Tag Archives: Net neutrality

Regulating by the Extremes

It’s hard to describe federal telecom regulation as anything other than regulation by the extremes. We are now moving to the fourth administration that has essentially reversed the regulatory philosophy and policies of the previous administration.

It’s clear that the FCC and other parts of the federal telecom regulation agencies have fallen victim to regulatory capture. This is an economic principle that describes when regulatory agencies are dominated by the industries they are supposed to be regulating. Economic theory predicts that regulators caught by regulatory capture act in ways that protect incumbent providers instead of the public interest.

What I find odd about the back-and-forth reversal of policies is that it doesn’t seem to be benefiting the big ISPs. Let’s take a look back at the Tom Wheeler FCC that passed the first set of net neutrality rules. I recall at the time these rules were passed that the CEOs of every large ISP made public statements that the net neutrality rules weren’t going to have any real impact on their businesses.

And yet the big ISPs still went into overdrive and fought the FCC’s rulings in court. They were unsuccessful and the courts said that the FCC had the authority to regulate broadband, which clearly is a telecommunications service.

But then the Ajit Pai FCC came into power through a change of administration and instantly set to doing what the courts could not do, which was reverse net neutrality and all of the implications of regulating broadband. The courts also weighed in on this and said that Ajit Pai’s FCC has as much right to not regulate broadband as the previous FCC had to regulate it.

I’ve been watching this back and forth for more than a decade and I can’t see how this regulatory back-and-forth helps the big ISPs. I’ve come to the conclusion that the problem at the federal level is caused more by the lobbyists than by the Board rooms of the big ISPs. Regulation is at most a minor burr under the saddle of the big ISPs, and it’s hard to believe that folks in the Board rooms get too bent out of shape over most FCC actions – and yet the companies react publicly like the sky is falling.

We now have an entrenched lobbying industry that tackles issues on behalf of the big ISPs. I’ve thought for many years that some of the big trade associations drag ISPs into regulatory fights, not the other way around. It seems like overreaction to new regulation has become reflexive, which is in nobody’s best interest because it automatically makes the regulatory process adversarial.

I’ve been watching the regulatory process in a lot of states over the years – not just for telecom, but for power and other utilities. A few states are almost as dysfunctional in the regulatory area as the FCC, but many are not.

It’s worth stepping back and looking at the purpose of the regulatory process. Regulation is needed in industries where industry bad actions can harm the public. States have established a regulatory process that sits between industry and the public. In many States and in some industries, the process works like it’s supposed to. There is horse trading by regulators to give companies some of the things they want in trade for concessions that benefit the public. That’s how regulation is supposed to work. However, sane regulation is not possible when every ruling against industry is taken as a life-and-death affront.

I’m doubtful we’re ever going to see a return to sane telecom regulation. As dysfunction as regulation has been for a decade, we now have courts who also think they should be making regulatory decisions. This can only make things worse.

As I said in opening this blog, none of this back and forth benefits big ISPs. They spend far too much money and energy on lobbying. They antagonize and demonize regulators. And the public grows increasingly tired of bad corporate behavior and chooses smaller ISPs when they get the option. Who other than the lobbyists is winning this never-ending regulatory battle?

Courts Kill Net Neutrality

The U.S. Court of Appeals for the 6th Circuit struck down the FCC’s net neutrality ruling that was passed earlier in 2024. The Court ruled on an appeal filed by a group of major industry trade associations that are against broadband regulation.

The FCC’s effort to classify broadband has always been described in the press as  net neutrality, but that is only a small part of what was included in 434 page FCC order that just got killed. The primary emphasis of the FCC order was to classify broadband as a telecommunication service under Title II regulations. This is the third reversal of this FCC policy. It was first passed by the Tom Wheeler FCC, reversed by the Ajit Pai FCC, reinstated again by the Jessica Rosenworcel FCC, and now killed by this federal court.

