Wonkbook: How the net neutrality ruling could change the Internet

April 25

Welcome to Wonkbook, Wonkblog’s morning policy news primer by Puneet Kollipara. To subscribe by e-mail, click here. Send comments, criticism or ideas to Wonkbook at Washpost dot com. To read more by the Wonkblog team, click here.


(Photo byJonathan Ernst / Reuters)

Wonkbook’s Number of the Day: 1.5 million. That's how many more jobs the economy would have if housing activity were merely to return to post-World War II averages.

Wonkbook’s Chart of the Day: These charts show how millennials are undercutting their influence on social policy.

Wonkbook's Top 5 Stories: (1) Net-neutrality backlash; (2) to repeal, or not to repeal Obamacare? (3) the economy's housing drag; (4) an immigration deportation showdown; and (5) the first "No Child" waiver.

1. Top story: Why consumers and techies hate the FCC's Internet 'fast lane' proposal

How the FCC's new net-neutrality proposal could hurt consumers and startups. "The experience of watching videos online could soon become a hit-or-miss experience: either flawlessly smooth movies on Netflix or frozen and frustrating videos from the site of a smaller firm. The reason would have nothing to do with superior technology but with money -- how much companies are willing to pay to move their content onto faster Internet lanes into American homes.... With few details provided in its new approach, critics of the FCC proposal said the rule could add massive costs to start-up firms, causing a chilling effect on entrepreneurs." Cecilia Kang in The Washington Post.

Explainers:

Everything you need to know about the FCC's new net-neutrality proposal. Brian Fung in The Washington Post.

Five questions about the future of the Internet. Brooks Boliek and Tony Romm in Politico.

Is this the end of 'net neutrality' as we know it? "The proposal for a new set of network neutrality rules threatens to undermine the FCC's long-held principle of ensuring equal access to all content. It would be a major victory for the network providers, which spend billions of dollars a year maintaining and upgrading their networks. They long have argued that companies consuming the most bandwidth -- usually with video streams -- should pay extra for that privilege. The content providers have countered that equal access is necessary to maintain a level playing field in an exploding marketplace for streaming video." Jim Puzzanghera and Meg James in the Los Angeles Times.

Quotable headline: "Sad But True: The Only Way to Save the Open Internet Requires Sucking Up to Corporate Titans." David Dayen in The New Republic.

The FCC may not have had much choice. "Commission officials argue the stronger rules that advocates want probably wouldn't survive in court. The FCC first adopted net-neutrality rules in 2010.... This past January, the D.C. Circuit Court of Appeals struck down the rules.... The FCC hasn't classified broadband Internet providers as common carriers, and requiring them to serve all websites indiscriminately is essentially a common-carriage regulation, the court ruled. Although the D.C. Circuit threw out the rules, it upheld broad FCC authority to regulate broadband Internet.... Wheeler announced he would try to rework the rules under the authority that the court outlined. But he couldn't just reinstate the old order." Brendan Sasso in National Journal.

Is the real issue here anti-competitive behavior? "The FCC’s new approach would put more power in the hands of ISPs, who will inevitably push companies that offer Internet services toward their fast lanes. It will be up to the FCC to police the providers’ strategies for doing so, and watch to see when the ISPs’ use of persuasion and punishment crosses the line. It’s unclear where the FCC will draw such a line, but it certainly seems to be erasing the absolute one that net neutrality advocates support. It just so happens that the federal government is weighing a merger that could have major competitive implications in this very industry." Joshua Brustein in Bloomberg Businessweek.

How the U.S. 'fast lane' approach contrasts with European approaches. "The proposals, which will be released for public comment on May 15, are unlike new rules in Europe that outlaw attempts by telecommunications or cellphone carriers to charge for improved access to their data and mobile networks. The decisions put American and European policy makers on different sides of the debate about the future of so-called net neutrality." Mark Scott in The New York Times.

How the approach contrasts with President Obama's own past views. "Obama in 2007 explicitly rejected the possibility that 'gatekeepers' someday could 'charge different rates to different websites'.... Obama’s comment now seems at odds with the so-called fast lanes that might result from the open Internet proposal from FCC Chairman Tom Wheeler. But the president still 'strongly supports' net neutrality, a White House spokesman stressed Thursday, while declining to comment on the specifics of Wheeler’s plan. Obama hadn’t yet seen the text, added the aide, who also pointed to the fact that the FCC is an independent agency." Tony Romm in Politico.

