Tag Archives: digital discrimination

Big ISPs Hate the FCC’s Digital Discrimination Rules

The big ISPs certainly have their knickers in a knot over the adoption of digital discrimination rules by the FCC. The FCC was required to adopt some version of digital discrimination rules by language included in the Infrastructure Investment and Jobs Act. The IIJA Act says that the FCC needs to prevent discrimination based on income level, race, ethnicity, color, religion, or national origin.

The big controversy that has stirred the big ISPs is the definition of discrimination. The ISPs wanted discrimination to be defined as intentional discrimination where an ISP purposefully decides not to serve somebody. The trouble with that definition is that it would likely require a whistleblower with documentation from inside an ISP to prove intent. The FCC adopted intentional discrimination but also adopted what it calls disparate market impacts, which means the agency can consider discrimination that is obvious in the market without having to prove an ISP’s intent.

The ISPs have been screaming loudly against the FCC decision. Perhaps one of the best summaries of the ISP’s outrage comes from a recent editorial in the Wall Street Journal. I don’t provide links to articles behind paywalls, but a Wall Street Journal editorial warns that the new rules will weaken the Internet by giving the FCC the power to micromanage the industry. They roll out examples of how the FCC might abuse its new power.

“Marketing materials that feature too many white people could be ruled discriminatory. Companies could be forced to scrap credit checks that cause more minorities to be rejected for smartphone leasing plans. Providers could even be punished for charging the same prices to all customers since their rates might have a disparate financial impact on minorities. The FCC could likewise prohibit low-cost wireless plans that include data caps because these are selected more often by people with lower incomes. . . Wireless carriers might also be prohibited from building out 5G networks in suburbs and city downtowns before inner cities and rural areas.”

I have always enjoyed a good lobbying rant, and the above is a classic. We saw a lot of the same kind of overblown rhetoric from both sides during the process leading up to the net neutrality decision a few years ago.

It’s obvious that the Wall Street Journal has fully adopted the arguments being made by the giant ISPs. The reality is that big ISPs don’t want any regulatory rules or oversight. It’s laughable to think the FCC would be upset that an ISP charges everybody the same rates. That’s the very definition of non-discrimination. Discrimination is more likely going to be claimed due to practices like the study last year that uncovered that Charter was offering the highest prices in the poorest neighborhoods of Los Angeles.

The big ISPs are particularly distraught over the idea of the FCC monitoring digital discrimination since it is coupled with a likely vote to reintroduce Title II regulation of broadband. They are worried that the combination of the two sets of regulations will mean they won’t be free to do anything they like in the market. The unspoken worry that the big ISPs don’t want to talk about is the fear that regulators will put pressure on them to stop big annual rate increases. It’s hard to fathom the FCC ever deciding to directly regulate broadband rates, but it’s not hard to picture them putting public pressure on ISPs to keep rates affordable.

The Wall Street Journal is using the rhetorical trick of pointing out the most extreme ways that the new regulations could be used. But it’s rare for regulators to go to the extremes. The new regulations do not mean that the FCC is going to come down on the big ISPs with a hammer. The FCC didn’t do that the last time when Title II was the regulatory framework. But it does mean that the FCC is likely to call out some of the most obvious abuses by the big ISPs and possibly force them to cease the worst practices.

That’s what regulation is supposed to do. A handful of large ISPs have near-monopoly power in the broadband market, and the job of regulators is to balance that power by making sure that the general public still gets a fair shake. You’ll not hear the big ISPs talking about that.

A Peek Inside the FCC

I write a lot about the FCC, but I would imagine that a lot of the folks who read this blog don’t realize the many functions handled by the agency. Like any regulatory agency, the FCC staff and Commissioners have been tasked by Congress with a wide range of responsibilities.

The public gets to formally hear from the FCC once each month when the agency has its public meeting. These meetings are where the Commissioners vote on various issues. The monthly meetings operate much like a city council meeting, with items on a public agenda coming up for discussion or a vote.

In the November open meeting, the FCC will be voting on a wide range of issues.

