FCC Chairman Julius GenachowskiFor nearly two months recently, the Federal Communications Commission convened closed-door talks between powerful broadband and Internet companies, hoping to deliver a compromise on net neutrality that Congress would find palatable.

In the end, the process collapsed after Verizon (VZ) and Google (GOOG) bailed out of the talks and agreed to forge their own proposal. After years of dithering by the FCC, it finally took two private companies to ditch the feckless feds, sit down and actually hammer out a deal (here's an in-depth look at the Google-Verizon net neutrality deal).

Back on the presidential campaign trail, a righteous-sounding President Obama declared that he would "take a back seat to no one" on the issue of net neutrality, a broad, foundational principle of the Internet that essentially means broadband providers can't restrict or block access to legal websites or favor their own services over rivals'.

In April, however, a federal appeals court said the FCC lacked the power to enforce net neutrality, throwing the agency's ambitious National Broadband Plan into chaos. Obama's old Harvard law school chum, Julius Genachowski (pictured), whom the president tapped to head the FCC, has gotten off to a rocky start.

"It's obviously been a really tough year for Genachowski," says Art Brodsky, communications director of Public Knowledge, a D.C.-based net neutrality advocacy group. "He came into office with a great deal of momentum and political capital, and he allowed himself to get beaten, bullied and pushed around by everyone from Congress to the industry."

An FCC spokesperson did not return a request for comment.

Codifying Accepted Practice

In the early years of the Bush administration, the FCC, then led by Clinton-appointee Michael Powell, classified broadband Internet -- which was still in relative infancy -- as a Title I "information service," which severely limited the agency's ability to regulate broadband providers. In 2005, Powell enumerated four "principles," that, while not binding, were supposed to protect consumers from network abuse by carriers, such as traffic-blocking, which is simply cutting it off, or traffic-throttling, which is a slowing down of high-bandwidth traffic and a means of prioritizing it.

Powell's principles weren't really new, they certainly weren't regulations and, as it turns out, they weren't even enforceable. The principles were simply meant to codify how the Internet had operated during its explosive growth -- free, open and unfettered -- allowing Google, Facebook and Twitter and many others to transform from tiny start-ups into billion-dollar companies in less than a decade.

In 2008, FCC Chairman Kevin Martin, a Bush appointee, decided to use Powell's principles to sanction Comcast (CMCSA) for blocking certain Internet traffic. But Martin was totally wrong. Comcast admitted to throttling peer-to-peer traffic, but as many pro-net neutrality advocates feared, the FCC did not, in fact, have the authority to enforce Powell's original four principles, as a federal court ruled in April.

Comcast had won, and Martin's attempt to use Powell's principles had failed. Suddenly, the now-Genachowski-led FCC lacked the authority to enforce its own rules. In general, when regulators lack the authority to enforce their own rules, they can be thought of as dysfunctional.


No Help From Congress

"The decision has forced the FCC into an existential crisis, leaving the agency unable to protect consumers in the broadband marketplace, and unable to implement the National Broadband Plan," S. Derek Turner, research director for pro-net neutrality group Free Press, said at the time.

To be fair, the FCC certainly hasn't gotten any help from Congress, which is bitterly divided over net neutrality. Telecom and cable lobbyists have a reliable cadre of powerful lawmakers they can call on to advance their agenda -- and that agenda doesn't include net neutrality. AT&T (T) and other major broadband interests have donated $400,000 to six Republican senators who have consistently rejected net neutrality legislation.

After Comcast's legal victory, Chairman Genachowski proposed a so-called "third way," which would reclassify broadband as a "communications service," thus regaining jurisdiction for the FCC over broadband. But that idea was about as popular among lawmakers during an election year as a bonfire in hell. However, many public interest groups support that approach.

In general, the big broadband providers have opposed net neutrality because, they say, Google (especially bandwidth-hogging YouTube) and other powerful Web companies like Facebook are getting a "free ride" on the "pipes" the carriers invested billions to build. (Google counters that like everyone else, it pays for Internet access.) Some industry executives envision a future Internet more akin to how cable TV now operates. Customers can buy a package of basic services. Or they can pay more, and more and more to get the truly premium experience with all the extra content, like multiple HBO and Showtime channels.

"There has almost been a theological tone to this conversation," says an industry source. "Proponents of net neutrality really think they're right about everything, and opponents really think they're right about everything."

