Wednesday, August 27, 2014

Not everyone wants stronger net neutrality rules. Here's why.

FCC chairman Tom Wheeler Karen Bleier/AFP/Getty Images

In the last two weeks, the debate over network neutrality has focused on a specific legal maneuver known to insiders as "reclassification." A decade ago, the Federal Communications Commission decided to classify broadband internet as an "information service," a legal category that limits the agency's ability to regulate it. That led to a legal setback in January, when an appeals court ruled that it was illegal for the FCC to impose common carrier regulations on services in this category, meaning that the network neutrality rules it had agreed to were a no-go.

That left the FCC with two options: it could water down its net neutrality rules to fit within the boundaries the court had set for information services, or it could declare that broadband is actually in a different legal category, a "telecommunications service," which would allow the FCC to establish the kind of robust rules that net neutrality supporters favor. Right now, net neutrality activists are outside the FCC urging the agency to reclassify.

But not everyone thinks this is a good idea. Incumbent telecom companies, free-market advocates, and a number of members of Congress have all urged the FCC to retain the low-regulation "information service" category. Here are the three biggest problems that, opponents claim, could be created by reclassification.

Lower investment

This is a favorite argument of the cable industry. "Cable operators and telecommunications companies have made massive private investments in broadband networks," the National Cable and Telecommunications Association wrote in a Wednesday letter to the Federal Communications Commission. The NCTA worries that reclassifying would put cable networks into a "heavy-handed framework" of regulations that "would discourage network investment." The theme was echoed by Rep. Gene Green (D-TX), in his letter warning the FCC not to reclassify.

Gus Hurwitz, a legal scholar at the University of Nebraska College of Law, says that reclassifying could give the FCC the power to regulate broadband prices, connection and disconnection of service, and interconnection with other internet companies. He says the 1996 Telecommunications Act could even be read as requiring the FCC to regulate how internet services interconnect with the traditional telephone network — a nonsensical concept that could waste the time of FCC policymakers.

Network neutrality supporters say this concern is overblown because of forbearance. That's a legal procedure that allows the FCC to choose not to enforce provisions of the law that are deemed overly burdensome or counterproductive. But Hurwitz argues that the FCC has never tried to use forbearance on the scale that would be required to apply telecommunications regulations to the modern internet. It could become a legal quagmire and at a minimum it could become a distraction for FCC decision makers.

Reclassification opponents say broadband providers will be less willing to open their wallets when there's a lot of uncertainty about when and how they'll be allowed to profit from their networks. Of course, as Vox's Matt Yglesias has noted, the NCTA's own statistics suggest that cable companies are investing less in their networks today than they did in the early 2000s, a time when there was a lot of uncertainty about the legal status of broadband networks.

More litigation

The FCC has been bogged down in litigation over the legal status of broadband networks for years. Opponents contend that reclassification will only make the situation worse.

Indeed, this is the primary argument made by Tom Wheeler himself. In its January ruling striking down the FCC's network neutrality rules, the DC Circuit Appeals Court gave the agency a kind of road map for crafting regulations that could pass muster with the courts while maintaining the current classification of broadband. Many net neutrality proponents believe that this approach will lead to network neutrality rules that are too weak, but Wheeler contends that weak rules now are better than additional years with no enforceable rules on the books.

If the FCC reclassifies, that decision is almost certain to trigger a lawsuit. Most observers believe the courts would eventually affirm the FCC's power to reclassify, but it could mean years of additional uncertainty. "If we do see reclassification, we're probably looking at another 2 to 4 years of just litigating questions of the commission's basic authority," Hurwitz says.

Political backlash

Opponents of reclassification have dubbed it the "nuclear option," drawing a parallel to proposals to end the filibuster in the US Senate. It's not a bad comparison. In both cases, critics don't have the legal power to stop the "nuclear option," but they're effectively threatening to make life miserable for the majority if it's invoked.

There are two ways opponents of reclassification could make life difficult for Tom Wheeler if he reclassifies. First, members of Congress can haul Wheeler before Congress to grill him about his policies. And second, telecom companies could mount more legal challenges to FCC decisions, forcing the agency to spend more time defending itself in court, leaving it with less time to pursue other initiatives.

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