Wheeler Says Title II Raises Questions About Whether Broadband Should Pay Into USF

Going into more detail about the issues he sees facing a Title II approach than he has said publicly, FCC Chairman Tom Wheeler told public interest advocates that the agency would have to grapple with its legal authority to impose net neutrality rules on wireless, given a section of the Communications Act that some say prohibits treating mobile as common carriers, said three people who attended the Nov. 10 meeting. Wheeler also raised questions about the impact reclassification would have on privacy, according to the attendees, as well as an issue commissioners Mike O'Rielly and Ajit Pai brought up Friday at a Free State Foundation panel discussion on net neutrality: Would broadband providers have to begin paying into the USF?

O’Rielly and Pai, both of whom opposed reclassification, said ISPs would have to pay into the fund, passing on the fee to Internet users. While acknowledging broadening the base of USF contributors could lower the assessment rate, O’Rielly said that would happen only if USF spending remained the same. But, O’Rielly said, the commission intends to go on a “spending spree” by increasing E-rate and Lifeline funding.

Those who attended the meeting with Wheeler said the chairman wasn't saying Title II reclassification couldn't be accomplished, but he was laying out some of the issues he sees. “It was more that he was saying if we’re going down this path, we’re really going to have to do our homework,” said one of those in the room. The attendee took that to mean Title II would have withstand attacks from Congress and a court challenge. The attendees were quick to say the issues Wheeler mentioned have solutions and that they offered some ideas during the meeting.

Wheeler’s comments at the meeting went beyond the statement he issued Nov. 10 in response to President Barack Obama’s call for basing net neutrality rules on Title II, attendees said. Wheeler had said that regardless of a hybrid or a straight reclassification approach, “Title II brings with it policy issues that run the gamut from privacy to universal service to the ability of federal agencies to protect consumers, as well as legal issues ranging from the ability of Title II to cover mobile services to the concept of applying forbearance on services under Title II.”

The FCC has declined requests to elaborate on the Nov. 10 statement since then and had no comment Friday on what Wheeler said at the meeting. An FCC official pointed to Wheeler’s statement, laying out “a number of issues that need further examination” and said the agency is “in the process of determining the most appropriate course of action.”

According to three of those at the meeting, Wheeler said an issue with regulating wireless was Section 332(d)(3) of the Communications Act, which CTIA has argued bars treating private mobile radio service as a common carrier. Wheeler noted there was not much in the record about the Section 332 issue, the attendees told us. A CTIA spokeswoman declined comment Friday. She pointed to the association’s ex parte filing about an Oct. 15 meeting, in which it raised the issue with General Counsel Jonathan Sallet and other commission officials. The commission and the courts have ruled that mobile broadband service is a PMRS, CTIA officials said at the meeting. The spokeswoman wouldn't say if Section 332 was mentioned during meetings with agency officials. Ex parte filings by the association about the meetings didn't explicitly mention the section. CTIA argued in separate meetings with Wheeler’s aides, Commissioner Mignon Clyburn, Pai and an aide to Commissioner Jessica Rosenworcel that mobile should have distinct rules separate from broadband and that Title II regulations would deter investment.

Section 332 “presents no barrier to treatment of mobile broadband as a common carrier service,” said Michael Calabrese, director of the New America Foundation Open Technology Institute’s Wireless Future Project, at the meeting with Wheeler, according to Free Press’ ex parte filing. Calabrese said Congress, in subsection (d) of the section, “explicitly left to the Commission’s discretion the determination and definition of what qualifies as an ‘interconnected service,’ or as the ‘functional equivalent of a commercial mobile service,’” the filing said. OPI also filed a letter about the point [see (Ref:1411130052)].

Wheeler also raised the issue of how the reclassification would affect protecting customer privacy. One issue, said one of the attendees, was what role the FCC and the FTC would play. Public Knowledge Senior Vice President Harold Feld, who wasn't at the meeting, said in an email that the agency is also concerned about the impact of extending customer proprietary network information privacy protection to broadband providers and how it could affect “how the existing Internet functions. i.e., whether any existing information sharing practices would (or might be construed) to violate Section 222.” Providers “have raised these concerns, claiming that existing applications that use things like geolocation would not be able to operate without violating Sec. 222,” Feld said.

Wheeler did not state a view on whether broadband providers would have to pay into the USF, which supports such programs as E-rate and Lifeline, one of the attendees said, but raised it as “another example of a possible implication of Title II that needs additional work.”

USF Impact

Speaking at the FSF event, Pai said, “public utility regulation would mean higher broadband prices for consumers. Once broadband service is classified as a telecommunications service, universal service charges will be assessed on carriers’ broadband revenues. And many state and local taxes will automatically kick in. The net result is that every single American broadband customer will have to pay a new tax or taxes to access the Internet. That translates into less broadband adoption, especially among the millions of families that still struggle to make ends meet in this lackluster economy.”

An NCTA spokesman said the association shares the concern and pointed to its Oct. 28 blog post. It said in part, “if the FCC decided to regulate broadband as a Title II telecommunications service, customers for the first time would see the USF contribution fee assessed on their broadband bills.”

If the commission decides it doesn't want to require broadband providers to pay into the USF, the agency could simply forbear the requirement, Feld told us.

Outside the net neutrality debate, groups like NARUC have pushed for USF contribution revisions. Feld and other public interest advocates said having broadband providers pay into the fund may be justified. The providers would be eligible to draw from the fund, Feld noted. “I'm not sure why ‘hey, the program designed to bring 21st Century communications networks to rural areas and make them affordable to the poor will now actually apply to the 21st Century communications network’ is such a terrible argument,” Feld emailed.

“I'm curious how Pai and O'Rielly see the future of USF? Do they think no one is going to be on the contribution side? Do they propose elimination of USF altogether?” Feld emailed. He said the commission also would have to pass a separate order assessing broadband providers the fee.

O’Rielly at the FSF event, though, argued, “there is nothing simple” about the forbearance process, and said the commission “has, over time, set the bar so high for forbearance that it is nearly impossible to meet, especially when the commission deals with core common carrier provisions on a nationwide basis.” O’Rielly also said the “commission already has plans for” the broadband fees. He said based on “conversations,” E-rate and Lifeline “are expected to be expanded by many billions of dollars and shatter the USF collection and spending levels of this year." O'Rielly stressed he was not responding to Obama's statement.

Free Press Policy Director Matt Wood responded: "Commissioner O'Rielly can conjure up all of the spending spree fantasies he wants, citing to unsourced conversations with people he won't name. The fact is that the Commission has several options for broadband and USF, but one of those options cannot be simply refusing to ask questions about how Section 254 [which deals with the USF] will work in a broadband telecom world." As a commissioner, Robert McDowell had helped “float” the idea of expanding the contribution base, Wood said. “Is Rob McDowell the conversation partner that Commissioner O'Rielly is talking about?" Wood said. McDowell didn't comment Friday.

House Communications Subcommittee Vice Chairman Bob Latta, R-Ohio, called Obama’s push for Title II “extremely troubling and disappointing.” He said the “light-touch regulatory framework that has long governed its operation and functionality has been central to the innovation and advancement we are experiencing at both the core and edge of the network today.”