Net Neutrality Rules Likely on GOP's Chopping Block

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By Lydia Beyoud and Kyle Daly

Nov. 9 — Donald Trump's administration and the GOP-controlled 115th Congress are expected to sweep aside major Federal Communications Commission policies under President Barack Obama, including its regulatory reclassification of broadband internet providers and related net neutrality rules.

The Democratic-controlled agency has pursued an aggressive agenda. But once Trump takes office in January, the new commission and its GOP allies on Capitol Hill likely will undo significant parts of it.

The FCC's net neutrality regulations, one of current Chairman Tom Wheeler's signature policies, seem all but certain to be in the crosshairs. Republican dominance is likely to lend fresh momentum to GOP congressional efforts to roll back the rules, which prevent internet service providers from blocking or throttling traffic flowing over their networks except in certain circumstances.

Such a dramatic reversal is sure to please broadband internet services providers, but would face staunch opposition from the tech companies and consumer groups that fought successfully for the FCC to reclassify ISPs as common carriers under communications law.

Target on Net Neutrality?

“I think net neutrality has a target on its back,” Robert Kaminski, a telecommunications industry analyst for Capital Alpha Partners in Washington, said during a Nov. 9 event sponsored by the Federal Communications Bar Association.

In November 2014, Trump tweeted “Obama’s attack on the internet is another top down power grab,” in reference to net neutrality. That stance, in combination with Republican lawmakers' disapproval of the FCC's approach in implementing its net neutrality rules by reclassifying broadband internet providers under a utility-style regulatory regime, spells trouble for the net neutrality rules grounded in the FCC's reclassification. Both the FCC and Congress are expected to revisit the reclassification decision and the net neutrality rules next year.

That doesn't necessarily mean GOP regulators and lawmakers won't replace the existing net neutrality rules with a different approach.

“Here’s a prediction: net neutrality will be protected; however, it will not be protected the way that Mr. Wheeler’s FCC sought to protect it,” Rick Boucher, a partner at Sidley Austin LLP and former Democratic congressman, told Bloomberg BNA. “The first order of business should be, and I think will be, a return to the status quo ante, which was light-touch regulation of broadband and simply a return of broadband to information services,” he said.

A U.S. Court of Appeals for the District of Columbia Circuit panel upheld the reclassification in June against a challenge by broadband providers ( U.S. Telecom Assoc. v. FCC, D.C. Cir., No. 15-1063, petition for en banc hearing 7/29/16 ). The providers have asked the full D.C. Circuit to hear the case.

Other major Wheeler policies that are under threat include the FCC's new broadband privacy regime and pending commission proposals to impose new regulations on business data services providers and open the pay-TV set-top box market to competition.

The commission is scheduled to vote on finalizing the business data services rules at a Nov. 17 meeting. The set-top box proposal may not see action before the GOP assumes control of the agency and is highly unlikely to advance with Republicans in charge.

A Trump administration could also mean a reversal from what Kaminski said had been the Obama administration's support of regulations in favor of tech companies, including Alphabet Inc.'s Google, Facebook Inc. and other Silicon Valley players.

Deregulation Ahead

Trump's FCC chairman is expected to take a sharp look at the policies Wheeler put in place during his tenure, likely with an eye toward rolling back regulation of the telecommunications marketplace.

Trump's administration is likely to focus on the “notion of a less intrusive FCC, more focused on enforcing rules and less focused on writing new ones,” Jeffrey A. Eisenach, communications and technology policy director for the American Enterprise Institute, said in an Oct. 25 interview on C-SPAN's Communicators program.

“Everybody's surprised” by Trump's sweep to victory, telecommunications industry analyst Roger Enterner, of Recon Analytics, said during the Nov. 9 FCBA event. “At the same time, everybody is encouraged by Trump's comment last night that he wants to grow the economy, stimulate investment.”

Telecom companies and trade groups Nov. 9 generally embraced the Trump campaign's support for telecommunications infrastructure investment as a part of a core policy focus on infrastructure.

M&A Impact

It's not clear how much the FCC under Trump will change its stance on merger reviews. How the Trump administration unites deregulatory policies with his populist tone “is anybody's guess,” Matt Wood, policy director for consumer advocacy group Free Press told Bloomberg BNA.

Trump publicly opposed the year's largest telecom deal, a bid by AT&T Inc. to acquire Time Warner Inc. for $85.4 billion. In an Oct. 22 tweet, he said his administration wouldn't sign off on the deal because it would concentrate too much power among too few companies.

However, telecom industry analysts' outlook on that deal and future telecom mergers and acquisitions was optimistic on Nov. 9. “The thing I’m most encouraged about is M&A,” Frank Louthan, an analyst with Raymond James, said during the FCBA event. Despite Trump's populist rhetoric and public position on the proposed AT&T-Time Warner merger, his view might change once he understands the deal's structure better, Louthan said.

Next year's Republican-led FCC may seek to play a smaller role in merger reviews, seek fewer merger conditions, and be more inclined to accept industry consolidation, Louthan said.

Former FCC Commissioner Robert McDowell, now a partner at Cooley LLP, told Bloomberg BNA that “although no one knows for sure what a Trump FCC will do, it is likely to be less regulatory and friendlier to M&A.”

AT&T’s planned Time Warner buy is not the only proposed telecom merger that will now likely be considered by Trump-appointed regulators. Other pending mergers include two proposed tie-ups among business broadband providers — one between CenturyLink Inc. and Level 3 Communications Inc., the other between Windstream Holdings Inc. and EarthLink Holdings Corp. There's also Verizon Communications Inc.’s bid for XO Communications LLC, itself a business data provider servicing corporate customers and cell sites.

Sprint Corp., a frequent target of merger speculation, saw its stock price spike Nov. 9 following Trump’s win.

Next FCC Head

As for who will take over from Wheeler in the next administration, telecom industry insiders were reluctant to handicap Trump's pick.

“I’ve been around way too long to know that such predictions are usually foolhardy. The so-called ‘leading candidates’ often aren’t the picks at all,” Free State Foundation President Randolph May told Bloomberg BNA by e-mail. “But, importantly, I’ll be looking closely to see whether the person picked, or those considered, have at least some basic understanding of communications policy and a demonstrable commitment to regulatory reform,” May said.

An FCC spokeswoman declined to comment Nov. 9.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com ; Kyle Daly in Washington at kdaly@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com

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