FCC to Investigate MDU Broadband

The FCC is launching an investigation into anticompetitive practices that are keeping broadband from coming to apartments and other multi-tenant buildings. They have issued a Notice of Inquiry in Docket in GN Docket 17-142 looking into the topic and are expected later this month to formally release it to the public. The docket specifically looks at barriers to competition in what the FCC is calling MTEs – multiple tenant environments, which includes apartments, condominiums, shopping malls and cooperatively owned buildings.

This is not the first time that the FCC has tackled the topic. Back in 2008 the commission banned some contractual arrangements that gave incumbent ISPs unfair advantage over competitors. However, that order didn’t go far enough, and ISPs basically shifted to arrangements that were not banned by the FCC. The FCC is looking into the topic because it’s become obvious that exclusive arrangements are harming the introduction of faster broadband into a sizable portion of the market. There are cities where half or more of residents live in apartments and don’t have the same competitive choices as those living in single family homes.

The FCC has an interesting legal challenge in looking at this issue. This docket specifically looks at the potential for regulating broadband access in MTEs, something that the FCC has the authority to do under Title II regulation. But assuming that the FCC moves forward this year with plans to scrap Title II regulation they might also be eliminating their authority to regulate MTEs in the manner suggested by the NOI. If they decide to act on the issue it will be interesting to see how they define their authority to regulate anything that is broadband related. That might be our first glimpse at what a regulatory regime without Title II looks like.

Further, Chairman Ajit Pai has shown a strong preference to lighten the regulations on ISPs and you have to wonder if he is willing to really tackle a new set of regulations. But he’s faced with the dilemma faced by all regulators in that sometimes the market will not automatically produce the results that are beneficial to society and sometimes regulations are the only way to get corporations and others to behave in the way that benefits everybody. It’s clear that residents in MTEs have little or no competition and choice and new regulations might be the only way to get it for them.

The NOI looks at specific issues related to MTE broadband competition:

  • It asks if the FCC should consider overriding state and local regulations that inhibit the deployment of broadband in MTEs. Some jurisdictions have franchising and other rules that make it hard for a smaller competitor to try to serve only MTEs or parts of markets.
  • It asks if the FCC should prohibit exclusive marketing and bulk billing arrangements by ISPs.
  • It asks if the FCC should prohibit revenue sharing and exclusive wiring arrangements with ISPs.
  • It asks if there are other kinds on non-contractual practices that should be prohibited or regulated.

The NOI is interesting in that it tackles all of the topics that the FCC left untouched in 2008. When that order came out I remember thinking about all of the loopholes the FCC had left available to ISPs that wanted to maintain an exclusive arrangement with apartment owners. For example, bulk billing arrangements are where a landlord buys wholesale connections from an ISP and then includes broadband or cable TV as part of the rent, at a mark-up. Landlords under such arrangements are unlikely to allow in another competitor since they are profiting from the exclusive arrangement. The FCC at the time didn’t feel ready to tackle the issues associated with regulating landlord behavior.

The NOI asks for comments on the non-contractual issues that prohibit competition. I’ve seen many such practices in the marketplace. For instance, a landlord may tell tenants that they are pro-competition and that they allow access to multiple ISPs, but then charge exorbitant fees to ISPs for gaining access to buildings or for wanting to collocate electronics or to run wiring. I can think of dozens of different roadblocks that I’ve seen that effectively keep out competitors.

I am heartened a bit by this docket in that it’s the first thing this new FCC has done to solve a problem. Most of the work they’ve done so far is to dismantle old rules to reduce regulation. There is nothing wrong with that in general and I have my own long shopping list of regulations that are out of date or unnecessary. But there are industry issues like this one where regulation is the only way to provide a needed fix to a problem. It’s clear that large ISPs and many landlords have no interest in bringing competition to their buildings. And if that is a goal that the FCC wants to foster, then they are going to have to create the necessary regulations to make it happen – even if they prefer to not regulate.

Means Testing for FCC Funding – Part II

Yesterday I wrote about the recent blog by FCC Commissioners Michael O’Rielly and Mignon Clyburn that suggests that there ought to be a means test for anybody accepting Universal Service Funds. Yesterday I looked at the idea of using reverse auctions for allocating funds – an idea that I think would only serve to shift broadband funds to slower technologies, most likely rural cellular service for broadband. Today I want to look at two other ideas suggested by the blog.

The blog suggests that rural customers ought to pay more for broadband since it costs more to provide broadband in sparsely populated areas. I think the FCC might want to do a little research and look at the actual prices charged today for broadband where commercial companies have built rural broadband networks. It’s something I look at all of the time and all over the country, and from what I can see the small telcos, cooperatives, WISPs and others that serve rural America today already charge more than what households pay for broadband in urban areas – sometimes considerably more. I am sure there are exceptions to this and perhaps the Commissioners have seen some low rural pricing from some providers. But I’ve looked at the prices of hundreds of rural ISPs and have never seen prices below urban rates.

