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.

Should We Regulate Google and Facebook?

I started to write a blog a few weeks ago asking the question of whether we should be regulating big web companies like Google and Facebook. I put that blog on hold due to the furor about Cambridge Analytica and Facebook. The original genesis for the blog was comments made by Michael Powell, the President and CEO of NCTA, the lobbying arm for the big cable companies.

At a speech given at the Cable Congress in Dublin, Ireland Powell said that edge providers like Facebook, Google, Amazon and Apple “have the size, power and influence of a nation state”. He said that there is a need for antitrust rules to reign in the power of the big web companies. Powell put these comments into a framework of arguing that net neutrality is a weak attempt to regulate web issues and that regulation ought to instead focus on the real problems with the web for issues like data privacy, technology addiction and fake news.

It was fairly obvious that Powell was trying to deflect attention away from the lawsuits and state legislation that are trying to bring back net neutrality and Title II regulations. Powell did make same some good points about the need to regulate big web companies. But in doing so I think he also focuses the attention back on ISPs for some of the same behavior he sees at the big web providers.

I believe that Powell is right that there needs to be some regulation of the big edge providers. The US has made almost no regulations concerning these companies. It’s easy to contrast our lack of laws here to the regulations of these companies in the European Union. While the EU hasn’t tackled everything, they have regulations in place in a number of areas.

The EU has tackled the monopoly power of Google as a search engine and advertiser. I think many people don’t understand the power of Google ads. I recently stayed at a bed and breakfast and the owner told me that his Google ranking had become the most important factor in his ability to function as a business. Any time they change their algorithms and his ranking drops in searches he sees an immediate drop-off in business.

The EU also recently introduced strong privacy regulations for web companies. Under the new rules consumers must opt-in the having their data collected and used. In the US web companies are free to use customer information in any manner they choose – and we just saw from the example of Cambridge Analytica how big web companies like Facebook monetize consumer data.

But even the EU regulations are going to have little impact if people grant the ability for the big companies to use their data. One thing that these companies know about us is that we willingly give them access to our lives. People take Facebook personality tests without realizing that they are providing a detailed portrait of themselves to marketeers. People grant permissions to apps to gather all sorts of information about them, such a log of every call made from their cellphone. Recent revelations show that people even unknowingly grant the right to some apps to read their personal messages.

So I think Powell is right in that there needs to be some regulations of the big web companies. Probably the most needed regulation is one of total transparency where people are told in a clear manner how their data will be used. I suspect people might be less willing to sign up for a game or app if they understood that the app provider is going to glean all of the call records from their cellphone.

But Powell is off base when he thinks that the actions of the edge providers somehow lets ISPs off the hook for similar regulation. There is one big difference between all of the edge providers and the ISPs. Regardless of how much market power the web companies have, people are not required to use them. I dropped off Facebook over a year ago because of my discomfort from their data gathering.

But you can’t avoid having an ISP. For most of us the only ISP options are one or two of the big ISPs. Most people are in the same boat as me – my choice for ISP is either Charter or AT&T. There is some small percentage of consumers in the US who can instead use a municipal ISP, an independent telco or a small fiber overbuilder that promises not to use their data. But everybody else has little option but to use one of the big ISPs and is then at their mercy of their data gathering practices. We have even fewer choices in the cellular world since four providers serve almost every customer in the country.

I was never convinced that Title II regulation went far enough – but it was better than nothing as a tool to put some constraints on the big ISPs. When the current FCC killed Title II regulation they essentially set the ISPs free to do anything they want – broadband is nearly totally unregulated. I find it ironic that Powell wants to see some rules the curb market abuse for Google and Facebook while saying at the same time that the ISPs ought to be off the hook. The fact is that they all need to be regulated unless we are willing to live with the current state of affairs where ISPs and edge providers are able to use customer data in any manner they choose.

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.

Broadband Regulation in Limbo

The recent ruling earlier this week by the US Court of Appeals for the 9th Circuit highlights the current weak state of regulations over broadband. The case is one that’s been around for years and stems from AT&T’s attempt to drive customers off of their original unlimited cellphone data plans. AT&T began throttling unlimited customers when they reached some unpublished threshold of data use, in some cases as small as 2 GB in a month. AT&T then lied to the FCC about the practice when they inquired. This case allows the FTC suit against AT&T to continue.

