Taking Away an Open Internet

Remarks of Tom Wheeler
At event hosted by Benton Foundation and 1871
Chicago, IL
September 18, 2017

We gather today at a critical moment in the history of an Open Internet; in the fight for Net Neutrality. So, right here at the outset, let’s make clear something that will bear repeating throughout these remarks: An Open Internet is the law of the land and any change to that policy would take away from consumers, innovators and the competitive marketplace something they have today. The proof point that opponents to an Open Internet must hurdle is the factual basis for why it is necessary to remove existing protections? Those protections can be boiled down to one simple principle: Consumers must be in charge of how they use their broadband connections, free from manipulation by their broadband providers.

It’s not hard to understand what an Open Internet delivers. Today, a handful of companies – four to be precise – control over 70% of the broadband connections that run to American homes. If meaningful net neutrality goes away, this handful of very big broadband providers will have the power to decide what content reaches consumers and the terms under which consumers may use the connections they purchase. In the absence of meaningful Open Internet rules, it will be the networks that make the rules.

Think about it this way. These remarks are being streamed. Today, no one had to ask permission from any broadband provider. Neither do the startups that are here at 1871 have to ask permission to pursue their vision. The Open Internet rule assures no one has to fight network favoritism.

This openness is at risk, however. Contrast the openness that is presently mandated for internet access with the behavior of the network companies when they offer cable television service. On the “cable TV side” of the business, the networks decide exactly what programming reaches you. They can force you to pay for things you don’t watch, and charge you extra for what you do want to watch. Taking away the Open Internet protections means the broadband side of the networks will be able to behave like the cable side: picking and choosing and charging.

Unfortunately, those of us who believe the internet should be fast, fair and open are in for a fight. The majority of the Trump Federal Communications Commission (FCC), the Republicans in Congress, and the big broadband providers are ganging up on consumers. They mouth the words, “We support an open internet,” yet oppose meaningful protections of that openness. So let me say it again, the current effort is to take away protections that now exist. This is principally about four economically and politically powerful broadband providers – companies that control the connections to 70 percent of American homes – seeking to take something away from tens of millions of consumers and tens of thousands of entrepreneurial innovators.

The Trump FCC’s ongoing proceeding to accomplish this is a sham, starting with its name. In the Orwellian world of alternative facts in which we now live, the FCC calls gutting the Open Internet: “Restoring Internet Freedom.” The only thing this effort frees are the broadband providers that escape from their obligations to consumers. The effort to repeal or revise the Open Internet rules is contrary to statute, and contrary to the facts demonstrating how broadband providers can, have, and will abuse their role as gatekeeper to the network that will define the 21st century. And the best its proponents can come up with to support their position are claims of reduced investment that add up to nothing more than special pleading by the biggest cable and telecommunications companies.

First, let’s look at the law. Everything boils down to Title II of the Communications Act, which provides that telecommunications companies must offer non-discriminatory service, and other protections. They can’t pick and choose among users or unfairly favor some customers over others. Applying Title II to companies delivering access to the internet is not a new idea; early internet services were delivered over Title II phone and DSL lines. Early online services like DARPANet and AOL would not have even existed without Title II’s mandatory non-discriminatory access.

For over a dozen years Republican and Democratic FCCs struggled with how to assure the internet remained open. Every such effort was opposed and then successfully challenged in court by broadband providers. After multiple trips to the D.C. Circuit, the Commission recognized in 2015 that meaningful protection could only be rooted in Title II classification of broadband services. This time, the court agreed - twice.

Let’s make no mistake about it, the broadband market is not a competitive market. Almost 70 percent of American households have only one choice (or no choice) for the fast broadband connections that run to their homes. Absent meaningful oversight, these non-competitive companies will make the rules.

These big broadband providers possess both the technological power and economic motivation to turn your internet connection into a clone of your cable TV service by cutting back on the openness that is now mandated by the law.

In 1996 Congress enacted legislation to ensure that Internet services and content wouldn’t be artificially controlled by telecommunications companies. Congress accomplished this by ensuring that Title II and its core non-discrimination requirements apply when a service transmits data without change in form or content.

And that’s what broadband providers do. You want a movie, they deliver it. They don’t edit the movie on the way or swap out a happy ending for a sad one. They just deliver it. That is a telecommunications service, and that is Title II.

It is important that the law is this simple. Without Title II, the FCC cannot apply bright-line rules. Without Title II, the FCC can’t stop broadband providers from blocking you from reaching the content you desire. It can’t stop those companies from degrading the quality of a video stream on its way to you. Without Title II, the FCC can’t – and this is at the heart of the legal reasoning – do anything that prevents the broadband providers from forcing internet services – not just video, but also companies like those here at 1871 – to negotiate with them for access to your home.

So, the bottom line: No Title II, no Open Internet.

