Two former Obama-era solicitors general are arguing the FCC should not restore network neutrality rules eliminated under Republican chair Ajit Pai.

In a new paper co-written by Donald B. Verrilli Jr. and Ian Heath Gershengorn, the veteran legal minds get together to advise that the Federal Communications Commission does not have the authority to reclassify broadband access as a telecommunications service subject to common carrier regulations, specifically nondiscriminatory access regs and that the commission needs to let Congress weigh in.

Democratic FCC chair Jessica Rosenworcel now has a majority in support of restoring those rules, but Verrilli and Gershengorn say that would be the wrong way to go.

While they laud the goal of “enacting core open internet principles so that all consumers

can enjoy free and unimpeded access to lawful internet content of their choosing,” they said if the FCC tries to do so by reclassifying internet access, the Supreme Court will simply overrule it on the grounds that it lacks authority.

According to the “major questions” doctrine that would guide any Supreme Court decision, they say, the FCC would have “clear congressional authorization” and even Congress can't agree on what authority the regulator has under statute.

“Nothing in Title II of the Communications Act itself or in any other statute gives the Commission the clear and unambiguous authority to classify broadband as a Title II telecommunications service subject to common carrier regulation, and the Commission cannot reasonably conclude otherwise,” they wrote.

“Any attempt by the Commission to impose such broad regulatory requirements under current statutes would be struck down by the Supreme Court,” Verrilli and Gershengorn wrote. “And the contentious litigation leading to that inevitable result would waste countless resources for the government, industry, and the public, while distracting all parties from more promising efforts, such as obtaining congressional action to resolve these important issues.”

Given that, they said, the FCC “should not go down that path.”

Some could argue that regulating internet-service providers as some kind of online gatekeeper is fighting the last war, though ISPs would say they have never been the enemy when it comes to access to content.

Edge providers have taken over as the major target of Congress over the issue of the power of Big Tech to affect access to communications.

ACA Connects made its case to a federal appeals court Tuesday (Sept. 14) that broadband providers should not face a “patchwork of conflicting state regulations” on broadband access, including to a majority of judges who said they had issues with how the FCC reclassified broadband as an information service and pre-empted state regulation that differed from that approach.

Also Read: Net Neutrality Goes Back to Court in California

That came in oral argument in the 9th U.S. Circuit Court of Appeals in ACA Connects v. Rob Bonta. The trade group representing smaller, independent cable operators had challenged a lower court's refusal to grant it a preliminary injunction blocking California's network neutrality law, the California Internet Consumer Protection and Net Neutrality Act of 2018.

California's bill was a response to the Federal Communications Commission's 2017 decision under Republican chairman Ajit Pai to eliminate the FCC's open internet rules and reclassify access as an information service under Title I of the Telecommunications Act of 1996 not subject to common carrier rules.

The ACAC case was heard by a three-judge panel of the court, Judges Mary M. Schroeder, J. Clifford Wallace and Danielle J. Forrest.

Also Read: California Net Neutrality Law Victory Draws Crowd

The state of California vigorously defended the law against what it said was an FCC policy decision that did not square with statute.

ACAC's lawyer, Scott Angstreich of Kellogg Hansen, told the court that providers faced the prospect of 50 different sets of rules for streaming Netflix shows or accessing Zoom calls or relaying national news to customers in different states.

Angstreich said that the FCC concluded that Title I is the best regime for ensuring an open internet and that, further, using a Title II common-carrier regime would harm the internet.

He pointed out that the court has already found that when the FCC regulates interstate services (such as broadband access) under Title I, the regulation of intrastate services, like broadband in California only, is pre-empted if it undercuts that federal regime. ACAC argues the California rule does just that, since it imposes the same rules the FCC found harmed an open internet when it classified broadband access as a Title I service.

Judge Schroeder said she was struggling with what FCC pre-emption authority flows from simply reclassifying a service.

Angstreich said the FCC had the authority to figure out the best way to regulate broadband, and chose the best statutorily sound way to do that, including the pre-emption of intrastate regulation that conflicted with its approach.

Judge Forrest said she was also struggling. She said she didn't read the statute as meaning that deciding which category to put a service in was a policy choice.

Judge Schroeder pointed out that California has other consumer protection statutes. Supposing the court agreed that the net neutrality statute is pre-emptive and someone sued a provider who tried to block access or unfairly charged for access in a way that violated consumer protection laws as an unfair business practice, she asked, would that also be pre-empted?

Angstreich said current consumer-protection laws enforce promises by broadband providers, and that if they promised not to block and did, enforcement would not be pre-empted. What would be pre-empted, he said, would be regulating access differently from the federal regime, as California is trying to do.

Judge Wallace suggested that rather than continue the preliminary injunction, the appellants might want to simply press for a decision on the underlying case, then seek a permanent injunction, pointing out that the judges' time is limited.

Angstreich said that because the preliminary injunction was denied, his clients are facing the very harms it identified in seeking that injunction, so waiting until the final judgment creates “real and pressing” harms.

At least in terms of pre-emption questions, ACAC says there is no factual development left on that issue “and the harm persists,” Angstreich said.

Patty Lee, the lawyer for California, defended the law and its prevention of blocking, throttling and some paid prioritization, which are the practices the FCC’s scrapped net neutrality rules prevented.

Without those “essential protections,” she said, broadband providers can “discriminate against content providers they disagree with or charge them fees for reaching internet users.”

Lee also said that case law did not support pre-emption unless backed by ancillary authority, authority which she said the FCC did not sufficiently establish.

She invoked the COVID-19 pandemic to argue that no one can doubt the value of an open internet with so many people online. Immediate access to information, like on California wildfires, can be a matter of life and death, she said.

To that point, she argued that states are the primary protectors of their citizens' health and safety and don't need “prior federal authorization” to do so, “especially when it comes to a basic necessity like access to the internet.”

She said there was no conflict between California's law and the FCC’s 2018 order reclassifying the internet under Title I and eliminating the rules against blocking, throttling and paid prioritization.

Asked by Judge Schroeder about the policy issue, she said the FCC's decision might reflect policy, but that does not mean the decision has pre-emptive effect, which flows from the statute and not the policy. Under Title I, she said, both the FCC and the states have the authority to regulate broadband.

Schroeder said if the court concluded it was a policy decision, there would be a direct conflict because there is a totally different policy approach, i.e. no need for bright-line rules against blocking, throttling and paid prioritization (FCC), versus a definite need for bright-line rules (California).

Lee said that an agency can't regulate — and certainly can’t pre-empt — on policy preferences alone. She said the classification decision should not be a way to get around the statutory language that says the FCC only has ancillary regulatory authority under Title I.

Schroeder asked if Lee thought there was any way the FCC could take a deregulatory approach to internet regulation that would pre-empt state efforts to do the opposite.

Lee said that the agency could reclassify broadband access under Title II, though she conceded that comes with regulations that "generally should be imposed on common carriers," then forbear from enforcing some of those rules.

In effect, Lee was suggesting that the prior approach of net neutrality regulations under Title II with forbearance of rate regulation, among other things, was that deregulatory approach — something ISPs would definitely take issue with.

In rebuttal, Angstreich said the 9th Circuit has already held that the FCC can pre-empt under Title I, including state laws that get into the FCC's intrastate regulatory lane.

"When a state copies the FCC's definition and tries to regulate the exact same service as the FCC in a way that the FCC has held is harmful to broadband deployment, and unnecessary to internet openness," he told the court, "it is pre-empted."

ACAC had no comment on the oral argument.

"It is always dangerous to draw broad inferences from oral argument, especially when there is only 15 minutes per side," said veteran attorney Andrew Jay Schwartzman, “but the panel did seem skeptical about the pre-emptive effect of the FCC's action in light of the Mozilla holding.”

Federal Communications Chairman chairman Ajit Pai said Monday (Oct. 5) that the commission plans to vote at its October meeting on its response to a federal appeals court remand on its Restoring Internet Freedom (RIF) ISP deregulation order.

Pai said the item addressed the court's issues and “affirms that the FCC stands by the Restoring Internet Freedom Order, consistent with the practical reality consumers have experienced since December 2017 of an internet economy that is better, stronger and freer than ever.”

Related: Court Upholds Most of FCC ISP Dereg

The U.S. Court of Appeals for the D.C. Circuit upheld the bulk of the agency's decision to reclassify ISPs as Title I information service providers that aren’t subject to Title II common-carrier regulations and to eliminate the rules against blocking, throttling, paid prioritization, and a general conduct rule. The court also said the FCC was within its authority and the decision was not arbitrary and capricious, but it said the FCC had not sufficiently explained the impact of that deregulation — eliminating rules against blocking, throttling and paid prioritization — on public safety, the regulation of pole attachments and its Lifeline broadband/phone subsidy program. 

Related: NCTA Says RIF Order Is on Firm Ground

The fact that the Republican-led FCC would defend the Republican majority-backed order is no surprise, but Democratic commissioner Jessica Rosenworcel, who voted against the RIF order, was not pleased. 

“This is crazy,” Rosenworcel said in response to the chairman. “The internet should be open and available for all. That’s what net neutrality is about. It’s why people from across this country rose up to voice their frustration and anger with the [FCC] when it decided to ignore their wishes and roll back net neutrality. Now the courts have asked us for a do-over. But instead of taking this opportunity to right what this agency got wrong, we are going to double down on our mistake.”

