A protester outside the FCC building in Washington on Thursday.
To the chagrin of net neutrality advocates, the Federal Communication Commission’slatest Open Internet Proposal, released on Thursday, waves a wet noodle at companies that flout open Internet rules.
But a reclassification of broadband services as “utilities” could give the FCC a hammer.
As it stands today, Internet service providers are classified as information services, which means the FCC cannot regulate them as it would landline phones, which are considered telecommunication utilities and under the FCC’s purview. Reclassifying ISPs as utilities (like common carrier telephone services) would potentially give the FCC far greater control over ISPs and, potentially, help the FCC ensure an open Internet.
There’s little indication that the FCC truly wants to make this change. In a statement Thursday, the commission said that keeping ISPs classified as information services "presents the quickest and most resilient path forward," but called a reclassification "a viable alternative."
The problem with defining broadband (not including mobile) differently than land-based common carriers (your traditional and highly regulated phone companies), which are governed by Title II in the original 1934 Telecommunications Act, is that the FCC doesn’t have the right to regulate broadband or truly protect net neutrality.
And even though the FCC doesn’t seem to love the idea of the big switch, most ISPs are nervous enough over the prospect to have written a strongly-worded letter on May 13 warning the FCC against changing their designation.
“The future of the open Internet has nothing to do with Title II regulation, and Title II has nothing to do with the open Internet,” the ISPs wrote. Among the signees were AT&T, Comcast and Verizon, all of which recommended the FCC “categorically reject” any effort to equate the open Internet with Title II.
Why are the ISPs so scared, and why is the FCC only investigating this change and not simply making it the cornerstone of its Open Internet Proposal?
To understand why broadband is not regulated like standard communications, you need to look at the portion of the 1996 Telecommunications Act that first addressed broadband.
Make it grow
It sought to protect and advance the growth of broadband (then referred to as “advanced telecommunication capability") for all Americans. It did this by “utilizing in a manner consistent with the public interest, convenience, and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.”
In other words, the FCC wanted broadband to spread rapidly throughout the nation, but have the rules, regulations and guidance to do so. If the growth of broadband access in the U.S. in the last two decades is any measure, that part of the plan worked.
But by not lumping in broadband with common carriers — even though the same companies would soon be providing both services — the FCC was left with two sets of rules and unequal power over each communication and information sector. When the FCC sought to censure Verizon’s efforts to manage its own Internet traffic, the D.C. Court of Appeals found it had overstepped its bounds and struck down the net neutrality rules the FCC essentially built as a bulwark against Internet access abuse. The rules it was applying to Verizon’s Internet services were not covered under Section 706 of the 1996 Telecommunications Act, which governed the FCC's oversight of broadband.
Give 'em the hammer
Section 706 didn’t give the FCC that kind of power. Redefining services like Comcast as a utility would allow the FCC to bring to bear all the rules and power found in Title II of the 1934 Telecommunications act.
George Foote, a partner at the international law firm Dorsey & Whitney, works closely with the FCC and believes the Title II switch would be counter to the FCC’s decades-long efforts to deregulate.
But if broadband companies were reclassified as utilities, Foote said they could be introduced to a host of new regulations:
- The FCC might have a say in who can and cannot provide a service.
- It could influence the price of the service.
- The FCC could define how ISPs provide broadband services.
- Consumers would get a more formal complaint system.
- ISPs revenues could come under scrutiny.
Just the threat of this kind of regulation apparently has ISPs and their investors panicking. “Even the potential threat of Title II had an investment-chilling effect by erasing approximately 10% of some ISPs' market cap,” the ISPs wrote in their letter to the FCC.
Not everyone is buying the regulation argument. "The fact is that reclassification doesn’t mean any additional regulation at all,” said Free Press research director S. Derek Turner. Turner added that industries like wireless and carrier Ethernet currently classified under Title II “are thriving.”
Either way, ISPs like Comcast actually have little to fear, Foote said. “The FCC’s threat to impose Title II is really just that.”
Net neutrality proponents believe officially designating broadband as a utility is the only way to ensure an open Internet. “It is exactly what the bulk of activists are supporting, as the recent court decision made it clear that it is the only way in which true net neutrality regulations can be applied,” said David Segal, executive director of Demand Progress.
Some would like the whole Internet designated a public utility. “The Internet is a public utility and the FCC must regulate Internet providers as common carriers. Anything short of undoing the [George W.] Bush-era deregulation of broadband industry is fake net neutrality, and we're not falling for it this time,” said Becky Bond, Political Director at CREDO Mobile.
For the time being, no one is redefining ISPs as utilities. The FCC's proposal is just that: a proposal, open to months of debate before a final document is voted on at the end of this year. Whether the Title II reclassification concept survives that long is anyone's guess.