As the FCC grappled with how to regulate network neutrality following an April court decision that diminished its authority over Internet service providers (ISPs), over the summer it began holding industry meetings. The goal was to bridge the gap between two groups that have been diametrically opposed on network neutrality: content providers fighting for an open Internet and Internet carriers fighting FCC regulation of their network management practices. Just when a stalemate seemed inevitable, on Aug. 9 content provider Google–a leading pro-net neutrality voice–and carrier Verizon broke away from the FCC talks and released their own joint legislative framework proposal.

Under the proposal, ISPs would be prohibited from “undue” discrimination against “lawful” data. They wouldn’t be allowed, as in the case that threw the FCC into uncertainty, to limit speeds to bandwidth-sucking content providers such as peer-to-peer filesharing networks, or, conversely, to allow faster speeds between users and certain content providers.

However, the proposal exempts wireless Internet from such net neutrality rules, which could have meaningful impact as the use of wireless broadband continues to grow. It also carved out exceptions to the nondiscrimination rule for largely undefined “additional online services,” which Google and Verizon wrote in a joint blog post could include “health care monitoring, the smart grid, advanced educational services, or new entertainment and gaming options.” Some also see in the proposal a foundation for prioritizing data by type, such as voice and video.

Because of such loopholes, the proposal received swift criticism from consumer groups and other pro-net neutrality interests, including web content providers such as Facebook and Skype, which formerly had a pro-neutrality allegiance with Google. One FCC commissioner, Michael Copp, said in a statement the proposal had “many problems.” Venture capitalists said the proposal would hamper competition.

“The proposal was very disappointing, and it certainly is not network neutrality,” says Marvin Ammori, former general counsel of Free Press who argued for the group as an intervenor in Comcast v. FCC. “Essentially, they engaged in double speak. The proposal used just about every loophole it could, and once you get through the loopholes, it gives very little jurisdiction to the FCC–it would defer to [mediation by an] industry body.”

Lost Authority

Google took to its Public Policy blog to defend the proposal by pointing to otherwise fruitless net neutrality discussions.

In his post, Google’s telecom and media counsel Richard Whitt wrote, “At this time there are no enforceable protections–at the Federal Communications Commission or anywhere else–against even the worst forms of carrier discrimination against Internet traffic. … We’re not saying this solution is perfect, but we believe that a proposal that locks in key enforceable protections for consumers is preferable to no protection at all.”

The proposal comes on the heels of what has been a tumultuous period for the FCC as it has been forced to re-evaluate how it can regulate ISPs on net neutrality.

In April, the D.C. Circuit found in Comcast that the agency lacked the authority to regulate ISPs’ network management practices, having failed to tie its ancillary, or implied, authority over ISPs to any express statutory authority. The ruling shook the foundation of the FCC’s governance over net neutrality and highlighted the weaknesses in the current regulatory scheme.

Following that ruling, the FCC proposed what it called a “Third Way”–an alternative to either continuing to regulate under the ancillary authority that the D.C. Circuit said it lacked, or applying its authority, set forth in Title II of the Telecommunications Act, over telecommunications services to Internet and broadband providers. The Third Way struck a balance–the FCC said it would assert its Title II authority to regulate certain ISP practices, but only where that authority was clear from the statute. In murkier areas, it would use rulemaking procedures to gain such authority. (The scheme would require committee-level approval, at the least, from Congress.)

“It’s not as good as if they’d gone to Congress and tried to get legislation passed,” says Kevin Thompson, a member at Davis McGrath. “[It's uncertain whether] they’re going to get the authority they need, but in this political climate they might think it would be easier to get that through than with a whole new set of regulations.”

Neutrality Stalemate

Under Title II, telecommunications companies are mandated to treat all data on their networks equally, and broadband carriers balked at the reclassification that would effectively expose them to stricter net neutrality regulations.

This summer, the FCC began holding closed-door meetings on the issue with Internet companies, carriers and industry groups including Google, Skype, industry representatives from the Open Internet Coalition, Verizon, AT&T and the National Cable & Telecommunications Association. (Consumer groups, meanwhile, were furious at their exclusion from the discussions as well as the lack of transparency surrounding the talks.)

“Carriers have fought net neutrality for years, and the discussions have conceded nothing–the idea that the talks would go anywhere was laughable,” Ammori says. “There was huge backlash for the FCC. The carriers were not conceding at all, and were asking for things that were totally unacceptable.”

Awaiting Action

It was against this backdrop that the Google/Verizon proposal made its entrance–leading the FCC to suspend all industry talks. (They resumed, sans the FCC’s involvement, in mid-August.)

“The proposal certainly is something they would have floated to the FCC in those meetings, and it was likely rejected because their proposal doesn’t give the FCC much authority at all, which wasn’t very flattering to the FCC,” Thompson says.

There also has been some question as to whether the FCC should have authority over the Internet at all.

“Deborah Platt Majoras, the last Federal Trade Commission chairwoman, [repeatedly said] the FTC should have jurisdiction over the Internet, which would leave the FCC with nothing to do in the nonbroadcast arena–in other words, it would become irrelevant,” says Tom Dougherty, a telecommunications lawyer at Fletcher, Heald & Hildreth.

The FCC could prove its effectiveness as a regulatory agency with action. Many expect rulemaking action before the midterm elections could hand more seats to Republicans, who have been less supportive of net neutrality.

“All the pro-neutrality forces will want [FCC Chairman Julius Genachowski] to stiffen his spine and make a decision before the election,” Ammori says. “But a lot of pro-neutrality forces think he wants to let the clock run out and then, after November, say that there’s nothing they can do there because they lost seats. Meanwhile, I think Google will remain silent, chastened.”