The small rural ISPs have to make a commercial go of their broadband networks and they’ve realized for years that the only way to do that is to charge more. In most urban areas there is a decent broadband option starting around $40 per month and you rarely see a price close to that in rural America. If you see a low price in rural America it probably offers a very slow speed of perhaps a few Mbps, which certainly doesn’t compare to the 60 Mbps I get from Charter for $44.95 per month.

The issue of rural pricing does raise one policy issue. Historically the Universal Service Fund was used for precisely what this blog seems not to like – to hold telephone rates down in rural America so that everybody in the country could afford to be connected. That policy led to the country having telephone penetration rates for decades north of 98%. I’m not advocating that USF funds ought to be used to directly hold down rural broadband rates, but it’s worth a pause to remember that was the original reason that the Universal Service Fund was started and it worked incredibly well.

The second idea raised by the blog is that Universal Service Funds ought not be used to build broadband to wealthy customers. They suggest that perhaps federal funding ought not to be used to bring broadband to “very rich people who happen to live in the more rural portions of our nation.”  The blog worries that poor urban people will be subsidizing ‘some of the wealthiest communities in America.’  I am sure in making that statement that the Commissioners must have a few real-life communities in mind. But I work all over the country and there are not very many pockets of millionaires in rural America, except perhaps for farmers.

Farmers are an interesting case when it comes to broadband. By definition farmers are rural. But US agriculture is the largest industry in the country and the modern farmer needs broadband to be effective. We are headed soon towards a time when farm yields can increase dramatically by use of IoT sensors, farm robots and other high technology that is going to require broadband. I know that a lot of the rural communities that are clamoring for broadband are farming communities – because those farms are the economic engine that drives numerous counties and regions of the country. I don’t think it’s unreasonable if we are going to rethink policy to talk about bringing broadband to our largest industry.

The FCC blog suggests that perhaps wealthier individuals ought to pay for the cost of getting connected to a broadband network. It’s certainly an interesting idea, and there is precedent. Rural electric companies have always charged the cost of construction to connect customers that live too far from their grid. But with that said we also have to remember that rural electric grids were purposefully built to reach as many people as possible, often with the help of federal funding.

This idea isn’t practical for two reasons. It’s already incredibly hard today to finance a fiber network. I picture the practical problem of somehow trying to get commitments from farmers or other wealthy individuals as part of the process of funding and building a broadband network. As somebody who focuses mostly on financing fiber networks this would largely kill funding new networks. To get the primary borrower and all of the ‘rich’ people coordinated in order to close a major financing is something that would drive most lenders away – it’s too complicated to be practically applied. The FCC might want to consult with a few bankers before pushing this idea too far.

But there is a more fundamental issue and the FCC blog touches upon it. I’m trying to imagine the FCC passing a law that would require people to disclose their income to some commercial company that wants to build a fiber network. I’m not a lawyer, but that sounds like it would bump against all sorts of constitutional issues, let alone practical ones. For example, can you really picture having to report your income to AT&T?  And I then go back to the farmers again. Farmers don’t make a steady income – they have boom years and bust years. Would we put them on or off the hook for contributing towards a fiber network based upon their most recent year of income?

I certainly applaud the Commissioners for thinking outside the box, and that is a good thing when it leads to discussions of ways to improve the funding process. I will be the first to tell you that the current USF distributions are not always sensible and equitable and there is always room for improvement. Some of the ideas suggested by the blog have been discussed in the past and it never hurts to revisit ideas. But what most amazes me about the suggestions made by this blog is that the proposed solutions would require a heavy regulatory hand – and this FCC, or at least its new Chairman has the goal of reducing regulation. To impose a means test or income test would go in the opposite direction and would require a new layer of intrusive regulations.

Can the States Regulate Internet Privacy

Since Congress and the FCC have taken steps to remove restrictions on ISPs using customer data, a number of states and even some cities have taken legislative steps to reintroduce some sort of privacy restrictions on ISPs. This is bound to end up in the courts at some point to determine where the authority lies to regulate ISPs.

Congress just voted in March to end restrictions on the ways that ISPs can use customer data, leading to a widespread fear that ISPs could profit from selling customer browsing history. Since then all of the large telcos and cable companies have made public statements that they would not sell customer information in this way, but many of these companies have histories that would indicate otherwise.