The ruling demonstrates that the FTC has some limited jurisdiction over common carriers like AT&T. However, the clincher came when the court ruled that the FTC only has jurisdiction over issues where the carriers aren’t engaging in common-carrier services. This particular case involves AT&T not delivering a product they promised to customers and thus falls under FTC jurisdiction. But the court made it clear that future cases that involve direct common carrier functions, such as abuse of net neutrality would not fall under the FTC.

This case clarifies the limited FTCs jurisdiction over ISPs and contradicts the FCC’s statements that the FTC is going to be able to step in and take their place on most matters involving broadband. The court has made it clear that is not the case. FCC Chairman Ajit Pai praised this court ruling and cited it as a good example of how the transition of jurisdiction to the FTC is going to work as promised. But in looking at the details of the ruling, that is not true.

This court ruling makes it clear that there is no regulatory body now in charge of direct common carrier issues. For instance, if Netflix and one of the ISPs get into a big fight about paid prioritization there would be nowhere for Netflix to turn. The FCC would refuse to hear the case. The FTC wouldn’t be able to take the case since it involves a common carrier issue. And while a court might take the case, they would have no basis on which to make a ruling. As long as the ISP didn’t break any other kinds of laws, such as reneging on a contract, a court would have no legal basis on which to rule for or against the ISPs behavior.

That means not only that broadband is now unregulated, it also means that there is no place for some body to complain against abuse by ISPs until the point where that abuse violates some existing law. That is the purest definition of limbo that I can think of for the industry.

To make matters worse, even this jumbled state of regulation is likely to more muddled soon by the courts involved in the various net neutrality suits. Numerous states have sued the FCC for various reasons, and if past practice holds, the courts are liable to put some or all of the FCC’s net neutrality decision on hold.

It’s hard to fathom what that might mean. For example, if the courts were to put the FCC’s decision to cancel Title II regulation on hold, then that would mean that Title II regulation would still be the law of the land until the net neutrality lawsuits are finally settled. But this FCC has made it clear that they don’t want to regulate broadband and they would likely ignore such a ruling in practice. The Commission has always had the authority to pick and choose cases it will accept and I’m picturing that they would refuse to accept cases that relied on their Title II regulation authority.

That would be even muddier for the industry than today’s situation. Back to the Netflix example, if Title II regulation was back in effect and yet the FCC refused to pursue a complaint from Netflix, then Netflix would likely be precluded from trying to take the issue to court. The Netflix complaint would just sit unanswered at the FCC, giving Netflix no possible remedy, or even a hearing about their issues.

The real issue that is gumming up broadband regulation is not the end of Title II regulation. The move to Title II regulation just became effective with the recent net neutrality decision and the FCCs before that had no problem tackling broadband issues. The real problem is that this FCC is washing their hands of broadband regulation, and supposedly tossed that authority to the FTC – something the court just made clear can’t work in the majority of cases.

This FCC has shown that there is a flaw in their mandate from Congress in that they feel they are not obligated to regulate broadband. So I guess the only fix will be if Congress makes the FCC’s jurisdiction, or lack of jurisdiction clear. Otherwise, we couldn’t even trust a future FCC to reverse course, because it’s now clear that the decision to regulate or not regulate broadband is up to the FCC and nobody else. The absolute worst long-term outcome would be future FCCs regulating or not regulating depending upon changes in the administration.

My guess is that AT&T and the other big ISPs are going to eventually come to regret where they have pushed this FCC. There are going to be future disputes between carriers and the ISPs are going to find that the FCC can not help them just like they can’t help anybody complaining against them. That’s a void that is going to serve this industry poorly.

The FCC’s 2018 Broadband Report

The FCC has released a draft the key findings from the 2018 Broadband Deployment Report that will be officially released to Congress this week. This report is usually interesting, and this year’s report includes a few big surprises.