The Court just reversed a lot more than net neutrality rules. For example, the FCC order had reinstated the FCC’s formal complaint process for the public. The order included transparency rules that require ISPs to disclose network management practices and network performance. The order put the FCC back into the role of arbitrating disputes between carriers on issues like peering, traffic exchange, and interconnection. The FCC’s order provided the authority for the agency to develop rules for broadband in apartment buildings – a controversial issue during 2024. Perhaps the most important thing killed by the court is the FCC’s ability to deal with cybersecurity issues and malicious actors. I’ve read opinions from regulatory experts that think this ruling might hinder the FCC from enforcing broadband privacy protection, fighting digital discrimination, or even promoting broadband deployment using the Universal Service Fund.

This ruling is incredibly heavy-handed. The question before the court was if the FCC has the authority to regulate broadband – not if it should do so. This issue has been in the courts for a decade, and no previous court thought the FCC didn’t have this authority. Courts affirmed that authority in upholding Tom Wheeler’s FCC decision to regulate broadband under Title II, and affirmed the same authority to support Ajit Pai’s decision to not regulate it. The courts have consistently ruled that the decision to regulate or not regulate broadband is within the intended authority granted to the FCC by Congress. This is as good of a case as any that shows the increasing common trend by federal courts to go beyond settling disputes and to set federal policy.

This ruling is also the result of another dangerous trend, where plaintiffs go court shopping and bring cases in the jurisdiction that is likely to side with them. Historically, issues concerning the FCC have always been held in the Appeals Court in the District of Columbia, which has an accumulated expertise in telecom issues.

Interestingly, this ruling did not rely heavily on two recent Supreme Court cases in making its ruling. The order gives only a minor nod to the Supreme Court’s Loper Bright decision that overturned the Chevron doctrine. The Court also did not rely on “major question doctrine” arguments that were argued by the ISPs that brought the appeal.

One consequence of this ruling will be to free States to fill the regulatory void now that the FCC is clearly out of the business of regulating broadband. California already has a net neutrality rule in place that is even a little stronger than the federal one that just got killed. New York is now enforcing rules that require ISPs to offer low rates for low-income homes. I expect a lot more states will now get involved with some aspect of regulating broadband. I have to wonder if this is what big ISPs really want. Instead of weak regulation by the FCC they are likely to see a patchwork of stronger regulations in states.

The Court decision returns us to the same place we’ve been for decades. Congress could easily clarify the FCC’s role in regulating broadband, but it has not done anything meaningful since the Telecommunications Act of 1996. Because of the huge influence of telecom lobbyists, the chance that Congress will wade into regulatory issues seems increasingly remote.

What Survives from the Rosenworcel FCC?

Any time there is a change of administration at the White House the FCC gets a new Chairman and a new agenda – and we now know the new Chairman will be current Commissioner Brandon Carr. With a new Chairman comes new policies, but also a turn against some of the policies of the previous FCC. In today’s blog, I speculate on what might survive and what might get tossed from the agenda pushed by Chairwoman Jessica Rosenworcel.

There are a few things that obviously get reversed. First is net neutrality, which is poorly named and is really an effort to put some regulatory oversight on broadband. The new FCC has an interesting choice. Chairman Carr could act quickly to kill Title II regulation, like was done by Chairman Ajit Pai. The FCC could instead bide its time to see if the Courts kill it. Big ISPs appealed the reinstatement of Title II authority, and there is a chance that the Sixth U.S. Court of Appeals could side with the ISPs. That would be a stronger way to reject the issue than a reversal by the FCC.

It seems likely that Commissioner Carr will reverse Chairman Rosenworcel’s decision on discrimination. ISPs were strongly in favor of an intentional discrimination standard – one that means the FCC has to prove that an ISP is purposefully discriminating before it can take any action. The FCC instead chose a disparate discrimination standard, which means that discrimination can be proved by seeing the impact of ISP actions on the public. Congress required the FCC to adopt a discrimination standard, so it’s likely that the standard will be softened.

