Verizon's Gamble on Internet Rules Might Have Backfired

Verizon set off a wide debate in January over how the federal government should regulate the Internet by winning a legal challenge to the existing rules. It now looks possible that the company’s victory has paved the way for its political defeat.

The Federal Communication Commission held the final roundtables on its net neutrality regulations on Tuesday, and FCC Chairman Tom Wheeler will presumably retreat to his office to finalize his proposal. He has said he wants to have new rules in place by the end of the year, meaning a vote could happen at the commission’s open meeting on Dec. 11.

Proponents of stronger rules have clearly won the battle for public opinion by turning the regulatory issue into a popularity contest: Netflix and John Oliver on one side, the cable industry on the other. The FCC received 3.7 million comments on the issue, sparked in no small part by Oliver’s savage takedown of the cable industry. Comcast and Co. aren’t going to win a fight like that.

As if a debate over rules concerning Internet infrastructure wasn’t obscure enough, the real issue now is how the FCC claims legal authority to pursue those rules. Advocates of the most aggressive approach want the commission to reclassify broadband as a telecommunications service. This option, known as Title II, is what advocates see as the only way left open by the court to prohibit Internet providers from charging for preferential access to their customers. Opponents argue that the court actually did give the FCC the authority to pursue net neutrality rules without this reclassification. Confusingly, this side also believes the commission wouldn’t have the legal authority to ban such activity outright even after reclassification.

The Internet Association, a trade group whose members include Facebook and Google, has remained noncommittal.

Marvin Ammori, a fellow at the New America Foundation who has been pushing for reclassification, says it’s a tossup as to which way Wheeler goes. Even getting to this point could be seen as a victory, given that Title II was politically untenable the last time the FCC wrote rules in 2010.

Immediately after the Verizon decision in January, Ammori says, reclassification was a pipe dream. But things began to change when Wheeler floated a proposal that was tilted heavily toward the side of the Internet providers, leading to the public backlash. Now Ammori’s confident enough to say that he doesn’t think compromise is a possibility. “The court decision leaves very little choice for a third way,” he says. “It will either be we win on Title II or we lose.”

That would almost certainly result in another lawsuit, says Representative Gene Green, a Texas Democrat who rounded up 19 other lawmakers to send a letter to the FCC opposing reclassification. Broadband providers are terrified of reclassification, which they see as a backdoor way to new regulations.

Various camps are looking for other ways out. Green thinks that Congress should rewrite the 1996 telecommunications law to address broadband—don’t hold your breath for that one. Representative Henry Waxman (D-Calif.) recently proposed a hybrid solution (PDF) that would take aspects of the legal approaches advocated by both sides, although it inspired little initial enthusiasm. It will be up to the chairman to find some common ground politically.

“If Wheeler is going to stand firm against Title II, he’s got to offer something to people pushing it,” says Berin Szoka of TechFreedom, a libertarian think tank opposing tighter rules. Top of Szoka’s list of suggestions: additional rules for wireless networks, which were exempted from the strictest rules in the 2010 law. Most net neutrality advocates want this reversed, and people from both sides of the debate seem to think it’s likely that Wheeler will go this way. This would be a particularly bitter pill for Verizon to swallow, given that it’s the country’s largest wireless carrier.

Wheeler has floated additional action on the interconnection fees that companies like Netflix pay to cable providers. Several major telecommunications mergers are also under review, and Washington could extract conditions as part of a broader approach to Internet governance.

Advocates of Title II say that this plan wouldn’t work because the FCC wouldn’t have the authority to write strong enough rules. But the broadband industry is apparently annoyed with Verizon for ruining what seems in retrospect to have been a pretty good thing. Anyone thinking about challenging the FCC might think twice, given the result of the last legal victory.

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