US sweeps aside net neutrality, allows telcos to erect paywalls

The US Federal Communications Commission has swept aside rules barring broadband providers from favouring the internet traffic of websites willing to pay for speedier service, sending the future of net neutrality on to a likely court challenge.

The Republican-led commission voted 3-to-2 on Thursday to remove Obama-era prohibitions on blocking web traffic, slowing it or demanding payment for faster passage via their networks. Over objections from its Democrats, the FCC gave up most authority over broadband providers such as AT&T Inc and Comcast Corp and handed enforcement to other agencies.

In 2015, the FCC formalised net neutrality into law, blocking internet service providers (ISPs) from being able to receive payments for prioritising content (See: FCC unveils new net-neutrality regulations).

But on Thursday the FCC under Chairman Ajit Pai made a U-turn and abolished net neutrality. If legal challenges do not reverse the FCC decision, ISPs will be able to create a fast lane and sell ''paid prioritisation''.

As Fortune points out, the word ''prioritization'' here is misleading. ISPs will not provide faster Internet access. The content of providers who pay fees to ISPs will be delivered at normal speed. But the content of those who do not pay will be slowed down.

''It is time for us to restore internet freedom,'' said Pai, who was chosen by President Donald Trump to lead the agency, and who dissented when the FCC adopted the rules under Democratic leadership in 2015. ''We are restoring the light-touch framework that has governed the internet for most of its existence.''

The change is to occur after the Office of Management and Budget reviews a portion of the rules and ''that can take months'', Kris Monteith, chief of the FCC's Wireline Bureau, told reporters. The draft order had said the rule change would take effect 60 days after being published in the Federal Register that chronicles regulatory activity.

The new rules drew immediate threats of lawsuits seeking to overturn the action. Pai said he's confident of prevailing in court. ''There's no question that what we did was lawful,'' Pai said in a news conference.

Free Press, an activist group that helped organise opposition to Pai's order, announced it planned ''to sue the FCC on the basis of its broke process, deeply flawed legal reasoning, wilful rejection of evidence that contradicts its preordained conclusions, and absolute disregard for public input.'' The attorneys general of Washington and New York states also said they would sue.

Eliminating the regulations frees broadband providers to begin charging websites for smooth passage over their networks. Critics said that threatens to pose barriers for smaller companies and startups, which can't afford fees that established web companies may pay to broadband providers, or won't have the heft to brush aside demands for payment. Broadband providers said they have no plans for anti-competitive ''fast lanes'', since consumers demand unfettered web access.

''Today's action does not mark the 'end of the Internet as we know it;' rather it heralds in a new era of light regulation that will benefit consumers,'' David L Cohen, Comcast's senior executive vice president and chief diversity officer, said in a statement.

The FCC's vote concludes a tumultuous eight-month passage since Pai proposed gutting the earlier rules. The agency took in nearly 24 million comments, but many of those appeared to be of dubious origin including almost half a million routed through Russia.

That prompted New York State Attorney General Eric Schneiderman to say he would sue over the ''illegal rollback of net neutrality'' and cited ''two million fake comments that use the stolen identities of people across the country''.

Dozens of Democratic lawmakers expressed opposition, while Republicans lauded Pai's plan. Protesters were demonstrating in front of the FCC building as the meeting got under way. Shortly before 1 pm, just before the vote, a female staff member approached the dais and handed Pai a piece of paper. Pai adjourned the meeting ''on advice of security'' and armed security guards told attendees to leave bags and coats behind. The meeting resumed about 10 minutes later and the vote was taken.

The reaction in Congress broke down along party lines. The FCC's action will ''return the internet to a consumer-driven marketplace free of innovation-stifling regulations'', Senate Majority Leader Mitch McConnell, a Kentucky Republican, said in remarks prepared before the agency's vote. Two Republican members of the House with responsibility for technology policy said ''the table is set'' for legislation.

The vote ''will help more Americans than ever before access the web, video streaming, telemedicine, and the innovations of the future made possible by increased investment in broadband,'' Energy and Commerce Committee Chairman Greg Walden and Communications and Technology Subcommittee Chairman Marsha Blackburn said in a joint statement.

''What you're going to see is Congress step forward and take some action to put in place some free and open Internet rules,'' Blackburn told Bloomberg TV on Wednesday. ''There are things that we all agree on, like I said - no blocking, no throttling, addressing latency.''

But Democratic Senator Amy Klobuchar, of Minnesota, said the FCC with its vote ''will put internet service providers, not consumers, in charge of determining the future of the internet.''

Pai argued that the Obama-era rules brought needless government intrusion to a thriving sector, and discouraged investment in broadband. Supporters said investment has flowed unhindered, and that rules are needed to keep internet service providers from unfairly exploiting their position as gateways to homes and businesses. The FCC with its 2015 rules claimed powers that could include regulating rates charged by internet service providers. The agency said it wouldn't immediately do so, but the prospect helped propel broadband providers' opposition.

The cable and telephone companies also criticised the breadth of what critics called utility-style regulations, including a portion written to allow the FCC to vet data-handling practices it couldn't yet envision. Companies supporting Pai's rollback proposal included AT&T, Verizon Communications Inc and cable providers led by Comcast and Charter Communications Inc.

Web companies such as Alphabet Inc's Google, Facebook Inc and Amazon.com Inc wanted to keep the previous regulations. ''Having clear, legally sustainable rules in place finally established rules of the road and provided legal certainty,'' the Internet Association, a trade group for web companies, said in comments to the FCC. ''The commission should maintain its existing net neutrality rules and must not weaken their firm legal basis.''

Google issued a statement after the vote saying, ''We will work with other net neutrality supporters large and small to promote strong, enforceable protections.''

Opponents of Pai's rules are expected to ask US judges to overturn the ruling and restore the old rules. Issues before the judges will include whether the FCC has adequate grounds to reverse a decision taken less than three years earlier. Judges last year upheld the previous rules.

Congress could write a law to overrule the FCC's action, but it hasn't acted yet.

(See: 'Consumers must pay for profit boost to telcos, cable firms')