Internet Privacy Furor Is a Preview of the Coming War Over Net Neutrality

(Bloomberg) -- The U.S. Congress's decision to invalidate a set of internet privacy rules from the Obama administration set off a firestorm this week. The change, which will allow service providers like AT&T Inc. and Verizon Communications Inc. to collect and sell customers' information without their permission, prompted ad campaigns from internet freedom groups shaming lawmakers and a small wave of service journalism about VPNs and other privacy tools.

Reactions in certain corners of the internet got hysterical pretty quickly. The creator of Cards Against Humanity said he'd buy the browsing histories of Republican lawmakers and post them publicly. In reality, the change won't immediately create a shadowy new market for online voyeurism, but it does serve as a preview for a much bigger policy fight likely to unfold over the next several months. Republicans who want to roll back rules on net neutrality are expected to use this week as a template for revisiting the most contentious issue on the menu of internet policy topics.

Net neutrality has been the premier issue of internet policy wonks for years. Broadly speaking, it refers to regulations keeping internet providers from treating traffic differently based on its source. So with net neutrality in place, Comcast Corp. couldn't tell Netflix Inc. that the streaming provider will have to pay to keep its videos from slowing down. In 2015, Tom Wheeler, then chairman of the FCC under Barack Obama, pushed through the most stringent net neutrality rules to date.

This week's privacy rule and a potential reversal of net neutrality are both consistent with President Donald Trump's agenda to undo what he sees as government overreach that holds back businesses. In the case of Tuesday's vote in the House, lifting the restriction on internet providers from collecting and monetizing customer data could allow them to compete more directly with Google and Facebook Inc., which have used targeted advertising to create some of the most valuable businesses on earth. Congress's move means the telecoms can get started, especially since it will legally preclude the Federal Communications Commission from passing similar rules in the future.

Ajit Pai, who Trump designated as FCC chairman this year, said in a statement that the privacy rules had been “designed to benefit one group of favored companies over another group of disfavored companies.” On Thursday, White House spokesman Sean Spicer echoed the remarks, in a way that some interpreted as a commitment to undo the broader net neutrality rules.

Gigi Sohn, who worked at Wheeler's FCC as counselor to the chairman, said she sees this week's positioning on the privacy rules as a precursor to Republicans arguing that the FCC shouldn't regulate internet service providers at all. “They haven't done that yet, but that's what the net neutrality battle is going to be all about, and that's what Spicer was somewhat signaling,” she said.

Net neutrality protections aren't dead yet, but they're effectively dormant. Pai's FCC has made clear it won't enforce them. Last month, the regulator dropped investigations into whether internet providers violated net neutrality rules through a practice known as zero-rating, where certain services are exempt from data caps on their wireless plans. Given his longstanding opposition to the rules, Pai is unlikely to open any new net neutrality investigations. Sohn, who's now a fellow at the Open Society Foundations, expects to see the commission attempt to unwind the rules in earnest over the next few months.

When this happens, the two sides of the debate will frame the issue differently. Republicans will say they're only looking to reverse a bureaucratic power grab, as Pai argued after the privacy vote. “It's worth remembering that the FCC's own overreach created the problem we are facing today,” he said. He'd like the FCC to get out of the internet regulation game, and let the Federal Trade Commission enforce privacy complaints on a case-by-case basis. This also happens to be the prevailing Republican view on net neutrality, which sees the 2015 rules as unnecessary because the FTC had all the power it needed to deal with abuse individually.

Supporters of net neutrality don't think handing things back over to the FTC would be enough to curb abuse. Sohn said the Obama administration rules set explicit guardrails, while the FTC's broader charge of policing unfair and deceptive business practices will leave too much wiggle room.

There's little chance Obama-era neutrality will remain fully intact, said Berin Szoka, president of TechFreedom, a think tank that opposed the FCC's 2015 rules. Republicans could agree to leave some rules in place through new legislation while simultaneously stripping the FCC of the new authority it claimed. The rollback of the FCC's privacy rules will serve as a catalyst for neutrality negotiations, said Szoka. “That ought to have the effect of helping get Democrats to come to the table on some kind of permanent deal,” he said.

Such a compromise would adopt the bloodless view that Pai and Congressional Republicans bring to the issue. They see internet regulation in terms of how it affects the balance of power between corporate interests, arguing that there's little impact on the public's well-being. Few people stay up at night worrying about turf wars between federal agencies.

But the pro net neutrality crowd believe they have a good populist issue to work with, as the fierce reaction to the privacy rules showed. When Wheeler took office, few people expected him to push for strong net neutrality rules. His commission initially floated a proposal that neutrality advocates hated, leading to an unprecedented public outcry. This was a primary reason the 2015 rules were passed. Neutrality supporters are hoping to replicate that same outrage for the next fight.

To contact the author of this story: Joshua Brustein in New York at jbrustein@bloomberg.net.

To contact the editor responsible for this story: Mark Milian at mmilian@bloomberg.net, Emily Biuso