Competition/Antitrust

On August 3, the passed the following technology and telecommunications bills:

1. S. 19, Making Opportunities for Broadband Investment and Limiting Excessive and Needless Obstacles to Wireless Act (MOBILE NOW Act), Legislation to increase spectrum availability for next-generation gigabit wireless services and foster broadband deployment. Sponsors: Sens. John Thune (R-SD), Bill Nelson (D-FL)
2. S. 96, Improving Rural Call Quality and Reliability Act of 2017, Legislation to require the FCC to establish quality and reliability standards for rural phone networks. Sponsors: Sens. Amy Klobuchar (D-Minn.), John Thune (R-SD), Jon Tester (D-MT)
3. S. 123, Kari’s Law Act of 2017, Legislation initiated after the murder of Kari Hunt in a hotel in Marshall, Texas, when Hunt’s daughter tried to call 911 but was unsuccessful due to a required “9” prefix on the hotel phone. This legislation bans the requirement of a prefix when dialing 911 for assistance. Sponsors: Sens. Amy Klobuchar (D-MN), Deb Fischer (R-NE), Brian Schatz (D-Hawaii), John Cornyn (R-Texas), John Thune (R-SD), Ted Cruz (R-Texas)
4. S. 134, Spoofing Prevention Act of 2017, Legislation to stop the transmission of misleading or inaccurate caller ID information, including such calls and text messages originating overseas. Sponsors: Sens. Bill Nelson (D-Fla.), Deb Fischer (R-Neb.), Amy Klobuchar (D-MN), Roy Blunt (R-MO)
5. S. 174, Federal Communications Commission Consolidated Reporting Act of 2017, Legislation to require the FCC to condense duplicative reports on competition in the telecommunications market into one comprehensive report released every two years. Sponsors: Sens. Dean Heller (R-NV), Brian Schatz (D-Hawaii)
6. S. 88, Developing Innovation and Growing the Internet of Things Act (DIGIT Act), Legislation to bring together private sector and government entities to assess the needs of the Internet of Things (IoT) and study the readiness of government to support the IoT. Sponsors: Sens. Deb Fischer (R-NE), Cory Booker (D-NJ), Cory Gardner (R-CO), Brian Schatz (D-Hawaii)

Charter Communications has moved 30 percent of the customers it acquired in a blockbuster merger onto new pricing plans, resulting in many people paying higher prices. Charter closed the acquisitions of Time Warner Cable (TWC) and Bright House Networks in May 2016. Before the merger, Charter had about 6.8 million customers; afterward, Charter had 25.4 million customers in 41 states and became the second-largest US cable company after Comcast. The merger was quickly followed by customer complaints about pricing in the acquired territories. In November 2016, we noted that "tens of thousands of ex-Time Warner Cable video subscribers have canceled their service since the company was bought by Charter, and pricing changes appear to be the driving factor." At the time, Charter CEO Thomas Rutledge explained that the TWC video customer base was "mispriced" and needed to be moved "in the right direction." Charter came up with new prices and packages, and many customers saw their bills rise when their previous discounts expired and they were switched to non-promotional pricing. Now, 30 percent of the ex-TWC and ex-Bright House customers are paying different—and often higher—prices.

Cable providers are among the most despised businesses in the country, regularly coming in below airlines, banks, and drug companies in public-opinion polls. "Cable is essentially a monopoly now in urban areas,” said Susan Crawford, a professor at Harvard Law School and a former policy adviser to President Barack Obama on science, technology, and innovation.

Internet service was deregulated during the George W. Bush Administration, with the theory that fewer rules would foster greater competition. For a time, as AT&T and Verizon started building fibre-optic networks to compete with cable Internet, there seemed to be truth to the idea. Over the past few years, however, the companies have largely abandoned those projects; according to Crawford, the capital investments required were too high. Rather than fuel vigorous competition and lower prices, the rise of these giant companies has meant that Americans are paying inflated costs for poor service.

Pinetops' (NC) fight to get municipal broadband demonstrates how far Big Telecom will go to keep its monopoly. The town was finally getting hooked up to high-speed fiber internet that would deliver 1 gigabit per second speeds to homes and businesses across the rural community. But a series of convoluted laws and court decisions created a scenario in which residents of tiny Pinetops (population: 1,300) received some of the fastest internet in the United States for six months—absolutely free.

For Pinetops, that was municipal broadband, where the local government runs its own ISP and delivers it to paying customers, similar to how electricity utilities work. Their provider: the nearby town of Wilson. Wilson is about 20 miles from Pinetops, just across the county line. The small city (population 50,000) has long supplied nearby towns with utilities like water and electricity, so when Wilson launched its municipally-run fiber optic broadband network called Greenlight in 2008, Pinetops was eager to get hooked up. But just as Wilson was preparing to expand the program in 2011, North Carolina passed House Bill 129: the "Level Playing Field" act, which was supported by Big Telecom lobbyists. This put tight restrictions on any town hoping to start its own municipal broadband, and reined in existing systems under the thinking that it was unfair for the government to compete in the open market with private businesses. After the law was passed, Wilson was not allowed to bring high-speed internet to Pinetops.

