Broadband & Neutrality Regulation

A few states have passed Internet regulations because the Trump FCC, citing a 20 year US policy of leaving the Internet “unfettered by Federal or State regulation,” decided to reverse the Obama FCC’s 2015 decision to regulate the Internet with telephone laws.

Those state laws regulating Internet traffic management practices–which supporters call “net neutrality”–are unlikely to survive lawsuits because the Internet and Internet services are clearly interstate communications and FCC authority dominates. (The California bill also likely violates federal law concerning E-Rate-funded Internet access.) 

However, litigation can take years. In the meantime ISP operators will find they face fewer regulatory headaches if they do exactly what net neutrality supporters believe the laws prohibit: block Internet content. Net neutrality laws in the US don’t apply to ISPs that “edit the Internet.”

The problem for net neutrality supporters is that Internet service providers, like cable TV providers, are protected by the First Amendment. In fact, Internet regulations with a nexus to content are subject to “strict scrutiny,” which typically means regulations are struck down. Even leading net neutrality proponents, like the ACLU and EFF, endorse the view that ISP curation is expressive activity protected by First Amendment.

As I’ve pointed out, these First Amendment concerns were raised during the 2016 litigation and compelled the Obama FCC to clarify that its 2015 “net neutrality” Order allows ISPs to block content. As a pro-net neutrality journalist recently wrote in TechCrunch about the 2015 rules, 

[A] tiny ISP in Texas called Alamo . . . wanted to offer a “family-friendly” edited subset of the internet to its customers.

Funnily enough, this is permitted! And by publicly stating that it has no intention of providing access to “substantially all Internet endpoints,” Alamo would exempt itself from the net neutrality rules! Yes, you read that correctly — an ISP can opt out of the rules by changing its business model. They are . . . essentially voluntary.

The author wrote this to ridicule Judge Kavanaugh, but the joke is clearly not on Kavanuagh.

In fact, under the 2015 Order, filtered Internet service was less regulated than conventional Internet service. Note that the rules were “essentially voluntary”–ISPs could opt out of regulation by filtering content. The perverse incentive of this regulatory asymmetry, whereby the FCC would regulate conventional broadband heavily but not regulate filtered Internet at all, was cited by the Trump FCC as a reason to eliminate the 2015 rules. 

State net neutrality laws basically copy and paste from the 2015 FCC regulations and will have the same problem: Any ISP that forthrightly blocks content it doesn’t wish to transmit–like adult content–and edits the Internet is unregulated.

This looks bad for net neutrality proponents leading the charge, so they often respond that the Internet regulations cover the “functional equivalent” of conventional (heavily regulated) Internet access. Therefore, the story goes, regulators can stop an ISP from filtering because an edited Internet is the functional equivalent of an unedited Internet.

Curiously, the Obama FCC didn’t make this argument in court. The reason the Obama FCC didn’t endorse this “functional equivalent” response is obvious. Let’s play this out: An ISP markets and offers a discounted “clean Internet” package because it knows that many consumers would appreciate it. To bring the ISP back into the regulated category, regulators sue, drag the ISP operators into court, and tell judges that state law compels the operator to transmit adult content.

This argument would receive a chilly reception in court. More likely is that state regulators, in order to preserve some authority to regulate the Internet, will simply concede that filtered Internet drops out of regulation, like the Obama FCC did.

As one telecom scholar wrote in a Harvard Law publication years ago, “net neutrality” is dead in the US unless there’s a legal revolution in the courts. Section 230 of the Telecom Act encourages ISPs to filter content and the First Amendment protects ISP curation of the Internet. State law can’t change that. The open Internet has been a net positive for society. However, state net neutrality laws may have the unintended effect of encouraging ISPs to filter. This is not news if you follow the debate closely, but rank-and-file net neutrality advocates have no idea. The top fear of leading net neutrality advocates is not ISP filtering, it’s the prospect that the Internet–the most powerful media distributor in history–will escape the regulatory state.

The move to small cells and fixed wireless broadband means states, cities, and the FCC are changing their regulatory approaches. For decades, wireless providers have competed primarily on coverage, which meant building large cell towers all over the country, each one serving hundreds of people. That’s changing. As Commissioner Carr noted,

5G networks will look very different from today’s 4G deployments. 5G will involve the addition of hundreds of thousands of new, small-scale facilities with antennas no larger than a small backpack.

Currently, wireless companies don’t have many good options when it comes to placing these lower-power, higher-bandwidth “small cells.” They typically install small cells and 5G transmitters on public rights-of-way and on utility poles, but there may not be room on poles and attachment fees might be high. 