Big on Ambition, Short on Results

Perhaps the biggest obstacle to sensible broadband management policies, however, has been the FCC itself. While often well-intentioned, it has watched its own "open Internet policy" slowly, but systematically, crumble over the course of the last five years.

Last year, Obama tasked Genachowski with a bold agenda in three areas: expand broadband to rural areas and raise speeds, establish a world-class emergency communications system and push for net neutrality. (As then-candidate Obama's top tech adviser, Genchowski helped craft the campaign's lofty net neutrality promises.)

Thirteen months into his tenure, Genachowski has made very uneven progress in those areas. He can't be blamed for the actions of his predecessors Powell and Martin, but his lawyers did lose the landmark Comcast case, which threw out the agency's authority to regulate the Internet and enforce net neutrality.

"Chairman Genachowski's tenure thus far has been characterized by two things: A reluctance to act decisively on the communications issues of our time -- net neutrality and universal access -- and an apparent tone-deafness to the public outcry on these same issues," says Tim Karr, campaign director for Free Press, a Washington, D.C.-based group that supports net neutrality.

Closed-Door, Open Internet Talks


Then, Genachowski allowed his Chief of Staff Edward Lazarus, an entertainment lawyer from Los Angeles, to convene the now-infamous closed-door, private "negotiations" about net neutrality with AT&T, Verizon, Google, Skype and the Open Internet Coalition, a consortium of Internet companies and public interest groups. The irony of closed-door, open Internet negotiations wasn't lost on many. After Lazarus unilaterally waived the agency's standard disclosure rules, which require the FCC to provide documentation of all meetings or discussions related to rule-making, public interest groups howled at the lack of transparency.

"Those negotiations were nonsense," says Brodsky. "Eddie Lazarus pushed that deal, and it blew up in his face. He pushed Verizon and Google together and got this toxic nonsense that blew up net neutrality for half the internet, the wireless side."

Lazarus's project exploded in failure after two of the key participants, Google and Verizon, yanked their marbles and struck their own deal, which they had been working for one year to achieve -- well before and then in parallel -- with the closed-door FCC talks. Lazarus apparently thought that he could broker a compromise on one of the most contentious policy issues in Washington and hand a ready-made legislative plan to lawmakers on a platter.

A Decision That Can Make or Break a Legacy

But where was his boss, Chairman Genachowski, during this process? For at least one weekend, at least, he was on the guest list for the Allen & Co. Sun Valley conference to hobnob with the very mega media moguls he's supposed to be regulating -- including determining media ownership rules and approving multibillion-dollar mergers, such as the pending Comcast-NBC Universal transaction.

"Genachowski now faces a choice, and his legacy as chair rests on his decision," says Karr. "Will he be true to Internet users and restore the agency's power to protect an open and accessible Internet? Or will he buckle to pressure from the phone and cable companies and look the other way as they undermine the Internet's democratic nature?"

Given the lack of progress on net neutrality at the FCC -- and a paralyzed Congress -- is it any wonder that Google and Verizon essentially said, to hell with these guys, let's do our own thing?

Follow Sam Gustin, a reporter at DailyFinance, on Twitter here.

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47 Comments

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alasusu

You guys aren't telling the truth here. The Free Press is not about "free speech" in any form whatsoever. Net Neutrality is progressive speak for control over the free speech of the internet. Those reading this need to look further and not take this author's word as fact.

August 18 2010 at 12:06 PM Report abuse rate up rate down Reply
jankantius

Either Obama is the greatest actor/magician ever, or he is truly on our side. I pray, hope, and believe he is on our side. Smart people better get vocally behind him... or we are seriously going to lose. You know what that means. Our empire will crumble and we will be only a small footnote in the history of mankind. My wife is looking at closing a deal on selling her condo... I am thinking that any money we have as surplus should be invested in Chinese Bonds.

August 18 2010 at 10:38 AM Report abuse -2 rate up rate down Reply
JUDITH

I think they already limit dial-up, my AOL dial-up is so slow, has interuptions, freezes. I've called them and they just blame my phone company however, after the phone company replaced my underground lines, I still have the problems and its getting worse. To get broadband ect out here, it would cost alot more than I can afford and they (the internet providers) refuse to bring highspeed to my area. My guess is because the return would take forever and they can't get rich from it.

