Net neutrality - One year at the FCC

What has happened: Perhaps the thorniest issue the FCC has addressed in the past year is net neutrality. President Obama made net neutrality a central plank of his technology policy platform as a candidate, and FCC Chairman Julius Genachowski argued strongly for moving forward with the action.

But even before the commission approved draft net neutrality rules in October 2009 for both wired and wireless networks, the proposal was being lobbied against heavily by the likes of AT&T (NYSE:T) and the CTIA, which see rules for wireless networks as completely unnecessary.

The FCC collected comments on the proposal throughout the winter, but in April, the whole process got thrown off track. In a 3-0 decision, the U.S. Court of Appeals for the District of Columbia said the FCC overstepped its statutory authority when it cited Comcast in 2008 for preventing users from accessing peer-to-peer file sharing services. The court said the FCC could not rely on its "ancillary jurisdiction" to regulate how Comcast managed its network.

In response, Genachowski proposed in May a "third way" forward on net neutrality that essentially reclassifies broadband from a Title I information service to a Title II common-carrier service, while at the same time forbearing from, or agreeing not to pursue, many of the regulations that are imposed on Title II services such as telephone systems. Genachowski argued the move would give the FCC the legal authority to impose net neutrality.

However, as the FCC formally moved forward on whether to reclassify, the agency concurrently set up closed-door meetings with top stakeholders, including Verizon and Google, on the issue--a move public interest groups decried as backroom dealing contrary to the FCC's pledge of transparency. However, those meetings were called off days before Google and Verizon unveiled a separate public policy framework on net neutrality--a move aimed at influencing policy on the topic. The proposal forbids any kind of prioritization--including paid prioritization--of Internet traffic over wired networks, but, importantly, does not apply to wireless networks. It also carves out exemptions for certain "additional, differentiated online services."

What's next:  Public interest groups continue to press the FCC to move ahead with its own processes. "It really comes down to whatever Genachowski wants to do, and he'll always have two votes against him no matter what he does," said Harold Feld, referring to the two Republican members of the five-member FCC panel. Feld is the legal director of Public Knowledge, a digital rights advocacy think tank.

The FCC declined to comment on its current thinking.

"You can't rush to judgment on something where you need to collect not only the facts but also the legal analysis to what you're doing," said Michele Farquhar, a partner at the Washington law firm Hogan & Hartson.

The commission has several options. The FCC can decide to drop the issue, which seems unlikely. It can move ahead with reclassification--which could potentially be challenged in court. It also can wait for Congress to draft net neutrality legislation. Or, it can adopt as its own framework ideas proposed by private entities.

Mitchell Lazarus, a telecom lawyer and partner at Fletcher, Heald & Hildreth, a law firm based in Arlington, Va., said the FCC could take that last option, but would likely have to make it look like the ideas originated at the commission and not from the commercial sector.

David Kaut, an analyst with Stifel Nicolaus, said the issue is becoming so politicized that it may be impossible to move ahead on it before the November elections.

Net neutrality - One year at the FCC