Tag Archives: Ajit Pai

Protecting Broadband Customer Data

At the end of July, the FCC proposed a $20 million penalty against Q Link and Hello Mobile for not complying with the Customer Propriety Network Information (CPNI). The FCC concluded that the two companies violated the CPNI rules when they failed to protect confidential user data. The companies both had security flaws in their apps that allowed outside access to customer account information.

Today’s blog is not talking about these two carriers, but their security measures must be terrible to invite fines of that magnitude. Today’s blog will use these fines to highlight that there are still stringent privacy rules in place for voice providers, but nothing similar for broadband. Other than perhaps invoking an investigation from the Federal Trade Commission for allowing leaks of broadband customer information, there are no specific prohibitions in place to stop ISPs from misusing customer data.

There is an interesting history of regulations for the protection of broadband customer information. The FCC, under Chairman Tom Wheeler, had implemented CPNI rules for broadband in 2016 along with other broadband regulations like net neutrality. These regulations went into effect near the end of 2016 and included a provision to allow customers to opt in or out of allowing an ISP to use and share their personal data.

In 2017, Congress eliminated the CPNI protections for broadband in response to a request by FCC Chairman Ajit Pai. Pai argued that it wasn’t fair to enforce privacy rules on big ISPs that weren’t also required for web companies like Google and Facebook. He also argued that CPNI rules made no sense after the Pai FCC had eliminated Title II regulation, which had declared that broadband is considered to be an information service and not a telecommunications service. Congress passed the Congressional Rule Act that eliminated the CPNI requirement along with other broadband regulations, and the FCC implemented the change in September 2017.

This has resulted in an unusual regulatory environment where two cellular carriers can be heavily penalized for not protecting customer data while ISPs cannot.

Telephone companies routinely capture details of customer calling – who you call and who calls you. This is familiar to anybody who’s seen a TV crime show since one of the first things detectives routinely do is to ask to see telephone calling records for a suspect. Telephone companies can’t release this information without a warrant. CPNI rules also require phone companies to keep other customer data secure, such as billing records, credit card numbers, etc. Telephone companies are even prohibited from marketing their own products to customers if a customer opts out of such marketing.

The 2016 privacy rules that were in place for only a short time implemented the same sort of privacy rules as voice, but customers were also given the choice to allow or deny access to their records. ISPs gather a lot more data about customers than telephone companies. For example, an ISP knows every web page you have visited since they control the DNS routing that connects you to websites. There are numerous other things an ISP can know about a customer if they choose to look deeper into the packets between users and websites.

ISPs I know aren’t worried about these issues because they don’t share customer information. They don’t record details of customer broadband transactions, and they try hard to keep information like credit card numbers safe from hackers. But I don’t think anybody believes the largest ISPs when they say that they don’t monetize information from customer data, particularly since, with current rules, there is no restriction against them doing so. The big ISPs don’t want any restrictions on what they do with customer data and any revenue streams that might come from selling data, and in today’s regulatory world, they are largely getting what they want.

Revisiting the Impact of Killing Net Neutrality

Ajit Pai recently wrote an article in the National Review where he talks about how his decision as head of the FCC to repeal net neutrality was the right one. He goes on to claim that repealing net neutrality was the driver behind the current boom in building fiber and upgrading other broadband technologies. He contrasts the progress of broadband in the U.S. with Europe and says that the FCC’s action is the primary reason we are seeing a fiber boom in the U.S.

He points out that his opponents who wanted to keep net neutrality made all sorts of crazy claims about how killing net neutrality would mean killing most of what people like about the Internet. He’s right that the arguments for keeping net neutrality got wrapped into politics, and most of the predicted consequences of ending net neutrality were exaggerated by those in favor of net neutrality. But the claims of the benefits for killing net neutrality were also badly exaggerated by the big carriers.

Why is he writing this now? With the possibility of seating a fifth Commissioner, he knows that the issue of reinstating net neutrality and Title II authority is going to be raised at the FCC. Killing net neutrality was his crowning achievement at the FCC, and he’s defending it as a way to lobby against bringing back net neutrality. I think we’re going to see a lot of this kind of rhetoric this year about how repealing net neutrality was the right thing to do. The big ISPs will be repeating the same rhetoric being told by Pai.

But Pai is not telling the real story. Industry insiders and experts didn’t expect much change to come from repealing net neutrality. The CEOS of all of the big cable companies admitted that keeping or killing net neutrality would have almost no impact on their businesses.

