Broadband & Neutrality Regulation

The last several months have been a busy time for tech policy. Major policies have been enacted, particularly in the areas of surveillance and Internet regulation. While we haven’t checked in here on TLF in some time,TechFreedom has been consistently fighting for the policies that make innovation possible.

  1. Internet Independence: On July 4th, we launched  the Declaration of Internet Independence, a grassroots petition campaign calling on Congress to restore the light-touch approach to Internet regulation that resulted in twenty years of growth and prosperity.
  2. Internet Regulation: This February the FCC issued its Open Internet Order, reclassifying broadbandas a communications service under Title II of the 1934 Communications Act, despite opposition from many in the tech sector, including supporters of our “Don’t Break the Net” campaign. In response, we’ve joined and several leading internet entrepreneurs in litigation against the FCC   to ask the Court to strike down the Order.
  3. Surveillance: Section 215 of the PATRIOT Act, which authorized bulk collection of phone records, sunset this May, giving privacy advocates the opportunity to enact meaningful surveillance reform. TechFreedom voiced support for such reforms, including the USA FREEDOM Act, which will end all bulk collection of Americans’ telephone records under any authority.
  4. Broadband Deployment: Making fast, affordable Internet available to everyone is a goal that we all share. We’ve been urging government at all levels to make it easier for private companies to do just that through policies like Dig Once conduits, while cautioning that government-run broadband should only be a last resort.
  5. FTC Reform: The FTC is in dire need of reform. We’ve recommended changes to ensure that the agency fulfills its duty to protect consumers from real harm without a regulatory blank check, which stifles innovation and competition. While progress has been made, there’s still a long way to go. The agency can start by helping to unshackle the sharing economy from legacy regulations.

Hal Singer has discovered that total wireline broadband investment has declined 12% in the first half of 2015 compared to the first half of 2014.  The net decrease was $3.3 billion across the six largest ISPs.  As far as what could have caused this, the Federal Communications Commission’s Open Internet Order “is the best explanation for the capex meltdown,” Singer writes.

Despite numerous warnings from economists and other experts, the FCC confidently predicted in paragraph 40 of the Open Internet Order that “recent events have demonstrated that our rules will not disrupt capital markets or investment.”

Chairman Wheeler acknowledged that diminished investment in the network is unacceptable when the commission adopted the Open Internet Order by a partisan 3-2 vote.  His statement said:

Our challenge is to achieve two equally important goals: ensure incentives for private investment in broadband infrastructure so the U.S. has world-leading networks and ensure that those networks are fast, fair, and open for all Americans. (emphasis added.)

The Open Internet Order achieves the first goal, he claimed, by “providing certainty for broadband providers and the online marketplace.” (emphasis added.)

Yet by asserting jurisdiction over interconnection for the first time and by adding a vague new catchall “general conduct” rule, the Order is a recipe for uncertainty.  When asked at a February press conference to provide some examples of how the general conduct rule might be used to stop “new and novel threats” to the Internet, Wheeler admitted “we don’t really know…we don’t know where things go next…”  This is not certainty.

As Singer points out, the FCC has speculated that the Open Internet rules would generate only $100 million in annual benefits for content providers compared to the reduction of investment in the network of at least $3.3 billion since last year.  While the rules obviously won’t survive cost-benefit analysis, I’m not sure they will survive some preliminary questions and even get to a cost-benefit analysis stage. Continue reading →

As FCC Commissioner Jessica Rosenworcel said of the Internet, “It is our printing press.” Unfortunately, for First Amendment purposes, regulators and courts treat our modern printing presses — electronic media — very differently from the traditional ones. Therefore, there is persistent political and activist pressure on regulators to rule that Internet intermediaries — like social networks and search engines — are not engaging in constitutionally-protected speech.

Most controversial is the idea that, as content creators and curators, Internet service providers are speakers with First Amendment rights. The FCC’s 2015 Open Internet Order designates ISPs as common carriers and generally prohibits ISPs from blocking Internet content. The agency asserts outright that ISPs “are not speakers.” These Title II rules may be struck down on procedural grounds, but the First Amendment issues pose a significant threat to the new rules.

ISPs are Speakers
Courts and Congress, as explained below, have long recognized that ISPs possess editorial discretion. Extensive ISP filtering was much more common in the 1990s but still exists today. Take JNet and DNet. These ISPs block large portions of Internet content that may violate religious principles. They also block neutral services like gaming and video if the subscriber wishes. JNet offers several services, including DSL Internet access, and markets itself to religious Jews. It is server-based (not client-based) and offers several types of filters, including application-based blocking, blacklists, and whitelists. Similarly, DNet, targeted mostly to Christian families in the Carolinas, offers DSL and wireless server-based filtering of content like pornography and erotic material. A strict no-blocking rule on the “last mile” access connection, which most net neutrality proponents want enforced, would prohibit these types of services. Continue reading →

The FCC is being dragged–reluctantly, it appears–into disputes that resemble the infamous beauty contests of bygone years, where the agency takes on the impossible task of deciding which wireless services deliver more benefits to the public. Two novel technologies used for wireless broadband–TLPS and LTE-U–reveal the growing tensions in unlicensed spectrum. The two technologies are different and pose slightly different regulatory issues but each is an attempt to bring wireless Internet to consumers. Their advocates believe these technologies will provide better service than existing wifi technology and will also improve wifi performance. Their major similarity is that others, namely wifi advocates, object that the unlicensed bands are already too crowded and these new technologies will cause interference to existing users.

