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CES 2015: FCC Chair Tom Wheeler on Net Neutrality

By Daniel B. Kline - Jan 10, 2015 at 8:42AM

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The agency boss tipped his hand on his proposed regulation, and the ISPs are not going to like it.

Federal Communications Commission Chair Tom Wheeler took office under a cloud of suspicion.

Many expected Wheeler, a former cable industry lobbyist, to side heavily with the industry. Instead, during his 14 months in charge of the regulatory agency, Wheeler has leaned toward protecting the interest of the public while balancing the needs of business. He's walking a tightrope to keep both sides happy, but he has largely managed to keep his balance.

Now, with the FCC considering exactly how to bring about an open Internet that can stand up to legal challenges, Wheeler sat down for a one on one interview with Consumer Electronics' Association CEO Gary Shapiro at the 2015 Consumer Electronics Show.

The FCC has a plan

It was clear that Wheeler, an engaging personality who doesn't seem to take himself all that seriously, understood that he was speaking in front of a crowd of technology professionals -- people who overwhelmingly support open Internet. But he was also candid with Shapiro and announced publicly for the first time that the FCC is putting the finishing touches on its open Internet plan, which will be presented to the agency's commissioners on Feb. 5 and voted on Feb. 26.

"The whole open Internet issue is two challenges," Wheeler said. "The first is you want to make sure that innovators and consumers have open access to the networks. ...The other component that you have to deal with is you want to make sure that you're creating an environment that provides sufficient incentive for the ISPs to want to build more and better networks."

It was not an accident that Wheeler put consumers first. That was a theme he hit on repeatedly during the presentation. He made it clear that making sure there's something in it for business was important, but not nearly as important as providing open access for the public.

Shapiro, left, and Wheeler were very comfortable with each other on stage. Source: author.

The FCC is going new places

"What is cool about this job is you get to exist at the intersection of new technology and policy," Wheeler said in his opening remarks.

He said that as technology has changed, the old regulatory system no longer works and and a new way of approaching regulation is needed.

"Trying to create an environment where you stimulate competition and try to encourage innovation requires the creation of a new paradigm," he said.

Shapiro cited the announcement by DISH Network (DISH 3.82%) that it's launching a pay television service that would be purely digital and not require a cable subscription as an example of the shifting industry the FCC regulates. Wheeler agreed and explained that the emergence of over-the-top networks is why the open Internet issue has become so important.

"You've got to have access to the networks," he said.

How the FCC plans to act

Saying you support an open Internet and actually delivering one are different stories. Wheeler said the FCC had considered a number of approaches, but he heavily implied that the plan that will be presented to commissioners on Feb. 5 will be based on reclassifying Internet service providers under Title II of the Communications Act. Using Tittle II would make the ISPs utilities, subject to stricter regulation than they are currently.

"That would be a stinging defeat for ISPs and a victory for advocates of a stringent approach to net neutrality -- including President Obama, who appointed Wheeler," wrote the Los Angeles Times. It would also probably lead to court challenges from the service providers, and the Republican-controlled Congress could seek to overturn the FCC decision as well.

What is commercially reasonable?

Wheeler did not seem concerned, explaining that the test of what is appropriate -- the so-called "commercially reasonable" test, which the court that struck down the previous open Internet rules referred to, was the key.

"It became clear that 'commercially reasonable' could be determined as what is reasonable for the ISPs, not what's reasonable for the consumers and innovators," he said.

A better method for judging ISPs' behavior is the "just and reasonable" standard under Title II, Wheeler said.

What are the goals

The chairman said that a number of solutions were considered, but the FCC found that Title II had the "best protections." He laid out the goals his agency considered the end product of any action:

  • No blocking.
  • No throttling of applications.
  • No paid prioritization.
  • Transparency.

Businesses matter, but there is precedent

Wheeler did make it clear that while Title II may not be what the ISPs want, making sure that they have incentive to build and improve their networks was also a major factor.

"Big ISPs came in and said that Title II would disincentivize us," he said.

Wheeler dismissed that idea, saying that the wireless industry is regulated under Title II and that "for the last 20 years the wireless industry has been monumentally successful -- hundreds of billions of dollars of investments as a Title II regulated [industry]."

There's a way to do Title II right, he explained. "The model has been set in the wireless business."

Good for everyone?

When you walk the floor of CES, Wheeler noted, "the Internet of Things type of opportunities that are out there on the floor ... demand open networks."

Ultimately, the bottom line for Wheeler is that open Internet is something consumers and innovators need, but it won't be bad -- even if enacted under Title II -- for ISPs.

"We're going to come out with what I hope will be the gold standard in how open Internet and investment ought to go," he said.

Daniel Kline owns shares of Apple. The Motley Fool recommends and owns shares of Apple, Google (A and C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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