It gets a little harder after that to find policies that will get reversed. Part of the reason for this is that the Rosenworcel FCC wasn’t able to implement a lot of its ideas since it took several years to seat a fifth Democratic Commissioner after the 2020 election.

It will be interesting to see if the FCC will continue with plans for the 5G Plan for Rural America. This plan proposes to use $9 billion from the Universal Service Fund to bring new cell sites to rural America. The concept is popular, and I know a lot of rural counties that are excited about the idea. However, there is a big chance that a new FCC will instead reexamine the overall role of the USF – or that Congress will do so. The current USF is getting increasingly difficult to fund with a levy on voice services, and there are some aspects of the fund that are not popular in Congress.

For example, there are some big subsidies in the Universal Service Fund to build rural broadband, like finishing the RDOF and EACAM infrastructure spending. There are already rumors floating that there is a growing administration sentiment against spending federal money to build rural fiber. It would not be shocking to see these programs curtailed or even ended – possibly in favor of supporting rural satellite service.

There has been an open docket for a year looking at the issue of banning bulk billing for apartments. This is an attempt by the FCC to get more broadband choice for apartment tenants. This docket has been open for a long time with a lot of loud support against the idea from building owners and ISPs. This was always going to be tough to enforce since courts have often sided in the past with building owner rights over FCC rules. My guess is that this will never come up for a vote.

One of the big wins for the Rosenworcel FCC was an emphasis on going after spam robocallers. It’s hard to think this will be reversed, and more likely will be strengthened.

The FCC is always involved in a lot of issues that get little press. For example, the current FCC took another shot at making it easier to add fiber to poles. The FCC has been investigating ways to free up more wireless spectrum, although its hands have been tied when Congress let the ability for the FCC to auction spectrum lapse. It’s likely that most of the mundane things the FCC has been doing will continue.

The Regulatory Yoyo Continues

We’re about to see the fourth change of the party in the White House in this century, and that means a fourth time that telecom regulations will flip-flop in what I’ve called the regulatory yoyo. Regulatory policies have always changed to some extent when the party in power changes, but in this century, the degree of change from administration to administration is more intense than what we saw in the 70s, 80s, and 90s.

I’ve thought hard about why this is so. One clear reason is the explosion of broadband this century. At the end of 1999, about 100 million people in the U.S. used the Internet (compared with 330 million today), and most of them were using dial-up. It wasn’t until 2004 that there were more customers using DSL and cable modem than dial-up. It’s funny how the use of dial-up feels like the far-distant past. At the turn of the century a conscious decision was made by the FCC and Congress not to interfere with the fledgling and growing broadband industry.

In 2000, the FCC regulated telephone service, cable TV, and cellular service. 94% of homes had a landline at the beginning of 2000. There were 67.3 million cable households (64% penetration). There were 86.1 million cellphone users, about 41% of adults. Before the start of this century, the FCC had deregulated cable rates, although it continues to regulate issues like channel line-ups. The process of deregulating telephone rates started with the Telecommunications Act of 1996. While the cellular industry is regulated, it was never regulated to the same degree as landlines.

Much of the regulatory yoyo comes from attempts to regulate broadband. Democratic administration tend to be more pro-consumer and want to put some restraints on abuses by big ISPs. Republican administrations have been more hands-off in favor of letting the market regulate itself.

We’re about to see the third flip-flop on what has been labeled as net neutrality, but which has really been an attempt by Democratic administrations to put some regulatory constraints on big ISPs. The current FCC, under Chairperson Jessica Rosenworcel, restored the net neutrality rules in April of this year. The new FCC might not need to act to abolish net neutrality as was done by Ajit Pai in the previous FCC since there is a chance that the 6th U.S Court of Appeals could uphold a challenge to that FCC order. But if the court doesn’t act, a new FCC will surely reverse that ruling – and they might not wait for the court to decide.

Another reason for the regulatory yoyo is that broadband issues have become partisan. That’s an interesting change over time. Only a miniscule percentage of people in the U.S. could have named the Chairman of the FCC in 2001. Decisions by the FCC didn’t make big press and most people never heard of most rulings by the FCC.