The average South Korean can choose between three major private internet providers –SKT, KT and LG U+ – and pay less than $30 a month for the fastest internet in the world. That’s $17 less than what the average American pays for a much slower internet hookup. But why? How is it possible that the citizens of the last developed democracy have a faster and more affordable internet than Americans? The simple answer to this question is that in the 1990s South Koreans decided that their country needed a fast and affordable internet provided by a vibrant private sector, and there was the political willingness, and a national plan, to achieve that goal.

On July 17, Free Press submitted comments to the Federal Communications Commission, demonstrating once again that the 2015 decision to base Net Neutrality rules on Title II got it exactly right. The 2015 Open Internet Order ushered in an era of broadband investment and internet innovation while giving users assurances that their service providers will not block, throttle or discriminate against their online communications.

Free Press Policy Director Matt Wood said, “Chairman Ajit Pai’s allegiance to the broadband industry is so great that he has continued to ignore the overwhelming evidence and political forces arrayed against him. The Net Neutrality rules and their Title II framework are working beautifully. Proof of that is everywhere, from the ISPs’ increases in investment and profits to the astounding levels of innovation from companies that use the internet to reach their customers. Phone and cable ISP profits are not the only thing at stake here, though they seem foremost in Pai’s mind. But the fact is that along with their finances, these broadband providers’ service speeds are also on the rise. Companies like AT&T, which industry lobbyists falsely paint as a victim of Title II’s fictional harms, have taken advantage of technological upgrades to deploy faster speeds while spending less than they used to. But don’t take our word for it: AT&T’s own CEO has bragged repeatedly about how it continues to get cheaper-to-deploy fiber and build out the company’s wireless networks."

The Republican-led Federal Communications Commission is preparing to overturn the two-year-old decision that invoked the FCC's Title II authority in order to impose net neutrality rules. It's possible the FCC could replace today's net neutrality rules with a weaker version, or it could decide to scrap net neutrality rules altogether. Either way, what's almost certain is that the FCC will eliminate the Title II classification of Internet service providers. And that would have important effects on consumer protection that go beyond the core net neutrality rules that outlaw blocking, throttling, and paid prioritization.

Without Title II's common carrier regulation, the FCC would have less authority to oversee the practices of Internet providers like Comcast, Charter, AT&T, and Verizon. Customers and websites harmed by ISPs would also have fewer recourses, both in front of the FCC and in courts of law. Title II provisions related to broadband network construction, universal service, competition, network interconnection, and Internet access for disabled people would no longer apply. Rules requiring disclosure of hidden fees and data caps could be overturned, and the FCC would relinquish its role in evaluating whether ISPs can charge competitors for data cap exemptions.

This study evaluates the estimated impact of the Federal Communications Commission’s recent efforts to remove barriers to investment into next-generation wireless and wireline broadband networks, and thereby to accelerate the transition from legacy copper networks to next-generation services.

We estimate that these proposed changes could have a significant impact not only on new wireless and wireline broadband infrastructure investment, but could also positively impact job creation, economic output and consumer welfare. Our models forecast that with these new rules in place, up to an incremental 26.7 million premises would become economical to serve with next generation networks, driving up to $45.3 billion in capital investment. This investment would be made by incumbent service providers across the country and is expected to take place over at least five years.

A battle is brewing at the Federal Communications Commission between cable and telecom industry groups and state attorneys general over broadband speed investigations. Citing state complaints alleging false advertising of internet speeds, USTelecom and NCTA have asked the FCC for a ruling confirming internet service proviers are following federal transparency rules by posting online their average performance during times of peak usage, as evaluated by the Measuring Broadband America program. But a bipartisan group of 35 attorneys general told the agency the petition “represents nothing more than the industry’s effort to shield itself from state law enforcement.”

One of the AGs involved, New York’s Eric Schneiderman, accused Charter in February of misleading customers by advertising internet speeds the company hasn’t delivered. The industry groups say the Charter complaint relies on unofficial speed measurement tools. The deadline for reply comments to the FCC is July 3.

[Commentary] Recently, without any reference to the Net Neutrality debate, the cable industry trade association NCTA made the unsurprising observation that broadband speeds in the US continue to rise, as they always have. Seeing all things through the lens of Net Neutrality, Public Knowledge Senior Vice President Harold Feld immediately laid claim to the trend, asserting that the data in NCTA’s post supports the FCC’s reclassification decision. According to Feld, the speed trend confirms that the “Title II Virtuous Circle” is “totally working” because “the rate of increase has accelerated since the FCC adopted the Title II Reclassification Order in February 2015.”

Feld sets up a direct test of the wisdom of Title II reclassification based on the pace of speed increases following the 2015 Open Internet Order. An empirical question requires an empirical answer. Using the Akamai speed data, Ford subjects Feld’s “theorem” to a battery of statistical tests. Without exception, the data reveal a statistically significant decline in the rate of average broadband speed increases for the US subsequent to the 2015 Open Internet Order. Ford finds that “but for” the FCC’s 2015 Open Internet Order, US broadband speeds would have been about 10% higher—or about 1.5 Mbps faster—on average. Thus, in direct contradiction to Feld’s claim, reclassification appears to have significantly retarded expected broadband speed increases.