Lawmakers on both sides are hitting the FCC. "Democrats who have pushed for net neutrality in the past slammed Wheeler for wanting to allow Internet 'fast lanes' for deep-pocketed content companies.... Meanwhile, Republicans who have opposed the net neutrality rules for years accused Wheeler of trying to resurrect unnecessary restraints on Internet providers." Kate Tummarello in The Hill.

Other tech reads:

Time Warner Cable chief defends merger plan with Comcast. Emily Steel in The Financial Times.

Feds beg Supreme Court to let them search phones without a warrant. Andy Greenberg in Wired.

JUDIS AND KINSTLER: Obama's broken promise. " Wheeler, too, has decided to avoid a fight with industry. He has chosen the third alternative -- hallucinatory wording.... Anna Eshoo, who represents a Silicon Valley district ...i sn’t fooled.... 'I fear that the latest round of proposed net neutrality rules from the FCC will not do enough to curtail discrimination of Internet traffic, but rather leave the door open to discrimination under more ambiguous terms,' she says.... Eshoo needs to tell that not just to Wheeler but to the man in the White House who appointed him." John B. Judis and Linda Kinstler in The New Republic.

WU: Goodbye, net neutrality. "This is what one might call a net-discrimination rule, and, if enacted, it will profoundly change the Internet as a platform for free speech and small-scale innovation. It threatens to make the Internet just like everything else in American society: unequal in a way that deeply threatens our long-term prosperity." Tim Wu in The New Yorker.

ROOSE: The techie freakout may be a bit premature. "A hyperbolic tech-sector freakout over net neutrality has happened in the past.... The hand-wringing might be a little premature -- the FCC's commissioners still have to vote on the proposal, and as Dan Primack notes, the proposed rules may be nothing more than a trial balloon to gauge public opinion.... But a rule finally and officially declaring the end of net neutrality would mean that techies have been right in their paranoia all along. Unless they're prepared to change their minds, or unless early reports are sorely mistaken, the FCC should gird themselves for a backlash like none other they've seen before." Kevin Roose in New York Magazine.

THE FINANCIAL TIMES: Why net neutrality no longer works. "The fine detail of the FCC’s decision will matter. The regulator will have to ensure its reforms do not create barriers to entry for small and innovative companies.... The risks of permitting discrimination will also need to be managed. Competition must be maintained.... However, the FCC’s broad reform of net neutrality is the right one. An internet that remains completely neutral will ultimately be stymied. The FCC should now focus on how to encourage the innovation and investment that are critical if the web is to be as successful in the next 25 years as it has been in the past quarter-century." Editorial Board.

Top opinion

KRUGMAN: The Piketty panic. "'Capital in the Twenty-First Century,' the new book by the French economist Thomas Piketty, is a bona fide phenomenon. Other books on economics have been best sellers, but Mr. Piketty’s contribution is serious, discourse-changing scholarship in a way most best sellers aren’t. And conservatives are terrified. Thus James Pethokoukis of the American Enterprise Institute warns in National Review that Mr. Piketty’s work must be refuted, because otherwise it 'will spread among the clerisy and reshape the political economic landscape on which all future policy battles will be waged.' Well, good luck with that." Paul Krugman in The New York Times.

PONNURU: Affirmative action is not a constitutional question. "The idea that the Constitution mandates colorblindness in government institutions, including government-funded universities, is attractive.... Race-conscious admissions policies treat some applicants unfairly, generate ill will and reduce the likelihood that some students will succeed. Universities that follow these policies also seem incapable of telling the truth about what they're doing. But it's a policy question, not a constitutional one. The Constitution doesn't tell us how the University of Michigan or the state's voters should decide the issue. And we should all quit pretending otherwise." Ramesh Ponnuru in Bloomberg View.

FURMAN AND STOCK: Now is the time for housing reform. "Although there are indications of pent-up demand for homes, uncertainty, including regulatory uncertainty, is placing unnecessary restraints on lending by banks and other mortgage originators. Creditworthy borrowers are being limited in their ability to buy homes, thereby creating fewer jobs and slowing economic growth. To support the recovery and set a firm foundation for the future, now is the time for reform." Jason Furman and James Stock in The Wall Street Journal.

McARDLE: The courts' limits on color-blind equality. "We are still arguing affirmative action precisely because the judicial interventions of the 1970s failed to make affirmative action irrelevant. If these earlier efforts had been more fruitful, today’s judges might have been more willing to issue an effective judicial mandate yesterday. Instead, we got an opinion that was, well, ambivalent....It left a difficult question up to the voters. They may or may not do a good job. But unfortunately, when it comes to the vexing questions that remain about America’s tragic racial legacy, the courts haven’t done so well, either." Megan McArdle in Bloomberg View.