That changed over time, and there was 3.7 million comments made in the net neutrality docket in the 2015 net neutrality docket under Chairman Tom Wheeler. This grew to 22 million comments in the docket under Chairman Ajit Pai in 2017 (although many of them were faked). This interest can only be explained by the widespread use of social media and the Internet which allowed news of what the FCC is doing to spread widely.

What is ironic is that the regulatory yoyo is not great for big ISPs. CEOs of big ISPs have said many times over the years that they like regulatory certainty. They can figure out a strategy to deal with known rules and still thrive. But the yoyo keeps resetting the rules.

What’s particularly troublesome for big ISPs is that when the FCC kills regulations, states like California jump in to fill the void. California now has net neutrality rules and Internet privacy rules that are in place regardless of what the FCC does. The worst regulatory scenario for big ISPs is different rules in different states.

You might note that I mentioned big ISPs above. The big issues at the FCC have some impact on small ISPs, but not to the extent as on big ones. Small ISPs are often excluded from regulations or given relaxed rules since regulations are generally aimed at tempering the behavior of the biggest companies.

The regulatory yoyo provides fodder for people like me who write about it. But repeatedly going back and forth on regulation is not good for the broadband industry as a whole. One thing that is for certain – since we’re only one-fourth of the way through the new century, we’re not done yet with the regulatory yoyo.

Unpacking the Net Neutrality Order

Today’s blog provides a short summary of the FCC’s new Order that reinstates Title II authority and net neutrality. It’s a monster order of 434 pages and 2,921 comments.

Following are my key takeaways from the Order:

  • A large part of the Order reinstates nearly the same Title II rules back that were vacated by the Ajit Pai FCC that killed Title II authority.
  • For those of you who need a new acronym, the Order refers to broadband as BIAS (broadband Internet Access Service). ISPs are now BIAS providers, an unfortunate acronym.
  • The Order reinstated Title II authority over BIAS services – meaning broadband is considered to be a telecommunications service, not an information service.
  • The FCC granted itself new and expanded authority to defend national security. It notes that it has taken actions related to national security in recent years that would have been stronger if based on the new authority described in this Order.
  • The FCC also described its role in addressing cybersecurity issues.
  • The FCC says Title II authority gives it more tools to deal with network resiliency and reliability related to natural disasters or malicious interference. The Order gives it authority to make ISPs participate in the Mandatory Disaster Response Initiative (DIRS).
  • The Order reinstates privacy and data security rules under Section 222 rules that have only been applied to voice services.
  • The FCC thinks the Order gives it the authority to develop rules that apply to ISPs that serve multi-dwelling units – a topic being explored in a different FCC proceeding.
  • The FCC says the Order extends opportunities to ISPs who provide broadband-only and no other services that are under FCC jurisdiction. That should help such ISPs for issues like attaching to poles. It also allows such ISPs to participate in Universal Service Fund support plans.
  • The FCC thinks the order gives it the authority to require ISPs to provide better access for people with disabilities.
  • The Order clarifies that specialized services at the networks edge are not considered to be broadband, with examples like the networks built inside a large enterprise. Broadband edge services provided by premise operators, like broadband at coffee shops, universities, bookstores, and libraries are also not regulated. Content delivery services, VPNs, web hosting, and data storage services are also not regulated.
  • The FCC says that services like peering, traffic exchange, and interconnection fall under Title II authority.
  • The FCC took on expanded authority to preempt States that want to regulate broadband. For now, the FCC is not preempting the California net neutrality rules.
  • The FCC specifically decided not to expand contributions to the Universal Service Fund to include broadband. There has been a lot of lobbying to have the FCC pick up the expiring ACP program, and this shut that door.
  • The FCC went out of its way to say that it is not going to engage in rate regulation. This is the big bogeyman that giant ISPs have said would come with regulation – and for now, the FCC is not invoking any authority over rates, but admits that it has the authority to do so.
  • Of course, the Order is adopting all of the rules referred to as net neutrality. These are the rules that prohibit ISPs from blocking or throttling traffic or engaging in paid prioritization. This is not the main thrust of the Order and didn’t get discussed until page 264.
  • The FCC is reinstating the transparency rules for ISPs that were first put into place in 2015. Under these rules, ISPs must publicly disclose accurate information to customers involving network management practices, network performance, prices, and other information that customers rely on to buy broadband. The transparency requirements go significantly beyond what is required for the broadband labels. For now, these rules will only apply to ISPs with more than 100,000 customers.
  • The Order reinstates both the informal and formal complaint process where consumers can lodge complaints against ISP practices, and ISPs can ask the FCC to intervene in carrier disputes.
  • The Order reminds ISPs that it has the ability to enforce broadband regulations using fines or other tools at its disposal.