Interestingly, a new bill has been introduced in Congress called the BROWSER Act of 2017 that would add back some of the restrictions imposed on ISPs and would also make those restrictions apply to edge providers like Google and Facebook. The bill would give the authority to enforce the privacy rules to the Federal Trade Commission rather than the FCC. The bill was introduced by Rep. Marsha Blackburn who was also one of the architects of the earlier removal of ISP restrictions. This bill doesn’t seem to be getting much traction and there is a lot of speculation that the bill was mostly offered to save face for Congress for taking away ISP privacy restrictions.

Now states have jumped in to fill the void. Interestingly the states looking into this are from both sides of the political spectrum which makes it clear that privacy is an issue that worries everybody. Here is a summary of a few of the state legislative efforts:

Connecticut. The proposed law would require consumer buy-in before any “telecommunication company, certified telecommunications provider, certified competitive video service provider or Internet service provider” could profit from selling such data.

Illinois. The privacy measures proposed would allow consumers to be able to ask what information about them is being shared. The bills would also require customer approval before apps can track and record location information on cellphones.

Massachusetts. The proposed legislation would require customer buy-in for sharing private information. It would also prohibit ISPs from charging more to customers who don’t want to share their personal information (something AT&T has done with their fiber product).

Minnesota. The proposed law would stop ISPs from even recording and saving customer information without their approval.

Montana. The proposed law there would prohibit any ISPs that share customer data from getting any state contracts.

New York. The proposed law would prohibit ISPs from sharing customer information without customer buy-in.

Washington. One proposed bill would require written permission from customers to share their data. The bill would also prohibit ISPs from denying service to customers that don’t want to share their private information.

Wisconsin. The proposed bill essentially requires the same restrictions on privacy that were included in the repealed FCC rules.

This has even made it down to the City level. For example, Seattle just issued new rules for the three cable providers with a city franchise telling them not to collect or sell customer data without explicit customer permission or else face losing their franchise.

A lot of these laws will not pass this year since the new laws were introduced late into the legislative sessions for most states. But it’s clear from the laws that have been proposed that this is a topic with significant bipartisan support. One would expect a lot of laws to be introduced and enacted in legislative sessions that will occur later this year or early next year.

There is no doubt that at some point this is going to result in lawsuits to resolve the conflict between federal and state rules. An issue of this magnitude will almost certainly will end up at the Supreme Court at some point. But as we have seen in the past, during the period of these kinds of legislative and legal fights the status of any rules is muddy. And that generally means that ISPs are likely to continue with the status quo until the laws become clear. That likely means that ISPs won’t openly be selling customer data for a few years, although one would think that the large ones have already been collecting data for future use.

The Proliferation of Small Wireless Devices

Cities nationwide are suddenly seeing requests to place small wireless devices in public rights-of-way. Most of the requests today are for placing mini-cell sites, but in the near future there are going to be a plethora of other outdoor wireless devices to support 5G broadband and wireless loops.

Many cities are struggling with how to handle these requests. I think that once they understand the potential magnitude of future requests it’s going to become even more of an issue. Following are some of the many issues involved with outdoor wireless electronics placement:

Franchising. One of the tools cities have always used to control and monitor placement of things in rights-of-way is through the use of franchise agreements that specifically spell out how any given company can use the right-of-way. But FCC rules have prohibited franchises for cellular carriers for decades – rules that were first put into place to promote the expansion of cellular networks. Those rules made some sense when cities only had to deal with large cellular towers that are largely located outside of rights-of-way, but make a lot less sense for devices that can be placed anywhere in a city.

Aesthetics. These new wireless devices are not going to be placed in the traditional locations like large cellular towers, water towers and rooftops of buildings. Instead the wireless providers will want to place them on existing telephone poles and light poles. Further, I’ve heard of requests for the placement of new, taller poles as tall as 100 feet that would be used just for the wireless network.

The devices that will be used are going to vary widely in size and requirements, making it difficult to come up with any one-size-fits-all new rules. The devices might vary in sizes ranging from a laptop computer up to a small dorm refrigerator. And some of the devices will be accompanied by support struts and other devices that together make for a fairly large new structure. The vast majority of these devices will need an external power feed (some might be solar powered) and many are also going to need a fiber feed.

It’s also expected that 5G devices are going to want relatively clear line-of-sight and this means a lot more tree-trimming, including trimming at greater heights than in the past. I can picture this creating big issues in residential neighborhoods.

Proliferation. I doubt that any city is prepared for the possible proliferation of wireless devices. Not only are there four major cellular companies, but these devices are going to be deployed by the cable companies that are now entering the cellular market along with a host of ISPs that want to deliver wireless broadband. There will also be significant demand for placement for connecting private networks as well as for the uses by the cities themselves. I remember towns fifty years ago that had unsightly masses of telephone wires. Over the next decade or two it’s likely that we will see wireless devices everywhere.