  • The Commissioners will vote on a proposal that is supposed to identify and prevent digital discrimination. The FCC was required to examine this issue by November 15 in the Infrastructure Investment and Jobs Act.
  • The Commission will consider rules to help victims of domestic violence by helping survivors separate service from their abusers and also protect the privacy of calls made to domestic abuse hotlines.
  • The FCC will debate opening an investigation into the threats posed by artificial intelligence in the generation of robocalls and robotexts.
  • They’ll be looking at rules to thwart cell phone fraud by scammers who take over victims’ cell phone accounts by covertly swapping SIM cards to a new device or porting phone numbers to a new carrier.
  • They will consider rules to modernize ham radio by allowing operators to use digital tools.
  • They will look at a specific case that will reduce regulation in the rural long-distance market.
  • And while not on the listed agenda, the FCC is looking at resetting the definition of broadband to 100/20 Mbps.

The public meetings are only one small piece of what the FCC routinely tackles. Here are a few of the other ongoing functions of the FCC:

  • Is in charge of spectrum policy and use. Decides exactly how each slice of spectrum can be used and who can use it. Was in charge of wireless spectrum auctions – but this is now on hold.
  • Issues licenses to users of services the agency regulates. This includes radio and TV stations. This includes spectrum licenses, such as microwave links. It includes authority for companies to engage in international long-distance.
  • Approves communications devices before they hit the U.S. market. This includes a long list of electronics like computers and peripherals, power adapters, Bluetooth devices, remote control devices, IT equipment, WiFi and other wireless equipment, cellphones and telephones, radio transmitters, garage door openers, etc.
  • Approves and regulates satellite companies that will engage in communications.
  • Oversees the Universal Service Fund through an arrangement with USAC.
  • Participates in a Joint Board with state regulators looking at universal service policies and regulations.
  • Tackles ad hoc issues, like the current push to try to control and eliminate robocalling and spam calls. Another interesting, current effort involves examining how to improve communications for precision agriculture.
  • Is in charge of issuing telephone numbers.
  • Makes certain that those with disabilities have access to communications systems.
  • Oversees disputes from companies that engage in areas the agency regulates. Courts often remand lawsuits filed in the court back to the FCC.
  • Issues fines to companies that break its regulatory rules.
  • Accepts and sometimes tries to mitigate consumer complaints about regulated companies.
  • Coordinates with regulators around the world on issues of common interest, like spectrum usage and device compatibility.

Digital Discrimination

The FCC recently opened a docket, at the prompting of federal legislation, that asks for examples of digital discrimination. The docket asks folks to share stories about how they have had a hard time obtaining or keeping broadband, specifically due to issues related to zip code, income level, ethnicity, race, religion, or national origin.

The big cable companies and telcos are all going to swear they don’t discriminate against anybody for any reason, and every argument they make will be pure bosh. Big corporations, in general, favor more affluent neighborhoods over poor ones. Neighborhoods that don’t have the best broadband networks are likely going to be the same neighborhoods that don’t have grocery stores, gas stations, retail stores, restaurants, banks, hotels, and a wide variety of other kinds of infrastructure investment from big corporations. The big cable companies and telcos are profit-driven and focused on stock prices, and they make many decisions based on the expected return to the bottom line – just like other large corporations.

There is clearly discrimination by ISPs by income level. It’s going to be a lot harder to prove discrimination by ethnicity, race, religion, or national origin, although it’s likely that some stories of this will surface in this docket. But discrimination based on income is everywhere we look. There are two primary types of broadband discrimination related to income – infrastructure discrimination and price discrimination.

Infrastructure discrimination for broadband has been happening for a long time. It doesn’t take a hard look to see that telecom networks in low-income neighborhoods are not as good as those in more affluent neighborhoods. Any telecom technician or engineer can point out a dozen of differences in the quality of the infrastructure between neighborhoods.

The first conclusive evidence of this came years ago from a study that overlaid upgrades for AT&T DSL over income levels, block by block in Dallas. The study clearly showed that neighborhoods with higher incomes got the upgrades to faster DSL during the early 2000s. The differences were stark, with some neighborhoods stuck with first-generation DSL that delivered 1-2 Mbps broadband while more affluent neighborhoods had been upgraded to 20 Mbps DSL or faster.

