Tag Archives: net neutraility

FCC to Reimpose Broadband Regulation

The FCC will vote on reimposing Title II authority over broadband at its April 25 meeting this month. It seems likely that the proposal will pass since three Commissioners have already expressed support for the idea. The proposed order is 434 pages long and includes 2,921 footnotes. Hopefully this summary will suffice for anybody but full regulatory nerds like me.

The press is largely going to label this as the FCC putting net neutrality back in place. However, net neutrality is only a small portion of the regulatory changes that accompany reimposing Title II authority over broadband. The national conversation would be more useful if the question was asked if people think broadband should be regulated – and it’s likely that a large percentage of folks don’t like a world where giant ISPs set the rules and prices.

Anybody who follows telecom regulation knows that regulating broadband at the federal level has been on a roller-coaster ride that follows the party that wins the White House. Chairman Tom Wheeler, who led the FCC under President Obama, implemented net neutrality rules tied to the existing Title II regulation. Chairman Ajit Pai led the FCC under President Trump and canceled both Title II authority and net neutrality rules to try to make it harder for future FCCs to reinstate broadband regulation. The Pai FCC went so far as to wipe the FCC’s hands of remaining broadband regulation and defaulted to the Federal Trade Commission as the final say on some broadband issues. The current move to reimpose Title II regulation was only enabled after a Democratic president nominated and Congress finally approved a fifth Commissioner to replace Chairman Pai. It almost seems inevitable that if the White House changes parties again that the roller coaster ride will repeat.

As a backdrop, while Chairman PAI was killing Title II authority, a federal court ruled on a previous challenge to Chairman Wheeler’s net neutrality order and concluded that the FCC has the regulatory authority to implement net neutrality as long as Title II regulations are in place. This should mean that any challenges to the actions of the current FCC would need to use a different tactic to challenge new Title II authority.

The current proposal from the FCC differs in some areas from the Tom Wheeler set of rules. In addition to reimposing net neutrality, the new rules will enable the FCC to monitor broadband outages, give the FCC more authority over network security issues, and increase the protection of consumer data. The new rules will also mandate national net neutrality rules that would preempt state rules like the ones created in California – although the FCC said it will tread lightly in these areas as an experiment in state rule.

It’s a natural question to ask why we need Title II regulation because the press rarely talks about broadband regulation in terms that consumers can understand. Here are just a few of the things that can happen after the FCC reintroduces Title II regulation:

  • The FCC used to have a broadband complaint process where the agency would intervene in cases of bad behavior by ISPs. Consumers could plead for relief from particularly egregious ISP behavior, and the FCC often required ISPs to set things right. The FCC also had the authority to dictate policies related to broadband customer service.
  • While they never exercised it, the FCC has the ability to regulate rates under Title II. This is the big bogeyman that worries ISPs. The FCC in the past used this power to coax ISPs to cut back on practices like rate caps.
  • The FCC used to have the authority to make ISPs refund money to customers when ISPs overbilled or otherwise cheated customers.
  • The FCC used to intervene and mediate disputes between ISPs over network practices. That ability died when Title II authority was killed.
  • The FCC had the authority to fine ISPs that engaged in bad behavior with customers – that largely died when Title II authority was killed.
  • The FCC had more authority to act against hacking and other behavior by bad actors.

Anybody who has been reading my blog knows that I am a huge fan of some basic level of broadband regulation. It seems irresponsible for the government not to have any authority over the actions of what can be argued to be the most important industry in the country. It’s an industry that is largely dominated by a handful of duopoly players who serve the large majority of customers in the country. Broadband is vital to both the economy and to people’s everyday lives, and it’s almost unfathomable that the FCC hasn’t been looking out for the public for the last six years after Title II authority was killed.

Reimposing Title II authority is far from ideal since it won’t stop the roller-coast ride if there is a future change of parties. A much better solution has always been to have Congress give the FCC specific authority to regulate broadband. That would also cut back on lawsuits that challenge the FCC’s authority to create regulations. But Congress hasn’t done anything major along these lines since the Telecom Act of 1996, during the early days of dial-up access. It doesn’t seem to be a big ask to give the FCC permanent authority over broadband, and the failure of Congress to do so is evidence of the stranglehold that ISP lobbyists have on Capital Hill. I’ve been hoping for Congressional action for over twenty years – and maybe they will surprise me one of these years and do the responsible thing.

