“The Impact of Title II Regulation of Internet Providers On Their Capital Investments” is a 22-page study penned by economists Kevin A. Hassett and Robert J. Shapiro. It was submitted to the FCC as part of an ex part by the US Telecom Association. If you care about the future of the Internet, you need to add it to your reading list.
For the study, Hassett and Shapiro approached the question of Title II reclassification armed with numbers. Specifically, an alarming drop in projected private investment should the FCC choose to reclassify. As the economists write:
If the status quo continues, with data services unencumbered by Title II regulation, the several ISPs in our sample are expected to spend approximately $218.8 billion in new capital investments over the next five years in their wirelines and wireless networks. In contrast, under Title II regulation of all wireline data services, these ISPs’ wirelines and wireless capital investments over the next five years would drop an estimated range of $173.4 billion to $190.7 billion. Title II regulation of ISPs thus reduces these companies’ total investments by $28.1 billion to $45.4 billion (between 12.8 percent and 20.8 percent) over the next five years. Wireline investment by these firms would be 17.8 percent to 31.7 percent lower than expected.
That’s a lot of numbers with the word billion attached, but the main focus should really be on the percentages. You don’t have to be an economist to realize that a reduction of total investment dollars of 12.8 percent to 20.8 percent (and wireline investment dollars of 17.8 percent to 31.7 percent) would have a profound effect on America’s communications infrastructure. And by profound, I mean decidedly negative — not just for network expansion and upgrades, but for innovation across the Internet board.
The blow to innovation, Hassett and Shapiro argue, would be particularly hard on wireless networks. Again, from the study:
[T]he network managements practices which Title II regulation would potentially bar enable wireless investment and innovation, because wireless networks face serious capacity constraints. Thus, regulations that discourage or bar those practices raise the risk of introducing new products and applications: Without those practices, carriers would be less able to manage unpredictable changes in network demand associated with their introduction, and so maintain the quality of network services for all of its users.
In other words, the next big app or service could cripple wireless networks, and under Title II, providers would be hamstrung by regulations to solve the problem in a timely manner. Want to launch an innovative new streaming video app? Good luck gaining users when your app meets a road block of network congestion.
Too often the debate surrounding net neutrality is one of extremes, and I freely admit the above scenario falls within that category. But also too often, the economic realities of building, upgrading, and maintaining networks are either ignored or downplayed. Net neutrality doesn’t have to be an emotional issue; we all benefit from the Internet continuing to be open. The question is, how best do we ensure that happens while at the same time encouraging the investment necessary to keep networks growing. As Hassett and Shapiro’s study makes clear, the numbers show Title II would do more damage than good.
Over at Bloomberg Law, our Co-Chairman Larry Irving and Honorary Chairman Rick Boucher have penned an op-ed on why the FCC should focus on Section 706 rather than Title II when it comes to net neutrality. An excerpt:
Everyone agrees that broadband providers should not become content gatekeepers. That’s been clear since 2010 when the FCC initiated its inquiry into how best to maintain an open Internet. Moreover, the facts make clear that the underlying success of the Internet in the two decades since its commercialization has been based on light-touch federal regulation and private sector, commercially-negotiated arrangements among service providers that have led to very few real complaints about supposed “gatekeepers.”
Under section 706, the FCC could prohibit so-called “paid prioritization” anytime such a practice has the effect of slowing down content or degrading the quality of service that any broadband customer receives, and which represent the alleged potential harms that lie at the core of the concerns expressed by activists urging Title II reclassification.
This fall’s intense debate is not about whether to preserve an open Internet. It’s about which of two available approaches the FCC could use is best.
In an op-ed for the San Jose Mercury News, our Co-Chairman Larry Irving argues that when protecting net neutrality, the first job of the FCC is to ensure they do no harm. An excerpt:
The Title II path presents several potential harms. First, and most dangerous, is the harm to innovation. A light-touch regulatory environment has advanced ideas birthed in the valley. Introducing outmoded regulations on entrepreneurial business models in the tech sector could hurt the pace at which we’re seeing new start-ups, technologies, and products emerge.
A system of having to ask “Mother, may I?” of government would naturally introduce a chilling effect, as companies of all sizes would start wondering whether they or their product would be regulated. Would their products have to change to comply with regulation? Or would it be better to not introduce products to avoid regulation?
The President got this one wrong. Since the dawn of commercial Internet access during the Clinton Administration, light-touch regulation has guided its development and explosive growth. It has helped encourage continuous innovation, spur massive investment, and provide consumers with new services and applications in a competitive digital marketplace. The choice is clear: we can stay the course and promote 21st century technologies or turn back the clock and return to a 20th century, Title II-regulated utility model at the expense of the American consumer.
Today, the President encouraged the FCC to reclassify and treat broadband Internet access as a “Title II”-regulated public utility, a model designed for rotary telephones. We agree on the need to preserve an Open Internet, but IIA believes the President’s approach creates unnecessary legal and market uncertainty that would jeopardize our world leading Internet-driven investment and innovation, and ultimately inhibit further high-speed broadband deployment to America’s consumers. We can and must preserve the open Internet, but Title II is the wrong approach that would put at risk the nation’s Internet economy that today remains the envy of the world.
