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Obama’s Net Neutrality Stance May Spur More Boisterous Partisan Debate

Just hours after President Obama announced that he favors a robust regulatory regime for net neutrality, his ideological foe Ted Cruz tweeted, “Net neutrality is Obamacare for the Internet.”

Think about what is ahead: A hard-to-understand, often abstract concept distilled into a snappy social media bite. In other words, will a decade-long, wonkish policy debate morph into something that will mobilize the right on an entirely new issue?

But in favoring the reclassification of the Internet as a Title II service — akin to that of a utility — Obama is betting that public will is on his side.

More than 3.7 million comments flooded the FCC over the summer and early fall, many of them fueled by campaigns by progressive and public interest groups calling for a robust approach. That’s a record number of comments for an FCC proceeding, and it’s likely that a majority of them favor stronger rules.

While Obama’s position was immediately met with alarm by telecommunications and cable providers, like the president their public approval ratings aren’t exactly soaring.

And if support from industry is a concern, Internet companies like Google and Facebook, via their trade association, came out in favor of Obama’s proposed approach. They have their own self interest, to be sure: Netflix, for instance, is balking at having to pay Comcast and other Internet providers interconnection fees so they can be sure their signal gets to subscribers in quality form.

Why now? A month ago, on a trek to Los Angeles, Obama visited an incubator for start up tech companies and signaled his support for such an approach when he said that he favors banning paid prioritization, in which content companies could pay Internet providers for speedier access to the consumer. Perhaps going a step further was a way of avoiding a midterm election minefield, on an issue that otherwise wasn’t getting much attention on the campaign trail.

Moreover, as Obama looks to his final two years constrained by a Republican majority, net neutrality is an issue with resonance in Hollywood’s creative community and tech start ups, significant voices in driving enthusiasm for the Democrats who will need plenty of it as the head into the presidential election cycle.

The big solace to the White House may be in what happened with the Stop Online Piracy Act, or SOPA. While the movie industry lobby was blindsided by the online campaign to defeat the legislation, what it also showed was the emotional attachment that users have with mobile devices, apps and Internet access. The idea that Congress was about to “brake the Internet” may have been hyperbole in Hollywood’s eyes, but it framed the issue in a way that created public outcry and a cascade of calls to Capitol Hill.

Similarly, Republicans have and will be characterizing Title II as a move that will “break the Internet,” but that’s also the way that pro-net neutrality groups frame what will happen if weak rules are put in place. The latter was out in full force first, trying to define the issue in a way that would stir up excitement even greater than past efforts to write rules of the road for the Internet.

FCC chairman Tom Wheeler doesn’t have to heed Obama’s wishes. He presides over an independent agency. He didn’t rush to support what Obama said but called it a “welcome addition to the record.” Given the reaction of Wall Street and the words of some analysts, however, Monday’s announcement is a significant new development in the future of broadband. Comcast shares dropped 4% in trading Monday as the Street interpreted Obama’s stance as another ominous sign for the cable giant’s pending merger with Time Warner Cable.

Obama’s announcement at once complicates things for the FCC chairman and provides support should he decide to pursue a Title II approach. Wheeler has been trying to write net neutrality rules in a way that will pass legal muster, but the vehement reaction from Internet providers raises doubts that any robust approach won’t be met with another legal challenge.

Some Wall Street analysts believe that the confluence of net neutrality with the Comcast-TW Cable merger and AT&T-DirecTV union may lead to some sort of “grand bargain,” in the words of a report from MoffettNathanson last month. Instead of reclassifying the Internet, it would be continued to be a Title I information service. The net neutrality rules would allow for paid prioritization, but such deals would be banned as conditions of the mergers. Other parts of the Internet backend, like interconnection, would be reclassified. “The ‘grand bargain’ remains the most likely scenario, in our view,” MoffettNathanson wrote.

Wheeler said that his own “hybrid” approach needs more review, particularly on an issue that may get more emotional in the coming months — if it hasn’t already — on the left and the right. A handful of protesters on Monday stood and sat on Wheeler’s driveway, blocking his ability to get back up his Mini Cooper and be off to work.

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