24/7 Wall St.

Even though the room had to be cleared once for security purposes, nothing could stop the Federal Communications Commission (FCC) from taking a vote on what FCC chairman Ajit Pai called a “Restoring Internet Freedom” proposal. The three to two vote in favor of the Pai’s proposal came strictly on party lines with all three Republican members voting in favor and both Democrats voting against.

The FCC vote effectively kills the Obama administration’s 2015 regulation — known as “Net Neutrality” — that defined the internet as a common carrier on which all data receives equal access to both bandwidth and transfer speed. The regulation also gave the FCC enforcement power for the rule.

The regulation adopted Thursday replaces the FCC as the regulatory agency for the Internet with the Federal Trade Commission (FTC) and ultimately allows internet backbone carriers like Verizon, AT&T and Comcast to offer tiered pricing — the more a person or company pays, the faster their packets are moved through the fat pipes. So far no carrier has said it plans to do that, but net neutrality supporters claim that without common carrier restrictions there is no way to prevent providers from doing so in the future.

FCC commission Mignon Clyburn, a Democrat, released a scathing attack on the chairman’s proposal:

[A] soon-to-be-toothless FCC, is handing the keys to the Internet – the Internet, one of the most remarkable, empowering, enabling inventions of our lifetime – over to a handful of multi-billion dollar corporations. And if past is prologue, those very same broadband internet service providers, that the majority [of FCC commissioners] says you should trust to do right by you, will put profits and shareholder returns above, what is best for you.

Pai’s argument against that criticism is, essentially, that the market will ensure the basic features of net neutrality by requiring broadband providers to pledge to abide by net neutrality principles such as no blocking or paid prioritization of internet traffic.

Commissioner Clyburn is not moved:

Many have asked, what happens next? How will all of this – Net Neutrality, my internet experience, look after today? My answer is simple. When the current protections are abandoned, and the rules that have been officially in place since 2015 are repealed, we will have a Cheshire cat version of net neutrality. We will be in a world where regulatory substance fades to black, and all that is left is a broadband provider’s toothy grin and those oh so comforting words: we have every incentive to do the right thing. What they will soon have, is every incentive to do their own thing.

New York state attorney general Eric Schneiderman has already filed suit to halt implementation of the new FCC rule, and it is a safe bet implementation will not occur in 2018 and perhaps even in 2019 as the FCC faces lawsuits from every direction.

24/7 Wall St.
SunTrust Analysts Love 5 Data Center and Tower Stocks for 2018