Tag Archives: Title II authority

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.

FCC Investigating Data Caps

In June 2023, FCC Chairperson Jessica Rosenworcel announced that the FCC was going to investigate the impact of data caps imposed by ISPs on broadband usage. For those who don’t know what a data cap is, it is an arbitrary cap on the amount of home broadband usage in a given month. Most ISPs with data caps charge extra for exceeding a data cap – and customers who won’t pay more typically get throttled to very slow speeds.

Most ISPs don’t use data caps, and most home broadband usage is unlimited. But there are still ISPs that enforce data caps. Here are a few of the larger ISPs that use the practice – there are numerous smaller ones:

  • Comcast imposes data caps in some, but not all markets. The data cap is 1.2 terabytes per month, and extra usage is billed at $10 for an extra 50 gigabytes.
  • Cox has a data cap of 1.28 terabytes per month, and extra usage is billed at $10 for an extra 50 gigabytes.
  • Mediacom has data caps that differ by product. Their smallest data cap is 350 gigabytes per month and largest is 1 terabyte. Extra usage is $20 for 50 gigabytes.
  • Sparklight has a data cap on some products. On their slowest products the data cap is 700 gigabytes. Other products have a cap of 1 terabyte. All plans get throttled to very slow speeds if monthly usage hits 5 terabytes.
  • Viasat and HugesNet have severely small data caps.
  • Cellular hotspots also have small data caps, but FWA cellular doesn’t seem to have a cap.
  • Practically all cellphone plans have a data cap, with a separate cap for overall usage and tethering.

The FCC opened a Notice of Inquiry on October 15 to examine data caps. This is an interesting document that talks about the ever-increasing amount of home broadband usage. I’ve written a number of blogs about this issue over the years. OpenVault reported at the end of 2023 that the average broadband customer in the country uses 561 gigabytes per month of broadband – which is download and upload usage combined.

In the NOI, the FCC wants to understand more about the impact that data caps have on customers. This might be from seeing increased costs for exceeding the data cap limit or having speeds reduced. There are different practices that fall under the FCC investigation, including hard data caps, like the ones listed above, soft data caps that ISPs sometimes selectively invoke, de-prioritization where customers that reach a cap may be knocked out of service in times of heavy demand, and throttling where speeds are severely decreased when the data cap is reached.

When the FCC decided to investigate data caps in 2023, the agency opened a portal and asked consumers to tell them stories of the impact of data caps. Consumers can still provide their experiences with data caps at this link.

Consumers almost universally hate data caps. A household that uses more data than the cap can pay as much as $50 more per month for broadband. This is a severe penalty if you consider that every network engineer I know scoffs at the idea that there is an incremental cost from using reasonable amount of extra broadband in a month. If there is a cost, it is pennies, not the large fees charged for exceeding data caps. It’s clear that data caps are a way to increase revenues, not to protect networks.

It’s even more painful for customers who hit a data cap and can’t afford to buy more data. Speeds can be curtailed to dial-up speeds, which in today’s online world means it’s nearly impossible to connect to websites.

The investigation is interesting, because the FCC doesn’t currently have the authority to do anything about data caps. They would have gained that authority from their decision to implement Title II authority over broadband. But that order is sitting in a court and the FCC is only going to be able to do anything about broadband and data caps if and when they win that court dispute.

Can States Pick Up the End of ACP?

FCC Chairwoman Jessica Rosenworcel made it clear recently that the FCC is not willing to tackle funding for the ACP plan that is expiring in May. She estimated that the FCC would have to add something like $9 to every broadband bill in the country to fund the ACP plan.

But there is another alternative. States could pick up the ACP funding just for their state. States will have the authority to do this after the FCC approves the reinstitution of Title II authority this month. That authority would give the FCC the authority to create the fee needed to fund the ACP through the FCC Universal Service Fund.

We’ve always had a regulatory structure that allows States to tackle any telecom issue that the FCC decides not to pursue. Once Title II regulation is in place, and assuming that the FCC formally passes on funding ACP, then each state would be free to do so.