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.

Net Neutrality Again?

There is an interesting recent discussion in Europe about net neutrality that has relevance to the U.S. broadband market. The European Commission that oversees telecom and broadband has started taking comments on a proposal to force content generators like Netflix to pay fees to ISPs for using the Internet. I’ve seen this same idea circulating here from time to time, and in fact, this was one of the issues that convinced the FCC to first implement net neutrality.

Netflix generates less than 10% of the broadband traffic in Europe and European ISPs think that Netflix should pay a substantial fee for using the Internet network. Europe looks a lot like the U.S., and Netflix, Meta, Amazon, Google, Apple, and Microsoft generate most of the traffic there. Online video accounts for 65 percent of all traffic on the web. Netflix argues that the amount of video on the web will continue to climb and that any fees charged to video providers will eventually be applied to a wider range of content providers.

It’s an interesting topic that can be considered from different perspectives. First, companies like Netflix already spend a lot of money to use the network today. Just like in the U.S., Netflix has built or purchased transport to allow local peering. Netflix claims to be providing 18,000 local servers around the world in 175 countries to move its video signals closer to ISP networks. This relieves a lot of volume on the web core and also improves the quality of Netflix content. The same is true for other content providers, and in the U.S., there are a lot of local peering points that have been created by Google, Meta, and others.

Netflix makes the point that the big ISPs in Europe are already profitable and the ISPs would simply pocket any new revenue stream. They are highly skeptical that any benefit to ISPs from charging Netflix would be passed on to Netflix customers through lower broadband prices.

When net neutrality was discussed in the U.S., there was a good argument made by content providers that subscribers are already paying for end-to-end use of the Internet in the monthly fees paid to ISPs. Charging the content providers for using the Internet would amount to billing twice for the same traffic. Since the original net neutrality discussion here, U.S. broadband prices charged by cable companies have increased significantly, making it even more true that customers are supporting the Internet.

Another way to think about the issue is that video is the service that drives a lot of households to buy broadband. Without Netflix and the other online video content providers, there would not be nearly as many broadband users, and ISPs would not have such a large market share. There is a truism in the industry that says you shouldn’t build a broadband network solely to provide entertainment to customers, but there is no denying that there are a lot of homes that wouldn’t buy broadband if it wasn’t for video and social media. Not everybody works from home or has students that need broadband for schoolwork.

There are several reasons why I am highlighting this European issue. Topics that become issues in Europe invariably are raised as issues here, and vice versa. If American ISPs see that European ISPs have been able to extract payments from Netflix, our ISPs will immediately start making the same demands here.

The other interesting aspect of this particular argument is that it’s something that we already solved once in the past when the FCC passed net neutrality rules. But the Ajit Pai FCC tossed out those rules, so it was inevitable that net neutrality topics would eventually come to life here again.

The net neutrality issue is one of the most interesting topics from a regulatory perspective. Even after Ajit Pai tossed out the net neutrality rules, American ISPs didn’t change their behavior. There are two possible reasons for this. I think ISPs have tried to keep a cap on behavior that would induce regulators to try to put net neutrality back in place again. It seems that perhaps the mere threat of reintroducing net neutrality has kept ISPs in check. However, I find it likely that ISPS are now feeling braver after having squashed the proposed fifth FCC Commissioner.

The other reason is that California put its own version of net neutrality rules in place. This has slowly made its way through the courts and is now in effect. ISPs might not be willing to take on California, because to do so might invite many other states to pass different version of the same rules. As much as ISPs hate the idea of federal regulations, they don’t like, the= biggest fear is a hodgepodge of different regulations in states.

The Race to Bury Net Neutrality

The Internet is currently full of news articles describing how the FCC will soon be putting to bed the last vestiges of its order a few years ago to eliminate net neutrality rules. The order that is widely being called the net neutrality ruling was a far-reaching change at the FCC that essentially wrote the FCC out of any role in regulating broadband.