In a blog post on the Oct. 27 meeting agenda, Pai attributed pushback on that RIF order to "far-left special-interest groups, Hollywood stars, and Silicon Valley tech giants, as well as many in the media," whom he said "tried to scare the American people about what would happen once the FCC adopted the Restoring Internet Freedom Order."

Sen. Ed Markey (D-Mass.), one of Congress' strongest proponents of strong net neutrality rules joined Rosenworcel in blasting the FCC for "undermining" net neutrality. 

“The FCC was wrong when it repealed the net neutrality rules, and it’s wrong again today,” he said. “By failing to course-correct what the D.C. Circuit Court accurately described as an action ‘unhinged from the realities of modern broadband service,’ the Commission is continuing to take us down a path towards a less free and open internet. The FCC should restore the Open Internet Order and the Commission’s clear authority over broadband in order to protect not only the free flow of ideas, but also to make clear that the FCC has the power to ensure public safety and promote broadband access. 

“At a time when the coronavirus pandemic has made us more dependent than ever on broadband and wildfires are devastating the West, we need the FCC to step up, not double down on its past failures to promote the public interest."

FCC chair Ajit Pai took his pitch for rolling back Title II regs to the upper Midwest, saying "net neutrality" was about marketing, but the issue was about government dictates.

That came in a joint interview (with Republican Sen. Ron Johnson of Wisconsin) about broadband expansion, Title II, and internet fast and slow lanes on WTMJ (AM) Milwaukee during Pai's tour of the Midwest.

Pai also neatly summed up his broadband regulatory philosophy toward the internet, saying that with the Department of Justice and the Federal Trade Commission to handle potential anti-competitive conduct, “you don't need an FCC preemptively regulating every single internet service provider and every single business practice." He said, that, instead, the FCC needs to focus on “investment and infrastructure." 

Asked about net neutrality, Pai suggested the term was a great marketing slogan, but that in reality it was about Internet regulation and the question of "whether you want the government deciding how the internet is run."

Related: Net-Neutrality Action Day Set

Pai argued that the Clinton-era light-touch regulation had allowed the marketplace to evolve, but that the 2015 Title II reclassification had taken it in another direction, putting the government, rather than the private sector, in the forefront.

He said his proposal was to return to that Clinton-era light-touch model.

Related: Spiwak Says Title II Debate About Power

Pai was asked whether Title II didn't protect smaller companies from larger ones, "like Comcast or someone like that."

He responded that, no, on the contrary it hurt smaller businesses, saying "complex regulations are always benefitting the bigger companies" -- at least relatively speaking, since Pai argues that such regs should not be applied to any size company.

Related: Netflix's Hastings Says Possible Net-Neutrality Changes 'Unfortunate'

"Those [larger] companies will always have the compliance resources, the lawyers, the accountants, the lobbyists, to comply with our rules," he said. "It's those smaller companies that are going to suffer, and they have told us over the past several weeks that they have suffered because of these Title II regulations."

Johnson agreed: "Network neutrality is a slogan. What you really want is expansion of high-speed broadband, and in order to do that you need to create an incentive for those smaller ISPs to invest."

Pai has said broadband deployment, particularly in rural areas, is a key priority of the FCC under his watch.

Related: Pai Talks Rural Broadband

Johnson put in a pitch for prioritizing traffic, talking about the ability to prioritize life-saving diagnoses ahead of movie streaming, for instance.

Asked who would decide who is going to be in each lane if there is to be a high-speed and a slow-speed lane on the Internet, Pai said that the priority is ubiquitous access for everyone. He turned the question toward deploying broadband and the expense, particularly in rural areas. He suggested that allowing flexibility of business models would allow companies to get a return on the kind of investments they would need to close the digital divide.

Obviously, we want to have ubiquitous access," Pai said in response to the question. "Laing fiber in the ground, putting up towers, all this stuff is very expensive, especially in rural areas. In sparsely populated parts of Wisconsin, a lot of companies might just say, 'You know what, we just can't see the return on investment there; we're not going to invest in the first place.'

"So, our primary goal at the FCC is closing that digital divide and making sure everyone in Wisconsin has internet access if he or she wants it," Pai said. "It shouldn't matter where you live."

To do that, he said, there needs to be a regulatory framework that gives companies an incentive to invest. He said that was FCC's first mission.

Johnson argued that "the more pipeline you have laid, there won't be a problem...there haven't really been any clogs." Johnson agreed with Pai that businesses need economic incentive to invest capital.

The interviewer -- the segment was on the station's morning news program -- said the fear he had was that removing Title II appeared to be treating the Internet as a commodity rather than a utility and ISPs could decide to favor their own content, and slow others. "This wide open pipe is going to be monetized for the provider's profit," he said.

Pai said he understood the concern, but had two responses. He said the internet had been free and open before Title II reclassification, and if there was anticompetitive conduct, the Justice Department, Federal Trade Commission and state agencies oversee competition and consumer protection.

"You don't need an FCC preemptively regulating every single internet service provider and every single business practice in order to address that concern," he said. "We at the FCC need to be focused on investment and infrastructure." 

Johnson was asked how, if the FCC loosens regs, ISPs are going to "do the right thing."

Johnson said that it is in their best business interest to advance high-speed broadband. Johnson conceded that some government help is needed -- via the Universal Service Fund subsidies.

The Phoenix Center has released a new study, backing up a previous study by the company, on the impact of Title II classification of ISPs on telecommunications investment.

The new study, which addresses comments on the study released last month, concludes that without reclassification, investment in total fixed assets would have been about $30 billion more annually, while investment in equipment and property would have been $20 billion more.

"Reclassification has weighed heavily upon the broadband industry for years," said study author and Phoenix Center chief economist Dr. George S. Ford in releasing the new report, Net Neutrality, Reclassification and Investment: A Further Analysis, which updates last month's Net Neutrality, Reclassification and Investment: A Counterfactual Analysis.

"A variety of proper statistical procedures applied to public data confirm sizable declines in investment in Internet networks," Ford added.

Ford said that since 2010 -- when Title II was first proposed by then-FCC chair Julius Genachowski (when ultimately a compromise was struck with ISPs to avoid reclassification) -- investment has been $150 billion to $200 billion less than it would have been without that regulatory overhand and eventual 2015 reclassification.

Democratic Senators joined with representatives of net-neutrality activists Free Press and Fight for the Future to pledge war against any effort by FCC chairman Ajit Pai to reverse the common-carrier classification of ISPs.

That came at a press conference Wednesday morning (April 26) held by Sens. Ed Markey (D-Mass.), Richard Blumenthal (D-Conn.) and Ron Wyden (D-Ore.), three of the most passionate defenders of the FCC's Title II Order, in advance of FCC chairman Ajit Pai's speech on the future of net-neutrality regulation at an event at the Newseum in Washington hosted by FreedomWorks and the Small Business & Entrepreneurship (SBE) Council.

Related:Sen. Schatz Meets With NCTA, Others on Open Internet Order

Also on the call were Craig Aaron of Free Press and Evan Greer of Fight for the Future.

As he has before, Markey said chairman Pai should expect a tsunami of resistance to any such proposal.

Unlike the Republicans' ability to push through a repeal of the related broadband privacy framework, the participants argued, to roll back the FCC's Open Internet order will take time, time they can use to their advantage.

Blumenthal and others pointed out that to reverse Title II, the FCC would have to demonstrate to the court, which upheld the reclassification, that something major and material had changed, which would take time to build a record, and have that record commented on.

They vowed to use that time to mobilize that "tsunami" of consumer opposition, which has so far been a trickle if the FCC's accounting of most active dockets over the past 30 days is any example -- only 69 comments.

They also suggested the Trump Administration had miscalculated its base, which they said did not want big cable companies, which already charge too much for service, deciding where they could go on the Web and what they could do.

One way to delay the rollback would be for FCC commissioner Mignon Clyburn not to vote such a proposal, which would deny the Republicans the quorum they needed to proceed, but neither Markey nor Blumenthal, who weighed in, said they would advise Clyburn to take such action, or inaction as it were, saying that was up to her. Markey did say he would talk to Clyburn, who is the only remaining commissioner who voted for the Open Internet order.

Related:Clyburn Will Make Hill Plea for Open Internet Order

"She is in the middle of the battle herslef, and it is a tough choice, but I am sure she is going to make the right judgmentBlumenthal said. "I will talk to her about what is the best course of action, but I don't want to prejudge it."

Blumenthal said not voting was only one part of a potential strategy, a strategy that "utilizes public opinion, that reaches out to the chairman and the commission," adding that it was obviously her decision.

The language tended toward the extreme on the call, with Blumenthal saying the Trump Administration was trying to kill a vital part of the Internet, the openness that was the heritage and DNA of the "net, and destroy the basic protections of no blocking and throttling and paid prioritization.

He also talked about the speech implications, saying allowing blocking or discrimination threatened the public square soapbox the 'net had become.

Blumenthal outlined their plan of attack, which included to "galvanize the seismic outcry that should follow this kind of misguided effort, and oppose the rollback in committee, on the Senate floor and in the courts.

Asked if Pai's plan could prompt some Democrats to come to the table on a possible legislative fix to secure basic protections outside of Title II classification, Markey said there was nothing wrong that needed fixing and he was focused on stopping Pai. He also suggested any compromise bill would lack sufficient protections.

