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FCC chairman begins assault on net neutrality rules

Ajit Pai introduces a proposal that would eliminate the legal foundation of the FCC's controversial net neutrality rules, but still try to preserve some openness.

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FCC Chairman Ajit Pai introduced a new proposal at an event in Washington on Wednesday that would gut the legal underpinnings of the agency's controversial net neutrality regulations.

Eric Thayer/Getty Images

Federal Communications Chairman Ajit Pai has started to roll back Obama-era net neutrality regulation, setting up a showdown between tech companies and broadband providers.

In a speech in Washington on Wednesday, Pai outlined his plan for eliminating the utility style regulatory framework the FCC adopted in 2015, while still keeping principles to prevent broadband and wireless providers from favoring their own services over competitors'.

"When the FCC rammed through the Title II Order two years ago ... I voiced my confidence that the Title II Order's days were already numbered," he said during his speech. Pai said this is the first step in making that prediction a reality. "Make no mistake about it: this is a fight that we intend to wage and it is a fight that we are going to win."

Pai began circulating the proposal among the FCC commissioners today and will release it to the public on Thursday. The FCC will vote to formally open the proposal for public comment at the May 18 meeting. Pai expects the FCC to vote on a new set of rules that will return broadband to its "light touch" regulatory framework by the end of the year.

Under his proposal the FCC will throw out the legal underpinnings of the net neutrality order, which reclassified broadband as a so-called Title II utility service under the Communications Act. This means companies, like AT&T, Comcast and Verizon, will no longer be subject to stricter regulation.

The agency will also abandon the general conduct rule, which allowed the FCC to look into the business practices of internet service providers on case-by-case basis to ensure they weren't harming competitors or consumers.

It's unclear how the agency will preserve the basic protections of net neutrality, which prevent broadband companies from blocking or slowing down internet traffic. Pai said the agency will be taking comments on how best to preserve these core principles.

It had been previously reported that Pai would ask broadband providers to voluntarily agree to these principles and that the Federal Trade Commission, not the FCC, would oversee compliance. Pai didn't address these issues in his talk Wednesday.

Pai said in his speech that getting rid of the Title II classification on broadband will bring high-speed internet access to more Americans, create more jobs, boost competition and provide "the best path toward protecting Americans' online privacy," by reinstating the Federal Trade Commission's authority to police privacy concerns of broadband providers.

The proposal is a stark departure from the strict set of rules established by the FCC under Democrat Chairman Tom Wheeler. Democrats in Congress, consumer advocacy groups and the technology community are already lining up to fight the proposal.

The Internet Association, a group that represents companies like Google, Facebook, and Microsoft, said in a statement that the rules should remain unchanged. The group also met with Pai last week to make their position known.

"Consumers pay for access to the entire internet free from blocking, throttling, or paid prioritization," said Michael Beckerman, president and CEO of the Internet Association. "Rolling back these rules or reducing the legal sustainability of the Order will result in a worse internet for consumers and less innovation online."

More than 800 startups, investors and entrepreneurs from across the US, which included companies like Etsy, Foursquare and GitHub, have already sent a letter to Pai stating they were "deeply concerned" with his plans to undo the legal framework of net neutrality. Without the rules broadband providers would be able to pick winners and losers by favoring their own services over competitors' either by impeding traffic or forcing them to pay for access, they argued.

"Our companies should be able to compete with incumbents on the quality of our products and services, not on or our capacity to pay tolls to internet access providers," the letter said.

Sen. Ed Markey, a Democrat from Massachusetts, said at a press conference ahead of Pai's speech on Wednesday that the FCC should expect a "tsunami of resistance from every walk of life committed to defending net neutrality."

What is net neutrality again?

The net neutrality rules the FCC adopted two years ago basically prevent broadband providers from blocking consumers' access to websites. It also prevents them from playing favorites on the internet by either steering users to or away from certain sites or services. And it prevents internet providers from charging companies that use the internet extra fees to access their customers faster than their competitors.

The tech industry and consumer advocates say these rules are important because it means companies, like AT&T or Comcast, which offer their own streaming video services, can't slow down or block access to services like Netflix or YouTube. It also prohibits them from charging companies like Spotify more to give their music streams priority over competing services like Pandora.

Broadband providers say they are fine with the general principles of net neutrality. What they really don't like is the regulatory framework the FCC used to justify its rules. As part of the order, the FCC reclassified broadband as a Title II service under the Communications Act, which means broadband networks are treated like a public utility, like the old phone network, and must adhere to a stricter set of regulations. Broadband companies argue these regulations have hurt investment, and they point to reports from economists sympathetic to their agendas.

"We continue to support the fundamental tenants of net neutrality," AT&T CEO Randall Stephenson said Tuesday on the company's earnings call. "However, we think it's illogical to regulate using rules that were put in place 83 years ago for the phone network."

He added that a "light touch" regulatory approach means that companies no longer have to pause before introducing a new service or rate plan while they consider whether it violates FCC rules. Stephenson anticipates this will lead to more investment in networks and services.

AT&T and other broadband companies have found an ally in Pai, who reiterated in his speech that he isn't against a free and open internet. In fact, he argued that the internet has always been "neutral" because the federal government as far back as former President Bill Clinton took a hands-off approach to regulation. The FCC's change of heart in 2015 was prompted by political pressure from former President Barack Obama, Pai said, who during the 2008 and 2010 elections promised special interest groups strong net neutrality rules.

Pai said the rules have cost the country $5.1 billion in broadband capital investment, according to the conservative group Free State Foundations. He added that between 75,000 and 100,000 jobs have been lost as a result of the Title II regulation on broadband.

The broadband industry applauded Pai's proposal. Brian Roberts, chairman and CEO of Comcast, said that he fully supports stripping broadband of its "outdated" Title II classification.

"Chairman Pai's proposed reversal of Title II does not mean there will be no open Internet protections," he said in a statement. "But rather creates an environment where we can have a fresh constructive dialogue."

Democrats say they'll fight

Consumer groups and Democrats on Capitol Hill say Pai and his supporters are playing fast and loose with the facts. At a press conference before Pai's speech, Markey pointed to figures suggesting broadband companies have continued to invest in their networks.

"At this point there is no problem that needs fixing," he said. "There's a system in place today that's working. And our focus should be on the FCC leaving in place the pro-competition and pro-consumer rules."

Sen. Richard Blumenthal, a Democrat from Connecticut, said Pai's efforts to cut down the legal basis for net neutrality won't be as easy at it sounds. He said the FCC can expect court challenges.

"In order to change the rules Pai needs a fact-based docket to show that something has changed from two years ago," he said. "And nothing has changed."

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