Service by your local cable or satellite provider. F. C. C. Chairman tom wheeler has presented his Net Neutrality proposal to the other commissioners. The vote in the federal Communications Commission is due on february 26. Joining us on the communicators this week to talk about that is f. C. C. Special counsel gigi sohn. Gigi sohn, about a month or so ago, chairman wheeler talked about a different proposal that did not include title 2 regulation. Whatever happened to that . Why didnt that get presented to the commissioners . I think youre referring to a couple months ago there was a discussion of a hybrid proposal but that included title 2. And in fact, there were several different proposals. All of which included title 2. So the chairman really had been considering title 2 as part of a Net Neutrality solution. Now id say, for about four or five months now. Well, our guest reporter had a frontpage story this week in the wall street journal on the process of developing that. What i wanted to ask was, some of the Companies Involved with the white house, according to our guest are pretty successful companies. Etsy et cetera. Why do they need further protection as it were, Net Neutrality protection, when theyve been successful up to this point . The reason those groups and by the way, chairman wheeler met with those groups in brooklyn, new york last june, groups like etsy and tumbler and kickstarter. They became successful because the internet was open. They got to choose who they got to sell their goods to. You know, they got to choose how they wanted to run their business without an Internet Service provider in the middle telling them what to do or whether they had to pay for Priority Service or better equality of service. So thats why theyre successful. What they were asking for was for us to preserve those rules. As you know, the rules that were in place in 2010 got struck down by the d. C. Circuit here in town in january of 2014. So the chairman needed to reinstate rules in order to ensure that those companies could continue to thrive. But has anything changed in the way the net operates since 2010 . Well, under the 2010 rules the Internet Service providers Broadband Internet access providers, like verizon, like comcast, they knew that if they prioritized their own content or other content for pay that somebody could come to the f. C. C. And say theyre acting illegally. So and for the most part they behaved. Whats really important about those rules was it gave Public Interest groups and others, and companies, a tool by which they could go to an Internet Service provide, if they felt they were engaging in discriminatory behavior, and say, hey, look, youre violating the rules here. I think those rules kept the companies that doing the wrong thing. Similarly, even though the rules were struck down in 2014, the chairman said right away, in february im going to reinstate these rules. Im going to figure out the best way to reinstate these rules. The Internet Service providers also were on their best behavior, because they knew if they even ran afoul of the 2010 rules that had been struck down, theyd be asking for trouble. Gigi, when the chairman gave that statement you just referred to, he indicated he believed it was possible to preserve Net Neutrality without changing how broadband was classified. Subsequently, we have seen him evolve, as he has said, to a position where now hes going to be classified both mobile and fixed broadband as common carriers for the purpose of implementing these rules. Why is that necessary . So let me just talk a little bit about the chairmans evolution, because, you know, your article was very interesting. But i do think that it missed one fundamental point. Your article said that the president by his announcement, calling for title 2, forced the chairmans hand. But the fact of the matter is that he was evolving long before that. Let me give you a couple of data points. In june the chairman announced he was going to do an investigation. The f. C. C. Was going to do an investigation into interconnection practices between netflix and comcast and verizon. So he started to see the importance of that market. In august, he sent a letter to verizons c. E. O. , because they were throttling, quote unquote unlimited customers. In response, verizon stopped doing that. At that time, he started to kind of look at the laws governing mobile broadband and found that in fact mobile broadband excuse me mobile voice had been regulated under title 2 of the Communications Act for 20 years in a lighttouch way and had led to almost 300 billion worth of investment. In fact, he met with the Wireless Industries in september and basically told them in almost no Uncertain Terms really wasnt any mystery that he was going to level the Playing Field between mobile broadband and fixed broadband when it came to Net Neutrality rules which was something that was not in the 2010 rules. Then by october, as we started talking about this hybrid that had title 2 in it. So there really was an evolution here. I find the fascination with the chairmans evolution kind of interesting, because nobody talks about how the president evolved on gay marriage anymore right . Its not important where he was. Its important where he is now. And where he is now is that title 2 is the securitiest Legal Authority. Weve been to court twice. Some people will argue whether weve lost twice or whether we sort of won the last one, because the court said we had authority under 706. The