Eliminating net neutrality rules was only a small part of that order. Net neutrality is a set of principles that describe how ISPs and network owners are to not discriminate between bits carried over the Internet. Most of the largest ISPs said that they could live with the net neutrality principles, and eliminating net neutrality was not a high priority for companies like AT&T and Comcast. The real priority for the big ISPs was to take advantage of a friendly FCC that was open and willing to deregulated broadband – particularly willing to eliminate any threat of broadband rate regulation.

So when you read the flood or articles this month talking about net neutrality, you need to substitute the term ‘net neutrality’ with ‘regulating broadband’ as you read articles on the topic. The FCC chose to disguise their attempt to kill regulation under the moniker of net neutrality and was successful since the average American probably has no idea that the FCC no longer regulates ISPs and broadband.

The FCC is holding a vote on October 27, just before the presidential election to cement the last open pieces from the FCC’s order to eliminate broadband regulation. The FCC’s order to write the agency out of broadband regulation was challenged in federal court. The court basically said that the FCC had the regulatory authority to either change the rules (or not change the rules) to walk away from broadband regulation.

However, the court said that the FCC needs to demonstrate that eliminating regulatory authority over broadband didn’t impact three areas negatively. The FCC was asked to clarify:

  • How eliminating broadband regulation impacts public safety;
  • How the FCC can still regulate pole attachments if it doesn’t regulate broadband;
  • If walking away from regulation negatively impacts the FCC’s ability to offer the FCC Lifeline programs that benefit low-income Americans.

On October 27 the FCC is going to take a vote to say that it’s earlier order doesn’t negatively impact any of these issues. It’s clear that that the FCC wants to finish the elimination of broadband regulation before the election on the chance that a new Democratic president will mean a new head of the FCC. The FCC has openly said that it changed the rules on broadband regulation in such a way that will make it hard for a future FCC to overturn its order.

A new FCC can obviously undo anything that was done by a previous FCC. However, the net neutrality order was done in such a way that a new FCC would have to go through the full cycle of the FCC’s processes that including various cycles of notices of proposed rulemaking, a final rulemaking, and then the inevitable court challenges to any attempt to reregulate broadband – all done with vigorous opposition from the big ISPs. The process of reversing the deregulation of broadband would likely stretch over many years.

However, there is a much shorter and quicker path for reversing the FCC’s order. Congress is free to reset the FCC rules in any way it seems fit, and Congress could finally pass a new telecom act. There hasn’t been any major telecom legislation out of Congress since 1996 – during the heyday of dial-up Internet. In today’s political environment it would take a Democratic sweep of the White House and both houses of Congress to get new telecom legislation passed.

Even should that happen with the election, the new Democratic majority would have to agree on what is contained in a new telecom act. I can’t foresee that being an easy or quick process. There is an accumulation of topics in addition to broadband regulation that would benefit from Congressional clarification including privacy, regulation of web companies, solving the digital divide, elimination of outdated cable TV and telephone regulations, a national policy on spectrum, regulation of low orbit satellites, and a host of smaller issues.

If the Democrats don’t make a clean sweep of Congress and the White House, then the current FCC will largely have succeeded and it might be many years until a determined FCC could reestablish any regulatory authority over broadband. What is clear to somebody who closely watches industry regulation – it’s going to be interesting few years ahead of us in this industry regardless of what happens at the polls in November.

Will Congress Be Forced to Re-regulate Broadband?

Last year the current FCC largely deregulated broadband. They killed Title II regulation and also handed off any remaining vestiges of broadband regulation to the Federal Trade Commission. The FCC is still left with broadband-related tasks associated with broadband. For instance, they still have to track broadband adoption rates. They are still required to try to solve the rural digital divide. They still approve electronics used to provide broadband. But this FCC has killed its own authority to make ISPs change their behavior.

I wrote a blog a month ago talking about the regulatory pendulum. Industries that become dominated by monopolies are always eventually regulated in some manner – governments either proscribe operating rules or else break up monopolies using antitrust laws. One only has to look at the conversation going on in Washington (and around the world) about somehow regulating Facebook, Google and other big web platforms to see that this is inevitable. Big monopolies always grow to trample consumers and eventually the public demands that monopoly abused be curbed.

