AT&T, Verizon say FCC net neutrality move will stifle broadband investment, raise prices

The FCC voted to pass new net neutrality rules for wireless and wireline networks that would bar blocking and throttling of content and ban carriers and ISPs from striking deals with content companies, a move that incumbent telcos AT&T (NYSE: T) and Verizon (NYSE: VZ) say will stifle innovation and drive up costs for consumers.

In particular, the carriers are concerned about the FCC applying utility-style regulation on the Internet by using Title II of the 1934 Communications Act to implement new net neutrality rules.

"The FCC's move is especially regrettable because it is wholly unnecessary," said Michael E. Glover, senior vice president of public policy and government affairs for Verizon, in a statement. "The FCC had targeted tools available to preserve an open Internet, but instead chose to use this order as an excuse to adopt 300-plus pages of broad and open-ended regulatory arcana that will have unintended negative consequences for consumers and various parts of the Internet ecosystem for years to come."

Likewise, AT&T said that the FCC's decision creates a political divide among Republican and Democratic leaders.

"Today, an Administration and an FCC that appeared headed toward another bipartisan win on net neutrality were driven instead to a partisan fight," wrote Jim Cicconi, senior EVP of eternal and legislative affairs for AT&T, in a blog post. "The 3-2 FCC vote, along party lines, for sweeping new regulation of the Internet, is a rejection of the compromise win and an embrace, however reluctant, of the political fight."

Echoing a similar thesis was the telco's main industry organization, USTelecom, which said that the telecom industry will be forced to challenge the FCC's order in both the courts and in Congress.

"USTelecom strongly opposes the FCC's intention to impose utility-style regulation on the Internet, a move that reverses longstanding bipartisan precedent," said Walter McCormick, president of USTelecom. "This shift in policy will hurt efforts to achieve broadband deployment throughout the United States and lead to increased costs on consumers. Broadband service providers fully support and operate in complete conformance with the open Internet standards advanced by the president. Industry will turn to the courts for review, and work with Congress on a bipartisan basis to advance legislation."

With these new rules in place, any retail broadband service Americans buy from a cable operator, telco or a wireless operator would be reclassified as a telecommunications service, instead of a lightly-regulated information service. Both the service to the end user and to edge providers would be classified under Title II.

These new rules were approved by a 3-2, party-line vote, with the panel's three Democrats supporting the rules and the two Republicans opposing it.

Under the new rules, the FCC has laid out three main provisions:

  • No blocking: Broadband providers will not be able to block access to legal content, applications, services or non-harmful devices.
  • No throttling: Broadband providers will not be able "impair or degrade" lawful Internet traffic on the basis of content, applications, services or non-harmful devices.
  • No paid prioritization: Broadband providers may not favor some lawful Internet traffic over other lawful traffic in exchange for payment, i.e., there will be  no "fast lanes." Carriers and ISPs will also be barred from prioritizing content and services of their affiliates.

The commission's new rules would also include a "standard for future conduct," with the rationale being that because the Internet is always evolving, "there must be a known standard by which to determine whether new practices are appropriate or not. Thus, the proposal would create a general Open Internet conduct standard that ISPs cannot harm consumers or edge providers."

The will also forbear from three key provisions: 1) rate regulation, unbundling or other forms of utility regulation; 2) Universal Service Contributions under Section 254; and 3) imposing new taxes or fees. 

FCC Chairman Tom Wheeler said during the meeting announcing the new rules that the new rules aren't about simply regulating the Internet.

"This proposal has been described by one opponent as, quote, a secret plan to regulate the Internet. Nonsense," Wheeler said. "This is no more a plan to regulate the Internet than the First Amendment is a plan to regulate free speech. They both stand for the same concepts: openness, expression, and an absence of gate keepers telling people what they can do, where they can go, and what they can think."

FCC Republican Commissioners Ajit Pai and Mike O'Rielly opposed the vote. Pai said the FCC is usurping Internet freedom by placing "government control" over it.

"The Internet is not broken. There is no problem for the government to solve," he said.

Although the FCC's order does not put a ban on capping usage, the FCC said it can intervene if a service provider uses a data cap to another competitor or a customer.

While the order was just put forth today, it's likely that it is going to face a number of legal challenges going forward, particularly from AT&T and Verizon.

However, Wheeler said that the FCC has the legal foundation to defend the new rules. Wheeler's proposal is leveraging two main elements of legal authority: Title II of the Communications Act and Section 706 of the Telecommunications Act of 1996. By using these two provisions, the FCC said the "proposal provides the broad legal certainty required for rules guaranteeing an open Internet."

For more:
- see this FCC release
- Ars Technica has this article

Special Report: Net neutrality for wireless and wireline carriers

Related articles:
Google Fiber: Title II reclassification could ease access to utility poles, rights-of-way
FCC says proposed net neutrality rules will withstand legal challenges from AT&T, Verizon
FCC's Wheeler aims to update Title II for new net neutrality rules
FCC says proposed net neutrality rules will withstand legal challenges from AT&T, Verizon
Wheeler's Title II plan could unwind Netflix-Comcast deal, other interconnection pacts

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