FCC Majority Approves NOI on Genachowski Broadband Plan

A sharply divided FCC on Thursday approved a notice of inquiry seeking comments on Chairman Julius Genachowski’s proposed “third way” broadband reclassification proposal. FCC Republicans Robert McDowell and Meredith Baker dissented sharply. Debate on the NOI showed deep divisions among the commissioners in their view of the broadband market and whether the FCC needs to reclassify Internet service under Title II of the Communications Act, while effectively keeping Internet content and applications under more light-handed Title I.

The FCC announced a relatively compressed timeframe for the inquiry, asking for initial comments by July 15 and replies by Aug. 12, giving the commission plenty of time to approve rules before the November elections. Genachowski declined to say whether action on the reclassification proposal would come before a vote on net neutrality rules. “I haven’t thought about timetables,” Genachowski said during a brief news conference.

Changes are unlikely before the election. The NOI states that the FCC could delay the effective date of classification by 180 days after an order is approved “or another suitable period.” Moreover, “certain provisions of Title II, such as sections 222, 254(d), and 255, could be phased-in on an even longer timetable.”

The FCC has no choice but to examine how broadband is classified in light of the Comcast decision, Genachowski said, saying he would welcome congressional action if lawmakers think that is necessary. “In view of the court decision … the FCC has an obligation to move forward with an open, constructive public comment process to ask hard questions, to find a solution, and resolve the uncertainty that has been created,” he said. “The Congressional and FCC processes are complementary.”

Genachowski urged the commissioners to remain open-minded, during the news conference. “I actually think we have, each of us, an obligation to keep an open mind as we run a public process,” he said. “There’s no point in having a notice and comment process unless people bring open minds to it.”

Commissioner remarks showed that if anything they have dug in since Genachowski unveiled the third-way proposal May 6. McDowell and Baker dissented and did not participate in the writing of the NOI, but staff for Commissioner Michael Copps and Mignon Clyburn pushed for language in a edit to the NOI that appeared on the commission e-mail chain Wednesday night intended to toughen the FCC’s stance, we've learned. They said the NOI should be changed to make clear that there was not a “consensus” on the commission when cable modem and DSL service were classified as information services in 2002 and 2005, respectively. The two also sought to eliminate “unnecessary factual statements or unintended declaratory conclusions … inappropriate at this stage of the proceeding” that would have softened the language in the notice. The change was not a last minute edit and had been previously discussed with the chairman’s office, an FCC official said.

Copps said the time had finally come for the FCC to reverse a series of misguided policy calls and regulate broadband as a common carrier service. “Between a few big industry players who never liked the telecommunications law passed by Congress and previous commissions only too ready to sacrifice the public interest to special interests, consumers find themselves in quite a box,” Copps said in remarks that ran to more than 2,100 words. “We are on the cusp of perhaps the greatest communications revolution since the printing press, yet we enter this new Digital Age arguably shorn of the ability to offer consumers the most basic of protections -- such as insuring their security, safeguarding their privacy, providing them with the benefits of competition and making sure that dynamic new technologies are available to them and are open to the maximum extent possible -- without needless gatekeeper control at the on-ramps to the information highway.”

Copps, taking on the opposition of major carriers, said the public should “beware of all the slick PR you hear, and remember that much of it is coming from lavishly funded corporate interests whose latest idea of a triple play is this: slash the FCC’s broadband authority; gut the National Broadband Plan; and kill the open Internet."

"It is essential that we ask probing questions that enable us to gather the information required to make informed and sensible policy decisions,” said Commissioner Mignon Clyburn. The notice “affords all interested parties -- industry, public interest groups, public officials, and ordinary Americans -- the opportunity to weigh in on the specific legal and policy merits of those proposals. The item succeeds in taking a difficult and combustible topic and presenting it in a way that should produce meaningful and fruitful discourse."

