‘Net neutrality’ puts FCC at center of storm

Silicon Valley once cheered the election of President Obama, comforted by his stance that Internet service providers should be banned from charging Web sites such as Facebook or Netflix for faster access to American homes. And for much of the past six years, tech firms felt shielded from the possibility that the Internet would ever have separate slow and fast lanes for traffic.

But on Thursday, the government is poised to vote on a plan that could make that scenario a reality. Tom Wheeler, a Democratic Obama appointee, is pressing new rules at the Federal Communications Commission that would allow an Internet service provider such as Verizon to charge YouTube, for instance, for higher-quality streaming of videos.

The proposal has sparked an outcry of protest from Obama’s earliest supporters — consumer advocates, high-tech firms and investors, and from Democratic lawmakers.

The FCC, which for years heard only from a handful of phone companies about its policymaking, has been flooded with more than 100,000 e-mails and calls to commissioners’ offices from consumers voicing concern about protecting the principle known as “net neutrality,” which says that all content should be treated equally online.

This week, a small group of demonstrators camped in tents outside the agency’s headquarters, calling for Wheeler to drop his “pay for play” rules. A question-and-answer session this week on Twitter with one of Wheeler’s top aides made “#FCCNetNeutrality” one of the top trending terms on the site for the Washington region.

Silicon Valley is “very frustrated,” said Marvin Ammori, a technology-policy consultant who helped organize a letter of protest to the FCC from more than 100 tech start-ups and big companies including Google, Facebook and Yahoo.

Ammori said the tech community picked Obama over Hillary Rodham Clinton in the 2008 primaries after he aggressively courted them, partly with his stance on the Internet. “They were the only really rich people in 2008 who weren’t already rich in 1996 and therefore not part of the Clinton family legacy,” Ammori said.

The FCC is an independent agency, as White House press secretary Jay Carney pointed out when asked this week about Wheeler’s plan. Carney added that Obama still supports net neutrality and “will be closely following developments as the FCC launches its proceeding.”

The plan is expected to get enough votes Thursday to move forward, with support likely to come from Wheeler’s two fellow Democrats on the commission. (The agency’s two Republican commissioners have opposed from the beginning any attempt to regulate the Internet.)

The next phase would be four months of public comments, after which the commissioners will vote again on redrafted rules that are meant to take into account public opinion. But the enactment of final rules faces significant challenges.

The proposal has sparked a massive fight between two of the most powerful industries in the country — on one side, Silicon Valley, and on the other, companies such as Verizon and AT&T that built the pipes delivering Web content to consumers’ homes.

Investors and executives from telecommunications firms and Silicon Valley have met with commissioners in recent weeks, picking apart the chairman’s plan. The telecom companies say that without the ability to charge tech and media firms for higher-speed connections, they will not have enough money to invest in faster pipes for consumers.

Critics say the agency, under Julius Genachowski — Wheeler’s predecessor and another Obama appointee — botched its earlier plan to institute net-neutrality rules that would have reflected Obama’s views. That attempt was struck down by a U.S. appeals court in January.

The FCC’s repeated stumbles and the stark retreat from Obama’s original goals reveals the thorny challenge of creating first-time regulations for the Internet — the very medium that has fueled rising populist campaigns in Washington.

Critics say the government rules crafted by Wheeler would for the first time explicitly permit Internet service providers to create online fast lanes for the highest corporate bidders. Start-ups would be at a distinct disadvantage compared with giants such as Facebook, Netflix and Amazon.com that could afford to pay for better access to consumers.

Consumers could see higher costs for searching the Web, listening to music and updating social networks as companies such as Kayak, Spotify and Facebook try to recover expenses from doing business with Internet service providers.

“The Chairman’s proposal to permit paid prioritization and discrimination will change the relationship between creators and investors,” Brad Burnham, a New York venture-capital investor in Twitter, Tumblr and Zynga, wrote in a filing after meeting with FCC commissioners, adding: “I can’t imagine that we will risk our investors’ capital in companies that will now be vulnerable to the whims of a gatekeeper that has the technology and incentive to discriminate against our companies’ services.”