My Broadband Regulatory Wishlist

Chairwoman Jessica Rosenworcel wasted no time in declaring that the FCC is going to tackle reinstituting Title II regulation for broadband. She made the announcement only a few days after the Senate approved Anna Gomez to fill the open fifth Commissioner slot. Since her announcement, I’ve been thinking about the things I’d like to see the FCC tackle with five Commissioners.

Net Neutrality. This is not at the top of my list, but I put this first to get it out of the way. Most big ISPs have not been engaging in big violations of the net neutrality principles. This is partially because ISPs didn’t want to see net neutrality to be the excuse for reintroducing broadband regulation. But it’s also because California has been successful in implementing net neutrality. There is no practical way for a nationwide ISP to violate net neutrality rules everywhere except California, so they hesitate to do so. The bottom line is that discriminating against some classes of customers or types of traffic is bad business and most big ISPs just don’t go there to the extent that was always feared by net neutrality proponents. But it seems likely that the net neutrality rules will be reinstated.

Carrier Disputes. Industry insiders miss the ability to take broadband disputes between carriers to the FCC for resolution. This is a quiet part of the industry that has always been effective yet under the radar. Just the threat of taking another carrier to the FCC was often an effective negotiating tactic when ISPs violated contracts or industry practices. But killing Title II regulation for broadband meant that the FCC no longer claimed jurisdiction over many broadband disputes – leaving carriers with a much tougher path of taking disputes to court.

Consumer Protection. Probably the biggest change when Title II regulation was killed was that the FCC stopped taking an active role in protecting consumers against bad behavior by ISPs. When people got so fed up that they finally complained to the FCC about bad ISP behavior, the ISPs generally tried to resolve issues to stay on the good side of the FCC. In the cases where a lot of consumers were harmed by an ISP practice, the FCC ordered ISPs to fix bad behavior and often required refunds of overcharges. That all went away with the end of Title II regulation. The FCC still has a complaint process, but the agency just forwards consumer complaints to ISPs which have been free to ignore them. The FCC further passed the responsibility for consumer protection to the FTC to police ISP’s bad behavior – which is totally ineffective since the FTC doesn’t have the authority to set industry-wide rules and only prosecutes the worst of the worst behavior, one ISP at a time.

Merger Conditions. The FCC often used its Title II authority to make ISPs accept conditions for broadband mergers. Charter customers can all thank the FCC for blocking the company from instituting data caps as a result of an agreement made when the company wanted to merge with Time Warner Cable. The FCC has not always stuck to its guns in enforcing merger conditions, but this is one that has saved millions for Charter customers. This prohibition will end soon, so be on the lookout for Charter data caps.

Collecting Real Pricing Data. The FCC periodically does urban rates studies, but in doing so, it doesn’t collect real prices – just the prices that ISPs claim. A study in Los Angeles last year showed that Charter had different prices by neighborhood throughout the City, with the best deal being offered to areas with higher household incomes. Title II regulation theoretically would allow the FCC to somehow regulate prices – but it’s hard to imagine it would ever do so. It doesn’t regulate prices for telephone, cable, or cellular service, and it’s hard to imagine an FCC wading into this issue. But having Title II authority could give the FCC leverage to encourage lower rates when ISPs ask for other concessions from the agency.

