The Commission Deserves Credit

By Bruce Mehlman

Most investors and innovators saw no need for new regulations and feared even more burdensome regulatory alternatives that previously were under serious consideration.

While the devil is always in the details, the Commission deserves credit for listening to a broad spectrum of stakeholders over the past year, and for rejecting even more extreme political solutions.

Free From Distraction

By David

Governing requires compromise and the Chairman deserves credit for seeking a way forward that appears like it will preserve both private sector investment and Open Internet principles.

Finally bringing the net neutrality chapter to a close would be a welcome relief from a debate that for too long has distracted the Commission from focusing on the National Broadband Plan and achieving the critical goal of 100 percent access and adoption. We welcome the opportunity to work with the FCC and other stakeholders in future efforts to promote broadband, which has become a critical life tool.

Net Neutrality Passes

By Brad

Moments ago, the FCC passed Chairman Genachowski’s Open Internet Order (also known as net neutrality) by a vote of 3-2. Voting nay were Republican Commissioners McDowell and Baker, with Democratic Commissioners Copps and Clyburn joining the Chairman in voting yea.

For more on the vote, see Sara Jerome’s post at Hillicon Valley and Cecilia Kang’s write-up at Post-Tech.

Top Three Reasons to Vote Yes on FCC Net Neutrality Order

By IIA

1. CERTAINTY: Prolonging the gridlock of the net neutrality debate will discourage the investment needed to power our country’s economic recovery and promote universal broadband.

“Markets abhor uncertainty… To the extent that reduced network investment increases network congestion (particularly if these [net neutrality] regulations apply to wireless networks), then the implications for downstream equipment and applications providers are also negative, inasmuch as the user experience can be anticipated to degrade.”

—Craig Moffett, Senior Analyst, U.S. Telecommunications, Cable & Satellite Broadcasting, Sanford C. Bernstein & Co., LLC

2. BETTER THAN OTHER PROPOSED ALTERNATIVES: Greater regulatory intervention would lead to the loss of thousands of jobs at a time when one in 10 Americans is unemployed. Stricter regulations would soon be outdated and constrain new innovations beneficial to consumers and the economy.

“A study using an econometric model found that a 10 percent negative shock to capital expenditures (such as from new regulatory interventions) results in an average loss of about 130,000 information-sector jobs per year in the subsequent five years.”

— Beard, Randolph and George Ford, Hyeongwoo Kim, “Jobs, Jobs, Jobs: Communications Policy and Employment Effects in the Information Sector,” Phoenix Center, October 2010

“The notion that policy tends to lag behind technological innovation has probably never been so brutally true as it is today.”

— Jeff Silva, Senior Policy Director, Telecommunications, Media and Technology, Medley Global Advisors, LLC

3. BROADBAND AFFORDABILITY: Pursuing heavy-handed regulations could raise the cost of broadband service, pushing this economic tool out of reach for low-income households.

“Net neutrality could impose anywhere from $10 to as much as $55 each month on top of an average broadband access charge of $30. To the extent that consumers are unwilling or unable to pay it, net neutrality could have the effect of discouraging consumers to connect to the Internet.”

— Jude, Michael, “Net Neutrality: Impact on the Consumer and Economic Growth,” Stratecast (Frost & Sullivan)), May 2010

As the Net Neutrality Vote Nears

By Brad

With the FCC set to vote on net neutrality next week, The Hill’s Sara Jerome reports that twenty-nine Republican senators have signed their names to a letter sent to Chairman Genachowski opposing his proposed rules.

Meanwhile, via Cecilia Kang of the Washington Post, investment analyst Rebecca Arbogast (who was one of the panelists at our recent broadband symposium) believes, despite opposition from both sides of the net neutrality debate, that the FCC will pass the new rules:

“We believe it’s in the majority’s interests to coalesce around a decision,” Arbogast wrote. “So while we expect some tough bargaining that goes down to the wire next Tuesday, our sense is an order likely will be approved, with some modifications, but not radical changes, to the draft, given the tightrope the FCC leadership appears to be walking.”

Endorsement From the FTC

By David

In an interview with Bianca Bosker of the Huffington Post about the challenges of protecting privacy online, Federal Trade Commission Chairman Jon Leibowitz weighed in on the other big Internet issue currently being tackled in Washington:

Liebowitz also endorsed proposed recent new rules from the Federal Communications Commission aimed at barring large Internet providers from impeding Web traffic flowing to sites that partner with competitors.

Though critics have argued that the FCC’s plan is riddled with loop holes, the FTC Chairman portrayed them as the best that could be hoped for given the need to balance competing interests.

He turned a more critical eye on the net neutrality debate, seeing little truth to the “dystopian future” dreamed up by net neutrality’s advocates and opponents.

