The Broadband Industry’s Plan for Killing Obama's Net Neutrality Plan

The nightmare scenario for Internet providers is starting to come true.

President Obama urged the Federal Communications Commission Monday to enact the "strongest possible" regulations to protect net neutrality. Under his plan, the FCC would invoke sweeping new powers over Internet providers, classifying them under the same legal provision as telephone utilities.

The move is necessary, Obama said, to ensure that Internet providers can't "restrict the best access or to pick winners and losers in the online marketplace for services and ideas."

The FCC is an independent agency, so it is not bound to enact Obama's plan. But three of the five commissioners are Democrats, and it seems unlikely that they would buck the president on such a critical issue.

So it looks like the Internet providers' lobbying campaign to prevent the executive branch from imposing stringent net-neutrality regulations has failed. But they have two more branches of government to turn to.

The major broadband providers issued statements Monday saying that they're ready to continue the fight in Congress and in the courts.

"If the government were going to make such a momentous decision as regulating the entire Internet like a public utility, that decision is more properly made by the Congress and not by unelected regulators without any public record to support the change in regulation," Jim Cicconi, AT&T's top lobbyist, said in a statement. "If the FCC puts such rules in place, we would expect to participate in a legal challenge to such action."

Comcast claimed Obama's plan would violate decades of decisions by the FCC and the courts and that such a "radical reversal" in policy should only be made by Congress. Verizon also warned that Obama's plan would "face strong legal challenges."

IN CONGRESS

The companies will find sympathy among Republican lawmakers, who just won control of the Senate last week.

House Speaker John Boehner vowed that Republicans will continue their efforts to "stop this misguided scheme to regulate the Internet." Sen. Mitch McConnell, who is poised to become the majority leader in January, and other top Republicans in both chambers also vowed to fight Obama's plan.

Republicans won't have the 60 Senate seats they need to overcome Democratic filibusters next year. But that might not matter for net neutrality. Under the Congressional Review Act (which was passed as part of the Republican "Contract with America" in 1996) Congress has an opportunity to fast-track an up-or-down vote on all new federal regulations. Democrats won't be able to block a vote to repeal net-neutrality rules.

Republicans, however, would still need two-thirds votes in both chambers to reverse a presidential veto. Leading Democrats praised Obama's statement Monday, so the GOP is unlikely to get much bipartisan support to kill the rules.

Republicans may also use the appropriations process to try to starve the FCC of funds unless it scales back its regulations. And FCC Chairman Tom Wheeler should expect to be grilled about the issue at oversight hearings in both chambers.

IN THE COURTS

The other front in the industry's war against the new regulations will be the federal courts.

The FCC first enacted net-neutrality rules in 2010, but Verizon sued, saying the agency had overstepped its authority. The other broadband providers held their fire at the time, figuring those rules were the best deal they were going to get from the Obama administration. The D.C. Circuit Court of Appeals sided with Verizon earlier this year and threw the old rules out.

After the defeat, Internet activists urged the FCC chairman to classify broadband Internet as a "telecommunications service" under Title II of the Communications Act. The move would grant the agency expansive new powers over Internet service, and, the activists claim, allow the agency to enact rules that can survive future court challenges.

In Obama's announcement Monday, he said treating the Internet like telephone service is "a basic acknowledgment of the services [Internet companies] provide to American homes and businesses, and the straightforward obligations necessary to ensure the network works for everyone—not just one or two companies."

But it's not a sure thing that the courts would uphold net-neutrality rules under Title II. In 2002, during the Bush administration, the FCC first decided to classify broadband Internet as an "information service," subjecting it to weaker regulation. In 2005, the Supreme Court upheld that decision.

So Title II reclassification may be bound for another Supreme Court ruling. Although the court has already backed the lighter regulatory scheme, that decision deferred to the FCC's expertise on technical issues. The court may give the agency latitude to change its mind.

Even if the courts allow the FCC to classify the Internet under Title II, there would probably be an onslaught of legal skirmishes over how much of the provision should apply. Title II allows the FCC to control prices, determine which customers a company has to serve, and a myriad of other powers. Obama said the FCC should waive the rate-regulation requirements and "other provisions less relevant to broadband services." But companies and advocacy groups will probably fight over which exact requirements to impose.

And broadband providers argue that the section won't even allow the FCC to ban broadband providers from creating special "fast lanes" for companies that pay—one of the most critical issues in the net-neutrality debate. Telephone companies, for example, are subject to Title II but can still create 1-800 numbers for companies that pay for it.

Obama's statement Monday was huge win for activists who have been rallying for stronger net neutrality and a devastating defeat for broadband providers. But it may only have set the stage for more battles in Congress and the courts for years to come.

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