be “a radical reversal that would harm investment and innovation, as today’s immediate stock market reaction demonstrates,” adding that Congress should take up the issue.
Shares of Comcast and Time Warner fell 4% and 5% respectively Monday as investors appear to worry that a more hawkish FCC might choose to block the companies’ proposed merger.
Net neutrality supporters have argued that any rules that don’t include full reclassification are destined to fail in court. Both sides have acknowledged that regardless of what rules the FCC adopts, litigation appears all but certain. Given the likelihood of court battle, FCC officials are taking their time on writing the rules, and may seek additional comment on the pros and cons of reclassification.
Mr. Wheeler appeared to confirm that a vote on the rules isn’t likely until 2015 in a statement where he welcomed the president’s input on the issue.
“The more deeply we examined the issues around the various legal options, the more it has become plain that there is more work to do.
.
The reclassification and hybrid approaches before us raise substantive legal questions. We found we would need more time to examine these to ensure that whatever approach is taken, it can withstand any legal challenges,” Mr. Wheeler said.
Support for the president’s statement was strongest in Silicon Valley, where Web companies and venture capitalists view net neutrality as crucial to the future of their industries.
“It’s amazing,” said Matt Mullenweg, founder and CEO of Automattic, the San Francisco-based parent company of the Web publishing platform WordPress. “This is great for us at WordPress…We’re particularly affected by net neutrality because we power the independent Web. Our small customers cannot afford to do paid deals with cable and telcos.”