Wheeler's Title II plan could unwind Netflix-Comcast deal, other interconnection pacts

As the cable industry assess the broader impact of strict Title II regulation of the Internet, one significant factor already appears likely: interconnection deals, such as the one Comcast (NASDAQ: CMCSA) notoriously carved out with Netflix (NASDAQ: NFLX) last year, could go away.

On Wednesday, FCC Chairman Tom Wheeler confirmed that he is proposing broadband regulation congruent with Title II of the Communications Act. The five-member FCC commission body is still set to vote on Wheeler's proposal later this month.

Should it become law as predicted, the FCC would have the right to regulate the behavior of ISPs like Comcast, which have signed controversial deals with streaming media companies like Netflix to give these services better throughput at the point where the open Internet reaches their networks.

Wheeler's proposed rules would give companies like Netflix redress when complaints about network performance crop up.

"We support the commission asserting jurisdiction over interconnection and implementing a case-by-case process that prevents ISPs from charging unfair and unreasonable tolls," reads a Netflix statement released Wednesday. "If such an oversight process had been in place last year, we certainly would've used it when a handful of ISPs opted to hold our members hostage until we paid up."

Not surprisingly, the cable industry reacted negatively to Wheeler's proposal.

Wrote Michael Powell, president and CEO of the National Cable Telecommunications Association: "Chairman Wheeler's proposal to impose the heavy burden of Title II public utility regulation on the Internet goes far beyond the worthy goal of establishing important net neutrality protections. It will result in a backward-looking new regulatory regime, ill-suited for the dynamic Internet, with far reaching and troubling consequences. We believe that such a significant expansion of the FCC's authority is unnecessary and will only deliver further uncertainty instead of legally enforceable rules that everyone supports. Despite the repeated assurances from the President and Chairman Wheeler, we remain concerned that this proposal will confer sweeping discretion to regulate rates and set the economic terms and conditions of business relationships."

Added Matthew Polka, American Cable Association president and CEO: "Title II is the wrong approach for ensuring an open Internet, particularly for smaller ISPs and their customers. Rather than doing the hard work required to examine individual markets and individual competitors, the FCC has taken the easy way out by treating all ISPs the same. Yet, as ACA has demonstrated to the FCC, smaller ISPs, including smaller cable operators, rural telcos, and municipal providers, do not have an incentive or ability to harm the openness of the Internet, and new Title II regulations will be disproportionately onerous for them. ACA and its members urge the FCC to address this error and grant relief for smaller ISPs to avoid harming them and their customers.  Reduced investment in broadband and higher retail rates that would result from onerous regulation will benefit no one."

For more:
- read this Washington Post story
- read this Variety story

Sound Off: Reactions to the FCC's new net neutrality rules

Related links:
Wheeler confirms it: new net neutrality rules will reclassify broadband under Title II
FCC to strengthen oversight of ISP interconnection deals
AT&T, Verizon challenge FCC's authority on net neutrality

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