Many proponents of “net neutrality” routinely declare the Internet sky is falling. That if the government — specifically, the Federal Communications Commission — doesn’t take far greater control of the Internet, then the very platform itself will all but collapse.
Such scare tactics may rile up Americans, but ironically, it’s the very solution proponents are now pushing that could deal the most devastating blow to the free and open Internet.
Title II reclassification may seem simple — just make the Internet a public utility! — but as a new paper from Anna-Maria Kovacs shows, reclassification would have far greater consequences for the Internet than its supporters let on.
Kovacs’ paper, “Regulations in Financial Translation: Investment Implications of the FCC’s Open Internet Proceeding,” is a dense 27-page read, but don’t let the length — or the dry academic title — deter you from digging in. In the paper, Kovacs takes the temperature of communication investors as the FCC continues to mull over reclassification. And while the majority of investors don’t expect the Commission to use the “nuclear option” of Title II, as it’s commonly known, that doesn’t mean they’re breathing easy. As Kovacs writes (all emphasis mine):
From the perspective of investors, Title II reclassification makes no sense. It does not solve the problem of paid prioritization that the vast majority of net neutrality advocates are demanding the FCC solve, but it carries the risk of enormous collateral damage to both infrastructure and edge providers. It would bring stultifying regulation that would choke the Internet ecosystem that has become on of the primary engines of economic growth for the U.S. and the world. It would encourage other governments to follow suit, endangering the success of American digital service — and application-providers abroad.
This stultifying regulation, Kovacs rightly argues, would be especially brutal to mobile broadband investment, where America leads the rest of the world by leaps and bounds. Kovacs again:
U.S. mobile Internet traffic is expected to grow at a compound annual rate of 50% per year between 2013 and 2018. Keeping up with that traffic will require ongoing capital investments as well as additional spectrum. During 2014-2015, mobile broadband Internet access providers (mobile BIAs) are expected to raise about $57 billion for spectrum purchases, as indicated by the FCC’s reserve price for the 2014 AWS-3 auction and the Greenhill report’s valuation of the broadcast spectrum the FCC hopes to sell in early 2016. That $57 billion is, of course, in addition to the $68 billion in capital investments that mobile BIAs will spend over those two years. Thus, for the FCC’s spectrum auctions to be successful, mobile BIAs will need to raise 84% more funding during 2014-2015 that they do in normal years. With increased price competition and a shrinking revenue base — something the wireline industry has endured for years but that is new to wireless — these companies are facing an increasingly skeptical investment community that will have little tolerance for regulatory shock, on either the fixed or mobile side.
That’s a whole lot of numbers (and acronyms) to digest, but boiled down it means a) Providers need more spectrum; b) Billions will need to be raised to purchase that spectrum; c) Investment dollars could easily dry up in the face of regulatory actions like reclassifying under Title II.
Kovacs goes on in the paper to make the case that the FCC has sufficient authority to ensure the Internet remains open under section 706, which makes it possible for the Commission to create rules specifically for this purpose. While those rules would still face judicial review, they would also keep the FCC (which, remember, is made up of appointed officials) from overreach. In contrast, Kovacs points out, Title II…
...automatically invokes price regulation, resale and interconnection obligations, customer privacy rules, and numerous other obligations, which have been implemented via many thousands of regulations at the FCC and various state commissions.
Thousands of government regulations. Does that sound like a free and open Internet?
But what about forbearance, the provision with mythical powers that Title II proponents point to as a counterpoint to the excessive regulations argument? Well, Kovacs makes plain why the idea of the FCC using forbearance powers doesn’t sit well with investors:
While the FCC is allowed to forbear from some of those obligations if it can justify the forbearance to the courts, investors who have watched the attempts of ILECs to obtain forbearance are all too aware of the difficulties of that process. For example, investors have watched ILECs lose most of their market share yet still be treated by the FCC and state commissioners as if they were dominant carriers for PSTN voice service. As a result, they have little faith that the FCC would apply Title II to BIAs but then forbear from all the regulations that come with that.
Look, when it comes down to it, we all want the Internet to remain open. It’s in the best interest of consumers and providers to keep it that way. But we also need to keep investment dollars flowing into our communications infrastructure. As Kovacs’ paper shows, Title II won’t really do either. Instead, it could have the complete opposite effect. Want the Internet sky to fall? Saddle it with regulations created when Franklin D. Roosevelt was in office.
In an op-ed for Roll Call, Bret Swanson — President of Entropy Economics and one of our Broadband Ambassadors — argues that even the so-called Title II ‘Lite’ could have disastrous results. An excerpt:
In a new legal analysis, in fact, the Phoenix Center says “Title II Lite” is an impossibility. Any imposition of Title II on broadband, Phoenix argues, will bring tariffing and thus price controls to the entire net. It will convert all edge providers, by definition, into customers of the broadband service providers. And the FCC will not, contra the “lite” advocates’ assertions, be able to forbear from the numerous and weighty rules of Title II.
