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Obama's big net neutrality announcement, explained

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President Obama just weighed in on the most controversial issue in internet regulation: whether to put broadband internet service into a different legal category to allow more regulation. Advocates say this change, known as reclassification, is essential if the Federal Communications Commission is to protect network neutrality. But critics say the move could tie the internet up in red tape, slowing investment and innovation.

Here's what you need to know.

What is reclassification?

Technology companies and open internet activists want regulations protecting network neutrality. That's the idea that all content and services on the internet should receive equal treatment online. Advocates say that without network neutrality, big companies will be able to pay for their content to be delivered over a virtual 'fast lane,' leaving the rest of the internet stuck in the slow lane.

But there's a big problem: the FCC currently places broadband services into a regulatory category that precludes this kind of regulation.

Under current law, communications services fall into two categories. The "information services" category is designed for online services such as Facebook and Netflix. The law sharply restricts the FCC's ability to regulate services in this category. The second category, "telecommunications services," is designed for public utilities such as traditional phone service. The FCC has broad powers to regulate services in this second category.

For the last decade, the FCC has put broadband internet into the low-regulation "information services" category. Yet in 2010, the FCC tried to impose network neutrality regulations on broadband providers anyway. The courts said that was illegal: if you want to regulate a service like a public utility, you have to first put it into the public utility category.

Network neutrality activists have been urging the FCC to do just that: to "reclassify" broadband as a telecommunications service. They believe this is the only way to have strong protection for network neutrality.

Does President Obama's announcement mean that we're going to get those strong net neutrality regulations?

No. The FCC is an independent agency. Its five commissioners are appointed by the president, but once they're in office the president can't remove them or overrule their decisions. So officially, President Obama is simply offering the commission his opinion. The FCC could ignore him and do something different.

But obviously, the president isn't just a random citizen. His decision to speak out will intensify the already significant pressure the FCC is facing from liberal activists and technology companies for reclassification.

What's the case against reclassification?

Network neutrality opponents say it's not possible to have just a little bit of utility regulation: once you put broadband in the high-regulation bucket, it's going to get slammed by a ton of outdated regulations that were designed for old telephone networks.

For example, the Telecommunications Act imposes a complex system of price regulations on telecommunications providers. Critics say this cumbersome and bureaucratic rate-setting process is ill-suited for the fast-changing internet economy. They warn that reclassification would cause the FCC — and, more importantly, the internet economy — to get bogged down with red tape.

Would reclassification really bog the internet down in red tape?

Proponents don't think so. They acknowledge that some of the regulations that govern traditional telecommunications services are a poor fit for the internet. But they argue that the FCC can address these concerns with a legal process called forbearance.

The 1996 Telecommunications Act was enacted by a Republican Congress that was anxious to avoid excessive regulation. So they included a provision allowing the FCC to forbear — that is, not enforce — any regulations that it judged to be contrary to the public interest.

So advocates argue that the FCC can re-classify broadband as a telecommunications service, but then it can use its forbearance power to cancel the most burdensome requirements the law would otherwise impose as a result. Opponents say that might not work, but their arguments aren't very convincing.

How has FCC Chairman Wheeler responded?

In a statement released an hour after Obama, Wheeler thanked Obama for his comments but stressed that the FCC is an independent agency. He was noncommittal about Obama's call for reclassification.

"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," he wrote. He said that he was considering multiple options, including reclassification. These options "raise substantive legal questions," he argued.

"We found we would need more time to examine these to ensure that whatever approach is taken, it can withstand any legal challenges it may face."

What happens now?

Officially, Obama's announcement doesn't change anything. FCC Chairman Tom Wheeler has signaled that he plans to announce his final network neutrality rule before the end of the year. He'll continue working on his proposal.

To enact new regulations, he needs to convince two other FCC commissioners — most likely, the other two Democrats — to go along with his proposal. Obama's comments may be aimed at these commissioners as much as the chairman. If they insist on full reclassification, and refuse to accept any regulations short of that, Wheeler might feel he has no choice but to go along.

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