The real purpose of killing net neutrality was to kill Title II authority over broadband. That is an esoteric policy wonk issue and rarely got discussed during the debate. The Ajit Pai FCC gave up all rights of the agency to regulate broadband except for a few rules that are mandated by Congress. While there was a huge noise on both sides of the argument about killing net neutrality, the big ISPs only cared about killing regulation. That was the number one agenda item for Ajit Pai, and he handed the big ISPs everything on their wish list. If you want to understand the net neutrality issue from the big ISP perspective, substitute the word regulation for net neutrality every time they talk about the topic.

Pai cannot say with a straight face that there have been no repercussions about the end of broadband regulation. Consider Comcast and Charter, the two largest ISPs that together have over half of the broadband market. Since the end of Title II regulation, Comcast has raised rates for basic broadband to around $100, Charter is over $90 and is in the process of catching up to the Comcast rates.

At the same time, the FCC dropped all semblance of representing the public. The FCC complaint process for broadband customers might as well not even exist since nothing happens when a customer complains about mistreatment by an ISP.

Pai is taking credit for the boom in broadband competition. I’ve been advising ISPs on their expansion plans for decades, both before and after the death of Title II regulation, and I’ve never heard an ISP consider regulation as part of any discussion of expanding to a new market. Perhaps Pai can take credit for making it easier for others to compete against big cable companies since they have been free to raise rates at will – but I don’t think that’s something he wants to claim out loud. The real impetus for broadband competition came from the pandemic when many millions of customers found out that their broadband was inadequate. That experience has convinced people that they need fiber broadband and faster speeds, and fiber overbuilders are reacting to that market demand. The cable companies are rushing to upgrade speeds in response to the pressure from fiber competition.

None of the fiber boom is due to killing regulation. All that killing regulation did was allow big ISPs to run roughshod over customers without consequences. The FCC can’t even pull ISPs in to talk about their bad broadband behavior.

Ajit Pai’s accomplishment was not killing net neutrality – it was handing the reins of the broadband business to the big ISPs by allowing the ultimate regulatory capture of having the FCC walk away from its regulatory responsibilities. I’m sure that Pai is quite happy with that outcome, but you’ll never see Pai talking about what really happened.

Is Broadband Regulation Dead?

I ask this question after Gigi Sohn recently withdrew her name from consideration as an FCC Commissioner. It’s been obvious for a long time that the Senate was never going to approve her nomination. Some Senators tried to blame their reluctance to approve on Sohn’s history as an advocate for the public over big corporations.

But the objections to Sohn were all the kinds of smokescreens that politicians use to not admit the real reason they opposed the nomination. Gigi Sohn is not going to be the next Commissioner because she is in favor of regulating broadband and the public airwaves. The big ISPs and the large broadcasting companies (some companies which are both) have been lobbying hard against the Sohn nomination since it was first announced. These giant corporations don’t want a third Democratic Commissioner who is pro-regulation.

In the past, the party that held the White House was able to nominate regulators to the FCC and other regulatory agencies that reflected the philosophies of their political party. That’s been a given in Washington DC, and agencies like the FCC have bounced back and forth between different concepts of what it means to regulate according to which party controlled the White House.

But I think the failure to approve Sohn breaks the historical convention that lets the political party in power decide who to add as regulators. I predict this will not end with this failed nomination. Unless the Senate gets a larger majority for one of the parties, I have a hard time seeing any Senate that is going to approve a fifth FCC Commissioner. If Republicans win the next presidential race, their nominee for the fifth Commissioner slot will also likely have no chance of getting approved.

The primary reason for this is that votes for an FCC Commissioner are no longer purely along party lines. The large ISPs and broadcasters make huge contributions to Senators for the very purpose of influencing this kind of issue. That’s not to say that there will never be a fifth Commissioner, but rejecting this nomination means it’s going to be a lot harder in the future to seat FCC Commissioners who embrace the position of the political party in power, like was done by Ajit Pai and likely would have been done by Gigi Sohn.

I think we’re now seeing the textbook example of regulatory capture. That’s an economic principle that describes a situation where regulatory agencies are dominated by the industries they are supposed to be regulating. Economic theory says that it’s necessary to regulate any industry where a handful of large players control the market. Good regulation is not opposed to the large corporations being regulated but should strike a balance between what’s good for the industry and what’s good for the public. In a perfectly regulated industry, both the industry and the public should be miffed at regulators for not fully supporting their issues.

The concept of regulatory capture was proposed in the 1970s by George Stigler, a Nobel prize-winning economist. He outlined the characteristics of regulatory capture that describes the broadband industry to a tee.

