Bruce Mehlman is a leader in Washington DC, helping Fortune 500 companies and innovative start-ups understand, anticipate and navigate the public policy environment and trends likely to impact the global marketplace through the bipartisan lobbying firm he founded, Mehlman Vogel Castagnetti. He concurrently serves as Executive Director of the Technology CEO Council and Co-Chairman of the Internet Innovation Alliance.
Mehlman previously served as Assistant Secretary of Commerce for Technology Policy. At Commerce Mehlman worked closely with leaders from industry, federal labs, universities and governments on issues impacting technology creators and users including innovation policy, broadband, biotechnology, tech-led economic growth, technology transfer, nanotechnology and workforce policy.
Mehlman worked as telecommunications policy counsel for Cisco Systems, policy director and general counsel to the House Republican Conference under Rep. J.C. Watts (R-OK), general counsel to the National Republican Congressional Committee, and as a commercial litigation attorney in a major Washington law firm. He serves on the Board of One Economy Corporation, and the Advisory Boards of the NanoBusiness Alliance and the Princeton Plasma Physics Lab.
Bruce's Blog
Thursday, September 02
The FCC’s Public Notice
By Bruce
Yesterday, the FCC announced it was delaying a decision on Title II regulations for Internet providers in order to seek more comment on two sticking points in the debate: managed services and whether wireless should be included in new regulations.
Sara Jerome at the Hill reports that the FCC will likely seek more comment on proposed net neutrality regulations. Specifically, managed services and whether wireless traffic should be included.
From a must-read editorial in today’s Washington Post on the perils of regulating Internet providers:
The FCC stands poised to reclassify broadband service providers as content carriers, a category that would subject them to the same sort of regulation that telephone companies are saddled with, even giving the FCC the ability to set rates. The agency’s chairman says that the FCC won’t use this power—but this could change in another administration. Such a move would be a serious step backward.
A better route would be legislative enactment of something like the Google-Verizon plan, with an emphasis on transparency about decisions that providers are making. Giving the FCC the authority to nudge things in the right direction will be a good first step. As the Internet evolves, the nature of needed oversight will evolve as well. Establishing a clearly limited power to take action against anti-competitive violations, rather than encumbering this vital sector with detailed and prescriptive regulation, is the sensible approach.
The latest report from the Pew Center finds that nationwide home broadband adoption has increased — from 63 percent last year, to 66 percent so far in 2010. That’s the good news. The bad news, the Washington Post reports, is that support for the FCC’s National Broadband Plan is relatively lackluster:
When asked their views about efforts by the government to provide affordable high-speed Internet access to everyone in the country, 53 percent said the government shouldn’t attempt the effort or that it was “not too important” a priority, according to the Pew Center report. The phone survey of 2,252 adults comes as the Obama Administration and Federal Communications Commission have made it a priority to bring broadband Internet connections that are faster and more affordable to all homes.
Obviously, more needs to be done to educate the public at large that bringing broadband to everyone will benefit America as a whole. Unfortunately, the FCC’s current Title II distractions may be getting in the way of that effort.
When Google and Verizon announced their agreed upon framework for net neutrality earlier this week, one of the loudest complaints from net neutrality advocates was the plan’s exclusion of wireless broadband outside of transparency rules. But as Fortune Tech reports, the realities of wireless broadband technology — which is still in its infancy — make excluding it from strict net neutrality rules the best option:
If wireless carriers using today’s technology wanted to mimic the capacity of DSL or cable, they’d have to triple the number of towers for each subscriber. Upgrading the network is neither simple nor quick. While it only takes a minute for one anime-over-Android addict in a neighborhood to bring down everyone’s cell service, it takes three years in some cities for a new cell tower to get approved. The carriers want to be able to control their traffic; customers should, too.
Or, as Bernstein Research analyst (and IIA Broadband Ambassador) Craig Moffett describes later in the article:
“Someone gave a very good example… ‘My mother just got a pacemaker that will wirelessly contact the hospital if she suffers from cardiac arrhythmia. Are you telling me it would be illegal to prioritize that traffic over a video of a squirrel on waterskis?’”
For more on the challenges of wireless broadband, see this smart piece from Larry Dignan at ZDNet.
Forget all that speculation about data centers. It turns out, the secret negotiations between Google and Verizon were about finding common ground on net neutrality. From a post on Google’s Public Policy Blog:
Crafting a compromise proposal has not been an easy process, and we have certainly had our differences along the way. But what has kept us moving forward is our mutual interest in a healthy and growing Internet that can continue to be a laboratory for innovation. As policy makers continue to formulate the rules of the road, we hope that other stakeholders will join with us in providing constructive ideas for an open Internet policy that puts consumers in charge and enhances America’s leadership in the broadband world. We stand ready to work with the Congress, the FCC and all interested parties to do just that.
The net neutrality agreement — which, outside of “transparency,” would not apply to wireless services — takes steps to define the FCC’s regulatory powers, including the ability to levy a $2 million fine for bad actions. It also lets broadband providers strike deals for “differentiated online services.” In short, there could be a “public Internet” where all traffic is treated equally, and a “private” Internet where companies continue to pay for special services. Lastly, the agreement proposes reforming the Federal Universal Service Fun to deploy broadband.
The FCC is reportedly looking into the agreement. Given that it addresses two of the concerns the FCC has following its loss to Comcast in federal court — namely, its powers to safeguard broadband services for consumers and ability to move ahead with the National Broadband Plan — it will be interesting to see their reaction, along with the reaction from hardcore net neutrality advocacy groups and other stakeholders.
Attached to [the] Federal Medical Assistance Percentage Bill was an amendment which removed “$302 million in Recovery Act funding provided to the Department of Commerce for broadband grants.” The bill passed the Senate 61-38.
In the wake of yesterday’s story — and denials — that Google and Verizon are reportedly working on a deal that could render all the net neutrality talk moot, the Wall Street Journal (among others) reports that the closed door meetings being held at the FCC have been called off:
The meetings, which involved Internet and telecommunications giants, sought to give the Federal Communications Commission authority to act as an Internet traffic cop without the need to adopt controversial wholesale changes to the law.
The agency abandoned the talks a day after news reports that two participants, Verizon Communications Inc. and Google Inc., had reached a separate agreement on Internet traffic rules that would allow the phone giant to carry some broadband traffic at faster speeds.
People familiar with the situation said the talks were cut off abruptly. These people said FCC officials felt the Verizon-Google deal undermined their broader talks. The companies haven’t publicly released the agreement.
The Hill reports that Senator Bob Nelson (D-Neb.) has added his name to the growing list opposing the FCC’s efforts to reclassify broadband under TItle II:
Nelson said Genachowski should not change the regulatory status of broadband services from that of a lightly-regulated information service to the more heavily-regulated telecommunications service, as Genachowski proposed in May.
“I am concerned by any unilateral actions which may be taken by the FCC when it comes to how broadband networks are regulated,” he said in the letter.
The big news of the day is the New York Times report that two Internet giants are close to a deal that could have a major effect on net neutrality:
Google and Verizon, two leading players in Internet service and content, are nearing an agreement that could allow Verizon to speed some online content to Internet users more quickly if the content’s creators are willing to pay for the privilege.
The charges could be paid by companies, like YouTube, owned by Google, for example, to Verizon, one of the nation’s leading Internet service providers, to ensure that its content received priority as it made its way to consumers. The agreement could eventually lead to higher charges for Internet users.
Such an agreement could overthrow a once-sacred tenet of Internet policy known as net neutrality, in which no form of content is favored over another. In its place, consumers could soon see a new, tiered system, which, like cable television, imposes higher costs for premium levels of service.
“I don’t want to announce things we haven’t announced yet,” [Google CEO Eric Schmidt] said. “We have been talking to Verizon for a long time about trying to get an agreement on what the definition of Net neutrality is.”
Schmidt said his belief is that the core of Net neutrality is the idea that network providers shouldn’t be able to favor one particular provider of content over another, but he said that networks should be able to prioritize a content medium, say, voice over video.
“People get confused about Net neutrality,” Schmidt said. “I want to make sure that everybody understands what we mean about it. What we mean is that if you have one data type, like video, you don’t discriminate against one person’s video in favor of another. It’s OK to discriminate across different types.
Last week, Reps. Fred Upton (R-Mich) and Gene Green (D-Tex) co-submitted a resolution asking the FCC to step back from regulating the Internet under Title II. From The Hill:
“Currently, Congressional Leadership is working on crafting targeted legislation aimed at broadband Internet. It is important that the FCC gives Congress time necessary to complete its work,” Green said in a statement.
48 congressional leaders are listed as co-sponsors of the resolution.
Meanwhile, two more net neutrality supporters — Reps. Ben Chandler (D-Ky) and Alan Grayson (D-Fla) — sent a joint letter to the FCC stating that Congress, and not the Commission, should be the ones to tackle the legalities of broadband service.
Last week, Rep. John Dingell (D-Mich) expressed frustrations with FCC Chairman Julius Genachowski:
“I find it wholly frustrating that Chairman Genachowski, after nearly two months, still has not responded to my questions about the classification of broadband Internet access services,” Dingell said in his letter.