One thing the FCC might consider to stimulate 5G and small cell investment is to dust off its 20 year-old over-the-air-reception-device (OTARD) rules. These little-known rules protect homeowners and renters from unwarranted regulation of TV and broadband antennas placed on their property. If liberalized, the OTARD rules would open up tens of millions of other potential small cell sites–on rooftops, on balconies, and in open fields and backyards around the country. 

Background

In the early 1990s, cities and homeowner associations would sometimes prohibit, charge for, or regulate satellite dishes that homeowners or renters installed on their rooftops or balconies. Lawmakers saw a problem and wanted to jumpstart competition in television (cities had authorized cable TV monopolies for decades and cable had over 95% of the pay-TV market).

In the 1996 Telecom Act, then, Congress instructed the FCC to increase TV competition by regulating the regulators. Congress said that state, local, and HOA restrictions cannot impose restrictions that

impair a viewer’s ability to receive video programming services through devices designed for over-the-air reception of television broadcast signals, multichannel multipoint distribution service [MMDS], or direct broadcast satellite services.

With these congressional instructions, the FCC created its OTARD rules, informally known as the “pizza box rule.” Briefly stated, if your TV antenna, satellite TV receiver, or “fixed wireless” antenna is smaller than a large pizza (1 meter diameter–no cell towers in front yards), you are free to install the necessary equipment on property you control, like a yard or balcony. (There are some exceptions for safety issues and historical buildings.) The 1996 law expressly protects MMDS (now called “broadband radio service”), which includes spectrum in the 2.1 GHz, 2.5 GHz, 2.6 GHz, 28 GHz, 29 GHz, and 31 GHz bands. The Clinton FCC expanded the rules to protect, broadly, any antennas that “receive or transmit fixed wireless signals.” You can even install a mast with an antenna that extends up to 12 feet above your roofline. 

OTARD reform

The rules protect fixed wireless antennas and could see new life in the 5G world. Carriers are building small cells and fixed wireless primarily to provide faster broadband and “mobile TV” services. Millions of Americans now view their cable and Netflix content on mobile devices and carriers are starting to test mobile-focused pay-TV services. AT&T has Watch TV, T-Mobile is expected to deploy a mobile TV service soon because of its Layer3 acquisition, and reporting suggests that Verizon is approaching YouTube TV and Apple to supply TV for its 5G service. 

The FCC’s current interpretation of its OTARD rules doesn’t help 5G and small cell deployment all that much, even though the antennas are small and they transmit TV services. The actual rules don’t say this but the FCC’s interpretation is that their OTARD protections don’t protect antenna “hubs” (one-to-many transmitters like small cells). The FCC liberalized this interpretation in its Massport proceeding and allowed hub one-to-many transmitters [Correction, via Connor at the FCC: the FCC liberalized to say that one-to-many transmitters are permitted, not hub antennas.] but did not extend this interpretation for homeowners’ antennas. In short, under the current interpretation, cities and HOAs can regulate, charge for, and prohibit the installation of 5G and small cells on private property.

The FCC should consider expanding its rules to protect the installation of (low power) 5G and small cell hubs on private property. This would directly improve, per the statute, “viewers’ ability to receive video programming services” via wireless. It would have the ancillary effect of improving other wireless services. The prospect of installing small cells on private property, even temporarily, should temper the fees carriers are charged to use the public rights-of-way and poles.

In rural areas, the FCC might also consider modifying the rules to allow masts that extend beyond 12 feet above the roofline. Transmitters even a few feet taller would improve wireless backhaul and coverage to nearby homes, thus increasing rural broadband deployment and IP-based television services.

Wireless trends

OTARD reform is especially timely today because the Wheeler and Pai FCCs have freed up several bands of spectrum and fixed wireless is surging. Fixed wireless and mesh network providers using CBRS and other spectrum bands could benefit from more installation sites, particularly in rural areas. C Spire, for instance, is creating “hub homes” for fixed wireless, and Starry and Rise Broadband are expanding their service areas. CableLabs is working on upgrading cable networks for mobile and 5G backhaul and cable operators might benefit from OTARD reform and more outside infrastructure.

Modifying the OTARD rules might be controversial but modification directly gives consumers and homeowners more control over improving broadband service in their neighborhood, just as the rules improved TV competition in the past. Courts are pretty deferential when agencies change an interpretation of an existing rule. Further, as the agency said years ago:

The Federal Communications Commission has consistently maintained that it has the ultimate responsibility to determine whether the public interest would be served by construction of any specific antenna tower.