Last time around, when a massive campaign helped move the Open Internet needle toward Title II, Fight for the Future generated calls to Congress and comments to the FCC and even camped out outside the FCC in protest. Greer warned the same could happen this time around: "Hell hath no fury like the Internet scorned," he said.

FCC commissioner Mignon Clyburn will join House Energy & Commerce Committee Democrats on the Hill Wednesday following a planned speech by FCC chair Ajit Pai about the future of net-neutrality regulation.

Clyburn is the lone remaining FCC commissioner who supported the FCC's 2015 Open Internet order.

Foes of the reversal of the Title II, common-carrier reclassification of ISPs under Democratic FCC chairman Tom Wheeler and President Barack Obama are expecting Pai's speech to lay out the plans for the chairman's expected rollback -- he strongly dissented from the Open Internet order's reclassification -- though some were looking more for a broad brush than a blueprint.

Clyburn has the power to block a rollback, at least temporarily, by not voting the item on circulation, or not showing up at a public meeting where it was scheduled to be voted, or resigning when her term ends at the end of June -- she could stay on until the end of the Congress after this one if she wanted -- or before.

Related: FCC's Clyburn: 'I Still Have Work to Do'

The FCC needs a quorum to approve items and currently is down to three commissioners:, Pai, fellow Republican and Title II reclassification opponent Michael O'Rielly and Clyburn.

Scheduled to appear at the afternoon press conference on the Hill side are ranking member Frank Pallone (D-N.J.), Communications Subcommittee ranking member Mike Doyle (D-Pa.), Doris Matsui (D-Calif.) and Yvette Clarke (D-N.Y.).

Pai has been discussing net neutrality with telecom trade groups and edge providers, including how a voluntary commitment to openness regime might work.

Supporters of the FCC's Open Internet order, including Democrats on the Hill, have sworn to fight a pitched battle to preserve it, as they did to get the FCC to pivot toward Title II under Wheeler.

Jonathan Taplin, director emeritus of the University of Southern California’s Annenberg Innovation Lab, warns that the government will soon have to decide whether to regulate edge-provider giants like common carriers.

The FCC has already done that with Internet service providers, via Title II reclassification, under former chairman Tom Wheeler and with the blessing of President Barack Obama, though the new administration is set on reversing that.

But in an op ed in The New York Times, Taplin said the power of the edge is something the government will need to reckon with, now or later.

He suggested that the government will likely have to step in given that "Google has an 88 percent market share in search advertising, Facebook (and its subsidiaries Instagram, WhatsApp and Messenger) owns 77 percent of mobile social traffic, and Amazon has a 74 percent share in the e-book market."

Taplin said that at a minimum those Big Three should not be allowed to do any other buying-up of companies like Snapchat or Spotify, and if the government leaves them to their own devices, it may ultimately have to force them to divest as it ultimately forced the breakup of AT&T's nautral monopoly.

"Force Google to sell DoubleClick," Taplin wrote. "Force Facebook to sell WhatsApp and Instagram."

He said other steps the government could take include regulating them like public utilities; requiring them to license out patents for nominal fees, as the government required Bell Labs to do; or removing the safe harbor from the Digital Millennium Copyright Act, which allows Facebook and YouTube to take a "free ride" on content produced by others.

He suggested that might not be a priority for the Trump administration given that Trumpthe president is close with "libertarian" tech moguls like Peter Thiel. The Obama Administration, by contrast, was generally thought to be tight with the folks at Google, and Wheeler consistently held to the position that the FCC could not regulate the edge and did not use the bully pulpit to suggest that its most powerful players were a gatekeeper threat to Internet openness on par with ISPs.

But Taplin sees it differently.

"We are going to have to decide fairly soon whether Google, Facebook and Amazon are the kinds of natural monopolies that need to be regulated, or whether we allow the status quo to continue, pretending that unfettered monoliths don’t inflict damage on our privacy and democracy," he wrote.

Taplin, a USC professor until last year, is the author of Move Fast and Break Things: How Google, Facebook and Amazon Cornered Culture and Undermined Democracy.

WASHINGTON — A look at the recent filings from ISPs asking a federal appeals court to take another look at the FCC’s Title II decision makes clear how important they think it is to keep challenging the reclassification of Internet access as a common-carrier service under that section of the Telecommunications Act.

These are the same folks who agreed to the Federal Communications Commission’s compromise bright-line network-neutrality rules under a non-Title II approach — admittedly as the lesser of two evils — and have been trying to get back to that original compromise ever since FCC chairman Tom Wheeler and his fellow Democrats chose the “nuclear” option of Title II.

Related:Opponents Plot a Title (II) Rematch

But while that concern is clearly real, the ISPs’ driving home of the importance of the case in those filings is also a legal calculation — one meant to be a signal to the U.S. Supreme Court if the case eventually winds up there.

DIVVYING UP ARGUMENTS

Cable and telecom Internet-service providers divided up their arguments this time around, filing at least four separate petitions asking the full U.S. Court of Appeals for the D.C. Circuit to review last month’s three-judge decision to uphold the Open Internet order.

That FCC order included bright-line rules against blocking, degrading and anticompetitive paid prioritization, as well as a general-conduct standard to target other potential threats to the Internet’s so-called virtuous circle. The bright-line rules are also being applied to mobile broadband for the first time, and interconnections are being considered under Title II on a case-by case basis.

Related:Top Takeaways From the Title II Decision

Each petition targets a different issue. CTIA—The Wireless Association, which represents cellphone carriers, is focusing on applying the regulations to mobile for the first time, which it says the FCC can’t do.

Cable’s main trade groups — the National Cable & Telecommunications Association and the American Cable Association — are focusing on procedure, arguing that the FCC failed to justify its 180-degree turn from non-Title II-based rules and illegally failed to give notice of “key aspects” of that change.

But they share the common theme that this is a huge, potentially historic decision.

In its filing, telco trade group USTelecom cited the FCC’s Republican commissioners as calling the agency’s decision, and by extension the court’s upholding of that decision, a “monumental shift” toward government control.

USTelecom said the decision on whether Congress deeded the FCC that power is “is a question of exceptional importance to the assignment of power within our government.” The court did not rule on the wisdom of the FCC’s Title II approach, only that it was within its authority to make the decision, and that the decision was not arbitrary and capricious.

The NCTA and ACA call the Title II ruling “one of the most consequential telecommunications rulemakings in American history” and said the court panel’s decision to uphold it “eviscerates” procedural protections.

CTIA, which represents wireless carriers, called it an issue of “exceptional importance” whose impact on the country will be immense.

Given that it would be unusual to grant an en banc rehearing with the full appeals court, billing the decision is an effort to get that court to weigh in, but beyond that, it is a signal to the Supreme Court.

The highest court will generally weigh in to clear up splits that occur when two appeals courts disagree, but that is not the case here.

HOPE SPRINGS FROM ‘BURWELL’

A recent Obamacare decision out of the Supreme Court, though, appeared to buttress the “major questions” doctrine.

Of that decision, called King v. Burwell, attorney Adam White of Boyden Gray said in a post on Scotusblog that “[c]ourts will need to ask whether the policy matter at hand is of such economic or political significance that it cannot be presumed to have been committed to the agency’s discretion by Congress.” ISPs are banking on meeting that threshold.

Courts have generally given significant, so-called Chevron deference to federal agencies as the subject-area experts per another Supreme Court decision. ISPs are hoping the Burwell decision signals a new carve-out for important decisions.

Andrew Schwartzman, a veteran attorney who backs the Open Internet rules, called that view a stretch. “The idea of using this case [Burwell] for such a challenge is ridiculous. The Supreme Court has already said [in Brand X] —when it narrowly upheld the FCC’s earlier classification of ISPs as information services — that the reclassification issue was properly delegated to the FCC. I doubt that there is any other statute in the last few decades which so clearly delegated so much to the FCC for decision.”

The cable industry’s regulatory environment has heated up in the past year, with potential new set-top-box rules and the Federal Communications Commission’s decision to back off on retransmission-consent reform just the latest in a long list of cable-centric rules that could place undue burdens on operators large and small. While limited resources would make it hard for small, independent operators to fight lengthy regulatory battles, they have the American Cable Association to do it for them.

As The Independent Show in Orlando, Fla., drew near, ACA president and CEO Matt Polka spoke with Multichannel News senior finance editor Mike Farrell about how small operators can deal with the changing climate. An edited transcript follows.

MCN Independent Operators of the Year:WideOpenWest Covers Its Bases | Buckeye: Building on Broadband

MCN:What are the biggest issues for small operators going into the show?

Matt Polka: The theme of the show is, “Refocus and Reconnect.” I think that is appropriate in many ways. I would also say recommit. We’ve never had a year like this where we are under such enormous regulatory strain, where the types of important rulemakings that are moving at the commission, each on their own, could have a significant impact on our members’ ability to deploy more broadband service. We’re telling our members to refocus, reconnect and recommit, so you can be strong in the face of this storm.

As part of that recommitting, we’re saying, “Recommit with us at ACA so your voice can increasingly be heard.” We’re also telling our members to look at their customer service as a key differentiator that will help them maintain a strong positon and will also keep them from scrutiny.

A couple of weeks ago, Sen. [Claire] McCaskill (DMo.) and Sen. [Rob] Portman (R-Ohio) had a hearing regarding customer service for primarily the larger MVPDs. And while that hearing wasn’t focused on our members, it’s a good lesson to never ever take anything from a customer-service perspective for granted, [to] ensure that we as cable operators are presenting the best cable customer service we can provide and demonstrating that value that we are a vital connection to the community.

