In the ‘net neutrality’ battle, tech has a secret weapon: Its lobby
FORTUNE — On a warm evening in early April, some of the most powerful figures on Capitol Hill were converging on the Carnegie Library in downtown Washington. Rep. Greg Walden (R-Ore.), who leads the House subcommittee overseeing the tech industry, was bounding up the library’s marble steps when he spotted somebody he knew and stopped to genuflect theatrically. On the receiving end of the bow: Gina Woodworth, a top lobbyist with The Internet Association.
Her year-old trade group was hosting the event, officially its first-annual awards dinner but also something of a debut for the outfit itself. Inside, attendees dined on bento boxes while Sen. Ron Wyden (D-Ore.), newly installed atop the Senate’s tax-writing committee, and House Oversight and Government Reform Chairman Darrell Issa (R-Calif.) each collected an “Internet freedom” award shaped like the wifi symbol.
The whole scene would have been tough to imagine a relatively short time ago. Back in 2006, the first and only time the issue of “net neutrality” came up for a vote in the full House, the tech industry was only just beginning to emerge from its extended infancy in Washington. And it showed: Squaring off against the entrenched lobbying machines of the telecom giants, the techies got crushed, 152-269, in their attempt to enshrine net neutrality principles in law. The result was even starker considering the industry lost nearly a third of Democrats, whose leadership was trying to corner Silicon Valley’s loyalty and whose grassroots were in full-froth in support of the cause.
This week is shaping up as a test of just how far the tech industry has come in the intervening years. FCC Chairman Tom Wheeler today is set to unveil his proposal for regulating broadband. His proposal flows from a federal Appeals Court ruling earlier this year striking down open Internet principles the FCC adopted back in 2010. In recent weeks, indications that Wheeler would seek to authorize the creation of “fast lanes” — allowing Internet providers to charge for quicker data delivery — stirred enough of a backlash that Wheeler has since signaled he’s revised his approach. Some net neutrality proponents — including consumer advocates and the trade group representing Internet startups — are pushing for more. (Indeed, some activists are actually camping out at the FCC headquarters to make sure their message gets through to commissioners.) They want the FCC to reclassify Internet providers as utilities, under Title II of the 1934 Communications Act. Providers, backed by Republicans, unsurprisingly strenuously oppose that option, since it would allow the agency to exert greater control over setting Internet traffic rules.
Whatever happens today is likely only to be the opening salvo in an extended engagement. If Wheeler can convince two commissioners — likely his two fellow Democrats — to vote with him to move his proposal forward, the agency will open a public comment period that runs through the summer. And the rulemaking ultimately could land right back in the courts.
Update 11:38am: The FCC this morning voted to move ahead with Chairman Tom Wheeler’s plan for crafting new “net neutrality” rules. Wheeler’s plan, governing how Internet providers can charge content creators for speedy delivery of their data, has been the subject of intense debate between the telecom and tech industries and, increasingly, consumer advocates and grassroots activists. With the commission voting along partisan lines to to proceed, the FCC will now open a comment period that ends July 25 — the next step toward adopting a new regime after a federal Appeals Court in January struck down rules the agency adopted back in 2010.
For now, one of the biggest wildcards remains just how far tech heavies are willing to go in their battle with the telecom giants. As far Beltway influence goes, Google (GOOG), for example, was a virtual nonentity back in 2006. It spent less on lobbying that year than Boston University. Its fledgling political action committee doled out a measly $37,000. AT&T (T), by comparison, spent six times as much supporting its K Street army and showered lawmakers with $2.7 million in campaign contributions. No wonder the House vote was so lopsided.
Two major developments since then have shifted the balance of power: a massive buildup of lobbying strength by tech industry leaders, and an explosion in the size (and political sophistication) of the netroots activist corps. The strength of that one-two punch sent policymakers reeling two years ago during the debate over a pair of anti-piracy bills known as SOPA and PIPA. Widespread, bipartisan support for the measures collapsed entirely in the face of a tsunami of opposition from what seemed like everyone with an Internet connection, conscripted into the fight by industry leaders.
But to paraphrase another sort of web master: With great power comes great perplexity. Google is, by any measure, a behemoth in Washington these days. Its PAC doled out more than $1 million during the 2012 election year (less than half of what AT&T gave, but still) — and actually narrowly edged the phone giant in lobbying expenses in 2013. That growth has tracked with Google’s rise globally as a corporate colossus, with all the attendant complications. In the summer of 2010, word leaked that the company was in talks with Verizon (VZ) — an erstwhile net neutrality foe, though many of its phones are powered by Google software — to allow providers to charge content creators for faster delivery. Consumer advocates fumed that the deal represented an about-face and that the company had sold out on its commitment to the open Internet. The joint proposal, a “suggested legislative framework” for tackling the issue, was overtaken by events. But it demonstrated that the clear lines once dividing industry players no longer applied.
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“The last thing you want to do is get cross with the providers when you’re sitting at the table negotiating the deal for your handset that’s going to come out on their network,” one industry lobbyist says. “These companies are more sophisticated. And in a way, having a bigger presence in Washington can negate your ability to dive in on an issue and ruffle the feathers up on Capitol Hill.”
Google, Amazon (AMZN), Ebay (EBAY), Facebook (FB), Netflix (NFLX), Yahoo (YHOO) and 100 other Internet companies last week sent FCC commissioners a letter warning that allowing providers to impose new tolls for transmission “represents a grave threat to the Internet.”
Still, while Engine Advocacy, the trade group for smaller Internet companies, is on record calling for the FCC to pull out the big guns and reclassify Internet services under Title II, the Internet Association — representing name-brand Internet companies — as of press time hadn’t yet followed suit. Says Engine Advocacy executive director Julie Samuels, “I think some the big companies won’t be leaders on this. They’re a little bit conflicted for practical reasons, and a lot of them feel burned from the last couple of net neutrality battles. It’s really hard fighting the cable companies. They have incredible—and frankly, frightening—amounts of resources.”