Dingell added that he has “serious concerns about the FCC’s proposed course of action” and that Congress has “intense interest” in Genachowski’s plans.
Since then, The Hill reports, Chairman Genachowski has responded to Rep. Dingell — but the reply failed to mollify the Representative’s concerns:
Dingell said in a letter dated Wednesday that the FCC should “abandon” its effort to increase its authority over Internet service providers.
“Unfortunately, the paucity of substantive responses to my [questions] has served only to substantiate my fear that the commission’s proposed path with respect to the regulation of broadband is based on unsound reasoning and an incomplete record, and is thus fraught with legal risk,” Dingell said.
He said the commission should instead look to Congress to grant it more power.
“In this way, the Congress and the commission may ensure the establishment of a steadfast legal foundation for an open Internet,” Dingell wrote.
The discussion over allocating current government-used spectrum for private use continues, with House Homeland Security Emergency Communications Subcommittee Chairwoman Laura Richardson (D-Calif.) warning the FCC yesterday it needs to move forward carefully. Reports Tech Daily Dose:
“The plan contends that public safety would be able to leverage commercial innovation, economies of scale, and additional spectrum via priority access and roaming agreements on commercial networks,” Richardson said. “These are promising attributes, but the subcommittee needs more assurances that these features will provide adequate resources and capacity for public safety to meet its mission-critical needs.”
As part of the FCC’s proposal to free up more critical spectrum, private industry would help build a communications network for first responders. The Department of Homeland Security is warming to the idea, but with a “number of significant caveats.”
As reported yesterday, Senator Jim DeMint (R-SC) and six other Republican senators are sponsoring a bill to curb the FCC’s ability to regulate the Internet under Title II. Reports CNet:
“The FCC’s rush to takeover the Internet is just the latest example of the need for fundamental reform to protect consumers,” DeMint said in a statement. Without this legislation, DeMint said, the FCC will “impose unnecessary, antiquated regulations on the Internet.”
The new bill—called the Freedom for Consumer Choice Act, or FCC Act—doesn’t eliminate the FCC’s power over broadband providers. But that power would be narrowed in scope, and come to resemble the antitrust enforcement power of the Department of Justice.
One section, for instance, lets the FCC define “unfair methods of competition” and levy “requirements” on the industry, but only if marketplace competition is inadequate.
From a new study conducted by the Progressive Policy Institute entitled The Coming Communications Boom? Jobs, Innovation, and Countercyclical Regulatory Policy:
There’s little doubt that a permissive regulatory regime for derivatives and securitization helped foster the housing boom, creating millions of jobs in construction and finance. But it also set the stage for the financial crisis that eventually sent unemployment soaring. Right now regulators seems intent on tightening the regulatory regime on the communications sector, despite it being one of the few growth sectors in the economy, and despite the fact that communications-related industries were completely blameless in the housing boom and bust. The Federal Communications Commission (FCC) is considering imposing tighter regulations on broadband, bringing it under the same common carrier rules that govern older phone networks. That would be part of a move towards net neutrality, a policy that would require broadband providers to follow rules about what kind of service and products they could offer. There are different approaches to net neutrality, but the strictest version would be like requiring airlines to sell all tickets to a particular destination at the same price, no matter what the time of day or when the ticket was bought.
The debate over net neutrality is intense. But whether or not you think that such a move is a good idea, it seems unlikely that such regulations would boost investment or employment in the telecom industry. The experience of the airline industry suggests that differentiated pricing and service is an essential part of keeping a high-fixed-cost industry running.
The Hill reports that House Majority Leader Steny Hoyer (D-Md.) has joined the growing list of names who believe that Congress, and not the FCC, should clarify rules overseeing broadband.
In an op-ed for Roll Call, Rep. John Culberson (R-Tx) has some strong words for the FCC regarding its push to regulate the Internet under Title II:
The FCC cannot regulate the Internet without clear and unambiguous statutory authority from Congress, which it does not have. But instead of coming to Congress and asking for it, the FCC lawyered up and attempted to bend the rules to its liking.
As a member of the Appropriations Committee, I forcefully oppose spending our tax dollars on the legal misadventures of the FCC. I will be offering an amendment to prohibit funds from going to the FCC for the purpose of regulating the Internet in general. The courts have spoken, and their conclusion is that the FCC does not have the authority to do what it’s trying to do. Until that authority is granted by Congress, it has no business using tax dollars for this power grab.
Via Multichannel News, Rep. Joe Barton (R-Tex.) — the ranking member of the House Energy & Commerce Committee — had some strong words for the FCC regarding its Title II efforts:
“It is inexcusable that the FCC chairman is trying to reclassify broadband service under the pretext that the commission lacks authority to implement aspects of the national broadband plan when he should instead be focusing on bipartisan aspects of the plan that he clearly has authority to move on, such as reducing antiquated voice service subsidies.”
PC World talked with some telecom experts about the FCC’s move to regulate the Internet under Title II:
The move to reclassify broadband will create many years of legal uncertainty because of likely challenges to the FCC’s actions, said telecom lawyer Jonathan Nuechterlein, a partner at the Wilmer Hale law firm in Washington, D.C. “What the FCC is proposing to do here is create a lawyer’s paradise,” said Nuechterlein, a former deputy general counsel at the FCC. “They will send my kids to college and their kids to college.”
But Chris Wright, a partner in the Wiltshire and Grannis law firm and former general counsel at the FCC, disagreed. While Genachowski’s plan may not lead to immediate certainty for lawyers and investors, reclassifying broadband may give the FCC clearer legal authority than any attempts to continue to create broadband rules on a case-by-case basis, he said. The FCC, under its current limited authority, would probably “lose a lot” of legal cases when trying to implement its national broadband plan, released in March.
“It’s a lawyer’s paradise either way,” Wright said. “There is uncertainty. There will be considerable uncertainty for a long time.”
Via the Hill, FCC Chairman Julius Genachowski’s chief council and senior legal advisor, Bruce Gottlieb, has announced he will be leaving the commission in order to be general council for the Atlantic Media Company.
Commissioner Mignon Clyburn’s chief of staff Rick Kaplan will be succeeding him.
According to a report in The Hill, last Friday’s meeting on Capitol Hill between Internet stakeholders over Internet regulations yielded “little results.”
The groups are expected to try again later this month.
Via Broadband Breakfast, last week the House Appropriations Committee quietly rescinded $602 million from the broadband stimulus programs of the Commerce and Agriculture Departments. The cut came as part of an overall effort to funnel an additional $75 billion to the wars in Iraq and Afghanistan.
The Hill is reporting that Rep. Rick Boucher (D-Va.) is holding a surprise meeting today with Internet stakeholders about narrow legislation on broadband. Representatives from AT&T, Google, and Verizon are expected to participate.
The FCC has announced that Dr. Douglas Sicker —computer science professor at the University of Colorado at Boulder, and former chief of network technology for the FCC — is now chief technologist at the commission.
The United States isn’t the only nation wrestling with Internet regulations. Reports Tech Daily Dose:
The European Commission announced Wednesday that it has launched an examination into the issue of network neutrality that will look at such issues as whether Internet service providers should be allowed to adopt network management practices that prioritize certain types of content over others.
During the announcement, Neelie Kroes, European Commission Vice President for the Digital Agenda, pledged a thorough examination of the issue before moving forward:
“I am committed to keeping the Internet open and neutral. Consumers should be able to access the content they want… Content providers and operators should have the right incentives to keep innovating. But traffic management and net neutrality are highly complex issues. I do not assume that one approach or another should prevail.”
The Hill offers some nuggets from last week’s congressional meeting on the FCC and Internet regulations:
The parties discussed what powers the Federal Communications Commission (FCC) has over broadband service providers and whether it has enough authority to implement the National Broadband Plan, its strategy for expanding Internet access, according to sources in the meeting.
The participants also looked at what characteristics a possible net neutrality rule might have if targeted legislation were to be shaped, they said, but the usual disagreements on this remained intact.
The goal of this and subsequent meetings is to quickly find consensus on a “targeted broadband bill” that will define the FCC’s jurisdiction. The FCC is also holding meetings with Internet stakeholders.
The Hill reports on the closed-door discussion between the FCC, Internet content providers, and ISPs earlier this week. At issue was the so-called nondiscrimination rule:
Providers have lobbied hard to fend off such a rule, which might make it difficult for them to charge Internet companies more to move certain content and applications (such as high band-width programs) over their networks.
The disclosure filing also indicates that stakeholders hashed out whether such a rule would apply to wireless platforms, a topic dividing cable and wireless companies.
While the two sides were reportedly unable to reach an agreement, the fact that they’re willing to sit down to work things out encouraging.
The FCC’s closed door meeting yesterday with major Internet stakeholders didn’t sit well with groups pushing for heavier government involvement in the Internet. So yesterday afternoon, FCC Chief of Staff Ed Lazarus posted a letter to clarify the situation. From the letter:
Senior Commission staff are making themselves available to meet with all interested parties on these issues. To the extent stakeholders discuss proposals with Commission staff regarding other approaches outside of the open proceedings at the Commission, the agency’s ex parte disclosure requirements are not applicable. But to promote transparency and keep the public informed, we will post notices of these meetings here at blog.broadband.gov. As always, our door is open to all ideas and all stakeholders.
