The FCC's expected change of heart on net neutrality isn't all welcome news for entrepreneurs.

By the end of February, when Federal Communications Commission chairman Tom Wheeler delivers his final set of rules on net neutrality, Wheeler would expand the agency's reach over the internet and broadband providers through a series of "bright line rules" that would take the debate over net neutrality to yet another level. 

Wheeler's new rules--which would prohibit blocking, throttling, or paid prioritization of internet content--would also reclassify broadband and internet service providers, or ISPs, as public utilities under Title II of the Telecommunications Act. As such, the chairman's proposal represents an about-face from his stance just a year ago. At that time, the FCC chairman essentially agreed with a federal ruling that would have given ISPs a free hand in setting access to the Web--largely tossing out the underpinnings of net neutrality.

Wheeler has additionally proposed giving the FCC more of a watchdog role over the flow of data. The commission would issue new protections for consumer privacy, and ensure Web access to consumers with disabilities, as well as for those living in remote locations without broadband. To put the broadband industry at ease, he has suggested modernizing Title II to remove the threat of new federal taxes, fees, and charges. 

Some net-neutrality experts wonder if Wheeler has taken things too far--saying the door is now open to more legal disputes as the parameters of net neutrality continue to get hammered out. But small tech startups see the about-face (largely) as good news, since the order promises to protect them from noncompetitive practices.

"I am cautiously optimistic," says Chris Herndon, co-founder and president of San Francisco-based Apartment List, a 75-person company that depends on fast broadband downloads of video and rich media content for its customers. "As they say, though, the devil is in the details, and any form of regulation has the potential to create more bureaucracy."

Power Play

Wheeler holds forth at length about his change in direction in an op-ed piece for Wired on Wednesday, describing his experience as the head of a tech startup called NABU in the 1980s as one reason for his change of heart. NABU depended on access to the Web from cable providers at the time, Wheeler writes, drawing a comparison between his company and Steve Case's, who was simultaneously starting AOL. While NABU went broke, thanks in part to cable operators, AOL thrived because it was able to take advantage of telecommunications lines, designated as common carrier utilities:

While delivering better service, NABU had to depend on cable television operators granting access to their systems. Steve Case was not only a brilliant entrepreneur, but he also had access to an unlimited number of customers nationwide who only had to attach a modem to their phone line to receive his service. The phone network was open whereas the cable networks were closed. End of story. The phone network's openness did not happen by accident, but by FCC rule.

Wheeler further acknowledges that he is proposing "the strongest open internet protections ever proposed by the FCC."

Still, some net-neutrality experts say the commissioner is overreaching. Larry Downes, project director of the Georgetown Center for Business and Public Policy, for instance, says Wheeler's attempt to reclassify broadband as a public utility will open the door to more legal disputes and federal court cases for years to come. It could eventually wind up before the Supreme Court, too, he adds.

"It goes further than we anticipated, and radical is the right word for it," Downes says, adding Wheeler has gone too far, chiefly because the FCC does not have the authority to reclassify broadband as a utility or update Title II the way Wheeler's proposal intends to do.

Wheeler's decision also flies in the face of a legal precedent set by the Supreme Court in 2005, notes Downes. In the case, National Cable & Telecommunications Association v. Brand X Internet Services, the High Court ruled that ISPs are information services, as the FCC had defined them at the time, and not public utilities.

Some Background

Wheeler's change of heart on net neutrality follows a protracted public comment period, in one of the most intensely debated policy moves of the FCC's history. By Wheeler's own accounting, the FCC received some four million comments from people who wanted to weigh in on an earlier approach that would have allowed for so-called fast lanes and slow lanes, on the basis of what customers were willing to pay. In that instance, the FCC would have used a lighter regulatory approach available to it under section 706 of the Telecommunications Act, instead of Title II.

The change also follows a public stance taken by the White House, with President Obama saying in November he favors maintaining net neutrality by using the heavy regulatory approach of Title II.

Through all of this, a particularly vocal constituency that favored maintaining net-neutrality regulations as they were prior to the court's 2014 ruling included a who's who of some of the most important technology companies, such as Amazon, Facebook, Google, and Microsoft.

But up-and-coming tech companies, including the newly public Etsy, the online craft marketplace, have also weighed in. And they were mostly pleased with Wheeler's announcement this week.

"A year ago, most folks thought Title II was a long shot, even if it was the right thing to do," says Althea Erickson, Etsy's head of public policy. "It took four million comments to the FCC and a concerted effort from the public interest and startup communities to make Title II a real possibility."

Published on: Feb 5, 2015