Privacy. Like with net neutrality, California is far ahead of the FCC in terms of trying to protect customer privacy. It would be great to see the FCC change privacy policies to protect consumer data in today’s complicated online world.

Giving the States Cover for Regulating. When the FCC gave up on regulating broadband, most states did so as well. It’s difficult and expensive for states to take on the big ISPs without the cover of the FCC regulating and taking most of the industry flak. ISPs use the tactic of suing states that try to regulate them in any way.

A Broadband Map that Works. This issue probably means I am completely fantasizing. I don’t think there will ever be a broadband map that can work. When the BEAD grants are behind us, I suspect we’ll move back to not carrying how lousy the maps are. But if we are somehow forced to care about maps, it would be good if the process worked.

Filling a Regulatory Void

Earlier this year, the Ninth Circuit Court of Appeals upheld the net neutrality regulations enacted by California. The appeal case was filed on behalf of big ISPs by ACA Connect, CTIA, NCTA, and USTelecom.

The case stems from the California net naturality legislation passed in 2018. The California law was a direct reaction to the Ajit Pai FCC that not only killed federal net neutrality rules but also wiped out most federal regulation of broadband. The California legislation made it clear that the State doesn’t want ISPs to have an unfettered ability for bad behavior.

The California net neutrality rules are straightforward. The law applies to both landline and mobile broadband. 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 Google) for delivering Internet traffic or content.
  • Prohibits paid prioritization.
  • Prohibits zero-rating.
  • Prohibits interference with an end user’s ability to select content, applications, services, or devices.
  • Requires the full and accurate public disclosure of network management practices, performance, and clearly worded terms of service.
  • Prohibits ISPs from offering any product that evades any of the above prohibitions.

This is an interesting step in the battle to regulate ISPs. The big ISPs put a huge amount of money and effort into getting the FCC under Ajit Pai to kill federal broadband regulation. There has been a long-standing tradition in the telecom world that cedes that the FCC has the power to make federal rules, but states have always been free to regulate issues not mandated by the FCC. There have been some tussles over the years between states and the FCC, but courts have consistently sided with the FCC’s authority to make national rules. When the FCC walked away from most broadband regulation it created a regulatory void that tradition would imply that states are allowed to fill.

Losing this court case creates a huge dilemma for big ISPs. California is such a large part of the economy that it would be hard for ISPs to follow this law in California and not follow it elsewhere. It also seems likely that other states will now pass similar laws over the next few years, and that will create the worst possible nightmare for big ISPs – different regulations in different states.

I’ve always adhered to the belief that there is a regulatory pendulum. When regulations get too tough for a regulated industry, there is usually a big push to lighten the regulatory burden. But when the pendulum swings the other way and regulation gets too slack, there is inevitably a big push to put more restrictions on the industry being regulated. In this case, the ISPs and Ajit Pai went too far by eliminating most meaningful federal broadband regulation. There is nothing surprising about California and other states reacting to the lack of federal regulation.

With this court decision, there is nothing to stop a dozen states from creating net neutrality rules or tackling the other regulations that got voided by the Ajit Pai FCC. It’s also not hard to predict that the big ISPs will now push to create a watered-down federal version of net neutrality as a way to override a plethora of state rules.

I said earlier that this is a dilemma for large ISPs because it is extremely rare and not easy for a small ISP to violate net neutrality principles. The California rules will require ISPs to create more plain English terms of service, but otherwise, small ISPs in California will not likely be bothered by any of these rules.

For the big ISPs, this is a harsh reminder that the regulatory pendulum always swings back. It’s not hard to envision celebration behind the scenes at the big ISPs when they convinced the FCC to give them everything on their wish list. But when regulations get out of balance, there is inevitably pushback in the other direction.