Meanwhile, Verizon CEO Ivan Seidenberg had some strong words about the FCC’s move to regulate the Internet under TItle II. The Wall Street Journal reports:
“We are very concerned that, in attempting to address legitimate issues about access to the Internet, the FCC has proposed an unimaginative and overbearing set of rules that essentially tries to retrofit a new industry into an old framework and expand their reach well beyond what is necessary,” Seidenberg said Tuesday at the Economic Club of Washington, D.C.
“As we’ve said – and as we’ve demonstrated – communications companies will continue to work with the Commission and the other players in the Internet space to protect customers and ensure an open and robust broadband environment,” he continued.
Just as Congressional leaders are set to begin closed door meetings about Internet regulations, the Wall Street Journal reports the FCC is holding meetings of its own:
Edward Lazarus, the chief of staff at the Federal Communications Commission, and other senior FCC staffers are holding closed-door meetings with a small group of lobbyists representing Internet providers, including AT&T Inc., Verizon Communications Inc., the National Cable & Telecommunications Association, and Internet services companies such as Google Inc. and Skype Ltd.
The negotiations revolve around a possible compromise that would avoid wholesale changes in how the FCC regulates Internet lines but still give the agency the ability to enforce “net neutrality” rules, which would prevent Internet providers from deliberately slowing or blocking Internet traffic.
During a two-and-a-half-hour meeting Monday, the lobbyists discussed issues that their companies might be able to agree on but reached no consensus, according to people with knowledge of the meeting.
More meetings — with more stakeholders — will reportedly be happening throughout the week.
A group of bipartisan leaders overseeing America’s communications policies have announced they will be holding a series of sessions about overhauling communication laws. From the Senate Committee on Commerce, Science, and Transportation release:
The leaders include: Senator John D. Rockefeller IV, Chairman, and Senator Kay Bailey Hutchison, Ranking Member, of the Senate Committee on Commerce, Science, and Transportation. Rep. Henry A. Waxman, Chairman, and Rep. Joe Barton, Ranking Member, of the House Committee on Energy and Commerce. Senator John F. Kerry, Chairman, and Senator John Ensign, Ranking Member, of the Senate Subcommittee on Communications, Technology, and the Internet. Rep. Rick Boucher, Chairman, and Rep. Cliff Stearns, Ranking Member, of the House Subcommittee on Communications, Technology, and the Internet.
The first set of staff-led stakeholder sessions will address broadband regulation and FCC authority, with a focus on protecting consumers and promoting broadband investment. The first session will be held on June 25, 2010. After these sessions are concluded, additional stakeholder meetings will be convened to address spectrum policy and broadband deployment and adoption.
This is an encouraging first step to bring much-needed legal certainty to America’s outdated communications laws. And even though a list of interests who will have a seat at the table has yet to be released, it’s also encouraging that the committee has pledged to bring together a diverse group of stakeholders.
Update: The Hill is reporting that activist group Free Press, which wants much greater government involvement in the Internet, has been told it has been invited to participate. Hopefully the committee will expand the range of participants soon.
IIA has espoused the same formula for 6 years now: minimize regulation & politics to maximize investment, innovation and competition. The Title II maneuver proposed by the FCC today seems more like a political solution to a political problem rather than a practical measure to align old regulations with new technologies and market realities. A bipartisan majority clearly sees the need for the FCC to slow down and Congress to step up in a focused and targeted way.
As we’ve heard from a majority of elected officials, what’s needed now is clear guidance to regulators that comes from thoughtful debate and narrow and considered policy decisions by elected officials in Congress and the Administration. With thoughtful bipartisan action, we can advance the mission of delivering high-speed Internet to every American and build world-class broadband networks that make our country a better, more prosperous, and fairer society.
Tech Daily Dose notes that Democratic opposition to the FCC’s proposed Title II regulations continues to grow in both chambers of Congress, with the tally now standing at 77 members.
Meanwhile, The Hill reports that a bipartisan group of 22 senators sent a letter to FCC Chairman Julius Genachowski last week complaining that the Commission’s National Broadband Plan — which risks being forgotten amid all the Net Neutrality and Title II talk — treats rural areas as “second class”:
Among those who signed last week’s letter to Chairman Julius Genachowski were Democratic Sens. Byron Dorgan (N.D.), Patrick Leahy (Vt.), Herb Kohl (Wis.), and Max Baucus (Mont.) and Republican Sens. Chuck Grassley (Iowa) and John Barrasso (Wyo.).
It follows a similar House effort last month in which a bipartisan group of 42 members expressed opposition to parts of the National Broadband Plan, the FCC’s decade-long agenda for getting everyone in the U.S. online and boosting broadband speeds across the country.
Both letters charged that the agency is not ambitious enough with its broadband goals for rural America, especially in comparison with its targets for cities.
In an opinion piece for Multichannel News, Gregary Garre — chair of the Supreme Court, and former Solicitor General of the United States — warns that the FCC is over-stepping its legal boundaries by attempting to regulate the Internet under Title II:
Instead of tying itself into knots trying to conceive a jurisdictional basis for regulating broadband Internet access, the FCC would do well to recognize its own inherent limits. The constitution vests “all” legislative authority in the Congress, and all administrative agencies have only the rule-making authority that is delegated to them by the Congress.
The problem for the FCC is that Congress has not authorized the FCC to regulate broadband Internet access. Several bills have been introduced to give the agency that authority. But none has passed. Instead, Congress has repeatedly sought to ensure a free market for Internet services “unfettered by federal or state regulation.”
With the net neutrality debate still percolating in Washington D.C., a number of tech heavy hitters have announced they’re joining together in an attempt to reach consensus on network management protocols. From the Washington Post:
The Technical Advisory Group, formed by AT&T, Comcast, Google, Intel, Microsoft and Verizon, said it will consist of engineers and will be led by former Federal Communications Commission CTO Dale Hatfield. Their intention is to minimize disputes over policy questions such as how broadband providers can manage traffic on their networks in the context of the FCC’s push for new net neutrality rules.
Their agreement also comes amid a raging debate over FCC Chairman Julius Genachowski’s push to assert greater authority over broadband service providers by redefining Internet access as a telecommunications service. Analysts say the FCC could welcome voluntary commitments from the industry to meet its cornerstone objectives on broadband policy. The agency’s role as guardian over broadband Internet services was tested by a court case brought by Comcast on a previous net neutrality sanction.
In an op-ed for AOL News, former FCC commissioner Deborah Taylor Tate cautions the FCC’s current push Internet regulations:
During this continued and challenging economic period for most Americans, the Congress and the FCC should look to the recent and extraordinary successes the Internet has brought with light-touch regulation, taking into consideration the massive boom in advanced technologies that continue to offer completely new tools to American consumers each day, provide new jobs and keep us globally competitive.
That’s why we should all hope that the FCC realizes it’s headed in the wrong direction before it is too late.
The editorial board of the Chicago Tribune weighs in on the FCC and Internet regulations:
This decision introduces the prospect of tightening government clamps on a business sector that has thrived, attracting billions of dollars of investment. The FCC could ultimately meddle with online content, too. Genachowski says he has no intention of doing that. But there would be nothing to stop his FCC, or a future FCC, from stepping in under the rules that govern common carriers.
Over at App Rising, Geoff Daily makes a convincing case that the FCC should abandon its plans to regulate the Internet and instead let Congress get to work:
I think it’s a mistake for the FCC to try and blaze its own trail on these issues. I say that for multiple reasons.
The first is simple: what good is a “third way” if whatever the FCC comes up with as a compromise is overruled or made irrelevant by Congressional action? That could easily happen in big and small ways, meaning that all the work the FCC puts into this may be for naught.
The second is a related thought: the FCC should wait until it has its new Congressional authority before trying to re-regulate broadband. At this point we have no idea what the FCC’s new powers will be, so it seems unwise to embark on such a fundamental reexamining of how we regulate broadband with this much uncertainty.
The third is to acknowledge the basic reality that Congress is higher on the totem pole than the FCC. There’s really nothing the FCC can do that can’t be taken away by Congressional action, so it seems like it makes sense to try and work with Congress rather than against them.
Add Sen. Olympia Snowe — a staunch net neutrality supporter — to the growing list of Senators and Representatives from both sides of the aisle who are against the FCC’s move to regulate the Internet under Title II. From The Hill:
Snowe said she supports the commission’s goal of keeping the Internet open and expanding broadband to all Americans, but that she sees “significant drawbacks” in Genachowski’s proposal to change broadband’s regulatory status. The centrist Republican senator from Maine said Genachowski’s effort could create uncertainty that would “hamper or delay investment in much-needed broadband.”
The criticism was included in a letter from Snowe to Genachowski dated Tuesday.
In the letter, Sen. Snowe went on to say that she’s onboard with updating the Communications Act, and that there is a “growing consensus” to get it done sooner rather than later.