It’s not hard to put ourselves into the mind of the local AT&T managers in Dallas who made these decisions. The local manager would have been given an annual DSL upgrade budget and would have decided where to spend it. Since there wasn’t enough budget to upgrade everywhere, the local manager would have made the upgrades in neighborhoods where faster cable company competition was taking the most DSL customers – likely the more affluent neighborhoods that could afford the more expensive cable broadband. There were probably fewer customers fleeing the more affordable DSL option in poor neighborhoods where the price was a bigger factor for consumers than broadband speeds.

These same kinds of economic decisions have been played out over and over, year after year by the big ISPs until affluent neighborhoods grew to have better broadband infrastructure than poorer neighborhoods. Consider a few of the many examples of this:

  • I’ve always noticed that there are more underground utilities in newer and more affluent neighborhoods than in older and poorer ones. This puts broadband wires safely underground and out of reach from storm damage – which over time makes a big difference in the quality of the broadband being delivered. Interestingly, the decision of where to force utilities to be underground is done by local governments, and to some degree, cities have contributed to the difference in infrastructure between affluent and low-income neighborhoods.
  • Like many people in the industry, when I go to a new place, I automatically look up at the conditions of poles. While every place is different, there is clearly a trend to have taller and less cluttered poles in more affluent parts of a city. This might be because competition brought more wires to a neighborhood, which meant more make-ready work done to upgrade poles. But I’ve spotted many cases where poles in older and poorer neighborhoods are the worst in a community.
  • It’s easy to find many places where the Dallas DSL story is being replayed with fiber deployment. ISPs of all sizes cherry-pick the neighborhoods that they perceive to have the best earnings potential when they bring fiber to a new market.

We are on the verge of having AI software that can analyze data in new ways. I believe that we’ll find that broadband discrimination against low-income neighborhoods runs a lot deeper than the way we’ve been thinking about it. My guess is that if we map all of the infrastructure related to broadband we’d see firm evidence of the infrastructure differences between poor and more affluent neighborhoods.

I am sure that if we could gather the facts related to the age of the wires, poles, and other infrastructure, we’d find the infrastructure in low-income neighborhoods is significantly older than in other neighborhoods. Upgrades to broadband networks are usually not done in a rip-and-replace fashion but are done by dozens of small repairs and upgrades over time. I also suspect that if you could plot all of the small upgrades done over time to improve networks, you’d find more of these small upgrades, such as replacing cable company power taps and amplifiers, to have been done in more affluent neighborhoods.

We tend to think of broadband infrastructure as the network of wires that brings fast Internet to homes, but modern broadband has grown to be much more than that, and there is a lot of broadband infrastructure that is not aimed at home broadband. Broadband infrastructure has also come to mean small cell sites, smart grid infrastructure, and smart city infrastructure. I believe that if we could map everything related to these broadband investments we’d see more examples of discrimination.

Consider small cell sites. Cellular companies have been building fiber to install small cell sites to beef up cellular networks. I’ve never seen maps of small cell installations, but I would wager that if we mapped all of the new fiber and small cell sites we’d find a bias against low-income neighborhoods.

I hope one day to see an AI-generated map that overlays all of these various technologies against household incomes. My gut tells me that we’d find that low-income neighborhoods will come up short across the board. Low-income neighborhoods will have older wires and older poles. Low-income neighborhoods will have fewer small cell sites. Low-income neighborhoods won’t be the first to get upgraded smart grid technologies. Low-income neighborhoods won’t get the same share of smart city technologies, possibly due to the lack of other infrastructure.

This is the subtle discrimination that the FCC isn’t going to find in their docket because nobody has the proof. I could be wrong, and perhaps I’m just presupposing that low-income neighborhoods get less of every new technology. I hope some smart data guys can find the data to map these various technologies because my gut tells me that I’m right.

Price discrimination has been around for a long time, but I think there is evidence that it’s intensified in recent years. I first noticed price discrimination in the early price wars between the big cable companies and Verizon FiOS. This was the first widespread example of ISPs going head-to-head with decent broadband products where the big differentiator was the price.