There is still one piece of unfinished business in this case. There is still an open issue in the court examining if the California law impinges on interstate commerce. But the Ninth Circuit’s ruling made it clear that California is free to enforce its version of net neutrality within the state.

Net Neutrality Legislation

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

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

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

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

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

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

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

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

Big ISP Fear of Rate Regulation

Policy fights often take bizarre directions. You might remember the furor seven years ago when the FCC under Chairman Tom Wheeler was contemplating imposing net neutrality. There were over 22 million public comments filed in the case. There was a big controversy when some of those against net neutrality filed bulk comments labeled as being from people who knew nothing about the comments, including several politicians.

I’m not entirely sure why the public got so stirred over the topic, because up until that time, there had been only a few blatant cases where ISPs had violated the net neutrality principles, with the most common being something the public largely favored – ISPS giving free access to a video service for buying broadband.

The big ISPs all lobbied hard against the net neutrality rules, but the CEO of every big ISP was on the record at least once saying that the net neutrality rules were not a big deal and that they could live with net neutrality. So why did the big carriers lobby so hard about what the FCC was doing?

The answer is that the carriers were far more worried about the FCC’s regulations that came along with FCC’s planned net neutrality rules. The FCC under Tom Wheeler was planning on strengthening the Title II regulatory policies that gave the FCC the right to regulate ISPs. The real fear that ISPs had was that the FCC would eventually use Title II authority to impose rate regulation on broadband. I think in hindsight that the big ISPs seven years ago already had long-term plans to migrate broadband rates as high as possible. Today we’re seeing the big cable companies starting to narrow in on basic broadband rates of $100 per month.

But the big ISPs couldn’t publicly lobby against rate regulation and Title II. The ISPs would have had a hard time convincing folks to file comments against controlling ISPs rates. The big ISPs would have had to argue that ISPs don’t need to be regulated – something the public would clearly and strongly disagree with. Most broadband customers of the big ISPs had at least one story of when they had an uncomfortable interaction with their ISP. The big ISPs were so unpopular at the time that they had the lowest ranking of all industries on surveys of how people rank U.S. corporations.

The big ISPs certainly could not have publicly told the truth and said that the only squabble with net neutrality rules was the risk of being told that rates are too expensive. That would be a public argument that even public allies of the big ISPs would have shied away from.

Seven years ago, the big ISPs pulled out all stops to lobby against net neutrality, although all they really cared about was the ability of some future FCC to tell them to stop raising rates. The big ISPs lost that battle in the Wheeler FCC, which everybody expected – because the FCC at the time had a Democrat majority.

The big ISPs didn’t have to wait long to get what they wanted after Donald Trump unexpectedly won the presidency. He promoted Ajit Pai to head the FCC, and his first order of business was to completely dismantle Title II regulation. This was again framed by the big ISPs as eliminating unneeded net neutrality rules – but the real issue that still was never said out loud was the goal of eliminating the threat of rate regulation.

Now that Democrats are back in charge of the White House, the whole issue has surfaced again. The big ISPs have been trying to derail or delay confirmation of Gigi Sohn as the fifth FCC Commissioner because they know that one of the first actions of the FCC under Chairman Jessica Rosenworcel will be to reintroduce Title II regulation.

I’ve seen a lot of pro-ISP articles lately talking about how net neutrality was an empty issue and how there have been no bad consequences from killing net neutrality. That may be largely true other than a few ugly examples like Verizon disconnecting firefighters battling forest fires.

But the lack of a threat of rate regulation has allowed big ISPs to raise rates with impunity. In the last five years, we’ve seen Comcast and Charter regularly raise broadband rates. Comcast rates are now north of $90, and after a series of $5 rate increases, Charter is not far behind. Other big cable companies like Cox and Atlantic Broadband charge even more than the big two. The public is currently complaining about inflation due to supply chain issues, but the cable companies have been busy raising broadband rates at a pace that far outstrips inflation.

