Derek Turner

The claim that restoring light-touch Title II authority and basic Open Internet rules would harm—or did harm, from 2015 through 2018—ISPs’ broadband network investments is extraordinary. Not only because mountains of evidence from the ISPs themselves demonstrate its falsity; it is also extraordinary because the mechanism by which this supposed harm would occur is illogical and unreasonable, and has been proven ever more outlandish over time.  ISPs exist to generate economic returns for their shareholders.

The US telecommunications market has significantly evolved since Congress last overhauled the Communications Act more than a quarter century ago. But the Federal Communication Commission’s universal service distribution policies – though periodically tweaked – are still rooted in a framework designed to support incumbent telephone companies. However, the Congress and the FCC now have before them an opportunity to reimagine and reinvent universal service policy for the future.

The Rural Digital Opportunity Fund is looking more and more like one of the most wasteful projects in Federal Communications Commission history. Critiquing the FCC for awarding more than $2 billion to unproven companies using questionable technologies to serve questionable areas is fully valid. So is raising concerns about awards to a bankrupt incumbent. These two critiques can coexist. Yet FCC Chairman Pai views them as the bread of a “job well done” policy sandwich.

To connect those most in need most often means connecting people to networks that already exist. That’s why it’s important to expose how the Federal Communications Commission’s rush to build new broadband networks has resulted in wasteful spending. Though I believe solving the rural-deployment problem is important, the roots of that problem are different from the root causes of the digital divide that plagues urban areas.

The Pai Federal Communications Commission took a victory lap when it announced the results of a $9.2-billion reverse auction that is supposed to bring broadband to over 5.2 million unserved homes and businesses.

At a House hearing on net neutrality, the claims of Joseph Franell — the general manager and CEO of Eastern Oregon Telecom (“EOT”) — stood out like a sore thumb. He said, “The application of Title II as part of Net Neutrality had a dramatic chilling effect on rural telecom in the Pacific Northwest and I suspect the same could be said about the rest of the country.” He also said that since the repeal of the 2015 Federal Communications Commission order, “investors have been much more willing . . .

Financial and marketplace evidence demonstrates that the FCC’s 2015 Open Internet Order is an absolute success, accomplishing its stated goal of preserving and promoting the online ecosystem’s “virtuous cycle of investment.” ISP investments accelerated following the vote (e.g., aggregate capital expenditures by publicly traded ISPs have risen by more than 5 percent during the two-year period since the FCC’s February 2015 vote; investments in core network technology at cable companies during that same time period are up by more than 48 percent). Investments in the edge, including those by online video providers and edge computing firms, are up as well (e.g., capital expenditures by firms in the U.S. data-processing sector increased 26 percent in the year following the FCC’s order while there was just 4 percent growth in the year prior). More new U.S. “over-the-top” video services launched in the two years following the vote than in the seven years prior. Furthermore, the certainty the FCC’s action created spurred the entry of numerous pay-TV full replacement providers, with vertical carriers such as AT&T now distributing (and others poised to distribute) their pay-TV services via other ISPs’ last mile networks. In sum, the 2015 Open Internet Order and accompanying legal classification decision settled the prior uncertainty about open, nondiscriminatory broadband telecom service access. What followed that decision was a historic period of U.S. investment and innovation.

Free Press delivered a letter to the Federal Communications Commission urging the agency’s new leadership to take serious strides toward closing the digital divide by making broadband more affordable. New FCC Chairman Ajit Pai recently claimed that closing the divide was going to be “one of his core priorities” during his tenure.

The Free Press letter commends Chairman Pai for this new focus, but strikes a note of caution given his prior track record as a commissioner. “No matter how laudable the new chairman’s sentiment may be, his proposals to close that divide could be ineffective — and even harmful,” Free Press warns. “The Commission must not subsidize build-out that is already occurring in the market, and yet not even address the primary structural barrier keeping tens of millions of people offline: affordability of the services already available to them.” ”Our research contains many similar findings that all point to the same conclusion: the root cause of the adoption gap is the lack of affordability, and that is an outcome created primarily by a market structure that produces too few affordable choices and suboptimal competition. The adoption gap is an affordability gap,” the Free Press letter reads. Pai’s preliminary plan focuses on giving significant tax breaks to the handful of ISPs that control the broadband-access marketplace. Pai proposes using taxpayer dollars to fund the construction of gigabit networks in below-average-income neighborhoods, despite the fact that most of these deployment projects are already underway. His plan does nothing to make these services affordable.

[Commentary] Press reports indicate that Federal Communications Commission Chairman Tom Wheeler will propose new Open Internet rules that would allow Internet service providers to implement so-called paid-priority schemes.

These would allow Internet service providers (ISPs) to charge extra fees to content companies to guarantee their content reaches end-users ahead of those that don’t pay. The proposal would also allow ISPs to favor their own content. Chairman Wheeler insists his proposal would “restore the concepts of Net Neutrality.”

He stated that the court “made it clear that the FCC could stop harmful conduct if it were found to not be ‘commercially reasonable.’ Acting within the constraints of the Court’s decision, the Notice will propose rules that establish a high bar for what is ‘commercially reasonable.’” But the judges were pretty clear here: Unless the FCC reclassifies ISPs as common carriers, it can’t impose any rules that stop ISPs from discriminating against content or favoring their own content.

Chairman Wheeler’s post ends with a promise that his rules will not permit ISPs to favor their own content. But nowhere in the legal history is there any suggestion that such moves would run afoul of the “commercially reasonable” standard. What’s more commercially reasonable than a company looking out for its own best interests? Nowhere in his post does Chairman Wheeler suggest that his rules will bar paid prioritization.

And unless the FCC reclassifies ISPs as common carriers, it can’t legally prohibit this practice. So instead of fighting for real Net Neutrality, the FCC instead has chosen to bless online discrimination.