Although 246 (and counting) members of Congress — including 75 Democrats — have urged the FCC not to move forward with regulating the Internet, House Speaker Nancy Pelosi remains committed to both the FCC’s Title II regulations and net neutrality. From the Washington Post:
“Reclassification, net neutrality, universal access for every American, these are priorities for us. And we see it not in isolation but as part of a new propserity, as a job creator, to make America healthier, smarter and an international leader,” Pelosi said.
Speaker Pelosi also declared that any bill seeking to stop net neutrality “wouldn’t happen on her watch.”
I write to you with respect to the May 6, 2010, announcement by the Federal Communications Commission (“the Commission”) that it will commence a proceeding to classify broadband access services as a telecommunications service subject to the provisions of Title II of the Communications Act of 1934 (47 U.S.C. 201 et seq.).
As you are aware, I support calls for appropriate and reasonable authority for the Commission to address and prevent consumer abuses with respect to the Internet, as well as encourage private sector investment and innovation. More specifically, I have long supported an open Internet and have voted in favor of network neutrality in the past. I continue to believe that keeping the Internet open and accessible is an important goal that will promote civic discourse through the proliferation of new media, as well as contribute to economic growth and prosperity.
As you are also aware, as Ranking Minority Member of the House Committee on Energy and Commerce, I was intimately involved in the drafting of the Telecommunications Act of 1996 and its consideration by the Committee and full House of Representatives, and stood next to President Clinton in the Library of Congress at its enactment. Moreover, as Chairman of the Committee prior to 1994, I authored related predecessor legislation.
For both legal and policy reasons, however, I have strong reservations about the course the Commission is presently taking with respect to the regulation of broadband access services. I have arrived at this conclusion both as a supporter of the principle of network neutrality and as one who remembers what the Congress intended when it created the distinction between “telecommunications services” and “information services” in the 1996 Act. With that history and experience in mind, I would appreciate a response to the following questions:
1. In its 1998 Report to Congress, the Commission, then under the leadership of Chairman William Kennard, concluded, “when an entity offers transmission incorporating the ‘capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information’ it does not offer telecommunications. Rather, it offers an ‘information service’ even though it uses telecommunications to do so.” This statement indicates the Commission’s conclusion that the terms “telecommunications service” and “information service” are mutually exclusive. Now it appears that the Commission is embarking on an effort not simply to find anew the existence of two separate services, but actually to disaggregate into two parts what for the last several years has been viewed by consumers as a single service and further, then to subject the transmission component to Title II of the Communications Act. Do you disagree with the conclusion reached by the Commission in its 1998 report? If so, is that because you believe the underlying technological facts (as distinguished from the legal situation created by the D.C. circuit court’s recent decision in Comcast vs. FCC) have changed since 1998? If the latter, please explain what technological facts have changed so as to warrant a departure from the Kennard Commission’s vision.
2. In its 2002 Cable Modem Order, the Commission applied the conclusions of its 1998 report referenced above and held that broadband transmission service provided via cable modem was an information service, not a telecommunications service. The Supreme Court sustained that approach in its 2005 Brand X decisions. Subsequently, the Commission extended that conclusion to other modes of broadband transmission, including DSL, wireless, and broadband over power lines. Do you believe the underlying technologies or relevant facts associated with those technologies have changed since 2005, so as to warrant abandoning that approach? If so, please explain why.
3. Your announcement of a new approach to classifying broadband transmission service and the accompanying explanation of Commission General Counsel Austin Schlick appear to rely heavily upon a dissent in the Brand X case written by Associate Justice Antonin Scalia. In that case, Justice Scalia was joined by only two of his colleagues. The six-justice majority in that case sustained the Commission’s classification of broadband transmission as an information service, which in turn is subject to light regulation under Title I of the Communications Act of 1934. Please cite any other Commission decision or order that has relied so heavily upon a minority opinion in a Supreme Court case. Futher, please share any evidence or indication you may have that any of the other six justices would reverse themselves and support classifying broadband transmission as a Title II telecommunications service.
4. In the 12 years since the Commission first articulated its intention to treat telecommunications services and information services as mutually exclusive, and in the seven years since the Brand X decision, no legislation has been introduced in the House of Representatives or Senate (let alone passed by either body) to change the Commission’s 1998 interpretation of the distinction between these two services or its 2005 placement of the various broadband modes in the latter category. In the 2009 case of FCC vs. Fox Television Stations, Inc., the Supreme Court made clear that when an agency adopts a new policy that contravenes a previously established one, there are circumstances in which that agency must provide a “more detailed justification than what would suffice for a new policy created on a blank state.” One such circumstance involves serious reliance interests having been placed on the prior policy. Another is the development or discovery of “factual findings that contradict those which underlay its prior policy/” In the absence of congressional action to change that policy after 12 years, what is your “more detailed justification” for changing course relative to regulation of broadband access services?
5. Under all the circumstances described above, would it not be better for the Commission to work with the Congress, the sole progenitor of the Commission’s authorities, to secure the necessary statutory authorities to permit the appropriate and effective regulation of broadband, rather than following a tortured legal path premised on a minority opinion written by Justice Scalia?
These questions, as you may conclude, evince my grave concern that the Commission’s current path with respect to the regulation of broadband is fraught with risk. I fear your “third way” risks reversal by the courts, especially given the scope of its efforts to expand the Commission’s authority. It also puts at risk significant past and future investments, perhaps to the detriment of the Nation’s economic recovery and continued technological leadership. More importantly, it may paralyze more holistic regulatory efforts to keep the Internet open to consumers, advance cybersecurity, protect consumer data privacy, and ensure universal access to and deployment of broadband.
On May 13, 2010, Energy and Commerce Subcommittee on Communications, Technology, and the Internet Chairman Boucher expressed a willingness to consider legislation to address the issues called into question as a result of the Supreme Court’s decision in the case of Comcast. Committee on Energy and Commerce Chairman Waxman and Committee on Commerce, Science, and Transportation Chairman Rockefeller also have indicated an openness to legislation to provide the Commission with authority necessary to regulate broadband properly. These offers present the Congress and the Commission the opportunity to determine the appropriate authority the Commission needs, as well as the ability to do so in a manner that significantly reduces the risks inherent in the Commission’s current course of action. I encourage the Commission to give serious consideration to abandoning the Title II classification effort it has set in motion, and instead seek the authority it needs by asking the Congress to enact a statute that delegates it. Following this course would be consistent with the proper and accepted role of administrative agencies and, more importantly, provide the Commission with a sound legal basis for pursuing policies listed above.
Writing at the Huffington Post, Robert J. Shapiro — former Under Secretary of Commerce for Economic Affairs under President Clinton — examines the FCC’s plans to regulate the Internet under Title II:
The Internet’s operations raise legitimate issues for regulators, who should work to ensure, for example, that consumers’ rights are fully respected in the online environment. Yet, given the enormous stakes for all of us in the vast range of innovations being driven by broadband service and its applications, sweeping new rules for the Internet should not come by regulatory fiat, but only after careful and extended debate by both the Administration and the Congress.
The Washington Post reports that as part of its move to regulate the Internet under Title II, the FCC is expected to seek input on whether wireless broadband services should be included:
The editorial board of the Denver Post has weighed in on the FCC’s plan to regulate the Internet:
We continue to favor a light regulatory touch, but acknowledge that laws have not kept up with the evolution of technology. We’re glad to see movement in Congress to update the Telecommunications Act of 1996, and hope lawmakers keep in mind the system has worked pretty well thus far and that less is better when it comes to regulating the Internet and broadband providers.
Meanwhile, Reuters reports that the FCC will be discussing the regulations at a June 17 meeting, where members will vote on whether to seek public comment.
Writing at the Huffington Post, Democratic Leadership Council Chairman Harold Ford, Jr. succinctly expresses many of the concerns business leaders and analysts have about the FCC’s proposed Title II regulations:
The growth of the Internet ecosystem relies on continued private investment. For the past decade, a stable market atmosphere has prospered under the “light regulatory touch” of the original classification of broadband under Title I of the Communications Act. This has allowed companies—both the operating companies and investment firms—to make reasoned judgments on how and where to invest and innovate. We are talking about sophisticated investors helping provide funding to build wired and wireless networks which now reach 95 percent of the American public. It was this confidence in the FCC to work in partnership with consumers and with providers which investors in the private sector saw as a reason to invest in broadband companies, judging their prospects to earn a reasonable rate of return were justified. All that is about to change. From my experience in Congress and judging by the opinions from market analysts from around the country, this move by the FCC to classify broadband as a Title II “telecommunications service” will create massive uncertainty for investors.
With Congress set to update the 1996 Communications Act to better reflect today’s broadband age, Sen. John ENsign (R-Nev.) is calling on the FCC to abandon its regulating the Internet under Title II. From the Washington Post:
The ranking member of the communications subcommittee said that the FCC shouldn’t proceed with its plan as Congressional Democrats last Monday announced plans to update the 1996 Communications Act to better reflect the nation’s Internet-based communications infrastructures.