  • Regulated industries devote a large budget to influence regulators at the federal, state, and local levels. It’s typical that citizens don’t have the wherewithal to effectively lobby the public’s side of issues.
  • Regulators tend to come from the regulated industry, and they tend to take advantage of the revolving door to return to industry at the end of their stint as a regulator.
  • In the extreme cases of regulatory capture, the incumbents are deregulated from any onerous regulations while new market entrants must jump through high hoops.

The FCC is a textbook example of a captured regulator. The FCC under Ajit Pai went so far as to deregulate broadband and to wash the FCC’s hands of broadband as much as possible by theoretically passing the little remaining regulation to the FTC. It’s hard to imagine an FCC more under the sway of the broadband industry than the last one.

There is no real fix for regulatory capture other than a loud public outcry to bring back strong regulation. But that’s never going to happen when regulatory capture is so complete so that it’s impossible to even seat a fifth Commissioner.

Regulatory Capture

Regulatory capture is an economic principle that describes a situation where regulatory agencies are dominated by the industries they are supposed to be regulating. Economic theory predicts that regulators caught by regulatory capture act in ways that protect incumbent providers instead of the public interest. Unfortunately, the broadband industry is one of the best (or worst) examples of regulatory capture.

Economic theory says that it’s necessary to regulate any industry where a handful of large players control the market. Good regulation is not supposed to be antagonistic to large corporations but should strike a balance between what’s good for the industry and what’s good for the public. In a perfectly regulated industry, both the industry and the public should be miffed at regulators for not fully supporting their issues.

The concept of regulatory capture was proposed in the 1970s by George Stigler, a Nobel prize-winning economist. He described the characteristics of regulatory capture as follows. His list matches what’s happening in the broadband industry to a tee.

  • Regulated industries devote a large budget to influence regulators at the federal, state, and local levels. It’s typical that citizens don’t have the wherewithal to effectively lobby the public’s side of issues.
  • Regulators tend to come from the regulated industry, and they tend to take advantage of the revolving door to return to industry at the end of their stint as a regulator.
  • Regulation from the legislative process tends to become corrupt, such as when politicians vote for bills they don’t understand in return for contributions. Actual regulators can also be corrupt – but often regulators side with the industry over the public because they have an industry perspective.
  • In the extreme case of regulatory capture, the incumbents are deregulated from any onerous regulations while new market entrants have hoops to jump through.

There are many examples throughout history of economic cartels that successfully captured regulators. For example, the railroads in the 19th century ran roughshod over the economy and regulators. Unfortunately, the best current example of regulatory capture is the broadband industry, perhaps closely followed by big agriculture and big pharmaceuticals. There is no question that the power of the broadband industry is concentrated among only a few firms. Comcast, Charter, AT&T, and Verizon together serve 75% of all broadband customers in the country.

The FCC is a textbook example of a captured regulator. The FCC under Ajit Pai went so far as to deregulate broadband and to wash the FCC’s hands of broadband as much as possible by theoretically passing the little remaining regulation to the FTC. It’s hard to imagine an FCC more under the sway of the broadband industry than the last one.

But federal regulators are only the tip of the iceberg. The large ISPs have convinced most state regulators to deregulate (or never regulate) broadband. The ISPs spend an immense amount of money in state legislatures trying to get laws passed that favor the big ISPs or that disfavor any potential competitors. The surest sign of regulatory capture is that the big ISPs are also active at the local level and pressure City and County Councils to not consider local broadband projects. There is an immense lobbying effort currently underway to dissuade local politicians from using ARPA grant money for broadband.

We don’t have to look far to see how the industry has gotten its way with regulators. The U.S. has some of the most expensive broadband in the world. Tens of millions of homes have little or no broadband. The broadband industry has the worst overall customer service among all industries- and that’s saying something. The big ISPs abuse customers in other ways such as quietly monetizing customers’ private data.

There is no real fix for regulatory capture other than a loud public outcry that brings back strong regulations. That can start at the FCC, but even that isn’t going to put a dent in the influence of the ISPs at the state and local level.

The FCC and the Digital Divide

The current FCC Chairman Ajit Pai talks a lot about his commitment to solving the digital divide and to bring broadband to everybody in the country. Chairman Pai has now made numerous visits to rural America and to poor communities and has repeatedly promised that this FCC is on board with finding broadband solutions for everyone. Yet there are numerous actions by this FCC that tell a different story.