Safety. One of the concerns for any city and the existing utilities that use poles and rights-of-way is the safety of technicians that work on poles. Adding devices to poles always makes it more complicated to work on a pole. But adding live electric feeds to devices (something that is fairly rare on poles) and new fiber wires and the complexity increases again – particularly for technicians trying to make repairs in storm conditions.

Possible Preemption of City Rights. Even after considering all these issues, it’s possible that the choice might soon be moot for cities. At the federal level both the FCC and Congress are contemplating rules that make it easier for cellular companies to deploy these devices. There are also numerous bills currently in state legislatures that are looking at the same issues. In both cases most of the rules being contemplated would override local control and would institute the same rules everywhere. And as you might imagine, almost all of these laws are being pushed by the big cellular companies and largely favor them over cities.

It’s easy to understand why the cellular companies want universal rules. It would be costly for them to negotiate this city by city. But local control of rights-of-way has been an effective tool for cities to use to control haphazard proliferation of devices in their rights-of-way. This is gearing up to be a big battle – and one that will probably come to a head fairly soon.

What is ‘Light Touch’ Regulation?

The new FCC Commissioner Ajit Pai has made several speeches in the last month talking about returning to ‘light-touch regulation’ of the big ISPs. He is opposed to using Title II regulation to regulate ISPs and wants to return to what we had in place before that.

His argument is that the Internet has grown and thrived under the prior way that it was regulated. And he has a point – the Internet has largely been unregulated since its inception. And in many ways the industry has even received preferential regulatory treatment such as the way that Congress has repeatedly exempted broadband services from taxes.

It’s certainly hard to argue with the fact that the Internet has thrived. It’s a little harder to draw the conclusion that light regulation was the cause for this, as the Internet has primarily grown because people love the online content they find there.

But we are now at a different point in the broadband industry than we were when it was in its infancy. Consider the following:

  • The vast majority of homes now have broadband. While the industry is still adding customers there aren’t that many more households that can get broadband that don’t have it.
  • Look back just ten years ago and there was a lot more competition for broadband. In 2007 cable modems and DSL served roughly the same number of customers with similar products in terms of speed. But today cable broadband has become a near-monopoly in most markets.
  • One of the drivers towards implementing net neutrality was the explosive growth of video. Just a few years ago there were many reports of the big ISPs slowing down Netflix and other video traffic. The ISPs were trying to force video providers to pay a premium price to gain access to their networks.
  • While broadband prices have held reasonably stable for a decade, both the cable TV and voice products of the large ISPs are under fire and it’s widely expected that the ISPs will have to start raising broadband rates every year to meet earnings expectations.
  • The ISPs have changed a lot over the last decade and all of the big ones now own content and are no longer just ISPs. This gives them competitive leverage over other competitors.
  • The Internet has become a far more dangerous place for consumers. Hacking and viruses run rampant. And the ISPs and web services like Google and Facebook routinely gather data on consumers for marketing purposes.

I would be the first to agree that hands-off regulation probably contributed to the growth of the Internet. But this is no longer the same industry and it’s hard to think that any of the big ISPs or transport providers need any further protection. These are huge companies with big profits.

It seems to me that the Chairman’s use of the term ‘light-touch regulation’ is code for basically having no regulations at all. And since that was the state of the industry just a few years ago we don’t have to stretch the imagination very far to know what that means.

Before Title II regulation the FCC had almost no power over the big ISPs. The most they could do was to encourage them to do the right thing. Interestingly, in the two or three years leading up to the Title II order it was the threat of coming regulation that kept the ISPs in line more than anything else. The FCC tried to intercede in disputes between the ISPs and video providers and found that they had no leverage on the ISPs. The FCC also didn’t like data caps but they had no power to do anything about them. However, since the ISPs feared price regulation under Title II most of them raised data cap limits to defuse the public outcry over the issue.

So my recollection of the past five years is that it was the threat of coming regulation that kept the big ISPs in line. Because at the end of the day a big ISP could challenge the FCC on broadband issues in court and win every time. So the FCC’s best way to influence the ISPs was to hold the threat of regulation over their heads.

If we go back to that same regulatory place (which is what would happen if Title II is reversed) then there will no longer be any leverage at the FCC. ISPs will be free to do almost anything they want in the broadband arena. The FCC has already let them off the hook for consumer privacy, and that is just the beginning.

You can expect without regulation that the ISPs will do all of those things that net neutrality was supposed to protect against. They all say today that will never happen, and that they believe in the core tenets of net neutrality. But I think we all know that is public relations talk and that the big ISPs will pursue anything that will make them money. That means discriminating against traffic and demanding payments from video providers to get unimpeded broadcasts. It means the ISPs favoring their own content over content of others. And it means a return of price caps and broadband price increases with no fear of FCC intervention. I have a hard time thinking that ‘light-touch’ means anything other than ‘no-touch.’