VINIK: Imagining the impact of Piketty's global tax on wealth. "But put political considerations aside for a moment. How might such a proposal work? Would it really help reduce inequality? And would it do so without causing more harm?... A wealth tax could affect the economy in many ways, but it’s hard to be certain about how.... Could governments use the revenue wisely? Could they even collect it? Many will find those propositions hard to believe. But Piketty himself admits the proposal is 'utopian.' The point is to emphasize the need for bold, dramatic efforts to combat inequality. And that’s something that shouldn’t be beyond the political imagination." Danny Vinik in The New Republic.

COHN: Those Obamacare cancellations weren't as bad as you've heard. "As with every aspect of the Obamacare debate, it’s difficult to be certain, let alone precise, about the law's financial impact on individuals and the population as a whole. It will take months and probably years to sort out the data, and even then there will some difficult, contentious debates over what people really want and need. But this latest study confirms what previous studies have shown: Lots of people who lost old policies are no worse off for the change. That makes a big difference, particularly when it seems so many more people are benefitting." Jonathan Cohn in The New Republic.

Robot interlude: President Obama plays soccer with a Japanese robot.

2. To repeal, or not to repeal, Obamacare? Repeal may no longer be the answer for GOP

Boehner suggests repeal no longer possible now. "Speaker John A. Boehner said Thursday that changes brought about by the Affordable Care Act make it impossible to just repeal the health care law unless Congress has a replacement ready as well.... Boehner said simply repealing the Affordable Care Act 'isn’t the answer' and it would take time to transition to a new system.... Spokesman Brendan Buck downplayed Boehner’s comments. 'For four years now the House Republican position has been repeal-and-replace,' he said." Matt Fuller in Roll Call.

That doesn't mean Democrats are in the clear on Obamacare. "Too many people assume that the key to understanding the politics of the healthcare law is the overall approval/disapproval of the ACA or even the number of enrollments. In truth, as it relates to the coming midterm election, the critical piece of data is how intensely Republicans oppose the law versus how passionately Democrats support it. As of today, there's still a gap there. And that should worry Democrats -- no matter how good their polls look right now." Chris Cillizza in The Washington Post.

Related: New polling data on Senate races and Obamacare. The New York Times/Kaiser Family Foundation.

Charts: Here's how Democrats are treating ACA on their websites. Sam Stein and Sabrina Siddiqui in The Huffington Post.

Counterpoint: Obamacare could still potentially be a positive for many Dems. "The reason why is easier to understand if you flip the issue around and look at it from the Republican side. Conservative orthodoxy still holds that Obamacare is a socialist abomination, and this requires Republican candidates to continue to advocate its repeal. It’s true that the law’s repeal is a strong motivator for Republican voters, and that does carry electoral advantages. But in practice, repealing Obamacare would entail dissolving popular state plans such as Kynect. Voters are bound to notice and make the connection." Joshua Green in Bloomberg Businessweek.

Oregon is likely folding on its troubled ACA exchange. "Behind the scenes, the officials say, federal and Oregon officials already have agreed that closing down the state marketplace is the best path to rescue what has been the country’s only one to fail so spectacularly that no resident has been able to sign up for coverage online since it opened early last fall. The collapse of Oregon’s insurance marketplace comes as federal health officials are focusing intensely on faltering exchanges in...Maryland and Massachusetts." Amy Goldstein in The Washington Post.

Explainers:

So, what comes next for Oregon? Jason Millman in The Washington Post.

How did Oregon get its exchange so wrong? Sarah Kliff in Vox.

If you liked your plan, you might have lost it anyway. "Last fall, as cancellation letters arrived in mailboxes around the country, opponents of the law cited them as evidence that President Barack Obama lied to Americans when he promised, 'If you like your health care plan, you can keep it.' But most individuals who lost plans probably would not have continued them even without the law, according to the study, which was published online Wednesday in Health Affairs. Its author questions whether those cancellations contributed much to the nation’s ranks of short-term uninsured." Sarah Wheaton in Politico.

Other health care reads:

E-cigarette rules draw mixed reactions. Brady Dennis in The Washington Post.

Obamacare high-risk pools to end. Louise Radnofksy in The Wall Street Journal.

Mississippi could soon shutter only abortion clinic. Sophie Novack in National Journal.

Rural hospitals weigh independence against need for computer help. Eric Whitney in NPR.

Long read: How Calif. took the lead on Obamacare, and why it's too early for a victory lap. Dan Diamond in California Healthline.

'Super Mario Bros.' interlude: Fingersnapping the theme song.

3. Housing could hold back the economy this year

Why housing is holding back the economy. "Investment in residential property remains a smaller share of the overall economy than at any time since World War II, contributing less to growth than it did even in previous steep downturns in the early 1980s.... If building activity returned merely to its postwar average proportion of the economy, growth would jump this year to a booming, 1990s-like level of 4 percent, from today’s mediocre 2-plus percent. The additional building, renovating and selling of homes would add about 1.5 million jobs and knock about a percentage point off the unemployment rate.... That activity would close nearly 40 percent of the gap between America’s current weak economic state and full economic health." Neil Irwin in The New York Times.

What's holding back housing? Potential buyers getting mixed signals. " In America, those mulling a purchase are hearing particularly confusing signals. Prices have soared for the past couple of years, suggesting that those who wait will suffer. But slowing prices, weak construction data and jitters about a possible interest-rate rise (among other worries) suggest that prices might drop, as they did five years ago. Perhaps scrambling onto the housing ladder now is unwise after all?" The Economist.

Bad week of indicators suggests bad year for housing. "The National Association of Realtors hinted Tuesday that it’ll lower...its forecast for sales of existing homes. The group reported that sales dipped 0.2 percent in March...with sales of single-family homes dipping 7.3 percent compared with the pace of March 2013. Wednesday brought similarly weak data on new home sales...a double whammy, since new homes tend to be purchased by existing homeowners who are trading up.... Nationwide housing production rose 2.8 percent above February numbers ... hardly indicative of a sizzling housing market. It all adds up to the likelihood of yet another subpar year for the housing sector." Kevin G. Hall in McClatchy Newspapers.

Homes are costing more — in part because they're getting bigger. "The Census Bureau figures that are most widely quoted ... simply reflect the number of new single-family homes sold. By that measure, new home sales increased 18 percent between 2010 and 2013, according to an analysis by research firm CoreLogic. But when a home’s size and other characteristics are factored in, prices climbed at only half that rate, CoreLogic says. This is reflected in a separate Census index (the 'constant-quality' measurement) that’s less widely publicized." Dina ElBoghdady in The Washington Post.

Demand for home loans plunging as rates rise. "Mortgage lending declined to the lowest level in 14 years in the first quarter as homeowners pulled back sharply from refinancing and house hunters showed little appetite for new loans, the latest sign of how rising interest rates have dented the housing recovery. Lenders originated $235 billion in mortgage loans during the January-March quarter, down 58% from the same period a year ago and down 23% from the fourth quarter of 2013." Nick Timiraos in The Wall Street Journal.

Jobless claims are up more than expected. "The number of Americans filing new claims for unemployment benefits increased more than expected last week, but the rise probably does not suggest a shift in labor market conditions as the underlying trend continued to point to strength. Initial claims for state unemployment benefits rose 24,000 to a seasonally adjusted 329,000 for the week ended April 19, the Labor Department said on Thursday." Reuters.

Still, durable goods orders are up, showing manufacturing strength. "All seven major components of durable goods orders rose in March for the first time since April 2013, helping boost total bookings by a greater-than-forecast 2.6 percent, Commerce Department figures showed today. It marked only the fifth instance since 2000 that all major categories increased in any one month." Victoria Stilwell in Bloomberg.

U.S. manufacturing is becoming more competitive. "U.S. manufacturers have grown more competitive over the past decade compared with factories in China, Brazil and most of the world's other major economies. So says a new private study, which found that rising wages and higher energy costs have diminished China's long-standing edge over the United States. So has a boom in U.S. shale gas production. It's reduced U.S. natural gas prices and slowed the cost of electricity." Associated Press.

Other economic/financial reads:

No trade deal yet, but Obama and Japan's Abe find path forward. Doug Palmer in Politico.

U.S. trade bank urges lawmakers to avoid "political games." Reuters.

Science interlude: This video explains how tsunamis work.

4. An immigration deportation showdown is nigh

And Obama is considering a two-pronged move on deportations. "The White House is considering small steps in the near term to ease the threat of deportation for some undocumented immigrants, but advocates in communication with the administration expect President Barack Obama to make bigger changes later in the year. With legislation to reform U.S. immigration policy stalled in Congress, Obama has come under increasing pressure from the immigrant community to take executive action to curb the rate of deportation that has reached a record level under his presidency." Julia Edwards and Richard Cowan in Reuters.