It’s only been a little over a year since the FCC deregulated broadband and there are already topics looming that beg for regulation. There is nothing to stop this FCC or a future FCC from reintroducing regulation – the courts already gave approval for regulating using Title II. Regulation can also come from Congress – which is the preferred path to stop the wild swings every time there’s a new administration. Even the ISPs would rather be regulated by Congress than to bounce back and forth between FCCs with differing philosophies.

Over half of the states have introduced bills that seek to regulate data privacy. Consumers are tired of data breaches and tired of having their personal information secretly peddled to the highest bidder. A year ago the California legislature passed data rules that largely mimic what’s being done in Europe. The Maine legislature just passed rules that are even more stringent than California in some ways.

It’s going to be incredibly expensive and complicated for web companies to try to comply with rules that differ by state. Web companies are in favor of one set of federal privacy rules – the big companies are already complying with European Union rules and they’ve accepted that providing some privacy to consumers is the cost of doing business. Privacy rules need to apply to ISPs as much as they do to the big web companies. Large ISPs are busy gathering and selling customer data in the same manner as web companies. Cellular companies are gathering and selling huge amounts of customer data.

There are other regulatory issues that are also looming. It seems obvious that if the administration and the Senate turn Democratic that one of their priorities will be to reimplement net neutrality. The ISPs are already starting to quietly violate net neutrality rules. They are first tackling things that customers like such as sponsored video as part of a cellular plan – but over time you can expect the worst kind of abuses that were the reasons behind net neutrality rules.

I think that broadband prices are going to become a major issue. The big ISPs have all acknowledged that one of the few tools they have to maintain earnings growth is to raise broadband prices. Cord cutting is accelerating and in the first quarter the ISPs lost cable customers at a rate of 6% annually. Cord cutting looks like it’s going to go much faster than the industry anticipated as millions of customers bail on traditional cable each quarter. The pressure to raise broadband rates is growing.

We’ve already seen the start of broadband price increases. Over the last few years the ISPs have been raising rates around the edges, such as increasing the monthly price for a broadband modem. More recently we’ve seen direct broadband price increases such as the $5 rate increase for bundled broadband by Charter. We’re seeing Comcast and other ISPs start billing people for crossing data caps. Most recently we know that several ISPs are talking about significantly curtailing special rates and discount for customers – eliminating those discounts probably equates to a 10% – 15% rate increase.

At some point, the FCC will have to deal with rising broadband rates. Higher broadband rates will increase the digital divide as households get priced out from affording broadband. The public will put a lot of pressure on politicians to do something about ISP prices.

Deregulating broadband at a time when a handful of ISPs have the vast majority of broadband customers was one of the most bizarre regulatory decisions I’ve ever seen. All monopolies, regardless of industry need to be regulated – we’ve known this for over a hundred years. It’s just a matter of time before Congress is forced to step up and re-regulate broadband. It may not be tomorrow, but I find it highly unlikely that broadband will still be deregulated a decade from now, and I expect it much sooner.

California’s Net Neutrality Bill

On the last day possible, Jerry Brown, the Governor of California passed SB 822, a state net neutrality bill into law. Within hours the US Justice Department filed a lawsuit against the California legislation.

As bill is relatively short and straightforward. The law applies to both landline and mobile broadband. The prohibitions against ISP behavior are detailed more clearly than in the old FCC net neutrality rules. Specifically, the California net neutrality law:

  • Prohibits ISPs from blocking lawful content;
  • Prohibits ISPs from impairing or degrading lawful Internet traffic except as is necessary for reasonable network management;
  • Prohibits ISPs from requiring compensation, monetary or otherwise, from edge providers (companies like Netflix or Facebook) for delivering Internet traffic or content;
  • Prohibits paid prioritization;
  • Prohibits zero-rating;
  • Prohibits interference with end user’s ability to select content, applications, services or devices;
  • Prohibits ISPs from offering any product that evades any of the above prohibitions;
  • Requires the full and accurate public disclosure of network management practices, performance, and clearly-worded terms of service.

As you would expect, the big ISPs in the state like AT&T and Comcast vehemently opposed the legislation and almost derailed its passage. Interestingly, the big edge providers like Google, Facebook and Netflix have remained quiet on the new law.