The future of wireless services is densification–putting fiber and small cells all over downtowns and neighborhoods in order to increase broadband capacity for cutting-edge services, like smart glasses for the blind and remote-controlled passenger cars. The OTARD rules and the FCC’s authority over wireless antennas provides another tool to improve wireless coverage and TV services.

Though ubiquitous in urban and rural landscapes, most people barely notice utility poles. Nevertheless, utility poles play a large role in national broadband policy. Improving pole access won’t generate the headlines like billion-dollar spectrum auctions and repeal of Title II Internet regulations, but it’s just as important for improving broadband competition and investment. To that end, the FCC is proposing to create “one-touch-make-ready” rules for FCC-regulated utility poles across the country. I was pleased to see that the FCC will likely implement this and other policy recommendations from the FCC’s Broadband Deployment Advisory Committee.*

“Access regulations”–like must-carry of broadcast TV, net neutrality, and telecom network unbundling–are always controversial and frequently fail. However, in my view, one-touch-make-ready is an example of useful access regulation and I think it’s likely to succeed at its aims–more broadband competition and investment. Pole access appears to be, using former FCC chief economist Jerry Faulhaber’s phrase, an efficient market boundary. FCC pole access mandates are feasible because the “interface”–physical wires and poles–is relatively simple and regulatory compliance–did the entrant damage existing users? did they provide notice?–is pretty easy to ascertain. Typically, visual inspection will reveal damage and the liable party is usually obvious.

As the FCC says in the proposed order, these proposed modifications and one-touch-make-ready,

put[] the parties most interested in efficient broadband deployment—new attachers—in a position to control the survey and make-ready processes.

Reasonable people (even on the free-market side) will disagree about how to regulate utility pole access. One-touch-make-ready was a controversial proposal and commercial operators have been divided on the issue. In the end, it was not unanimous but the BDAC reached large consensus on the issue. In my view, the FCC struck the right balance in protecting existing companies’ equipment and promoting infrastructure construction and competitive entry.

Some utility pole basics: Utility poles are often owned by a phone company, a utility company, or a city. At the top of utility poles are electric lines. (The FCC is not talking about doing work near the electric lines on top, which is trickier and more dangerous for obvious reasons.) The rule changes here affect the “communications space,” which is midway up the poles and typically has one or several copper, coaxial, or fiber lines strung across.

For decades, the “market” for communications space access was highly regulated but stable. National and local policy encouraged monopoly phone service and cable TV provision and, therefore, entrants rarely sought access to string up lines on utility poles. In the 1990s, however, phone and cable was deregulated and competition became national policy. In the last ten years, as the price of fiber broadband provision has fallen and consumer demand for competitive broadband options has increased, new companies–notably Google Fiber–have needed access to utility poles. The FCC notes in its proposed order that, going forward, “small cell” and 5G deployments will benefit from competitive, lower-cost fiber providers.

The pre-2018 approach to pole attachments, wherein many parties had effective veto rights over new entrants, was creating too many backlogs and discouraging competitive providers from making the investments necessary. The FCC’s proposed rules streamline the process by creating tighter deadlines for other parties to respond to new entrants. The rules also give new entrants new privileges and greater control in constructing new lines and equipment, so long as they notify existing users and don’t damage existing lines.

I’m pleased to see that the Broadband Deployment Advisory Committee’s recommendations are proving useful to the agency. It’s encouraging that this FCC, by taking a weed-whacker to legacy policies regarding spectrum, pole access, and net neutrality, is taking steps to improve broadband in America.

 

*I’m the vice chair of the Competitive Access working group.

Related research and commentary:

The Importance of Spectrum Access to the Future of Innovation (pdf)

A Truly ‘Open Internet’ Would Be Free of Burdensome FCC Regulation (NRO)

Lawmakers frequently hear impressive-sounding stats about net neutrality like “83% of voters support keeping FCC’s net neutrality rules.” This 83% number (and similar “75% of Republicans support the rules”) is based on a survey from the Program for Public Consultation released in December 2017, right before the FCC voted to repeal the 2015 Internet regulations.

These numbers should be treated with skepticism. This survey generates these high approval numbers by asking about net neutrality “rules” found nowhere in the 2015 Open Internet Order. The released survey does not ask about the substance of the Order, like the Title II classification, government price controls online, or the FCC’s newly-created authority to approve of and disapprove of new Internet services.

Here’s how the survey frames the issue:

Under the current regulations, ISPs are required to:   

provide customers access to all websites on the internet.   

provide equal access to all websites without giving any websites faster or slower download speeds.  