Another Reversal of the FilmOn X Decision

In the continuing saga of looking for alternate ways to get programming to the home, the U.S. Court of Appeals for the Ninth Circuit reversed an earlier ruling that said that FilmOn X had a right to retransmit over-the-air television signals.

FilmOn is a global provider of internet-based programming. They carry over 600 channels of broadcast TV from around the world. They also carry a big library of movies and offer a few of their own theme-based channels (such as Shockmasters that specialize in Alfred Hitchcock movies and television shows).

I won’t go through the history of the company and its attempts to carry the major US networks like ABC, NBC, CBS and Fox. The company was granted the right to carry this content several times in various courts and then had those decisions reversed by other courts. This case marks the third time that the company has been told it doesn’t have the right to retransmit these networks.

The company has tried several ways of delivering these networks to customers. They originally just grabbed the signals out of the air and put them on the internet. When told this wasn’t allowed by the courts they then set up satellite farms to wirelessly send individual signals to customers in a manner similar to Aereo.

This latest ruling said specifically that FilmOn is not eligible to call itself a cable company and to demand that local stations sell them content. That ruling hinged upon testimony provided by the US Patent office that said that such authority for internet-based retransmission was not clear. This differed from an earlier US Supreme Court ruling in the Aereo case that said that internet retransmission was equivalent to cable retransmission.

What’s really at the heart of this case is the definition of who is eligible to retransmit signals from the major over-the-air networks. Congress, through various laws, has given the right (and usually also the obligation) for landline-based cable companies to carry the major networks. Cable companies are obligated to carry those stations that are within certain distances from their customer base.

But over the years those that have been allowed to carry local programming has grown. Within the last decade the satellite cable companies began carrying local stations in many markets. I lived in the Caribbean for many years and some of the cable providers in Puerto Rico and the Virgin Islands somehow obtained the rights to carry some New York City local stations. Today there are a number of OTT providers like Sling TV and Playstation Vue that are carrying local network stations.

But the current rules draw a firm distinction between those that must carry local programming and everybody else. And this gives the flexibility to local stations to decide if they will sell their signal to those without the automatic rights. The big networks have decided to provide programming to Sling TV, but not to FilmOn or Aereo.

Originally both FilmOn and Aereo captured the broadcast signals from the air and put them onto their own networks. That obviously angered the big networks and they got that ruling reversed. But then these providers refused to sell their signal to these two companies. One has to think that was partly done to punish these companies for challenging them, and perhaps partly due to the cable companies who lobbied against competition.

This ruling could really stifle new OTT providers. It seems one part of the OTT appeal is the ability to deliver local network programming as part of their packages. This ruling gives local stations the ability to choose who can or cannot buy their signal, and to thus pick winners and losers in the competitive OTT battlefield.

It’s hard to think that this makes any sense. But Congress or the FCC could clarify this issue if they cared to tackle it. Just over two years ago the FCC put out a Notice for Proposed Rulemaking asking about this exact topic. The FCC wanted to clarify the rights for internet-based programmers to buy content, and in that docket the FCC had suggested that anybody ought to be allowed to buy programming if they agree to pay the market rates for it. But the FCC has never acted in that docket which has led to today’s situation where some providers are given programming and others not. The have-nots aren’t just companies like FilmOn and Aereo, and it’s been reported for years that Apple has been unable to get programming rights.

At some point this needs to be clarified. The last companies we want deciding who can or cannot offer programming services are the major networks, especially since some of them are owned by cable companies. I have no idea if the FCC will address this, but they need to.

Municipal Broadband

One of the fights that I expect to see resurface this year is on the topic of whether local governments should be allowed to build fiber networks and become ISPs. The last FCC tackled this issue in a small way when they granted petitions by Chattanooga, TN and Wilson, NC to expand their broadband networks beyond their electric service territories and municipal boundaries. That ruling got reversed by a US district court and was not appealed by the FCC. But the ruling was of limited scope anyway and only addressed those two cities and didn’t set any precedent for other communities.

There are a lot of moving parts on this topic and it’s hard to know where this might go with the current FCC. This FCC is obviously pro-big ISP and companies like Comcast and AT&T have been staunch opponents of municipal broadband. But by the same token, this administration seems to lean towards states’ rights – and up until now municipal broadband has been regulated on a state-by-state basis.

Interestingly, at the local level municipal broadband has broad bipartisan support. In most communities almost all local politicians of both major parties support local broadband efforts. In my experience in working around the country, the only local political opponents of municipal broadband I have seen are those who are strong opponents of government spending money for anything but essential services. Generally local, state and even federal politicians support local broadband efforts in the communities they serve. I think the broad bipartisan appeal is due to politicians recognizing the strong public support for broadband and that almost every household wants broadband these days.