This is already shaping up to be one of the most interesting legal fights we’ve ever seen concerning the FCC. Chairman Pai and the other Republican FCC Commissioners immediately declared that the new law is invalid and that states can’t override FCC policy. The lawsuit filed by the Justice department says that California is “attempting to subvert the Federal Government’s deregulatory approach” to the Internet.

That’s where it gets interesting, because the FCC didn’t deregulate broadband. They instead took themselves out of the picture as a broadband regulator by cancelling Title II regulation of broadband, and passing regulation to the Federal Trade Commission.

The FCC could have chosen a different path, which would have been to continue to regulate broadband, but choosing to not require any specific regulatory requirements. That’s the tactic the agency has taken in the past when it decided to end some telephone regulations. The FCC still has the legal authority to re-regulate those telephone issues, but exercises its authority to not regulate – and maintaining the authority to authority is the key issue in this case. The FCC deliberately killed Title II regulation to make it harder for future a FCC to regulate broadband – but in doing so they literally wrote the agency out of the broadband regulation business.

The courts will have to decide if the federal government has any basis for overriding the California law. The FCC created a legal void when they walked away from regulating broadband. In regulatory terms broadband is not deregulated – it is not regulated, and while perhaps a subtle language difference, it’s a huge distinction.

The legal question is not if California is challenging the FCC’s authority to deregulate broadband, because the FCC themselves say they no longer have any authority over broadband. The courts will have to instead decide if a state can step into a regulatory void when the federal government walks away from regulating an industry. There are numerous lawyers saying that California has a strong legal position.

This is such a major decision that I’m guessing it’s going to have to eventually get resolved by the Supreme Court – and that’s going to take a while. The FCC created this situation by abrogating their responsibility to regulate broadband. It’s nearly unthinkable that one of the major industries in the country, operated mostly by a small number of giant companies should not be regulated. But the regulatory mess we have with broadband ultimately lies with Congress which has not passed an update to the telecom rules since 1996, when dial-up was our portal to the Internet.

Killing Net Neutrality Again?

The current FCC repealed the net neutrality rules earlier this year, with that repeal going into effect last month. In a move that is a head-scratcher, the Department of Justice recently filed a petition with the Supreme Court asking them to squash a lower court ruling in favor of net neutrality.

The original net neutrality rules were implemented by the FCC in 2015. The FCC’s order relied upon the use of Title II regulations as their authority to pass those rules. AT&T and other opponents of the ruling immediately appealed the FCC’s action, and in 2016 the DC Circuit Court of Appeals ruled that the FCC had the authority to invoke Title II. The same opponents of net neutrality appealed that decision to the whole Circuit Court, and in 2017 the court refused to take the case, thus upholding the 2016 decision.

The Department of Justice is now asking the Supreme Court to overturn the 2016 order that upheld net neutrality. It’s an unusual request because net neutrality has already been repealed by the FCC, so it seems like the issue is moot.

Nobody is sure about the reason for this filing, because neither action or inaction by the Supreme Court would realistically change anything. The Department of Justice argues that it is cleaning up loose legal ends. Proponents of net neutrality say that it’s an action to make it more difficult for a future FCC to reinstate net neutrality. They say that the administration is trying to kill a precedent that could be used by a future administration to reinstate net neutrality.

What’s most interesting about the whole net neutrality fight is that both the past and current FCC have had to get creative to first pass the net neutrality rules, and then to repeal them. What’s been missing in this fight is a Congress willing to vote on the issue, because legislation would put the issue to rest. The messy court battles over net neutrality for the last decade are all due to a Congress that won’t weigh in on the issue.

The FCC is mandated to follow the direction of Congress. It seems unlikely that net neutrality is ever going to come up for a vote in Congress. Polls have shown huge public support for net neutrality with various polls over the last few years showing support between 76% and 85%. Nobody in the GOP wants to go on record as opposing the issue.

We are badly in need of a new Telecom Act. Many of the rules that govern the FCC are far out of date. We need to fix cable rules that are massively out of synch with a world of on-line content. We need updated privacy laws that deal with current technology. And we need to know definitively if Congress thinks that we should or shouldn’t regulate some aspects of broadband.