The 25/3 Mbps Speed Benchmark. The FCC announced that it is keeping the 25/3 Mbps definition of broadband that was established by the former Tom Wheeler FCC. This is a surprise because all three Republican commissioners have been writing and making speeches that said that this benchmark is too high. Their positions on the topic garnered a lot of political pressure and it looks like, for now, that they are choosing to leave that benchmark alone. But as you will see below, they have still found a way to dilute the importance of the benchmark.

Mobile Broadband not a Substitute for Landline Broadband. There had also been a lot of discussion by the Republican commissioners to count a cellular broadband connection the same as a landline connection. They have been making the argument that many people are satisfied by a cellular connection and that functionally both kinds of broadband connection can functionally be substituted. They had suggested last year that a customer that uses either of the two kinds of broadband But the new report makes the positive statement that the two kinds of broadband are different and that there are ‘salient differences between the two technologies”.

Continuing to Track Fixed Broadband. Since cellular broadband is not a substitute for landline broadband the FCC concludes that is obligated to continue to track the deployment of landline broadband as it has done in the past. If tracking had been changed to show households that have access to either landline broadband cellular broadband, then almost everybody in the country would have been considered to have broadband.

The FCC is Meeting its Statutory Mandate to Promote Broadband. This is the zinger finding from the FCC. Reminiscent of George W. Bush’s comment after hurricane Katrina of “Brownie, you’re doing a heck of a job”, the FCC has patted itself on the back and concluded that it has already done enough to satisfy the Congressional mandate that everybody in America has access to broadband.

The FCC notes that it has taken sufficient steps to meet its regulatory mandate for improving broadband:

  • Has reduced regulatory barriers to the deployment of wireline and wireless broadband;
  • Created a Broadband Deployment Advisory Committee to make recommendations on how to better deploy broadband;
  • Instituted reforms to the high-cost universal service funds to ensure accountability;
  • Introduced a reverse auction to provide additional rural broadband funding;
  • Revised rules for special access to promote facility-based competition for business services.
  • Authorized new wireless spectrum for use for landline and satellite broadband;
  • Eliminated Title II regulation and returned to light-touch regulations.

I’m not going to pick apart all of the items on that list, and some of them, like releasing more spectrum are positive steps. However, even there this FCC seems to favor licensed spectrum for the large ISPs rather than more public bandwidth. It’s really hard to make the argument that reversing Title II regulation and network neutrality will improve broadband coverage in the country. The recommendations from the FCC’s BDAC sub-committees are nothing more than suggestions, and from what we’ve seen so far most of the recommendations from these groups are parroting the positions of the giant ISPs.

It’s too early to know if the CAF II reverse auction will prove beneficial. There is some speculation that these funds will largely be pocketed by the big cellular carriers as another subsidy to continue to replace rural copper with cellular service. This may just turn into more of the same disaster we’ve seen with the first CAF II subsidy for the big rural telcos.

When the numbers get released with the final report we’ll still see that more than 20 million Americans don’t have access to broadband. While many of these live in rural areas there are still huge pockets of unserved residents in urban areas as well.

It’s true that this FCC has been active in the last year and has made the decisions cited in this draft report. But it’s nearly impossible to see how they can conclude that America has the broadband they need and that they have satisfied the Congressional broadband mandate. I guess we’ll have to see if Congress takes exception with their declaration that the state of American broadband doesn’t need any more help.

FCC and FTC Divvy up Broadband Regulation

The FCC voted last Thursday to reverse the Net Neutrality order that had been put into place by the previous Tom Wheeler FCC. This action eliminates the use of Title II to regulate broadband. In order to get rid of Title II authority the FCC believes it has to relinquish some of its regulatory role today and to move certain regulatory functions to the Federal Trade Commission. To effectuate this shift the two Commissions have agreed to a Memorandum of Understanding (MOU) that defines the ongoing regulatory and enforcement responsibility of each agency related to broadband.

The Federal Trade Commission will renew investigating ISPs as they do other large businesses in the country. They will investigate complaints made against the companies for practices that the agency deems to be unfair or deceptive. The agency has undertaken this kind of investigation in the past and has cited and fined a few big ISPs for various deceptive pricing and billing practices. In this role the FTC could elect to tackle topics that were part of net neutrality such as anticompetitive blocking of Internet traffic, throttling customer broadband or paid prioritization practices. While the three legs of net neutrality would not explicitly be part of the FTCs responsibilities, they should be free to investigate practices that harm the public. The FTC would also take back jurisdiction over ISP privacy practices.