August 18 2010 at 10:36 AM Report abuse -1 rate up rate down Reply
pstox@lbagroup.com

Is anyone really surprised by this? For lawmakers this really is becoming the "National Broadbandwagon Plan" as coined here: http://rfblog.lbagroup.com/the-national-broadbandwagon-plan/

August 18 2010 at 10:09 AM Report abuse +1 rate up rate down Reply
tnkerbelny

So I have been reading through these comments and have seen many people saying things akin to "the free market will decide what is best". I ask these people to define the free market for me and what it has in common with our economic system? We do not live in a free market, not even close. We live in a capitalist market. They are two very different things. Go back and read Wealth of Nations and the Communist Manifesto. The free market (Adam Smith) and capitalism (Karl Marx) have very little in common. The free market is an ideal that even Smith realized was essentially impossible due to government. He advocated a compromise in which government would have as little power as possible in the economy, essentially to ensure that taxes were minimalized and business was not helped or hurt by government. Capitalism is essentially rule by the burgois, ie those who control the means of production, ie powerful corporations at the expense of those who produce, the proletariat. We live in a mess of the two. So basically all I am saying is that the free market doesn't exist so how can it decide for us what is best? Net neutrality is essential, as that is where our society gets its information, and freedom of information is THE MOST IMPORTANT THING IN ANY REPUBLICAN SOCIETY AND IS NECESSARY FOR ITS CONTINUED SURVIVAL. Sorry for the caps but its important.

August 18 2010 at 10:08 AM Report abuse +1 rate up rate down Reply
1 reply to tnkerbelny's comment
jotwinowski

I totally agree that ours is not a completely FREE market, nor should it be. At this point it is both grossly over-regulated and grossly under-regulated. Tha is not, unfortunately, mutually exclusive. It is overly regulated for whatever pet projects our various government bureaucrats have and under-regulated in the one area where it should be regulated: the safety of the consumer. However, when it comes to the world of ideas, I would infinitely prefer to take my chances with corporations than with government. The trouble with a "fairness" doctrine enforced by the government is that it WILL, and I do mean will not might, result in stifling ideas not approved by the government bureaucracy - and I do mean the bureaucracy not the elected officials. I'll take my chances with the profit motive, any day.

August 18 2010 at 10:36 AM Report abuse +2 rate up rate down Reply
posstum123

it's like anything else in the usa, PROFIT is first!! While it is important to be profitable, a level playing field will temper the profits. why did europe's governments build the infrastructure for cell phones? no one company has any advantage over another when it comes to access so they all have to compete with service and price. why can't that happen here? CORRUPTION!! these companies pay congress for protection of turf! how much of the money invested in infrastructure by these companies is actualy tax money in the form of tax credits? I say, the fed should apply eminent domain and take over the infrastructure, then let the individual companies compete with price and service, and see what happens. I am willing to bet service will get much better, prices will drop and the also rans will be out of business. the winners will be we the people!

August 18 2010 at 10:03 AM Report abuse +3 rate up rate down Reply
tnkerbelny

l

August 18 2010 at 10:00 AM Report abuse rate up rate down Reply
gseager

The eliminination of net neutrality means that corporations, in other words, Wall St. will will put "for profit" websites and conservative-biased, "top down" viewpoints in the fast lane. Say goodbye to the free web and look for an explosion of new pop-up junk ads and slow access to your favorite websites.

August 18 2010 at 8:06 AM Report abuse +5 rate up rate down Reply
1 reply to gseager's comment
jotwinowski

goeager: take a look at the nightly news and then tell me that corporations will put conservative thought first, Corporations will put whatever there is a market for, period. If there are a lot of conservatives, they will put in conservative websites and if there are a lot of liberals, they will put liberal websites. As long as there is even a small market for some kind of information, there will be a corporation that will see the niche market and support it. A much better idea than having the government tell us what to think, thank you.

August 18 2010 at 10:41 AM Report abuse rate up rate down Reply
kristoporski

We don't need the Though Police to decide what is fair. The free market decides that. Companies will decide based on consumer demand what they will or will not use. We don't need Big Brother to decide for us.

August 18 2010 at 7:30 AM Report abuse +1 rate up rate down Reply
buzzcat666

DON'T SCREW WITH MY INTERNET

August 18 2010 at 6:53 AM Report abuse +10 rate up rate down Reply