But there are 22 states with some restrictions on municipal broadband. These range from hurdles that can be overcome, like a referendum, up through states that have a total prohibition on municipal broadband. There has been a continual effort by ALEC (American Legislative Exchange Council) – funded by large corporations – to pass new state restrictions on broadband. But most recent efforts to increase prohibition of local broadband have been rebuffed, because few politicians want to go on the record against broadband. But I would not be surprised to see the big ISPs try to press their current advantage at the FCC and try to pass new national restrictions.

Today I see the municipal world dividing into two separate constituencies – urban and rural. Very few big cities have any desire to become an ISP. But they have legitimate concerns that urban broadband isn’t benefiting everybody. For example, San Francisco and some other cities are unhappy that apartment residents don’t have the same broadband opportunities and options as single family homes. And a lot of cities are still unhappy that after all of these years there is no solution for the digital divide. The FCC said last year that there are still around six million people in pockets of urban areas that don’t have access to broadband that meets the 25 Mbps download standard. But while these issues are viewed as a major problem in urban areas, I don’t see much appetite for big city governments tackling the cost of building broadband networks, which is particularly expensive in cities.

Rural America is a totally different story. We have come to the point where communities without good broadband really suffer. Broadband is not just about Netflix but is necessary to take part in the modern world. Local governments are finding that nobody wants to buy homes without broadband if there is a nearby community with broadband. Worse, communities are seeing businesses move away or bypass them when considering new locations. Lack of broadband puts school kids at a definite disadvantage and there are still a lot of households that drive kids daily to public hotspots just to do homework. And lack of broadband takes away all the opportunities for working at home – probably the biggest area of job growth in rural America.

I see small communities – even down to really small sizes like townships with 700 residents – trying to find ways to build a broadband network. I’ve read a few hundred RFPs from rural communities over the last few years, and probably not more than 5% want to become an ISP. But they will do so if they can’t find a commercial company willing to do it. Rural communities largely favor of public-private partnerships. More and more of them are willing to kick money into a building a network if an ISP will invest in their community and operate a broadband network.

I believe that within a decade we are going to start seeing broadband ‘deserts’ where communities without broadband start withering – just as happened in the past to communities that didn’t get electricity, or that were bypassed by railroads or interstate highways. It’s hard to think that a community today can keep their kids at home without broadband – and this is starting to scare local governments.

I just hope that the FCC doesn’t wade into this battle on the side of the big ISPs. Those big companies are not spending money in rural America – or if they are, it’s only when handed to them by the federal government. And even then they are just putting band-aids on rural broadband rather than building fast new networks. I have a feeling that many of the states that have restrictions on rural broadband are going to start having second thoughts about those restrictions when they realize that broadband is at or near the top of concerns of most of rural America.

There are companies building great rural broadband networks. The small telcos are almost all expanding their service areas to build broadband networks. And many of them are working with or partnering with local governments. But all of these small companies collectively can only solve a relatively small percentage of the rural broadband gap – together they do not have the capacity to borrow anything close to the billions needed to build broadband everywhere. Many rural electric cooperatives are now looking hard at the issue, and they could satisfy another slice of the rural market. But that’s still going to leave millions of rural residents with no broadband on their horizon. And I predict these folks are going to become a vocal constituency that politicians will be unable to ignore.

How Much Does Title II Regulation Matter?

We’ve known since January that new FCC Chairman Ajit Pai has intended to somehow roll back net neutrality. And now he’s started the process and says that he wants the Commission to undo regulation of broadband using Title II rules. I’ve been thinking about this for a while, and today I ask the question if this rollback means the end of the open Internet as a lot of press would have you believe.

It’s not an easy answer. Let me start with a quick review of the history of Title II regulation. The FCC has wanted to somehow regulate some aspects of broadband for a long time. They took a stab at this back in 2010 that established six principles that became known as net neutrality. But the courts eventually said that the FCC didn’t have the authority to enforce these rules. The court order that reversed the FCC interestingly suggested that they only path they saw to accomplish the FCC’s goals was to invoke Title II regulation.

Title II regulation derives from various acts of Congress that were developed in the last century to regulate telephone companies. When these regulations started back in the 1930s, the primary nationwide telephone provider was Ma Bell (AT&T) and the FCC used the new rules to heavily regulate the company. But those old rules don’t really fit broadband and so in the net neutrality order the FCC chose to invoke only the parts of the old rules that applied to broadband – and that is what made the big ISPs the most nervous. This feared that a future FCC could unilaterally elect to invoke other of the old title II rules, including the ability to regulate rates.

