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The Dragonslayer

A year ago, FCC Chairman Tom Wheeler saved the internet.
In this exclusive interview, he tells us what’s next

By Nilay Patel

Two years ago, John Oliver called Tom Wheeler a dingo.

The host of Last Week Tonight had set his sights on the then-raging net neutrality debate, acerbically calling out broadband providers like Comcast and Verizon for their throttling antics and intense Congressional lobbying. Midway through the segment, Oliver dryly pointed to President Obama’s appointment of former cable and wireless lobbyist Wheeler as the new head of the Federal Communications Commission — "the equivalent of needing a babysitter and hiring a dingo."

"[Now] that they are overseeing their own oversight, it is hardly surprising that cable companies are basically monopolies," said Oliver.

This claim — that the FCC has been captured by the very interests it is supposed to regulate — has been around for years. The path from a Commission seat to an aisle seat inside Comcast’s private jet and vice versa has been wide open for years: former FCC Chairman Michael Powell is now the president of the National Cable and Telecom Association, which counts Comcast as its largest member. Former FCC Commissioner Meredith Baker…. left the agency to work for Comcast. The list goes on.

But Wheeler pushed back against Oliver and various other critics (including me) who felt the FCC was soft-pedaling on net neutrality and on regulating telecom companies in general. And in the past year of his chairmanship, the FCC has turned into a sharply pro-consumer and pro-competition agency: with the passage of the Open Internet Order, net neutrality is now the law; upcoming rules will prevent carriers from collecting and selling user data without permission; a spectrum auction next month will lay the groundwork for 5G mobile internet; and now Wheeler has his sights set on making TV providers open their cable networks.

Speaking exclusively to The Verge the day before he appeared in front of Congressional Republicans investigating the net neutrality vote, Wheeler was candid and direct about his desire to protect upstarts. "You know my mantra," he says. "Competition, competition, competition."

Far from being captured by telecom companies, Wheeler seems to relish the insight his lobbying history has given him about their operations. And he’s using that insight to fight the multi-headed dragons of the television, wireless, and broadband industries on multiple battlefields, all at once.

And he’s winning.

Wheeler section break

Nilay Patel: So Oliver called you a dingo —

Tom Wheeler: Yes.

— Because he was upset you were put in charge of regulating an industry you first represented. It’s been about a year since you passed net neutrality, and you’re back at it with the push to unlock cable boxes. It seems like something’s changed — like your approach has gotten more aggressive.

I’m the same guy I was then. I think it’s just that people didn’t know who I was.

What was the cable industry like when I was lobbying for them? They were the underdog. They were the folks trying to climb up the hill, and broadcasters and telephone companies tried to stop them.

What was the wireless industry like when I was there? They were the young guys coming up the side of the mountain. What was I doing when I was a VC? I was funding startup companies that were challenging the incumbents.

My heart has always been with the insurgents, not the incumbents. And nobody stopped to really look at that — they just wanted to make this judgement. But I’m the same guy I always was.

Let’s start with net neutrality. It’s been a year since it passed, but there’s still a lawsuit challenging it, and the Senate Republicans just put out a report saying President Obama inappropriately and secretly influenced the FCC into regulating broadband providers as common carriers under Title II of the Communications Act. So I’ll ask you directly: when did you decide to push for the stricter Title II regulations?1

Wheeler’s initial approach to net neutrality was much looser, relying on the FCC’s broad authority to "promote broadband competition" to set rules. After intense public outcry, the Oliver video, and a push from Obama, Wheeler switched to the much stricter Title II approach.

Title II has always been on the table. As we went through the process it began to be really clear that the "commercially reasonable" test was untried. I was comfortable I could apply it, but after I was gone somebody would look back and say, "Oh, this means ‘reasonable for the commercial entity.’" That’s the wrong interpretation.

But as you know we’d always had Title II in the [proposal]. Then I coupled that with my experience representing the wireless industry — we went to Congress and asked to be made common carriers!

So it was that kind of an evolutionary process. This idea that there were some kind of secret instructions from the White House has been around for more than a year, and I’m sure it will be around a year from now. It’s a quick and easy take, but it’s a quick, easy, and wrong take.

The second allegation is that the staff of the FCC raised concerns internally about needing more comment. Do you have a response to that?

That’s the job of the staff, to constantly say, "Wait a minute, what are the details here, and are we building the record as it needs to be built?"And as you know I pushed [it]. I was hoping to move on [net neutrality] in November, and I said, "Nope! We’re not ready!" I said that publicly. I didn’t say it as some kind of secret thing. I actually put out a statement saying, "We’re going to hit pause because we need to continue to develop the record." And if you go to the lawsuit one of the things that they’re arguing right now is that we didn’t do a good job building a record. So I guess it made sense to pause.

