Will FCC Choose “The Nuclear Option” In Net Neutrality Fight?

Today’s decision by the U.S. Court of Appeals to strike down the FCC’s authority to order Comcast (CMCSA) not to throttle down traffic from BitTorrent and other file-sharing services poses a fundamental challenge to the government ability to impose Net Neutrality on Internet access providers.

Bernstein Research analyst Craig Moffett writes today in response to the ruling “raises grave doubts” about whether the FCC can demand carriers provider an open Internet. He notes, though, that Net Neutrality has been supported by the Obama Administration and FCC Chairman Julius Genachowski. Moffett things the FCC has three choices on how to proceed:

• Ask Congress to pass legislation giving the FCC the needed authority.
• Ask Congress to pass Net Neutrality legislation.
• Reclassify broadband services to bring them under FCC jurisdiction.

The latter option is what Moffett describes as the “nuclear option,” and would involve the reclassification of broadband service to be what’s known as a Title II service, or a common carrier. Broadband is now designated as a Title 1 service, which carriers fewer regulatory restrictions.

Moffett notes that applying a Title II service to broadband “would have sweeping implications, far, far beyond net neutrality,” and would bring with it “a raft of regulatory obligations from the days of monopoly telecommunications regulation, potentially including price regulation.” He says designating broadband as a Title II service “would broadly throw into question capital investment plans for all broadband� carriers, potentially for years, while the issue was adjudicated.:”

Moffett says telecom and cable operators have privately indicated that a Title II designation for broadband would head to a “radical downsizing of their broadband investment plans” due to the enormous regulatory uncertainty it would introduce.

In short, he says that a Title II designation for broadband services “would call into question virtually every assumption about the terminal value of networks, as they would be subject to enormous and unpredictable regulatory risk going forward.

CMCSA today is off 4 cents, at $18.79.