But we’re not likely to get a new Telecom Act to a vote since net neutrality is going to get dragged into any discussion of new regulations. That means we’re likely to see the FCC continue to deal with current issues for which they have no direction of basis of action. That can only result in an FCC that grows gradually weaker and ineffective in its ability to tackle the communications issues that we need to face.

What we don’t need is a government that is looking backwards and wasting legal resources to kill a court order for an issue that has already been decided by the current FCC. This is one of the dumbest and most wasteful court actions I’ve ever seen in the industry. We don’t need to fill the over-busy courts with frivolous lawsuits – we need a Congress and an FCC to together tackle the current pressing issues in the industry.

Now That Net Neutrality is Dead . . .

The FCC’s net neutrality rules expired last week. There is a process for FCC rule changes that require the agency to take steps like publishing their decisions in the Federal Register, and all of the administrative steps have been taken and the old rules expired.

The press and social media made a big deal about the end of the administrative process, but the issue is a lot more complicated than that and so today I’ll look at what happens next. Officially the big ISPs are now free to make changes in their policies that were prohibited by net neutrality, but for various reasons they are not likely to do so.

First, 22 states filed a lawsuit against the FCC challenging various aspects of the FCC’s ruling. That suit now resides at the US Circuit Court of Appeals in Washington DC. The big ISPs are unlikely to make any significant changes in policies that might be reversed by the courts. In the past the whole industry has waited out the appeals process on this kind of lawsuit because the Courts might find reason to reverse some or all of the FCC’s actions. The ISPs aren’t legally obligated to wait out the lawsuits, but I’m sure their legal counsel is telling them to do so.

Interestingly, the judges hearing this case also heard the previous appeals associated with net neutrality and are familiar with the issues. This court previously had ruled that the FCC had the authority to use Title II regulation as the way to regulate broadband and net neutrality. I’ve not read any predictions yet of how the courts might rule in this case. But if the FCC had the authority to institute Title Ii authority I would think they also have the authority to reverse that decision.

The big ISPs also have to worry about Congress. The Senate voted to reverse the repeal of Title II regulations as part of the Congressional Review Act (CRA) that was used to pass the last budget. The issue is not currently slated for a vote in the House of Representatives and it seems clear that there are not enough votes there to reverse the FCC’s decisions. But it’s only four months until the next election and there is a chance that the Democrats will win a majority of seats. One would think that net neutrality would be on the list of legislative priorities for a Democratic House since polls show over an 80% public approval of the issue.

A vote by Congress to implement net neutrality would end the various court cases since the new laws would supersede any actions taking by the FCC on prior rules. It’s been the lack of Congressional action that has been the underlying reason for all of the various FCC actions and lawsuits on the topic over the years – Congress can give the FCC specific direction and the authority to enforce whatever Congress wants done.

There is another wild card in the mix in that numerous states have either passed rules concerning net neutrality or are contemplating doing so. Most of the state laws would restrict the award of state telecom business to vendors that adhere to net neutrality. My guess is that these lawsuits will make it through appeals because States have the authority to determine their purchasing preferences. But realistically these laws might backfire since most ISPs that are large enough to tackle state telecom needs are likely to be in violation of net neutrality. States implementing these rules might find themselves unable to find a suitable telecom vendor.

The most direct state net neutrality law comes from Washington. Their law, which went into effect automatically when the FCC net neutrality laws expired, prohibits ISPs from blocking or throttling home landline or mobile data. It also specifically prohibits paid prioritization.  An even more stringent bill was near passage by the California legislature. As I was writing this blog it appears that AT&T lobbyists were successful in derailing that legislation. It’s likely that we’ll see more actions from state legislatures in the coming year.

The FCC stated in the Title II repeal order that States were not allowed to override the FCC order. But as we’ve seen many times in the past at the FCC, there is a constant battle between federal authority and state’s rights, .and disputes of this kind are almost always resolved by the courts. There is a long history of battles between FCC authority and State’s rights and over the years both sides have won battles.