There are four primary issues from a rulemaking perspective: The set-top box rulemaking; the rulemaking on business data services, otherwise known as special access; the broadband privacy rulemaking at the FCC; and then just the implementation of Title II. Each one of these is a specific regulatory effort — although [with] Title II, the FCC hasn’t said what it might do yet — each one of those areas are crucial because of the cost impact to comply with the regulation, man hours, paperwork hours, the diversion of resources from deployment of broadband service to what we see as needless regulatory compliance.

MCN:It seemed like all of the indications pointed to the FCC finally doing something on the retransmission-consent reform front. How will inaction affect the industry going forward?

MP: Based on even as late as late last week [July 15] meetings with the bureau and other commission staff indicated there was going to be an order. For [FCC chairman Tom Wheeler] to say, “Nah, I don’t think so,” we’re shocked by that. I think what it’s going to mean — this isn’t the year when most agreements come up, it’s next year — unless something changes at the FCC or at the Hill, we’re going to see the impact of basically an unfettered broadcast industry that has carte blanche to do whatever it wants. That’s not a result that anybody wants.

Related >It’s a Small World After All: A Q&A With the NCTC's Rick Fickle

MCN:This year is an election year. Does that mean even more change is in store for the industry?

MP: We’re looking ahead to what’s going to happen in 2017. Heavens knows what is going to happen in the presidential elections. We’re going to have to deal with a new administration, most likely an interim FCC chair and then a new FCC chair. There will be a new head of the Energy & Commerce committee in the House because of term limits there; it’s unknown whether the Senate is going to flip from Republican to Democratic and whether [Democratic] Sen. [Bill] Nelson from Florida will be the chairman or [Republican] Sen. [John] Thune from South Dakota will remain the chairman.

We’re telling our members regardless of all of this uncertainty in the political environment, we at ACA are well-positioned because we’ve done the homework, we’ve done the grassroots, we’ve done the groundwork, so regardless of these possible changes we can stay focused on our policy objective moving forward.

One of the big issues that remains is whether [FCC Democrat Jessica] Rosenworcel is renominated and how that could affect the commission, and whether chairman Wheeler, as is tradition, steps down. There could be some bills on the Hill passed during the lameduck session, like an enhanced transparency exemption extension bill.

The Senate not too long ago passed a small-business broadband bill that increased the number of subscribers that subscribe to an ISP from 100,000 to 250,000 to comply with the FCC enhanced transparency requirements. That bill is likely to get passed at year-end. The rest of the Hill agenda for this year is kind of cloudy.

MCN:Small operators have been very outspoken over the years on a lot of regulatory issues. Could consolidation change that?

MP: It remains to be seen what impact consolidation will have on our segment of the industry. I do see some strategic combinations of our members that help to provide maybe better operational control within a particular area. It really remains to be seen whether some of the large interests have any interest in acquiring our members.

The truth of it is, I don’t care who you are, Mediacom, Cable One, WideOpenWest, that’s still really small. Even if you combine some of the larger smaller ops, you’re still tiny compared to Charter and AT&T and Comcast. If there is any consolidation, I tend to think we’ll still be fighting for the same issues.

MCN:One issue that small operators have been especially vocal about over the years has been forced bundling by programmers. Now that larger operators have taken up the skinny-bundle mantle, do you think we’ll see some traction there soon?

MP: I do. We’ve always comically but also seriously at the ACA called ourselves the canary in the coal mine. What has happened is whether it is retransmission consent or problems of cable programming choice or lack thereof, or other issues, is that larger MVPDs have gravitated toward us as they have seen in their own companies with much greater scale the need for relief and reform.

As those companies bring their greater influence to bear, it complements what we at ACA have been doing for years quite well because we compare and contrast on the same track to say the market has changed; the regulations that were once needed aren’t needed anymore with the dynamic, changing marketplace; and that government should release the straps of regulation and let the market decide.

WASHINGTON — The Federal Communications Commission won a big victory in a federal appeals court with a ruling that the agency had sufficiently justified its Title II-based approach to network-neutrality rules. But the last chapter has yet to be written in the years-long legal battle.

Internet-service providers have vowed to continue the fight, either by appealing the three-judge panel decision to the full U.S. Court of Appeals for the D.C. Circuit, or by going straight to the U.S. Supreme Court.

Some interested parties huddled with reporters after the decision to talk about the implications of the court’s call and prospects on appeal.

POTENTIAL LINES OF APPEAL

Network-neutrality detractors seemed to agree that the FCC’s decision to reclassify wireless under Title II of the Communications Act might be fruitful ground for appeal, given the distinctions the FCC had previously drawn between wired and wireless, though they were not handicapping prospects for success.

Another possibility at the Supreme Court, said Russ Hanser, partner at Wilkinson Barker Knauer, was what might be a nascent doctrine at the Supreme Court regarding reviews of particularly important agency decisions, in which agencies have “reshaped” the statutory authority bestowed by Congress.

Attorney Andrew Schwartzman, who supports the Title II-based rules, wasn’t buying that argument. He called “fanciful” the suggestion the Supreme Court wants to cut back on traditional deference by suggesting some cases are “too big” for Congress to have meant to delegate its authority.

“The Supreme Court has already said [in the Brand X case upholding the FCC’s previous definition of Internet access as an information service] that the reclassification issue was properly delegated to the FCC,” Schwartzman said. “I doubt that there is any other statute in the last few decades which so clearly delegated so much to the FCC for decision.”

Hanser cited a case involving the Affordable Care Act (aka Obamacare), in which the Supreme Court said in cases of such national importance, the court’s traditional deference to agency decisions might be more limited. That calls into question how much discretion agencies have, he said.

When Congress gave FCC forbearance authority, Hanser added, most people saw that as a deregulatory move. “There seems to be something strange to use it to vastly expand regulation, just not as far as it otherwise would have been expanded,” he said.

He would not be surprised if appeals of the rules to the Supreme Court focused on how much authority agencies have to create regimes different from the ones anticipated in the statute, he said.

Seth Cooper of free-market think tank Free State Foundation thinks the FCC’s general-conduct standard is another weak spot in the court decision.

“The D.C. Circuit’s light-touch review of a heavy-handed regulatory order offered an unsatisfying analysis of the general conduct standard, too eagerly downplaying its vagueness,” Cooper said in a blog post.

Cooper said the vagueness issue should be brought up on appeal, but an as-applied challenge could also be the legal vehicle to challenge the network-neutrality rules. If the FCC was to make a ruling based on the general-conduct standard — by disallowing zero-rating plans, for instance — an as-applied challenge to that decision could be a way to get a fuller vetting than the D.C. Circuit provided.

LOW ODDS ON REVERSAL

Schwartzman was not shy about offering up odds on an appeal, saying the chances for reversal are “close to zero.”

Given that the dissenter in the case — Judge Stephen F. Williams would have remanded the decision back to the FCC — was focused not on the agency’s power to reclassify (which the court upheld), but on how the FCC applied the law, the “core legal issue” is not in play, Schwartzman pointed out.

The only reason to seek rehearing is a tactical one to put off going to the Supreme Court until there is a ninth justice in place, Schwartzman said.

As to the Supreme Court, Schwartzman said there is no split in the circuit for it to resolve, and “it has already said that the central provision is ambiguous, and even Judge Williams agreed that the FCC has the power to reclassify. The only other issues in the case are garden variety administrative law statutory questions of no interest to the Supreme Court plus a nearly frivolous First Amendment question.”

Presumptive Democratic presidential candidate Hillary Clinton has released her full technology  policy agenda, which includes fighting for Title II -- and applying it to interconnection -- in court if need be and tapping into a $25 billion Infrastructure Bank to provide money to localities to foster access to high-speed Internet at "affordable prices."

Among her other planks are defending net neutrality abroad, creating a Chief Innovation Adviser position, closing the "digital divide," pushing 5G wireless deployment, reallocating and repurposing government spectrum, and promoting a multistakeholder model of Internet governance.

"Hillary believes that the government has an obligation to protect the open internet," the campaign said. [She] strongly supports the FCC decision under the Obama Administration to adopt strong network-neutrality rules that deemed Internet service providers to be common carriers under Title II of the Communications Act. These rules now ban broadband discrimination, prohibit pay-for-play favoritism and establish oversight of “interconnection” relationships between providers. Hillary would defend these rules in court and continue to enforce them. She also maintains her opposition to policies that unnecessarily restrict the free flow of data online – such as the high-profile fight over the Stop Online Piracy Act (SOPA)."

In the platform, the Clinton campaign points out that the candidate made network neutrality a foreign policy imperative as Secretary of State..

The Computer & Communications Industry Association, representing many companies that also pushed for net-neutrality rules and broadband buildouts, applauded the candidate's tech platform.

“The ability to grow the economy in the future will depend on a good foundation for the digital economy," said CCIA president Ed Black. "This is the platform of a candidate who can be trusted to grow the economy. [W]hat distinguishes Clinton is her articulation of a platform to provide better trained workers, Internet access, and policies both here and with our trading partners to deliver economic growth.” 

CCIA had suggested a tech policy platform in a letter to the presidential candidates.

