Why the Broadband Industry Is Secretly Furious With Verizon Over Net Neutrality

The company’s lawsuit against the FCC stirred a hornet’s nest that may ultimately result in tougher regulations for everyone.

A Verizon store is seen April 21, 2011 in Santa Monica, California.  
National Journal
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Brendan Sasso
Oct. 3, 2014, 2:19 a.m.

Ve­r­i­zon took the the fed­er­al gov­ern­ment to court over net neut­ral­ity and won, but the com­pany’s in­dustry peers are privately peeved that it chose to pick the fight at all.

That’s be­cause now that the old net-neut­ral­ity re­gime is gone, the Fed­er­al Com­mu­nic­a­tions Com­mis­sion is con­sid­er­ing a new set of In­ter­net reg­u­la­tions—and the new rules could well be stronger than the ones that came be­fore.

The FCC is con­sid­er­ing new pro­pos­als that would more tightly re­strict how Ve­r­i­zon and oth­er pro­viders can handle cel­lu­lar data (the old net-neut­ral­ity rules left mo­bile traffic mostly un­touched), and the agency may even de­cide to treat In­ter­net ser­vice like a heav­ily reg­u­lated util­ity.

Oth­er In­ter­net ser­vice pro­viders won’t pub­licly cri­ti­cize Ve­r­i­zon. But privately, lob­by­ists grumble that they wouldn’t be in this mess if Ve­r­i­zon had just ac­cep­ted the old rules.

Four broad­band-in­dustry of­fi­cials said there’s wide­spread frus­tra­tion with Ve­r­i­zon for mak­ing what they view as a bad stra­tegic er­ror. Some com­pan­ies had even tried to talk Ve­r­i­zon out of fil­ing its law­suit, of­fi­cials said.

“They were like a dog chas­ing a bus,” one broad­band source said. “What are you go­ing to do when you catch the bus?”

A spokes­man for Ve­r­i­zon de­clined to com­ment for this story.

The FCC first en­acted net-neut­ral­ity reg­u­la­tions in 2010 that barred home broad­band pro­viders from block­ing or “un­reas­on­ably” dis­crim­in­at­ing against any In­ter­net traffic. Cell-phone pro­viders couldn’t out­right block web­sites, but they were free to speed up or slow down cer­tain ser­vices or ex­empt oth­ers from monthly data caps.

The goal of net neut­ral­ity is to pre­vent gi­ant cor­por­a­tions from dis­tort­ing the In­ter­net to fa­vor them­selves at the ex­pense of users.

Many In­ter­net act­iv­ists were dis­ap­poin­ted with the 2010 rules, com­plain­ing that they im­posed only vague stand­ards and were too le­ni­ent on wire­less ser­vice. Most In­ter­net pro­viders felt the rules were a fair com­prom­ise that they could live with.

But Ve­r­i­zon sued any­way, claim­ing that the FCC had over­stepped its leg­al au­thor­ity. In Janu­ary, the D.C. Cir­cuit Court of Ap­peals agreed and struck down the reg­u­la­tions.

It was al­ways un­likely that the FCC would just give up and let the rules die. Pro­tect­ing net neut­ral­ity was a plank on Pres­id­ent Obama’s 2008 cam­paign plat­form, and is a top pri­or­ity for Demo­crats.

At first though, it looked like Ve­r­i­zon’s gamble could ac­tu­ally pay off. In May, FCC Chair­man Tom Wheel­er un­veiled a new net-neut­ral­ity pro­pos­al that was weak­er than the old rules. His pro­pos­al would have al­lowed In­ter­net pro­viders to charge web­sites for faster ser­vice as long as the agree­ments were “com­mer­cially reas­on­able.”

But the plan sparked a massive back­lash, with Web com­pan­ies and ad­vocacy groups warn­ing it could cre­ate a two-tiered In­ter­net. More than 3.7 mil­lion people filed com­ments with the FCC (the most ever for an is­sue), and Wheel­er is now un­der in­tense pres­sure to toughen up the rules.

He has already in­dic­ated that he is likely to im­pose stronger re­stric­tions on wire­less ser­vice. In a speech in Las Ve­gas last month, Wheel­er said the wire­less in­dustry has changed dra­mat­ic­ally since 2010 and that “con­sumers in­creas­ingly rely on mo­bile broad­band as an im­port­ant path­way to ac­cess the In­ter­net.”

Wire­less-in­dustry lob­by­ists are scram­bling to beat back the pos­sible reg­u­la­tions—but it in­creas­ingly looks like they’re fight­ing a los­ing battle.

Tough­er wire­less net-neut­ral­ity rules would be an es­pe­cially pain­ful blow to Ve­r­i­zon, the na­tion’s largest mo­bile car­ri­er. The com­pany has its home broad­band and TV ser­vice FiOS, but its wire­less net­work re­mains the core of its busi­ness.

The FCC is even eye­ing a more dra­mat­ic move to re­clas­si­fy broad­band In­ter­net as a “tele­com­mu­nic­a­tions ser­vice” un­der Title II of the Com­mu­nic­a­tions Act. Con­sumer ad­voc­ates ar­gue that the reg­u­lat­ory man­euver is the only way to put net-neut­ral­ity rules on firm leg­al ground. But broad­band pro­viders fear Title II would turn them in­to pub­lic util­it­ies and would strangle their in­dustry’s growth.

The pro­vi­sion, which the FCC already uses to reg­u­late land­line phone com­pan­ies, in­cludes the abil­ity to con­trol prices and de­term­ine which cus­tom­ers a com­pany has to serve. The com­mis­sion could also de­cide to waive par­tic­u­lar re­quire­ments un­der the pro­vi­sion.

In­ter­net pro­viders aren’t en­thu­si­ast­ic about net-neut­ral­ity rules that lim­it how they can man­age traffic, but they view Title II reg­u­la­tion as an apo­ca­lyptic out­come.

In a sense, Ve­r­i­zon is lucky that it didn’t get a more de­cis­ive vic­tory at the D.C. Cir­cuit. Al­though the judges threw out the rules, they hin­ted that the com­mis­sion could come up with new reg­u­la­tions us­ing the ex­ist­ing leg­al au­thor­ity. If the court had sided en­tirely with Ve­r­i­zon, the FCC may have had no choice but to in­voke Title II to pro­tect net neut­ral­ity.

At this point, Ve­r­i­zon and the oth­er broad­band pro­viders will be thank­ful if they get rules that closely re­semble the 2010 reg­u­la­tions.

In­ter­net act­iv­ists won’t say they’re happy Ve­r­i­zon won in court, but they feel the wind is at their backs to get stronger rules this time.

“If noth­ing else, this pro­ceed­ing has al­lowed the FCC to reex­am­ine some of the con­clu­sions baked in­to the 2010 rules,” said Mi­chael Wein­berg, a vice pres­id­ent at the con­sumer-ad­vocacy group Pub­lic Know­ledge. “Any op­por­tun­ity to have the FCC po­ten­tially strengthen open In­ter­net pro­tec­tions is an op­por­tun­ity we wel­come.”


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