Net Fix: Why FCC's Wheeler is 'defying the greatest lobbyists in the world'
FCC Chairman Tom Wheeler is at the center of a historic debate over how we'll all use the Internet. Fans applaud a consumer-friendly approach. Critics say he'll strangle innovation. Both sides agree he's not afraid to do what he thinks is right.
This story is part of a CNET special report looking at the challenges of Net neutrality, and what rules -- if any -- are needed to fuel innovation and protect US consumers.
Tom Wheeler has made a career out of surprising people.
The 68-year-old chairman of the Federal Communications Commission is commonly called out as a former top lobbyist for the cable and wireless industry, a role he served for a quarter of a century. Few remember his long career as an entrepreneur. Even fewer know it was one of his startups that informed his view of the Internet -- before the World Wide Web was even invented -- that's now driving his approach to Internet regulation
In 1984, the then-38-year-old Wheeler took over NABU Network, which offered specially designed home computers that could access news, games and other applications through the cable television network. The National Museum of Science and Technology later described the network as the "Internet -- 10 years ahead of its time." A few blocks from NABU's Alexandria, Va., office, 27-year-old Steve Case was working on a similar project that tapped into the telephone network, which Wheeler derided as inferior.
"We used to look down our noses at them because they were so slow," Wheeler recalled in a half- hour-long interview last month.
But it was Case's company, America Online, that became an Internet titan during the dot-com boom. NABU folded in 1985. The difference between the two approaches? Wheeler's company relied on a closed network.
"Steve [Case] could build a national footprint immediately, and we had to go from cable operator to cable operator to ask permission to get on the network," said Wheeler. "That is exactly the situation that entrepreneurs face today. If you can't have open access to the Internet, innovation is thwarted and new services grind to a halt."
As head of the regulatory body that governs the Internet, Wheeler is taking those lessons learned and readying the biggest initiative of his career: introducing rules this week designed to ensure Internet service providers give equal access to content and applications -- without blocking or forcing content providers to pay for faster delivery to their online customers.
The industry calls this notion "Net neutrality."
Those in favor of the open Internet include consumer advocates, Internet companies such as Netflix, Reddit and Mozilla, and President Barack Obama, who declared in November no toll takers should stand between you and your favorite online sites and services. Critics of Net neutrality argue that too much regulation will stifle innovation by quashing investments in Internet networks and services.
Net neutrality advocates, initially wary of Wheeler because of his past association with the industries he regulates, now applaud his leadership. Reed Hastings, CEO of the Netflix video-streaming service, likens Wheeler's stance to the one taken by business mogul Joseph Kennedy Sr. in 1934, when he was tasked with regulating Wall Street for the first time as chairman of the newly formed Securities and Exchange Commission.
"Chairman Wheeler is on the edge of making history by defying the greatest lobbyists in the world -- from the telco and cable industry -- to secure an open and fast Internet for all Americans," Hastings said. "You have to go back to Joseph Kennedy Sr. running the SEC to find as surprising and courageous an example of policy leadership given the person's prior background."
See also: Net Fix -- Making sense of the Net neutrality debate
The once-powerful advocate for the cable and wireless companies has rocked his former employers on their heels.
"The joke around Washington these days is that the only thing that can bring together cable, wireless and TV broadcasters is Tom Wheeler," said a Washington communications lawyer, who represents some of Wheeler's critics.
The FCC is set to propose its new rules on February 5. A vote by the agency is scheduled for February 26.
The lobbying game
Wheeler, a native Ohioan who holds an undegraduate degree from Ohio State University, won recognition for his work promoting the cable TV industry during lobbyist stints for the telecommunications industry, first as the head of the National Cable & Telecommunications Association starting in 1976 and, later, the Cellular Telecommunications & Internet Association. He's the only person to be inducted into both the Cable Television Hall of Fame and The Wireless Hall of Fame, a fact President Obama once joked made Wheeler "the Bo Jackson of telecom."
It was while lobbying for the cable TV industry that Wheeler met his wife, Carol. A lobbyist for the National Association of Broadcasters, she was fighting on the other side of almost all the issues he found important. "That's how we got to know each other," Wheeler recounted in a 2009 interview on C-Span, a network he helped create while working at the NCTA.
Wheeler rose through the ranks at NCTA and, after only three years at the trade group, took over as president. He was 33 years old. "It was an incredible learning experience at a very young age, and a very dynamic growing industry," Wheeler said about his career's fast ascent.
He left the NCTA in 1984 and took over at NABU. Although Wheeler knew little about technology, his former colleagues describe him as a relentless student who spent hours with engineers, asking them to explain over and over how things worked. Those conversations helped him form a clear picture of the communications industry's future.