Linda Moore, president of TechNet, comprising senior technology execs, praised Clinton for outlining her agenda and echoed CCIA's shout-out.

“Hillary Clinton is the first of the presidential candidates to lay out a technology and innovation agenda," Moore said. "In doing so, Hillary proves that she gets it — that our nation's ability to grow our economy and drive job creation is dependent on our ability to stay ahead of the curve in innovation."

TechNet was also a signatory to that tech policy platform letter.

The U.S. Court of Appeals for the D.C. Circuit’s 2-1 majority decision to completely uphold the FCC’s Open Internet Order on every single argued point surprised most everyone, given the number and seriousness of the legal challenges put forth, and the selective skepticism the judges signaled at oral arguments.

Given that this total support of the FCC was not anticipated, what does this potentially seminal court precedent mean practically?

1. For now, the FCC effectively enjoys complete deference from this court on Open Internet issues.

The majority dismissed every single one of the petitioners’ best legal, process and constitutional challenges and proactively cauterized them with court assertions that the FCC’s actions were reasonable, supported by the evidence, and compliant with the APA, or that the challenges were unpersuasive.

In apparently presuming from the start that total Chevron deference was warranted as it discussed and dismissed every single challenge, the court’s majority effectively examined only individual “trees” and, in doing so, apparently ignored most any context of the overall “forest.” The effective organizing principle of Judge Williams’s dissent was to expose that the majority was missing the proverbial forest for the trees in ignoring the contextual, contradictory and cumulative effect of their total deference.

2. The FCC is now the de facto Federal Communications Congress on Open Internet issues and the D.C Circuit appears to be a reliable non-check on the FCC’s regulatory powers.

Until and unless the Supreme Court reverses this decision, at least in part, or Congress passes legislation to the contrary that becomes law, the FCC Open Internet Order is the law of the land and three votes by unelected FCC commissioners may effectively continue to legislate whatever they want as long as they can base their decisions somehow on some Title II provision and provide a modicum of notice, justification and evidence to support the FCC’s decision.

Given that the court majority’s total Chevron deference apparently ignored Congress’ role, congressional intent, and its due process guardrails enshrined in the normally guiding Administrative Procedures Act, for now the FCC is practically more of a creature of the Executive Branch than a creature of Congress on Internet issues.

3. The FCC and this affirming court decision de facto create new operative Open Internet law that makes the FCC’s “virtuous circle theory of Internet openness” the effective “modern” purpose and organizing principle behind FCC regulation.

What many forget is that the terms “net neutrality,” “Open Internet,” “virtuous circle of innovation” and “edge provider” are all FCC-created/adopted terms and principles that are not found in U.S. law written by Congress about the FCC. However, this USTelecom v. FCC decision, along with its predecessor decision Verizon v. FCC, use these terms and concepts repeatedly throughout their “net neutrality” decisions, which effectively gives those FCC terms a practical force of law to some extent.

As Judge Stephen Williams’s dissent effectively explains in great detail, the FCC ignores and avoids discussing Congress’s 1996 purpose for the FCC of promoting “competition” because it so conflicts with and undermines the FCC’s homegrown purpose for itself of promoting “net neutrality” and an ”Open Internet” and the “virtuous circle of innovation” for the benefit of the FCC-created constituency of “edge providers.”

The FCC is loathe to talk about “competition” in the context of net neutrality because it kneecaps its necessity and urgency, and because it brings unwelcome attention to the fact that the least competitive segments in the U.S. economy are dominated by giant “edge” platforms that the FCC is proactively protecting and helping, like Google, Apple, Facebook, and Amazon.

4. The FCC’s net-neutrality regime’s greatest strength, that three FCC votes can do anything, is now also its greatest vulnerability — three “no” FCC votes in the future. Only Congress can give the FCC’s Open Internet creation the permanence and credibility it needs to survive long term.

This appeals court decision is a two-edged sword. What three FCC commissioner votes have created in the Open Internet Order, three future different FCC commissioner votes could destroy under the total FCC deference this court decision confers on an FCC majority in the future.

As huge a win as this court decision is to the FCC, and to the very strategic, clever and determined elite brain trust behind its creation and growth, its victory is temporary and highly vulnerable long-term without Congress ultimately embedding their principles, concepts and terms permanently into law. 

Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is president of Precursor LLC, a research consultancy for Fortune 500 companies, and chairman of NetCompetition, a pro-competition e-forum supported by broadband interests.

FCC chairman Tom Wheeler vigorously defended the process by which the FCC reached its decision to reclassify Internet access as a Title II common-carrier service.

That came in a Senate Commerce Committee FCC oversight hearing during which he was grilled by Sen. Ron Johnson (R-Wisc.), chair of the Senate government oversight committee.

Johnson's office this week released a report -- following a year-long investigation -- that alleged the FCC had been less than independent in its net-neutrality decision and had switched gears at the urging of the White House and without sufficiently notifying the public and stakeholders about the shift in direction.

Johnson asked Wheeler whether he was aware of some of the staff's concerns about a "thin record" for supporting the Title II move, which was detailed in the report. Wheeler said he hoped the lawyers were "constantly second-guessing each other and me." He said there was fulsome debate and discussion.

Asked why he had prepared a public notice to beef up the record, but did not pull the trigger, Wheeler said the FCC had hit pause for the purpose of "enriching the record," and that was because the FCC knew "the Big Dogs are going to sue" and wanted to make sure "all the i's were dotted and the t's crossed."

Wheeler said the FCC had not circumvented the ex parte notification requirement about communications with White House staffers. He conceded there had been meetings and e-mails, but said that the only time ex parties were required was when there was "substantial significance" to the communications and they were intended to affect the outcome of the decision.

Johnson said the FCC turned on a dime after the President came out in favor of Title II, so they appeared to be significant conversations. Wheeler pointed out the White House had filed an ex parte in connection with the President's statement. 

During his questioning, Sen. Ed Markey (D-Mass.) followed up, giving Wheeler a chance to point out that communications between the White House and independent agencies are not unusual, and are in fact typical -- "the White House, Congress and everybody," Wheeler said -- and that, in fact, other Presidents have been known to contact FCC chairs, pointing to a meeting between former FCC chair Mark Fowler and President Ronald Reagan.

Wheeler said the FCC had used the same process followed by both Democratic and Republican FCCs in crafting the order.

Free Press research director Derek Turner said FCC commissioner Ajit Pai was flat-out wrong when he said investment by larger ISPs has flat-lined since the FCC's decision a year ago to reclassify Internet access as a Title II telecommunications service subject to common-carrier regs.

In a speech on Feb. 26 marking the one year anniversary of the vote, Pai said the reclassification had decreased investment, discouraged innovation and injected uncertainty in the marketplace, all things he pointed out he had predicted in voting against the regs.

In response, Turner, said Monday (Feb. 29): "The broadband industry’s apocalyptic predictions about how the adoption of enforceable Net Neutrality rules would destroy the market have failed to materialize in the year since the FCC’s historic vote. Network investment is up. Revenues and profits are higher. And subscriber growth continues at a high level even as prices rise and the market nears saturation."

He called Pai a "dead-ender" peddling a false claim and then blaming the FCC's new rules for a nonexistent result.

“Policymakers like Pai should stop going on about imaginary harms and start tackling real problems," Turner said "Future threats to the U.S. broadband market come not from regulation, but from the consequences of market-power abuses that are likely to arise as the industry becomes more concentrated and less competitive.”

A favored telecommunications analysts painted a bearish, if not bleak, picture for a loyal following of small and medium cable operators, as he considered new Internet rules and price regulations.

MoffettNathanson principal and senior analyst Craig Moffett, a longtime cable bull, gave the crowd at The Independent Show in Boston a mixed forecast for the next decade.

He reminded the crowd of the painful market forces that have begun to buffet cable operators – and programmers -- of all sizes at this moment in time. 

TV ratings are down, and programming costs are up. The biggest programmers are licensing more shows to OTT players. 

“They’re increasingly licensing content (to OTT) because it’s the only way to plug the hole in the income statement,” Moffett said.

He suggested that the trickle of OTT services could swell to a torrent that could do real harm to the traditional dual-revenue stream business model that has served programmers and cable operators so well for so many years.

And there is ample evidence that cord-cutting continues to accelerate, he said, triggering nods in unison around the crowd when he noted the pressure on the bottom line.

As if the current conditions weren’t bad enough, Moffett said the near future will be tougher to navigate. The one, big bright spot for cable operators from a revenue viewpoint – broadband service – may soon see the end of its heady growth as the market matures.

Penetration of broadband has been steady, but slower growth is ahead; almost everyone who can afford broadband or wants it, has it. Of the people who don’t have broadband, most are not ideal customers: Half of them make less than $25,000 annually, or are considered undereducated or don’t own computer, Moffett noted.

While he said he saw some bright spots with potential for growth, they were few. Potential growth lies in such areas as business services, and the growth of wireless demand holds promise for cable’s Wifi offerings. The most obvious option for revenue growth: Cable operators can leverage the pricing of broadband.

“It’s the one thing here that you have some flexibility to control, at least competively,” Moffett said.

But if they do, they risk the ire of the FCC, which is soliciting complaints. Title II “is absolutely about broadband price regulation,” he said, “and in that context lies the real challenge for the cable operators.”

Still, he said, Title II is not a certainty either, as the new rule could be quashed by a new congressional action or get tossed out by a federal  court or even left inactive by a new FCC chairman.

