FCC Rules On Net Neutrality, Sets New Guidelines For Spectrum Licenses

FCC Rules On Net Neutrality, Sets New Guidelines For Spectrum Licenses

AT&T and Verizon came out ahead, and Sprint and Netflix got handed the raw end of the bargain as the US communications regulator ruled on net neutrality and spectrum licenses

By Hassan Ali on May 16, 2014 at 6:44 am EST

Amid widespread protests and much hype, the Federal Communications Commission convened yesterday to vote on net neutrality. Also on its agenda were little-voiced but just as crucial guidelines regarding telecom spectrum holdings.

The commission wasted little time, taking on the hottest topic right at the very beginning. After customary comments by the commissioners, the vote came down to party lines. Democratic commissioners Jessica Rosenworcel and Mignon Clyburn joined FCC head Tom Wheeler, while Republicans Ajit Pai and Michael O’Reilly gave the ‘nay’ votes.

Net Neutrality

The proposal, as drafted by Tom Wheeler, says the concept of net neutrality will be defended in essence, with the commission ensuring that ISPs do not discriminate against specific content providers or their user base by either blocking or throttling internet speeds. It does, however, allow companies to strike “commercially reasonable” agreements with each other, where content producers can pay ISPs to get access to “fast lanes.”

Open-Internet activists are in arms over the latter clause, suggesting that the concept of fast lanes is by its very nature discriminatory. They are calling for the FCC to re-classify the ISPs as common carriers, which will put the industry under stricter oversight and ensure openness and equality.

The FCC’s latest proposal is now open to public comment, and with big interests wielding power on both sides of the divide, there is sure to be a heated debate.

On one side are the telecom companies, AT&T Inc. (T) and Verizon Communications Inc. (VZ), and ISPs like Comcast Corp. (CMCSA). These broadband carriers have championed the argument that they should be allowed to charge content providers who generate a disproportionate amount of one-way traffic. Under the Court of Appeals’ latest ruling, these companies will now be legally able to do so.

Fighting for the status quo are the content producers and some of the largest tech companies in the world. These include Netflix Inc. (NFLX), which has been spearheading the effort, Google Inc. (GOOG), Facebook Inc. (FB), Amazon.com Inc. (AMZN) and Microsoft Inc. (MSFT), among others. These companies argue that they are being held hostage by ISPs who are trying to exact additional fees for services that their customers already pay for.

The lines have been drawn and the troops will now be rallied. The big boys are already at the table, but it remains to be seen what the American public will say on what has become an extremely polarized debate.

Spectrum Holdings

While the net neutrality debate overshadowed all others, there was an equally pivotal issue on the commission’s agenda. The issue concerned ‘spectrum screens’, or how much spectra a specific telecom operator can control in any given market.

‘Spectrum screens’ call for closer scrutiny of a telecom deal if a company will control in excess of a third of the total spectra in any specific market as a result of a merger, acquisition, or spectrum bid. While “one-third of the total” is not a hard and fast rule, it is a measure by which regulators regularly consider the antitrust aspect of potential deals.

The FCC has voted to raise the amount of spectra that companies can hold in any single market, giving Verizon and AT&T the ability to acquire additional airwaves and/or a potential competitor. Dish Network Corp. (DISH) will now become a prized spectrum holder up for grabs. From the initial analysis of the commission’s guidelines, it seems as if Sprint Corp. (S) is probably getting the worst end of the deal.

The commission has voted to count the spectrum Sprint acquired from Clearwire towards the spectrum screen, whereas it had not done so prior to the recent ruling. Also, a potential bid by Sprint for T-Mobile US Inc. (TMUS) has essentially been thwarted, since that will take spectra in control of the combined entity in most markets over the allowed limit. Just to drive their point home regarding the commission’s stance on a potential Sprint and T-Mobile merger, the FCC has made airwave allotments discretionary in case a major deal is proposed between the two.

Both companies faced an additional blow when the commission revealed it had decided to reserve lower-than-expected spectra for an auction of airwaves scheduled for 2015.

What’s your take on the FCC’s ruling on net neutrality? Leave your comments in the section below!

comments powered by Disqus