FCC Could Craft a Net Neutrality ‘Grand Bargain,’ Analyst Says

Reviews of Comcast, AT&T deals could help achieve open internet commitments

FCC Chairman Tom Wheeler will eventually conclude his review of the agency’s open Internet rules with a net neutrality plan tougher than he first proposed, predicts a top Wall Street analyst.

Craig E. Moffett of MoffettNathanson LLC made his prediction in a blog note Friday, saying he thinks Wheeler will get his way by avoiding a regulatory stance that infuriates Internet service providers.

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Wheeler has indicated that the FCC is likely to consider an open Internet proposal stronger than the one he offered early this year. It remains unclear how strong and whether the revised FCC proposal will ban paid prioritization outright or take major steps toward doing so.

But it’s expected there will be far more limits on mobile Internet providers than the original proposal, which was directed mainly towards wired home connections.

At a press conference two weeks ago, Wheeler noted that the prospect of Internet service providers creating a fast lane for favored content providers — paid prioritization — remains a strong concern. “If paid prioritization hurts or is anti-competitive or anti-consumer or anti-innovative or degrades the network, it is dead on arrival,” he said.

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According to the Wall Street Journal, Wheeler was considering a compromise open Internet rule that would determine that service providers are acting as “common carriers” and subject to additional FCC oversight, including a ban on paid prioritization when they provide backend services for Web sites, but acting as “informational services” and have greater flexibility about how they offer Internet access to consumers.

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FCC officials said Friday that Wheeler is still considering a number of different options. Consumer groups who have seen previous FCC open Internet rules overturned in court want it to classify the business of providing Internet connections a “common carrier” service, which would give the commission additional legal authority to regulate discrimination by service providers.

Moffett called the news story a “trial balloon” but said a split in how the FCC regulates the Web could be part of a “grand bargain” in which it takes a light approach in developing rules, then uses other approaches including its review of big mergers to get much of what it wanted for the immediate future.

Moffett said the FCC could demand a ban on paid prioritization as a price for approval of Comcast’s deal for Time Warner Cable and AT&T’s deal for DirecTV, rather than banning it through rules, adding that it would be welcomed by the market.

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“It neatly sidesteps the worst case scenarios, and while interconnection regulation is certainly not good news for operators, neither is it a calamity,” he explained.

Meanwhile, consumer groups want to see any proposal from Wheeler. Gene Kimmelman, president of Public Knowledge, said his group would welcome an FCC decision to classify obligations of service providers as “common carrier” but also remains concerned.

“It is critical that the chairman explains how it will protect the core tenets of an open Internet that consumers expect and businesses require,” said Kimmelman.