The survey then essentially asks the participant if they favor these “regulations.” The nearly 400-page Order is long and complex and I’m guessing the survey creators lacked expertise in this area because this is a serious misinterpretation of the Order. This framing is how net neutrality advocates discuss the issue, but the Obama FCC’s interpretations of the 2015 Order look nothing like these survey questions. Exaggeration and misinformation is common when discussing net neutrality and unfortunately these pollsters contributed to it. (The Washington Post Fact Checker column recently assigned “Three Pinocchios” to similar net neutrality advocate claims.)

Let’s break down these rules ostensibly found in the 2015 Order.

“ISPs are required to provide customers access to all websites on the internet”

This is wrong. The Obama FCC was quite clear in the 2015 Order and during litigation that ISPs are free to filter the Internet and block websites. From the oral arguments:

FCC lawyer: “If [ISPs] want to curate the Internet…that would drop them out of the definition of Broadband Internet Access Service.”
Judge Williams: “They have that option under the Order?”
FCC lawyer: “Absolutely, your Honor. …If they filter the Internet and don’t provide access to all or substantially all endpoints, then…the rules don’t apply to them.”

As a result, the judges who upheld the Order said, “The Order…specifies that an ISP remains ‘free to offer ‘edited’ services’ without becoming subject to the rule’s requirements.”

Further, in the 1996 Telecom Act, Congress gave Internet access providers legal protection in order to encourage them to block lewd and “objectionable content.” Today, many ISPs offer family-friendly Internet access that blocks, say, pornographic and violent content. An FCC Order cannot and did not rewrite the Telecom Act and cannot require “access to all websites on the internet.”

“ISPs are required to provide equal access to all websites without giving any websites faster or slower download speeds”

Again, wrong. There is no “equal access to all websites” mandate (see above). Further, the 2015 Order allows ISPs to prioritize certain Internet traffic because preventing prioritization online would break Internet services.

This myth–that net neutrality rules require ISPs to be dumb pipes, treating all bits the same–has been circulated for years but is derided by networks experts. MIT computer scientist and early Internet developer David Clark colorfully dismissed this idea as “happy little bunny rabbit dreams.” He pointed out that prioritization has been built into Internet protocols for years and “[t]he network is not neutral and never has been.” 

Other experts, such as tech entrepreneur and investor Mark Cuban and President Obama’s former chief technology officer Aneesh Chopra, have observed that the need for Internet “fast lanes” as Internet services grow more diverse. Further, the nature of interconnection agreements and content delivery networks mean that some websites pay for and receive better service than others.

This is not to say the Order is toothless. It authorizes government price controls and invents a vague “general conduct standard” that gives the agency broad authority to reject, favor, and restrict new Internet services. The survey, however, declined to ask members of the public about the substance of the 2015 rules and instead asked about support for net neutrality slogans that have only a tenuous relationship with the actual rules.

“Net neutrality” has always been about giving the FCC, the US media regulator, vast authority to regulate the Internet. In doing so, the 2015 Order rejects the 20-year policy of the United States, codified in law, that the Internet and Internet services should be “unfettered by Federal or State regulation.” The US tech and telecom sector thrived before 2015 and the 2017 repeal of the 2015 rules will reinstate, fortunately, that light-touch regulatory regime.

Years ago it looked like the Obama FCC would make broadband deployment, especially wireless service and spectrum reform, a top priority. They accomplished plenty–including two of the largest spectrum auctions to date–but, under tremendous political and special interest pressure, FCC leadership diverted significant agency resources into regulatory battles that had very little upside, like regulating TV apps and unprecedented regulation of Internet services.

Fortunately, the Trump FCC so far has made broadband deployment the agency’s top priority, which Chairman Pai signaled last year with the creation of the Broadband Deployment Advisory Committee. As part of those deployment efforts, Commissioner Carr has led an effort to streamline some legacy regulatory obstacles, like historic preservation and environmental reviews and the FCC will vote this week on an order to expedite wireless infrastructure construction.

According to the FCC, somewhere around 96% of the US population has LTE coverage from three or more wireless operators, like Verizon, AT&T, T-Mobile, and Sprint. The operators’ job isn’t done in rural areas, but much of the future investment into broadband networks will be to “densify” their existing coverage maps with “small cells” in order to provide wireless customers more bandwidth.

Since telecom companies build infrastructure, many current projects require review under the federal National Historic Preservation Act and the National Environmental Policy Act. However, unlike for the 100-foot cellphone towers in the past, the environmental checklists currently required for small cells are largely perfunctory since small cells typically use existing infrastructure, like utility poles. For Sprint’s tens of thousands of small cell site applications, for instance, the proposed order says “every single review resulted in a finding of no significant impact.”