Redefining Broadband. Last year the FCC considered changing the definition of broadband – a change which would have drastically lowered the count of households without good broadband The FCC suggested that 10/1 Mbps cellular broadband is equivalent to a 25/3 Mbps landline connection. This change would have reclassified millions of homes as having access to broadband and would have instantly ‘solved’ a huge portion of the digital divide without changing anybody’s broadband. The FCC is required by Congressional edict to set policies that bring broadband to all, and their solution was to unilaterally declare that millions of homes served with only cellular broadband needed no further FCC assistance.

The public and the industry rebelled against this suggestion and the FCC backed down. However, the FCC is required by Congress to examine the availability of broadband every year and they will have annual opportunities to redefine broadband and recalibrate the way we count those on the wrong side of the digital divide. One has to only talk to a rural household trying to run their home broadband from a tethered cellphone to understand the ridiculousness of this idea. The high cost, low data caps, slow speeds and high latency make cellular broadband an extremely expensive and unsatisfactory substitute for landline broadband. There are many people who elect to use only cellular data, but that’s not the same thing as assuming that a cellphone connection can provide enough broadband for the typical home.

Lifeline Program. This FCC seems to be trying to eliminate or greatly restrict the Lifeline program. It’s clear that Chairman Pai would like the program to go away completely and the FCC has been whittling away at the program.

First, they stopped accepting new applications for carriers that want to join the Lifeline program. I know of two municipalities that planned to expand their broadband networks to thousands of low-income homes and offer $10 – $20 broadband that would have been enabled by the $9.95 monthly Lifeline subsidy. They were dissuaded when the FCC made it clear they were not likely to approve new Lifeline providers.

The FCC also changed the rules making it hard or impossible for MVNOs (wireless resellers) from receiving the Lifeline subsidies. These companies were the primary proponents and sellers of low-cost cellular phones and data plans for low-income customers. For example, there are MVNOs that provide a low-function phone, and a limited amount of voice and data to the homeless for the $9.95 reimbursement from the Lifeline fund. There have been numerous testimonials how these phones have improved the quality of life for the homeless by providing them with access to social services and allowing them to make phone calls or texts. Blocking these carriers from Lifeline kills this kind of initiative.

The FCC also eliminated the additional $25 per month from the lifeline program that was available to low-income natives living on tribal land. Eliminating this subsidy and also restricting the Lifeline funds to only facility-based carriers is having the effect of making cellphones unaffordable in some of the poorest places in the country. Even the big cellular companies like AT&T and Verizon opposed this change to the Lifeline fund.

Eliminated Title II Regulation. Perhaps the most damaging change the FCC made was to eliminate all FCC regulation of broadband by eliminating Title II regulation. This FCC order is referred to as the net neutrality order, but there are a number of aspects of the order that have nothing to do with net neutrality.

The FCC removed itself as the watchdog on all aspects of broadband including pricing, data caps, disclosure of practices and policies, etc. The FCC instead shuttled broadband issues to the Federal Trade Commission – an agency that can punish companies which badly abuse the public, but which cannot set proactive policies.

We are poised to see big future increases in broadband prices. That’s the only way that the big monopoly ISPs can continue their historic revenue growth. The big ISPs have hit a wall with slowing numbers of new broadband customers and sinking cable TV and telephone revenues. Rising broadband prices will do more harm to universal service than any other policy. One Wall Street analyst last year suggested that Comcast’s basic broadband price ought to be $90 – something that would drive millions of homes from landline broadband. The FCC has removed themselves as broadband regulators, meaning that the big cable monopolies are going to be free to do what monopolies do and raise rates to maximize profits. Even if the FCC never directly regulates broadband prices they have many other ways to pressure big ISPs to act responsibly – but they’ve given away their regulatory authority and any regulatory leverage is gone.

Legislating Better Broadband

The Senate Commerce Committee recently passed the Rural Reasonable and Comparable Wireless Act if 2018. The bipartisan bill was co-sponsored by Senators Maggie Hassan (D NH) and Shelly Moore Capito (R WV).

It’s an innocuous bill that would have the FCC compare urban and rural pricing and availability of cellular voice service, cellular broadband service and broadband internet access services. Rather than do this nationwide the bill would gather data in and around the top twenty metropolitan markets. The sponsors of the bill say it will help to close the digital divide and will provide the extra tools the FCC needs to make sure that people in rural communities get a fair shake when with access to mobile broadband.

This sounds great, but the bill does nothing more than require gathering data to point out what we already know – that urban areas have better broadband of all types, landline and cellular. The bill won’t help to close the digital divide or fix any broadband problems because it doesn’t require the FCC to do anything other than gather more data – much of which it already gathers today.

