WASHINGTON—In November, the White House’s top economic adviser dropped by the Federal Communications Commission with a heads-up for the agency’s chairman, Tom Wheeler. President Barack Obama was ready to unveil his vision for regulating high-speed Internet traffic.
The specifics came four days later in an announcement that blindsided officials at the FCC. Mr. Obama said the Internet should be overseen as a public utility, with the “strongest possible rules” forcing broadband providers such as AT&T Inc. and Verizon Communications Inc. to treat all Internet traffic equally.
FCC Chairman Tom Wheeler outlined several points that would ensure all internet traffic is treated equally. Mozilla head of public policy Chris Riley discusses whether free internet advocates have reason to cheer on the News Hub. Photo: iStock/monkeybusinessimages.
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The president’s words swept aside more than a decade of light-touch regulation of the Internet and months of work by Mr. Wheeler toward a compromise. On Wednesday, Mr. Wheeler lined up behind Mr. Obama, announcing proposed rules to ensure that the Internet “remains open, now and in the future, for all Americans,” according to an op-ed by Mr. Wheeler in Wired.
The prod from Mr. Obama came after an unusual, secretive effort inside the White House, led by two aides who built a case for the principle known as “net neutrality” through dozens of meetings with online activists, Web startups and traditional telecommunications companies.
Acting like a parallel version of the FCC itself, R. David Edelman and Tom Power listened as Etsy Inc., Kickstarter Inc., Yahoo Inc. ’s Tumblr and other companies insisted that utility-like rules were needed to help small companies and entrepreneurs compete online, people involved in the process say.
In an office on the fourth floor of the Old Executive Office Building, some companies claimed they would have never gotten off the ground if they had been forced to pay broadband providers. “We want to compete on product and service, not on our ability to negotiate preferable treatment with an Internet service provider,” said David Pashman, general counsel for Meetup Inc.
The big losers in the White House process were cable and phone companies, which spent years lobbying to gain support for their view that toughened rules would make it harder for them to offer new kinds of services. Executives who tried to go over the two aides’ heads, including by appealing directly to Valerie Jarrett, Mr. Obama’s senior adviser, got nowhere.
Mr. Wheeler wasn’t available for comment Wednesday. Senior FCC officials say he was always open to shifting his position and became convinced that the tougher stance advocated by Mr. Obama wouldn’t discourage broadband companies from upgrading their networks.
White House spokesman Josh Earnest said Wednesday that the White House was “encouraged to see that the FCC is heading in the same direction of safeguarding net neutrality with the strongest possible protections.” He added: “This is consistent with the view that the president articulated back in the fall.”
While Mr. Obama’s position stunned officials at the FCC, he wanted to push for strong rules ensuring net neutrality right after his 2008 election over Sen. John McCain (R., Ariz.). The FCC’s chairman at the time, Julius Genachowski, supported Mr. Obama and aimed to write strong rules preventing broadband providers from making some websites work faster than others for fees.
But Larry Summers, then the Obama administration’s chief economic adviser, and other officials urged the president to focus his attention on the turbulent economy, former White House officials say.
“I’ve always supported net neutrality, but I have been very concerned and remain very concerned about overly heavy-handed approaches to net neutrality that I believe could choke off substantial volumes of productive investment to the detriment of American economic growth,” Mr. Summers says.
Mr. Genachowski went ahead with FCC rules that were weaker than those proposed Wednesday, but they were thrown out in January 2014 by a federal appeals court. The court said the FCC couldn’t impose the rules because it had explicitly decided previously not to classify broadband as a telecom service.
The ruling sent the question of how to regulate the Internet back to the FCC, where Mr. Wheeler became chairman in November 2013. The former cable- and wireless-industry lobbyist sought a compromise.
People familiar with his thinking say he didn’t want to regulate broadband companies in the same way that phone companies are regulated. Mr. Wheeler also wanted to leave some room for broadband providers to explore new business models, including accepting payments from content providers. That could allow broadband companies to offer free or cheap services.
Broadband companies generally liked the FCC chairman’s approach, but net-neutrality die-hards quickly started mobilizing against it. Last April, Marvin Ammori, a lawyer who advises startups and Web companies, warned in a meeting at Tumblr’s headquarters in the Flatiron District of New York City that Internet regulation was a do-or-die necessity for small firms.
The FCC soon proposed rules allowing broadband providers to charge companies a premium for access to their fastest lanes, as long as such arrangements are available on “commercially reasonable” terms for all interested content companies. “Commercially reasonable” would be decided by the FCC on a case-by-case basis.
Officials at some Internet startup companies decided they had to fight the proposal but didn’t know where to start. Mr. Ammori recalls that some officials asked if they needed to register as lobbyists to meet with regulators and lawmakers. They didn’t. Mr. Wheeler resisted stronger rules.