"He is an entrepreneur," said Arthur Esch, who worked at NABU with Wheeler and has been a close friend for 30 years. "He was light years ahead of everybody we played with. And he would try to explain to folks, who probably had never even used a computer, that they needed to take look at what we were doing, because even though it looked like a bit of a risk at the time, they needed to get in front of the technology."
From 1984 to 1992, Wheeler worked with five startups, all related in one way or another with delivering data or content to the home or office. In 1992, he took over as CEO of the CTIA, and in 2004, he became a technology entrepreneur and executive at the Washington, D.C.-based venture capital firm Core Capital Partners.
"It's one thing to start one company, but to help grow an entire industry -- it's phenomenal," said Bryan Biniak, founder and CEO of Jacked, a startup that Core Capital helped fund.
"And he did it twice," said Biniak, who is now an executive at Microsoft. "He has a natural entrepreneurial bent that he brings to everything he does."
A wolf in charge of the hen house?
Even in a town known for revolving doors between government and industry, Wheeler's 2013 nomination as chairman of the FCC raised eyebrows. Critics quickly portrayed him as a shill for the telecommunications industry, and his appointment was so contentious it helped make him one of the first policy wonks to become a national celebrity.
In June 2014, comedian John Oliver even compared the former lobbyist's appointment to asking a "dingo to babysit a baby" in a 13-minute sketch that propelled the Net neutrality issue into the national spotlight. Oliver's video has gotten nearly 8 million views on YouTube.
But what the critics failed to highlight, say people who know Wheeler, is that his stints as entrepreneur and venture capitalist make him more likely to side with an underdog rather than with a market power.
"The Tom I know is a scrappy entrepreneur," said Noah Glass, founder and CEO of Olo, a company in which Wheeler had invested when at Core Capital. "I know Tom as a David strategizing how to fight the Goliaths, and not as the Goliath looking to crush the Davids. So it was shocking to hear how people have represented him."
Wheeler supporters also point out that it's been 31 years since he lobbied for the cable industry and 11 years since he left the wireless industry. To put things in perspective, Apple Computer had just introduced the Macintosh and "Ghostbusters" was the hit of the year when Wheeler left his post as the head of NCTA.
"He is no more a former lobbyist than I am a former high school student," said Reed Hunt, a fellow Democrat who served as FCC chairman from 1993 to 1997.
No company man
The lanky, 6-foot 4-inch Wheeler comes across as plain-spoken, with a Midwestern sensibility. He often quotes Abraham Lincoln, about whom he has written two books. Despite working in the country's most political city, Wheeler seems more concerned with getting things done at the FCC than with the niceties.
That let's-get-it-done style can grate, though. The New York Times noted in its November 2014 profile of Wheeler that "listening is often as far as it goes...Mr. Wheeler's style has led to some grumbling among the commissioners at FCC headquarters. Aides say the other commissioners often are excluded from the drafting of new proposals."
Over the past 15 months, Wheeler has pushed to modernize the e-rate program that provides technology funding for schools and libraries, raised a record-breaking $45 billion in revenue from a January 2015 wireless spectrum auction, established a schedule for yet another spectrum auction scheduled for 2016, eliminated a decades-old sports blackout rule that prevented fans from watching their favorite teams on television and voted to raise the broadband download speed benchmark to 25 megabits per second from 4 megabits.
"I think Tom is one of those guys who knows that when you're representing a client, you represent their interests," said Blair Levin, the former chief of staff for Hundt and author of the 2010 National Broadband Report. "Now his client is the US consumer."
An FCC vote on wireless data roaming in December didn't make him any friends at AT&T and Verizon , either. That's when Wheeler sided with T-Mobile and agreed to clarify rules requiring the two biggest wireless operators to offer roaming services on their 4G LTE data networks at reasonable rates to smartphone customers.
His proposal to redefine broadband as 25 Mbps irritated cable operators because the slower DSL service offered by telephone companies would no longer be considered broadband, a move that makes the broadband market far less competitive than the cable industry would like us to think. The chairman also supported pre-empting state laws that prevented cities and other municipalities from setting up their own broadband networks, leading to more competition for cable operators.
The fight to keep the Internet open
Wheeler was thrown into the Net neutrality quagmire a year ago when a federal appeals court threw out the FCC's 2010 Open Internet rules. A pragmatist, his first instinct was to re-establish the rules agreed to four years earlier -- rules, by the way, that never explicitly prohibited providers from offering paid-priority services.