The bill doesn’t require the FCC to take action should coverage gaps be identified (which will happen in every market), and so it’s another toothless broadband bill – it’s what I call addressing the broadband problem by press release. I don’t know anything about these two Senators, but I am sure that in the upcoming elections they, and other Senators who vote for this bill will point at this bill as proof that they are trying to help fix the rural broadband problem. Instead, this bill just spends money to create another big annual report from the FCC and will not try to fix any of the problems causing the rural broadband gap.

I really didn’t intend to bust on this bill when I started writing this blog. But this legislation is another example of the toothless telecom bills we’ve seen out of Congress over the last few decades. The FCC can only do those things that Congress authorizes and Congress could tackle the rural broadband issue. Prior FCC’s have tried to do so, but without a clear edict from Congress the FCC has been forced to concoct complicated legal authority, like Title II regulation to tackle broadband issues.

I’ve seen the public mood shift drastically in the last few years in rural America. People have gone from wanting better broadband to now demanding better broadband and politicians better start listening to their constituents if they want to keep their jobs. Broadband is a non-partisan issue and rural America is ready to listen to anybody who can bring them a broadband solution.

Rural America doesn’t need more reports from the FCC telling them what they don’t have – they need funding to build rural broadband infrastructure. I travel extensively in rural America and I’ve noticed that every rural household can identify the nearest place that has real broadband. They don’t need the FCC to tell them that broadband is better in the County seat or in the nearest big city – they are well aware of it.

We are badly in need of a new telecom bill. The current FCC is now chipping away at some of the last vestiges of the Telecom Act of 1996 by killing resale and the use of unbundled network elements. This Congress sat blithely by while the current FCC undid Title II regulation of broadband. The public and the press have been attacking Chairman Ajit Pai for killing net neutrality and Internet privacy – but at the end of the day this is all the fault of Congress.  Congress could give new instructions any day on these issues to the FCC, but they’ve punted on that responsibility.

Aside from the politicians running the current FCC, who are clearly in the pockets of the big ISPs, most reasonable people would agree that broadband should be regulated to some degree. We are nearing the time when the big cable companies will have a monopoly stranglehold over broadband in most US markets. And even where they don’t have a monopoly, where they compete against large fiber builders like AT&T the two sides cooperate to keep prices high – classic duopoly competition.

Monopolies must always be regulated. With Title II regulation now dead we are going to see the big ISPs aggressively monetizing customer data. We’ll see them raise broadband rates as the easiest way to meet Wall Street earnings expectations. We’ll see them tighten and enforce data caps and use every trick available to extract as much money as they can from customers. This is what big corporations do when they are free of regulation.

The current FCC has washed their hands of even trying to regulate the big ISPs, and only Congress can create the rules that can put some reasonable curbs on bad ISP behavior. I don’t hear even one member of Congress calling for Congressional responsibility – instead of solutions that can provide better rural broadband and that controls the worst impulses of the big ISPs we will get bills like this that creates a new annual report that reminds us that broadband is not as good in rural Maryland and Virginia as it is in Washington DC.

Tearing Down Rural Copper

In his FCC blog, FCC Chairman Ajit Pai is touting the June 7 open FCC meeting as his own version of “Avengers: Infinity War”. He says the FCC is taking on familiar headliners like “freeing up spectrum, removing barriers to infrastructure buildout, expanding satellite services, modernizing outdated rules, eliminating waste, improving accessibility, protecting consumers—and rolling them into one, super-sized meeting.”

I want to focus on the agenda item “removing barriers to infrastructure buildout”. The Chairman goes on in his blog to say the following about that topic:

Removing regulatory barriers to encourage the deployment of next-generation networks and close the digital divide certainly fits that bill. That’s something that consumers strongly support; as I’ve traveled from the Mountain West to the Gulf Coast, I’ve heard many of them say that they want to benefit from modern, more resilient technologies like optical fiber instead of limping along with slower services like DSL provided over old, often-degraded copper. To respond to that desire, I’ve shared an order with my colleagues that would make it easier for companies to discontinue outdated, legacy services and transition to the networks of the future. These reforms would enable the private sector to stop spending scarce dollars propping up fading technologies of the past and promote investment in technologies of the future. They will also make it easier to restore service in the aftermath of natural disasters and other catastrophic and unforeseen events. 