It’s obvious that the big ISPs are worried about this. A joint letter from Comcast, Charter, and Cox was recently sent to the FCC asking it to preempt States from establishing a State version of ACP.

If I was a betting man, I bet that the FCC will not preempt the States on this issue. While the FCC is not ready to take on the flak that would come with creating a nationwide ‘tax’ on every broadband household and business, I’m guessing that they will allow States to do so.

Many States already have a mechanism that easily could handle this. A lot of States have a State universal service fund that mimics the structure of the FCC’s USF. The States have used these funds in the past to support rural telcos or to fund other telecom-related issues. Many States already assess a fee on telephone customers to fund the State USF. It’s not much of a stretch for a State to extend this to cover a broadband discount.

States that decide to create a low-income subsidy plan that like the ACP will face the same kind of issues highlighted by Chairwoman Rosenworcel. A State fee could easily be anything from a few dollars per month to over $10 per month. People are annoyed at any taxes and fees added to products they must buy, and a large fee is going to draw a lot of public attention and ire.

There are ways that the States could reduce the size of an ACP replacement. An easy change would be to not cover cellphones, just home broadband connections. States are also likely to fiddle with the qualifications. The ACP program had a wide range of ways to qualify, with the most important one being that ACP is eligible to homes making as much as twice the level of poverty for a given area. States might lower that threshold to lower the size of the fund and the size of any monthly fee.

It’s always interesting to watch big ISPs fight hard to keep fees from being assessed on broadband. In this particular case, a State USF assessment wouldn’t likely cost an ISP anything since they would pass the fee on to customers. But big ISPs are fighting hard to maintain the current environment where broadband can’t be taxed. While payments to a state or federal USF fund are technically fees and not taxes, they feel like taxes to the folks who pay them. The big ISPs have been successful at keeping broadband from being taxed for the last 25 years, and they don’t want to open up the floodgate where State and local governments feel they can tax broadband revenues for ACP since that would raise the issue of assessing fees for a wide variety of other purposes.

Of course, this discussion could end in a hurry if Congress steps up and funds some version of ACP. That’s not something I’m willing to bet on.

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.

The FCC and Broadband Outages

Comcast had a widespread network outage in early November. The problems started in San Francisco and spread the next day to Chicago, Philadelphia, parts of New Jersey, and three other states. The outage knocked out broadband customers along with Comcast cellular customers. Comcast has never disclosed the reason for the outage and announced only that it was due to a ‘network issue’.

In 2020 CenturyLink suffered an even larger outage that not only knocked out CenturyLink customers but spread into other networks, including Amazon, Cloudflare, and Hulu. The problem was blamed on a software update that blocked the establishment of Border Gateway Protocol (BGP) sessions and impeded broadband traffic routing.

T-Mobile also had a major network outage in 2020 that knocked out broadband customers and also cut off some voice calls and most texting for nearly a whole day. T-Mobile blamed the issue on problems with a leased circuit that was compounded by two previously undetected flaws in third-party software. Reports at the time said that the electronics failed on a leased circuit, and then the backup circuit also failed. This then caused a cascade that brought down a large part of the T-Mobile network.

In 2019 CenturyLink had perhaps the largest outage that knocked out much of its network and customers that relied on the Level 3 network for transport. The company blamed the outage on a bad circuit card in Denver that somehow cascaded to bring down a large swath of fiber networks in the West, including numerous 911 centers.

The FCC investigates big outages from time to time and opened an inquiry in October 2020 in a few of the outages listed above. The FCC also recently adopted a Notice of Proposed Rulemaking to investigate the disaster resiliency plans of major telecom providers to take a harder look at how cellular and broadband carriers make repairs after big storms.

Interestingly, the FCC recently fined T-Mobile $19.5 million for the 2020 outage, but not the other carriers. This is not because T-Mobile’s outage was worse than the others. T-Mobile was fined because they are a cellular carrier and still fully regulated by the FCC. But Comcast and CenturyLink are ISPs and under different regulatory rules.

