Coverage: Regulating the Internet

The Federal Communications Commission continues to debate how to handle the issue of ‘net neutrality,’ which refers to all sites having equal access to bandwidth. The issue is one that could give large companies an edge over small or local business. And it’s so important that President Obama weighed in on the issue.

Edward Wyatt had this story in The New York Times:

In his most direct effort yet to influence the debate about the Internet’s future, President Obama said on Monday that a free and open Internet was as critical to Americans’ lives as electricity and telephone service and should be regulated like those utilities to protect consumers.

The Federal Communications Commission, Mr. Obama said, needs to adopt the strictest rules possible to prevent broadband companies from blocking or intentionally slowing down legal content and from allowing content providers to pay for a fast lane to reach consumers. That approach, he said, demands thinking about both wired and wireless broadband service as a public utility.

“For almost a century, our law has recognized that companies who connect you to the world have special obligations not to exploit the monopoly they enjoy over access into and out of your home or business,” Mr. Obama, who is traveling in Asia, said in a statement and a video on the White House website. “It is common sense that the same philosophy should guide any service that is based on the transmission of information — whether a phone call or a packet of data.”

While consumers cheered the news, cable investors began to worry about the future of one of the industry’s largest mergers Liz Hoffman and Shalini Ramachandran reported in The Wall Street Journal:

The comments sent the latest shiver through the ranks of investors wagering on the Time Warner Cable takeover. Some fret that such a reclassification of broadband sets the stage for increased regulation that could make the tie-up less lucrative.

Shares of Time Warner Cable fell 5% and Comcast dropped 4%, further widening to 11.5% the gap between the current value of Comcast’s offer and the current share price for Time Warner Cable. The difference is a signal investors are worried the deal might not close, or might face delays or other setbacks.

Comcast Executive Vice President David Cohen said in a statement that the White House proposal “would be a radical reversal that would harm investment and innovation, as today’s immediate stock market reaction demonstrates.”

Writing for ABC News, Susanna Kim pointed out several ways the internet could change without rules governing net neutrality:

1. Degraded service

Services that consumers use without paying a special fee to Internet service providers (ISPs) will not work as well because they will be excluded from the ISP’s “fast lane,” said Michael Weinberg, vice president at Public Knowledge, a digital advocacy group in Washington, D.C.

2. Higher costs

Another short-term consequence is that services offered by an ISP that now have a fee could be more expensive, because those companies may pass the fee on to users, Weinberg said.

Companies like Netflix, which is the largest user of bandwidth in the U.S., may pay more to ISPs to make sure their content is accessible to customers.

However, the major broadband providers, like Comcast, have pledged not to discriminate.

3. Less innovation

Though innovation of late heavily involves the Internet and Web-enabled devices, Weinberg said he fears that losing net neutrality will lead to fewer new innovative services in the long term.

Some industry groups weren’t happy with the president’s statements, according to an USA Today story by Mike Snider and Roger Yu:

However, industry groups that represent ISPs criticized the plan. “Such a move would set the industry back decades, and threaten the private sector investment that is critically needed to ensure that the network can meet surging demand,” the Telecommunications Industry Association in a statement.

Sen. Ted Cruz, R- Texas, compared the plan to Obamacare on Twitter, saying that “the Internet should not operate at the speed of government.”

The FCC has been recasting new net neutrality rules because the previous set were tossed out by a federal court in January. The court agreed that the agency could regulate the Internet but first must enact rules that establish its authority. The agency got nearly 4 million responses during its public comment period on potential rules.

While the FCC had been expected to vote on new rules by the end of the year, that is unlikely. “The more deeply we examined the issues around the various legal options, the more it has become plain that there is more work to do,” FCC Chairman Tom Wheeler said in a statement after the president’s was made public.

It’s anyone’s guess as to what rules the FCC will finally approve, but it’s clear that the story reaches beyond the Time Warner/Comcast merger. Investors in broadband and cable companies are watching this closely, as are technology companies. It’s even a concern for your local stores, which may have trouble reaching consumers as fast as larger Internet retailers. The debate over how to govern access is sure to be intense and seems to be just heating up.