So, in a second try at net neutrality the FCC elected Title II regulation and then layered on some new concepts that are referred as bright line rules, which includes no blocking of broadband traffic, no throttling of content and no paid prioritization of traffic. These are the rules that proponents of net neutrality care about, and so the key question going forward is if the FCC can find some way to enforce the bright line rules if they get rid of Title II authority.

Frankly, it will be hard. If net neutrality is reversed we’ll be back to the regulatory regime that was in place before 2015. The FCC largely regulated broadband for a number of years by pressuring ISPs to be good citizens – but the FCC didn’t have the legal authority to make most things stick. Any time a big ISP didn’t like an FCC directive they knew they could take it to court and win due to lack of FCC authority. Everything I have read suggests that without Title II regulation that we’d back to that same place – where the FCC would have no real authority over most issues affecting broadband.

There is only one path that would codify the bright line rules, and that is if Congress would pass legislation requiring the bright line rules. The whole reason that the FCC has no clear authority over broadband is that numerous Congresses have refused to grant it to them. I can remember at least half a dozen attempts by earlier Congresses to create the needed new rules, but there has never been enough support to pass the laws and to overcome any potential vetoes by presidents.

I certainly don’t have any political crystal ball and I have no idea if this Congress or some future one might tackle this issue with legislation. A faction of the current Congress has been making noise about having a new telecom act, and this could be done as part of that effort. But that doesn’t seem likely from the current Congress. Here at the beginning of their new session they appear to favor big corporations like Comcast and AT&T over the public on these issues. It’s probably worth noting that most smaller ISPs already follow the bright line rules and it’s only a handful of the largest companies that create all of the problems.

The biggest fear of ISPs of all size is that telecom issues have become a political ping-pong ball that will bounce back and forth as we change future administrations or future Congresses. That kind of uncertainly plays havoc with creating new products and policies. I think even the largest ISPs would rather keep net neutrality regulated if the alternative was to see the rules radically changed every few years.

There are market forces that could have some impact on net neutrality. One is competition. For example, if one of the large wireless carriers adopts practices that violate net neutrality and that customers don’t like, then one or more of the other carriers will likely compete by promising products that the public wants.

And the public is likely to to have a big influence on combatting bad ISP behavior. Recall that the FCC received far more comments from the public on the net neutrality docket than anything else they had ever considered. And also remember that it was public outcry that stopped companies like Comcast from imposing draconian data caps. There is not a ton of competition in many broadband markets – but there usually is some. As new wireless products eventually come onto the market there will be even more competition. In this new day of social media we’ve started to see that the public can be stirred up to react in strong ways against big companies that have practices they don’t like. So perhaps an engaged customer base and growing competition will work over time to somewhat keep the big ISPs in line. As an ISP customer I’d much rather have firm regulations in place that prohibit bad ISP behavior – but I guess we’ll have to take whatever we can get.

The FCC’s Plan for Net Neutrality

This is already stacking up to be the most disruptive year for telco regulations that I can remember in my career. While 1996 and the Telecom Act brought a lot of changes, it looks like it’s possible that many of the regulations that have been the core of our industry for a long time might be overturned, re-examined or scrapped. That’s not necessarily a bad thing – for example, I think a lot of the blame for the condition of the cable TV market for small providers can be blamed on the FCC sticking with programming rules that are clearly obsolete. 

We now know for sure that one of our newest regulations, net neutrality, is going to largely be done away with at the FCC. FCC Chairman Ajit Pai has now told us about his plans for undoing net neutrality. His plan has several components. First, he proposes to undo Title II regulation of ISPs. Without that form of regulation, net neutrality naturally dies. It took nearly a decade for the FCC to find a path for net neutrality, and Title II was the only solution that the courts would support to give the FCC any authority over broadband.

However, Pai says that he still supports the general concepts of net neutrality such as no blocking of content and no paid priority for Internet traffic. Pai proposes that those concepts be maintained by having the ISPs put them into the ISP’s terms of service. Pai also doesn’t think the FCC should be the one enforcing net neutrality and wants to pass this responsibility to the Federal Trade Commission.

It’s hard to know where to start with that suggested solution. Consider the following:

·         I’m concerned as a customer of one of the big cable companies that removing Title II regulation is going to mean ever-increasing broadband rates, in the same way we’ve seen with cable rates. While the FCC said they didn’t plan to directly regulate data rates, they’ve already put pressure on the big ISPs over the last few years to ease up on data caps. Since the big ISPs have tremendous pressure from Wall Street to always make more, they have little option other than increasing data rates as a way to increase the bottom line.

·         Unless some federal agency proscribes specific and unalterable net neutrality language, every ISP is going to come up with a different way to describe this in their terms of service. This means that the topic can never really be regulated. For example, if somebody was to sue an ISP over net neutrality, any court ruling would be specific to only that ISP since everybody else will be using different language. Regulation requires some level of consistency and if every ISP tackles this in a different way then we have a free for all.

