Is There Life After Net Neutrality? Republicans Want to Find Out

(Bloomberg) -- Republicans fighting to undo net-neutrality rules have a lot of options now that Donald Trump is in the White House and their party controls Congress.

They can use the Federal Communications Commission, freshly under Republican control, to void the regulations on internet service providers and hope to be upheld by the courts. They can try to pass a law that supersedes the FCC rules. And once done, they can let the broadband industry police itself.

Any path to change the rule that mandates fair treatment of web traffic will rouse determined opposition from Democrats, who insist the strong, utility-style rules the commission passed in 2015 under Democratic control are needed to keep communications networks open to new competitors and new ideas.

“You need enforcement,” said Kevin Werbach, who teaches internet policy at the University of Pennsylvania's Wharton School and supports the FCC's rule. “There's too much opportunity for the big guys to cut deals that aren't good for the little guys.”

FCC's Net Neutrality Rules Now in Republican Sights: QuickTake

The FCC, then under Democratic control, imposed net neutrality rules in 2015 to keep broadband providers, such as AT&T Inc. and Comcast Corp., from interfering with the information flow to homes and businesses. They feared the companies would slow delivery of web content from competitors or speed up that of paying partners. Republicans said there is scant evidence of such problems -- and certainly not enough to justify a new rule.

The commission invoked its authority to regulate utilities such as phone companies but said it didn't want to set prices companies can charge. A court upheld the rules last year and, since then, much of the argument in Washington has centered around whether the rules give the FCC too much power over companies.

New FCC Chairman Ajit Pai, President Donald Trump's choice to lead the agency, has called the net neutrality rules a “mistake” and said he wants to return to “light-touch regulation” that existed before 2015.

“There's a broad consensus about the need for a free and open internet,” Pai said in an interview Tuesday with Bloomberg TV. “The only question is, what regulatory framework can we adopt that both protects that core value and preserves a massive incentive to invest.” He said, “that's what we're in the context right now of deciding.”

Pai hasn't offered details on how he'll move forward. Congress may leave the task to him. Representative Marsha Blackburn, who is chairman of the telecommunications subcommittee that oversees the FCC, wants the agency to proceed to revise the rules before Congress tries to write a law, said Dan Schneider, a spokesman for the Tennessee Republican.

Fear of Backlash

Congressional Republicans are almost universally opposed to the rules, yet may be hesitant to act for fear of a popular backlash, Paul Gallant, a Washington-based analyst for Cowen and Co., said in a Feb. 16 note. Opposition to Trump's health care and immigration policies are making it more difficult to adopt a broadband law that would supersede the FCC regulations and be insulated from change if agency control switches back to Democrats, Gallant wrote.

If Congress is on the sidelines, the focus lands on the FCC.

One approach Pai could take is to conduct a months-long inquiry, leading to a decision that the rules don't serve the public interest and can be voided, said Harold Furchtgott-Roth, an economist and Republican former FCC member. The courts that deferred to the FCC's judgment on the 2015 rule should defer again, he said.

“The court will have a terrible double standard if they say the commission has a higher and different standard to repeal the rules,” Furchtgott-Roth said.

Supporters of the regulations see it differently, saying judges could reject a reversal of course by the agency. Judges will balk “if the FCC says, ‘We've changed our minds just because there's a new guy in the White House,'” said Werbach.

Self Regulation

Rather than strict rules, regulators, companies and interest groups could work together to devise codes of conduct and, in essence, allow for self-regulation, said Roslyn Layton, a scholar who advised the formative Trump administration before the inauguration. Companies with different interests such as Alphabet Inc.'s Google and Comcast could adjudicate disputes in such a setting, which spurs more innovation in countries that try it than in countries with strict rules, she said.

“If you want to have innovation, all parts of your ecosystem must interact," Layton said.

Voluntary Rules

Congress, the FCC and companies negotiated in an attempt to write voluntary rules in 2010 and failed to reach a consensus. The FCC later that year passed rules eventually struck down after Verizon's challenge.

Pai has lauded an earlier approach originally suggested by a Republican chairman. The FCC in 2005 issued principles that said consumers may access the lawful internet content of their choice with the device of their choice.

“I think those four core freedoms are something that we'd like to see people embrace," Pai said at a news conference Feb. 23.

Details of the debate are obscure to most people, but the stakes are clear, said Mignon Clyburn, the sole Democrat on the FCC.

“They clearly understand that if a broadband provider owned their favorite streaming video service and decided to speed up that service while disadvantaging a competing video service with slower speeds, that this is unfair,” Clyburn said Monday. “Or worse, if they actually blocked the competing video services all together or forced them to pay an additional toll.”

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net.

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman