'Modern Title II' Doesn't Satisfy Reclassification Opponents

The FCC portrayed the reclassification of broadband in Chairman Tom Wheeler’s net neutrality proposal as a modernized Title II. But pledges from senior agency officials not to impose traditional Communications Act common-carriage regulations like rate regulation didn't ease the concerns of reclassification’s opponents.

Though the Title II approach revealed Wednesday (see 1502040055) was widely expected, a critical question that had remained was how the agency would deal with forbearance, an issue that split public interest groups that wanted to retain many provisions, from industry groups that wanted forbearance from everything. The approach calls for not forbearing from sections 201 and 202, which ban “unjust and unreasonable practices,” Section 208’s authority for the agency to investigate consumer complaints, and enforcement sections 206, 207, 209, 216 and 217, said an agency fact sheet.

Also retained would be Section 224, which allows fair access to utility poles and conduits, section 225 and 255 protections for people with disabilities, and a partial application of Section 254, which involves contributions to the USF program. The order wouldn't require broadband providers to pay into the fund, but defers the decision to the pending recommendation of the Federal-State Joint Board on Universal Service, which the commission has asked to examine the issue (see 1408070020). The agency would have to take a separate action from approving the net neutrality order to apply broadband to USF, an agency official said. Google had called for preserving Section 224, saying giving broadband providers access to utility poles would promote competition (see 1412310041).

In painting the order as not the traditional Title II, FCC officials stressed the proposed order would not subject broadband to rate regulation or tariffs, last-mile unbundling, and filing and accounting standards associated with traditional utility regulation, said officials and the fact sheet.

Wheeler, in a Wired.com op-ed outlining his proposal Wednesday, wrote that net neutrality protections under Title II “can be accomplished while encouraging investment in broadband networks. To preserve incentives for broadband operators to invest in their networks, my proposal will modernize Title II, tailoring it for the 21st century, in order to provide returns necessary to construct competitive networks.” An agency official told reporters speaking on condition of anonymity that there's sufficient discussion of forbearance on the record for the agency to act. The forbearance aspect of the draft order is legally grounded in the Section 10, which allows the commission to forbear from requirements that aren't necessary, said the official.

Countering industry arguments that a Title II approach would deter broadband deployment, a second agency official pointed to $400 billion in wireless investments under the classification. The official also pointed to $45 billion in provisionally winning bids in the AWS-3 auction. Bids were made even after President Barack Obama’s call for a Title II approach, the official said. Google and Sprint had said that reclassification wouldn’t deter investment, the official also said. Public interest groups praised the draft order. Free Press Policy Director Matt Wood said it reflected the suggestions of most consumer groups.

Title II opponents disputed the notion of a new Title II. “There is no 'modern Title II' -- there is just Title II," said Cinnamon Mueller cable lawyer Barbara Esbin, who represents the American Cable Association. ACA and individual operators said they're concerned about the rules (see 1502040054). But the FCC is "saying that they are going to forbear from the Section 203 requirement that common carriers must file tariffs containing their rates, terms and conditions of service," said Esbin. "Because they intend to apply Section 201, 202 and 208, they will be permitting after-the-fact regulation of rates through the adjudication of complaints by consumers, edge providers, third-party ISPs, etc. These complaints can be over rates, refusals to service, terms and conditions of service, as well as practices in connection with the provision of service.”

Esbin disputed the comparison with licensed spectrum, calling it a “scarce commodity” that has a high demand. That spectrum is “tightly controlled” by the government, as well as the uncertainty over the next auction, drives up the auction prices, she said. ACA had pushed the agency in recent weeks to exempt small cable operators from reclassification, saying they don't have the ability to hinder the open Internet and would be disproportionately hurt by regulations. “Rather than doing the hard work required to examine individual markets and individual competitors, the FCC has taken the easy way out by treating all ISPs the same,” ACA President Matthew Polka said in a statement opposing the proposed reclassification.

“A ban on paid priority -- while permitting non-paid priority -- is effectively rate regulation,” Hal Singer, economist and senior fellow at the Progressive Policy Institute, emailed us. “It sets the price of paid priority to a regulated rate of zero.”

Future commissions could change course and include rate regulation, Singer said. “Precisely what Wheeler decides to forbear from in 2015 is irrelevant. His decision is not binding on future commissioners. That these provisions might be seemingly innocuous misses the point. By reclassifying broadband, Wheeler has just made it easier for future commissioners to embrace rate regulation and unbundling.” An agency official said a future commission could change course, but it would run against the agency’s trend toward less regulation.

Free State Foundation President Randolph May said that despite the agency’s comments, "of course there will be rate regulation. They will just call it by another name, for example, by regulating usage tiers, banning zero-rating plans, and controlling interconnection prices. What is banning paid prioritization if not rate regulation. If you don't want to regulate rates, why not forbear from Section 201?"