“Much of our communications law is based on 19th-century railroad regulation, and the last significant update, 14 years ago, barely mentioned the Internet,” Ensign said in a statement. With the announcement by commerce committee chairmen to revisit the laws, “the FCC should abandon its misguided attempt to upend settled and successful Internet policy by reclassifying broadband service as a common carrier.”
“Senator [John] Kerry believes that this process is complimentary to the efforts at the FCC, not a substitute for them. The deliberative process, both here and at the agency, will help inform and enhance our respective responsibilities to write and execute law and regulation that encourages innovation, inclusion, and consumer protections.”
As a recent story in the New York Times points out, most people are now using their cellphones for data than for calls. But all those downloaded bits come with a price — specifically, a greater need for spectrum.
To its credit, the FCC recognized the need to free up more spectrum for wireless as part of the National Broadband Plan. And yesterday, Fierce Wireless reports, the commission voted to free up 25 MHz of spectrum specifically for mobile broadband. Though the FCC still has a ways to go before it achieves its goals of freeing up 300 MHz, Chairman Julius Genachowski is right when he calls yesterday’s vote “a strong down payment on a vital national need.”
In a letter Thursday (May 20) to FCC Chairman Julius Genachowski, Hutchison said she was extremely disappointed that he had decided to reclassify broadband service under Title II common carrier regs.
She said the move would lead to “lengthy appeals” and regulatory uncertainty that could hurt broadband investment. She urged him to reconsider the move, but in the meantime wanted him to clear up “conflicting reports” about the impact of the BitTorrent decision. She cited a comment by FCC General Counsel Austin Schlick that the decision has “no effect at all on most of the plan,” then a Genachowski statement that reclassification was necessary “so that the commission can implement important, common sense broadband policies.”
techPresident reports that Deputy U.S. Chief Technology Officer Andrew McLaughlin was recently reprimanded over using his private Gmail address to talk to people at Google:
McLaughlin was cited for two kinds of actions: using a personal email account for some professional email exchanges and for violating restrictions on contacts with Google, his former employer. Most notable among the latter were a pair of conversations with the Director of U.S. Public Policy for Google about mobilizing Google’s resources to respond to negative press mentions. Those breaches, according to a memo by OSTP Director John Holdren, “implicated” the Federal Records Act and the President’s Ethics Pledge signed by McLaughlin upon his employment as an Obama administration point person on innovation and Internet policy, within the White House Office of Technology and Science Policy.
In one exchange, [Google’s Director of U.S. Public Policy Andrew] Davidson alerts McLaughlin to possible fallout from his remarks on net neutrality. Later, the company offers to go to bat for McLaughlin, promising to “tee up” the Open Internet Coalition—of which Google is a chief member—to defend the Web chief’s remarks.
The conversation ends when Davidson writes: “Update on this—haven’t seen anything run yet. We and a few OIC folks talked with reporters. It’s possible that killed it, which is probably driving [AT&T] crazy.”
From a May 16 Detroit News editorial reacting to the FCC’s proposed regulations of the Internet:
FCC Chairman Julius Genachowski told a group of cable operators in Los Angeles last week that if his colleagues adopt his regulatory proposals, the FCC will have a policy of “forbearance” on heavy-handed regulation of the net. But why should they believe him? After all, he proposed his plan just days after a federal court told him his agency didn’t have the authority to do what he now plans to do.
In the end, this is a much bigger issue. If the FCC can regulate the distribution of bandwidth, it can ultimately claim the right to regulate content and decide who has access to the Web and who doesn’t.
Congress should step in and put the FCC back in its place.
The Hill reports that in an attempt to avoid prolonged legal and legislative battles over the FCC’s push to regulate broadband under Title II, members of Congress are looking for common ground:
Top net neutrality supporters in Congress are hoping to avert an all-out legislative showdown that could result from the FCC’s push to regulate Internet providers.
As the commission under Chairman Julius Genachowski seeks to regain its authority to rein in those companies, a move that is likely to draw tough legal challenges in the coming months, members of Congress this week invited broadband providers to work with them on new regulations, which many lawmakers agreed are inevitable in some form.
Leading the charge is Rep. Rick Boucher (D-Va.), who has asked broadband providers to work with Congress to find a compromise:
“We could get something done very quickly if there is consensus,” said Boucher, who chairs the House subcommittee that chiefly handles Internet issues. But, he added, “if there is not consensus, we’re not going to be able to act at all, not even in the next four to five years.”
Whether or not Congress is willing — or able, given the current state of hyper-partisan gridlock — to wade into the fight remains to be seen.
On the heels of Rep. Cliff Stearns (R-FL) submitting legislation that would require the FCC to prove new regulations on the Internet are necessary before moving forward, two more republican lawmakers — Rep. John Boehner of Ohio and Rep. Eric Cantor of Virginia — have sent a letter to President Obama expressing concern over the FCC’s current path. From the Washington Post:
In their letter, Boehner and Cantor said the FCC should seek additional authority from Congress after a federal court last month put the agency’s ability to regulate broadband services in doubt. The U.S. Circuit Court of Appeals for the District of Columbia said the FCC in 2008 overstepped its authority when it sanctioned Comcast for blocking a peer-to-peer application. That decision threw into question whether the FCC could continue with its net neutrality proposal and portions of its national broadband plan.
But the lawmakers said the proposal to reclassify broadband under the FCC risked putting more rules on broadband providers.
“To help expedite our recovery and create jobs, we urged you to refocus the Commission on promoting broadband investment and deployment,” they wrote.
Net neutrality means service providers cannot discriminate against content providers in any way. This was at issue when Comcast concluded that BitTorrent customers were delaying ordinary Internet traffic through peer-to-peer swapping of massive files, such as entire movies, and thus delayed BitTorrent traffic. The FCC sanctioned Comcast (which had since made a deal with BitTorrent); a federal appeals court said it had no authority to do so.
Internet carriers have warned that full telephonelike regulation would lead them to cut investments in network expansion by billions of dollars. They would be fully justified. The Net could become clogged, which would lead to demands for more regulation. If they understand their own interests, users like Google should be the first to protest against the FCC plans instead of cheering the commission on.
Yesterday, in the wake of the FCC’s recent announcement that it will be moving forward with regulations on the Internet, Republican Rep. Cliff Stearns of Florida — a ranking member of the Communications, Technoligy and Internet subcommittee — introduced legislation requiring the FCC to partake in a market analysis before enacting new rules. Reports the Washington Post:
The FCC would need to prove that regulations are necessary and that there is a market failure that warrants rules. The agency would have to report the findings to Congress.
“I see no reason for Internet regulation. Yet, if there is ever a cause for regulation, it is a decision to be made by Congress – not the FCC,” Stearns said in a statement.
In the wake of the Washington Post reporting that FCC Chairman Julius Genachowski was leaning against new regulations on broadband, Senators Jay Rockefeller (D-W. Va.) and Henry Waxman (D-Calif.) have sent a letter to the chairman calling on him to “consider all viable options” to enact net neutrality rules — including reclassification.
Research firm Frost & Sullivan has released a new report, “Net Neutrality: Impact on Carrier Investment and Economic Growth,” which examines the possible effect new regulations would have on consumers, the economy, and the FCC’s National Broadband Plan. From the report (which we’ve posted to our site):
After interviews with several carriers as well as several consumer advocacy organizations, we determined that net neutrality was likely to impact the following variables:
• Innovation: Net neutrality impacts operator innovation by either providing incentives to develop products and services or to discourage those activities. Based on primary research conducted by this author, the assumption is that the more confusion or restrictions that are placed on an organization, the less likely it is to be creative and, by extension, innovative.
• Prospective ARPU: Average revenue per user is a statement of the expectation that particular consumers, both individuals and commercial users, will generate a particular amount of revenue over time. The important point here is not whether the average user will actually generate such revenue, but whether the operator expects the user to do so. It is the expectation of return that motivates an investor to invest.
• Non-access Service Revenue: Anything likely to discourage consumers or commercial entities, such as content providers, to subscribe to an operator’s service offerings is likely to decrease the total amount of non-access related revenue that can be generated.
• OPEX: Operational expense is the overhead required to deploy, manage and maintain networks. Net neutrality, by potentially increasing the overhead associated with ensuring regulatory compliance or by reducing the efficiency of managing networks could increase OPEX.
• CAPEX: Capital expense is the direct cost of deploying networks. In an environment where the revenues associated with services are denied or reduced for operators, CAPEX could be expected to decrease. Contrariwise, if QoS approaches are denied operators, CAPEX could increase as operators overbuild to address traffic growth.
Check out the full report, which should raise a major red flag for the excellent broadband team at the Federal Communications Commission. Rather than getting distracted by divisive new regulations with significant economic risks to consumers, the Commission should drive full speed ahead on those aspects of its Plan more surely focused on broadband adoption and deployment.
Delivering his opening remarks at an Open Internet Workshop in Seattle, Washington, FCC Chairman Julius Genachowski reaffirmed his commitment to moving forward on net neutrality regulations:
In a positive step for America’s digital infrastructure, the so-called “ditch-digging bill” — which would require broadband fiber to be laid during construction of new roads and highways — has received backing from Rep. Henry Waxman {D-Calif.), the Chairman of the House Energy and Commerce Committee.