McDowell replied that classifying broadband Internet access as common carriage under Title II is “unnecessary” and the proposal “already … has caused harm in the marketplace. Investors and international observers are expressing serious concerns about what the FCC is poised to do. Analysts are counseling a wide variety of investors to withhold badly needed investment capital in fear of regulatory uncertainty and litigation risks. … While Title II classification is being advanced in the name of furthering broadband deployment, it may have the unintended consequence of stunting growth in this sector."

Baker questioned whether Genachowski has “prejudged” the outcome of the proceeding. “The Chairman has publicly endorsed the so-called ‘Third Way’ approach in the days leading up to this notice,” Baker said. “I cannot support such a conclusion. At the outset, I reject the effort to re-brand a Title II classification with forbearance as a middle ground, it is not.” Baker conceded that retaining the FCC’s Title I framework is “not without some legal risk too -- no approach is.” But the status quo is “substantially less risky than reclassifying broadband and overturning forty years of Commission precedent codified by Congress, and affirmed by the courts,” she said. “And, if legal certainty is paramount, only Congress has the ability to provide the commission with clear jurisdictional footing and direction to move forward to tackle the challenges of the broadband age."

The NOI, released Thursday afternoon, said reclassification is necessary because of Comcast. “This Notice begins an open, public process to consider the adequacy of the current legal framework within which the Commission promotes investment and innovation in, and protects consumers of, broadband Internet service,” it said. “Comcast appears to undermine prior understandings about the Commission’s ability under the current framework to provide consumers basic protections when they use today’s broadband Internet services. Moreover, the current legal classification of broadband Internet service is based on a record that was gathered a decade ago. Congress, meanwhile, has reaffirmed the Commission’s vital role with respect to broadband, and the Commission has developed a National Broadband Plan recommending specific agency actions to encourage deployment and adoption."

As previously hinted by the FCC, the NOI makes clear that wireless broadband may not be treated the same as wireline. The NOI asked a series of questions on the preferred treatment of terrestrial wireless and satellite service.

"We seek comment on which of the … legal frameworks specifically discussed in this Notice, or what alternate framework, would best support the Commission’s policy goals for wireless broadband,” the notice said. “In addition, as the Commission recently noted in the Open Internet NPRM, “there are technological, structural, consumer usage, and historical differences between mobile wireless and wireline/cable networks. We seek comment on whether these differences are relevant to the Commission’s statutory approach to terrestrial wireless and satellite-based broadband Internet services. Do consumers today view wireless broadband as a substitute for wired services? How are terrestrial wireless and satellite Internet services purchased, provided, and perceived?"

CEA President Gary Shapiro said that the FCC “must ensure that consumers can enjoy unfettered access to broadband networks and content without overly regulating the Internet, the engine of technology driving our innovation economy. A robust competitive marketplace is key to broadband deployment. CEA commends the Commission for moving expeditiously to solicit public input in order to avoid any regulatory uncertainty that could leave consumers in limbo and chill innovation. Following the D.C. Circuit’s Comcast decision, the Commission has proposed some creative solutions that are worthy of honest and thorough discussion. We look forward to providing our comments to the Commission consistent with these principles."

But other major industry players sharply criticized the decision to go forward on the NOI. “Reclassifying high-speed broadband Internet service as a telecom service is a terrible idea,” said Verizon Executive Vice President Tom Tauke. “The negative consequences for online users and the Internet ecosystem would be severe and have ramifications for decades. It is difficult to understand why the FCC continues to consider this option. Rather than attempting to make the new world of broadband fit into the regulatory scheme of the old telephone world, the FCC should acknowledge that this is an issue Congress should address. Nearly 300 members of Congress have signed letters to the FCC, warning against reclassification and expressing support for congressional action."

AT&T Senior Executive Vice President Jim Cicconi said: “Today’s decision by the FCC is troubling and, in many respects, unsettling. It will create investment uncertainty at a time when certainty is most needed. It will no doubt damage jobs in a period of far-too-high unemployment. … The FCC has argued that it is not seeking to regulate the Internet. The facts-indeed the very words of the proposal voted on today-tell a different story.” The Internet is commonly defined as “a network of networks,” and the FCC proposes to regulate broadband networks virtually end-to-end under a regulatory structure devised in 1934 for monopoly telephone networks.

