2010 Year in Review: Net neutrality debate centers on wireless

The news: News on the net neutrality front was relatively quiet until April, when 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. The ruling cast doubt on the agency's authority to implement net neutrality.

In response, FCC chairman Julius Genachowski in May proposed a "third way" forward on net neutrality that essentially would reclassify 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 (NYSE:VZ) unveiled a separate public policy framework on net neutrality--a move aimed at influencing policy on the topic. Verizon and Google's proposal would forbid any kind of prioritization--including paid prioritization--of Internet traffic over wired networks. However, it would not apply to wireless networks.

Opponents of net neutrality largely backed the Verizon-Google proposal, while proponents declared it to be an end run around the FCC. (Genachowski later said he "would have preferred if they didn't do exactly what they did when they did it, and said it "had the effect of slowing down some processes.")

In late August, the FCC opened up to public comment on two of the thorniest issues surrounding the debate: whether and how the rules should be applied to wireless networks, and how to treat "specialized" services. Supporters of net neutrality claimed the FCC was punting on the issue.

Throughout the fall, Genachowski insisted the FCC was trying to find a way forward. After much speculation and buildup, he announced a new draft proposal in a speech on Dec. 1.

That proposal was largely adopted at the FCC's December meeting, by a 3-2 vote along party lines. Wireless carriers will be barred from blocking services like Google Voice and Skype that compete with their own voice and video offerings, as well as those in which they have an attributable interest. However, wireless carriers would not face the same restrictions wired operators will on blocking Web traffic and other applications--a ban on unreasonable discrimination in transmitting lawful network traffic.

Wireless carriers also will face transparency requirements on network management policies and a basic "no-blocking" rule on lawful content and applications. The no-blocking rule won't generally apply to carrier engaged in the operations of application storefronts. The rules will allow for reasonable network management--which is defined as actions that are "appropriate and tailored to a legitimate network management purpose, taking into account network architecture."

The commission's two Republicans, Robert McDowell and Meredith Attwell Baker, argued that the proposal is not necessary, legally unjustified and is politically motivated. Both McDowell and Baker said that the FCC is pursuing the same legal strategy that the court struck down in the Comcast case.

Net neutrality rules are now on the books, but the order will likely be challenged in court in 2011.

Why it was significant: Net neutrality remains the most volatile and contentious public policy proposal affecting the wireless industry. Wireless carriers insist that, due to the inherent physical limitations of spectrum, they should be allowed greater flexibility to manage their networks than wired broadband providers. Proponents of strong net neutrality rules for wireless networks argue that the future of the Internet is going to be on mobile devices, and clear, enforceable rules are needed to protect consumers and content owners. In the end, wireless carriers largely got their way, but the entire order is likely going to face legal challenges in the months ahead.