Congress Punts Net Neutrality back to the FCC. Get Ready for Carrier Reclassification

Those who hoped that Congress might take a hand in the net neutrality mess can now officially be disappointed. House Republicans tanked the net neutrality bill, leaving the question of who will control the Internet's traffic, and to what end, completely in the air. Given the previous lack of consensus between FCC regulators and various parts of the tech industry, the chance of a realistic solution, even a compromise, is virtually nil. That means consumers are left in limbo and corporations will have to make decisions with no certainty of whether they understand what costs or revenues they may see.

The bill was apparently similar to the compromise that Google (GOOG) and Verizon (VZ) had struck, according to leaked versions of the draft proposal:

By those reports, the bill would have forbidden ISPs to "unjustly or unreasonably discriminate in transmitting lawful traffic over a consumer's wireline broadband Internet access service" and given the FCC some "case-by-case" fine making authority (up to $2 million a ding). But it would have denied the agency any authority to regulate ISPs as common carriers, and excluded wireless broadband from the scenario.
According to a statement from House Energy and Commerce Committee Chair Henry Waxman (D-CA), the legislation would have attempted to achieve a number of things:
  • "Restore the FCC's authority to prevent blocking of Internet content, applications, and services, which was struck down by the court in the Comcast decision."
  • "Prevent phone and cable companies from unjustly or unreasonably discriminating against any lawful Internet traffic."
  • "Prohibit wireless broadband providers from blocking websites, as well as applications that compete with voice or video conferencing, while preserving the FCC's authority to adopt additional safeguards under its existing authorities."
  • "Direct the FCC to issue transparency regulations so consumers know the price, performance, and network management practices of their broadband providers."
  • "[T]he FCC could begin enforcing these open Internet rules immediately â€" with maximum fines increased from $75,000 to $2,000,000 for violations."
  • "Our approach would provide the phone and cable companies with protection from the threat of reclassification for two years."
This was -- surprise! -- a party-line vote, and here's at least one likely reason why opinion split the way it did: campaign contributions. Here are two tables from that show average contributions from telephone utilities, telecom services and equipment companies, and cable and satellite TV companies to members of Congress from 1990 through 2010.

Average Telephone Utilities Contributions

Average Telecom Services & Equipment Contributions

Average Cable Contributions

I included all three categories because I found that some companies such as Qwest Communications (Q) and T-Mobile, which are carriers, were listed as telecom services and equipment rather than telephone utilities.

Notice a pattern: telephone utilities spent far more heavily on Republicans in the House. According to Waxman's statement, ranking committee member Joe Barton (R-TX) delivered the news that there would be no Republican support for the plan.

Over his time in office, from 1989 to the present, telephone utilities were tenth on his top contributing industries with $306,420 in contributions. Neither telecom services nor cable made the top 20, which makes it sound as though this was a decision of the Republican leadership and Barton become the conduit. Or perhaps it wasn't raw contributions so much as a chance to play another political football game and block the Democrats at yet another point.

Things are now back with the FCC, which leaves things in a mess unless the corporations involved have a sudden change of heart and decide that half a loaf is better than none. This is probably the worst outcome for telcos and cable companies.

A majority of the FCC was in favor of enforcing net neutrality. A court decision smacked down an earlier attempt at control, but there's still the potential of the FCC reclassifying carriers to bring them under its prevue. In fact, Waxman's office wrote that, in the absence of Congressional action, the FCC "should move forward under Title II."

This is the ending that the carriers in particular should have wanted to avoid. It would make them increasingly the subject of regulation. It's pretty clear that carriers would bring another court challenge, but it's hardly a given a court would agree that the agency had overstepped its bounds. At best, the companies might hope for a court to delay FCC action and leave things frozen as they are now for a bit longer. Perhaps their executives think that a shift in Congressional power after the elections would serve them better, but then they would have to get Barack Obama to sign a bill that he might not like.

In any case, this will continue to play out over at least the next year or two, with corporate managers left to guess at what strategy would work best.


Image: Flickr user Monica's Dad, CC 2.0.