Law allows for forbearance — itself a long and convoluted process — if there is competition. The FCC, however, has defined the BSPs as “terminating monopolies” — Comcast, in other words, has a monopoly on Comcast customers. Competition is thus impossible and therefore, argues Phoenix, is forbearance. Because of the complex, interconnected nature of the net, where software and content firms are also network firms, and vice versa, where consumers are also content providers, the inability to forbear would mean Title II spreading across every node and layer of the net and likely affecting the entire ecosystem.
There are several commonly disseminated myths aimed at perpetuating confusion and misinformation during the pendency of the Federal Communications Commission’s (FCC) Open Internet proceeding. Facts, however, cut through the clutter and allow for a discussion rooted in reality rather than rhetoric.
Title II reclassification of broadband is not necessary to preserve an Open Internet.
Here’s why the FCC can and should move forward with Open Internet rules designed under its Section 706 authority rather than reclassifying broadband services under Title II of the Communications Act:
TITLE II AND SECTION 706: Myths vs. Facts
Myth: Title II regulations helped bring about the Internet boom of the early 2000s.
Fact: Although an initial investment spike occurred immediately after the passage of the 1996 Act, that investment was short-lived. That initial spate of investment was primarily directed at technologies and business models that were quickly outstripped by more modern technologies. In fact, the majority of the investment in our country’s broadband infrastructure occurred after the FCC’s 2003-05 decisions to decrease regulations on the broadband industry. This surge in investment laid the groundwork for high-speed Internet to become a leading driver of our nation’s economic growth and to spur the incredible innovation consumers enjoy today.
Myth: Title II-like regulations helped Europe leapfrog the U.S. on broadband deployment.
Fact: Europe gave up its leadership position when it began its path toward heavy-handed regulation that deterred broadband investment and deployment.
According to an independent study, today nearly 82% of U.S. consumers enjoy access to next-generation, high-speed broadband networks (over 25Mbps) while only 54% of Europeans have comparable access. In rural areas, the U.S. again leads in access, 48% to 12%. Next-generation wireless broadband (LTE) is available to 86% of Americans but only 27% of Europeans.
European broadband policies are built on extensive, public utility-style regulation that has depressed broadband investment. In contrast, the U.S. light-touch regulation model has enabled U.S. broadband network operators to invest more than double per household than Europe does: $562 versus $244 in Europe.
Myth: Applying Title II regulations to broadband networks and providers will prevent companies from creating Internet “fast lanes”.
Fact: The FCC has stated that no ISP has ever engaged in paid prioritization schemes. No evidence exists that ISPs have ever or are likely to create fast lanes and slow lanes.
Reclassifying broadband under Title II would not prevent such. In fact, under Title II, public utilities have always been allowed to offer prioritized services. Telephone companies routinely offer installation and repair priority along with service level guarantees to those willing to pay extra money.
According to FCC Chairman Wheeler, the 2010 net neutrality rules were never intended to cover these privately-negotiated business deals, only the last mile of the Internet.
Myth: Wireless networks and wireline networks are virtually interchangeable these days and should have the same net neutrality rules.
Fact: In the 2010 rules, to which all carriers committed, the FCC stated that special characteristics of mobile broadband infrastructure make it essential to give mobile providers additional flexibility in how they manage the traffic on their networks. Due to resource constraints, such as the limited amount of spectrum available for consumer use, mobile networks operate differently than wireline networks. A stringent regulatory environment established under Title II, and intended primarily for a monopoly-era copper wireline world, would be onerous.
The FCC still imposed two conditions on wireless networks in 2010. First, wireless networks cannot block access to legal websites, with exclusions for reasonable network management. Second, wireless network providers were required to disclose their network management practices, performance and terms and conditions of their broadband services.
The current approach acknowledges how wireless networks are different from fixed networks but still protects consumers and enables investment and innovation in the intensely competitive wireless marketplace.
Myth: ISPs harm the open Internet through discriminatory practices. The only way to keep the Internet open is to reclassify Internet services as telecommunications services.
Fact: The Internet, without Title II regulations, is and has been open since its first public use. It continues to thrive in the current regulatory environment. In contrast, Title II regulation would stifle investment and hinder innovation. Innovative new services and business models would have to be vetted and approved by the FCC, slowing the Internet’s vitality and growth.
Ensuring a fair and open Internet through authority granted by Section 706 is a better path. Section 706 permits the FCC to prevent paid prioritization while encouraging innovation and investment from ISPs and other Internet companies.
Myth: Title II can be easily adapted to today’s modern communications systems.
Fact: The past 20 years have seen stunning technological advancements in the communication industry. Americans can now access a wealth of information in myriad new ways. The transformation of the communications industry has caused companies to no longer fit neatly into legal categories envisioned by the 1996 Telecommunications Act or, even more obviously, the Title II rules written in 1934. That’s why companies not normally thought of as “broadband providers” could find themselves categorized and regulated as telecommunications carriers because their service overlaps with the services provided by ISPs if Title II regulations are placed on broadband services. For example, when Google connects you to a business you searched, should it be considered subject to Title II? Or if a provider of email enables a video messaging session, would it open itself up to Title II regulation on the grounds that it is a facilities-based provider or reseller? Could be. And that’s the fear.