Oddly, the FCC has very little power to do anything about ISP network outages because the FCC has very little regulatory authority over ISPs in general. The FCC abrogated its authority to regulate ISPs when it killed Title II regulation and handed a few vestiges of regulation to the Federal Trade Commission. The FCC only regulates ISPs tangentially through the specific authority given directly by Congress. Any authority the FCC once had as a result of claiming Title II regulatory authority is gone.

The process has finally started to seat a fifth FCC Commissioner, and the industry speculates that one of the early acts with five Commissioners will be to reinstate Title II authority. This effort might be a little more streamlined in the past because federal courts have already ruled that the FCC can choose to regulate or not regulate broadband.

Unfortunately, any move to regulate ISPs and broadband will only last until we have another shift in administration that wants to kill regulation again. We have ended up in an absurd regulatory merry-go-round where regulating or not regulating ISPs depends on the party that controls the White House. It makes no sense to not regulate ISPs at a time when cable companies have nearly total monopoly power in some markets. Overall, broadband might be the most important industry in the country because it powers just about everything else. Local jurisdictions around the country regulate occupations like nail salon technicians, plumbers, and masseuses, and yet we can’t get our act together as a country to regulate an industry where a handful of giant ISPs openly manifest monopoly behavior.

There is a really simple fix for this. Congress could give authority to the FCC to regulate broadband so that future FCCs or administrations could not undo it. It would only take a simple law that says something like, “The FCC shall regulate the broadband industry for the benefit of the citizens of the United States.” Obviously, lawyers could word this to be more ironclad – but giving the FCC the authority to regulate broadband doesn’t have to be complicated.

What is Light-Touch Regulation?

One thing I’ve noticed recently is that a lot of people are climbing on board the idea of building better broadband to rural America. A lot of people seem to think that the FCC can somehow act to fix a lot of the shortcomings of rural broadband – but in doing so they have missed the entire point of what the FCC calls ‘light-touch’ regulation – because, from a practical perspective, broadband is not regulated at all.

It’s not hard to understand why people would misunderstand the situation, because ‘light-touch regulation’ is one of those euphemisms that governments invent to disguise what they are really doing. Chairman Pai at the FCC never misses an opportunity to talk about his regime of light-touch regulation. I have to wonder if there would be as much support for the light-touch regulation if that phrase was replaced with the simpler and more descriptive phrase ‘deregulated’. I suspect a lot of people would be uncomfortable that one of our largest industries is largely deregulated.

The FCC pulled off this huge change by hiding the deregulation inside of their move to undo net neutrality. The FCC didn’t just reverse the net neutrality rules put into place by the previous FCC, they killed Title II regulation – which is the authority given to the FCC by Congress to regulate ISPs as common carriers. The FCC gave up Title II authority and gave the tiny remaining vestiges of broadband regulation to the Federal Trade Commission – even though the FTC is not a regulatory agency. The FTC doesn’t create or enforce new rules – they are more like corporate police that fine corporations when they’ve abused their customers too egregiously.

What does it mean to give up Title II authority? The FCC can no longer judge, or even track broadband prices. ISPs are free to raise rates to any level they want and make any profits they want. There hasn’t been an FCC since the dawn of the broadband industry that has invoked price regulation – but the fact that they could always acted as a brake on bad ISP behavior.

The FCC can no longer intervene in disputes between ISPs or with their biggest customers. Under Title II regulation, the FCC could decide if an ISP was fairly dealing with Netflix or some other large user of broadband. When Title II regulation was killed, the FCC stopped acting as the arbiter in industry disputes – ISPs are free to act in any way they want.

The FCC can’t even intervene when ISPs abuse customers. I recently wrote about the FCC complaint process. Before the end of Title II regulation, ISPs would try to resolve issues raised during the complaint process. The FCC had the authority to make ISPs treat customers fairly if they decided to exercise it – and it was the threat of the FCC creating new rules that made ISPs willing to curb some of their worst behavior. But now the FCC is nothing more than a gatekeeper – they lamely pass on consumer complaints to ISPs, which the ISPs largely toss into the wastebasket since the FCC no longer has any regulatory teeth.