“There’s a little disconnect between the reality of net neutrality and the big fight of net neutrality,” said Leibowitz.

David Sutphen in Fierce Telecom

By Brad

In his latest column for Fierce Telecom, IIA Co-Chairman David Sutphen writes about how it’s time to embrace the compromise so we can finally move past the net neutrality debate:

The current FCC Order is a thoughtful and sincere effort on the part of Chairman Julius Genachowski to balance a multitude of priorities and sometimes conflicting interests. This is the first real middle-ground solution that will give the Commission the power it needs to preserve a truly open Internet. Anything else would likely have detrimental implications for communities that have been traditionally underserved by broadband technology.

You can read the full column at Fierce Telecom.

Pitching the Proposal

By Brad

Speaking of the net neutrality proposal, FCC Chairman Julius Genachowski took to the Commission’s official blog late last week to pitch it to the public:

This is not just a plan to protect a free and open Internet—this is a plan to protect jobs, now and in America’s future. It is my responsibility to make sure that the economic and legal environment that allowed these jobs to grow remains just as healthy and competitive for future generations.

I’m proud to oversee the FCC at a moment of unprecedented technological advancement. It’s my responsibility to act as a just steward for America’s technology economy and protect these valuable jobs. I’ve seen what works from some of the most dazzling entrepreneurs America has ever known. It’s my responsibility to fight to uphold the free and open principles that have brought us to where we are—and I am committed to this goal.

Leave Wireless Alone

By Brad

Next Tuesday, the FCC will likely vote on Chairman Genachowski’s net neutrality proposal. While the full proposal has yet to be released (a sticking point with Republican Commissioner Meredith A. Baker), in announcing the proposal Genachowski described the particulars as being relatively light-touch when it came to regulations on wireless. But with specific details still a relative mystery,  wireless association CTIA is preemptively warning that strict regulations on wireless could lead to trouble. As Multichannel News reports:

CTIA president Steve Largent… said Friday that if the FCC tried to impose more than the transparency and non-blocking items now applied in the draft order, his association would oppose it and would not rule out taking it to court.

Largent said the issue was “a moving ball as we speak,” and would continue to change and evolve. To that end, he also said the group had meetings scheduled with commissioner Mignon Clyburn and were looking to schedule one Monday or Tuesday to talk about the issue. Both have suggested that they might want to apply more of the net neutrality regs to wireless broadband as they work on edits and input to the draft in advance of the vote.

Friday Net Neutrality Hoedown

By Brad

With the FCC’s expected vote on the net neutrality proposal just 11 days away, things are really starting to heat up.

Yesterday, the National Journal’s Eliza Krigman reported that both sides of the debate were lobbying potential swing vote Commissioner Michael Copps. Now, as John Eggerton from Multichannel News reports, Copps is being encouraged to vote yes by Senator John Kerry, chairman of the Senate Communications Subcommittee:

According to a copy of the letter to [Commissioner Copps and Chairman Genachowski] from John Kerry (D-Mass.) dated Thursday, the senator is advising them to make the pragmatic call and accept “the good” over “the perfect,” saying that is what he would do and pointing out that the commission’s two Republicans have said they will oppose the chairman’s proposal, meaning the Democats’ votes will be necessary for approval.

Meanwhile, via the New York Times, the other Democrat at the FCC, Commissioner Mignon Clyburn, has some issues with how wireless is treated in Chairman Genachowski’s proposal:

Clyburn told a telecommunications conference that she had concerns about the wireless aspects of the measure, worried that “two kinds of Internet worlds” could be created by giving concessions to wireless carriers.

Finally, Multichannel News’ John Eggerton has a separate story on Republican Commissioner Meredith A. Baker calling for the net neutrality proposal to be release as soon as possible:

In a speech to the Practising Law Institute’s Telecommunications & Policy Regulation conference in Washington on Dec. 9, Baker, who opposes adopting the rules at the December meeting, said: “If this agency is to operate in the most transparent and inclusive manner, we should proactively put out a copy of our draft Net Neutrality rules for comment today. The comment cycle can be short, but putting some sunshine on what we are doing would inform our process.”

It May Come Down to Copps

By Brad

With the FCC set to vote yea or nay on Chairman Julius Genachowski’s net neutrality proposal, the National Journal’s Eliza Krigman reports that Commissioner Michael Copps, long one of the loudest voices calling for stricter regulations on providers, is being aggressively lobbied by both sides of the debate:

The two Republican Commissioners have already come out against the proposal and Democratic Commissioner Mignon Clyburn is widely expected to vote in favor of it. Genachowski needs three votes in order to have the order adopted as new regulations.

Out of roughly two dozen instances of meetings and or forms of communications with commissioners, or their staffers, since the net neutrality plan dropped, Copps’ name appears more frequently than any other.