Myth: The FCC could apply Title II to broadband, but exercise its forbearance authority when dealing with innovative companies and services.
Fact: Reclassifying broadband services as telecommunication services under Title II would burden 1/6 of the nation’s economy with stringent, investment-inhibiting government regulation. The government would have expansive power over all broadband services, likely including all edge providers and consumer broadband applications and services. The process necessary to analyze and identify which areas of the nation’s broadband economy the FCC would spare from heavy government intrusion would be both lengthy and costly. Additional time and resources would probably be squandered in the litigation that will inevitably follow.
Myth: Unlike Title II, the FCC does not have the power to promote an open Internet under the limited provisions of Section 706.
Fact: Relying on Section 706 to protect consumers and ensure an Open Internet is a superior choice to the overbroad, utility-style Title II regulatory framework of the 1934 Communications Act.
The FCC’s Section 706-like approach in 2010, created rules that found the right balance between regulations necessary to advance consumer protection goals and the need to attract new investment to broadband to ensure future deployments of modern high-speed networks. Under those rules, access to capital grew and we saw massive growth in the digital app economy, video over broadband, VoIP, the advent of tablet computing, and the rise of mobile e-commerce.
Moreover, a Federal Appeals court has given Section 706 its seal of approval and the FCC can assert this authority with confidence. In fact, the courts have said that the FCC is empowered to create rules “governing broadband providers’ treatment of Internet traffic…that they will preserve and facilitate the “virtuous circle” of innovation that has driven the explosive growth of the Internet.”
The facts are clear: Reclassification of broadband under Title II is unnecessary to ensure continued Internet openness and would backfire with harmful consequences for innovation and investment. The FCC should instead make use of its powers under Section 706 to protect consumers, promote innovation and encourage nationwide deployment of next-generation broadband.
Speaking of net neutrality, over at USA Today, Jeff Pulver makes the case that the government can look out for consumers with onerous new rules:
The heavy hand of the early 20th Century rules is not necessary to protect an open Internet, and the benefit of the more modern “information services” classification approach is that it doesn’t kill off the investment needed to continue modernizing our Internet infrastructure. As FCC Chairman Tom Wheeler and the courts have suggested, other provisions in the act provide ample authority for the FCC to protect consumers from potential anti-competitive conduct.
We should do everything to protect the open Internet – no one argues that. But we are doing the American public a disservice if we insist that the only path to that end is a Title II regulatory approach. If we go down that dead-end road and turn the Internet into a regulated public utility, we will ignore the lessons learned a decade ago in the process that led to the “Pulver Order” and choke off a new wave of innovation and investment that will support the next generation of entrepreneurs.
Among the tidal wave of comments the FCC has received over the open Internet/Title II issue, Fred Campbell of the Center for Boundless Innovation in Technology finds something interesting. As he writes:
A stunning revelation is buried in a lengthy Netflix filing at the Federal Communications Commission (FCC): Netflix used its subscribers as pawns in a Machiavellian game of regulatory chess designed to win favorable Internet regulations.
The filing reveals that Netflix knowingly slowed down its video streaming service with the intention of blaming Internet service providers (ISPs). Specifically, Netflix used its relationships with Internet ‘backbone’ providers (e.g., Level 3, Cogent) to deliberately congest their peering links with ISPs, and at the same time, started publishing ‘ISP speed rankings’ to make it appear that ISPs were causing the congestion. It appears that Netflix cynically held its subscribers hostage to reduced service quality in order to pressure the FCC into adopting favorable Internet regulations that would permanently lower Netflix’s costs of doing business.
Netflix’s plan to frame ISPs for sabotaging its service has been surprisingly successful so far. Some subscribers have blamed their ISPs for the service disruptions Netflix itself caused, which prompted the FCC to open an investigation of the Internet backbone market. Now all Netflix needs is for the FCC to adopt new regulations.
At the very least, Campbell’s post should serve as a reminder that in the current version of the seemingly never-ending “net neutrality debate,” it’s not really little guys vs. big guys, but one big tangled mess of special interests and corporations. All the more reason for the FCC to move forward without extreme caution.
This morning, IIA filed Reply Comments with the FCC urging the Commission to embrace its 706 Authority instead of Title II reclassification in order to preserve an open Internet. In our comments we warned that reclassification would reverser decades of Commission precedent and potentially hurt the Internet ecosystem’s continued success and future of innovation.
Section 706 has worked well to protect the open Internet that everyone wants to preserve, while minimizing harm to investment and innovation. Section 706 remains viable and effective. By contrast, Title II is an antiquated regulatory framework designed for the era of monopoly telephone service that would undermine today’s competitive broadband marketplace and disserve consumers, dissuade entrepreneurs and inject unnecessary regulatory uncertainty threatening future dynamism in the broadband ecosystem.
