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Open-internet rules look dead. Now what?

Rob Pegoraro
Contributing Editor
FCC Chairman Ajit Pai. (AP Photo/Susan Walsh, File)

President Trump’s new head of the Federal Communications Commission, Ajit Pai, hasn’t been in office long, but he’s has been quick to make his policy priorities clear. And diluting the net-neutrality regulations adopted by his predecessor Tom Wheeler — if not outright deleting them — looks high on his list.

The rules currently remain in force, and still bar internet providers from stopping or slowing down legal websites and apps — or straight up charging them for faster delivery of their data. But in his first two weeks as chairman, Pai has followed through on his longstanding opposition to those regulations by taking early steps to weaken them, which could mean your favorite sites and apps like Spotify will load a lot slower or cost more.

Opening moves

One of Pai’s first moves as chairman was to propose a five-year extension of an expired waiver that had let smaller internet providers out of reporting requirements mandating disclosure of “network management practices, performance and commercial terms,” otherwise known as fees and surcharges you may owe them.

Pai said that exemption, limited to providers with 250,000 subscribers or less (the old waiver set that ceiling at 100,000), would free them from “unnecessary, onerous and ill-defined reporting obligations.” But it also liberates them from the pressure to adopt last year’s FCC proposal for nutrition-label-style disclosures.

Days later, Pai terminated an investigation into whether AT&T (T) and Verizon (VZ) were violating net-neutrality principles by exempting their own video services from their wireless data caps. In a statement, Pai defended those “free-data plans” by saying they are popular with customers and boost competition among wireless providers.

Neither move should have surprised readers of Pai’s earlier statements. When the FCC adopted net-neutrality rules in early 2015, his 67-page dissent denounced them as “intrusive government regulations that won’t work to solve a problem that doesn’t exist using legal authority the FCC doesn’t have.”

In that and older writings — see, for instance, his May 2014 statement on net-neutrality — Pai has suggested that the FCC should defend basic freedoms to connect to and use legal sites and apps while allowing ISPs to charge sites and apps for better-than-basic delivery.

In a live-streamed press conference held Tuesday, Democratic senators lined up to defend the existing rules.

“There is no problem that needs to be fixed,” said Sen. Ed Markey (D.-Mass.). Sen. Patrick Leahy (D.-Vt.) scorned Pai’s vision of the internet as “free and open if you’ve got money.”

Varying views from private industry

A venture capitalist who has long backed net-neutrality rules, Union Square Ventures partner Fred Wilson, wrote in a blog post that “backing startups on a field tilted in the favor of the incumbents is not fun and not particularly profitable either.”

Another veteran investor who had expressed fears in 2014 about the viability of media-based startups, however, was more confident Monday.

“I am not really worried about this issue,” said John Backus, co-founder and managing partner of the PROOF Fund. He pointed to increasingly fast and cheap bandwidth, much of it from WiFi hotspots instead of cellular networks.

Backus also rejected the idea that startups would pay ISPs for premier treatment: “I have never seen a startup want to use high-cost equity capital to prioritize delivery of their bits.”

Large content companies, meanwhile, don’t seem afraid. Netflix (NFLX) has told shareholders that it’s now popular enough with ISPs’ customers to discourage any bullying attempts.

Young Turks Network founder Cenk Uygur pointed to his two big content hosts as reason for confidence that ISPs won’t bog down his news-and-talk shows.

“If they come for us, they’re coming for Google and Facebook,” he said in an interview Saturday. “I at least have some pretty decent heavyweight partners.”

Uygur, a net-neutrality advocate, added that smaller video sites had more to fear.

What about internet providers themselves? Big ones like Comcast (CMCSA) have made a point of saying they already follow open-internet principles. Net-neutrality opponents suggest that dumping the current rules would let smaller providers raise money by crafting their own deals, but will a Netflix pick up the phone when they call?

“We will never have the volume of traffic to get significant revenue on the content side,” said Michael Goldstein, vice president of sales and marketing at Ting. Ting, which resells Sprint (S) and T-Mobile (TMUS) wireless service and offers its own gigabit fiber internet connection in a few locations, backs net-neutrality.

An experiment with real-world consequences

The net-neutrality debate can seem abstract, especially since the current rules are call for the FCC to treat internet providers as “common carriers” that, like phone companies connecting calls, must treat all customers equally.

But the outcome of argument will have real-world consequences for not just internet providers and video sites, but you the paying subscriber.

Pai and other opponents say rolling back the current rules will free internet providers to invest in upgrading their service. That’s something we should be able to check in two years: If your connection gets faster and cheaper than it would have otherwise, the FCC chair can claim a victory.

But if going to sites or apps that your ISP hasn’t blessed gets notably more annoying, you’ll have grounds for complaint. That will also be the case if you get stuck “paying more for less,” as Markey warned in Tuesday’s press conference.

None of those outcomes are assured today. It’s easier to predict the persistence of the problem net-neutrality rules are supposed to address — a lack of competition. So whatever the FCC does, odds are you’ll still have the same couple of wired broadband providers — which for many of you will mean only one, the local cable company.

Disclosure: Verizon is in the process of buying Yahoo Finance’s parent company, Yahoo.

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