“This topic of regulation is unavoidable as you think about the next 10 years,” Moffett said.

CHIGAGO — Even as the faithful began to filter into the McCormick Place Convention Center here there was a feeling that this show would be different, and not just by the change of name from now retired “The Cable Show” to the inclusive new INTX: Internet & Television Expo.

Cable TV companies, the original disruptors, are being disrupted.

New “over-the-top” competitors are forcing deep trepidation and profound business strategy shifts for multichannel-TV distributors, who are creating new “skinny” bundles of TV with Internet to respond to the threat. To draw — and retain — customers, cable’s biggest operators are accelerating upgrades to make broadband speeds top out at 1 Gigabit per second and more.

And they are spending furiously — hundreds of millions of dollars, in the case of giant Comcast — to fortify the issue that despite genuine advances, stands today as the Achilles’ Heel of the entire industry: customer service.

Cable networks are seeking new metrics to measure the millennial shift to viewing on new devices, and they’re fretting over a more Darwinian ecosystem that will surely kill off the weaker networks, a certain result if new “slimmer” bundles take hold. Upstart channels won’t have a chance on linear television, and it’ll be harder for entrenched networks to show growth. Welcome to the jungle.

On top of these challenges, there will be little help from Washington, as Federal Communications Commission chairman Tom Wheeler made clear to the flummoxed crowd in Chicago, who sat, literally and figuratively, in the dark on his intentions. Unlike the last few glory years of the industry, federal regulators’ eyes will be trained hard on Internet distribution, with the ability — if not the intent — to control pricing.

Greater scrutiny was the point of the FCC’s lengthy suffocation of the $67 billion Comcast- Time Warner Cable merger, which was summed up by Comcast chairman and CEO Brian Roberts not with any verbal explanation, but by cutting his speech to a clip of an explosion from the movie Fast & Furious 7 (released, of course, by Universal Studios).

But the convention’s host — National Cable & Telecommunications Association president and CEO Michael Powell, cable’s articulate and admired general — reassured the assembled troops that cable’s long collective history of innovation wouldn’t stop soon.

For readers who couldn’t make to Chicago, following are five takeaways from the staff of Multichannel News.

1.A New Gold Standard for Broadband Speed: 1-Gig Is Here

Despite the specter of Title II hanging over the future of U.S. broadband, regulators aren’t slowing cable’s push to bring speeds of 1 Gigabit-per-second and more to residential customers.

Among MSOs, Cox Communications and Comcast last week trumpeted news of the new gold standard of Internet speed.

Cox said its 1-Gig “G1GABLAST” residential service has been launched in parts of four markets: Phoenix; Orange County, Calif.; Omaha, Neb.; and Las Vegas. Cox, which first launched G1GABLAST in Phoenix in October 2014, is also in the process of extending that fiber-based service to systems serving Arkansas, Louisiana, Rhode Island, Oklahoma and Virginia, and expects to light up service in those markets sometime this summer.

Comcast, meanwhile, said it had begun to roll out “Gigabit Pro,” a 2-Gbps residential service delivered via fiber-to-the-premises technology, in Nashville and other systems in middle Tennessee, as well as the greater Chicago region, including northwest Indiana. All told, Comcast expects to make Gigabit Pro available to 18 million homes that are within “close proximity” (about one-third of a mile) to its fiber network.

Much-smaller Mediacom Communications is preparing a 1-Gig trial in the university town of Columbia, Mo., using DOCSIS 3.0 technology.

While those services are being rolled out on a limited and targeted basis, cable operators aim to bring gigabit broadband to its more broadly deployed hybrid fiber/coax networks using DOCSIS 3.1, an emerging CableLabs-specified platform that will be capable of delivering up to 10 Gbps downstream and at least 1 Gbps in the upstream.

At INTX, Comcast offered a glimpse at its D3.1 strategy, showing off a fancy-looking “Gigabit Home Gateway” slated to go into production later this year and become available to customers in early 2016.

Although competition from Google Fiber and AT&T’s fiber-based “GigaPower” appears to be accelerating cable’s advances, it’s still not clear what apps and services will require such lofty capacities.

“I still think a Gigabit is overkill for some time,” Tony Werner, executive vice president and chief technology officer of Comcast, said on a panel last Tuesday (May 5) covering innovation and the future of media.

For now, it’s about future-proofing the network as apps and services develop that will require gigabit speeds.

“We think 1-Gig is about enabling the next generation of the Internet,” Philip Nutsugah, Cox’s vice president of access product development and management, said Thursday (May 7) on a panel dedicated to the gigabit topic. “As a service provider, we need to stay ahead of the demand curve.”

— Jeff Baumgartner

2. Cable Stops Worrying and Learns to Love OTT

INTX amplified the idea that 2015 will be the year cable learned to stop worrying and love over-the-top video. Instead of fearing OTT and considering it an enemy to the traditional pay TV ecosystem, operators are starting to embrace it.

That became increasingly apparent after a handful of cable operators, including Cablevision Systems and Mediacom Communications, struck distribution deals with Hulu, the OTT subscription video-on-demand service (see “Distribution: Hulu Antes Up” in Next TV).

Mediacom last week also became the latest in a growing group of pay TV providers to sign agreements that enable them to bring Netflix to MSO-leased set-top boxes. In Mediacom’s case, it will offer Netflix as an app on its TiVo-powered platform. But instead of signing on for Open Connect, Netflix’s private content delivery network, Mediacom and Netflix agreed to an interconnection deal under which the MSO will build fiber directly to Netflix’s facilities.

Comcast, meanwhile, is pushing hard on X1, a next-generation, Internet protocol-capable platform. So far, though, Comcast has not been nearly as aggressive with integrations of Internet-fed OTT video apps on the set-top. At this juncture, access has been largely limited to services such as Pandora, Instagram and Facebook. But Comcast’s platform is technically capable of supporting integrations with just about any OTT service.

TiVo has been preaching the value of TV-plus-OTT for years, and the message appears to be getting through, at least among its pay TV partners.

But Tom Rogers, TiVo’s president and CEO, said cable operators should be pushing even harder to blend their traditional TV service with increasingly popular over-the-top options.

“The cable guys can own that; they should own it,” Rogers said. “Instead, what is going on is programmers are creating individual streaming services. People are then thinking they can put together their own bundles, and that’s happening outside the integration and single experience that the cable operator can offer.”

The cable industry, he suggested, needs to be even more aggressive.

“It is amazing to me that they aren’t just putting their stamp on it,” Rogers said. “The best possible way to get it all and get it on a great interface … is the integration of traditional and over-the-top TV the way that only cable can do it.”

— Jeff Baumgartner

3. Bundles Are Gettiing ‘Skinnier’

Could 2015 be “the Year of the Skinny Bundle?”

Big multichannel distributors operators are creating “skinny” TV packages with Internet service, an effort to attract millennials and retain subscribers.

Peter Chernin, the former top Fox executive turned producer and online video entrepreneur, told the INTX crowd on Tuesday (May 5) that rather than destroy traditional channel packages, skinny bundles would “rationalize” them. “We’re going to see a tremendous explosion of new alternatives, largely IP-delivered,” he said. “That will ultimately force the bundle to justify itself, which is not the worst thing in the world.”

Later that day, a trio of seasoned execs offered similar predictions that the bundle is officially going on a diet. “I think you’re going to see more experimentation around this from programmers as well as operators. It’s in all of our best interest not to lose customers,” said Kathy Payne, senior vice president and chief programming officer of Suddenlink, during the panel session “Thin to Win: Choice, Change & the Rise of Skinny Bundles.”

Citing company survey findings, she added that market forces, especially OTT offerings, are making “people say, ‘Gosh, why am I paying this much to my cable operator when I have other choices?’ So we have to be nimble.”

Conversation and open diplomatic channels are key, the panelists agreed. Verizon’s bold move was preceded by virtually “no conversation” with programmers, Tonia O’Connor, president of content development and corporate business development for Univision Communications, said. “That was a head-scratcher for us because we’re more than happy to work with our partners to understand what the best option is for the consumer.”

Given the expectation of more OTT services, including some from traditional players (a la CBS All Access or HBO Now), O’Connor added ominously, “The launch of new linear channels as we know them today, there’s probably not a real future there.”

Mike Biard, distribution president for Fox Networks, declined to address his company’s legal fight with Verizon over its skinny bundle when asked by panel moderator Mark Robichaux, editorial director of NewBay Media’s TV Group. Later, though, he took issue with Verizon’s “touting” of a Nielsen study that found pay TV subscribers watch no more than 10 channels. While that notion “gets repeated ad-nauseum,” Biard said, “our research doesn’t back it up. What we hear from third parties doesn’t back it up. The idea that people have different tastes is absolutely true. But those tastes can cross over to a lot of different channels.”

— Dade Hayes, Broadcasting & Cable

4. Cable Ops Spend Big, Will Keep Spending on Customer Service

Comcast made the biggest splash on the customer care front, unveiling plans to spend $300 million on customer service, with several initiatives aimed at what Comcast Cable CEO Neil Smit called “productizing the customer experience.”

Chairman and CEO Brian Roberts unleashed a flurry of product and service announcements ranging from voice-activated remotes, 4K-enabled set-tops and sleek high-speed routers to customer-facing initiatives like an “Always on Time” pledge that will take effect in the third quarter, launching modern updates to its retail stores and hiring 5,500 new customer service reps over the next three years to handle calls.