The order under consideration will bring some structure to regulatory timelines and procedures. This should save carriers on unnecessary regulatory overhead and, more importantly, save time.

The order comes at a crucial time, which is why the prior FCC’s net neutrality distractions are so regrettable. Mobile broadband has huge demands and inadequate infrastructure and spectrum. According to studies, millions of Americans are going “mobile only,” and bypassing landline Internet service. Census Bureau surveys estimated that in 2015, about 20% of Internet-using households were mobile-only. (HT to Michael Horney.) That number is likely even higher today.

The construction of higher-capacity and 5G wireless, combined with repeal of the 2015 Internet regulations, will give consumers more options and better prices for Internet services, and will support new mobile applications like remote-control of driverless cars and AR “smart glasses” for blind people. Hopefully, after this order, the agency will continue with spectrum liberalization and other reforms that will expedite broadband projects.

Internet regulation advocates lost their fight at the FCC, which voted in December 2017 to rescind the 2015 Open Internet Order. Regulation advocates have now taken their “net neutrality” regulations to the states.

Some state officials–via procurement contracts, executive order, or legislation–are attempting to monitor and regulate traffic management techniques and Internet service provider business models in the name of net neutrality. No one, apparently, told these officials that government-mandated net neutrality principles are dead in the US.

As the litigation over the 2015 rules showed, our national laissez faire policy towards the Internet and our First Amendment guts any attempt to enforce net neutrality. Recall that the 1996 amendments to the Communications Act announce a clear national policy about the Internet: Continue reading →

Last week the FCC commissioners voted to restructure the agency and create an Office of Economics and Analytics. Hopefully the new Office will give some rigor to the “public interest standard” that guides most FCC decisions. It’s important the FCC formally inject economics in to public interest determinations, perhaps much like the Australian telecom regulator’s “total welfare standard,” which is basically a social welfare calculation plus consideration of “broader social impacts.”

In contrast, the existing “standard” has several components and subcomponents (some of them contradictory) depending on the circumstances; that is, it’s no standard at all. As the first general counsel of the Federal Radio Commission, Louis Caldwell, said of the public interest standard, it means

as little as any phrase that the drafters of the Act could have used and still comply with the constitutional requirement that there be some standard to guide the administrative wisdom of the licensing authority.

Unfortunately, this means public interest determinations are largely shielded from serious court scrutiny. As Judge Posner said of the standard in Schurz Communications v. FCC,

So nebulous a mandate invests the Commission with an enormous discretion and correspondingly limits the practical scope of responsible judicial review.

Posner colorfully characterized FCC public interest analysis in that case:

The Commission’s majority opinion … is long, but much of it consists of boilerplate, the recitation of the multitudinous parties’ multifarious contentions, and self-congratulatory rhetoric about how careful and thoughtful and measured and balanced the majority has been in evaluating those contentions and carrying out its responsibilities. Stripped of verbiage, the opinion, like a Persian cat with its fur shaved, is alarmingly pale and thin.

Every party who does significant work before the FCC has agreed with Judge Posner’s sentiments at one time or another.

Which brings us to the Office of Economics and Analytics. Cost-benefit analysis has its limits, but economic rigor is increasingly important as the FCC turns its attention away from media regulation and towards spectrum assignment and broadband subsidies.

The worst excesses of FCC regulation are in the past where, for instance, one broadcaster’s staff in 1989 “was required to review 14,000 pages of records to compile information for one [FCC] interrogatory alone out of 299.” Or when, say, FCC staff had to sift through and consider 60,000 TV and radio “fairness” complaints in 1970. These regulatory excesses were corrected by economists (namely, Ronald Coase’s recommendation that spectrum licenses be auctioned, rather than given away for free by the FCC after a broadcast “beauty contest” hearing), but history shows that FCC proceedings spiral out of control without the agency intending it.

Since Congress gave such a nebulous standard, the FCC is always at risk of regressing. Look no further than the FCC’s meaningless “Internet conduct standard” from its 2015 Open Internet Order. This “net neutrality” regulation is a throwback to the bad old days, an unpredictable conduct standard that–like the Fairness Doctrine–would constantly draw the FCC into social policy activism and distract companies with interminable FCC investigations and unknowable compliance requirements.

In the OIO’s mercifully short life, we saw glimpses of the disputes that would’ve distracted the agency and regulated companies. For instance, prominent net neutrality supporters had wildly different views about whether a common practice, “zero rating” of IP content, by T-Mobile violated the Internet conduct standard. Chairman Tom Wheeler initially called it “highly innovative and highly competitive” while Harvard professor Susan Crawford said it was “dangerous” and “malignant” and should be outlawed “immediately.” The nearly year-long FCC investigations into zero rating and the equivocal report sent a clear, chilling message to ISPs and app companies: 20 years of permissionless innovation for the Internet was long enough. Submit your new technologies and business plans to us or face the consequences.