So that lawsuit is out there, and the telecom companies seem to be actively pursuing that lawsuit. Why do you think Congress is deciding to wade into this mess now?

You gotta ask them! [laughs] You’re asking me to interpret the Republicans in Congress? I’m the least qualified person in America to do that.

And now we’re seeing a bunch of wireless carriers do sponsored data and zero rating,2 which seems like they might violate net neutrality. T-Mobile’s BingeOn is the most interesting to me — I don’t know where I stand on it. They’re throttling data —

Zero rating is the controversial practice of excusing certain apps and services from data caps, which effectively makes everything else more expensive.

Why do you think that’s more interesting than Go90? Just out of curiosity.3

Verizon’s new video service Go90 doesn’t count against the data cap for Verizon’s mobile customers; Verizon says Go90 is an independent subsidiary that pays for sponsored data just like any other company.

My take is that Go90 is actually way worse. It’s a separate company inside Verizon and they’re straight-up paying to have their data privileged. With T-Mobile they’re at least doing a blanket throttle and affecting everyone equally.

Either way it seems like a lot of carriers are trying to dance through the bright line rules of net neutrality. Where do you stand?

We were quite specific in the Open Internet Order saying we weren’t going to address zero rating because we could argue it both ways.

You can see where it’s helpful if it reduces cost and increases choice. You can see where it’s harmful if it discourages and discriminates. So it’s the poster child for why we wanted to make sure we had a general conduct rule in place. What we’re doing right now is looking at the various schemes that have been developed, and we’ve asked folks on multiple sides of the issue to come in and sit down and help us understand so we can think our way through this.

I think the key to the Open Internet Order is the concept of regulatory agility. And zero rating is a classic example of that. I can argue there are some aspects of it that are good, and I can argue there’s some aspects of it that are not so good. The job of the regulator is to figure out, "Okay, now how do I deal with this?"

So do you see a distinction between Go90 and BingeOn?

I don’t wanna get into that, but that’s the issue that I’m wrestling with.

So zero rating is the current net neutrality battle. Where do you think it goes from here? What’s your next battle?

Privacy.

What do you think the boundaries will be?

There are three key concepts: One, that [broadband companies] are collecting data on me and it isn’t being held securely. Two, they’re collecting data on me and they ought to be telling me what they’re collecting and what it's being used for. And three, I ought to have the choice to say whether I want them to do that or not.

When these companies were operating as phone companies, the information generated by a phone call couldn’t be released unless the consumer said so. You’ve got to ask yourself the question: why is the information generated by an internet search different?

All the carriers told me that Title II is an existential threat to their business, and there’s a lawsuit and Congressional hearings to challenge it. Meanwhile, these companies are trying to sidestep the rules with sponsored data. Verizon bought AOL for ad tech and now you’re going after how they can use that data.

That’s three battlegrounds and now you want to tackle cable box unlocking. Do you have enough time to get this done?

We’re here now, and we’re not going to be here a year from now. Why should you sit around and just think about doing things? Do ‘em!

So let’s get into cable box unlocking. 4 No one’s really thought about it for a long time. When I go and talk to the cable companies, they say, "Look, we’re doing apps!" as their solution to freeing up the content. What do you say to that? Why do we still need to worry about the hardware if they’re going to move to the app model?

Wheeler just passed a proposal that would require TV providers to allow any device to access TV programming; right now nearly every TV service has a proprietary cable or satellite box. The cable companies hate this, of course.

I’m fascinated by that response, because the reality is there’s nothing different about an app. An app is just doing things in software that used to be done in hardware. The question is whether the app is open or closed. And if they close the app it’s just as awful as a closed piece of hardware.

The cable companies all say that they’re the ones that go out and negotiate with video programmers and networks, and spend all the money on content. What’s the argument to unbundle their stuff and let it be open to every app?

Nobody is saying to the cable operator that they have to change anything that they do, other than provide access to competitive boxes. And the law is pretty clear: it says there needs to be competitive navigation devices. Well, let’s obey the law! I don’t know whether you saw the open meeting where we voted on this 3-2, but I threw up on the screen a 2010 letter from NCTA endorsing the idea.

But that was their previous plan, with CableCard and then Tru2Way, which totally failed.5 They were gonna own the middleware—

Previous efforts to allow other devices to connect to cable networks have been complicated, buggy, and failed spectacularly. How bad was it? Comcast CEO Brian Roberts once tried to convince Steve Jobs to build a cable box and Jobs refused because he wouldn’t use the required software.