·         Probably the most contentious issue that brought about net neutrality was the big fights between ISPs and companies like Netflix over the interconnection of networks. I recall the FCC saying during some of those cases that they were one of the most challenging technical issues they had ever tackled. It’s hard to think that the FTC is going to have the ability to intercede in disputes of this complexity.

·         The proposed solution presupposes that the FTC will have the budget and the staff to take on something as complex as net neutrality. From what I can see it’s more likely that most federal agencies are going to have to deal with smaller budgets in coming years. And we know from long experience that regulations that are not enforced might as well not exist.

Interestingly, the big ISPs all say that they are not against the general principles of no paid priority and no blocking of content. Of course, they have a different interpretation of what both of those things mean. For example, now that a lot of the big ISPs are also content providers they think they should be able to offer their own content on a zero-rating basis. But overall I believe that they were okay with the net neutrality rules. They don’t like the Title II regulation because they fear rate regulation, but I think they mostly see that an open Internet benefits everybody, including them.

The one thing that big ISPs have always said is that the thing they want most from regulation is consistency and predictability. All of the changes that the FCC are making now are largely due to a change in administration – and in the long run the ISPs know this is not to their benefit. Of course, they have always complained about whatever rules are in place, and frankly that’s part of the industry game that has been around forever. But the last the thing the big ISPs want is for the rules to swing wildly back the other way in a future administration. That creates uncertainty. It’s hard to design products or to devise a 5-year business plan if you don’t know the rules that govern the industry.

The End of Robocalls?

The FCC took action recently to block certain kinds of robocalls. These are the automated calls we are all familiar with where you hear a recording when you pick up the phone. The FCC estimates that there are over 2.4 billion robocalls per month. If you read the news articles that came out after the FCC order you would assume that this order means the end of all robocalls – but it doesn’t.

The FCC action is intended to eliminate robocalls that come from spoofed sources. Spoofing is when the caller hides their phone number or changes the originating number for caller ID. Callers have numerous reasons to spoof calls. Some spoofers are scammers and use robocalls to initiate fraud. For example, the IRS says that over $26 M in fraud is done each year from robocalls posing as tax collection calls. Other callers use spoofing to avoid the Do-Not-Call rules which is supposed to prevent solicitation calls to people who have elected to not receive them. If the number that shows up on caller ID is wrong, then there is no way for the FCC to catch or fine a caller from violating those calling rules.

The FCC accepted a proposal from a ‘strike force’ of large companies like AT&T, Google, Apple and Comcast to tackle the issue. Some spoofed calls will be relatively easy to block, like when spoofers use numbers that can’t be real such as 000-000-0000. But spoofers also use disconnected or unused numbers and these will be more challenging to find. A spoofer could use a legitimate number for a short time and abandon it before being blocked. Spoofing is similar to computer hacking in that it’s a game of cat and mouse – and you’d expect spoofers to figure ways around any schemes to catch them. It will be interesting to see how effective the strike force is at blocking spoofed calls.

But it’s important to remember that a lot of robocalls are legitimate and will continue. First, anybody is allowed to make a legitimate robocall to people who are not on the Do-Not-Call list. But even if you are on that list, all sorts of entities are allowed to call you. For example, any merchant like a bank, credit card, insurance company, cell phone provider, etc. is allowed to call their own customers. Government are allowed to call citizens and that means that political robocalls are legitimate as well as calls from other parts of the government. Certainly nobody is against localities that send out robocalls to warn of tornados, flooding or hurricane evacuations.

And some robocalls are useful. For example, the high school where our daughter goes calls once a week to tell us about things going on at the school. For the most part these are things that you would never hear about from your child.

There is no doubt that robocalls are a huge issue. The FCC says they are by far the number one type of complaint they get. I haven’t had a landline in twenty years, but the last time I spent a few days at my mother-in-law’s house, who still has a landline, I was amazed at the number of solicitation calls she got per day – both robocalls and from live callers. She’s on the Do-Not-Call list and still gets 5 – 10 calls per day.

I think a lot of people will be surprised to find that the FCC’s action won’t stop legitimate robocalls – and that has to be a huge percentage of the calls made. Your bank and other vendors that call you are doing so legitimately and do not try to hide who they are when they call. And I think that when that sinks in that the public they will be disappointed. That fault lies with the many misleading news articles declaring the end of robocalling. The FCC was clear in its own declaration that this was an action taken to try to eliminate scam calls. But if history has taught us anything it is that scammers will always find a way to do what they do. This order may slow scammers down, but they will find other ways to scam people – including figuring out how to still call using robocalls. I hope the strike force can find a way to stop this, but my guess is they will just slow it down, at best.