It appears that dropping the Title II regulatory regime allows the FTC to again regulate ISPs. Since the FCC approved Title II regulation, the big ISPs have argued that the FTC is prohibited by its charter to regulate common carriers. But since broadband providers are no longer considered to be common carriers it would seem to open the door to the FTC again.

The big difference in a shift to FTC regulation is that anything they do is done retroactively. They look at consumer complaints and then prosecute the worst abuses they find in multiple industries. But their rules often come years after abuse by companies and their rulings only generally affect one company at a time. Other ISPs might shift behavior due to an FTC enforcement action, but they are not required to do so. This is a drastic change from having a set of proactive regulations in rules in place that define acceptable ISP behavior.

The FCC will be giving up most regulatory oversight of broadband. There are still a few broadband rules that fall under FCC jurisdiction. For example, there are still rules in place that require ISPs to disclose information about their products, data speeds, etc., to customers. The FCC will still be monitoring and regulating these notices. There are also regulations that will remain in place because they were put in place by laws that can’t be reversed by the FCC. As an example, the FCC will still oversee CALEA compliance, where ISPs are required to provide access to broadband records to law enforcement.

Probably the biggest regulatory gray area left is cellular broadband. While broadband in general is now largely unregulated there are still numerous regulations about cellular service that remain in place. We’ll have to see how the FCC deals with any conflicts between old cellular rules and their desire to unregulated broadband.

To a large extent there will be little regulation of broadband and it is now an unregulated business line. This is a bit ironic in that broadband has grown to become the most important telecommunications product, while the many regulations on the waning product lines of telephone and cable TV still remain in place.

The FCC acknowledges that its technical staff best understands the ISP industry and has promised in the MOU to make FCC staff available to the FTC as needed. It will be interesting to see how that works in practice since some of the FTC investigations drag on for years. I foresee budgetary issues making major collaboration impractical.

The bottom line is that this MOU makes it clear that broadband is largely deregulated. The FTC can step in and punish ISPs that engage in fraudulent and unfair practices. But otherwise nobody will be monitoring or enforcing any regulations on broadband.

The Impact of the End of Net Neutrality

Charter has given us a peek at how the big ISPs are likely to take advantage of the end of net neutrality. Charter is in the middle of a lawsuit filed by New York Attorney General Eric Schneiderman. The suit attacks Charter for promising to deliver Internet speeds as part of the purchase of Time Warner that the company knew it couldn’t deliver. There are other allegations in the suit and I covered it in this earlier blog.

While the FCC won’t formally vote to end Title II regulation for another week it’s largely a foregone conclusion that they will do so. Charter is assuming that it’s a done deal and they have filed paperwork trying to dismiss the New York lawsuit based upon the assumption that the FCC will end net neutrality.

Charter has sent a letter to the courts and is making the following claims:

Federal law preempts state and local laws. Charter is arguing that the planned FCC order will preempt state and local laws concerning broadband. This is an aspect of the proposed FCC order that has not gotten much attention. The proposed FCC order contains a long discussion that talks about the role of federal versus state regulations and comes to the conclusion that federal low should override state and local broadband laws. It’s sort of an ironic position for the FCC to take since they are actually eliminating the FCC’s role in regulating broadband – but they interpret that to mean that states and localities also have no right to regulate broadband.

Charter specifically says that New York can’t criticize the company for delivering slow Internet speeds. They argue that since the FCC will no longer regulate broadband and Internet speeds that New York also does not have the right to do so.

Paid Prioritization. Charter is also arguing that New York has no right to regulate paid prioritization. This is one of the three principles of net neutrality that currently is in effect. Charter is arguing that the FCC’s proposed ‘light-touch’ regulation means that the FCC will be eliminating the net neutrality principles and this means that these principles can no longer be used to judge Charter’s products.

The New York lawsuit had attacked Charter for not maintaining a robust enough network that could deliver the speeds customers need. Specifically, New York alleged that people were unable to watch Netflix and that Charter’s network failures amount to throttling of the Netflix data stream.