"We are confident that a fully developed record will clearly demonstrate that to subject broadband Internet access to 20th Century monopoly telephone regulation is legally unsustainable, and will stifle job creation, investment and economic growth,” said Walter McCormick, president of USTelecom. “Despite the fact the FCC has heard from more than half of the elected officials in Congress that this approach is wrong, the Commission has chosen to ignore this diverse and bi-partisan group of Senators and Representatives from around the country,” said CTIA President Steve Largent. “Instead, the Commission’s action is a dangerous solution in search of a non-existent problem."

NCTA President Kyle McSlarrow said broadband deployment has been “an unparalleled success story” under Title I regulation. “As we revisit this question with the start of today’s inquiry, we see little benefit to changing course and great danger in attempting to shoehorn modern broadband services into a Depression-era regulatory regime without serious collateral effects to investment, employment, and innovation,” he said. “We appreciate that Chairman Genachowski is seeking comment on alternatives to a Title II approach. We also very much appreciate and agree with the Chairman’s statement of support for legislative efforts to provide much needed certainty."

Progress & Freedom Foundation President Adam Thierer said the FCC majority appears bent on “killing one of the great deregulatory success stories of modern economic history” and called on the FCC to wait for direction from Congress. “In its ongoing ‘by-any-means-necessary’ quest to regulate the Internet via Net Neutrality mandates, Chairman Genachowski’s FCC continues to flaunt the rule of law and magically invent its own authority as it goes along,” Thierer said. “If this Chairman wants to bring the Net under his thumb and regulate broadband networks like plain-vanilla public utilities, he should ask Congress for the authority to pursue such imperial ambitions. As the law stands today, the FCC has no such authority."

"It is sad but true that Don Quixote-like, Chairman Genachowski is leading the Commission on an ill-fated journey, all in the name of searching for solutions to non-existent problems,” said Randolph May, president of the Free State Foundation. “The quest is to put in place Internet regulations, despite the lack of evidence of market failure or consumer abuses."

Navigant Economics Managing Director Jeff Eisenach sees the “real impact” of the vote as “increased regulatory uncertainty,” he said. “The FCC’s NOI casts a dark cloud of regulation and litigation over the future of broadband investment in the United States."

Reclassification supporters released equally strong statements. The FCC “acted with uncommon courage today to make certain that everyone in the U.S. has a chance to participate in the 21st century economy and that consumers are protected from abuses by large telecommunications companies,” said Gigi Sohn, president of Public Knowledge. “The Commission’s simple, uncomplicated action today makes certain that the expert agency in telecommunications has the authority to carry out its mission. The Commission has been attacked unmercifully by multi-billion dollar companies using threats, intimidation and fabrications, among other distasteful tactics."

The Open Internet Coalition released statements by a handful of “investors” who support reclassification. “I'm not a lawyer but I live my life in the financial world and I have made a substantial investment in what I expect will be a major new broadband wireless network in the United States,” said Phillip Falcone, CEO of Harbinger Capital Partners. “In that respect, I can say that the FCC’s broadband policies continue to actively encourage Harbinger’s and others’ multi-billion dollar investment in broadband innovation. It’s a truism that investment goes where it is welcome and this FCC, under Chairman Genachowski’s leadership, has gotten it right."

Rick Whitt, Google Washington telecom and media counsel, said, “Broadband infrastructure is too important to be left outside of any oversight. Google, along with a dozen other tech companies, have written in support of Chairman Genachowski’s proposed ’third way’ as a straightforward way to protect consumers and the open Internet."

Comcast Executive Vice President David Cohen was pleased the NOI considers a variety of options, he said. “While we remain concerned about unjustified regulation, we are encouraged that the careful balancing the Chairman promised in his public statements since first announcing a ‘Third Way’ has led to a rational next step as all stakeholders continue to work together to keep the Internet ecosystem growing and open.”