The next FCC meeting, when the net neutrality vote is expected to happen, is scheduled for December 21.

Symposium Re-Cap

By Brad

Yesterday at the Newseum in Washington DC, we hosted the discussion “A View From Wall Street,” exploring the implications of Washington telecom policy on jobs, investment and economic recovery.

Former FCC Chairman Michael Powell opened things up, saying expanding the economy was “job number one” for America. He then noted that broadband has been “largely a bright spot in the global economy,” and warned that one of the key measures to increase jobs and grow the economy was the National Broadband Plan, which had unfortunately “fallen off track” while the net neutrality debate has dominated the discussion. Calling the idea of regulating broadband providers under Title II “fatally flawed,” Powell noted that the FCC seems to be moving toward a net neutrality resolution both sides could possibly agree with.

This was backed up by James Ratcliffe of Barclays Capital, who stated he believed the net neutrality proposal put forth by FCC Chairman Julius Genachowski would go through. But as far as other regulations, he stated that most investors were expecting it to be a quiet year from the federal government. This was echoed by Rebecca Arbogast from Stifel Nicolaus, although she also said she also believed the most obvious telecom legislation that could possibly come in the next year was the release of more spectrum for wireless.

Jeff Silva of Medley Global Advisors rightly pointed out that historically telecom policy has for the most part been bipartisan. But he also warned that “the notion that policy lags behind technological innovation is not as brutally true as it is today,” and that super-charged partisanship (like currently found in Washington) can send mixed signals to Wall Street over time.

The view from Wall Street was also addressed on by Craig Moffett, Senior Analyst from Sanford C. Bernstein. Discussing investment in broadband infrastructure, he said he believed America was “hitting a wall” in broadband penetration. He also noted that Verizon was cutting back on the expansion of its FiOS network (echoed by Baltimore resident Bob Constantini with CNN Radio, who said plans to expand FiOS had been abandoned in his city altogether). Moffett then touched on the need for the government to encourage investment in broadband, stating flatly that it was “really tough to make money by building networks.”

Still Pushing for Title II

By Brad

Looks like FCC Commissioner Michael Copps, who has long been one of the loudest advocates for strict regulations on broadband providers, will be a hard vote for Chairman Julius Genachowski to wrangle for his latest net neutrality proposal. As Fierce Wireless reports:

“These rules must be put on the most solid possible legal foundation and be quickly and effectively enforceable,” Copps said during a speech at Columbia University’s School of Journalism. “If this requires reclassifying advanced telecommunications as Title II telecommunications—and I continue to believe this is the best way to go—we should just do it and get it over with.”

With fellow Commissioners Robert McDowell and Meredith Baker already coming out against net neutrality, and Mignon Clyburn likely — if more quietly — in Copps’ camp, it’s possible that on December 21 the only yea vote for net neutrality may be Genachowski himself.

Translation: the net neutrality gridlock could be perpetuated — and the National Broadband Plan would continue to lack the attention it deserves.

Thumbs Up From Craigslist

By Brad

At least one longtime net neutrality advocate is on board with the latest net neutrality proposal. From Multichannel News:

“As the founder of Craigslist and a passionate believer in the economic and social benefits of an open and free Internet, I proudly endorse the Chairman’s historic efforts to protect these important principles in our society,” [Craig] Newmark said in a statement Wednesday. “Common-sense rules of the road will help ensure certainty in markets while also preserving the openness and freedom of the Internet that has helped generate millions of jobs and share billions of ideas around the world. To clarify, I’m interested in preserving traditional American values like fairness and a level-playing, with the least amount of government involvement.”

The Morning After

By Brad

The reviews are in, and FCC Chairman Julius Genachowski’s latest net neutrality proposal is being panned by many on both sides of the debate. While we at IIA are optimistic that this latest proposal will finally put the net neutrality issue to rest, both advocates for stricter regulations and Republicans in Congress are unhappy.

And, as the Washington Post’s Cecilia Kang reports, it looks like consensus will be hard to achieve even within the FCC.

Meanwhile, analyst Larry Downes, in the Orange County Register, believes that the proposal, no matter its merits, will only inspire more gridlock. He writes:

Regardless of the details, which have not yet been made public, it’s likely that any new rules adopted by the agency will lead to drawn-out court battles over their validity. So even if the commissioners vote Dec. 21 to approve Genachowski’s proposal, the fight is hardly over. It just shifts to a new venue. The regulatory certainty that is needed to encourage critical investments in our Internet infrastructure will continue to be deferred.

In other words, the net neutrality fight may be far from over.