Penning a joint op-ed for the New York Times, six professors and researchers from such institutions as Georgetown, Stanford, and University of California, Berkeley, urge the FCC and Congress to take a page from Europe when it comes to net neutrality and new regulations on the Internet:
As American policymakers decide what should be done about net neutrality, they would do well to consider the precedents set by Europe’s new framework. The goal should be to develop — through a deliberative process involving regulators, the public and affected companies — industry-wide disclosure requirements that provide consumers with easy-to-interpret information on company-based limitations on access, use of services or applications.
When it comes to the Internet and net neutrality, ensuring transparency promises to enhance the evolution of this dynamic market. Imposing heavy-handed rules about how providers can operate will only hinder it.
In an op-ed for CNet, Larry Downs from the Stanford Law School Center for Internet & Society examines some of the many issues involved with reclassifying broadband as a Title II type service:
Although the objective of that fight might simply be to enact Net neutrality rules and otherwise leave broadband providers alone (for now), expect to find some odd bedfellows joining the resistance. The communications industry, which has operated for the last several years under the belief that unregulated broadband Internet was settled law, would lead the charge. But there are plenty of other constituencies that would object to the FCC’s playing fast and loose with its governing statute.
That includes members of Congress who might otherwise be sympathetic to the Net neutrality cause but worried about an agency usurping legislative power. The courts, which believe that they are the only ones that get to reverse court decisions, might also prove hostile to the idea of upending Brand X on the mere promise of a “good reason.”
Consumers, too, might find common cause with the antireclassification movement. Even if some consumers like the idea of FCC-enforced Net neutrality rules, most Americans are justifiably skeptical of untethered legislating by unelected civil servants.
Given the legislative and legal mess reclassifying broadband could lead to, it’s not wonder Chairman Julius Genachowski told the Senate Commerce Committee the FCC hasn’t “settled on a path forward” yet.
With both sides of the looming Title II fight already making noise, Michael Grebb of CableFAX offers a possible solution:
[H]ere’s an idea. Call it crazy, but what if the FCC just left things alone—but with a caveat? What if Genachowski, with a wink from Obama, just told the big telecom players not to favor packets and to equally apply any bandwidth management schemes to all (including its own services). Net neutrality would loom over the industry like a threatening but dormant hydra. That way, cable and telcos would agree not to put their TV Everywhere-esque “TV on the Web” platforms on faster or prioritized pipes. And in return, Internet access would stay an information service with no market disruption. It would be voluntary, yes… and that always carries risks. But let’s face it: It’s mutually assured destruction—a friendly threat to ensure that the terrible, horrible, greedy, awful, despicable behavior that consumer groups tell us will occur… never does.
Speaking of Title II, Johna Till Johnson at Network World looks at what might happen if the FCC makes a move to reclassify:
Reclassifying Internet services as a Title II service would provoke a royal catfight with the carriers, which have preemptively warned the FCC not to go there. Back in February, carriers—- including Verizon, Time Warner, AT&T, Qwest, the National Cable andTelecommunications Association and the wireless and phone company trade associations—warned FCC Chairman Julius Genachowski that trying to classify Internet access as a Title II service would provoke “years of litigation and regulatory chaos.” More pointedly, they indicated such a decision would make them unwilling to invest the billions of dollars required to achieve the government’s goal of 100MBps broadband speeds to 100 million households by 2020.
This is a potent threat, because it shines a spotlight on the real elephant in the corner: Everybody wants broadband Internet access, but nobody knows how to pay for it. Internet connectivity simply doesn’t generate enough profit to justify the investment—whether from carriers, Google or anyone else. If the carriers decide to pull their investment dollars—or spend them on litigation instead—good luck having a functioning Internet in 2015.
As Johnson notes, reclassifying broadband would likely make net neutrality a “foregone conclusion.” The questions are: What will the regulations look like, and what will it mean for private investment.
Google and Verizon have not always seen eye-to-eye when it comes to the regulation of the Internet, but they have found some common ground. From a joint editorial by the two companies in the Wall Street Journal:
The Internet has thrived in an environment of minimal regulation. While our two companies don’t agree on every issue, we do agree generally as a matter of policy that the framework of minimal government involvement should continue.
The FCC underscores the importance of creating the right climate for private investment and market-driven innovation to advance broadband. That’s the right approach and why we are encouraged to see the FCC’s plan.
The Washington Post reports that all told, the FCC spent $20 million putting together the National Broadband Plan. $13 million came from stimulus funds, the other $7 million from the agency’s own budget.
Instead, the FCC should take a less intrusive, less rigid approach that will still allow it to deal with any real anticompetitive abuses that cause consumer harm. While it is highly unlikely that such abuses will occur in a marketplace in which consumers generally have a choice of Internet providers, there nevertheless is a properly delimited role for the FCC to play in policing and remedying any anticompetitive acts.
Rather than adopting broad-brush regulations that place ISP practices that may benefit consumers off limits, the FCC could adopt a simple rule prohibiting ISPs from engaging in practices that constitute an abuse of significant and non-transitory market power that harm consumers. A market-oriented rule like this would provide the FCC with a principled basis for adjudicating allegations that ISPs are acting anti-competitively and causing consumer harm. Using traditional antitrust-like jurisprudence that incorporates rigorous economic analysis, the Commission would focus on specific allegations of consumer harm in the context of the particular marketplace situation.
At Real Clear Markets, IIA Broadband Ambassador Bret Swanson examines the effect new regulations on the Internet could have on innovation and investment:
The U.S. began the 2000’s with fewer than five million residential broadband lines and zero mobile broadband. We begin the new decade with 71 million residential lines and 300 million portable and mobile broadband devices. In all, consumer bandwidth grew almost 15,000%.
Even a thriving Internet, however, cannot escape Washington’s eager eye. As the Federal Communications Commission contemplates new “network neutrality” regulation and even a return to “Title II” telephone regulation, we have to wonder where growth will come from in the 2010’s.
At the Washington Post, tech writer Cecilia Kang offers 10 smart questions for Congress to ask FCC Chairman Julius Genachowski about the National Broadband Plan.
I applaud the FCC for presenting an ambitious plan that sets goals for greater broadband availability, adoption and speeds — all key to the advancement of our economic, health care and educational systems.
The National Broadband Plan both highlights a decade of success and innovation in Internet technology and lays out the work that remains ahead. It has been estimated that hitting the targets outlined in the plan, including at least 90 percent broadband adoption by 2020, could cost as much as $350 billion. This plan could be powerful and positive provided strict new regulations are not imposed to undermine investment.
Over the weekend, the Washington Post published an editorial by FCC Chairman Julius Genachowski in advance of the FCC’s National Broadband Plan:
Our nation is at a high-tech crossroads: Either we commit to creating world-leading broadband networks to make sure that the next waves of innovation and business growth occur here, or we stand pat and watch inventions and jobs migrate to those parts of the world with better, faster and cheaper communications infrastructures.
This, of course, is not a choice—which is why, this week, at the behest of Congress and the president, the Federal Communications Commission is delivering the first National Broadband Plan: a comprehensive strategy for dramatically improving our broadband networks and extending their benefits to all Americans.
On a related note, today the FCC has released the Executive Summary for the National Broadband Plan, available here in a PDF.
In a surprising move — for government, anyway — the FCC has announced that it’s much anticipated national broadband plan will now be released on March 16 — a day earlier than originally scheduled.
With broadband stimulus funds slowly making their way to applicants, a new wrinkle has emerged that may slow down recipients putting the money to good use. As Phone Plus reports, it comes down to the question of taxes:
[I]f the government doesn’t clarify whether the grants are considered taxable income, onlookers fear recipients won’t use the money any time soon – defeating the purpose of the 2009 American Recovery and Reinvestment Act.
When asked whether recipients would be taxed on the stimulus funds, the Treasury Department reportedly offered no concrete answer. Stay tuned…
One of the questions surrounding the current net neutrality debate is whether the Federal Communications Commission has the authority needed to impose new regulations on the Internet. As Computer World reports, former solicitor general Gregory Garre believes the FCC must ask Congress for authority before it acts:
If the FCC wants to create new Internet regulations, it should have the backing of Congress, Garre added. “It would be appropriate for the FCC to go to Congress,” he said. “This isn’t some minor regulatory issue we’re talking about. The FCC itself has described the Internet as something that ‘has transformed our nation’s economy, culture and democracy.’”
In just 14 days, the FCC will present a national broadband plan to Congress. Today, the Wall Street Journal highlights some of what the plan will entail:
Federal Communications Commission Chairman Julius Genachowski’s coming National Broadband Plan will propose up to $25 billion in new federal spending for high-speed Internet lines and a wireless network for police and firefighters as part of a broader plan that appears to be a win for wireless companies.
The plan will also offer a variety of ideas for expanding Americans’ access to affordable Internet over the next decade. Mr. Genachowski has been slowly releasing details about the plan, which will be released in mid-March, and last week suggested that Congress spend $12 billion to $16 billion for the wireless Internet network for police and firefighters.