Fortunately, by rescinding the 2015 Order and creating the new economics Office, Chairman Pai and his Republican colleagues are improving the outlook for the development of the Internet. Hopefully the Office will make social welfare calculations a critical part of the public interest standard.

The FCC released a proposed Order today that would create an Office of Economics and Analytics. Last April, Chairman Pai proposed this data-centric office. There are about a dozen bureaus and offices within the FCC and this proposed change in the FCC’s organizational structure would consolidate a few offices and many FCC economists and experts into a single office.

This is welcome news. Several years ago when I was in law school, I was a legal clerk for the FCC Wireless Bureau and for the FCC Office of General Counsel. During that ten-month stint, I was surprised at the number of economists, who were all excellent, at the FCC. I assisted several of them closely (and helped organize what one FCC official dubbed, unofficially, “The Economists’ Cage Match” for outside experts sparring over the competitive effects of the proposed AT&T-T-Mobile merger). However, my impression even during my limited time at the FCC was well-stated by Chairman Pai in April:

[E]conomists are not systematically incorporated into policy work at the FCC. Instead, their expertise is typically applied in an ad hoc fashion, often late in the process. There is no consistent approach to their use.

And since the economists are sprinkled about the agency, their work is often “siloed” within their respective bureau. Economics as an afterthought in telecom is not good for the development of US tech industries, nor for consumers.

As Geoffrey Manne and Allen Gibby said recently, “the future of telecom regulation is antitrust,” and the creation of the OEA is a good step in line with global trends. Many nations–like the Netherlands, Denmark, Spain, Japan, South Korea, and New Zealand–are restructuring legacy telecom regulators. The days of public and private telecom monopolies and discrete, separate communications, computer, and media industries (thus bureaus) is past. Convergence, driven by IP networks and deregulation, has created these trends and resulted in sometimes dramatic restructuring of agencies.

In Denmark, for instance, as Roslyn Layton and Joe Kane have written, national parties and regulators took inspiration from the deregulatory plans of the Clinton FCC. The Social Democrats, the Radical Left, the Left, the Conservative People’s Party, the Socialist People’s Party, and the Center Democrats agreed in 1999:

The 1990s were focused on breaking down old monopoly; now it is important to make the frameworks for telecom, IT, radio, TV meld together—convergence. We believe that new technologies will create competition.

It is important to ensure that regulation does not create a barrier for the possibility of new converged products; for example, telecom operators should be able to offer content if they so choose. It is also important to ensure digital signature capability, digital payment, consumer protection, and digital rights. Regulation must be technologically neutral, and technology choices are to be handled by the market. The goal is to move away from sector-specific regulation toward competition-oriented regulation. We would prefer to handle telecom with competition laws, but some special regulation may be needed in certain cases—for example, regulation for access to copper and universal service.

This agreement was followed up by the quiet shuttering of NITA, the Danish telecom agency, in 2011.

Bringing economic rigor to the FCC’s notoriously vague “public interest” standard seemed to be occurring (slowly) during the Clinton and Bush administrations. However, during the Obama years, this progress was de-railed, largely by the net neutrality silliness, which not only distracted US regulators from actual problems like rural broadband expansion but also reinvigorated the media-access movement, whose followers believe the FCC should have a major role in shaping US culture, media, and technologies.

Fortunately, those days are in the rearview mirror. The proposed creation of the OEA represents another pivot toward the likely future of US telecom regulation: a focus on consumer welfare, competition, and data-driven policy.

Internet regulation advocates are trying to turn a recent FCC Notice of Inquiry about the state of US telecommunications services into a controversy. Twelve US Senators have accused the FCC of wanting to “redefin[e] broadband” in order to “abandon further efforts to connect Americans.”

Considering Chairman Pai and the Commission are already considering actions to accelerate the deployment of broadband, with new proceedings and the formation of the Broadband Deployment Advisory Committee, the allegation that the current NOI is an excuse for inaction is perplexing.

The true “controversy” is much more mundane–reasonable people disagree about what congressional neologisms like “advanced telecommunications capability” mean. The FCC must interpret and apply the indeterminate language of Section 706 of the Telecommunications Act, which requires the FCC about whether to determine “whether advanced telecommunications capability is being deployed in a reasonable and timely fashion.” If the answer is negative, the agency must “take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications market.” The inquiry is reported in an annual “Broadband Progress Report.” Much of the “scandal” of this proceeding is confusion about what “broadband” means.