It’s not completely fair to say that ISPs are 100% deregulated because there are a few areas of regulation that were not created under Title II authority that are still in place. For example, the Patriot Act created the requirement that ISPs have to allow federal law enforcement to be able to ‘wiretap’ broadband connections in the same way they used to wiretap telephone connections. The FCC can’t shed that responsibility and so they still enforce the CALEA rules that require ISPs to respond to subpoenas.

There are also various types of privacy and billing rules that were the result of other acts by Congress, and the FCC still oversees these remaining vestiges of regulation. As an example, the whole recent controversy over removing Section 230 protections for online companies like Twitter also applies to ISPs and is enforced by the FCC.

But the core basis for FCC regulation of ISPs was due to the fact that ISPs are common carriers, similar to telephone companies or cellular carriers. ISPs provide a two-way communications path with customers, and it is that basic function that justified regulating them under Title II regulations.

The FCC undertook one of the most bizarre steps in regulatory history when their voluntarily neutered themselves as broadband regulators. They no longer have the authority to force the big telcos to provide better rural broadband. They no longer have the authority to stop an ISP from raising rates to the point of unaffordability. They no longer even have the power to stop an ISP from billing customers for non-existent products. This is all easy to remember if you replace the term light-touch regulation with unregulated.

The Government Needs to Address the Homework Gap

I’ve been at a bit of a loss over the last few days on what to write about, because suddenly newspapers, blogs, and social media are full of stories of how impossible it is for some students to work at home during the Covid-19 shutdowns. I’ve been writing this topic for years and there doesn’t seem to be a lot I can add right now – because the endless testimonials from students and families struggling with the issue speak louder than anything I can say.

There have been some tiny reactions of the federal government to help solve the issue. For example, the FCC removed the E-Rate exemption that said that government-powered broadband couldn’t be used for the general public. This allowed schools and libraries to aim their broadband outside for the general public and for students trying to keep up with homework. This was always a stupid restriction and I hope whatever DC bureaucrat originally dreamed this up is forced to use satellite broadband for the next year.

I’ve also seen notices from small ISPs that are distributing WiFi hotspots to students that need them. That is a great idea and I totally support. What I haven’t seen is anybody talking about who is going to pay the cellular data bills on those hotspots when they come due. Verizon has halped a little by temporarily adding 15 GB of usage to its data plans, but it doesn’t take long to rack up a big cellular data bill working on a hotspot.

These fixes are temporary bandaids. I’m sure any students benefiting by these recent changes are grateful. But it’s still second-class broadband that makes families park in cars while kids do homework. And as much as cellular hotspots are a great solution that brings broadband to the home – it’s also a curse if this brings monthly broadband bills of hundreds of dollars per month just to do homework.

I’m sure that most school systems will somehow slog through the rest of this school year. However, I’ve talked to several rural school administrators in the last week who worry that half of the children working at home are learning little or nothing while at home. I’ve seen school systems already asking if they should push all students to the next grade this year, whether they are ready or not.

The big challenge is going to come if this crisis carries forward into the next school year starting this fall. I doubt that there are many school systems with rural students that are ready to face this for a whole school year. Let’s hope that doesn’t happen, but if it does then our lack of broadband for students becomes a national shame.

I don’t have many suggested quick solutions that will help the homework gap by the fall. It’s hard to even predict how much fiber construction will be done this summer due to social distancing – likely less than was planned.

One might hope that communities will install many more outdoor-facing hotspots. It would be nice to see these at every government building and at socially-minded businesses everywhere. This is a fix that is within the reach of every community. Any business that has broadband ought to consider sharing it during the times of the day or night when the business isn’t using it. Let’s turn all parking lots for towns of all sizes into WiFi zones.

It would also be nice if the FCC could somehow turn up the pressure on the wireless carriers to provide fixed cellular broadband. This is the technology used by AT&T that beams data using cellular frequencies from cell sites to small dishes at homes. This provides a better indoor signal than regular cellular service, and the cellular companies price this more like a broadband service than cellular service. AT&T has halfheartedly rolled out the product as a way to implement their CAF II obligations – but the word from rural areas is that it’s not marketed and nearly impossible for customers to buy. T-Mobile promised to roll this product out in every rural market as part of the agreement to merge with Sprint and the government needs to hold their feet to the fire to make this happen quickly this year.