The big ISPs hate uncertainty and each of these paths provide a way to reinstate net neutrality. It seems unlikely that the big ISPs will be aggressive with changes until they get a better feel for the resolution of these various challenges to the FCC. Some of the ISPs already had practices that skirted net neutrality rules such as zero-rating of their own content. It’s seems likely that the ISPs will continue to push around the edges of net neutrality, but it seems unlikely that the ISPs will be more aggressive with implementing products and practices that are clear net neutrality violations. The bottom line is that the end of the FCC administrative process was only the beginning of the process and we still have a way to go to get a clear resolution of the issue.

States and Net Neutrality

We now know how states are going to react to the end of net neutrality. There are several different responses so far. First, a coalition of 23 states filed a lawsuit challenging the FCC’s ability to eliminate net neutrality and Title II regulation of broadband. The lawsuit is mostly driven by blue states, but there are red states included like Mississippi and Kentucky.

The lawsuit argues that the FCC has exceeded its authority in eliminating net neutrality. The lawsuit makes several claims:

  • The suit claims that under the Administrative Procedure Act (ACA) the FCC can’t make “arbitrary and capricious” changes to existing policies. The FCC has defended net neutrality for over a decade and the claim is that the FCC’s ruling fails to provide enough justification for abandoning the existing policy.
  • The suit claims that the FCC ignored the significant public record filed in the case that details the potential harm to consumers from ending net neutrality.
  • The suit claims that the FCC exceeded its authority by reclassifying broadband service as a Title I information service rather than as a Title II telecommunications service.
  • Finally, the suit claims that the FCC ruling improperly preempts state and local laws.

Like with past challenges of major FCC rulings, one would expect this suit to go through at least several levels of courts, perhaps even to the supreme court. It’s likely that the loser of the first ruling will appeal. This process is likely to take a year or longer. Generally, the first court to hear the case will determine quickly if some or all of the FCC’s ruling net neutrality order will be stayed until resolution of the lawsuit.

I lamented in a recent blog how partisan this and other FCCs have gotten. It would be a positive thing for FCC regulation in general if the courts put some cap on the ability of the FCC to create new policy without considering existing policies and the public record about the harm that can be caused by a shift in policy. Otherwise we face having this and future FCCs constantly changing the rules every time we get a new administration – and that’s not healthy for the industry.

A second tactic being used by states is to implement a state law that effectively implements net neutrality at the state level. The states of New York, New Jersey and Montana have passed laws that basically mimic the old FCC net neutrality rules at the state level. It’s an interesting tactic and will trigger a lawsuit about state rights if challenged (and I have to imagine that somebody will challenge these laws). I’ve read a few lawyers who opine that this tactic has some legs since the FCC largely walked away from regulating broadband, and in doing so might have accidentally opened up the door for the states to regulate the issue. If these laws hold up that would mean a hodgepodge of net neutrality rules by state – something that benefits nobody.

Another tactic being taken is for states, and even a few cities, to pass laws that change the purchasing rules so that any carrier that bids for government telecom business must adhere to net neutrality. This is an interesting tactic and I haven’t seen anybody that thinks this is not allowed. Governments have wide latitude in deciding the rules for purchasing goods and services and there are already many similar restrictions that states put onto purchasing. The only problem with this tactic is going to be if eventually all of the major carriers violate the old net neutrality rules. That could leave a state with poor or no good choice of telecom providers.

As usual, California is taking a slightly different tactic. They want to require that carriers must adhere to net neutrality if they use state-owned telecom facilities or facilities that were funded by the state. Over the years California has built fiber of its own and also given out grants for carriers to build broadband networks. This includes a recently announced grant program that is likely to go largely to Frontier and CenturyLink. If this law is upheld it could cause major problems for carriers that have taken state money in the past.

It’s likely that there are going to be numerous lawsuits challenging different aspects of the various attempts by states to protect net neutrality. And there are likely to also be new tactics tried by states during the coming year to further muddy the picture. It’s not unusual for the courts to finally decide the legitimacy of major FCC decisions. But there are so many different tactics being used here that we are likely to get conflicting rulings from different courts. It’s clearly going to take some time for this to all settle out.