I thought your article on this was terrific. When you quoted Brian Roberts saying "say goodbye to the set-top box" [at CES 2008] and he brought out the guy from Panasonic, I thought that was a terrific piece of reporting.

Folks like Mitsubishi have said on the record that they wanted to build something but the cable operators wouldn’t give them access. Nvidia now has a $50 box, but the cable operators refuse to interface with it.

I am just dumbfounded by the response because they have no difficulty interfacing with an iPad. They have no difficulty interfacing with Google Android. This would work exactly the same way, and all of the sudden it’s the end of the world.

I’ve chronicled all of these TV product failures in one way or another, and I’m surprised the tech companies aren’t way out in front providing you cover on open navigation. But when we go to ask Google, Microsoft, and Apple about cable boxes, they all have no comment. Have you heard from them? Do you feel support from Silicon Valley?

It’s not what’s driving us, and it’s not essential to this. I mean, this is a simple question. There are two things intersecting. One is the law, which is black letter and very explicit. And the second is technology that finally allows a solution other than this cobbled-together CableCard solution. So, okay, we exist at the point in time where technology is allowing something like this to happen, and the law has said for the past 20 years that it should happen. Alright, let’s make it happen.

This feels connected to net neutrality, at least in spirit. They are metaphorically analogous—

It’s about openness. It’s all about openness.

But there’s something much more real underneath it. A company like Time Warner Cable provides both video and broadband services, and they’re trying to build streaming skinny bundles, because broadband service is a much higher margin. Is there a conflict here?

Our job is not to balance things out and pick winners or losers. Our job is to let the market work. You know my mantra is "competition, competition, competition."

Let me take this in another direction. We started this conversation and you said you’ve always represented the upstart. And the first few sets of upstarts you described were access-layer technology upstarts: cable TV, wireless internet. Is there another internet access technology you see that can provide competition to wired and wireless broadband? Or is that infrastructure so fixed in place now that we need to focus on competition in the layers above?

What a great question! And I don’t have the answer for that, Nilay.

But here’s the thing that is fascinating to me: those networks are built on assumptions from the industrial economy, i.e. scope and scale assumptions. But digital networks operate at zero marginal cost. There is an inherent conflict between those two. Zero marginal cost has allowed us to have all of these great innovations like the app economy and the web.

At the same time, you need to be producing a return on that investment. But you know, the situation right now is that the revenue per subscriber for the broadband providers has gone up since the Open Internet Order went into place. 6

The FCC says this claim is based on an "internal analysis." The public numbers we looked at seemed to indicate that these figures are mostly flat.

Which of course is logical because people are buying more, because more is available. It makes all the sense in the world. We’re living through an evolution from industrial economics to digital economics. And that will, by far, outlast my tenure here, but it’s the underpinning of what’s going to happen over the next ten years.

But there are still wires in the ground and antennas in the air. There’s a lot of industrial scale work that needs to get done.

I’m not saying that we’re walking away from the issues — you need to get a return on that. But the interesting thing was you used to have to build when you wanted to increase the capacity of a telephone line. You had to build a new circuit, right? But when you want to increase the capacity of fiber you put on new electronics. And the economics of both of those are huge.

You see AT&T and others talking about how they’re going to software-defined networks — the cost of software-defined networks are a fraction of the cost of hardware-defined networks. The economic model is changing. What we’re doing is we’re living through an evolution between two ways of approaching the world. That’s fascinating to me.

We’re talking about wired and wireless in the same breath. The Open Internet Order wiped away the idea that wireless is special enough to be regulated differently. But I still constantly hear the wireless companies say there’s a spectrum crunch and that’s why they have to do things like zero rating. You seem to be saying that that model should be fading away.

No, I think that there is a spectrum issue. I mean there’s no doubt about it—

Do you think crunch is as bad as they tell me?

Well, you know, I’m 28 days away from running a spectrum auction. [laughs] So I don’t think I’m going there, Nilay.

You should be saying there’s no spectrum left — you should be running up the prices!

It’s the last sale! Last chance to get a lease! [laughs]

But as you bring up software defined radios, they are able to mine more capacity out of a fixed amount of spectrum. Do you think that that brings the economics in line with what they’re able to do on the fiber side or is it actually different?

I think it’s different in a whole bunch of ways. So for instance, we always talk about this thing called "reasonable network management." Network management for a wireless network is massively more complex than network management for a wired network, because they have to manage around all the inherent difficulties that say you really shouldn’t be able to do this in the first place. Physics is working against you, and they’re measuring network activity in milliseconds.