Unfortunately, the FCC sabotaged their ability to push for better broadband solutions when they killed Title II authority and stopped regulating broadband. The solution we really need this year is for Congress to resolve the Title II issue once and for all and to make the FCC responsible for finding broadband solutions. Right now everything the FCC says on the topic is rhetoric because they have no power to compel ISPs to do anything. This is no time for politics and rhetoric, but a time for action.

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.

The FTC and Net Neutrality

One of the lynchpins of the FCC’s plans to reverse net neutrality is their assertion that the Federal Trade Commission (FTC) is ready to step in and protect consumers from any abuse by the big ISPs. FCC Chairman Ajit Pai argues that the FTC should always have been the go-to agency for privacy issues and issues like broadband rates. However, it’s possible, and perhaps even likely that the FTC will be legally unable to take on that role.

There is an open lawsuit that challenges whether the FTC has any authority over big ISPs like AT&T. The FTC sued AT&T and levied a $100 million fine on the company for abuses of their unlimited cellular data plans. AT&T stopped selling unlimited data plans in 2011. But the company had sold millions of limited plans that had promised that customers could keep the plans for life. This is about the time that customers could actually begin using large amounts of cellular data due to the burgeoning OTT video market, and AT&T started to pressure customers to drop the grandfathered unlimited plans. AT&T eventually took steps to throttle unlimited data users and even went so far as to block customers from using Facetime, the Apple product that lets customers video chat.

AT&T immediately appealed the FTC decision using the argument that Section 5 of the original FTC charter precluded the agency from regulating ‘common carriers’. The original Telecommunications Act of 1934, which established the FCC, had defined common carrier to be a company that provide public telecommunications facilities – which has been taken to mean facility-based telecom providers. Originally the common carrier definition meant the old Ma Bell and other regulated telephone companies, but over the years the FCC has expanded that definition to include other telecom facility-based providers including cellular carriers and long-haul fiber owners.

In February of 2016 the appeals court agreed with AT&T and said that the FTC had no jurisdiction to regulate a common carrier, even for “non-common carrier activities”. This means that the FTC could not regulate AT&T for its telecom business, but also couldn’t regulate other endeavor that the company might undertake, such as AT&T’s actions as the owner of DirecTV or their future actions as a programmer after a merger with Time Warner.

The FTC appealed that decision and the case is still open. The agency pointed out that the ruling created a huge enforcement gap. At the time it of the FTC appeal it was assumed that the FCC would continue to regulate telecom-related issues for common carriers, but the FTC pointed out that the ruling meant that nobody was regulating non-common carrier activities of common carriers like AT&T.

Almost immediately after this court ruling the formerly unthinkable happened and the FCC now wants to walk away from regulating broadband – the most important of the common carrier activities of AT&T and other ISPs. In doing so, the FCC argues that the FTC will be able to take over the regulation of issues like privacy, billing abuses, excessive rates, etc. However, the 2016 court ruling says that the FTC has no jurisdiction over any of the actions of a common carrier like AT&T.

The fact that the FCC is walking away from its responsibilities does not somehow create the right for the FTC to step in and regulate common carriers. This means that after the FCC reverses Title II authority that there might be no agency in the federal government able to regulate any consumer activities of common carriers like AT&T, even in areas that are not telecom related. It would free up AT&T and other common carriers to subject customers to enormous abuses with nobody able to step in to protect customers. AT&T and other common carriers could inflict unimaginable abuses on customers without consequence, up perhaps to the point of outright fraud, at which point the Justice Department could probably intervene.

To make matters worse, the FTC is not sure that they can really regulate companies like AT&T even should they win the appeal of the AT&T lawsuit. FTC Commissioner Terrell McSweeny says in this opinion piece that the FTC is ill-equipped to regulate companies like AT&T. He says the agency is underfunded for such activities and doesn’t have a staff that has the technical expertise to understand complex telecom issues – exactly the kind of expertise that resides at the FCC.

https://qz.com/1144994/the-fcc-plans-to-kill-the-open-internet-dont-count-on-the-ftc-to-save-it/

 

McSweeny further says that even if the FTC is able to take on this role that the agency doesn’t really regulate companies. Instead, the agency punishes companies for consumer abuses, many years after transgressions. That is not the same thing as proactively establishing rules to regulate corporations. He says that the FTC could not really preclude AT&T from abusing customers, and at best could occasionally fine them for the worst of such abuses, many years after they occurred.