The Chairman’s rhetoric sounds great and anybody in rural America would love for the FCC to help them “benefit from modern, more resilient technologies like optical fiber”. However, this is another false narrative coming from the Chairman. Rather than promoting fiber or fast broadband, the FCC will be voting on the attached order which authorizes the following:

  • Expedites the ability of telcos to discontinue broadband services slower than 25/3 Mbps;
  • Streamlines the process for discontinuing legacy voice services.
  • Eliminates the notice periods that telcos must give to customers before discontinuing legacy services or tearing down copper;
  • Extends streamlined notice period during force majeure events, meaning telcos can walk away from a legacy network that gets damaged from a natural disaster, like happened a few years ago on Fire Island after hurricane Sandy.

This order makes it a lot easier for AT&T and the other giant telcos to walk away from their copper technology, their DSL networks and their legacy copper services. This comes straight from the wish list of the big telcos and is another example of how this FCC is is handing the reins to the big ISPs.

The premise behind the Chairman’s rhetoric is that we must be able to discontinue the old copper networks if we are to make the investments in newer broadband technologies. This sounds like a reasonable premise except for one thing: the big telcos are not going to be bringing fiber or technologies like 5G to rural America today, tomorrow or ever.

This docket does nothing more than make it easier for the big telcos to kill copper and DSL networks and walk away from rural America. We all know those networks are dying and eventually have to come down. What bothers me about the Chairman’s rhetoric is that he is hiding the truth about this agenda item behind a lie – that tearing down the old networks somehow makes it easier to build new networks. There will be many rural households hurt by this docket. The farm with no broadband and no cellular coverage is going to see their copper lines torn down and will lose their landlines, their last remaining connection to the outside world, and the Chairman doesn’t want to publicly say that he thinks that is okay. The big telcos would like nothing more than to completely wash their hands of rural markets and this FCC is making it easier for them to walk away.

The Chairman is painting a picture that killing copper is the first step towards getting faster broadband in rural America and that’s the big lie. The FCC has it within their authority to force the big telcos invest some of their profits back into rural America, but they are instead letting them walk away. Once the copper lines are down there will be nothing to replace them and future regulators will have zero leverage over the telcos after the copper networks are gone.

I find it disturbing that we have regulators without the courage to tell the American public the truth. If this FCC believes that it’s time to start tearing down rural copper, then they should say so. They know there is nothing to replace rural copper and so they are sugarcoating the topic to avoid the wrath of angry citizens. It’s disingenuous to paint the picture that this FCC is going to bring better broadband to rural America when we all know that’s not true.

Telephone versus Broadband Privacy

We now have an unusual regulatory world where there is more privacy protection in place for telephone customers than there is for broadband customers. One of the many things done in the Congressional Review Act (CRA) for the new budget that went into effect on April 3 was to nullify the FCC’s privacy rules for ISPs. These rules were implemented in the fall of 2016 and prohibited ISPs from using customer data without customer consent.

There have been no equivalent changes in the rules for landlines, cellular phones and cable TV subscribers. The rules for telephone privacy were established by the Telecommunications Act of 1996 and are referred to as CPNI (Customer Proprietary Network Information). These rules prohibit phone companies from using calling records unless they have customer permission. There is a good summary of a customer’s rights on this FCC web page.

Telephone companies routinely capture details of customer calling – who you call and who calls you. This is familiar to anybody who’s seen a TV crime show since one of the first things detectives routinely do is to ask to see telephone calling records for a suspect. The telephone companies can’t release this information without a warrant if a customer has elected to keep their records private. In addition to calling records these rules also require phone companies to keep other customer data secure, such as billing records, credit card numbers etc. Telephone companies are even prohibited from marketing their own products to customers if the customers opt out.

The 2016 privacy rules for broadband had implemented the same sort of privacy rules. Customers were given the choice to allow or deny access to their records. This was a far more reaching protection due to the large volume of information that an ISP has about their customers. At a minimum an ISP knows every web page you have visited since they control the DNS routing that connects you to web sites. There are numerous other things an ISP can know about a customer should they choose to look deeper into the packets to and from customers.

The new FCC Chairman Ajit Pai led the charge to kill the 2016 ISP privacy rules. Those were put into place just before the 2016 election and he had voted against the rules then. His primary argument is that the protections put barriers onto ISPs while there was nothing similar to ‘edge providers’, that is web companies like Facebook or Google. Those companies have no restrictions on what they can collect from users of their software and platform. Chairman Pai argued that the privacy rules didn’t really protect customers and just ended up putting ISPs at a disadvantage compared to Google.

It’s a valid argument, but killing ISP privacy protection is not the only way to get more parity between web companies. The European Union has taken an opposite approach and has placed restrictions on what both ISPs and edge providers can collect without customer permission.

