Industry consolidation between 2004 and 2006 resulted in the top two telcos, AT&T and Verizon, securing about 80% of the DSL market and 40% of the overall broadband market between them. In addition, the aggressive deployment by Verizon of its FttP network and by AT&T of FttP and Fiber-to-the-Node (FttN) technology has further supported their dominant share of the market.
Both the ‘for’ and ‘against’ camps have engaged in intense campaigns given the high stakes. Yet the telcos have been particularly fervent with their political lobbying as well as their ‘astroturfing’ – faux grass roots campaigning. The telcos’ campaign has cast net neutrality regulation in the light of an impost on the internet rather than as a restraint on the network owners’ ability to discriminate against content. Also, as part of their campaign the telcos have argued that net neutrality regulation will dampen their incentive to invest. Essentially, cablecos and telcos want internet access put under a much lighter regime so they can segment the market and offer different types of access for different prices.
While legal and political wrangling continued to thwart hopes of passing net neutrality legislation, the FCC at least laid down guideline principles on the issue which it expected the telecommunications industry to follow.
For those demanding more stringent regulation of incumbents’ ability to control internet traffic, the Obama administration has been encouraging: in late 2009 the then newly appointed FCC chairman Julius Genachowski brought in new network neutrality ‘rules’. The term ‘rules’ is significant since the FCC’s previous net neutrality ‘principles’ comprised four voluntary doctrines, the enforceability of which Comcast tested in the courts. The rules applied to fixed-network as well as wireless operators.
The new net neutrality rules include the following:
· operators must allow consumers to access any legal internet content they wish;
· operators must allow consumers to use any networked application or service they wish;
· operators must allow consumers to use any safe wireless device they wish;
· consumers are entitled to competition among local service providers;
· operators may not discriminate against internet applications or content beyond ‘reasonable’ network management; and
· Operators must publicise their network management practises.
An updated version of the rules was adopted by the FCC in 2010. The ‘Open Internet’ rules included one which required that fixed-line ISPs and wireless operators were open and transparent to customers regarding how they manage network congestion. Another prevented ISPs from blocking content on (fixed-line ISPs abided by a more stringent set of rules than did wireless operators). A third rule, applying only to fixed-line ISPs, prohibited unreasonable discrimination against traffic on their networks.
Verizon Communications in 2011 challenged these rules, arguing that the FCC had Congressional authority to impose them. In January 2014 the federal Court of Appeals for the DC Circuit overturned the Open Internet rules, asserting that though the FCC had the authority to regulate broadband access, its net neutrality regulation was based on the notion of ‘common carriage’ which did not apply to ISPs. Since ISPs were classified by the FCC differently than were telcos, it could not use law pertaining to telcos to regulate broadband services. (In 2005 the Supreme Court ruled that broadband services should not be classified as telecom services, and thus the infrastructure of broadband providers cannot be regulated under common carrier principles).
The DC Court’s decision applies to all ISPs except Comcast, which when it acquired NBC Universal agreed to abide by the FCC’s Open Internet rules for seven years.
Prompted by the court’s decision, the FCC October 2014 proposed a hybrid plan that would separate internet access into wholesale and retail services, with different rules for different parts of the network.