Wheeler is now trying to balance the interests pushed by Washington’s armies of telecom-industry lobbyists, increasingly powerful lobbyists from Silicon Valley and the fast and furious campaigns organized by consumer advocates online.

“He’s trying to thread the needle on what is in many ways an impossible task,” said Jeffrey Silva, an independent telecom and media analyst.

Wheeler, who was appointed by Obama last year to lead the agency, signaled early on that he preferred light regulation and would encourage new business models such a paid prioritization. But he has also promised to put consumers first in the new rules and even asks in his proposal whether broadband providers should be subject to the same FCC regulations as “common carriers,” such as phone companies.

“There is a lot of momentum on this issue, and a few weeks ago I would have said the rules will pass because the other two Democrats don’t want to shoot it down outright,” said Matt Wood, policy director at Free Press, a consumer advocacy group. “But now I’m not so sure.”

The telecom giants have flexed their muscle in the debate. This week, the chief executives of AT&T, Verizon, Comcast and Time Warner Cable wrote a letter to all the commissioners warning against too much regulation. They said the last time the FCC considered reclassifying high-speed-
Internet providers as common carriers, their combined market caps immediately dropped by 10 percent on the stock market.

If anyone was supposed to see through the thicket of political and policy challenges, it was Wheeler, a former lobbyist for the cable and wireless industry. He is known for his ability to read through the motives of the lobbyists that huddle outside his office every day.

But his success and experience as a lobbyist was during a time before social media could spread leaked policy details and generate collective online rage. Silicon Valley companies and investors in high-tech firms are now better organized in their efforts to protect their profits in the face of government regulation.

When the federal appeals court overturned the FCC’s first effort, in rules set under Wheeler’s predecessor, to codify net neutrality, Stanford University law professor Barbara van Schewick contacted dozens of high-tech firms in Silicon Valley to explain the ruling.

Van Schewick, who directs Stanford Law School’s Center for Internet and Society, flew multiple times to Washington to discuss the FCC’s plans and returned to the Bay Area to warn companies that they needed to pay more attention. She said the FCC’s proposal for new net-neutrality rules was based on a hodgepodge of legal definitions and warned that Wheeler would allow paid prioritization online.

Burnham, the venture-capital financier, and other New York investors made their own visits to the FCC. They expressed concerns about the agency’s direction in private e-mail groups, sharing their worries with start-ups, other investors and policy lawyers in Washington.

Loosely organized, the Silicon Valley and New York contingents were in contact over e-mail and in conference calls. Many individuals protesting the FCC’s plan had also helped stage an online revolt against the Stop Online Piracy Act, introduced by Congress two years ago.

One of those was Alexis Ohanian, founder of the Web site Reddit, who spread word of the FCC’s proposal online. He crowd-funded an ad campaign of Metrobus signs plastered across Washington. at Metrobus stops. This week, he hosted a question-and-answer session with Sen. Ron Wyden (D-Ore.) on net neutrality.

Ohanian said Obama’s stance on the Internet was a big reason the candidate won his vote in 2008.

“The open Internet has had such a dramatic impact on my career and personal life that I can’t conceive of a world without net neutrality,” he said.

On Monday, Wheeler responded to the protests. He tweaked his earlier proposal with new questions for the public, including whether paid prioritization should be banned. But he still insists on moving forward with rules that permit the practice.

At the heart of the agency’s struggle is the thorny question of how it can be an effective regulator of high-speed-Internet providers with rules written in an age when cable-modem Internet was just getting off the ground and most Americans did not own a cellular phone.

Wheeler has tried to assure his plan’s critics that consumers would get a baseline of quality high-speed Internet access. Consumers could even benefit from new options for premium services, he has argued.

The FCC chairman is trying to create rules based on the federal appeals court’s legal analysis in its January ruling. But as the Internet increasingly becomes a necessity for communications and information, consumer advocates say the agency needs to more aggressively rethink its entire philosophy on broadband Internet regulation.

“People working on net neutrality wish for a ‘third way’ — a clever compromise giving us both network neutrality and no blowback from AT&T, Verizon, Comcast and others,” Ammori said.

But he warned that the compromises posed by Wheeler and others will not work. “That dream is delusional because the carriers will oppose network neutrality in any real form,” he said. “They want paid fast lanes.”