— IIA Co-Chairman Bruce Mehlman
Reliance on Section 706, we argue, enables proper balance between necessary regulation to advance such goals as consumer protection and the imperative of attracting new investment to broadband to ensure further deployments of ever-fast systems that will support the applications of tomorrow. It is also the only way to ensure the innovation and continued explosive growth necessary to meet the ambitious goals of the National Broadband Plan.
The FCC already has enough authority under Section 706 to keep the Internet open with high-speed access for consumers and flexibility for entrepreneurs to innovate. Reclassifying broadband as a utility is like using a sledgehammer when a screwdriver will suffice. Title II is a blunt instrument that might break the Internet’s record of innovation and investment, while Section 706 is a better tool for fixing any problems that arise.
— IIA Co-Chairman Jamal Simmons
Title II, we also note, was not the primary catalyst behind the massive investment that occurred following the enactment of the 1996 Telecommunications Act, and that if regulators wanted an example of the chilling effect Title II could have on broadband, Europe offers a good example.
European policies built on extensive, public utility-style regulation and wholesale network unbundling have depressed broadband investment and access to next-generation networks overseas, as fully 82% of U.S. consumers enjoy access to high-speed broadband networks compared to only 54% of European consumers. Section 706 fortunately offers us an alternative path that will enable the private investment necessary to deploy modern broadband networks—wireline, wireless, and cable—and continue the virtuous circle fueled by light-touch regulation of the Internet ecosystem.
The Progressive Policy Institute has released its annual list of “Investment Heroes,” and at the top of the list are AT&T and Verizon, with estimated capital expenditures of more than $20 billion and $15 billion, respectively. That’s a lot of investment dollars, but as Hal Singer warns in Forbes, current regulations being considered by the FCC could severely hurt that investment going forward:
This week, PPI released its third annual report on “U.S. Investment Heroes,” authored by Diana Carew and Michael Mandel, which analyzes publicly available information to rank non-financial companies by their capital spending in the United States. Once again, AT&T and Verizon ranked first and second, respectively, with $21 and $15 billion in domestic investment in 2013. Comcast, Google, and Time Warner also made PPI’s top 25 list, each investing over $3 billion. The authors credit investment in the core of the network with sparking the rise of the “data-driven economy.”
In light of the results from prior experiments in rate regulation, the FCC should eschew calls to regulate ISPs under Title II. The incremental benefits (potentially barring fast lanes) are dubious, but the incremental costs (less investment at the core of the network) would be economically significant. Given its size and contribution to the U.S. economy in terms of jobs and productivity, even a small decline in core investment in response to rate regulation would impose social costs beyond the immediate harm to broadband consumers from an atrophying network.
That’s the amount of investment broadband providers have made in networks since 1996, according to a new report from the US Telecom association. Obviously, that’s a lot of investment, and as the paper shows, all those dollars have made a huge difference when it comes broadband access and speeds. Some highlights:
• Over 95% of Americans can access fixed broadband, with 88% having at least two providers to choose from.
• 99% of Americans have broadband at speeds 10 mbps or more available to them.
• 99% also have mobile broadband available, with 97% able to choose from at least three providers.
• Broadband investment jumped to 10% — from $69 billion in 2012 to $75 billion in 2013.
While those are some impressive numbers across the board, It’s not all rosy news from US Telecom. As the association notes in its press release:
Ongoing investment in all broadband networks, wireline and wireless, will be essential to accommodate the expected data traffic growth and enable the continued adoption of more powerful information and communications technologies and applications. Economically efficient investment in U.S. broadband infrastructure will pay off in the form of consumer welfare, business productivity, and global competitiveness. As noted in USTelecom’s blog on investment, a move to stricter Title II regulation could inject unnecessary uncertainty and negative pressures into the broadband investment equation. This poses risks to broadband investment, and also to the so-called “virtuous cycle” of innovation among broadband and related information technology industries.
Investment in broadband matters, which makes any move away from the “light regulatory touch” in place since 1996 all the more problematic. Can the FCC keep the Internet open without putting all this investment at risk? The Progressive Policy Institute thinks so. According to their recent paper, “The Best Path Forward on Net Neutrality,” they’re confident the FCC can achieve its goals by leaning on its Section 706 authority.
Late last week, Bret Swanson of Entropy Economics (he’s also one of our Broadband Ambassadors) penned a column for Forbes breaking down the negative effects Title II regulations could have on the growing industry of web video. An excerpt:
Broadband and mobile networks and the core Internet have all grown up outside of Title II. The lack of interference from Washington is a big factor in their success (and why the heavily regulated Title II telephone network is withering away).
A Title II reclassification of broadband would throw broadband into a regulatory world it’s never seen; undermine the economics and existing technical and business arrangements of the entire ecosystem; and ignite a decade’s worth of strident litigation. Not only would Title II disrupt today’s broadband, video, and Web markets, it would also prevent this highly dynamic system from finding its way toward the new technologies, better products, lower prices, and unseen content innovations of the future.
