New Net Neutrality rules? Not so much

Today’s much-hyped speech by FCC Chairman Julius Genachowski doesn’t really reveal much more about what the federal agency plans to do about Net Neutrality than was already known. As expected, Gehachowski said he wants to add two new principles to the FCC’s existing Four Principles of Internet governance, announced in 2005 as the FCC’s Internet Policy Statement. The two new principles would prohibit discrimination against legal traffic by either blocking it or degrading it, and would require Internet service providers to publicly disclose how they manage their traffic. The other big change Gehachowski is proposing is to extend Net Neutrality rules to wireless service providers as well, as they are getting into data services.

Genachowski insists this doesn’t mean the federal government is going to regulate the Internet, insisting instead that he wants to create “fair rules of the road” for companies that control Internet access.

One of his reasons for doing so is that the number of ISPs has dropped in the move from dial-up to broadband, Genachowski points out. What he doesn’t address is the reason for that drop — that dozens of smaller ISPs were unable to make their business plans work. Many will point to the FCC’s decision not to force broadband service providers to open their next-gen networks to wholesale access as one reason for that. But even in the heady days of the late 90s, when CLECs were using local telephone company pipes to offer DSL, they couldn’t build up enough scale to survive. Of the companies that tried, only Covad Communications is still around, and its focus is on businesses, not residential customers.

Genachowski also doesn’t address the potential impact of the FCC’s Net Neutrality rules on the investment in local broadband. In anticipation of his speech, Stifel Nicolaus analyst Rebecca Arbogast is already predicting a negative impact on the stocks of companies such as AT&T, Verizon and Comcast. And he doesn’t tackle the tricky issue of how private investors can be forced to pay to build an infrastructure if they can’t be certain, at least in the early days, of the revenue it will generate.

And here is where the U.S. broadband policy always stumbles. Unlike countries such as the U.K. and Australia, we’re not willing to go the full nine yards and force broadband service providers to create a wholesale network organization that just offers broadband pipes to applications and services companies. Instead, we try to create some middle ground, where the Internet remains open but privately built and funded. If this FCC is to succeed where others have failed, there are going to have to be some new ideas brought to the table and we haven’t seen them yet from Genachowski.

What Genachowski did accomplish today was launch the next period of regulatory uncertainty. He isn’t going to Congress for new laws to empower the FCC to exert its authority to prevent discrimination and force transparency on network management practices. Instead, he’s opted for a Notice of Proposed Rulemaking at the FCC’s October open meeting. That means that any rules the FCC drafts will be the subject of rounds of comments and debate and then, inevitably, a court challenge. The current challenge by Comcast of the FCC’s action against its efforts to block some traffic is still in the courts, and could still impact what the new Democratic FCC attempts.

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