I write this 36,000 feet above Arizona, en route home from LA, where I spent the week at the NCTA show.  Always an interesting event, the mood was slightly more reserved this year as MSOs mulled the potential ramifications of Net Neutrality, and the so-called “Title II” discussions dominating the chatter in the halls.

Downtown LA’s Nokia Theater, venue of the Season 7 and 8 finals of American Idol, played host for a highly anticipated—though somewhat poorly attended—keynote from FCC Chairman Julius Genachowsi.  The interview format, moderated by NCTA president Kyle McSlarrow, was heavy on platitudes, and light on real news.

“Let’s roll up our sleeves, and get down to business!” seemed to be overarching theme.

In a very brief press conference later in the day, the Chairman did respond to some slightly tougher questions—and gave a pretty non-responsive answer to one posed by yours truly



A “Healthy and Fair” Third Way?

April’s court decision “has created a problem, and has damaged the legal foundation,"  according to Chairman Genachowski.  The FCC’s was faced with several options, according to a statement issued by the FCC:

• Do Nothing

The Commission could continue relying on Title I “ancillary” authority, and try to anchor actions like
reforming universal service and preserving an open Internet by indirectly drawing on provisions in Title II
of the Communications Act (e.g., sections 201, 202, and 254) that give the Commission direct authority
over entities providing “telecommunications services.”

• Deploy the “Nuclear Option”

The Commission could fully “reclassify” Internet communications as a “telecommunications
service,” restoring the FCC’s direct authority over broadband communications networks but also
imposing on providers of broadband access services dozens of new regulatory requirements.

• Third Way

With each of these deemed “too extreme,” the Commission instead has decided on a so-called “Third Way,”  a “Healthy and fair option” which would:

• Recognize the transmission component of broadband access service—and only this component—
  as a telecommunications service;
• Apply only a handful of provisions of Title II (Sections 201, 202, 208, 222, 254, and 255) that,
  prior to the Comcast decision, were widely believed to be within the Commission’s purview for
  broadband;
• Simultaneously renounce—that is, forbear from—application of the many sections of the
  Communications Act that are unnecessary and inappropriate for broadband access service; and
• Put in place up-front forbearance and meaningful boundaries to guard against regulatory
  overreach.

Unfortunately, the FCC's chosen path, reclassifying ISPs as common carriers and "forbearing" the majority of Title II regulations, hasn’t done much to instill confidence.  Critics say it opens the door to potential pricing regulation going forward, though the Chairman insists that is “off the table.”

The key enforced provision, Section 202, prohibits carriers from making any "unjust or unreasonable discrimination" in the way it charges.  Section 208, another provision on the table for enforcement, allows carriers, enterprises, and individuals to file complaints directly with the FCC for violations.

Buckle Up and Hang On

Along with many others, I have long operated under the assumption that, in principle, net neutrality was decided with the election of Barack Obama in November 2008. The latest court rulings have insinuated more fear, uncertainty and doubt into the mix.  And markets don't adapt well to fear, uncertainty and doubt.  I would suggest everyone buckle in tight, because this ride isn't over.  

See You in Court!

The process will be slow, there will be numerous legislative challenges and speed bumps--Representative Cliff Stearns from Florida recently introduced a bill that would require the FCC to deliver a detailed cost-benefit analysis to Congress before moving forward.  When I asked the Chairman yesterday about this, he only said that FCC "will work with Congress as a resource."

Not to mention the court cases…we should anticipate numerous legal challenges in the forthcoming months, and it wouldn't surprise me to see this ultimately end up in the Supreme Court. The real brunt of this will be felt by OTT ecosystem players.  Over the Top, by its very nature, is predicated on an open Internet.

Twelve, eighteen, or twenty-four additional months of limbo is the last thing these guys need.