A new paper from Progressive Policy Institute Senior Fellow Hal Singer and Brookings Non-Resident Senior Fellow Robert Litan examines the effect Title II regulations could have on investment and the Internet ecosystem as a whole. An excerpt:
Imposing public-utility style regulation on Internet access would dampen innovation and investment in more, faster broadband. We propose the FCC implement the same case-by-case process to adjudicate discrimination complaints it has established for cable companies to broadband providers.
It’s not just investment from traditional ISPs that could be negatively effected, Singer and Litan also warn. Many companies that provide services on the Internet could also find themselves among those regulated under Title II:
Reclassifying Internet access as a “telecommunications service” under Title II, as supplemented by the provisions of the Telecommunications Act of 1996, opens up the possibility that other tech services meet the same test. The clearest example would be Google’s ultra-fast broadband service, Google Fiber, which the company is gradually rolling out. But it does not stop there. There is a very slippery slope from subjecting ISPs as common carriers to including other forms of Internet transmissions, because they arguably use “telecommunications services,” the legal hook in Title II for its application.
For example, why not then include within the ambit of a telecommunications service the linkage to an advertiser’s website that Google and Microsoft provide for users of their search engines? By clicking on links, the search engine uses the Internet backbone; if Internet access is a “telecommunications service,” because it provides “transmissions,” then so, too, are the search engines. The same logic potentially applies to Amazon’s Kindle book reader device and service, because its owners are able to download books from Amazon, but only because they are connected to a wireless provider of Internet access in the process. Indeed, what would stop the FCC from classifying as Title II common carriers all device makers that have a connection to an ISP?
It’s not all concern and dire warnings in Singer and Litan’s paper, however, as the duo argue the FCC should focus its efforts on something already within its power:
[W]e think the FCC should eschew the heavy-handed approach of Title II regulation, and lean instead on its Section 706 authority to regulate potential abuses by ISPs on a case-by-case basis. Investment across both edge and content providers will be greater compared to Title II, and the FCC can avoid any unintended consequences such as creeping regulation that encompasses content providers or other ISP services.
In the Washington Post, Larry Downes completely dismantles the argument made by those pushing for regulating broadband under Title II. An excerpt:
So why the hysteria? Many of the groups involved in what became a very personal campaign against Wheeler have long sought to turn the Internet into a regulated utility or even to nationalize it outright. Any real or perceived threat to “the Internet as we know it,” even a manufactured crisis, is simply another opportunity to push an agenda Congress wisely rejected in 1996.
The extremists don’t want the FCC to adopt any rules. They want the agency, instead, to take over. That’s the hammer; net neutrality is just a convenient nail.
Yet much of the mainstream media, including The New York Times and US News, continue to validate the non-conspiracy. They continue to accept, for example, that Wheeler is proposing to “authorize” practices dangerous to the Internet (again, the rules only prohibit practices), to “end” existing net neutrality rules (there are none), and even to allow ISPs to “block” content at their discretion (the no-blocking rule explicitly prohibits this, as does antitrust law).
If you care about the future of the Internet, Downes column is required reading.
At Tech Policy Daily, Babette Boliek clears up some confusion about Title II regulations:
So I say to you NYT, and others under the same misted view of Title II, “I do not think it means what you think it means.” Title II treats telephone services as a common carrier. It is not about content, it is about prices – namely the regulation of prices. The “unjust and unreasonable” language the NYT points to is about prices. For example, if the post office (the quintessential common carrier) offers shipping services to a beef producer, they have to make those services available to other beef producers. Title II does not speak to the instance where beef producers are not offered delivery services (or, by analogy, certain content not allowed), and it does not prohibit the beef producer from asking for special treatment of her beef – like refrigeration or overnight delivery.
Given all the faulty information being tossed around about regulating broadband under Title II, Patrick Brogan of US Telecom has posted a blog correcting inaccuracies being spread by some of the biggest interest groups. An excerpt:
In comments filed at the Federal Communications Commission (FCC) and in an earlier blog, net neutrality proponent Free Press, is making a puzzling and questionable claim that broadband investment will not be harmed by reclassification to common carrier regulation under Title II of the Communications Act. In fact, Free Press makes the incorrect claim that “Title II is good for the economy” and actually promotes broadband investment.
On the contrary, a reclassification to Title II would create unambiguously negative pressures on broadband provider investment that would not exist absent reclassification. The question is one of degree and the relative weight compared to opposing forces, like demand and competition. At a minimum, Title II reclassification seems unnecessarily risky and potentially counterproductive for policy goals dependent on more investment, such as expanding deployment to all parts of the country and enhancing U.S. global competitiveness.
Over at The Grio, our Co-Chairman Jamal Simmons has penned an op-ed on the perils of reclassifying broadband under Title II. An excerpt:
Government should help set standards for business, such as a worthwhile minimum wage for workers. Defining the boundaries of acceptable behavior like emission standards is good too, but it doesn’t make much sense to have regulators in the middle of each team’s huddle signing off on plays. The market requires more flexibility than that. Uncle Sam should mostly get out of the way to let businesses compete.