Regarding that immigration reform stall ... Boehner mocks his party. "House Speaker John Boehner theatrically mocked his fellow Republican Congressmen for being afraid to reform immigration policy....'Here's the attitude. Ohhhh. Don't make me do this. Ohhhh. This is too hard,' Boehner whined.... 'We get elected to make choices. We get elected to solve problems and it's remarkable to me how many of my colleagues just don't want to' ... Boehner said he's been working for 16 or 17 months trying to push Congress to deal with immigration reform." Sheila McLaughlin in the Cincinnati Enquirer.

Explainer: Obama's next moves on immigration. Marc Ambinder in The Week.

How the deportation review is shaking up political debate. "With the heat increasing on the Obama administration from anti-deportation advocates, something is about to give.... Expect such relief to be welcomed by advocates, but still leave many dissatisfied that it has not gone far enough. On the flip side, such actions -- really, any deportation executive action -- will be used as further ammunition in the defense against doing anything on immigration policy this year. Republicans, even those who have spoken in favor of immigration reform, have said it can't happen while lawmakers don't trust the president to enforce laws already on the books." Elahe Izadi in National Journal.

Obama's proposal won't meet advocates' demands. "The Obama administration's review of deportation policy is considering questions such as whether people without serious criminal records should continue to be removed from the U.S. and how to assure that immigration field officers curtail deportations of low-priority illegal immigrants, people familiar with the review say....The result could be fewer deportations among the small slice of illegal immigrants who are settled in the U.S. and have minor or no criminal records but get snagged by law enforcement.... The outcome of the review...will feel 'modest' and fall far short of demands by many activists." Laura Meckler and Miriam Jordan in The Wall Street Journal.

Primary source: GOP senators' letter to President Obama bashing deportation review. The Hill.

Analysis: Obama faces an immigration catch 22. Caitlin Dickson in The Daily Beast.

Brian Williams interlude: He explains his recent "rapping" performances.

5. Washington state lost its 'No Child' waiver. Why that matters

Duncan yanks NCLB waiver from Washington state. "In an unprecedented but widely anticipated move, the Education Department is pulling Washington state’s No Child Left Behind waiver because the state hasn’t fulfilled the department’s requirements for reform. Specifically, the state didn’t tie teacher evaluations to student performance metrics in a timely fashion. The state Legislature had an opportunity earlier this year to pass a bill that would preserve the waiver, but failed to do so." Caitlin Emma in Politico.

It's a national first in the history of 'No Child.' "The Education Department is for the first time yanking one of the waivers it gave to states that exempts them the most onerous parts of the flawed No Child Left Behind law.... Because of the peculiarities of the law, this means that virtually all of the state’s public schools will be seen as failing because they didn’t not meet set performance goals." Valerie Strauss in The Washington Post.

The move highlights the war over standardized testing. "It sounds bureaucratic, but it's an important flare-up in a long-running war between teachers unions and the federal government over standardized testing -- and whether students' scores should play a role in evaluating teachers. Washington, like every other state with a waiver, had promised to make that happen. But the Legislature balked, in part because of pressure from teachers, but also because of growing 'test fatigue' among students and their parents. A standardized-test boycott...made national headlines last year....Duncan made it clear that test scores have to be part of the mix." Martin Kaste in NPR.

Other education reads:

Supreme Court's affirmative-action ruling seen having limited reach. Rebecca Ballhaus in The Wall Street Journal.

Proponents of affirmative action losing the battle? NPR.

'Fast and Furious' interlude: This car chase made with RC toys looks like it came from the movies.

Wonkblog roundup

Oregon will drop its Obamacare exchange. What now? Jason Millman.

The price of new homes is surging — in part because houses are getting bigger. Dina ElBoghdady.

Millennials are undercutting their own influence on social policy. Emily Badger.

Aetna: Late Obamacare changes account for half of 2015 premium increases. Jason Millman.

Et Cetera

Long read: How Obama shocked Harper as Keystone XL frustrator-in-chief. Edward Greenspon, Andrew Mayeda, Rebecca Penty and Theophilos Argitis in Bloomberg.

Trailing Canada, U.S. starts push for safer oil shipping. Jad Mouawad in The New York Times.

Politics cloud hopes for housing finance overhaul proposal. Margaret Chadbourn in Reuters.

Obama warns new Russia sanctions already "teed up." Geoff Dyer and Jonathan Soble in The Financial Times.

Got tips, additions, or comments? E-mail us.

Wonkbook is produced with help from Michelle Williams and Ryan McCarthy.

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