The American Consumer Institute has released a new study, “Innovation and National Broadband Policies: Facts, Fiction and Unanswered Questions.” From the Executive Summary:
“Innovation” has emerged as a pivotal element in the debate over whether the Federal Communications Commission (FCC) should impose new constraints on managers and providers of broadband network infrastructures. This study brings to bear facts and analysis emerging from a review of much of the literature on innovation and especially that bearing on claims by advocates of “net neutrality,” “open networks” and related notions.
We find that innovation is thriving at both the core and the edge of the network in the current policy environment, which has fundamentally allowed the Internet to evolve with little government involvement. Further, we find no evidence that greater FCC involvement in markets for broadband services would protect or promote innovation in the Internet Ecosystem. Indeed, we believe that such intervention is more likely to discourage innovation than stimulate it.
At the Huffington Post, Digital Society Fellow (and IIA Broadband Ambassador) Bret Swanson writes about the negative effect proposed net neutrality regulations would have on jobs and the economy:
Supporters might argue Net Neutrality will protect consumer access to the Internet and promote long-term innovation. These are crucially important goals. But I think they are wrong on these policy virtues as well. I’ve made the case elsewhere that Net Neutrality could have prohibited important business and technical innovations, from the exclusive handset arrangement that spawned the iPhone to the content delivery networks (CDNs) that enabled YouTube.
Regardless of one?s view of long-term effects, however, there is little chance Net Neutrality regulations could improve the near-term jobs picture. There is, on the other hand, a substantial possibility for harm. Net Neutrality could substantially reduce the willingness of service providers to invest in new wired and wireless networks. And it could do so immediately. Any capital expenditure reductions would directly affect tens of thousands of workers who build and maintain these networks. Capex reductions would also ripple through the whole network equipment and software value chain, starting with large companies like Cisco, Juniper, Corning, and Qualcomm; then damaging the prospects of hundreds of smaller suppliers in the high-end semiconductor and software sectors.
Yesterday, FCC Chairman Julius Genachowski revealed that as part of its impending national broadband plan, television broadcasters would be asked to volunteer some of their spectrum. From Ars Technica:
The FCC’s boss has to maneuver somewhat gingerly around this issue. The broadcasting industry has given a distinctly cold reception to wireless and consumer device maker proposals for ways that television license holders could dramatically reconfigure their high altitude, high power transmission systems to free up as much as 180 MHz of spectrum. Now the FCC and NTIA are talking about 500 MHz.
So Genachowski emphasized that this would be a “voluntary program.”
With the unprecedented adoption of mobile Internet in recent years, America is facing what Genachowski himself has called a “looming spectrum crisis.” Wireless carriers agree. Which means if broadcasters refuse to volunteer spectrum for wireless use, the fight could quickly turn heated. Stay tuned…
As proposed new regulations on the Internet continue to be debated, some of America’s major Internet providers — including Verizon, AT&T, and Time Warner, among others — have sent a letter to the FCC arguing that the broadband industry should not be classified as a Title II telecommunications service. From the letter:
Some net neutrality proponents believe that economic growth is propelled primarily by investment at the “edge” if the Internet, and not by network providers who operate the Internet’s core and access networks, but that is a dangerously flawed vision. Continued investment and innovation by each group mutually expands opportunities for the other. The greater ability of network operators to offer innovative, revenue-generating enhanced capabilities and features to application and content providers, the greater the ability of the network operators to expand the potential reach and robustness of those networks for consumers. And the better the network capabilities available to “edge” providers, the greater the opportunity for them to develop innovative services that increase consumer demand for broadband. The current, stable Title I regulatory environment has facilitated this “virtuous cycle” of investment and innovation all levels of the Internet, just as the Commission expected.
This is certainly no time to retreat from those policies. Many of our nation’s core priorities in education, health care, energy conservation, environmental protection, technological innovation, job-producing investment, and economic growth depend on the continued flow of private capital for deploying and expanding broadband networks.
In advance of its deadline to present a national broadband plan to Congress on March 17, the FCC conducted a consumer survey on Internet usage. The commission will be presenting the results at the Brookings Institute today, but via Multichannel News here are some highlights:
The survey, a random phone survey conducted in October and November, found that 80 million adults (and 13 million kids) do not have high-speed Internet at home.
More than one-third of the non-adopters (28 million adults) indicated that they don’t have broadband because either the price of service is too high (15%); they can’t afford a computer; installation costs are too high (10%); or they don’t want a long-term service contract (9%). According to the survey, the average monthly broadband bill is $41.
Geoff Daily of App Rising, who has been keeping a watchful eye on how and when federal broadband grants are doled out, has handed out grades for the first year of the effort. The overall grade: D+.
Despite the bad grade, however, Daily is still hopeful:
Just because the stimulus is failing now on almost all fronts doesn’t mean that it can’t recover and post solid even spectacular marks. Ultimately the grade that matters most is that the best projects are funded and on that they’re not failing. They’re also learning from at least some of their mistakes. So I for one am still hopeful that the broadband stimulus will be more than just another government folly.
More than $100 billion has already been spent to deploy high-speed systems across America. But the FCC has estimated that $350 billion is necessary to achieve universal broadband access. As such, the focus of the FCC should be on speeding this process, either through federal programs or by incentivizing the investment of private companies.
Throughout this process, we must also strive to ensure that access remains affordable. To achieve this, I see one logical solution - to have the build-out in these communities financed in part by agreements between the companies paying to lay the wires and the companies that will use those links to sell services.
Largely missing the point, proposals for new “neutrality” rules do nothing to help us realize these important goals. Instead, it is widely thought that new net neutrality regulations will reduce much needed investment in infrastructure, thus causing broadband to become less affordable and accessible to underserved and un-served populations.
Over at the FCC’s official broadband blog, Chairman Julius Genachowski has posted some tidbits from the commission’s upcoming national broadband plan. Writes Genachowski:
By setting ambitious goals and laying out proposals to connect all Americans to a world-class broadband infrastructure, we will help secure our country’s global competitiveness for generations to come.
The FCC’s National Broadband Plan will include the following key recommendations:
100 Squared Initiative: 100 million households at a minimum of 100 megabits per second (Mbs)—the world’s largest market of high-speed broadband users—to ensure that new businesses are created in America and stay in America.
Broadband Testbeds: Encourage the creation of ultra high-speed broadband testbeds as fast, or faster, than any Internet service in the world, so that America is hosting the experiments that produce tomorrow’s ideas and industries.
Digital Opportunities: Expand digital opportunities by moving our adoption rates from roughly 65 percent to more than 90 percent and making sure that every child in America is digitally literate by the time he or she leaves high school.
The full plan is scheduled to be presented to Congress on March 17.
Multichannel News digs into a new report from the FCC on the state of high speed Internet in America and finds there’s clear evidence that despite gains, the digital divide is alive and well — especially in low-density areas:
For the fixed connections, like cable and DSL, the commission data found that in 200 counties (representing 1% of U.S. households), no more than 20% met that definition of high speed, while in about half as many counties (104) with eight times the population (8% of the households), 80% had at least those speeds.
The Democratic Leadership Council has released a new report on job growth in America. Entitled “Where Jobs Come From: The Role of Innovation, Investment, and Infrastructure in Economic and Job Growth,” it helps shed light on the important role broadband expansion plays in creating new jobs. From page 11 of the report:
Job creation was also strongest in the industries that utilized information technology and had the most to gain from faster Internet connectivity. Industries such as Information; Finance and Insurance; Professional, Scientific, and Technical Services; and Utilities saw employment growth ranging from 12 to 16 percent. Given this evidence, there is enormous potential for job creation if we expand broadband deployment and upgrade existing infrastructure. A Brookings study found that for every 3 million new lines deployed, nearly 300,000 economy-wide jobs are created. Separate research has shown small businesses, the drivers of job creation and biggest beneficiaries of faster networks, hire 40 percent of the high tech workforce of scientists, engineers, and computer programmers.
Post Tech reports that Rep. Edward J. Markey (D-Mass.) has introduced a bill that will expand a program to bring e-book readers and broadband access to low-income students.
The bill is an expansion of the original program passed in 1996 along with the Telecom Act, which increased school connectivity from 12% to 95%.
Last week, Entropy Economics released a detailed report on the effects net neutrality would have on jobs. After examining the official comments submitted to the FCC, Entropy found that those who could be counted as “Net Neutrality Skeptics” directly employ 1,440,021 people. “Net Neutrality Supporters,” meanwhile, only employ 148,936 — a difference of 10 to 1.
The Entropy report also looked at the amount of Capital Expenditures for skeptics and supporters, and the result was even more startling. From an article at Digital Society by the report’s author, Bret Swanson (who is also an IIA Broadband Ambassador):
We have often noted the communications sector’s important capital investment role in the U.S. economy. In 2008, U.S. info-tech capital investment totaled $455 billion, or 43% of all U.S. non-structure investment. The communications service providers alone invest $65 billion or more annually. Among companies filing FCC comments, the Net Neutrality Skeptics invested $189 billion over the last three years, compared to $18 billion for the Net Neutrality Supporters. Two of the nation’s largest infrastructure investors, AT&T and Verizon, each have more employees than all the Net Neutrality Supporting companies combined.