Roberts demonstrated the voice activated remote at the INTX opening session last Tuesday; it finds shows and information intuitively — he found Forrest Gump by merely speaking a line from the movie: “Life is like a box of chocolates.”

In a moment of levity, Roberts aid into the remote, “show me the Comcast-Time Warner Cable merger,” into the remote, which brought up a scene in Vin Diesel’s Fast and Furious 7 featuring an exploding house.

A new home gateway router, capable of handling 9-Gigabit WiFi, IP video, phone and Xfinity Home is being trialed this year and will be available across Comcast’s footprint by the end of next year.

In Chicago, Roberts unveiled a prototype Studio Xfinity store complete with virtual-reality stations and video games for the kids alongside set-top boxes, modems and other equipment for subscribers. In introducing the store — which he said will be Comcast’s flagship retail operation and will officially open in June — Roberts said the intention was more toward education rather than the hard sell.

Comcast has had to weather several high-profile and embarrassing customer-care glitches in the past, and Roberts said that it has served as a “rallying cry” for employees to rethink how it does business.

He added that the initiatives have been more than two years in the making.

“We’re going to use that negative energy and turn it into positive energy,” Roberts said.

Leading the initiative is Comcast executive vice president of customer experience Charlie Herrin, who has a $300 million budget to make Comcast’s customer care vision a reality. He added that products and services aren’t the only part of the plan — at some point, all of Comcast’s 84,000 employees, from front-line workers to top executives, will go through hospitality training to improve the customer experience.

Comcast customers will soon be able to track technicians via their mobile phones with an Uber-like app that display’s the tech’s name, how far away he is and when he is expected to arrive. The app also has a ratings system for after the tech completes the job — anything less than a four-star rating will prompt a phone call from Comcast to find out how it can do better. With the “Always on Time” initiative, customer accounts will be automatically credited $20 if a tech shows up one minute late.

— Mike Farrell

5. Cable Is a Regulated Industry — and the FCC Is Watching

Federal Communications Commission chairman Tom Wheeler received a frosty welcome from the congregation at INTX last week, who were stingy with applause for a man who had just branded them “gatekeepers” and rocked their world with new regulations that the NCTA has dubbed “a disaster.”

The Title II regulations recently passed by the FCC will ensure there’s no discrimination against competitors, but MVPDs are concerned that other restrictive parts of the new rules — including price regulation, which the FCC is “forebearing” — could come to life in this or future administrations.

“I thought we operate in a different environment than he [Wheeler] seems to live in,” Time Warner Cable chairman and CEO Rob Marcus said at the start of the general session panel that immediately followed Wheeler’s speech. “In my world, broadband is very competitive. Competition has, in fact, fueled a tremendous amount of investment, and it’s investment we continue to make to make our broadband better. I wonder what the problem is.”

Wheeler defended his recent decisions and assured the crowd Title II would be the law of the land. He said the broadband industry was not competitive enough, and the FCC would be working to change that.

“[It] is important to understand that the tipping point from cable to broadband came while the transaction was under review,” Wheeler said of the Comcast-Time Warner Cable deal the FCC helped quash. “We recognized that the industry had changed and we saw concrete evidence of the new competition and business models made possible by high-speed Internet access. You don’t have a lot of competition, especially at the higher speeds that are increasingly important to the consumer of online video,” he said.

“By bringing competitive alternatives to television viewers, this industry did just that — and the video business was changed forever. Then, your industry went on to upgrade, compete with the telcos, and dominate broadband. Now the question is whether consumers will have competitive alternatives for broadband.”

— John Eggerton

The Federal Communications Commission released its network-neutrality order Thursday (March 12), beginning the process that will include publishing it in the Federal Register (likely in the next week or so), with the rules going into effect 60 days after that, followed by the inevitable lawsuits against the decision to reclassify Internet access as a Title II common-carrier service.

The order provides more meat on the bone of the general conduct standard the FCC is adopting and makes clear that the FCC sees ISPs as the potential problem in the "virtuous cycle" that includes both consumers and edge providers like Google and Netflix. The FCC even quoted Ben Franklin (chairman Tom Wheeler is a history buff) to suggest ISPs need broad oversight of their broadband conduct.

It also uses over-the-top alternatives to traditional video -- like Netflix, and HBO and CBS's plans for streaming services -- that can deliver video "free of cable subscriptions" to argue that the rules are needed to allow those new services to flourish.

The document, including statements, came out to 400 pages, but most of those cover the legal defense of the move and statements of commissioners, with the actual rules plus introduction and executive summary only taking up the first 17 pages.

As already telegraphed and explained by the FCC both before and on the day (Feb. 26) of the party-line vote on the rules, the order adopts bright-line rules banning blocking, throttling and paid prioritization, the last which the FCC defines as "when a broadband provider accepts payment (monetary or otherwise) to manage its network in a way that benefits particular content, applications, services or devices."

The order also boosts the network management transparency requirement to "promotional rates, all fees and/or surcharges, and all data caps or data allowances," and adds "packet loss as a network performance measure that must be disclosed to users." It also requires "specific notification to consumers that a network practice is likely to significantly affect their use of the service."

The rules apply to both fixed and mobile broadband, also called BIAS, which sounds pejorative but stands for broadband Internet access service.

The order also finds that interconnection is a Title II service subject to case-by-case review of alleged violations, but not to the bright-line rules. "We find that broadband Internet access service is a 'telecommunications service' and subject to sections 201, 202 and 208 (along with key enforcement provisions)," the order states. "As a result, commercial arrangements for the exchange of traffic with a broadband Internet access provider are within the scope of Title II, and the commission will be available to hear disputes raised under sections 201 and 202 on a case-by-case basis."

But the FCC left open the possibility of applying bright-line regs to interconnection down the line, saying it would not intervene "now," and explaining thattt one reason it was not applying the bright-line regs was that it did not have the regulatory experience with such a regime.

"While we have more than a decade’s worth of experience with last-mile practices, we lack a similar depth of background in the Internet traffic exchange context," the order states. "Thus, we find that the best approach is to watch, learn and act as required, but not intervene now, especially not with prescriptive rules."

There is an exception to the rules for specialized services, which was in the 2010 Open Internet order, but the FCC makes clear that if those are used to end-run the new rules, the FCC will step in.

"The commission expressly reserves the authority to take action if a service is, in fact, providing the functional equivalent of broadband Internet access service or is being used to evade the open Internet rules."

In its suggestion that it is the ISPs who are the potential snake in the garden (perhaps they should be called ASPs), the FCC has adopted a general conduct standard, alleged violations of which it will investigate both in response to complaints and on its own initiative if need be. That case-by-case approach includes alleged suppression of free expression.

"The key insight of the virtuous cycle is that broadband providers have both the incentive and the ability to act as gatekeepers standing between edge providers and consumers," the order says. "As gatekeepers, they can block access altogether; they can target competitors, including competitors to their own video services; and they can extract unfair tolls.

"The bright-line bans on blocking, throttling, and paid prioritization will go a long way to preserve the virtuous cycle," says the FCC order, but not "all the way."

"Gatekeeper power can be exercised through a variety of technical and economic means, and without a catch-all standard, it would be that, as Benjamin Franklin said, 'a little neglect may breed great mischief,' " the order states in explaining its adoption of the standard, which follows:

"Any person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not unreasonably interfere with or unreasonably disadvantage (i) end users’ ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of their choice, or (ii) edge providers’ ability to make lawful content, applications, services, or devices available to end users. Reasonable network management shall not be considered a violation of this rule. This 'no unreasonable interference/disadvantage' standard protects free expression, thus fulfilling the congressional policy that 'the Internet offer[s] a forum for a true diversity of political discourse, unique opportunities for cultural development, and myriad avenues for intellectual activity.' And the standard will permit considerations of asserted benefits of innovation as well as threatened harm to end users and edge providers."

Michael Copps, the former Federal Communications Commission commissioner, had a poignant moment at the end of last week's FCC meeting at which Title II regulation for Internet services was adopted.

As the crowd milled around, Copps worked his way to the front of the room and had a long chat with his former legal advisor, who also just happened to be commissioner Jessica Rosenworcel, who had voted "for" the plan. There was no audio of the informal conversation, although the C-SPAN camera captured plenty of smiles, head-nodding and a sense of accomplishment as the two celebrated a shared achievement.

For Copps, who from 2001 to 2011 served as an FCC commissioner (and briefly as interim chairman in 2009), it was a "wonderful feeling ... going back into the meeting room where I cast the only dissenting vote" when in 2002 then-FCC chairman Michael Powell pushed through the light-touch Internet regulatory policy, Copps told Multichannel News this week.

"I was thinking, 'Wow, this is really a big deal,'" Copps said. "To be there and be part of the enthusiasm and understanding that citizen power had a lot to do [with it] was a moving experience."

Copps, a passionate advocate for Title II regulation, said he was "thrilled to be there" when "we put ourselves more firmly on the road to Open Internet." He characterized the FCC's 3-2 decision as "a critical step" because it established "the best legal foundation" for the court and legislative challenges ahead.

Implementation and enforcement are now the FCC's major hurdles, he said.

"I'll be watching to make sure that we have a good implementation team," Copps said. "We've seen in the past all kinds of conditions put on them. I don't think that will happen here."