Here’s the second point. The current FCC is ready to say there is no threat from the broadband providers; that there are no facts demonstrating that broadband providers will do anything to harm openness. They present their arguments but they don’t confront the facts.

They argue that policy should be changed because of the election of Donald Trump. Well, that may have changed the makeup of the FCC, but it didn’t change the reality of how non-competitive networks behave. And it certainly didn’t change the legal requirement that when making a decision, the FCC must base that decision on the facts.

So, let’s talk about the facts.

Fact number one: in the short span since the adoption of the 2015 Order nothing has changed to warrant a 180-degree reversal of course.
Fact number two: When I was at the FCC we reviewed three huge mergers involving broadband companies. We spend months with more than one hundred staff members combing through evidence, including the most sensitive internal strategy documents of the companies.

What we learned from these documents was that the “cable” mentality of being a gatekeeper controls how broadband providers operate their businesses. Because the big broadband providers are also in the “cable TV” business, they don’t like it when internet-delivered competitors – so-called “over-the-top” video – use their broadband capacity to damage their “cable” video revenues. Both the Department of Justice and the FCC concluded that broadband companies have the technological power and the economic motivation to harm services they don’t like. Broadband providers can limit the ability of edge companies to deliver traffic onto their networks. They can favor some services over others by discriminating between who they like and who they don’t.

And that’s not all, the New York Attorney General filed comments with the FCC this summer that its independent investigations showed that at least two big broadband providers intentionally engaged in degradation of traffic in order to enhance their bargaining power with Internet companies.
Third point. In light of all of this, the current leadership of the FCC and the big broadband companies have invented an argument that is both wrong and wrong-headed.

Over the summer, the current Chairman of the FCC was asked by a congressman about the circumstances under which he would maintain Title II and the current Open Internet regulations. His answer was simple, and simply disturbing. He said that what would be required would be, “economic analysis that shows credibly that there's infrastructure investment that has increased dramatically” since the 2015 rules were adopted.(1)

Without waiting for the facts, the Trump FCC has already made its conclusion on this important point. In paragraph 46 of the Notice of Proposed Rulemaking, The Commission states that “reversing the Title II classification and restoring broadband Internet access service to a Title I service will increase investment.”(2)

It is on this assertion that the Trump FCC bases its effort to overturn the law that is now in effect.

But it’s flat wrong.

As Free Press has conclusively demonstrated on the record, with very detailed analysis, there is no evidence, no evidence at all, supporting the proposition that the 2015 Order has caused lower investment.

This chart tracks the change in capital expenditures following the Open Internet Order among broadband providers. There are some big green numbers there, look at Comcast, Verizon and Charter for example. The average company capital expenditure grew at 6.8% since 2014, the year before the Open Internet rules were adopted. And the total industry capital expenditure goes up as well.

If the challenge is to demonstrate how infrastructure investment has gone up…well, here is Exhibit A.

Of course, not everyone goes up. Look at AT&T; it’s capital expenditure goes down by one percent. Does that reflect a problem? Does that support the Trump FCC? How can we figure out the answer?

Well, it turns out all you have to do is ask AT&T. Free Press dug up comments filed by AT&T with the FCC in 2010. I want to read you AT&T’s words:

[T]here is no reason to expect capital expenditures to increase by the same amount year after year. Capital expenditures tend to be 'lumpy.' Providers make significant expenditures to upgrade and expand their networks in one year (e.g., perhaps because a new generation of technology has just been introduced), and then focus the next year on signing up customers and integrating those new facilities into their existing networks, and then make additional capital expenditures later, and so on. Minor variations from year to year thus should not be surprising...(3)

There you have it. The unvarnished truth, and the nail in the coffin of the Investment Apocalypse.

In fact, broadband service has continued to improve since the Open Internet Order. Just this month Recode reported that “[f]ixed broadband speeds are getting faster, thanks to infrastructure upgrades that are allowing internet service providers to offer faster and cheaper packages.”(4) Broadband networks continue to be deployed and expanded. For example, the cable industry investment in networks increased by almost 50 percent in the two years following the adoption of the 2015 rules.(5)

Perhaps most importantly, the use of software in place of hardware is making it cheaper and cheaper to deploy networks, meaning that less investment is needed to achieve even greater results. Here’s how AT&T quantified the reduction in cost to Wall Street, “In 2015/16 we’re going to deploy about 250% of the capacity that we did in 2013/14, and we’re going to do it for 75% of the cost.”(6) As the CFO of AT&T told investors in August, in 2016, 34% of network functions were software-based, by 2020 that will reach 75%. The result, he described as, “real Capex efficiency.”(7)

The claim that the Open Internet rule has a negative impact on investment simply doesn’t hold water – spending is up at the same time costs are down; significantly more connectivity is being built. However, there is an even bigger issue here. The test of the public interest has not and never should be based solely on the capex budgets of the biggest broadband providers.