fact of the matter is, there are no Net Neutrality rules now. He wants to be the last chairman to go to court and he wants that court to say you are on firm legal ground. It sounds like let me say two things. I think its important to remind people four million americans weighed in here. Okay . The president did as well. I think what the president s statement did was, rather than force the chairmans hand, was give him cover to do something that he already was thinking about doing. But as a lot of people know, ive been doing this kind of work for a really long time. For four Million People to weigh in to an f. C. C. Proceeding is humongous. The vast majority of them were asking for a stronger Legal Authority. They were asking for title 2. It shocked me, right . I expected people to say we want strong Net Neutrality rules. But for them to specifically ask for this, long before the president did, is really quite amazing. Gigi, so whats the advantage to a comcast, an at t, a verizon in your view if this proposal goes through . Certainty. These companies, particularly verizon, at t, they lived under a title 2 regime when they had dsl service. So prior to 2005 so in 2002 the f. C. C. Decided that Cable Modem Service was an information service. But dsl service which is what at t, verizon operated under was a title 2 service until 2005 when thenchairman martin, after the case had gone all the way to the Supreme Court and decided that dsl would be similarly deregulated. So its not like they dont know how to live under this regime. In fact, this regime has a lighter touch. Its only going to apply a handful of provisions of title 2, a lighter touch than what they lived with 12 years ago. Comcast, similarly, they know the rules. So this gives them the certainty that we havent had now for over 10 years. Frankly, even longer than that. Its really been about 15 years now that people have been advocating first it was called open access. Then it was called Net Neutrality. To put this thing to bed finally after 15 years, i think the companies will actually find that easier. In 2001, was Net Neutrality one of your key goals . It was. Title 2 Net Neutrality . No. I think that wasnt because remember, in 2001, the f. C. C. Hadnt classified Cable Modem Service yet as an information service. That didnt happen until 2002. If you remember, in 2001, in the late 90s, everybody was worried about a. O. L. And the walled garden. They wanted a. O. L. To open up its network to other voices. And it wasnt until the classification of Cable Modem Service and then the reclassification of dsl in 2005 that people started to say, why did we do this . I think theres an important point out. The brand x decision was a decision in 2005 where the Supreme Court said the Supreme Court looked at the f. C. C. s cable modem decision, the decision to classify it as a service, they said this isnt the greatest decision but its not arbitrary and capricious. Its not in plain english, totally wacky. And i think people misconstrue that brand x case. All the Supreme Court did is say the f. C. C. Has the discretion to interpret the Communications Act. Even though its not the best interpretation, as long as its not wacky, we have to uphold it. And i think thats whats going to happen here. Okay . Well, i think its going to be better here. We reclassify. Well inevitably be taken to court. And the court will say whether or not they agree with our reclassification, that is not wacky, not arbitrary capricious. An independent agency has the abilities and the legal right to determine what its authority is and determine what the classification of its services are. So i feel good about the Legal Authority that weve chosen here. The broadband industry officials, of course have many of them have a different opinion, i think its fair to say, about the Legal Authority youve chosen. They say they are okay with Net Neutrality but that classifying them as a common carrier is a step too far. As you outlined, the chairman signaled that he intended to forebear for much of the title 2 regulations i speak yesterday to broadband industry officials who believe that section 201 of title 2 would actually contain that rate regulation authority. So even if this f. C. C. Does not choose to use it, have you made it easier for a future f. C. C. , if they should so choose, to regulate broadband pricing . Thats a scare tactic. I know folks that work for the isps are up in wall street telling investors and others, oh, my god, this is going to lead to rate regulation. I think a perfect example is the mobile industry. There hasnt been rate regulation. Theres been no rate regulation of a Retail Service since cable regulation, 22 23 years ago. So i think the fear is unfounded. The chairman has said we are not going to rate regulate. And hey, i dont know who the next f. C. C. Chairman is. The next f. C. C. Chairman may try to throw out this whole regime and do something more free market oriented or less regulatory. I dont really buy the next chairman argument because the rules are only as good as the guy or the gal on the eighth floor enforcing them. So weve got to do our best to set up an infrastructure that will protect consumers, that will preserve on open internet which has been the greatest driver of Economic Development free speech, innovation this world has ever known. Theres been a lot of talk about preserving the internet the way it is. But the way the internet is today, a large percentage of americans, depending on your definition of broadband, dont have access to broadband at home. That is where the question of rate regulation comes in. Isnt there a case for some sort of subsidized program in order to make broadband available to a greater percentage of american households . Well, there is a program but its called universal service. Its not rate regulation. Its one of the privileges we will not be forebearing from. That ensures that people in the deepest rural areas, in the poorest urban areas, get an opportunity to have broadband. Now, let me tell you it hasnt solved the problem. Its existence has not solved the problem. We just put out a study a couple weeks ago that showed that 53 of rural americans do not have access to what we are considering table stakes for broadband. 