So the management of a wireless network is much more complex and active than the management of a wired network. That also gives it greater efficiencies in using [the spectrum] it’s got. However, I think both have to be opened. You know, if wireless is now carrying 50, 60 percent of all the internet access, how could it possibly not be open?

There’s the device question, too. We don’t have easily moveable handsets on carriers in the US. I can’t just buy an AT&T phone, stick a Verizon SIM card in it and walk away. Do you think there’s a way to get to a place where there’s easier switching between carriers?

Well the problem we had in 3G was that we had two standards. Then you got 4G, which kind of evolved through multiple standards. You can port pretty well with LTE right now. And with 5G I think it’s going be a question of what the standards are going to be again. I don’t know.

But what’s promising about 5G is that this summer we’re gonna open up the spectrum.

The Europeans are bound and determined to have a standards process that replicates what created 3G to create 5G, and they want us to participate. And my response to them is that I don’t participate in industrial policy.

What we’re going to do is make spectrum available faster than anybody in the world. This summer we’re going to hash out some of the rules for 5G spectrum. And then we’re going to get out of the way and we’re going to say to our carriers, "Go, use it, do whatever you want with it!"

That’s what got us to leadership in 4G, and I think that’s what will give us leadership in 5G.

Let me give you the obvious pushback. That got us to leadership in 4G, but it left Sprint basically cratered because they invested heavily in WiMax, which blew up in their face. Is there a place where you’d come in and have a standards-setting process or no?

So now you’re an acolyte of industrial policy then? [laughs]

Hey, I’m just asking the questions! But it’s true, right? Sprint made a billion-dollar wrong bet and they’ve never recovered from it.

Well, I mean, yes. Nobody said the marketplace is not without pain.

We’ve talked a lot about the big fights you have on your docket now: cable box unlocking, privacy, making sure Title II stays alive. Are there any other dragons you want to slay?

Sure, we’re gonna reform the lifeline program so that low-income Americans have access to 21st century networks. We’re going to address the provision of broadband data services by monopoly carriers. You know, the so-called special access issue. We’re gonna run through the tape here, Nilay.

Okay, so you’re going fast, you’ve got a lot of projects. But obviously you’re going to have a successor. What sort of advice do you give your successor, especially in the context of the these big industries and their lobbying? What advice do you have about keeping the office independent and being pro-consumer?

I don’t know how I can tell my successor anything other than to use his or her best judgement. But I can tell you that one of the things that has been very helpful to me is my experience as a lobbyist.

It’s kind of spooky sitting in this office as I’m speaking to you right now, because I used to come in here on my knees begging for things, saying that unless the Chairman did it my way, it would be the end of Western Civilization as we know it. [laughs]

I’m wondering if I can tell you this story —

You have to now!

Early on, literally my first week on the job, I brought all of the representative organizations together in a series of meetings. And I began — and this is something that is really high on my priority list — with all the representatives of disabilities groups.I said you are never going to have an FCC Chairman that is more in your corner and wants to do more to make sure we harness the technology of the 21st century to address the challenges of individuals with disabilities.

I had them at the first meeting because I wanted that to be symbolic and to send a message. But when we got to the various industry groups I said to them, "You know, I’ve sat in your shoes and I know the challenges of your job." I said my favorite movie is Patton, and and there’s a scene where Patton is having his first battle with Rommel in North Africa, and he had just finished reading Rommel’s book on tank tactics. He’s looking down on the valley and he sees the fight going on and he sees that he’s winning. And George C. Scott says "Rommel, you magnificent bastard, I read your book!"

And I said to these guys, hey, you know, I may not have written the book about how to lobby, but I’ve read it and maybe I even contributed a chapter or two. I used to be the one dishing it out. I understand the realities. I understand how they argue things. I understand what you have to do to hold an industry coalition together. I understand the challenge of their job. I respect the challenge of their job. And I think I’m somewhat inoculated to the effects as a result of it.

So real talk: do you think it’s a requirement to have been a lobbyist to be an effective regulator?

Oh, no, no. I’m just telling you my personal experience. And I am not the guy to reflect on who it would be next year. You know, here’s what I will tell this person, whoever he or she is: it’s a fabulous time to be in this job. This is a time where the digital world is redefining everything else in the world, and we get to sit here right in the middle of it. And, yes, we get to deal with really tough, really complex issues. My goodness, what a blessing, what a privilege.

Wheeler section break

Disclosure: Comcast’s NBC Universal division is a minority investor in The Verge’s parent company, Vox Media.

Photo of Tom Wheeler by David Ramos/Getty Images

Design by James Bareham

Edited by Michael Zelenko