At the same time, Mr. Ammori tried to build wider public support for net neutrality. Last May, he spoke with a researcher for “Last Week Tonight with John Oliver, ” the HBO comedy series. On June 1, Mr. Oliver unleashed a 13-minute rant in an episode of the show, comparing Mr. Wheeler to a dingo and encouraging viewers to bombard the FCC with comments.
The deluge crashed the FCC’s online comment system. Overall, the agency got more than four million comments on last year’s rule proposal.
Mr. Wheeler was open-minded about the concerns of online activists and Web startups, people close to him recall, holding meetings in Silicon Valley and New York to hear objections to his plan to allow some preferential treatment for Internet traffic.
Before one meeting, Mr. Ammori advised technology executives to share personal stories of how an open Internet helped them create their companies. They were discouraged when the FCC chairman opened the meeting with a sales pitch on his approach and why it would protect net neutrality, according to people who attended the meeting.
Mr. Wheeler ran into stiff resistance at a July 2014 meeting at the New York office of online crafts marketplace Etsy. Before the meeting, Mr. Ammori wrote a 10-page memo detailing the legal arguments against Mr. Wheeler’s approach—and gave copies to executives set to meet with him.
In a lucky coincidence, Tumblr Chief Executive David Karp , who attended the meeting in New York, found himself seated next to Mr. Obama at a fundraiser the following day hosted by investment manager Deven Parekh.
Mr. Karp told Mr. Obama about his concerns with the net-neutrality plan backed by Mr. Wheeler, according to people familiar with the conversation. Those objections were relayed to the White House aides secretly working on an alternative.
Mr. Edelman, who turned 30 years old on Wednesday, had previously spent four years at the State Department, starting as an analyst specializing in northeast Asia, and was finishing his doctorate in international relations from Oxford University. Mr. Power is a longtime telecom lawyer and White House official who took his first job at the FCC in the 1990s.
Messrs. Edelman and Power started working on the White House plan last spring. As their work progressed, aides began summarizing the arguments for net neutrality in allegorical terms. For example, the White House aides said, imagine calling the operator for a phone number for car-rental company Avis and being asked whether you would prefer Hertz.
Officials told participants not to discuss the process openly.
A generational shift, including the departure of Mr. Summers, left behind a younger, tech-savvy staff inclined to favor Web companies over telecommunications firms. Senior White House officials like Jeffrey Zients, director of the National Economic Council, were primarily concerned about the potential economic impact of changing the rules.
As rumors swirled last fall that Mr. Obama was preparing to call for tougher Internet regulations, Comcast Corp. CEO Brian Roberts called Ms. Jarrett, pressed her for information and urged the White House not to go through with the move, people familiar with the matter say.
She offered no help, these people say. Google Inc. Executive Chairman Eric Schmidt spoke with White House officials, urging them not to go through with utility-like rules.
Google, Facebook Inc. and other large Internet companies expressed support for net neutrality through the Internet Association, a trade group, but were largely on the sidelines during the White House process.
On Oct. 21, the White House invited chief executives of Tumblr, Etsy, Kickstarter, and IAC/InterActive Corp.’s Vimeo video platform to the West Wing for a meeting with Mr. Zients, top White House economist Jason Furman and other senior aides.
For more than an hour, White House officials questioned the CEOs gathered in the Roosevelt Room about why net neutrality was so important to them, according to people who attended the meeting.
Chad Dickerson , Etsy’s chief executive, replied that nearly nine of every 10 Etsy sellers are women, many earning a living from selling on the website. Kickstarter and Tumblr executives said treating Internet traffic equally was crucial to thousands of people who built businesses on their platforms.
While Obama administration officials were warming to the idea of calling for tougher rules, it took the November elections to sway Mr. Obama into action.
After Republicans gained their Senate majority, Mr. Obama took a number of actions to go around Congress, including a unilateral move to ease immigration rules. Senior aides also began looking for issues that would help define the president’s legacy. Net neutrality seemed like a good fit.
Soon, Mr. Zients paid his visit to the FCC to let Mr. Wheeler know the president would make a statement on high-speed Internet regulation. Messrs. Zients and Wheeler didn’t discuss the details, according to Mr. Wheeler.
Mr. Obama made them clear in a 1,062-word statement and two-minute video. He told the FCC to regulate mobile and fixed broadband providers more strictly and enact strong rules to prevent those providers from altering download speeds for specific websites or services.
In the video, Mr. Obama said his stance was confirmation of a long-standing commitment to net neutrality. The statement boxed in Mr. Wheeler by giving the FCC’s two other Democratic commissioners cover to vote against anything falling short of Mr. Obama’s position.
That essentially killed the compromise proposed by Mr. Wheeler, leaving him no choice but to follow the path outlined by the president.
In his op-ed Wednesday, Mr. Wheeler wrote: “I am submitting to my colleagues the strongest open Internet protections ever proposed by the FCC.”