Those in support of Title II argue that the fears of many business owners can be allayed by the FCC’s power to “forbear” from enforcing some of the Title II provisions. That exercise of restraint, however, doesn’t bind future commissions from rescinding that grant of forbearance.
Once the regulatory bear is out of its cage, there is no telling where it would stop. Some companies have proposed having wireless broadband service come under the umbrella of Title II also. Until now, the FCC has kept those services in a separate category that allows innovation and investment to flourish.
Last week, our Co-Chairman Larry Irving appeared on Government Matters to discuss Title II and the very real risks it could have on investment, innovation, and the entire Internet ecosystem. Check it out.
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As a condition of your use of the Internet Innovation Alliance Web Site, you warrant to Internet Innovation Alliance that you will not use the Internet Innovation Alliance Web Site for any purpose that is unlawful or prohibited by these terms, conditions, and notices. You may not use the Internet Innovation Alliance Web Site in any manner which could damage, disable, overburden, or impair the Internet Innovation Alliance Web Site or interfere with any other party’s use and enjoyment of the Internet Innovation Alliance Web Site. You may not obtain or attempt to obtain any materials or information through any means not intentionally made available or provided for through the Internet Innovation Alliance Web Sites.
USE OF COMMUNICATION SERVICES
The Internet Innovation Alliance Web Site may contain bulletin board services, chat areas, news groups, forums, communities, personal web pages, calendars, and/or other message or communication facilities designed to enable you to communicate with the public at large or with a group (collectively, “Communication Services”), you agree to use the Communication Services only to post, send and receive messages and material that are proper and related to the particular Communication Service. By way of example, and not as a limitation, you agree that when using a Communication Service, you will not:
Defame, abuse, harass, stalk, threaten or otherwise violate the legal rights (such as rights of privacy and publicity) of others.
Publish, post, upload, distribute or disseminate any inappropriate, profane, defamatory, infringing, obscene, indecent or unlawful topic, name, material or information.
Upload files that contain software or other material protected by intellectual property laws (or by rights of privacy of publicity) unless you own or control the rights thereto or have received all necessary consents.
Upload files that contain viruses, corrupted files, or any other similar software or programs that may damage the operation of another’s computer.
Advertise or offer to sell or buy any goods or services for any business purpose, unless such Communication Service specifically allows such messages.
Conduct or forward surveys, contests, pyramid schemes or chain letters.
Download any file posted by another user of a Communication Service that you know, or reasonably should know, cannot be legally distributed in such manner.
Falsify or delete any author attributions, legal or other proper notices or proprietary designations or labels of the origin or source of software or other material contained in a file that is uploaded.
Restrict or inhibit any other user from using and enjoying the Communication Services.
Violate any code of conduct or other guidelines which may be applicable for any particular Communication Service.
Harvest or otherwise collect information about others, including e-mail addresses, without their consent.
Violate any applicable laws or regulations.
Internet Innovation Alliance has no obligation to monitor the Communication Services. However, Internet Innovation Alliance reserves the right to review materials posted to a Communication Service and to remove any materials in its sole discretion. Internet Innovation Alliance reserves the right to terminate your access to any or all of the Communication Services at any time without notice for any reason whatsoever.
Internet Innovation Alliance reserves the right at all times to disclose any information as necessary to satisfy any applicable law, regulation, legal process or governmental request, or to edit, refuse to post or to remove any information or materials, in whole or in part, in Internet Innovation Alliance’s sole discretion.
Always use caution when giving out any personally identifying information about yourself or your children in any Communication Service. Internet Innovation Alliance does not control or endorse the content, messages or information found in any Communication Service and, therefore, Internet Innovation Alliance specifically disclaims any liability with regard to the Communication Services and any actions resulting from your participation in any Communication Service. Managers and hosts are not authorized Internet Innovation Alliance spokespersons, and their views do not necessarily reflect those of Internet Innovation Alliance.
Materials uploaded to a Communication Service may be subject to posted limitations on usage, reproduction and/or dissemination. You are responsible for adhering to such limitations if you download the materials.
MATERIALS PROVIDED TO Internet Innovation Alliance OR POSTED AT ANY Internet Innovation Alliance WEB SITE
Internet Innovation Alliance does not claim ownership of the materials you provide to Internet Innovation Alliance (including feedback and suggestions) or post, upload, input or submit to any Internet Innovation Alliance Web Site or its associated services (collectively “Submissions”). However, by posting, uploading, inputting, providing or submitting your Submission you are granting Internet Innovation Alliance, its affiliated companies and necessary sublicensees permission to use your Submission in connection with the operation of their Internet businesses including, without limitation, the rights to: copy, distribute, transmit, publicly display, publicly perform, reproduce, edit, translate and reformat your Submission; and to publish your name in connection with your Submission.
No compensation will be paid with respect to the use of your Submission, as provided herein. Internet Innovation Alliance is under no obligation to post or use any Submission you may provide and may remove any Submission at any time in Internet Innovation Alliance’s sole discretion.
