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Privacy vote is foretaste of net neutrality battle

The wait for Washington’s new Republican political establishment to take on the regulations that hold the country’s media, internet and communications industries in delicate balance is over.

Both chambers of Congress have lined up over the past week to slash the power of regulators to limit the freedom of the country’s cable and telecoms giants.

The opening shot came on Tuesday, as the House of Representatives voted to override a Federal Communications Commission regulation limiting the freedom of cable and telecoms companies to trade personal data about their customers to advertisers. That matched a vote by the Senate the week before.

If signed into law, this would remove the FCC’s authority over privacy regulations that relate to networking giants such as Comcast and Verizon. The move is the boldest sign yet of a broader change in policy direction in Washington since the November elections that promises to take the shackles off the cable and mobile industries.

According to lobbyists and consumer advocates, that makes it a forerunner to a pair of bigger fights that will shape the US internet and media industries for years to come: the net neutrality regime that sets the ground rules for access to digital communications and media, and approval of AT&T’s $109bn bid for Time Warner.

[The battle] to dismantle the regulatory state has begun

In the internet and media worlds, the battle “to dismantle the regulatory state has begun”, said Jeff Chester, a privacy advocate in Washington. For the White House, he added, the advertising battle has been a test case for a broader regulatory rollback: “High on the list is net neutrality. They really wanted to see what the opposition is going to be like.”

The severe retrenchment of FCC power fits with the agenda of Ajit Pai, the Republican-appointed commissioner who took over as chairman of the agency after the election. Mr Pai has been a vociferous opponent of net neutrality, and has already taken snips out of the regime put in place by the Obama-era FCC to limit the powers of cable and telecoms companies to exert more control over the data flowing through their networks.

The Republican congress’ action in recent days would also leave the remit for privacy regulation in the US completely with the Federal Trade Commission, which has taken a largely hands-off approach. While bringing the ISPs more into line with internet companies, that has not pleased privacy advocates.

The shift in direction to unshackle the network companies threatens to reset the competitive landscape, and is shaping up to be a mixed blessing for internet giants like Google and Facebook.

On the one hand, it promises to free cable and mobile companies to become more aggressive participants in the data economy. Critics argue that they have access to some types of personal data that are even more sensitive — and potentially valuable — than the information that underpins the Google and Facebook fortunes. ISPs, for instance, have ready access to location data, information about all the websites and apps a customer uses, and an insight into who they communicate with. If they can turn that into valuable insights for advertisers, it could change the competitive dynamics in online advertising — one reason why groups representing advertisers have been strong supporters of this week’s moves.

On the other hand, by cementing a light regulatory approach to privacy, the action on Capitol Hill stands to benefit all companies that depend on internet advertising. Had the FCC’s broadband privacy rules — adopted only last October — stayed in place, they could have set up future regulatory efforts to extend stronger privacy rules into more corners of the industry.

“Google and Facebook and others in the [internet] industry saw this as a threat — today it’s the ISPs, tomorrow it’s them,” said Mr Chester.

For consumer advocates who warn of a broad retreat from Obama-era protections of the internet, meanwhile, there was at least one encouraging sign this week. Fifteen Republicans voted against the rollback of FCC powers on Tuesday, resulting in a 215-205 majority in the House for the measure. Critics of the new policy direction in Washington say this points to a groundswell of unease over internet policies that would entrench corporate power but harm millions of consumers.

The last battle over net neutrality brought a rowdy grass roots rebellion over ceding power to network companies. For a White House that likes to pride itself on its populist credentials, this week’s move points to a difficult balancing act ahead.

Via FT