I think the first time I heard the term ‘win-back program’ was related to cable companies working hard not to lose customers to Verizon. There are stories in the early days of heavy competition of Comcast keeping customers on the phone for a long time when a customer tried to disconnect service. The cable company would throw all sorts of price incentives to stop customers from leaving to go to Verizon. Over time, the win-back programs grew to be less aggressive, but they are still with us today in markets where cable companies face stiff competition.

I think price competition has gotten a lot more subtle, as witnessed by a recent study in Los Angeles that showed that Charter offers drastically different online prices for different neighborhoods. I’ve been expecting to see this kind of pricing for several years. This is a natural consequence of all of the work that ISPs have done to build profiles of people and neighborhoods. Consumers have always been leery about data gathered about them, and the Charter marketing practices by neighborhood are the natural endgame of having granular data about the residents of LA.

From a purely commercial viewpoint, what Charter is doing makes sense. Companies of all sorts use pricing to reward good existing customers and to lure new customers. Software companies give us a lower price for paying for a year upfront rather than paying monthly. Fast food restaurants, grocery stores, and a wide range of businesses give us rewards for being regular customers.

It’s going to take a whistleblower to disclose what Charter is really doing. But the chances are it has a sophisticated software system that gives a rating for individual customers and neighborhoods based on the likelihood of customers buying broadband or churning to go to somebody else. This software is designed to offer a deeper discount in neighborhoods where price has proven to be an effective technique to keep customers – without offering lower prices everywhere.

I would imagine the smart numbers guy who devised this software had no idea that it would result in blatant discrimination – it’s software that lets Charter maximize revenue by fine-tuning the price according to a computer prediction of what a given customer or neighborhood is willing to pay. There has been a lot of speculation about how ISPs and others would integrate the mounds of our personal data into their businesses, and it looks like it has resulted in finely-tuned price discrimination by city block.

Is There a Fix for Digital Discrimination?

The big news in the broadband industry is that we are in the process of throwing billions of dollars to solve the ultimate case of economic discrimination – the gap between urban and rural broadband infrastructure. The big telcos completely walked away from rural areas as soon as they were deregulated and could do so. The big cable companies never made investments in rural areas due to the higher costs. The difference between urban and rural broadband networks is so stark that we’ve decided to cure decades of economic discrimination by throwing billions of dollars to close the gap.

But nobody has been seriously looking at the more subtle manifestation of the same issue in cities. The FCC is only looking at digital discrimination because it was required by the Infrastructure Act. Does anybody expect that anything will come out of the stories of discrimination? ISPs are going to say that they don’t discriminate. If pinned down, they will say that what looks like discrimination is only the consequence of them making defensible economic decisions and that there was no intention to discriminate.

Most of the discrimination we see in broadband is due to the lack of regulation of ISPs. They are free to chase earnings as their top priority. ISPs have no regulatory mandate to treat everybody the same. The regulators in the country chose to deregulate broadband, and the digital discrimination we see in the market is the direct consequence of that choice. When AT&T was a giant regulated monopoly we required it to charge everybody the same prices and take profits from affluent customers to support infrastructure and prices in low-income neighborhoods and rural places. Regulation wasn’t perfect, but we didn’t have the current gigantic infrastructure and price gaps.

If people decide to respond to this FCC docket, we’ll see more evidence of discrimination based on income. We might even get some smoking gun evidence that some of the discrimination comes from corporate bias based on race and other factors. But discrimination based on income levels is so baked into the ways that corporations act that I can’t imagine that anybody thinks this docket is going to uncover anything we don’t already know.

I can’t imagine that this investigation is going to change anything. The FCC is not going to make big ISPs spend billions to clean up broadband networks in low-income neighborhoods. While Congress is throwing billions at trying to close the rural broadband gap, I think we all understand that anywhere that the big corporations take the rural grant funding that the infrastructure is not going to be maintained properly and that in twenty years we’ll be having this same conversation all over again. We know what is needed to fix this – which is regulation that forces ISPs to do the right thing. But I doubt we’ll ever have the political or regulatory will to force the big ISPs to act responsibly.