Is Verizon Misleading on Net Neutrality?

By Markets Fool.com

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When it comes to Net neutrality, there's been no telecom more aggressive toward the FCC than Verizon Communications . In 2013, the company argued before the U.S. Court of Appeals to overturn the FCC Open Internet Order of 2010. And in January 2014 Verizon got its wish, as the appeals court vacated two key parts of the order: no blocking and no discrimination. The federal government was still allowed to enforce transparency.

So naturally, you'd expect others in the industry to be thankful to Verizon for avoiding regulation ... and you'd be wrong. According to an Ars Technica article, fellow Internet service providers were "furious" at Verizon for what they consider a "bad strategic error."

The dismissal of the 2010 regulations, which most telecoms and cable companies considered benign, goads the government to classify ISPs as common carriers, bringing Title II regulation that most industry participants consider burdensome. Namely, Title II regulation forbids common carriers from"any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services."

So you can see why ISPs, their CEOs, and shareholders could fear Title II regulation. Verizon itself has stated Title II classification would be harmful to its investment in broadband.

If this newest petition is correct, then Verizon doesn't really hate Title II
And if this newest complaint is correct, Verizon's been happy to use Title II regulation when it helps the company. After years of arguing that Title II regulation would result in less investment, Bruce Kushnick of the New Networks Institute and Tom Allibone of Teletruth are alleging that Verizon's been lying that Title II is hazardous to investment. In fact, their FCC petition argues that the exact opposite is true.

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Kushnick and Allibone are saying that Title II has enabled Verizon to charge landline customers more money, which has helped the company fund its broadband construction. Remember that Verizon's landline phone services are Title II regulated, but in many areas Verizon had replaced the former copper wires with fiber optics that transmit Internet, TV, and the aforementioned phone services. And, according to Allibone and Kushnick, Verizon used its Title II classification and pricing power to help build its FiOS fiber network.

Inconsistent and contradictory
Still, many Verizon shareholders are tiring of the politics and Verizon's missteps on this particular issue. Last year, a shareholder proposal called Verizon's stance "inconsistent and contradictory." The proposal continued:

As investors, we are concerned about potential regulatory and legislative risk related to Verizon's network management practices and the issue of network neutrality. There may also be reputational and commercial risk in not providing customers with evidence of open Internet policies that apply to wireless communications and preclude business models based on paid prioritization."

And while it should be noted the proposal failed, attracting 26.4% of the vote, the same proposal will be introduced at this year's shareholder meeting with renewed interest. However, this could be a moot point considering the shareholder's meeting is typically in April or May and the FCC plan to vote on the classification of ISPs on Feb. 26.

And even if the FCC wants to reclassify ISPs as common carriers to enforce net neutrality, Congressional Republicans may beat the FCC to the punch. Working with ISPs, it appears House and Senate Republicans voted to enforcemany of the principles of net neutrality without the common carrier classification...and who said the wheels of Washington move slowly these days?

The article Is Verizon Misleading on Net Neutrality? originally appeared on Fool.com.

Jamal Carnette owns shares of Verizon Communications. The Motley Fool recommends Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.