One interesting aspect of all of this is how the FCC will react if their cancellation of net neutrality is put on hold by the courts. If that happens it means that some or all of net neutrality will still be the law of the land. The FCC always has the option to enforce or not enforce the rules, so you’d suspect that they wouldn’t do much about ISPs that violate the spirit of the rules. But more importantly, the FCC is walking away from regulating broadband as part of killing Title II regulation. They are actively shuttling some regulatory authority to the FTC for issues like privacy. It seems to me that this wouldn’t be allowed until the end of the various lawsuits. I think the one thing we can count on is that this is going to be a messy regulatory year for broadband.

FCC’s Net Neutrality Myths

We’ve been having the policy debate over creating net neutrality since at least 2005. During that time there have been a lot of arguments made on both sides of the issue. But overall it’s been a policy debate that is similar to the many other issues discussed in the telecom regulatory world. Both sides make their arguments and eventually a decision is made to regulate or not regulate according to the arguments. Politics has always played a role in these debates and issues tend to slew a bit according to the political leanings of the FCC at any given time.

FCC Chairman Ajit Pai recently released a document that argues strenuously for the end of net neutrality. This document lists various ‘myths’ associated with net neutrality and then describes why each myth is untrue. If you look back at the history of the net neutrality debate you’ll see that his list is a summary of the arguments being made over time by the big ISPs. This is a document that one would expect from AT&T, Comcast, USTA or ALEC – but not from the Chairman of the FCC.

I have a problem with the Chairman’s list because most of the conclusions drawn are factually incorrect. It’s expected for the big ISPs to make arguments in their favor, even if those arguments are not wholly true – but it’s disturbing to see these same arguments coming from the FCC, which is supposed to be the arbiter for telecom policy issues.

I don’t think I have any bias that makes me see these statements as false. Anybody whose been reading my blogs knows that I am as biased as anybody else in the industry. My bias is towards policies that allows smaller ISPs to compete. And I am strongly in favor of policies that try to solve the rural broadband gap and the overall digital divide. But other than that I am largely neutral on other telecom policies and am receptive to hear all arguments on the various issues. Other than as a consumer I have no strong bias in the net neutrality debate because I don’t believe that small ISPs will violate net neutrality even if there aren’t any rules. The net neutrality argument really only concerns the behavior of the largest and most powerful ISPs in the telecom market. I could go through the document and discuss each ‘myth’ – but that doesn’t lend itself to a blog-length discussion. But I think every one of the Chairman’s arguments is stretching the truth.

For example, the document rolls out the old big-ISP argument that broadband investments have dropped due to Title II regulation. This argument goes back to shoddy work done by one researcher on the big ISP payroll and has been debunked numerous times. The numbers tell a different story and investments have not dropped. So do the actions of the big ISPs – AT&T, Verizon, Comcast and most of the other big ISPs are all undertaking aggressive expansion and upgrades. Look at what each of these companies is telling their stockholders and you don’t see an industry in retreat. Title II regulation has had almost zero impact on investment decisions (and regulation rarely has ever done so).

Chairman Pai also argues that the Internet was free and open before we had Title II regulation. That’s not the way I remember it. The net neutrality debate has been going on since 2005 and the ISPs have been held in check by the threat of net neutrality regulation. Even without Title II regulations in place the FCC was able in the past to pressure the ISPs on practices like data caps and zero-rating by the threat of future regulation – and for the last decade this has largely worked. Title II regulation didn’t just appear out of thin air with the FCC order in 2014 – the net neutrality principles were the backbone of FCC regulation and actions for a decade before then.

This FCC document also argues that the Federal Trade Commission is well equipped to police unfair, deceptive and anticompetitive behavior from ISPs. That gives the FCC cover to duck out of regulating broadband. What this doesn’t mention is that the big ISPs are now attacking the FTC’s right to regulate broadband (a blog will be coming on this soon). I find it extraordinary that the FCC would declare that it should have no role in regulating broadband – the most important telecommunications product. Regulating broadband seems to be their role in the industry almost by definition.

I guess more than anything else this document disappoints me. While there have always been some politics involved in the decisions made in our industry, past FCCs have largely decided issues on their merits. My own business was founded largely due to the Telecommunications Act of 1996 which unleashed much-needed competition into the industry. But I look at this current FCC and see that the pendulum has swung to one far extreme and the merit of issues aren’t even part of policy discussions. That saddens me.