CHICAGO — FCC Chairman Tom Wheeler defended newly imposed net neutrality rules as well as the agency’s plans to block the Comcast–Time Warner Cable merger, saying that moves have been necessary to protect competition.
“History proves that absent competition, a predominant position in the market such as yours creates economic incentives to use that market power to protect your traditional business in a way that is ultimately harmful to consumers,” he told the Internet and Television Expo, the annual gathering of the National Cable and Telecommunications Assn.
In fact, Wheeler noted that the industry had reached a “tipping point” as the Comcast-Time Warner Cable transaction was under review — HBO and CBS announced new “over-the-top” online video services in December that do not require a multichannel subscription, raising the prospect of significant disruption to business models.
“We recognized that the industry had changed and we saw concrete evidence of the new competition and business models made possible by high-speed Internet access,” he said.
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Comcast and TW Cable scuttled their merger after it became clear that the FCC and the Department of Justice would move to block it.
Wheeler said that “we recognized that broadband had to be at the center of our analysis, that video was, in essence, an application that flows over networks and that would be supplied both by the owners of facilities and by competitors that use broadband pathways to compete against the owners of those broadband pathways.”
In other words, the FCC had concerns over Comcast’s power over new Internet video services given its share of the broadband marketplace.
That scarce competition for high-speed broadband, in Wheeler’s eyes, is at odds with the views of many in the audience. He drew polite applause, but at a session after he spoke, some of the chieftains of major cable companies drew cheers as they criticized the regulatory environment.
The NCTA is challenging in court the FCC’s move to reclassify the Internet as a Title II telecommunications service, a regulatory maneuver to impose robust rules of the road for the Internet.
Wheeler said that he was in “violent agreement” with the industry in pledging that the Internet remain open and free. “We differ, however, on just what that means,” he added.
Cable executives say that the FCC’s move to Title II has imposed a regulatory burden after making substantial investment in the business, including on upgrading broadband speeds.
But Wheeler said that the concentration of the industry made the robust rules necessary. “Your challenge will be to overcome the temptation to use your predominant position in broadband to protect your traditional cable business,” he said. “The Internet will disrupt your existing business model.”
He said that the net neutrality rules retain “freedom to secure a return on your investments while also prohibiting actions that would harm the open Internet.”
Wheeler did praise the industry at several points. He said that the cable and broadband industry has made possible what is “truly the Golden Age of television.”
Wheeler noted that he favors a “technology neutral definition” of multichannel program distribution, as the FCC considers whether to put certain over-the-top services under the same status as cable and satellite operators. He also said that the FCC should begin a review of how it determines whether retransmission consent negotiations are conducted in “good faith.” He also reiterated that the move to Title II does not regulate pricing.
Nevertheless, on Tuesday, at a panel of Wall Street analysts, Craig Moffett said that he tends “to be more bearish than most” given recent decisions from federal regulators that “speak to the intervention of Washington into the business.”
Moffett sees price scrutiny as a possibility. Consumers would turn to the FCC to file complaints, he said.
“If broadband pricing is under a microscope or potentially regulated, it is a very different business,” he said.
Moffett also doubted that a legislative solution would get anywhere given the launch of a presidential election cycle. Republican sponsors of legislation to undo Title II regulation would also need Democratic support.
After Sen. Rand Paul (R-Ky.) “said that he would dismantle Title II,” Moffett said, it became “very clear that it is a presidential campaign issue. For any Democrats to cross the line and support bipartisan legislation would be handing an opponent of Hillary Clinton’s a legislative victory.”