Net neutrality supporters often dismiss the effect new regulations will have on private investment. But as the Entropy report makes clear, discouraging private investment from net neutrality skeptics would have a chilling effect on the U.S. economy. And with the FCC’s own estimates for the cost of a national broadband plan reaching as high as $350 billion, a reduction in private investment could put the goal of bringing broadband to everyone out of reach.
Entropy Economics has published a new report examining the effect proposed net neutrality regulations would have on the U.S. job market. From the report (PDF):
Regardless of one’s view of long-term effects… there is little chance Net Neutrality regulations could improve the near-term jobs picture.
There is, on the other hand, a substantial possibility for harm. Net Neutrality could substantially reduce the willingness of service providers to invest in new wired and wireless networks. And it could do so immediately. Any capital expenditure reductions would directly affect tens of thousands of workers who build and maintain these networks. Capex reductions would also ripple through the whole network equipment and software value chain, starting with large companies like Cisco, Juniper, Alcatel-Lucent, and Qualcomm; then damaging the prospects of hundreds of smaller suppliers in the high-end semiconductor and software sectors.
Entropy also looked at the number of employees of both net neutrality skeptics and supporters, and finds that skeptics directly employ 1,440,021 people, while supporters employ just a fraction of that — 148,836.
More Minority Groups Warning Against Net Neutrality
By Bruce
Via Broadband Breakfast, three minority business groups — the National Black Chamber of Commerce, the National Gay and Lesbian Chamber of Commerce, and the U.S. Hispanic Chamber of Commerce — held a conference call yesterday to express their concerns over the effect of proposed net neutrality regulations:
The business officials expressed concern over internet regulation, emphasizing their priority to bring broadband access to minority populations.
They said that broadband plays a role in job creation and as a vehicle for innovation, growth, and competition. This, they said, was a reason to avoid net neutrality regulations, as they could slow down the deployment of broadband networks in underserved areas.
With estimates for the final tab of a national broadband plan reaching as high as $350 billion, private investment will be critical for wiring America. Any new regulations that stall investment could put nationwide broadband out of reach.
During a special YouTube event yesterday, President Obama re-declared his commitment to proposed net neutrality regulations. Via Multichannel News:
“I’m a big believer in net neutrality,” he said. “I campaigned on this. I continue to be a strong supporter of it. My FCC chairman Julius Genachowski has indicated that he shares the view that we’ve got to keep the Internet open, that we don’t want to create a bunch of gateways that prevent somebody who doesn’t have a lot of money but has a good idea from being able to start their next YouTube or their next Google on the Internet.”
The president went on to say that the administration was getting “pushback, obviously, from some of the bigger carries who would like to be able to charge more fees and extract more money from wealthier customers.” Not addressed, however, were the concerns from many of the people against new regulations that imposing net neutrality could hurt private investment in the Internet and further exacerbate the digital divide.
With the FCC moving forward with its proposed net neutrality regulations, at least one member of the commission is already warning that any new regulations will surely face a legal challenge once enacted. Reports PC World:
If the U.S. Federal Communications Commission adopts broad new net neutrality regulations, the agency’s authority to do so will be challenged in court, predicted Robert McDowell, a member of the commission.
It’s unclear whether the FCC has the authority to create net neutrality rules for broadband providers, which under current FCC rules are classified as largely unregulated information services, McDowell said Friday during a speech at a Free State Foundation broadband policy forum. And the suggestion by some advocacy groups that the FCC reclassify broadband services as more heavily regulated common carrier services would also face lawsuits, he said.
A new study from Larry F. Darby, Joseph P. Fuhr, and Stephen B. Pociask of the American Consumer Institute helps shed light on the effect the FCC’s proposed net neutrality regulations could have on investment and job creation. The study, titled “The Internet Ecosystem: Employment Impacts of National Broadband Policy,” calls for “regulatory forbearance toward broadband networks” in order to stimulate investment and the creation of new jobs. From the executive summary:
• By eliminating business options successfully practiced by proponents of more regulation, the Commission’s proposal would dramatically increase market risk, lower expected growth, suppress network investment, and dampen opportunities for network providers to maintain and create jobs.
• The proposed change from Ex Post to Ex Ante regulation would create lengthy regulatory delays and increase regulatory risk for investors, while dampening prospects for new job creation in the Internet sector and in others it supports.
• These and other threats to investment incentives and job creation opportunities are out of line with both the emerging national broadband policy and the growing imperative to create more good, permanent jobs.
The study also warns that the proposed regulations would “shift risk, returns, growth and opportunity away from ‘core’ network providers and in favor of ‘edge’ applications and content providers.” Given that core companies (such as providers) historically invest more and create more jobs compared to “edge” companies (such as content providers), new regulation would have a chilling effect on both a national broadband plan and the creation of much-needed jobs.
The full study is available in a PDF on the American Consumer Institute website. It ends with an important message recently delivered from the Communications Workers of America to the FCC:
Put network investment and associated job creation at the center of the discussion, acknowledging that the telecommunications sector is essential to recovery in the current downturn and to our nation’s long-term economic competitiveness.
The Rural Utilities Service has announced the latest round of broadband stimulus funds, with 11 states receiving grants this time around: Alaska, Alabama, California, Iowa, Kansas, Tennessee, Louisiana, Missouri, North Dakota, Oregon, and Virginia.
All told, 14 projects are receiving funding, totaling $310 million.
Yesterday, the National Telecommunications and Information Administration announced the latest batch of broadband grants. In all, $63 million in grants were awarded to three states: Massachusetts, Michigan, and North Carolina.
So far NTIA has awarded $253 million in grants, roughly 3.5 percent of the eventual total.
Discouragement has been cited by the Bureau of Labor Statistics as a reason for an expected increase in the jobless rate this year. As of December, a large number of workers have quit looking for work because they think no jobs are available.
“Our study also shows the enormous potential benefit of community broadband centers for those who are not connected at home,” said Lawrence Spiwak, president of the Phoenix Center. “While broadband use at home delivers significant benefits, shared facilities can be a valuable solution to connectivity gaps in unserved and underserved communities.”
At the Huffington Post, Navarrow Wright, President of Maximum Leverage Solutions, has a must-read post breaking down the negative effects net neutrality could very well have on minorities and the urban poor:
The FCC is playing a dangerous game here, and the people who have the most to lose are already the socially and economically disenfranchised members of our national community - low-income, rural, urban, non-English speaking, tribal, minority, underserved and underserved populations. Neither the Commission nor the American people can rightly afford to preoccupy themselves with corporate interests over the greater priority interests of people. As responsible citizens, we have an obligation to speak out for and protect the interests of those who are not already digitally connected. I applaud the minority elected officials, the civil rights leaders and the consumer groups who are making their voices heard. I encourage the FCC to listen to the people.
Sphere has an interesting debate today on the FCC’s proposed net neutrality rules. In the pro camp, Timothy Karr writes:
Because of net neutrality, consumers have had unfettered access to new content and ideas online; our preferences and choices have determined which new ideas succeed and which don’t. Net neutrality simply means “no discrimination,” and this user-powered architecture is the reason the Internet has become such a powerful engine for consumer choice and democratic empowerment.
These protections have worked brilliantly. For two decades, the Internet thrived. It became a competitive market in the truest sense. Under net neutrality, doctoral students working out of their dorm room created Google; college students started Facebook; a Pez hobbyist invented eBay; an Israeli teenager wrote the code for instant messaging.
These innovators started small and used the Internet’s level playing field to become major forces in the new media marketplace. Their ideas have disrupted the status quo of information gatekeepers to usher in an era where content and consumers are king.
The fact is that different services have different requirements in order to work properly. Activities like online videos or remote medical monitoring are easily disrupted by tiny delays—often measured in milliseconds—that keep them from working properly. Others, like e-mail, tolerate delays with little problem.
To ensure the best performance possible, network operators need the flexibility to work with the providers of content, software developers, creators of online games, and other Internet-related businesses and services. But proposed Internet regulations under consideration at the FCC would greatly limit such collaboration.
Supporters of Internet regulations, typically advocated to ensure “network neutrality,” say regulations are needed to make sure that consumers can go to whatever Web site they want. But when was the last time that your Internet provider blocked you from any activity you wanted to perform online? Chances are you’ve never had that problem. And if it occurred, the FCC already has the authority to step in quickly and clear things up.
As part of the discussion surrounding proposed net neutrality regulations, IIA has submitted a comment to the FCC. Click here to read our thoughts. You can also upvote our comment and increase its visibility.
A new report from market research firm Pike & Fischer (via Broadcasting & Cable) estimates that new high-speed Internet subscriptions may drop by as much as 10% this year. The firm also predicts that home penetration will reach 65%, leaving 35% unconnected.
The FCC, due to present a national broadband plan to Congress by February 17, has asked for a one month extension so that it can “finish digging through the massive volume of public comments.”
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