The new FCC rules aren’t even in effect yet, but this tells a lot about how the big ISPs are viewing the change in rules. Charter wants to use these rules to protect themselves against any fines for not delivering advertised broadband speeds to customers. They also are openly acknowledging that they have no obligations against violations of the current net neutrality rules – and that they have no obligations to ever try to meet them.

Charter’s arguments in the case erase any doubt about how the big ISPs intend to act once they are not regulated. While they will probably generally try to deliver a decent broadband product, they feel under no legal obligation to do so. If you go back and look at the facts in this case you will see customers in New York who have been paying for clearly inferior broadband for years – broadband that is far slower than advertised and that is even too slow to deliver Netflix. Charter promised to fix the network issues that are causing the slow broadband, but it’s clear from the New York lawsuit that no upgrades have been implemented. Lack of broadband regulations might mean that the Charter customers in New York might never get good broadband – the company doesn’t think they have any obligation to provide it.

Charter’s response to this lawsuit largely validates all of the consumer fears that have been expressed as part of the net neutrality debate. The FCC is washing their own hands of anything having to do with broadband regulation, and are also preempting states and localities for doing anything. This leaves the consumer with no place to go to remedy, or even protest bad ISP behavior.

One hopes that the big ISPs want to deliver a decent broadband product – but the facts in this case show a blatant disregard for both customers and regulators. Charter has promised to improve the condition of the Time Warner networks as part of the merger but then failed to do so. The sad fact is that many of the customers with the shoddy Charter service have no real alternative. DSL is dying and the cable companies are becoming virtual monopolies in most of the markets in the country. If Charter prevails with these arguments it will show that there is no regulatory body with the ability to police the ISPs.

The Recent ALEC Letter to the FCC

Every once in a while I see an idea in this industry that makes me shake my head. Recently ALEC (the American Legislative Exchange Council) wrote a letter to the FCC asking them to override all state and local laws pertaining to making broadband connections. They specifically cite the issues associated with the placement of small cell sites. They urge the FCC to declare broadband to be an ‘interstate’ service and use that as the basis for setting nationwide rules.

It’s easy to understand where ALEC is coming from. It’s an organization that is funded by the largest corporations in the county and the biggest telcos and cable companies help to fund ALEC. Over the years the organization has drafted proposed legislation that benefits the large ISPs, and in recent years ALEC was behind many of the state legislative initiatives to block municipalities from building broadband networks. ALEC has also commissioned various white papers that espouse the positions of the big ISPs. The white papers are generally intended to be used to lobby with state and federal legislators.

I don’t think anybody in the industry is unsympathetic to some of the worst stories being told about locating small cell sites. There certainly are cases where local rules are definitely a barrier to deployment. But this is an area where states and cities are allowed to create local rules.

And it’s not hard to understand why ALEC would petition the FCC. This has to be the most big-carrier friendly FCC in the last century. It’s clear that this FCC would grant the ISPs many of the things on their wish list. If the FCC adopted what ALEC is asking for then the big ISPs could solve their problems in this area in one fell swoop – and they could stop the expensive lobbying effort at the state and local level.

But there are a few flaws in ALEC’s arguments. First, many of the FCC’s rules are the result of legislation passed by Congress. For instance, the FCC has no authority to override anything that was required by the Telecommunications Act of 1996 or many other congressional laws, and that law provided states and localities the right to make local rules concerning rights-of-ways and connections on poles or in conduits. I find it doubtful that the FCC can arbitrarily preempt those specific parts of that Act.

But the most important reason this makes no sense is that it comes just a few weeks before the FCC is likely to reverse Title II regulation of broadband. Once the FCC does that they will have effectively taken themselves out of the broadband regulation business. They will be handing off things like broadband privacy to the Federal Trade Commission, but many areas of broadband will become purely unregulated. The FCC can’t declare broadband to be an interstate service if they don’t regulate broadband.