By posting, uploading, inputting, providing or submitting your Submission you warrant and represent that you own or otherwise control all of the rights to your Submission as described in this section including, without limitation, all the rights necessary for you to provide, post, upload, input or submit the Submissions.
THE INFORMATION, SOFTWARE, PRODUCTS, AND SERVICES INCLUDED IN OR AVAILABLE THROUGH THE Internet Innovation Alliance WEB SITE MAY INCLUDE INACCURACIES OR TYPOGRAPHICAL ERRORS. CHANGES ARE PERIODICALLY ADDED TO THE INFORMATION HEREIN. Internet Innovation Alliance AND/OR ITS SUPPLIERS MAY MAKE IMPROVEMENTS AND/OR CHANGES IN THE Internet Innovation Alliance WEB SITE AT ANY TIME. ADVICE RECEIVED VIA THE Internet Innovation Alliance WEB SITE SHOULD NOT BE RELIED UPON FOR PERSONAL, MEDICAL, LEGAL OR FINANCIAL DECISIONS AND YOU SHOULD CONSULT AN APPROPRIATE PROFESSIONAL FOR SPECIFIC ADVICE TAILORED TO YOUR SITUATION.
Internet Innovation Alliance AND/OR ITS SUPPLIERS MAKE NO REPRESENTATIONS ABOUT THE SUITABILITY, RELIABILITY, AVAILABILITY, TIMELINESS, AND ACCURACY OF THE INFORMATION, SOFTWARE, PRODUCTS, SERVICES AND RELATED GRAPHICS CONTAINED ON THE Internet Innovation Alliance WEB SITE FOR ANY PURPOSE. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, ALL SUCH INFORMATION, SOFTWARE, PRODUCTS, SERVICES AND RELATED GRAPHICS ARE PROVIDED “AS IS” WITHOUT WARRANTY OR CONDITION OF ANY KIND. Internet Innovation Alliance AND/OR ITS SUPPLIERS HEREBY DISCLAIM ALL WARRANTIES AND CONDITIONS WITH REGARD TO THIS INFORMATION, SOFTWARE, PRODUCTS, SERVICES AND RELATED GRAPHICS, INCLUDING ALL IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT.
Internet Innovation Alliance reserves the right, in its sole discretion, to terminate your access to the Internet Innovation Alliance Web Site and the related services or any portion thereof at any time, without notice. GENERAL To the maximum extent permitted by law, this agreement is governed by the laws of the State of Washington, U.S.A. and you hereby consent to the exclusive jurisdiction and venue of courts in King County, Washington, U.S.A. in all disputes arising out of or relating to the use of the Internet Innovation Alliance Web Site. Use of the Internet Innovation Alliance Web Site is unauthorized in any jurisdiction that does not give effect to all provisions of these terms and conditions, including without limitation this paragraph. You agree that no joint venture, partnership, employment, or agency relationship exists between you and Internet Innovation Alliance as a result of this agreement or use of the Internet Innovation Alliance Web Site. Internet Innovation Alliance’s performance of this agreement is subject to existing laws and legal process, and nothing contained in this agreement is in derogation of Internet Innovation Alliance’s right to comply with governmental, court and law enforcement requests or requirements relating to your use of the Internet Innovation Alliance Web Site or information provided to or gathered by Internet Innovation Alliance with respect to such use. If any part of this agreement is determined to be invalid or unenforceable pursuant to applicable law including, but not limited to, the warranty disclaimers and liability limitations set forth above, then the invalid or unenforceable provision will be deemed superseded by a valid, enforceable provision that most closely matches the intent of the original provision and the remainder of the agreement shall continue in effect. Unless otherwise specified herein, this agreement constitutes the entire agreement between the user and Internet Innovation Alliance with respect to the Internet Innovation Alliance Web Site and it supersedes all prior or contemporaneous communications and proposals, whether electronic, oral or written, between the user and Internet Innovation Alliance with respect to the Internet Innovation Alliance Web Site. A printed version of this agreement and of any notice given in electronic form shall be admissible in judicial or administrative proceedings based upon or relating to this agreement to the same extent an d subject to the same conditions as other business documents and records originally generated and maintained in printed form. It is the express wish to the parties that this agreement and all related documents be drawn up in English.
COPYRIGHT AND TRADEMARK NOTICES:
All contents of the Internet Innovation Alliance Web Site are: and/or its suppliers. All rights reserved.
The names of actual companies and products mentioned herein may be the trademarks of their respective owners.
The example companies, organizations, products, people and events depicted herein are fictitious. No association with any real company, organization, product, person, or event is intended or should be inferred.
Any rights not expressly granted herein are reserved.
NOTICES AND PROCEDURE FOR MAKING CLAIMS OF COPYRIGHT INFRINGEMENT
Pursuant to Title 17, United States Code, Section 512(c)(2), notifications of claimed copyright infringement under United States copyright law should be sent to Service Provider’s Designated Agent. ALL INQUIRIES NOT RELEVANT TO THE FOLLOWING PROCEDURE WILL RECEIVE NO RESPONSE. See Notice and Procedure for Making Claims of Copyright Infringement.