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Regulation - What is it Good For?

Net Neutrality Legislation

In late July, Senators Edward Markey and Ron Wyden, along with Representative Doris Matsui introduced a short bill titled the Net Neutrality and Broadband Justice Act that would classify broadband as a telecommunications service under Title II of the FCC rules.

It’s an interesting concept because this bill would stop the see-saw battle between democrats and republicans about regulating broadband. The Tom Wheeler FCC implemented net neutrality and related broadband regulation using Title II authority in 2015, and the Ajit Pai FCC completely killed Title II regulation in 2017. It’s clear that the current FCC under Jessica Rosenworcel intends to reinstate the Title II authority. If Congress was to enact this law, it would make it impossible for future FCC’s to flip flop on the issue.

What is almost comical about the issue is that both parties make this appear to be a fight over net neutrality, which it is not. All of the public discussions of the issue have been couched as a discussion of whether we need federal net neutrality rules. However, the real fight is about whether broadband should be regulated. When the Ajit Pai FCC stripped away Title II authority for broadband, most of the FCC’s ability to regulate broadband in any meaningful way disappeared. It seems crazy not to have a national policy to regulate an industry where the two biggest ISPs control over 55% of the national market, where the four largest ISPs control over 75% of the market, and where fifteen ISPs control 95% of the market. Beyond the market power of a handful of ISPs, most consumers will say they have only one choice of fast broadband.

Net neutrality has never been the issue. The big ISPs have only violated the principles of net neutrality in a serious way a few times, like when the biggest ISPs restricted Netflix traffic in 2013 and 2014 to get the company to pay more for using the Internet. Soon after the Ajit Pai FCC killed net neutrality, the State of California introduced nearly identical rules, which have subsequently been affirmed by the courts. The biggest ISPs are largely following net neutrality since doing so everywhere except California would be nearly impossible to manage.

The real fear the big ISPs have of Title II authority is that the FCC could theoretically implement rate regulation. This is the underlying issue for the continuing fight. The big ISPs also understand that the FCC will enact other restrictions if the agency has the authority to do so. But it is the fear of putting any restrictions on rates that draws heavy lobbying from the industry. The big ISPs have been using the term light-touch regulation to describe the current state of affairs – which in real life translates to practically no regulations at all.

I can’t imagine a time when the FCC would try to put a cap on ISP rates, but the agency could still restrict what ISPs charge. For example, it’s not hard to imagine the FCC putting curbs on data caps, where ISPs charge customers a lot extra for using too much broadband in a month. Everybody who knows how ISPs operate understands that there is almost no extra cost to an ISP for serving a heavy broadband user – data cap fees verge on the edge of fraud.

It doesn’t look likely that this bill has any chance of making it through the current Congress. The bill is unlikely to draw any Republican votes and may not even gain a positive vote from all of the Democrats. The only way to ever get this passed would be to somehow find a way to do so with a simple majority vote rather than the needed 60 votes to pass.

It’s a shame because there should be regulatory oversight over such a vital industry that is operated by oligopolies. While a few cities seem to be finding a way to bring multiple ISPs to complete, most of the country still only has one or two ISPs that offer fast broadband. Because of the huge barrier to market entry due to the cost of building a new network, most of the country is not likely to see price competition for broadband. At a bare minimum, we ought to have the FCC fulfilling one of its prime regulatory responsibilities, which is to make sure that ISPs don’t overreach too badly with the public.

One reply on “Net Neutrality Legislation”

Many big US ISPs violate the principles of #NetNeutrality all the time through their peering policy. Avoiding last mile regulations and effectively creating a paid fast lane, ripping off consumers of the connectivity they pay for. Most European ISPs welcome open peering. Unfortunately, legislators and the FCC don’t think to include peering in any regulation.

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