It’s kind of ironic that the only way the FCC could try to do what ALEC is asking would be by maintaining Title II regulation – the only tool they have for regulating broadband. But once they renounce Title II authority the FCC is greatly weakened in making any regulations concerning broadband. I’ve always asserted that the big ISPs need to be regulated in some manner and this is a perfect example why. A friendly FCC with the authority to regulate broadband could give the big ISPs the things they most want – but the trade-off of being regulated is that it also means accepting things the ISPs don’t want . This request by ALEC is the perfect example of the ISPs wanting things both ways – they want to be regulated where they need it and unregulated where they don’t – but there is no logical ways to have it both ways.

The ISPs biggest fear with having Title II regulation is that some future FCC could use the authority to impose rules they don’t like. They particularly fear a future FCC that tries to regulate broadband prices. The ISPs don’t really have a lot of concerns about this FCC, but these companies have seen the FCC change over time with changes in administrations and they know that the pendulum always eventually swings the other way.

So I sit here and just scratch my head over this. ALEC is asking this FCC, which wants to reduce regulations, to create new regulations. And they want the FCC to use their authority to regulate this issue while at the same time they don’t want the FCC to use that same authority to regulate any other broadband issues. I don’t know if I’ve ever seen a better example of somebody that ‘wants their cake and eats it too’!

The Net Neutrality Furor

It seems pretty clear now that the FCC is going to reverse the net neutrality decision of a few years ago at their upcoming December meeting. They mechanism they will use to reverse the order is by reversing the decision to place broadband under Title II regulation. That move will take the FCC out of the business of regulating broadband, meaning that not only would net neutrality rules be reversed, but the FCC would no longer regulate things like broadband privacy. The FCC expects that washing their hands of broadband sends privacy and other issues to the Federal Trade Commission.

A lot of the public is up in arms over this FCC direction and the topic is all over the news and social media. But unfortunately, I think the public is fighting to maintain net neutrality for the wrong reasons. People seem to fear that without net neutrality that the ISPs will begin abusing their customers in dreadful ways. I’ve seen social media warnings that the end of net neutrality means that the ISPs will block or throttle any web site that is not under their economic control. People fear that the ISPs will block content they don’t like such as porn or political content they disagree with.

I have a hard time buying these arguments. The ISPs have no economic incentive to badly antagonize customers. Removing the net neutrality rules now does not mean that ISPs can’t be regulated again in the future. Congress always has the power to regulate them in any manner desired, and if the ISPs start doing crazy things some future Congress will likely react. The net neutrality rules have only been in place for a few years and the ISPs didn’t abuse customers in these feared ways before these rules. I find it unlikely that would do the extreme things that people are warning about.

But I still think people are right to support net neutrality. But the issue they should care about is not net neutrality, but the basic Title II regulation. That is the framework the FCC used as the basis for passing the net neutrality rules. These rules largely allow the FCC to regulate broadband in the same manner they have regulated telephone service. The ISPs challenged the FCC’s Title II regulations in court and the courts have upheld the FCC’s right to regulate broadband.

The ISPs hate Title II regulation, but not because it imposes the net neutrality principles. Their real fear is that the FCC will use these rules to regulate broadband prices. A lot of analysts think that the big ISPs are planning on significant rate increases over the next few years. While the Wheeler FCC said they would not regulate rates, the Title II rules grants the FCC authority to do so at any future time. And the FCC can regulate more than just prices and has the authority to regulate things like data caps.

The big ISPs have been working hard to repeal the Title II regulation due to the threat of price regulation – not because they don’t want the net neutrality principles. There are numerous quotes from the CEOs of the big ISPs saying that they could live with the net neutrality principles – and I largely believe them.

Interestingly there is already at least one ISP that is completely flouting the net neutrality rules. T-Mobile now includes Netflix for free with its cellular plans. This practice is called zero rating and is in violation of the paid prioritization principle of net neutrality. It’s likely that many T-Mobile customers won’t buy other video content since they are already getting Netflix for ‘free’. This practice clearly puts other OTT providers at a disadvantage on the T-Mobile network. And yet, I don’t hear any public outcry about T-Mobile’s practice and suspect their customers really love this feature. This is what zero net neutrality rules looks like – ISPs are likely to bundle in features that a large percentage of their customers like. But the negative consequence to this is not to directly disadvantage customers, but rather to pick winners and losers among web companies. But my guess is that the ISPs will bundle with platforms a lot of people already like and that this bundling will be largely popular, like the T-Mobile bundling of Netflix.

