FCC Chairman Proposes Abandoning Obama-Era Net Neutrality Rules

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  • Pai, a Republican, says change will unleash digital revolution
  • Move will hand victory to AT&T and Comcast over Silicon Valley
Bloomberg Intelligence’s Matthew Schettenhelm discusses the FCC’s proposal to end net neutrality rules.

U.S. Federal Communications Commission Chairman Ajit Pai on Tuesday proposed vacating Obama-era net neutrality rules, handing a victory to broadband providers such as AT&T Inc. and Comcast Corp. while critics warned of higher prices and a less-open internet.

Pai, a Republican, set a Dec. 14 vote on overturning rules adopted by the FCC in 2015, saying he wants to move away from “heavy-handed, utility-style regulations upon the internet” and return to a “light-touch, market-based framework.”

“Under my proposal, the federal government will stop micromanaging the internet,” Pai said in an emailed statement.

The proposal puts Pai, who was appointed by President Donald Trump, into position to kill a rule that survived a court challenge from broadband providers last year. In its place, broadband providers will need to disclose how they handle web traffic, he said.

“This is ridiculous and offensive to the millions of Americans who use the internet every day,” said FCC Commissioner Jessica Rosenworcel, a Democrat. “It hands broadband providers the power to decide what voices to amplify, which sites we can visit, what connections we can make, and what communities we create.”

Republicans and internet service providers have said the rules adopted by the Democratic-run FCC gave the agency too much power over companies, including the possibility of rate regulation. Democrats and internet companies said the rules are needed to prevent broadband providers from favoring their business partners’ offerings, or their own video and other content.

Rules to be overturned include a ban on blocking or slowing web traffic and a prohibition on offering “fast lanes” that give quicker service to content providers willing to pay extra. Broadband providers have argued that competition will ensure they don’t unfairly squelch traffic. Pai said the Federal Trade Commission would take on some duties for ensuring
broadband providers treat web traffic fairly.

“The removal of antiquated, restrictive regulations will pave the way for broadband network investment, expansion and upgrades,” Jonathan Spalter, chief executive officer of the trade group USTelecom with member including AT&T and Verizon Communications Inc., said in an emailed statement.

Under the proposal, the FCC’s rules would preempt state or local regulations that impose net neutrality requirements on broadband providers, a senior FCC official said.

NCTA-the Internet & Television Association, a trade group with members including top U.S. cable provider Comcast and No. 2 Charter Communications Inc., said it welcomed Pai’s proposal. The rules risked “stifling innovation, costing jobs, and casting a pall over the investment needed,” said Michael Powell, chairman of the Washington-based trade group.

House Minority Leader Nancy Pelosi, a California Democrat, called Pai’s move “an all-out assault on the entrepreneurship, innovation and competition at the heart of the internet.”

“The administration is moving to destroy the openness and dynamism of the internet,” Pelosi said in an email message.

Why Trump Wants to Toss Obama’s Net Neutrality Rules: QuickTake

Pai’s proposal is the latest step in a years-long tug-of-war over regulations dictating how companies such as AT&T and Comcast allow access to internet content -- from Facebook Inc.’s social media site to Netflix Inc.’s streaming videos. On Tuesday, the companies both issued statements criticizing Pai’s plan.

Snap Inc. said in its filing to go public that overturning net neutrality would enable mobile internet providers to undermine its service and seriously harm its business.

The Internet Association, a trade group with members including Netflix, Facebook, Google and Amazon.com Inc., said, “This proposal undoes nearly two decades of bipartisan agreement on baseline net neutrality principles that protect Americans’ ability to access the entire internet.”

Pai’s proposal “represents the end of net neutrality as we know it and defies the will of millions of Americans,’’ the group’s president, Michael Beckerman, said in an email.

Republican Representatives Greg Walden, of Oregon, and Marsha Blackburn, of Tennessee, said Pai’s plan shows the FCC "understands the importance of making sure the internet continues to flourish under a light-touch regulatory regime."

More: Comcast, AT&T Investors See Cloud Lift on Internet Rules

Consumers Union called the proposal “an enormous loss for consumers” that “would give internet service providers more power and control over the websites we can visit.”

“This move would likely lead to consumers paying higher prices for the internet access and speeds they have today,” Jonathan Schwantes, senior policy counsel at Consumers Union, said in an emailed message.

Former FCC Chairman Tom Wheeler, who led the agency as it adopted the 2015 rules, said in an interview with Bloomberg TV that Pai’s proposal will move the internet toward a cable-TV model.

“If you like your cable company and the way in which they choose which channels you can see, and the way in which they continue increasing their prices, you’re going to love what happens under this repeal,” Wheeler said. “Because suddenly the people making the rules are the networks."

Robert McDowell, a former Republican FCC commissioner, told Bloomberg TV that many protections remain in the law.

"There many laws already in effect here,” said McDowell, who is chief public policy adviser for Mobile Future, a trade group with members including AT&T and Verizon. "It’s all going to be just fine.”

— With assistance by Jing Cao, and Gerry Smith

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