Statements From Our Co-Chairs

By Brad

FCC Chairman Julius Genachowski deserves a lot of credit for proceeding so thoughtfully and choosing a commonsense compromise in the face of hyper-partisan brinksmanship. By finally turning the page on this issue, the FCC can now focus its attention on the National Broadband Plan and achieving universal access and adoption, as well as fostering broadband innovation and investment.

— David Sutphen

We continue to see new regulations largely as a solution in search of a problem. However, today’s proposal seems to be the most effective option for reducing regulatory uncertainty in the broadband marketplace, enabling more widespread investment and deployment that will ultimately benefit consumers and our economy.

— Bruce Mehlman

The FCC Makes a Move on Net Neutrality

By Brad

As expected, FCC Chairman Julius Genachowski announced this morning that net neutrality regulations will be up for a vote during the Commission’s December meeting. Encouragingly, the proposed regulations appear to have the support from both industry and public interest groups.

According to Genachowski’s speech, the regulations do not reclassify broadband providers under Title II, which was the so-called “Third Way” course Genachowski previously set the Commission on. Instead, the FCC will be using less-restrictive Title I, and while wireless is included, regulations on providers will be less strict due to mobile broadband’s relative infancy as a technology.

We’ll have more on this important turn of events, but for now the full text of Genachowski’s speech is after the jump.

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The Income Gap Online

By David

Despite recent gains, new research from Pew shows that America’s digital divide is still in place:

Analysis of several recent surveys conducted by the Pew Research Center’s Internet & American Life Projects finds key differences between those who live in households making $75,000 or more relative to those in lower-income households.

Some 95% of Americans who live in households earning $75,000 or more a year use the internet at least occasionally, compared with 70% of those living in households earning less than $75,000. Even among those who use the internet, the well-off are more likely than those with less income to use technology.

All the more reason for the FCC to move past the net neutrality distraction and re-focus on the National Broadband Plan.

Delaying the Next Meeting

By Brad

Yesterday, the FCC announced it was pushing back its December meeting by one week to December 21. Popular opinion is that the move has been made in anticipation of the Commission taking up net neutrality regulations. As the Washington Post’s Cecilia Kang reports:

FCC Chairman Julius Genachowski is expected to introduce a proposal that would be under its questionable legal jurisdiction over broadband service providers, according to Stifel Nicholaus analyst Rebecca Arbogast. And the chairman is in the difficult position of now having to convince two Democratic commissioners who have pushed him to reassert authority over broadband services so he can implement rules against discrimination of content on Internet networks.

Analysts said the delay was probably created so Genachowski could garner support for a majority 3 to 2 vote on a final rule.

“We suspect the Democrats could ultimately support a Title I order, but they may seek some sort of concessions on this or other matters,” Arbogast wrote in a research note Tuesday.

Meanwhile, Sara Jerome of The Hill reports that Free Press — the advocacy group that has long pushed for the strictest of regulations on broadband providers — may be warming to the tamer Title I order as well:

[W]ith Genachowski attempting what appears to be a renewed effort to create net-neutrality rules, analysts are predicting he will use the weaker Title I, rather than Title II, to stake the agency’s authority.

Free Press is nevertheless open to backing the potential proposal, even if it is not accompanied by an attempt to place broadband services under Title II.

“The most important component to get correct is the actual policy itself — the actual policy that will govern the rules of the road and determine if there’s discrimination over the Internet,” [Free Press political advisor John] Kelsey said.

The FCC is now scheduled to release the agenda of its December meeting on November 30.

(Note: Stifel Nicholaus analyst Rebecca Arbogast, mentioned in the Washington Post article excerpted above, will be a speak at our next symposium event on December 7. For more information on the event, visit our Symposium Page.)

It’s Time for Consensus on Net Neutrality

By IIA

Last week, FCC Chairman Julius Genachowski called net neutrality regulations “one of the most important policies the country can adopt to improve broadband deployment.” Here are reactions to the statement from our Co-Chairs Bruce Mehlman and David Sutphen:

The vast majority of economists, analysts and investors agree that new Internet regulations and policy uncertainty will deter investment, slow job creation and undermine broadband deployment. It’s time that we move beyond net neutrality — we can’t have excessive regulation if we hope to improve broadband deployment.

— Bruce Mehlman

NTIA just found that household broadband use in America rose sevenfold from 2001 to 2009 — hardly a market in crisis or in need of major new net neutrality regulations. And when thousands of offline citizens were asked why they have yet to adopt broadband, not one pointed to lack of more government net neutrality regulations as the reason. What we really need are policies that foster broadband adoption and lead to investment, job creation and economic opportunity. The common ground, consensus approach reflected in the Waxman bill remains the best framework for progress and compromise — anything beyond it, like regulating the wireless marketplace when there’s a spectrum scarcity, is a step in the wrong direction.

— David Sutphen