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June 13, 2018

The End of Net Neutrality: What Does It Mean?

As of this week, the repeal of net neutrality is officially in effect. The issue has become quite polarized since the FCC announced plans to change the Obama-era policy, with both sides engaging heavily via social media and on Capitol Hill to make their case. Silicon Valley giants like Netflix, Google and Facebook argue that net neutrality is necessary to regulate a fair and equal internet while telecom companies like Verizon and Comcast argue that doing away with the policy will lead to increased investment and innovation. With the future of the internet at stake, here’s what you need to know about net neutrality:

How did we get here?

  • In 2010, the FCC approved the Open Internet Order with a 3-2 vote, which guaranteed equal access to the web and set into motion the rules pertaining to net neutrality.
  • In 2011 Verizon sued the FCC after it issued the FCC Open Internet Order in 2010, a set of regulations that Verizon felt unfairly imposed neutrality rules on broadband carriers.
  • In 2014, the U.S. Court of Appeals for the D.C. Circuit ruled that the FCC Open Internet Order 2010 would only apply to common carriers, providers of a service that is open to everyone and subject to regulation.
  • Since Verizon and other similar telecommunications companies were considered ‘information services,’ it was exempt from the obligations of common carriage and excluded from the FCC Open Internet Order of 2010.
  • In 2015, the FCC reclassified internet service providers as common carriers under Title II of the Communication’s Act, imposing net neutrality on companies like Verizon and Comcast and nullifying the 2014 decision in Verizon’s favor.
  • In 2017, the FCC voted to reverse the Title II classification of internet service providers and restore their classification as information services with no neutrality obligations.
  • On June 11, 2018 internet service providers will officially be reclassified as internet service providers and net-neutrality regulations will expire.

What is net neutrality?

Net neutrality is a regulation enacted in 2015 during the Obama administration, founded in the belief that internet service providers (ISPs) are responsible for providing equal access to all applications and content, indiscriminately. The philosophy being that the internet is a public good and that it should be treated like a utility.  In particular, it prohibits ISPs from blocking, favoring or slowing access to websites and products.  The regulations mean that all websites and content must be provided equal access, and ISPs cannot prioritize some content over others.  So, even though Comcast owns NBC Universal, it can’t make NBC’s videos stream faster than its competitors.

Arguments in favor of net neutrality:

Those in favor of net neutrality argue that the Comcasts, AT&Ts and Verizons of the world will have the ability to censor content or give certain content priority over others when it comes to access or speed.  Another concern is that now that net neutrality is no longer in effect, ISPs will be open to charging more for different internet bundles, in the same vein that we now see cable bundles for those cutting the cord.  For instance, you can pay more to ensure your Netflix shows stream without interruption, while other websites may encounter slower connections.  There is another concern that, if ISPs can charge more for higher speeds, or what some call an internet “fast-lane,” it would benefit large companies and the wealthy at the expense of small businesses, start-ups, freelancers and those in lower economic strata.

In a letter to the chairs and ranking members of the House and Senate Subcommittees on Communications and Technology, several high profile “internet pioneers,” academics and business leaders wrote:

“The proposed Order would also repeal oversight over other unreasonable discrimination and unreasonable practices, and over interconnection with last-mile Internet access providers. The proposed Order removes long-standing FCC oversight over Internet access providers without an adequate replacement to protect consumers, free markets and online innovation.

Arguments against net neutrality, and pro repeal:

While those on the content side worry about prioritization and new fees, the infrastructure providers say that repealing these rules will lead to a “free and open internet.” The FCC has argued that net neutrality rules have held companies back and deterred increased investment in broadband infrastructure.  This is an especially important flashpoint, since we are currently on the cusp of adopting 5G, the next generation of broadband technology.  5G will provide for additional bandwidth to allow for faster browsing and streaming over mobile.  As CRI has pointed out, the telecommunication industry is working on building out this infrastructure, but are running into roadblocks when it comes to the regulatory process.  The development of 5G has been likened to an “arms race,” while the country successful in gaining the upper hand stands at a distinct economic advantage.

