FCC votes to repeal net neutrality rules in a sweeping act of deregulation

WASHINGTON – Federal regulators voted Thursday to allow Internet providers to speed up service for websites they favor – and block or slow down others – in a decision repealing landmark, Obama-era regulations overseeing broadband companies such as AT&T and Verizon.

The move by the Federal Communications Commission to deregulate the telecom and cable industries was a prominent example of the policy shifts taking place in Washington under President Donald Trump and a major setback for consumer groups, tech companies and Democrats who had lobbied heavily against the decision.

The 3-2 vote, which was along party lines, enabled the FCC's Republican chairman, Ajit Pai, to follow through on his promise to repeal the government's 2015 net neutrality rules, which required Internet providers to treat all websites, large and small, equally. The agency also rejected some of its own authority over the broadband industry in a bid to stymie future FCC officials who might seek to reverse the Republican-led ruling.

[GCI, Alaska Communications vow not to penalize Alaskans when net neutrality rescinded]

The result was a redrawing of the FCC's oversight powers, at a time of rapid transformation in the media and technology sectors.

The vote has also cast a spotlight on Pai, once a little-known regulator, who has become one of the faces of deregulation in the Trump era. On the eve of the vote, Pai released a video that featured him dressed as Santa, wielding a lightsaber and clutching a fidget spinner to defend his decision to repeal the net neutrality rules and mock his critics.

"Within a generation, we have gone from email as the killer app to high-definition video streaming," Pai told an audience at the FCC ahead of the pivotal vote. "Entrepreneurs and innovators guided the Internet far better than the heavy hand of government ever could have."

Consumers might not feel the effects of this decision right away. But eventually they could begin to see packages and pricing schemes that would steer them toward some content over others, critics of the FCC's vote argued.

For example, under the Obama-era rules, Verizon was not allowed to favor Yahoo and AOL, which it owns, by blocking Google or charging the search giant extra fees to connect to customers. Under the new rules, that type of behavior would be legal, as long as Verizon disclosed it.

"You and I and everyone else who uses the Internet for personal use will see some changes in pricing models," wrote Glenn O'Donnell, an industry analyst at the research firm Forrester, in an email. "For most of us, I expect we will pay more. Service bundles (e.g., social media package, streaming video package) will likely be bolted on to basic transport for things like web surfing and email."

Pai's opponents vowed to wage a fierce campaign. The hacking group Anonymous said it will "make these men realize what a terrible mistake they made," threatening to "come after" Pai and his allies. Opponents of the FCC action, meanwhile, said they would take the agency to court. New York's attorney general, Eric Schneiderman, announced Thursday that he intends to file a multi-state lawsuit "to stop the FCC's illegal rollback of net neutrality."

A legal challenge would extend the torturous journey of a consequential technology policy that began in 2004 under President George W. Bush and that has been approved by the FCC in multiple incarnations, only to be struck down or reversed later. Both sides have well-heeled companies and sophisticated lobbying operations, with cable and telecom groups opposing restrictions on their activities and high-flying tech giants and start-ups seeking such rules.

"For the last decade, we've been on a regulatory roller coaster," said Jack Nadler, a partner at the law firm Squire Patton Boggs. "We are likely looking at two or three more years of uncertainty. And then there is the 2020 presidential election, which could lead to yet another policy upheaval."

The FCC's decision eclipses what would have been considered middle-of-the-road conservative positions just a decade ago, said Jeffrey Blumenfeld, co-chair of the antitrust and trade regulation practice at the law firm Lowenstein Sandler.

"What we're seeing now is a dramatic change not just from the Obama administration, but even from the prior Republican administration," said Blumenfeld.

[FCC chairman approaches his biggest win with net neutrality repeal]

Under President George W. Bush, the FCC outlined a series of guiding principles that would eventually lead to the 2015 net neutrality rules. Then-FCC Chairman Michael Powell, in a 2004 speech, said Internet users should enjoy four fundamental freedoms: The freedom to access any Web content of their choice, so long as it was legal; the freedom to use any online application; the freedom to use their home broadband connections on any device; and the freedom to get subscription information from their own providers.

Internet providers say that the move by the FCC will not lead to the death of the Internet, as some net neutrality activists have claimed.

They argue there is no financial incentive to penalize specific apps or services, that giving some sites the option of faster service could in fact benefit consumers, and that the new rules allow the Federal Trade Commission to sue carriers that act anti-competitively. Consumers' daily Internet experience will not change, according to some industry officials.

"The Internet will continue to work tomorrow just as it always has," said AT&T in a statement Thursday.

The officials also said the 2015 rules discouraged providers from making broadband faster and more reliable, according to the industry. USTelecom, a trade group representing AT&T, Verizon and others, said that annual broadband infrastructure spending fell from $78.4 billion in 2014, before the rules took effect, to $76 billion in 2016.

Powell, who now leads a top cable industry trade group, said that the repeal of the FCC's net neutrality rules is still consistent with the four freedoms he described nearly 14 years ago.

"Our belief at the time was that the Internet needed to retain a light regulatory environment to get broadband moving," said Powell. "And the companion to those four freedoms was the decision to keep the Internet classified as an information service." ("Information service" providers face fewer obligations under the FCC's regulatory structure than do providers of telecom service, a category that covers landline phone companies.)

Under Democratic FCC Chairman Tom Wheeler, the net neutrality rules took the extraordinary step of reclassifying Internet providers as telecom providers, giving the FCC broad powers to define new obligations for providers on everything from prices to privacy practices.

Advocates hailed the 2015 decision as a victory for consumer protection and a necessary step in light of how differently the Internet now looks compared to its earlier days, when fewer massive companies dominated the space. Meanwhile, industry groups sought to get the regulations overturned in court. They failed, but have escalated the case to the Supreme Court. The Court has yet to decide whether it will hear the case.

Supporters of the net neutrality rules have signaled that the current FCC will face a court challenge designed to stop the policy change.

"If the arc of history is long, we are going to bend this toward a more just outcome – in the courts, in Congress, wherever we need to go to ensure that net neutrality stays the law of the land," said FCC Commissioner Jessica Rosenworcel, a Democrat.

Rosenworcel also took aim at the public feedback process that led to the decision, alleging major irregularities in the record. Two million comments filed to the FCC on net neutrality were submitted under stolen identities, she said. Half a million came from Russian addresses, and 50,000 net neutrality complaints have gone "inexplicably missing."

The comments have also been the subject of an investigation by Schneiderman and the state of New York, who joined 17 other state attorneys general Wednesday in a letter calling for the FCC to delay its vote. The FCC has repeatedly refused to cooperate with his agency's investigation, Schneiderman has said.

Analysts expect that such complaints could come up again in any litigation over the FCC vote.

Some analysts believe the uncertainty surrounding net neutrality provides an opening for congressional legislation to settle the issue once and for all. Republicans on Capitol Hill are optimistic. But their efforts are likely to stall unless they can court Democratic votes, and many Democrats view litigation against the FCC as the preferable course of action.

The sharp divides on net neutrality show that what began as a bipartisan issue has hardened into two distinct sides.

"Tribal partisanship is dominating our public policy debates," said Marc Martin, a communications lawyer at the firm Perkins Coie. "It wasn't always this way. First adopted and enforced during the Bush administration, net neutrality began as a noncontroversial policy to protect consumers' use of online platforms."