Federal Communications Commission chairman Julius Genachowski gave a head-fake when rumor started floating out of Washington that he would back off of pursuing net neutrality requirements. Instead of backing off from pursuing net neutrality, Genachowski appears to have put a new coat of paint on an old jalopy and wants us to believe that the car will run just fine.
The problem with Genachowski’s centrist-inspired “Third Way” approach is that the legal framework the FCC wants to establish for broadband regulation will eventually limit consumer choice and hamstring the business judgment of broadband providers.
On the one hand, the FCC allegedly wants the Internet to flourish in an as minimalized regulatory environment as possible. In order to do this, under the FCC’s proposed regulatory framework, the FCC will refrain from regulating broadband, stepping in only to protect consumers and to promote competition.
To bring about this centrist, light-touch new world order, the FCC will apply six sections of Title II of the Communications Act to ensure that denial of service and other unreasonable and unjust acts on the part of broadband providers are prohibited. What they fail to mention is that the existing four principles put in place in 2005 already ensure this. In other words, the FCC intends to hide behind the skirt of consumer protection in order to promote the regulation of broadband access.
The FCC’s proposal is nothing but a strategy that uses tanks to outflank the broadband industry with consumers being run over by the tracks. There are three impacts the FCC’s proposed legal framework would have.
First, the new framework would in effect reclassify enhanced or information services as telecommunications services. The aforementioned sections of the Communications Act are applied to common carriers. Common carriers are defined as any person providing interstate or foreign communications for hire via radio or wire.
Broadband providers, including providers of cable modem and digital subscriber line services, are classified as enhanced or information service providers not telecommunications companies. This distinction was determined by the FCC in 1998, reiterated by the FCC in its 2002 order on cable modem services, and further upheld in the U.S. Supreme Court’s 2005 ruling in Brand X.
With all this precedent, is the FCC ready to declare that all broadband providers are common carriers? The common carrier provisions of the Communications Act were designed to ensure that consumers were not discriminated against when trying to make a phone call, whether calling mom on Mother’s Day or dialing up AOL. The Title II sections were never designed to regulate an information service provider’s traffic or force an information service provider to share proprietary network management information with any consumer that petitions for it.
Second, the FCC’s proposal would introduce regulation of the Internet, a policy that both the Congress and the FCC have been avoiding for the past two decades. Congress and the FCC have determined that the Internet has been and should be allowed to continue to flourish in a competitive environment.
Finally, Genachowski’s Third Way ignores another consequence of the holding in Brand X, this time regarding equity between broadband services provided by cable modem and broadband provided by a telephone company via digital subscriber line services or DSL.
As far as consumers of cable modem service are concerned, their access lines are being used to access information services not telecommunications. This is part of the reason why the court held that cable modem should not be treated as telecommunications. If the FCC were not to apply this same legal approach to telecommunications companies, it would create a system of picking winners and losers; with the FCC favoring cable modem providers over DSL providers.
If the FCC is concerned about maintaining a competitive environment, creating regulatory induced inequities between cable modem and DSL will have a negative impact on consumer welfare. The regulatory and compliance costs for DSL providers will be driven up and eventually passed on to DSL subscribers in the form of higher rates.
The impact from implementing the FCC’s new proposal would be negative on both providers and consumers of broadband. The FCC’s Third Way is undoubtedly the wrong way.
Alton Drew, CEO of The Alton Drew Group, is a political analyst, economist and commentator, specializing in legal, policy, and political issues in the areas of broadband, cable, and telecommunications. Based in Atlanta, Drew regularly blogs on his site, www.lawandpoliticsofbroadband.com.