What is broadband?

First: what qualifies as “broadband” download speed? It depends.

The OECD says anything above 256 kbps.

ITU standards set it at above 1.5 Mbps (or is 2.0 Mbps?).

In the US, broadband is generally defined as a higher speed. The USDA’s Rural Utilities Service defines it as 4.0 Mbps.

The FCC’s 2015 Broadband Progress Report found, as Obama FCC officials put it, that “the FCC’s definition of broadband” is now 25 Mbps. This is why advocates insist “broadband access” includes only wireline services above 25 Mbps.

But in the same month, the Obama FCC determined in the Open Internet Order that anything above dialup speed–56 kbps–is “broadband Internet access service.”

So, according to regulation advocates, 1.5 Mbps DSL service isn’t “broadband access” service but it is “broadband Internet access service.” Likewise a 30 Mbps 4G LTE connection isn’t a “broadband access” service but it is “broadband Internet access service.”

In other words, the word games about “broadband” are not coming from the Trump FCC. There is no consistency for what “broadband” means because prior FCCs kept changing the definition, and even use the term differently in different proceedings. As the Obama FCC said in 2009, “In previous reports to Congress, the Commission used the terms ‘broadband,’ ‘advanced telecommunications capability,’ and ‘advanced services’ interchangeably.”

Instead, what is going on is that the Trump FCC is trying to apply Section 706 to the current broadband market. The main questions are, what is advanced telecommunications capability, and is it “being deployed in a reasonable and timely fashion”?

Is mobile broadband an “advanced telecommunications capability”?

Previous FCCs declined to adopt a speed benchmark for when wireless service satisfies the “advanced telecommunications capability” definition. The so-called controversy is because the latest NOI revisits this omission in light of consumer trends. The NOI straightforwardly asks whether mobile broadband above 10 Mbps satisfies the statutory definition of “advanced telecommunications capability.”

For that, the FCC must consult the statute. Such a capability, the statute says, is technology-neutral (i.e. includes wireless and “fixed” connections) and “enables users to originate and receive high-quality voice, data, graphics, and video telecommunications.”

Historically, since the statute doesn’t provide much precision, the FCC has examined subscription rates of various broadband speeds and services. From 2010 to 2015, the Obama FCCs defined advanced telecommunications capability as a fixed connection of 4 Mbps. In 2015, as mentioned, that benchmark was raised 25 Mbps.

Regulation advocates fear that if the FCC looks at subscription rates, the agency might find that mobile broadband above 10 Mbps is an advanced telecommunications capability. This finding, they feel, would undermine the argument that the US broadband market needs intense regulation. According to recent Pew surveys, 12% of adults–about 28 million people–are “wireless only” and don’t have a wireline subscription. Those numbers certainly raise the possibility that mobile broadband is an advanced telecommunications capability.

Let’s look at the three fixed broadband technologies that “pass” the vast majority of households–cable modem, DSL, and satellite–and narrow the data to connections 10 Mbps or above.*

Home broadband connections (10 Mbps+)
Cable modem – 54.4 million
DSL – 11.8 million
Satellite – 1.4 million

It’s hard to know for sure since Pew measures adult individuals and the FCC measures households, but it’s possible more people have 4G LTE as home broadband (about 28 million adults and their families) than have 10 Mbps+ DSL as home broadband (11.8 million households).

Subscription rates aren’t the end of the inquiry, but the fact that millions of households are going mobile-only rather than DSL or cable modem is suggestive evidence that mobile broadband offers an advanced telecommunications capability. (Considering T-Mobile is now providing 50 GB of data per line per month, mobile-only household growth will likely accelerate.)

Are high-speed services “being deployed in a reasonable and timely fashion”?

The second inquiry is whether these advanced telecommunications capabilities “are being deployed in a reasonable and timely fashion.” Again, the statute doesn’t give much guidance but consumer adoption of high-speed wireline and wireless broadband has been impressive.

So few people had 25 Mbps for so long that the FCC didn’t record it in its Internet Access Services reports until 2011. At the end of 2011, 6.3 million households subscribed to 25 Mbps. Less than five years later, in June 2016, over 56 million households subscribed. In the last year alone, fixed providers extended 25 Mbps or greater speeds to 21 million households.

