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The FCC’s Net Neutrality Comments: Don’t Read Them!

Posted by Andrew Regitsky

Jul 21, 2017 10:00:00 AM

NetNeutrality.jpgIt is summertime and I am sure that most of you would rather spend your free time outside rather than reading the thousands of industry comments filed this week regarding the FCC’s proposed Restoring Internet Freedom Order. Here’s the deal, go outside!

Like actors playing their assigned roles, each major industry participant filed predictable comments that could have been written easily by a computer. The only difference between these comments and ones these companies previously filed is this time, each side of the net neutrality argument spent big bucks to hire economic experts to (surprise!) parrot their well-known positions.

But some of you are new to net neutrality, so here is a quick summary. In 2015, a partisan Democratic FCC established net neutrality rules that forbid blocking, throttling or paid prioritization of Internet traffic. These are the so-called bright-line Internet rules that were legalized when the FCC reclassified broadband Internet access service (BIAS) as a Title II telecommunications service. This reclassification enabled the FCC to completely control the current and future behavior of Internet service providers (ISPs), including their pricing of services, as if they were telephone utilities in the 1900’s.

ISPs were furious and appealed the Order to the DC Circuit Court where they lost twice. The Order could be reviewed next by the US Supreme Court, however, in the interim, the country decided to elect a Republican president which resulted in the FCC becoming Republican dominated. In one of its first actions, the new Commission released proposed new Internet rules which would again reclassify BIAS as a Title I information service and questions the need and legality of the bright-line rules (or, in fact, any Internet rules at all.   

As mentioned above, predictable initial industry comments on the Restoring Internet Freedom proposal were filed this and the positions of the parties are set in stone. As usual, the edge providers (Google, Facebook, etc.) claim the 2015 rules are working brilliantly.  

There has been no demonstrable negative impact on broadband infrastructure investment, including no slowdown in investment in the U.S. compared to other OECD countries and no causal impact overall from the FCC policies on investment.

Investment by network operators has continued to rise every year since 2009, before the FCC first adopted net neutrality rules in 2010, and it appears unaffected by the change in regulatory classification of BIAS in 2015.

Broadband penetration continues to grow, just as it did prior to the FCC’s 2015 Open Internet Order, with fixed broadband subscriptions up over 3.5 percent from June 2015 to June 2016 and wireless broadband subscriptions up 10 percent in the same period.

Cable broadband speeds have doubled from 2014 to 2016 following the adoption of the current net neutrality rules and reclassification of BIAS.

There is no demonstrable evidence of network operator industry harm, with aggregate corporate net income and equity for ISPs increasing steadily over the years, including after 2015. (Internet Association Comments, Docket 17-108, filed July 17, 2017, at pp. i-ii).

While ISPs such as AT&T and Verizon argue exactly the opposite. They assert that Title II has crippled Internet investment and innovation, and the FCC is correct to again classify BIAS as a Title I service.

That outcome should be straightforward and indeed uncontroversial under any objective analysis of regulatory costs and benefits. The Title II rules that pro-regulation advocates now deem indispensable were not even adopted until 2015, nearly two decades into the broadband era. Throughout the lengthy non-Title II era, the open Internet prospered, and the broadband ecosystem reached heights of unparalleled investment and innovation. That ecosystem exhibited no systemic market failure requiring a prescriptive regulatory response. For that matter, it exhibited no individual instances of ISP conduct that could even theoretically justify more than a basic no-blocking/no-throttling rule. That track record is a complete answer to claims that the Commission will somehow imperil the open Internet if it restores the broadband ecosystem to the type of light-touch oversight that prevailed before 2015. (AT&T Internet Freedom Comments, Docket 17-108, filed July 17, 2017, at p. 2).

Title II invites regulatory overreach, as we recently saw with the Commission’s actions to investigate – and its threat to ice – free data programs (services that consumers love and which are in the same model as the unexceptional free-shipping service regularly offered by online retailers). Title II also provides the framework for price regulation – a toxic approach if the goal is to encourage investment or the entrance of new competitors into the market. And its mother-may-I approach to the introduction of new services and discontinuance of outdated ones flips on its head the permission-less innovation so fundamental to the success of the Internet. Indeed, Title II, with its rate regulation, mandatory fees, and required regulatory approval prior to either offering or discontinuing services, was tailored to address an era marked by a government sponsored monopoly for the provision of simple and standardized voice transmission services. That’s a far cry from the diverse and competitive broadband world of today. (Comments of Verizon, Docket 17-108, filed July 17, 2017, at p. 2).

Based on what we know so far about this FCC, these comments along with the more than 8 million comments filed by the general public will have absolutely zero impact on the outcome of this proceeding. This FCC is as predictable as the comments that will fail to persuade it.

This FCC has already decided to follow through with its proposal and without a doubt will reclassify BIAS as an information service. The agency is also likely to decide it doesn’t have statutory control over the bright-line rules and will either make them voluntary or dump them on the Federal Trade Commission.

Everyone knows this will happen. The final net neutrality outcome will either be decided at the Supreme Court or in Congress. A Congressional outcome is preferable because not only would it be permanent but it would also presumably be a compromise. However, based on the current level of partisanship in Congress, no one should hold their breath that Congressional action is near. That means that in the near-term, net neutrality will meander through the courts and that’s not good for ISPs, edge providers or the public.

Now that you know the truth about the net neutrality proceeding, this weekend go outside and enjoy yourself!

By Andy Regitsky, CCMI

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Topics: regulatory updates, FCC, Net Neutrality