17 of all americans dont have access. So this is a major problem. And we can try to solve it through programs like universal service, both through the connect america fund which goes to rural areas, and were also looking at whether lifeline, a subsidy for the poorest americans, whether that should be a broadband fund. Were also trying to promote competition. Everybody is so excited and focused on Net Neutrality, that theyve kind of ignored the other item on the docket in february, and thats what the chairman has recommended, again, there has to be a vote on february 26, but hes recommended the preelse preemption of two state laws that prohibit local Community Broadband providers from expanding their current footprints. So there are in our calculation, 21 states that have restrictions on communities building their own broadband service, whether its the city themselves, whether its a Publicprivate Partnership whether its coops. There are 21 states that restrict it. We believe if those bounds were freed, then there would be more competition. Competition drives down prices, results in Better Service results in more service. So we are going to find other ways to promote competition to fill the rule and the urban the rural and the urban gap. Gigi sohn, what was the rational behind treating wireless the same as wired broadband . And is this unprecedented in a sense . It is unprecedented because the 2010 rules did not have a level Playing Field with regard to open internet rules. They were applied very weakly. There were one or two provisions that applied to wireless, but for the most part, it didnt apply to wireless. 55 of all internet traffic is now mobile wireless. This is the future. Everybody has not everybody but most people have a smartphone or a tablet or, you know another device that connects to the wireless internet. Its everywhere. A lot of households have multiple devices. It just didnt seem to make sense to the chairman anymore, in 2014, now 2015, to leave wireless unprotected when it is more than half of the internet traffic. Speaking of wireless, we do see some more innovative or newer Business Models already emerged in wireless, especially in the low cost and prepaid arena, things called zero ratings. Your proposal indicates that you guys will handle those programs on a casebycase basis. Can you tell us, what is the criteria for Something Like a zero rated Facebook Program would be permitted under the Net Neutrality rules . So we talked about the Legal Authority in some detail. Let me talk about the actual rules themselves. There are three bright line rules. Okay . You cannot have an Internet Service provider cannot block lawful applications and services. They cannot throttle. That means they cant impair or degrade lawful content applications and services. And they cannot engage in paid prioritization, that is, either favor their own affiliated content or another content through consideration. Then theres what i call a safety net or catchall rule. That basically says that any Internet Service provider practice that harms user choice or edge providers ability to make their content applications and Services Available to users will be looked at for whether its discriminatory or not. Okay . So the zero rating, we do not take a position on zero rating. But if somebody were to bring a complaint and then have to do that, it would be viewed under that safety net lens. And lets talk about the other aspect of this order, which is that it will, for the first time, give the f. C. C. Authority over interconnection, where the back end of the Broadband Network connects to big traffic carriers like level 3 or content Companies Like netflix. Can you explain why there are going to be some paid arrangements allowed there, and again, what the criteria is when the f. C. C. Is evaluating them . I dont want to judge whether paid arrangements will be allowed. What we have done by extending title 2 to interconnection or Traffic Exchange is, for the very first time, giving Companies Like netflix google, level 3, amazon, the ability, if they believe theyre being charged unreasonable rates or theyre being discriminated against, if an Internet Service provider is favoring their own traffic over theirs, to come in and file a complaint and say they are discriminating against us they are charging unjust and unreasonable rates under section 201, 202 and 208 of the Communications Act. This is a very big thing, because weve never taken and this is where it goes further than the president s position, which is a point i wanted to make before. There are two places where our proposal is actually stronger than president obamas proposal. One is in that he didnt actually call for us to exert authority over interconnection and second is w