Regulations are often squirrely and it’s not hard to find regulatory rules that make no sense or that have lasted far past their usefulness. I find it particularly odd, though, that I can tell my cellular provider to keep details of my phone calls private, but I can’t stop them from recording all of the web sites I visit. I’m sure the average citizen is far more concerned about web usage records than they are about who called them.

People who are concerned about their web privacy are taking steps to protect their information. Many people have changed to VPNs to encrypt their web usage and keep the details away from the ISP. There are alternate providers that can do DNS searches so that you ISP doesn’t know the web sites you visit. People are using web browsers that don’t track their usage. Large numbers of people are reportedly dropping off Facebook and other platforms that routinely and openly benefit from their personal data.

What’s most disconcerting about all of this is that privacy is the kind of regulation that has now become partisan. It’s not hard to envision a future Democratic FCC putting the privacy rules back in place and we might see this and similar issues yo-yo with changes in the administration. Of course, the easiest way around that is to do what my smaller ISP clients do – they don’t record customer information, so they don’t really care what the FCC says about privacy – they just provide it as another aspect of good customer service.

Partisanship and the FCC

The current FCC has a clear bias towards the big cable companies, telcos and cellular companies. There is nothing particularly wrong with that since this FCC represents an administration that also is big-business oriented. Past FCC’s have clearly favored policies that reflected the administration in charge. For instance, the prior FCC under Tom Wheeler was pro-consumer in many ways and pushed things like net neutrality and privacy – issues that had the support of the administration but not of the giant ISPs.

However, in the last few decades the FCC has gotten a lot more partisan. It’s becoming rare to see a policy vote that doesn’t follow party lines. This isn’t true of everything and we see unanimous FCC Commissioner support for things like providing more spectrum for broadband. But FCC voting on any topic that has political overtones now seem to follow party lines.

The most recent example of the increased partisanship is evident with the release of this year’s 2018 Broadband Deployment Report to Congress. In that report Chairman Pai decided to take the stance that the state of broadband in the country is fine and needs no FCC intervention. The FCC is required to determine the state of broadband annually and report the statistics and its conclusions to Congress. More importantly, Section 706 of the Telecommunications Act of 1996 requires that the FCC must take proactive steps to close any perceived gaps in broadband coverage.

In order to declare that the state of broadband in the country doesn’t require any further FCC action, Chairman Pai needed to come up with a narrative to support his conclusion. The argument he’s chosen to defend his position is a bit startling because by definition it can’t be true.

The new broadband report, released on February 9 concludes that “advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion. . . This finding does not mean that all Americans now have broadband access. Rather, it means that we are back on the right track when it comes to deployment“. The kicker comes in when the report says that the FCC’s data from ISPs “does not yet reflect the beneficial effects of the Commission’s actions in 2017,” such as “ending the adverse impact on investment caused by the [2015 Net Neutrality] Order. . . For instance, several companies, including AT&T, Verizon, Frontier, and Alaska Communications either commenced or announced new deployments in 2017.”

In effect, the FCC now says that broadband deployment is back on track due to its December 2017 net neutrality repeal. But the ‘facts’ it cites don’t support its argument. First, any broadband improvements made by the cited telcos in 2017 would have been authorized and started in 2016 before this new FCC even was in place. Further, a big percentage of the recent broadband deployments of these particular telcos are due to earlier FCC decisions prior to the Pai FCC. For example, AT&T was required as a requirement of the purchase of DirectTV to pass 12 million new residences and businesses with fiber. A lot of the broadband spending made by AT&T, Frontier and Alaska Communications are using CAF II funds given to them by the Wheeler FCC and which the companies are required to spend. None of those expenditures have anything to do with the repeal of net neutrality. And since net neutrality was only reversed a few months ago, it’s impossible to believe that any of the broadband spending in 2017 was due to this FCC. It’s far too early to see if that order will have any impact on rural broadband expenditures (something no industry experts expect).

This FCC Broadband Report concludes that deployment of broadband in the country is on track and reasonable. Yet the numbers in the report show that there are still 19 million Americans in rural America without access to adequate broadband. There are 12 million school-aged children who are suffering from the homework gap because they don’t have broadband at home.

By declaring that broadband deployment is adequate, Chairman Pai has let his FCC off the hook for having to take any actions to address the issue. But his stated reasons are based upon an argument that is clearly not supported by any facts. This would seem to put the Chairman in violation of his Section 706 obligations, although that’s probably something only Congress can determine.

I’m saddened to see the FCC become so partisan. This is not a new phenomenon and we saw partisan voting under the last several FCCs. Before that we had pro-big business FCCs such as the one under Chairman Michael Powell. But that FCC was far less partisan and still basically used the facts at its disposal in making decisions and setting policy.