The FCC is not completely without guidance on this question. As part of the 2008 Broadband Data Services Improvement Act, Congress instructed the FCC to use international comparisons in its Section 706 Report. International comparisons also suggest that the US is deploying advanced telecommunications capability in a timely manner. For instance, according to the OECD the US has 23.4 fiber and cable modem connections per 100 inhabitants, which far exceeds the OECD average, 16.2 per 100 inhabitants.**

Anyways, the sky is not falling because the FCC is asking about mobile broadband subscription rates. More can be done to accelerate broadband–particularly if the government frees up more spectrum and local governments improve their permitting processes–but the Section 706 inquiry offers little that is controversial or new.

 

*Fiber and fixed wireless connections, 9.6 million and 0.3 million subscribers, respectively, are also noteworthy but these 10 Mbps+ technologies only cover certain areas of the country.

**America’s high rank in the OECD is similar if DSL is included, but the quality of DSL varies widely and often doesn’t provide 10 Mbps or 25 Mbps speeds.

It’s becoming clearer why, for six years out of eight, Obama’s appointed FCC chairmen resisted regulating the Internet with Title II of the 1934 Communications Act. Chairman Wheeler famously did not want to go that legal route. It was only after President Obama and the White House called on the FCC in late 2014 to use Title II that Chairman Wheeler relented. If anything, the hastily-drafted 2015 Open Internet rules provide a new incentive to ISPs to curate the Internet in ways they didn’t want to before. 

The 2016 court decision upholding the rules was a Pyrrhic victory for the net neutrality movement. In short, the decision revealed that the 2015 Open Internet Order provides no meaningful net neutrality protections–it allows ISPs to block and throttle content. As the judges who upheld the Order said, “The Order…specifies that an ISP remains ‘free to offer ‘edited’ services’ without becoming subject to the rule’s requirements.” 

The 2014 White House pressure didn’t occur in a vacuum. It occurred immediately after Democratic losses in the November 2014 midterms. As Public Knowledge president Gene Kimmelman tells it, President Obama needed to give progressives “a clean victory for us to show that we are standing up for our principles.” The slapdash legal finessing that followed was presaged by President Obama’s November 2014 national address urging Title II classification of the Internet, which cites the wrong communications law on the Obama White House website to this day.

The FCC staff did their best with what they were given but the resulting Order was aimed at political symbolism and acquiring jurisdiction to regulate the Internet, not meaningful “net neutrality” protections. As internal FCC emails produced in a Senate majority report show, Wheeler’s reversal that week caught the non-partisan career FCC staff off guard. Literally overnight FCC staff had to scrap the “hybrid” (non-Title II) order they’d been carefully drafting for weeks and scrape together a legal justification for using Title II. This meant calling in advocates to enhance the record and dubious citations to the economics literature. Former FCC chief economist, Prof. Michael Katz, whose work was cited in the Order, later stated to Forbes that he suspected the “FCC cited my papers as an inside joke, because they know how much I think net neutrality is a bad idea.” 

Applying 1934 telegraph and telephone laws to the Internet was always going to have unintended consequences, but the politically-driven Order increasingly looks like an own-goal, even to supporters. Former FCC chief technologist, Jon Peha, who supports Title II classification of ISPs almost immediately raised the alarm that the Order offered “massive loopholes” to ISPs that could make the rules irrelevant. This was made clear when the FCC attorney defending the Order in court acknowledged that ISPs are free to block and filter content and escape the Open Internet regulations and Title II. These concessions from the FCC surprised even AT&T VP Hank Hultquist:

Wow. ISPs are not only free to engage in content-based blocking, they can even create the long-dreaded fast and slow lanes so long as they make their intentions sufficiently clear to customers.

So the Open Internet Order not only permits the net neutrality “nightmare scenario,” it provides an incentive to ISPs to curate the Internet. Despite the activist PR surrounding the Order, so-called “fast lanes”–like carrier-provided VoIP, VoLTE, and IPTV–have existed for years and the FCC rules allow them.  The Order permits ISP blocking, throttling, and “fast lanes”–what remains of “net neutrality”?

Prof. Susan Crawford presciently warned in 2005: 

I have lost faith in our ability to write about code in words, and I’m confident that any attempt at writing down network neutrality will be so qualified, gutted, eviscerated, and emptied that it will end up being worse than useless.

Aside from some religious ISPs, ISPs don’t want to filter Internet content. But the Obama FCC, via the “net neutrality” rules, gives them a new incentive: the Order deregulates ISPs that filter. ISPs will fight the rules because they want to continue to offer their conventional Internet service without submitting to the Title II baggage. This is why ISPs favor scrapping the Order–not only is it the FCC’s first claim to regulate Internet access, if the rules are not repealed, ISPs will be compelled to make difficult decisions about their business models and technologies in the future.