Copps, who now serves as special advisor to Common Cause's Media and Democracy Reform Initiative and is also associated with the Benton Foundation, focused on the importance of the four million public comments that flowed into the FCC as well as President Obama's endorsement of Title II regulation.

"The fact that people would be attracted to [supporting] something as wishy-washy sounding as 'net neutrality'" was "incredible," Copps said.  He called the presidential support "very influential" and not unprecedented, citing  President George W. Bush's push on network-ownership issues.

Recognizing the inevitable Capitol Hill reviews of the FCC's decision, Copps said he "feels sorry for the commissioners having to spend so much time up there." He contended that the more Republican legislators "push this, they'll find it is not playing too well back home." He referred to polls -- but did not indicate a source -- that suggest "80% of the public doesn't want fast lanes."

'This is not a party issue," Copps said, referring again to the Republicans who opposed Title II regulation. "They may be in for a surprise."

He also complimented the FCC's "community broadband" decision as "a wonderful thing." Just prior to the net-neutrality vote, the Commission (also in a 3-2 partisan vote) ruled that Tennessee and North Carolina cannot stop local municipalities from expanding their own broadband networks.

"Put those all together, and we can make some forward progress," Copps said. Both votes resultedin "good rules that will encourage innovation."

"There's going to be a lot of money made," he added.

Maintaining his long-held populist views, Copps posted a blog this week simply entitled "Victory," in which he predicted that in the upcoming legal challenges, Internet Service Providers (naming names such as Verizon, Comcast and AT&T) will trot out "old skeletons dressed in new clothes." He said he expects "more astroturf strategy" and he doubts the ISPs "will be able to come up with anything new."

In particular, he said he hopes that civil rights and labor organizations won't be seduced again to support the ISPs' views after "they have [been] favored with corporate contributions ... to spread the ISPs’ message."

"Now is the time for them to rally 'round the Open Internet flag and fight for what has been achieved, rather than become the unwitting tool of those who seek to close the doors of Internet opportunity," Copps wrote in his blog. He deemed the FCC's decision "a civil rights issue -- perhaps the preeminent one of the 21st century."

Copps said he views the FCC's ruling as a "significant reform" that came "from pressure from the grassroots. That's really important."

"That was a big deal," he added. "It bodes well for the future of the Open Internet."

With the horse not quite out of the barn--the FCC has voted on new Open Internet rules but they won't be official for a couple of months at least--Rep. Marsha Blackburn (R-Tenn.) has reintroduced a bill that would block Title II reclassification of Internet Access, or any other new net rules for that matter.

H.R. 1212, the Internet Freedom Act would state that the rules have no force, and would prohibit the FCC from issuing new network neutrality rules.

Blackburn is vice chair of the Energy & Commerce Committee.

“Last week’s vote by the FCC to regulate the Internet like a 1930s era public utility is further proof that the Obama Administration will stop at nothing in their efforts to control the Internet,” Blackburn said in reintroducing the bill. “There is nothing ‘free and open’ about this heavy-handed approach. These overreaching rules will stifle innovation, restrict freedoms, and lead to billions of dollars in new fees and taxes for American consumers."

The bill is primarily a statement, since it would almost certainly be vetoed by a President who is vocally supportive of new rules in general and Title II in particular.

The FCC voted Feb. 26 on a straight party line for rules Chairman Tom Wheeler has described as a light-touch way to insure new rules pass court muster.

But Blackburn, and many other Republicans, see it as the first step on the road to the depths of the Internet's economic degradation. “Once the federal government establishes a foothold into managing how Internet service providers run their networks they will essentially be deciding which content goes first, second, third, or not at all," says Blackburn. "

The House Communications Subcommittee hearing on net neutrality showed just how far apart the Democrats and Republicans -- at least the ones still on the subcommittee -- are on the issue of new net neutrality rules.

Committee chairman Greg Walden (R-Ore.) started the hearing by criticizing Federal Communications Commission chairman Tom Wheeler for not making a draft of his proposed new rules public before the Feb. 26 vote. He said he had asked the chairman to make the process a little more open than usual, but said the new rule process was hardly usual as it prompted colorful protests, a riff by HBO's John Oliver and a president's use of his "weight" to steer the decision.

The hearing was framed by the Republican draft legislative proposal that its drafters say would prevent blocking, throttling and paid prioritization without imposing Title II common-carrier regulations. Republicans say that is a sensible way to preserve light-touch regs while protecting an Open Internet. Walden said it would "quell" uncertainty in the marketplace and prevent further FCC trips to the D.C. Circuit, "at least on this issue."

But the Republican legislative draft's prohibition on Title II and its explicit "clarification" that Sec. 706 is not an affirmative grant of authority have kept Democrats off the bill because they see it as setting up prohibitions the FCC can't enforce, a point ranking member Anna Eshoo (D-Calif.) made at the hearing. But Walden said the FCC would still have full authority to enforce those prohibitions.

BOUCHER: 'RIGHT DIRECTION'

One Democrat who aligned himself generally with the draft bill and the opposition to Title II was Virginia's Rick Boucher, former Democratic chairman of the subcommittee. He said the bill went in the right direction, which was toward light-touch, Title I-based regulation, but also said Republicans needed to recognize Democrats' legitimate concerns with the bill. He suggested that limiting Sec. 706 went too far and said removing that language would be a sensible step toward a compromise. So far, no Democrats support the bill, which was initially billed as a potentially bipartisan effort.

Boucher tried to appeal to Title II-supportive Democrats on the committee by raising the political issue of what could happen under a new presidential administration. He said if a Republican president were elected and a Republican FCC majority installed, all net-neutrality rules could be wiped away, which was why a light-touch approach established by legislation was the best way to insure those protections lasted beyond the next political cycle.

Republicans also expressed concern that a Democratically controlled FCC could decide to un-forbear from rate regulation or unbundling or leased access provisions Wheeler has said would not be applied.

Rep. Frank Pallone (D-N.J.), ranking member of the full committee, suggested the hearing was not necessary. He pointed out that the subcommittee had held a hearing on the issue only a few weeks ago and said the FCC's vote would be a historic effort to create what may be the strongest Open Internet protections ever. He said it was an example of Washington listening to the voice of the people--he noted the 4 million FCC comments, as did Rep. Doris Matsui (D-Calif.).

Pallone also said he welcomed the Republican "change of heart" on protecting openness (a reference to the legislation). Walden had conceded earlier in the hearing that some of his colleague had to be dragged "kicking and screaming" to the table, but that they were there, and the Dems were not.

Eshoo said the bill would need a lot of work before that could happen.

Pallone said the subcommittee had a lot of other important work it could be doing rather than hold yet another net-neutrality hearing, like insuring that the next FCC auction was as successful as the $45 billion AWS-3 auction. Rep. Bobby Rush (D-Ill.), when his time came to ask questions, said he wished the committee would spend more time on independent program carriage issues and less on net neutrality.

In a response of sorts to Walden's criticisms of Wheeler not releasing the draft, Pallone said he was sure the chairman would put out the order language as soon as he could after the vote and called on the other commissioners to help make that happen, though it is not sure how. Even after the order is published, the FCC can continue to make edits until it is published in the Federal Register, usually two to three weeks later. That is when the language becomes official.

VOTE COMING THURSDAY

The backdrop for the hearing was the FCC's Feb. 26 vote. Democrats praised it as securing Internet freedoms. Republicans saw it as generating years worth of legal uncertainty, as well as the political uncertainty of which party might do what depending on their control of the White House.

Four witnesses testified at the hearing, three of whom were not Title II fans. Those were Boucher; Robert Atkinson, president of the Information Technology and Innovation Foundation; and Larry Downes, project director, Georgetown Center for Business and Public Policy. Backing Title II was Public Knowledge president Gene Kimmelman.

Atkinson said the term network neutrality itself should be consigned to the dustbin of history. He said the Internet never has been neutral, and noted that traffic like real-time video needs to be prioritized over, say, e-mails, because where a millisecond is immaterial to the latter, it is by contrast crucial to the former. He said a rigid regulatory scheme like Title II did not fit the 'net both because of that rigidity and because of the legal and political uncertainty it produced. He suggested the FCC was attempting to fit the square peg of smart net policy into the round hole of Title II.

Downes added his own metaphor in making the point that activists were already signaling they want to push the FCC toward the unbundling, last-mile access, build-out requirements and rate regulation (either before or after the fact), all of which the chairman has said would not apply under the new rules. Downes said that signaled that Open Internet rules were always the populist tail (or perhaps he meant "tale") that was wagging the shaggy Title II dog.

CABLE FEARS NEXT MOVES

Cable operators have made no secret that they fear not only what the rules do, but what the FCC might do down the line to expand regulations under Title II. One fear is that the FCC's forbearance from rate regs or unbundling will be challenged in court by net-neutrality activists as a way to reshape the order into an even more regulatory one.

Among the issues raised by Title II opponents on the panel and in the witness chairs was reclassification's impact on international telecommunications.

A number of Republicans, including Walden, pointed out that other countries have pushed for telecommunications designation-based, sender-pays models for Internet traffic, but that the U.S. has always pushed back using the argument that the 'Net is different from a telecommunications service.

Asked by Walden if Title II telecom classification would have implications for international termination agreements, Downes said he was sure there were those eager for the sender-pays model to argue that undermines the U.S.'s historic position. He said he was not sure they would win that argument, but it undercuts the U.S. "high ground."