I honestly believe that the big ISPs are largely laughing at the public on this issue. The ISPs understand that the public has badly interpreted their real reason for attacking Title II regulation. The ISPs want the unfettered ability to raise prices. Without regulation it’s true that the ISPs could probably do the sorts of things the public is so stirred up about – but it would be bad business to do so. Can you imagine the furor if AT&T started blocking web sites? Since the ISPs and the FCC understand the real game they can brush off the public hysteria that is concentrating on the wrong issues, and they can now get down to the business of raising rates.

When Customers Use Their Data

In a recent disturbing announcement ,Verizon Wireless will be disconnecting service to 8,500 rural customers this month for using too much data on their cellphones. The customers are scattered around 13 states and are a mix those with both unlimited and limited data plans.

Verizon justifies this because these customers are using data where Verizon has no direct cell towers, meaning that these customers are roaming on cellular data networks owned by somebody else. Since Verizon pays for roaming the company say that these customers are costing them more in roaming charges than what the company collects in monthly subscription fees.

Verizon may well have a good business case for discontinuing these particular data customers if they are losing money on each customer. But the act of disconnecting them opens up a lot of questions and ought to be a concern to cellular customers everywhere.

This immediately raises the question of ‘carrier of last resort’. This is a basic principle of utility regulation that says that utilities, such as traditional incumbent telephone companies, must reasonably connect to everybody within their service territory. Obviously cellular customers don’t fall under this umbrella since the industry is competitive and none of the cellular companies have assigned territories.

But the lines between cellular companies and telcos are blurring. As AT&T and Verizon take down rural copper they are offering customers a wireless alternative. But in doing so they are shifting these customers from being served by a regulated telco to a cellular company that doesn’t have any carrier of last resort obligations. And that means that once converted to cellular that Verizon or AT&T would be free to then cut these customers loose at any time and for any reason. That should scare anybody that loses their rural copper lines.

Secondly, this raises the whole issue of Title II regulation. In 2015 the FCC declared that broadband is a regulated service, and that includes cellular data. This ruling brought cable companies and wireless companies under the jurisdiction of the FCC as common carriers. And that means that customers in this situation might have grounds for fighting back against what Verizon is doing. The FCC has the jurisdiction to regulate and to intervene in these kinds of situations if they regulate the ISPs as common carriers. But the current FCC is working hard to reverse that ruling and it’s doubtful they would tackle this case even if it was brought before them.

Probably the most disturbing thing about this is that it’s scary for these folks being disconnected. Rural homes do not want to use cellular data as their only broadband connection because it’s some of the most expensive broadband in the world. But many rural homes have no choice since this is their only broadband alternative to do the things they need to do with broadband. While satellite data is available almost everywhere, the incredibly high latency on satellite data means that it can’t be used for things like maintaining a connection to a school server to do homework or to connect to a work server to work at home.

One only has to look at rural cellular networks to understand the dilemma many of these 8,500 households might face. The usable distance for a data connection from a cellular tower is only a few miles at best, much like the circles around a DSL hub. It is not hard to imagine that many of these customers actually live within range of a Verizon tower but still roam on other networks.

Cellular roaming is an interesting thing. Every time you pick up your cellphone to make a voice or data connection, your phone searches for the strongest signal available and grabs it. This means that the phones of rural customers that don’t live right next to a tower must choose between competing weaker signals. Customers in this situation might be connected to a non-Verizon tower without it being obvious to them. Most cellphones have a tiny symbol that warns when users are roaming, but since voice roaming stopped being an issue most of us ignore it. And it’s difficult or impossible on most phones to choose which tower to connect to. Many of these customers being disconnected might have always assumed they actually were using the Verizon network. But largely it’s not something that customers have much control over.

I just discussed yesterday how we are now in limbo when it comes to regulating the broadband practices of the big ISPs. This is a perfect example of that situation because it’s doubtful that the customers being disconnected have any regulatory recourse to what is happening to them. And that bodes poorly to rural broadband customers in general – just one more reason why being a rural broadband customer is scary.