FCC Approves Net Neutrality Rules, Setting

Stage For Legal Battle

Telecom, cable industries expected to challenge commissions
3-2 vote
By
Thomas Gryta
Updated Feb. 26, 2015 1:49 p.m. ET
The Federal Communications Commission set aside two decades of laissez-faire policy Thursday
to assert broad authority over the Internet, voting to regulate broadband providers as public
utilities and overruling laws in two states that made it harder for cities to offer their own Web
service.
Both rulings were setbacks for big telecommunications and cable companies that have invested
billions of dollars in their networks and wins for Internet companies that have enjoyed explosive
growth as people spend more time online. The moves reflect an evolution from regulators
treating the Internet as a technological innovation that needed to be nurtured to a powerful
commercial venue with rival constituencies that need to be balanced.
The commission pledged to use a light touch, and the immediate practical effects of the decisions
are limited because companies, regulators and users all agree in principle that traffic shouldnt be
blocked.
Still, the shift in philosophy was notable, with possible implications down the road that are hard
to predict. It even drew warnings from Google Inc., which told the White House privately it was
making a mistake when President Barack Obama called in November for the approach the FCC
adopted on Thursday, .
The Federal Communications Commission approves net neutrality rules. Wharton's Kevin
Werbach explains what the ruling means for consumers on the News Hub. Photo:
Istock/shironosov
Net neutrality revolves around a key question: Should internet bandwidth be treated equally for
everyone? Here's a look at the debate.
The blessing and the curse for the cable industry and the telcos is they have an infrastructure
which is absolutely critical to the economy, to education, to health carefar beyond the original
use for which they built those networks, said Blair Levin, who was chief of staff at the FCC in
the 1990s and who headed up the agencys 2010 National Broadband Plan. The good news is
everybody needs it. The bad news is when everybody needs it, the government plays a role.

Netflix said the day was a win for consumers. Telecom and cable industry groups said the
decisions opened the door to heavy-handed regulation that would hurt innovation. FCC
Chairman Tom Wheeler shot back at such criticism ahead of the vote, saying, This is no more a
plan to regulate the Internet than the First Amendment is a plan to regulate free speech.
Both votes in the Democratic-controlled commission were 3-2 along party lines. In the more
closely watched decision, the FCC approved new net neutrality rules that bar Internet service
providers from blocking Web traffic or letting them charge websites for priority service.
The rules also extend the regulators reach into the middle of the Internet by saying if there are
complaints, the commission will review so-called interconnection deals, which allow companies
like Netflix to tie directly into networks like those owned by Comcast.
The telecom and cable industries said they agree with the principles behind the rules but bristled
at the oversight. Verizon, in a statement typed on a Remington typewriter and datelined Feb. 26,
1934, criticized the rules as antiquated and likely to create uncertainty that will hurt innovation.
The industries are preparing to fight the rules in court and are backing attempts by Republicans
in Congress to supersede them with new legislation.
The FCC has tried for the better part of a decade to find a middle path of using guidelines or
rules to enforce net neutrality without going so far as treating broadband as a regulated service
under Title II of the Communications Act of 1934.
Apple Computer co-founder Steve Wozniak, left, applauds the FCC ruling on net neutrality
Thursday. Below, FCC Chairman Tom Wheeler. Photo: Agence France-Presse/Getty Images
But those efforts have foundered. In 2010, the U.S. Court of Appeals for the D.C Circuit ruled
the commission overstepped when it cited Comcast for slowing down traffic for users of filesharing sites like BitTorrent. Last year, the same court ruled in favor of Verizon and overturned
the FCCs next attempt to set rules.
In the more recent ruling, the court said the FCC was treating Internet providers like traditional
common carrier telecommunications services even though it hadnt classified them as such.
The new ruleswhich reclassify broadband as a Title II serviceare an effort to patch that hole.
They are asserting the importance of broadband, and they are asserting the importance of the
government taking an active role in ensuring that we get deployment, and that its open and fair,
Mr. Levin said.
The FCCs other decision Thursday was aimed at state laws that make it harder for cities to build
or extend publicly owned Internet services. The panel granted petitions by public utilities in
Chattanooga, Tenn., and Wilson, N.C., to escape restrictions on expanding such service. About
20 states have passed such laws.

The FCC justified its preemption of the state laws by referring to its authority to encourage
broadband expansion and competition. The decisions dont affect the other states, but they do set
a precedent for consideration of similar petitions in the future.
Some states have designed thickets of red tape designed to limit competition, Mr. Wheeler said
Thursday. We are cutting away that red tape consistent with Congresss instructions to
encourage the deployment of broadband.
Telecom and cable companies have objected to allowing arms of the government to compete
with private business. The cost of building broadband networks to businesses and homes is high,
and the laws help protect those investments by ensuring they dont face competitors that have an
unfair advantage, they say.
Critics also say when local governments make mistakes, taxpayers can get stuck with the bill.
The city of Provo, Utah, eventually sold its struggling fiber-optic network to Google for $1.
Republican Commissioner Ajit Pai said that the FCC doesnt have the legal power to shoot down
the laws and would need a clear statement from lawmakers to do so. His fellow Republican,
Michael ORielly, made a similar argument, saying, Im deeply troubled by the policy
implications of this order.
Nevertheless, public support for firmer oversight of broadband is running high. Concerns about
the growing power of giant firms were fanned a year ago when Comcast struck a $45 billion deal
to buy fellow Internet provider Time Warner Cable. The FCC received around four million
comments on its net-neutrality proposals.
Chairman Wheeler, who disclosed details of the new net neutrality rules earlier this month,
received a standing ovation when he entered the commission room ahead of the votes. He
reiterated Thursday that the commission is acting only to establish regulatory authority to enforce
net neutrality and wont impose more onerous regulations like price controls.
Apple co-founder Steve Wozniak attended the meeting. On the sidelines, he said that he has only
slower DSL service at home and that providers need to be more closely regulated.
Broadband is essential, like water, Mr. Wozniak said.
Ryan Knutson contributed to this article.
Write to Thomas Gryta at thomas.gryta@wsj.com