But when his initial proposal was leaked to the public in April, the backlash was immediate and intense. The plan was panned by consumer advocates, who feared it might allow broadband providers, like cable operators, to create "fast lanes" for content companies willing to pay a premium for faster access to their customers.
The proposal also inflamed activists and led to Oliver's rant, prompting further outcry from the public. Protesters not only picketed the FCC office in Washington, they camped outside Wheeler's home in Georgetown.
Wheeler brushes aside the criticism.
"I have been trying to do what is the right thing to do for creating an open Internet," he said in a Jan. 12 interview. "To the extent that it became fodder for people, that was one thing. To the extent that people called me names or demonstrated at my house, that kind of goes with the turf."
After reading some of the nearly 4 million public comments the FCC received in September, and after having conversations with consumer advocates and Internet startups, Wheeler said his thinking evolved. He realized the old approach wasn't enough to protect the Internet for everyone.
In October 2014, his newly crafted plan was once again leaked. This time, it showed Wheeler was considering a so-called "hybrid" approach to regulating the Internet, offering some elements of a solution.
For the White House, it didn't go far enough.
The presidential push
In November, President Obama issued a nearly 1,100-word statement and posted a two-minute video urging the FCC to reclassify Internet service under Title II of the Telecommunications Act. That reclassification would treat broadband services for the first time as a public utility, just as telephone service has been treated since 1934.
"Ever since the Internet was created, it's been organized around basic principles of openness, fairness and freedom. There are no gatekeepers deciding which sites you get to access. There are no toll roads on the information superhighway," the President said, siding with consumers. The FCC, he said, needed to "recognize that for most Americans, the Internet is an essential part of everyday communication and everyday life."
Anything short of Net neutrality would mean the "end of the Internet as we know it," President Obama added.
That marked a significant turning point for the debate over Net neutrality.
In a presentation at the Consumer Electronics Show in January, Wheeler affirmed he would do as the president asked and reclassify broadband as a utility under Title II. But he said he was already considering this option before the president came out in favor of it. The White House position just helped solidify his thinking.
"The chairman has clearly been listening to all the input he has received -- including input from people like me and the president, but also from academics, entrepreneurs, large online businesses, small businesses in Minnesota, individual Americans, and many others," said Senator Al Franken (D-Minn.), a vocal supporter of Net neutrality regulation.
See also: Title Two, the two words that terrify the broadband industry
"It's no surprise, and no cause for criticism, that this input has shaped the chairman's thinking and has led him to focus on reclassifying broadband Internet under Title II," Franken said. "Title II offers the most viable path forward to preserve an open Internet for all Americans, because reclassification will allow the FCC to establish and enforce strong, sensible Net neutrality rules under clear legal authority."
Wheeler critics, especially those in the broadband industry, suspect the president forced his push toward reclassification.
"There is no question that the way the Net neutrality issue has unfolded has lost him the admiration of people in several industries," said a telecommunications attorney in Washington, DC, who asked not to be named. "Every chairman has to pay a price to do what he thinks is the right thing, but there is a perception that he has been beat down, pressured by the White House and taunted by people like John Oliver, to do something he doesn't really believe in."
Still, others say the president's nudge was just that. While Wheeler can be obstinate, he's not immovable on any issue, so long as it fits with his broader goals.
"I would say it can be very hard to change his mind," said Harold Feld, senior vice president at consumer advocacy organization Public Knowledge. "But he is pragmatic about the methods for getting there. He likes to think about things in a broad, holistic way rather than being very narrowly focused."
Battle lines drawn
Many broadband providers feel that reclassifying broadband under Title II is tantamount to "a nuclear option." Detractors, namely cable operators, wireless providers and phone companies, say such rules will apply outdated regulation to the broadband industry.
"If this piece of Title II was to pass, I can absolutely assure you it would certainly change the way we view our investment in our networks," Fran Shammo, chief financial officer of Verizon, said on an earnings conference call last month.
Wheeler isn't afraid of dissension. He's assembled his own advisers based on Lincoln's philosophy of building a "team of rivals." He hired Net neutrality proponent and activist Gigi Sohn, former president of Public Knowledge, as special counsel for external affairs at the FCC. He also brought on board attorney Jon Sallet, who has deep ties to telecom companies such as Verizon.
It's clear Wheeler isn't trying to please everyone. Hundt, who sat in that same chair, said that's for the best.
"If you're doing a good job as chairman at the FCC, no one in the industries you regulate should be happy," Hundt said. "I'd say that he has made everyone in industry roughly and equally unhappy. And that is what it usually means to be standing up for the public interest."