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How Comcast, Verizon, and the Rest of Big Telecom Blew the Net-Neutrality Battle

Rob Pegoraro
Contributing Editor
Yahoo Tech

FCC Chairman Tom Wheeler gestures near the end of a hearing for a vote on net neutrality. The FCC has agreed to impose strict new net neutrality regulations on Internet service providers like Comcast, Verizon, and AT&T. Net neutrality is the idea that service providers shouldn’t intentionally block or slow Web traffic, creating paid fast lanes on the Internet. (AP Photo/Pablo Martinez Monsivais)

Last Thursday’s vote by the Federal Communications Commission to enact sweeping net neutrality regulations represented almost a 180-degree turnaround from a year ago.

Back then, a federal court struck down a timid set of net neutrality rules, and the FCC responded by preparing still weaker regulations.

What happened between then and now? Much of the credit for this reversal goes to millions of Americans who got mad and let Washington know about it. The White House took note — in November, President Obama asked the FCC to return to treating Internet providers as “common carrier” utilities — and in January, FCC Chairman Tom Wheeler surprised many by saying the commission would do just that

READ MORE: FCC Adopts Net Neutrality Rules to Ban Internet Discrimination by Service Providers

But some of the credit must go to the giant telecom conglomerates that wanted no such thing.

Talking a Big Game

The story starts a decade ago, when suits at Big Telecom gave everybody reason to think their Internet provider would throw a tollgate in front of any popular site.

“Now what they would like to do is use my pipes free, but I ain’t going to let them do that, because we have spent this capital and we have to have a return on it,” SBC CEO Ed Whitacre told BusinessWeek in 2005 as if he had been personally stringing wire from telephone poles.

Later that year, BellSouth Chief Technology Officer William L. Smith said that company (which SBC later bought after renaming itself AT&T) ought to be able to charge a search engine for having faster loading times than its competitors.

And in 2006, Verizon Senior Vice President John Thorne decried Google for “enjoying a free lunch that should, by any rational account, be the lunch of the facilities providers”— as if it were a slacker on the couch borrowing the neighbor’s Wi-Fi, not a company that’s spent billions on data centers and high-speed links.

Opponents of stronger net neutrality rules can fairly argue that we haven’t seen many examples of the abuse they’d prevent (aside from Netflix becoming unwatchably slow over some large ISPs). But they can’t say these fears didn’t come straight from telco executives’ own mouths.

Relentless Litigation

Imagine an alternate universe where in 2005, after the FCC had finished reclassifying Internet providers as “information services” exempt from common-carrier requirements, Big Telecom had declared victory and gone home. They would have had far looser rules than today’s, and their lawyers could have spent more time with their families.

Alas, we don’t live in that world. First Comcast sued the FCC after the commission scolded it in 2007 for interfering with BitTorrent file sharing. It only wanted to “clear our name and reputation,” Comcast spokeswoman Sena Fitzmaurice told the Washington Post at the time; the effect of that 2010 ruling, however, was to nuke the existing net neutrality regulations.

The FCC responded with 2010’s “Open Internet Order,” which allowed providers to charge for faster delivery and left wireless carriers free to slow sites or charge extra for access to them.

To Verizon, that was too much. It sued the FCC and “won” in last year’s court ruling vacating most of those rules — a victory that now looks like the biggest own goal in the history of telecom regulation.

The Urge to Merge

Only weeks after that defeat in court, Comcast announced its plan to buy Time Warner Cable. A big part of the company’s sales pitch involved reminding people that the biggest and second-biggest Internet providers in America didn’t compete with each other. “We have no direct overlap,” Comcast CEO Brian Roberts said in a conference call at the time.

That was true, but reminding people of their lack of choice in broadband Internet access also evokes a common argument for net neutrality rules: If there’s not enough competition to keep companies honest, the government may have to step in.

Comcast dug its hole deeper with a steady stream of customer-service mishaps: badgering customers over the phone when they tried to cancel their service, allegedly getting one fired for complaining about the company, and even changing subscribers’ names on their bills to such flattering monikers as “Bitch Dog” and “A__hole Brown.”

At the same time, Comcast defended its merger attempt by saying it would extend net neutrality protections (it accepted those as conditions on its 2011 acquisition of NBC Universal) to TWC customers.

Simultaneously reminding voters of their powerlessness in the market and touting net neutrality principles: That’s something you’d expect from advocates of those rules, not the company that would be the biggest target of them.

And so now Big Telecom’s worst-case scenario has come to pass: Both wired and wireless Internet access now must comply with strict net neutrality rules that once again treat them as common carriers and foreclose all the business models they pined for a decade ago. These companies aren’t happy, and some of them may sue yet again.

Before they put even more billable hours on their tab, however, I would like to suggest a better use for that money: Try investing it in your network instead.

Email Rob at rob@robpegoraro.com; follow him on Twitter at @robpegoraro.