Consumers are at the center of the public interest. They are well-served by companies that innovate and compete. They are ill-served when companies limit their competitive choices, hike prices, reduce quality and limit innovation. They are seldom served when those companies make the rules.

But there’s one more thing. As many of you know, when I was Chairman, the Commission adopted comprehensive privacy regulation because your broadband providers have wide-ranging access to your private information as it passes over their connections. I thought the broadband providers ought to protect your privacy the same way that telephone companies always did. But the Trump Administration and its allies in the network companies quickly persuaded Congress to repeal those regulations. So, here’s another reason why the networks want to kill Title II: if it goes away, so does the FCC’s authority under Sec. 222 to protect your privacy.

Openness…privacy…consumer protection…innovation…competition…This is what is at stake. Whether the Trump Administration or Congress will take away the rules that give consumers control over the broadband connections for which they pay every month. Whether they will take away the right of consumers and innovators to use the connections in the way they want. Whether the broadband providers should be able to favor or prioritize some services, favor companies they own, and turn today’s Open Internet into a network resembling what exists today for cable television. Whether they will rip up the last remaining privacy that applies specifically to broadband providers.

The American people know that the answer to all of those questions is “No.” And here is some late-breaking news in that regard.

Last Thursday, the exciting mobile polling firm Qriously asked Americans, via their mobile devices, what they thought about the power of the networks. At the outset it is important to point out that this important exercise in democratic expression could be conducted because wireless networks are open. No one had to ask permission to allow Americans to speak out.

Asked to respond to the statement, “Internet providers should not decide what content or services consumers use,” two-thirds agreed or strongly agreed.

A similar two-thirds agreed, “Internet companies should comply with the same privacy protections as telephone companies.”

The Qriously survey tracks other studies, including a June Morning Consult/POLITICO poll in which 60 percent said that they favor rules so that broadband providers “cannot block, throttle or prioritize certain content on the Internet.” And, at a time when bi-partisanship is hard to find, that sentiment was equal across parties: 59 percent of Republicans and 61 percent of Democrats agreed protections were necessary.

We know what’s right, but let’s take a moment to discuss what’s possible.

The Trump FCC has pre-judged that they will repeal or drastically revise the Open Internet rule. One thing I learned as FCC Chair, however, is that everything the Commission does is subject to searching judicial review. The Trump FCC has set a course that caters to the big broadband providers by ignoring reality. They will have to defend in court – with facts – why, after only two years of successful operation, circumstances have changed so drastically that the Open Internet rule must be changed drastically. I don’t think that judges will stand for that.

Perhaps realizing that, the FCC Chairman has suggested Congress should act. Republicans in Congress have begun talking about passing legislation that claims to be about Net Neutrality, but would gut the current protections. According to news reports, the House Energy & Commerce Committee will soon be considering legislation that Republican leaders apparently want to push through the House of Representatives. They face multiple hurdles. The American people, as the polling shows, do not support this idea. Anything the Congress does do will mean taking away from the American people protections that are now the law of the land.

The Trump FCC and the Republican Congress say they support Net Neutrality. The big broadband companies buy ads saying they are in favor of Net Neutrality. However, the fact of the matter is they are all working together to take away the protections of Net Neutrality.
There is a simple test as to whether what the big companies, the Trump FCC and the Republicans in Congress are talking about is actually Net Neutrality - does it preserve the Open Internet protections that are in effect right now?

So, let me close where I began. An Open Internet is the law of the land and any change will take away from consumers, innovators, and the competitive marketplace what they have today and must not be allowed to happen.

Thank you.

Tom Wheeler is the Walter Shorenstein Fellow for Media and Democracy, Harvard Kennedy School; Visiting Fellow, Brookings Institution; and Klinsky Visiting Professor, Harvard Law School. He served at Chairman of the Federal Communications Commission November 2013 - January 2017.

Notes:

1. See Oversight and Reauthorization of the Federal Communications Commission, House of Representatives, Subcommittee on Communications and Technology, Committee on Energy and Commerce (July 25, 2017)
2. NPRM at paragraph 46
3. AT&T's 2010 CMRS report comments, https://ecfsapi.fcc.gov/file/7020652183.pdf). (emphasis added)
4. Molla, Rani. “Fixed broadband speeds are getting faster — what’s fastest in your city?” Recode (September 7, 2017) https://www.recode.net/2017/9/7/16264430/fastest-broadband-speeds-ookla-city-internet-service-provider
5. Free Press Reply comments at 21.
6. Bill Smith, President AT&T Technology Operations, AT&T Services, Inc., Wells Fargo Convergence & Connectiivity Symposium, June 21, 2016.
7. Free Press at 38 n. 69.