When the Federal Communications Commission voted to regulate Internet providers as common carriers under Title II of the Communications Act last year, Chairman Tom Wheeler made it clear that the FCC could have imposed even stricter requirements.

The commission primarily used Title II to impose net neutrality rules that prevent Internet providers from blocking or throttling traffic or giving priority to Web services in exchange for payment. But the FCC could have also imposed rate regulation and required last-mile "unbundling," which would force Internet providers to let competitors offer service over their networks.

Wheeler rejected that type of heavy-handed utility regulation, instead announcing that there would be "no rate regulation, no filing of tariffs, and no network unbundling." By promising only "light-touch" common carrier rules, Wheeler tried to convince Internet providers that the new regulatory regime wouldn't be that bad. Of course, the FCC was sued by broadband providers anyway. “Everybody sues us about everything,” Wheeler once said after a different decision on prison phone rates.

Given that the FCC would have to defend its rules in court, why not go even further? Wheeler explained his thinking last month in an interview with Ars. (See the rest of the interview in our story "How a former lobbyist became the broadband industry’s worst nightmare.")

If the FCC imposed unbundling, network operators would have to lease access to last-mile infrastructure so that any business could resell Internet service over incumbents’ networks without having to install their own wires. DSL Internet used to operate this way before the FCC under Republican leadership removed the unbundling requirement in 2005.

Wheeler argued that competition should be brought by companies that build their own infrastructure, not companies that have to rely on incumbents for access.

“I have a facilities-based proclivity. I think if you're going to get competition, competition is a facilities-based issue, it is not an ersatz unbundling issue,” he told Ars.

The competition in the DSL Internet days “was not sustainable,” he said. “Look at what happened to those companies that came out in that point in time… You want to create environments where people are going head to head… Tell me, how can you ever win if you have to buy your capacity from your competitor?”

As for tariffs and rate regulation, Wheeler said that strict controls on prices aren't necessary in competitive markets. “If you can create a competitive environment, which is everything we're striving for, then you don't need to have specific rate regulation."

But by going with Title II, the FCC kept its rate-making authority on the table, allowing it to stop practices like paid prioritization, in which Web services would pay ISPs for priority access to consumers.

“You still want to have rate authority" in order to act against paid prioritization "because paid is a rate,” Wheeler said. The Title II regime also lets customers file complaints that ISPs are charging unjust or unreasonable rates for Internet service. So while the Wheeler version of Title II doesn’t tell ISPs what they can charge in advance, it could theoretically stop the most egregious price gouging after it happens.

Despite Wheeler's statements about competition, Americans still have little choice of high-speed Internet providers. Competition is scarce largely because it’s so expensive to build new networks and then entice customers away from existing providers, but Wheeler’s FCC has been distributing money to carriers to expand rural broadband while increasing the minimum speed carriers must provide in order to get the funds. The FCC is also conducting “rural broadband experiments” to find new ways to serve sparsely populated areas, and it required AT&T to expand fiber deployments in exchange for approving its DirecTV acquisition.

Still, many people in AT&T territory lack even slow DSL Internet, and it’s not uncommon for ISPs to demand tens of thousands of dollars from consumers to cover network construction costs.

Political blowback

The notion of a common carrier—an entity that holds itself out to the public as being ready to serve all without discrimination—dates back centuries. Title II and the FCC were established in 1934 to regulate phone companies as common carriers and guarantee all Americans affordable access to telephone service. ISPs vehemently opposed the application of Title II to broadband.

Though Wheeler didn't go as far as he could have, the common carrier decision was a bold one that brought political and legal risk. Republicans in Congress have introduced a series of bills that would gut the FCC's Title II decision and the FCC's authority in general. Even the decision to let customers complain about unjust or unreasonable prices has been described as "rate regulation" by Wheeler's opponents, though the complaint process bears no resemblance to the strict rate-of-return regulation that historically applied to telephone service.

Republican Commissioner Ajit Pai and Republican senators accused Wheeler of choosing Title II only because that was President Obama’s preference. Wheeler initially favored weaker net neutrality rules using the commission’s Section 706 authority, but when asked if he changed his mind because of Obama’s public call for Title II, Wheeler said no. "Title II was always something we were looking at.”

At first, “I was looking to get something out there and working rather than having continued legal wrangling,” Wheeler said, referring to a court case that overturned previous rules passed under then-Chairman Julius Genachowski.

But Wheeler’s initial proposal in 2014 asked the public to comment on whether the Commission should instead adopt Title II. There ended up being huge public support for stronger net neutrality rules, and Wheeler said he came to realize that Title II might also be the best option legally. (That’s still to be determined by judges at the US Court of Appeals in Washington, DC.)

With rules backed only by Section 706, the FCC would have had to allow actions taken by Internet providers as long as they are “commercially reasonable,” Wheeler said. But with Title II, the FCC could use the stronger “just and reasonable” standard to judge whether ISPs are harming consumers or competitors.

“I became totally convinced that the problem was that the standard for 706 was commercial reasonableness, and it's a new standard, and the question is ‘what's commercially reasonable?’” he said. “You know what ‘just and reasonable’ is. It's got a long Title II history of adjudication and rulemaking.”

Wheeler came to that view slowly. One senior FCC official told Ars that Wheeler didn’t initially realize Title II was needed to impose the rules he wanted and have a good chance of them being sustained in court. The level of public support for Title II—driven in part by lack of competition and high prices for Internet service—also surprised Wheeler and others inside the FCC, the official said.

Though Wheeler didn't impose all the major components of utility regulation, his net neutrality decision got high marks both from consumer advocates and online service providers. “Even if you disagree with him about the ultimate outcome, you kind of have to admire the commitment and pluck to move through with a proceeding that was very politically unpopular,” Netflix Public Policy Director Corie Wright told Ars. “Many chairmen before had kind of capitulated to some of that political pressure.”

“He proved a lot of the doubters wrong and he was able to execute on something that was important for our industry and for any Internet user,” CEO Michael Beckerman of the Internet Association, a lobby group for online service providers such as Amazon, Facebook, and Google, told Ars. “That will probably be the one thing that defines his chairmanship.”