FCC net neutrality rules take effect despite industry objections

Reporting From Washington —  With a simple declaration on its website, the Federal Communications Commission launched a new era of Internet oversight by touting that its tough regulations for online traffic were now in place.

The so-called net neutrality rules, designed to ensure the free flow of Internet data, took effect Friday after federal judges declined for now to stop them.

FCC Chairman Tom Wheeler said that, starting Friday, “there will be a referee on the field to keep the Internet fast, fair and open.”

To prove that point, the agency’s online form for complaints about Internet service was updated to give consumers the option of choosing net neutrality along with billing, privacy, speed and other issues.

Average Internet users initially won’t notice much of a difference after the rules took effect, but the change has already reverberated through the online ecosystem. Broadband network owners are scrambling to come to grips with the regulations approved in February.

Companies, for instance, have been moving quickly to strike agreements covering key interconnection points — how they pass along one another’s traffic — on the network before the Federal Communications Commission gains new authority over those deals under the new rules.

Meanwhile, despite concerns that the regulations would chill deal-making and investment, Charter Communications Inc. Chief Executive Tom Rutledge told FCC Chairman Tom Wheeler that such a prospect “has not altered Charter’s approach of investing significantly in its network,” according to a regulatory filing.

Last month, Charter struck a $56.7-billion deal to buy Time Warner Cable Inc.

“The fears about a lack of investment were overstated,” said Tim Karr, senior director of strategy at Free Press, a public interest group that supported the tough rules.

“The net neutrality rules should bring a degree of certainty to these types of business deals,” he said. “It sets the rules for the playing field.”

But broadband providers said the Internet is entering a period of great uncertainty.

The providers, such as AT&T Inc., along with industry trade groups, said they support the central premise of net neutrality — that the Internet should remain open and that content should flow unhindered by the carriers.

But they have gone to court to try to overturn the way in which the FCC has decided to enforce those rules: by reclassifying broadband as utility-like service subject to potentially onerous regulation.

On Thursday, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit denied petitions for a temporary stay made in separate lawsuits by AT&T Inc. and other opponents of the rules.

The decision doesn’t end the litigation. The court said it would expedite lawsuits that threaten to leave the regulatory landscape unsettled for months if not years.

“None of the industry players have a firm idea exactly what sort of regulatory environment they’ll be facing,” said Doug Brake, a telecom policy analyst with the Information Technology and Innovation Foundation, which opposed the FCC’s approach.

Since the Clinton administration in the 1990s, the FCC has only lightly regulated the Internet, he said. The controversial new approach, passed on a party line vote in February by the Democratic-controlled agency, is a big shift away from that, Brake said.

The regulations, proposed by Wheeler and publicly backed by President Obama, prohibit broadband providers from blocking, slowing or selling faster delivery of legal content flowing through their networks to consumers.

Twice before, courts have thwarted the FCC’s efforts to establish net neutrality rules. This time, the FCC classified high-speed Internet as a telecommunications service, subjecting it to utility-like oversight and giving the agency more enforcement authority.

Wheeler has promised a light-handed approach, and the rules exempt broadband providers from rate regulation and other more onerous provisions that apply to conventional phone service.

“No price regulation means consumer revenues for [Internet service providers] should be the same the day after the order takes effect as they were the day before,” Wheeler said when the agency approved the rules. “It is these revenues that provide the stimulus for investment.”

But companies have complained that the door is open for tougher regulation and warn that will hinder investment in expanded networks.

Hal Singer, a senior fellow at the Progressive Policy Institute, a centrist Washington think tank, estimated in a study released last month that broadband providers will reduce their annual investments 5% to 12% from last year’s $77-billion level because of the concerns about future regulation.

“These guys are scared of what’s going to happen,” Singer said.

Republicans have sided with the broadband providers.

Both Republican FCC commissioners, Michael O’Rielly and Ajit Pai, voted against the new rules.

“The fight against the commission’s rules ... has only just begun because unless eradicated, they will ultimately harm the foundations of the Internet and limit its possibilities,” O’Rielly said.

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