The USTelecom Broadband Association estimates that investment in domestic broadband networks decreased by billions of dollars after the net neutrality rules went into effect in 2015. Meanwhile, preceding the net neutrality rules, we saw the rise of internet giants like Facebook, Amazon and Google, while investment topped $1.6 trillion.  With the repeal of net neutrality, the FCC will be handing over the reigns of oversight to the FTC.  This will transition the nature of government intervention from that of pre-emptive regulation to the less burdensome monitoring for anti-competitive practices—not exactly ushering in a new world of lawlessness as others have claimed.

The FCC also argues that the repeal of net neutrality will benefit small ISPs that reach more rural and low-income populations.  In a recent op-ed defending the FCC’s decision to repeal net neutrality, FCC Chairman Ajit Pai says resources that these providers were forced to put toward regulatory compliance could instead be invested in building out broadband networks to reach more of the lesser-served populations.

Regulatory questions at hand

What is the mandate of the FCC?

The Federal Communications Commission (FCC) was formed with the intention of it being an independent agency of the U.S. Government by the Communications Act of 1934. The Commission is directed by five commissioners, including one Chairman, appointed by the President and confirmed by the Senate for five-year terms. At the time of its conception, the FCC was tasked with regulating radio and wire communications. Since then, new technology has emerged and altered the breadth of the organization. Now, the FCC’s power to regulate extends over radio, TV, wire and satellite communications and it is responsible for maintaining standards amid ever-evolving types of media and communication while also protecting the interests of both consumers and business.

How does the internet fit into the FCC’s mandate?

Under net neutrality rules, the FCC reclassified broadband as a utility—giving the agency the ability to regulate the broadband infrastructure much like a telephone network.  As Pai put it,

“Rules designed for the Ma Bell monopoly during the era of rotary phones were a poor fit for the greatest innovation of our time, the internet.”

With the repeal of net neutrality, the FCC no longer has the authority to regulate broadband.  Instead, the oversight will be transferred to the Federal Trade Commission (FTC), which oversees consumer protection issues and questions of competition.  As Pai wrote:

“Our approach includes strong consumer protections. For example, we empower the Federal Trade Commission to police internet service providers for anticompetitive acts and unfair or deceptive practices. In 2015, the FCC stripped the FTC — the nation’s premier consumer protection agency — of its authority over internet service providers. This was a loss for consumers and a mistake we have reversed. Starting Monday, the FTC will once again be able to protect Americans consistently across the internet economy, and the FCC will work hand-in-hand with our partners at the FTC to do just that.”

So, according to Pai, instead of having the FCC pre-emptively regulating ISPs, the FTC will oversee their operations and monitor for anti-competitive behavior or actions that harm consumers.

What’s next?

Though the net neutrality rules have officially been repealed as of June 11, 2018, we can expect a long legal and political battle ahead.  Since these are regulations and not law, a different administration will be able to reverse the FCC’s decision and reinstate a net neutrality policy, after it navigates through the same rulemaking process.  It’s also possible for Congress to reverse the decision under provisions in the Congressional Review Act (CRA), which allows for the legislative body to overrule action taken by an agency.  The Senate recently passed a CRA “resolution of disapproval,” but in order to nullify the rule, the House will also have to pass its own–but as of now, Republican leadership is not likely to put such a resolution up for a floor vote.  Rep. Mike Doyle (D-PA.) has launched a discharge petition in the House, which could force a vote on the issue, but that petition requires a majority of House members to sign on in support, and he is about 50 votes shy of the necessary tally.

The politicization of an independent agency has led to an extreme whiplash effect, that cultivates a poor investment environment.  CNET points out that states have already begun pursuing their own legislation to maintain net neutrality rules within their own borders, while in other states, governors have signed executive actions to the same effect.

Whatever the impact, we are not likely to see changes in our internet experiences immediately, but rather over the course of several years as companies adapt to the new regulatory scheme.