In the recent confirmation hearing, Gigi Sohn said she was not in favor of rate regulation. I’m positive we’ll never hear the big ISPs publicly ask that question again because it will remind people about the impact of broadband on their pocketbooks. But I think we need to brace for another gigantic lobbying effort against rate regulation – disguised as arguments against net neutrality again.

The Consequences of No Broadband Regulation

A few weeks ago when the COVID-19 pandemic became apparent we saw the ridiculous spectacle of an FCC chairman begging ISPs to not disconnect customers during a pandemic that would likely throw tens of millions of people out of work. Chairman Pai was reduced to begging because a few years earlier he had voted to strip the FCC if its power to regulate broadband. Before that decision, Chairman Pai could simply have ordered ISPs to be on their best behavior during the pandemic.

This is the most recent demonstrations of the negative impact of deregulating an industry that is controlled by a tiny handful of carriers. In most urban markets the big cable companies have become de facto monopolies – and even most markets that haven’t quite reached monopoly status are, at best, duopolies. There is little broadband competition in most major metropolitan areas, and even in many rural county seats.

It’s not hard to see that the ISP industry thinks it’s bullet-proof against regulation. Consider what’s happened with prices in just the past few years:

  • When comparing data prices around the world, the US has the highest data rates among industrialized countries. Our cellular data prices are nearly the highest anywhere in the world other than a few remote places like Antarctica and war zones.
  • All the major ISPs have raised broadband rates in the last year – when everybody in the industry knows that broadband is already a product with huge margins. These rate increases serve no other purpose other than padding the bottom line. What’s worse is that Wall Street analysts are pushing the ISPs to raise rates much higher.
    • ISP bills are now full of hidden fees. Consumer Reports said last year that the average monthly company-imposed fees for the bills they analyzed averaged to $22.96 for AT&T U-verse, $31.28 for Charter, $39.59 for Comcast, $40.16 for Cox, and $43.79 for Verizon FiOS. They estimate that these fees could total to at least $28 billion per year nationwide.
  • Some ISPs like AT&T, Comcast, Cox, and Mediacom are making big money on data caps. It’s clear that the argument of having data caps to protect networks against overuse has zero basis in fact. Data caps are just a quiet way to raise rates and billings. We now know that over 8% of homes now use over a terabyte of data per month – and that was before the COVID-19 pandemic.
  • ISPs feel brave to openly gouge customers, like Frontier that is billing a monthly fee for WiFi modems that the customers purchased. Even when challenged publicly, the company won’t remove the charges because they don’t fear regulatory retribution.

One of the worst things about the deregulation of broadband is that the average consumer has no idea this happened. The FCC was slick enough to bury the deregulation of broadband in the net neutrality topic. Most people don’t realize that when the FCC killed net neutrality that they also gave away their authority to regulate broadband. People still look to the FCC to correct broadband injustices, without realizing that when they file an FCC complaint against a broadband provider that the agency is powerless to intercede on their behalf.

The FCC will argue that they didn’t kill broadband regulation, but they instead handed the responsibility to the Federal Trade Commission. That claim falls apart quickly once you realize that the FTC has zero authority to regulate industries – they can’t write a rule that applies to all ISPs. The FTC’s power is limited to fining ISPs that have blatantly injured the public – and this must be done by an agency that is also overlooking all other US corporations.

Other than to dole out spectrum for 5G, it’s hard to even justify the FCC any longer. If the US isn’t going to regulate one of the most important industries in the country – many would say during the current pandemic the most important – then perhaps we ought to stop pretending to do so.

Only Congress can fix the problem and they’ve shown no inclination to do so. Congress hasn’t done anything meaningful concerning broadband since the 1996 Telecommunications Act that was signed just as people were subscribing to AOL and Compuserve.

The FCC should be taking drastic action during this pandemic. The agency could have been leading the charge looking for ways to get broadband to kids stuck at home. They could have been taking actions to make it easier for telemedicine in the last few months. They could have reacted to the pandemic with plans to finally solve the broadband gap. Instead, all we got was a powerless FCC Chairman politely asking ISPs to not harm people during a national emergency.