The FCC has a mandate to balance what’s good for both the public and the telecom companies. In an ideal world the FCC would be a neutral arbiter that listens to the facts and sides with the best arguments. This trend towards a partisan FCC is bad for the industry because it means that major policies will flip-flop when we change administrations – and that’s not good for ISPs or the public. Partisanship does not excuse this FCC from abrogating its responsibility and making specious arguments not supported by facts. This FCC has taken partisanship too far.

The Big ISPs and Regulation

FCC_New_LogoLast week Chairman Ajit Pai halted the impending implementation of the new privacy rules that were to stop the big ISPs from monetizing customer data without customer permission. The Chairman’s stated reason is that he didn’t want to see different rules applied to the big ISPs than to big web companies like Facebook and Google. That argument sounds like a valid reason, but as you will see below, there is no easy path towards treating all of these companies the same.

The stay applied to FCC rules covering a wide variety of privacy issues. The rules were to require the big ISPs to get customer permission to use their data. The rules also created specific security requirements at the ISPs defining how ISPs have to protect customer data and how and when they had to disclose data breaches to customers.

So here is where the confusion starts. The FCC clearly has no authority to regulate the web and what it calls edge-providers – companies like Facebook and Google. It would take an Act of Congress to give the FCC any authority to regulate the web – something that neither Democratic nor Republican administrations have had an appetite for.

Chairman Pai did suggest that perhaps the easiest solution is to hand ISP security issues to the Federal Trade Commission. But the new head of the FTC said this the agency would have no authority to regulate ISPs as long as Title II authority gives this authority to the FCC. So perhaps this action is an indicator that Chairman Pai intends to reverse Title II regulation. He’s said that he is against net neutrality and the FCC used the tool of Title II regulation to implement it. So killing Title II regulations would also get rid of net neutrality.

But what is not being talked about is that the FTC has never contemplated privacy rules as sweeping as the ones implemented by the FCC. The FTC already could impose these rules on Facebook, Google and everybody else on the web, but has never taken any serious steps towards doing so.

Because of that, halting the privacy rules feels like Chairman Pai is just letting the big ISPs off the hook. The big ISPs have been lobbying against these rules from the second they were passed. The ISPs are jealous of the giant revenues that the web companies are making from data mining of consumer data. And the ISPs want to protect what they’ve already been doing. It’s been well known, for example, that AT&T has been monetizing customer data. The leaks from Edward Snowden showed that AT&T has been supplying far more data to the NSA than is required by the Patriot Act. There are reports of a lucrative multi-billion dollar AT&T product line called ‘Hemisphere’ that has been selling customer phone and internet records to the federal government and to local law enforcement agencies.

What I think all of this means is that we have seen the end, for a while of any government agency trying to provide privacy protection for customers. This mainly bothers me as a consumer more than as a consultant. I work entirely with smaller ISPs and none of them have the ability to use customer data in the same way that the big companies do. This latest FCC action only immediately affects perhaps the dozen largest ISPs.

There is a big functional different between ISPs and edge-providers like Facebook. An ISP can see every keystroke a customer makes on the web, except for those that are made inside some encrypted program. But almost nobody uses encryption and so your ISP knows every web site you visit, the contents of every email you write, and every query you make to a search engine. And they know even more about you from your cellphone records – where you traveled and when.

But the difference between Facebook and the ISPs is that nobody makes you use Facebook. I really hate the way that the big companies like Facebook and Google track everything you do inside their platforms. I dropped off Facebook last year partly for this reason.  I also rarely use Google as a search engine and don’t use Gmail or Google’s Chrome web browser. I can largely avoid the big web companies, but I can’t avoid my ISP. And like most Americans I don’t have any real option but to use a big ISP for broadband access.

I’m probably like most Americans and don’t feel like I have a lot to hide. But that still does not mean that I want big companies following my every movement, my every purchase, my every email and every web site I visit. That has far too much “big brother” about it for my liking. I know today that this data is mostly being used to develop targeted marketing, but this information could also easily be used for nefarious purposes, and some of that is starting to happen.

As much as this reversal of the privacy rules bothers me as a consumer, the big picture here is that, for now, the big ISPs finally have the FCC they want. This FCC has already said it’s going to reverse or gut net neutrality. This FCC just said they aren’t going to review the AT&T and Time Warner merger. Killing the privacy rules is final proof, only a month after the new Chairman has been in charge, that the big ISPs are likely to get everything they want. And I don’t think that is a healthy thing for the industry or for consumers.