Tom Wheeler FCC

New FCC chairman Tom Wheeler on Monday expressed support for continuing the agency’s net neutrality rules, now being challenged in a federal appellate court, but he said that they should let the marketplace “evolve” before addressing whether Internet providers should be able to charge users based on the amount of bandwidth they use.

Wheeler’s remarks, made at Ohio State University at a Q&A session following his first major policy speech, touched on the contentious question of usage-based pricing, which some public interest groups warn will limit the growth of Internet video if consumers face pressure to limit their viewing of movies and TV shows. Internet providers have said that usage-based pricing so far has been aimed at so-called data hogs, or the most egregious cases.

Wheeler said that “we are seeing the market evolve in such a way that there will be variations in pricing, there will be variations in service.”

He added: “I am a firm believer in the market. I think we’re also going to see a two-sided market where Netflix might say, ‘Well, I’ll pay to make sure that my subscriber receives the best possible transmission of this movie.’ I think we want to let those kinds of things evolve, and we want to observe what happens from that and we want to make decisions accordingly. I go back to the fact that the marketplace is where these decisions ought to be made, and the functionality of a competitive marketplace dictates the degree of regulation.”

Nevertheless, much of Wheeler’s speech was devoted to a robust role he saw for the FCC in the digital age. In fact, shortly before the speech, the FCC released an eBook he wrote, called Net Effects, in which he put the digital revolution in context with the printing press, the railroad and the telegraph and telephone.

He said that he “will not hesitate to invoke the full authority granted to us by Congress to protect competition, and I will not hesitate to use the full authority granted to us by Congress where competition is not available to secure the public interest through the promotion of competitive markets.”

The FCC could face a vexing situation soon, as the D.C. Circuit Court of Appeals is set to rule on the constitutionality of the net neutrality rules that the agency passed in late 2010, after which Verizon challenged the rules in court. If the rules are struck down, the FCC will be faced with whether to appeal or try to devise a new approach.

In his speech at Ohio State, Wheeler did not say what the FCC would do, but in seeing the agency’s role in ensuring consumer access to broadband, he said that “also means the ability of users to access all lawful content on a network.”

Although the net neutrality rules were passed during the tenure of Wheeler’s predecessor, Julius Genachowski, some public interest groups complained that they were not robust enough and even that the agency risked irrelevance with the growth of the Internet and wireless industries.

“As networks evolve, so should government oversight,” Wheeler said in his speech. “There are some who suggest that new technology should essentially free the new networks from regulation, that market forces are enough to ensure that the public interest will be served. I am a rabid believer in the power of the marketplace. But I have seen enough about how markets operate to know that they don’t always, by themselves, solve every problem.”

Wheeler pointed to his support of so-called mobile-phone unlocking, allowing users to switch to a different network from the one that sold the device. “I believe that once a consumer upholds his or her end of the deal to buy a phone, he or she should be able to switch that phone to another carrier’s network. It’s called competition.” He added that he spoke to the head of the wireless trade association to encourage them to adopt such mobile-phone unlocking, and said that “if mobile phone companies don’t act voluntarily — and quickly — to adopt a policy to unlock phones, I will work hard to ensure the FCC will act to require them to do so.”

He also pointed to the proposed merger of AT&T with T-Mobile, which the FCC refused to approve. “And look what happened,” he said. “Following the signal that the FCC is committed to a competitive mobile marketplace, both T-Mobile and Sprint have been able to attract significant investment capital to build out their networks and increase competition in the mobile industry.”

He cautioned that his approach didn’t mean “regulating the Internet,” something he called “a non-starter.”

He said, “What the Internet does is an activity where policymakers must be judiciously prudent and should not be involved. But assuring the Internet exists as a collection of open, interconnected facilities is a highly appropriate subject.”

“I have zero interest in imposing new regulations on a competitive market just because we can,” he said. “I have repeatedly advocated the ‘see-saw’ rule, that when competition is high, regulation can be low. The effect of the ‘see-saw’ rule gives companies control over their regulatory fates based on the degree to which they embrace competition in their markets.”

Wheeler said that the “number one issue” he has been working on is the preparations for a spectrum auction, in which broadcasters will voluntarily give up their airwaves and share in the proceeds of an auction to wireless firms. Among the issues he is facing is whether there will be limits on wireless carrier participation, as there are fears that smaller companies will be squeezed out. He also said that a schedule for the auction would be unveiled “in the not too distant future.” But he said that they will “not be rushed into the schedule” and cited problems with the rollout of healthcare.gov. “You want to make sure that the software is up to the task,” he said.

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