Sadly, we have an FCC that is aware of the regulatory gap and which is still willing to walk away from regulating broadband. It’s not hard to imagine what a company like AT&T might do with zero constraints. It’s likely that we’ll see huge price increases, unsavory practices like stringent data caps, constant violations of customer privacy through the mining of customer data, etc. The only constraint against such practices would be competitive pressures, but the other big ISPs in the market would also be unregulated and it’s not hard to imagine that cable companies would match AT&T abuses rather than compete against them.

The New FCC Broadband Privacy Rules

FCC_New_LogoThe FCC passed new privacy rules last week and the new rules are largely aimed at Comcast, AT&T, Verizon and other large ISPs. Most small ISPs do not participate today in the practices that the new rules are aimed at stopping. For the most part the rules won’t affect smaller companies much other than having more annual pieces of paper to file at the FCC saying that you follow the rules – and you probably already do.

The rules are aimed at protecting customers from abuse by ISPs, who by definition have the most access to a customer’s data. An ISP knows every web site visited, every web purchase made, every email and every instant message sent.

This is probably the FCC’s biggest use so far of its new Title II authority over broadband. The FCC knows this is going to be challenged in court, so the new rules don’t go into effect for a year, giving the lawsuits a chance to resolve.

I’m not going to repeat all of the specifics of how this works, but rather concentrate on what it means to the industry as a whole:

Customers have a right of privacy. The new rules create a new right that a customer’s data – where they search on the web, what they say in emails and texts – all belong to them. Each customer now has the right to decide if the ISP can use it. Today an ISP knows everything a customer does on the web that is not encrypted, and even with encryption they know the web sites visited. But the FCC now makes it clear that this customers can keep this personal information private if they so desire.

ISPs need to ask for permission to use customer data. The new rules compel ISPs to explicitly ask for permission to use customer data. I suspect ISPs are not going to be allowed to bury this choice inside a terms of service.

I would expect that big ISPs are going try to entice people to be able to use their data. They might offer lower prices or entice people by forwarding coupons to them from around the web for things they are interested in. But at the end of the day it’s the customer’s choice to allow or not allow their ISP to use the data. And there might be nuances. ISPs might ask to track where customers go on the web but not read emails. The rules would allow options for the ISP.

ISPs must say what they do with customer data. If somebody gives an ISP permission to use their data the ISP must disclose how they are going to use it. Are they using it only for their own marketing efforts or are they going to sell it to others? Right now, consumers don’t know what information is being collected by their ISPs, nor what’s being done with it.

ISPs will have to protect customer data. The new rules also place more responsibility on ISPs to protect customer data from hackers. This is perhaps the one area of the new rules that will have the most impact on smaller ISPs. ISPs must use best industry practices and also notify customers when there has been a data breach. And they must notify the FBI if a breach involves more than 5,000 customers.

This does not affect edge providers. The new rules only apply to ISPs. They do not apply to ‘edge providers’ like social media sites or search engines. Those companies are still allowed to use customer data in any manner they want since customers come to them voluntarily. So Facebook and Google are still free to use customer data since people use those sites voluntarily. This is the killer for the giant ISPs because they see how much money the edge providers make from using customer data from advertising and other uses. But it’s not clear if the FCC has any authority over edge providers.

Another big gap is the Internet of Things. As we saw in the recent giant denial of service attack, the devices used in the Internet of Things – thermostats, cameras, smart appliances, etc. – are not well protected. IoT companies also are capable of gathering a lot of information about customers. This will become a much bigger issue as people start using devices that include artificial intelligence like the Amazon Echo. It would be natural for the FCC to declare that IoT providers are also ISPs of a sort and regulate them that way. I expect that nothing will be done with IoT until this set of rules makes it through the court challenges.