Pai, Wright Criticize Internet Conduct Rule in Draft Net Neutrality Order

FCC Commissioner Ajit Pai and FTC Commissioner Joshua Wright said in an Chicago Tribune op-ed Wednesday that the “vague” Internet conduct rule in Chairman Tom Wheeler’s draft net neutrality order may be its “most problematic” part. The proposal would put in the “FCC’s cross hairs” on plans involving data caps like T-Mobile’s Music Freedom, Pai and Wright wrote. Separately, Evan Engstrom, policy director of Engine, also said he expects the draft to presumptively ban certain types of zero-rating.

Pai said targeting such programs hurts mobile carriers' ability to “differentiate themselves.” Net neutrality advocates like Engstrom defended commission oversight, likening the practice of exempting some programs from data caps or charges to paid prioritization deals that could hurt smaller content providers. Under T-Mobile’s program, music streamed from some sources like Google Play Music doesn't count toward subscribers' data cap limits.

In addition to more highly publicized rules against paid prioritization, blocking and throttling in the last mile, and jurisdiction over interconnection agreements, the order also would set a conduct standard that “ISPs cannot harm consumers or edge providers,” the agency’s Feb.4 fact sheet on the draft said. The Internet is “always growing and changing, there must be a known standard by which to determine whether new practices are appropriate or not,” the fact sheet said. Wheeler aide Gigi Sohn also said in a radio appearance this week that the commission will take a close look at data cap issues if the net neutrality order is approved next week (see 1502170029). The agency declined to detail the rule, but Pai at his Feb 10 news conference (see 1502100030) said the order would subject “usage-based pricing, data allowances” to a case-by-case review under the conduct standard, based on “seven vaguely-defined factors.”

Applying the standard would give the FCC “almost unfettered discretion to micromanage virtually every aspect of the Internet," Pai and Wright wrote. "If a company doesn't want to offer an expensive, unlimited data plan, it could find itself in the FCC's cross hairs.”

"Suggesting that the draft proposal would limit the consumers' choices of pricing plans is simply wrong," an agency spokeswoman emailed in response to the op-ed. "In fact, the proposal recognizes that a variety of pricing plans can benefit consumers. However, the proposal does not simply embrace every plan an Internet Service Provider might adopt without understanding the impact on an open Internet."

T-Mobile President John Legere said he’s “comfortable” with the draft order, during an investor call Thursday. “If it’s passed as we understand it, it will have no impact on Music Freedom.” The company didn't elaborate. Engstrom backed addressing issues arising from data caps. “Since demanding payment to exempt data from data caps implicates the same concerns as demanding payment to prioritize data (paid prioritization), both practices should be treated the same,” Engstrom said. Programs like Music Freedom, in which music providers don't pay to have their content exempted from data caps, “aren’t as problematic,” but still raise concerns, Engstrom said. They can “distort the Internet marketplace to the disadvantage of innovators,” he said. "If you're a small music startup, how do you sign up for the exemption? Most startups don't have the legal/lobbying power to negotiate such deals, but failure to be a part of such a program would almost certainly doom the startup.”

Pai’s comments “are extremely misleading,” Engstrom said. “Giving the FCC the authority to make sure ISPs aren't using data caps in a manner meant to circumvent net neutrality rules is hardly the same thing as the FCC taking steps to ban such caps."

More than 100 startups and entrepreneurs, including Etsy, Tumblr and Yelp, wrote the agency Wednesday backing the draft order, backing Communications Act Title II broadband reclassification and calling the “failure to protect an open Internet” an “existential threat.” The letter said that “a vibrant Internet economy depends on an open playing field in which small, innovative entrepreneurs can compete with incumbents on the quality of their services, not on the size of their checkbook or their roster of lobbyists.” Yelp in a blog post Wednesday also backed the draft, saying: “Without an empowered enforcement agency like the FCC to protect that free and open nature, the Internet could fall victim to entrenched, monopolistic ISPs and gatekeeper companies who would control when, how, from whom and at what cost you view content online.”

The Progressive Policy Institute questioned whether the public backs strong net neutrality regulations, releasing a Hart Research poll that found three of four Americans are unfamiliar with the term net neutrality and that nearly three-fourths want more disclosure of the details of the draft order. "These findings suggest that the FCC's bid to impose outdated telephone regulations on the Internet is driven more by professional activists than by the public, which seems instinctively to resist the idea," PPI President Will Marshall said. The PPI-commissioned poll of 800 adults was done Feb. 13-15 and has a margin of error of 3.5 percent. “This poll debunks the FCC’s claims that there is a groundswell of support for public utility regulation,” TechFreedom President Berin Szoka said in a separate release.

The “legal pitfalls” the order would face “are serious ones that may well lead to another judicial reversal of the FCC's efforts to adopt net neutrality regulations,” wrote Justin Hurwitz, a member of the Free State Foundation's Board of Academic Advisors and a University of Nebraska assistant law professor, in a report Thursday. “The FCC lacks authority to classify broadband Internet services as ‘telecommunications services,’ because broadband transmissions are not ‘telecommunications,’" a Center for Boundless Innovation Technology report said Wednesday.