March 2015

Netflix CFO David Wells, in comments at an industry conference, appeared to backtrack on the company’s previous position that broadband Internet service should be regulated by the US government as a telecommunications utility -- but Netflix later said that its position remained unchanged on the issue. Wells said the company wasn’t happy with the Federal Communications Commission move. He said that, while the streaming-video company wanted to see “strong” net neutrality measures to ensure content providers would be protected against Internet service providers charging arbitrary interconnection fees, Netflix would have preferred a lighter regulatory touch.

“Were we pleased it pushed to Title II? Probably not,” Wells said. “We were hoping there would be a non-regulated solution.” Asked for clarification, a Netflix rep said there has been no change in the company’s stance: “Netflix supports the FCC’s action last week to adopt Title II in ensuring consumers get the Internet they paid for without interference by ISPs. There has been zero change in our very well-documented position in support of strong net neutrality rules.”

The House Subcommittee on Communications and Technology, chaired by Rep Greg Walden (R-OR), heard from Federal Communications Commission Managing Director Jon Wilkins as members began their review of the FCC’s $530 million Fiscal Year 2016 budget request. As part of the subcommittee’s effort to modernize the federal government for the 21st century, members discussed their work to reauthorize the FCC -- a task not completed since 1990 -- which is a critical part of the update of the Communications Act of 1934. “Much has changed since the last reauthorization of the commission,” said Chairman Walden. “The industries and markets the commission oversees have without question undergone dramatic changes and continue to evolve at a rapid pace. But in the intervening years the FCC has struggled to reflect the evolution of technology that has brought about the integration of voice, video, and data services and the significant shifts in consumer consumption patterns that have resulted.” The hearing mostly stuck to policy questions about the FCC's increased budget request to pay for increased IT infrastructure and moving portions of the agency to a cheaper location.

The Hill reports that Director Wilkins reported no need for the FCC to beef up its legal budget to defend against anticipated lawsuits against its new network neutrality rules. He said the commission must defend itself against major litigation in any given year, and its budget does not have to be increased to defend the new regulations. "This is certainly an important issue that will take staff work,” Wilkins said. “But in terms of my staffing discussions with those offices and bureau heads, it is not different than the usual large important issues that those staffs support. So there is no increase in this budget, for example, to support that activity." Rep. Bill Johnson (R-OH) argued it would have been cheaper for Congress and the FCC to work out net neutrality legislation rather than forcing the commission to defend its own regulations in court. "That litigation is not free," Rep Johnson said. "The taxpayers are paying for that litigation. The question is: Wouldn't it have been more prudent to let Congress work with the FCC to get a legislative fix to net neutrality rather than spend taxpayer dollars to litigate something they know is going to be litigated?" Ranking Member Anna Eshoo (D-CA) shot back that the FCC has had to defend plenty of actions that Congress has approved, including the upcoming spectrum auction. "There is not a tidy answer to this,” she said. “Congress takes action on a daily basis and people sue, so it’s not just one way or another.”

The Federal Communications Commission might be facing a series of separate lawsuits over its new net neutrality regulations, rather than one major legal action. Matt Polka, the head of the American Cable Association -- which represents small and medium-sized cable -- said that “literally all of our options are on the table" in response to the rules, but said that he was not coordinating with others who are also eyeing a lawsuit. “Litigation is a potential strategy for us,” he said. However, "we’re looking at these issues on our own,” he said. “We’re not working in concert with any other groups.” In addition to the American Cable Association, the National Cable and Telecommunications Association -- the industry’s major lobbying group -- appears to be also actively eyeing a lawsuit.

If the Federal Communications Commission ever again does anything as high profile as its network neutrality rules, its systems might not make it. “The portals might explode,” joked Gigi Sohn, a top aide to FCC Chairman Tom Wheeler. “If we had to do this again, I don’t know what would happen.” Sohn said that the FCC was “unprepared in a number of ways” for the massive public backlash that it faced since 2014, as it worked on the Web regulations.

The FCC received about 4 million public comments on its regulations and twice during the process, the agency’s electronic commenting system -- which has long the object of scorn from users and journalists -- crashed. “Communications policy issues are no longer a backwater, if they ever were,” she said. “The public cares deeply about these issues and will act on them.” In order to make sure that the FCC’s systems are better prepared next time around, Sohn said that the agency needed more funding. Many of its technology systems are a decade old, officials have noted, which has caused a severe lag.