The LTE-U issue is new and developing. The TLPS proceeding, on the other hand, has been pending for a few years and there are warning signs the FCC may enter into beauty contests–choosing which technologies are entitled to free spectrum–once again.

What are FCC beauty contests and why does the FCC want to avoid them? Continue reading →

Chairman Thomas E. Wheeler of the Federal Communications Commission unveiled his proposal this week for regulating broadband Internet access under a 1934 law. Since there are three Democrats and two Republicans on the FCC, Wheeler’s proposal is likely to pass on a party-line vote and is almost certain to be appealed.

Free market advocates have pointed out that FCC regulation is not only unnecessary for continued Internet openness, but it could lead to years of disruptive litigation and jeopardize investment and innovation in the network.

Writing in WIRED magazine, Wheeler argues that the Internet wouldn’t even exist if the FCC hadn’t mandated open access for telephone network equipment in the 1960s, and that his mid-1980s startup either failed or was doomed because the phone network was open whereas the cable networks (on which his startup depended) were closed. He also predicts that regulation can be accomplished while encouraging investment in broadband networks, because there will be “no rate regulation, no tariffs, no last-mile unbundling.”  There are a number of problems with Chairman Wheeler’s analysis. First, let’s examine the historical assumptions that underlie the Wheeler proposal.

Continue reading →

This month, the FCC is set to issue an order that will reclassify broadband under Title II of the Communications Act. As a result of this reclassification, broadband will suddenly become subject to numerous federal and local taxes and fees.

How much will these new taxes reduce broadband subscribership? Nobody knows for sure, but using the existing economic literature we can come up with a back-of-the-envelope calculation.

According to a policy brief by Brookings’s Bob Litan and the Progressive Policy Institute’s Hal Singer, reclassification under Title II will increase fixed broadband costs on average by $67 per year due to both federal and local taxes. With pre-Title II costs of broadband at $537 per year, this represents a 12.4 percent increase.

[I have updated these estimates at the end of this post.]

Continue reading →

After some ten years, gallons of ink and thousands of megabytes of bandwidth, the debate over network neutrality is reaching a climactic moment.

Bills are expected to be introduced in both the Senate and House this week that would allow the Federal Communications Commission to regulate paid prioritization, the stated goal of network neutrality advocates from the start. Led by Sen. John Thune (R-S.D.) and Rep. Fred Upton (R-Mich.), the legislation represents a major compromise on the part of congressional Republicans, who until now have held fast against any additional Internet regulation. Their willingness to soften on paid prioritization has gotten the attention of a number of leading Democrats, including Sens. Bill Nelson (D-Fla.) and Cory Booker (D-N.J.). The only question that remains is if FCC Chairman Thomas Wheeler and President Barack Obama are willing to buy into this emerging spirit of partisanship.

Obama wants a more radical course—outright reclassification of Internet services under Title II of the Communications Act, a policy Wheeler appears to have embraced in spite of reservations he expressed last year. Title II, however, would give the FCC the same type of sweeping regulatory authority over the Internet as it does monopoly phone service—a situation that stands to create a “Mother, may I” regime over what, to date, has been an wildly successful environment of permissionless innovation.

Continue reading →

President Obama recently announced his wish for the FCC to preempt state laws that make building public broadband networks harder. Per the White House, nineteen states “have held back broadband access . . . and economic opportunity” by having onerous restrictions on municipal broadband projects.

Much of the White House announcement misrepresents the situation. Most of these so-called state restrictions on public broadband are reasonable considering the substantial financial risk public networks pose to taxpayers. Minnesota and Colorado, for instance, require approval from local voters before spending money on a public network. Nevada’s “restriction” is essentially that public broadband is only permitted in the neediest, most rural parts of the state. Some states don’t allow utilities to provide broadband because utilities have a nasty habit of raising, say, everyone’s electricity bills because the money-losing utility broadband network fails to live up to revenue expectations. And so on. Continue reading →

As 2014 draws to a close, we take a look back at the most-read posts from the past year at The Technology Liberation Front. Thank you for reading, and enjoy. Continue reading →

The FCC is currently considering ways to make municipal broadband projects easier to deploy, an exercise that has drawn substantial criticism from Republicans, who passed a bill to prevent FCC preemption of state laws. Today the Mercatus Center released a policy analysis of municipal broadband projects, titled Community Broadband, Community Benefits? An Economic Analysis of Local Government Broadband Initiatives. The researcher is Brian Deignan, an alumnus of the Mercatus Center MA Fellowship. Brian wrote an excellent, empirical paper about the economic effects of publicly-funded broadband.

It’s remarkable how little empirical research there is on municipal broadband investment, despite years of federal data and billions of dollars in federal investment (notably, the American Recovery and Reinvestment Act). This dearth of research is in part because muni broadband proponents, as Brian points out, expressly downplay the relevance of economic evidence and suggest that the primary social benefits of muni broadband cannot be measured using traditional metrics. The current “research” about muni broadband, pro- and anti-, tends to be unfalsifiable generalizations based on extrapolations of cherry-picked examples. (There are several successes and failures, depending on your point of view.)

Brian’s paper provides researchers a great starting point when they attempt to answer an increasingly important policy question: What is the economic impact of publicly-funded broadband? Brian uses 23 years of BLS data from 80 cities that have deployed broadband and analyzes muni broadband’s effect on 1) quantity of businesses; 2) employee wages; and 3) employment. Continue reading →