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FCC Reply Comments regarding the Framework for Broadband Internet Service

Submission Date: 
08/12/2010


Executive Summary

ACA's primary concern has been about the practical implications for smaller providers of subjecting the broadband Internet service to a regulatory framework developed a century ago for the monopoly provision of analog voice telephone service. Departing from the Commission's highly successful "light touch" regulatory environment for broadband Internet services to impose, for the first time, economic regulation on broadband Internet service providers risks foisting on smaller providers increased regulatory burdens and costs. Before making such a major shift in the governing regulatory framework, as a matter of law and sound policy, the Commission must fully assess and weigh the costs and benefits of its "Third Way" proposal, particularly with respect to the burdens of significantly increased regulation for small entities.

The record in this proceeding fully supports ACA's view, expressed in its initial Comments, that the Title II burdens associated with the Third Way proposal will have an immediate and significant economic impact on small broadband Internet service providers. The consequences of reclassification will include direct economic regulation of the rates, terms, conditions and practices associated with the provision of Internet service and the administrative recordkeeping, reporting and filing obligations of common carriers under the Commission's rules. The direct economic regulatory and administrative burdens ACA identified with common carrier status in its Comments should be viewed as just the visible tip of the economic iceberg small providers will have to navigate under the Third Way. ACA members will also face the prospect of numerous indirect economic burdens, vastly increased pole attachment rental rates, and the prospect of additional regulatory and tax burdens imposed at the state and local levels.

The consequences of reclassification will include, at a minimum:

Direct Regulatory Burdens under Title II:

* Increased behavioral and economic regulation under Sections 201 and 202.
* Increased legal expenses and time associated with case-by-case adjudication of rates, terms, conditions of service under Section 208.
* Increased costs resulting from:

+ Compliance with customer proprietary network information rules pursuant to Section 222.
+ Compliance with disabilities access guidelines pursuant to Section 255.
+ Administrative recordkeeping, reporting and filing requirements associated with common carrier status.

* Increased legal expenses and time associated with potential liability for monetary damages and federal court litigation under Sections 206, 207 and 209.

Indirect Burdens Caused by Need to Reflect Provision of Stand-alone Telecommunications Service:

* Costs associated with changes to:

+ Consumer marketing and billing materials.
+ IT systems used for billing, accounting, ordering and maintenance.
+ Customer service operations.
+ Network reconfiguration.
+ Business model for broadband Internet service
+ Need to review and revise subscriber terms of service and related agreements.

Additional Regulatory and Economic Burdens Associated with Reclassification:

* Vastly increased pole attachment rates.
* Likelihood of burdensome state and local telecommunications regulation.
* Prospect of state telecommunications taxes.

The increased direct and indirect regulatory burdens and costs flowing from reclassification could also negatively impact broadband deployment and consumer prices, with many of the increased costs of providing service being passed along to consumers through retail rate increases. Such results appear starkly at odds with the Commission's overarching policy goal, which ACA shares, of making available affordable broadband Internet service to all Americans.

The cumulative impact of the new regulatory burdens associated with common carrier status means that the Commission cannot go directly from the NOI to a declaratory ruling that has the force of law and alters the default regulatory classification of broadband Internet service. The record clearly supports ACA's contention that because the act of reclassifying the service as a common carrier offering is in the nature of a "legislative ruling" that imposes new legal obligations on providers and therefore requires both a formal noticeand- comment rulemaking under the Administrative Procedure Act ("APA") and the two regulatory flexibility analyses specified by the Regulatory Flexibility Act ("RFA"). The Commission cannot lawfully move directly from the NOI to a ruling having the force of law while skipping both of these important procedural safeguards mandated by law.

Proponents of reclassification via the Third Way have a tendency to characterize the companies on the other end of this proposal as "corporate behemoths," "Big Phone Big Cable," and "giant corporations." But the regulatory requirements associated with the Third Way will fall just as directly on the shoulders of the smallest providers as it will the largest. Unfortunately, the Commission has not given consideration to the disparate impacts such a "one-size-fits-all" approach will have on small and mid-size providers-those least capable of shouldering the substantial new regulatory burdens that will likely be imposed by all levels of government.

Conducting a notice-and-comment rulemaking in advance of a decision to reclassify will permit the Commission and affected parties the opportunity to identify with specificity and provide targeted commentary on the factual and legal basis undergirding reclassification and the precise scope of the rules that will be applicable to broadband Internet service providers post-reclassification. The record compiled in response to the NOI should provide an adequate basis for such a notice of proposed rulemaking. Because such proceedings also require the Commission to perform an initial and final regulatory flexibility analysis, it must assess and quantify the burdens reclassification will have on small entities and propose or at the very least, seek comment on, means of ameliorating disproportionate impacts. Taking these steps will improve the quality of the Commission's decision making and will ensure that any final rules adopted are consistent with the public interest in receiving service from financially viable broadband service providers.

ACA submits that achievement of the Commission's goals of affordable broadband Internet service available to all Americans and establishing a regulatory framework that promotes investment and innovation will not be possible unless the Commission takes full account, and develops means of mitigating, the disproportionate economic burdens reclassification will impose on small providers.

In light of the legal problems that could result from the lack of assessment of the magnitude of the regulatory burdens associated with reclassification, their impact on small entities, and the lack of consideration of flexible regulatory proposals aimed at minimizing the impact of the reclassification on small entities, as required by the RFA, the Commission must either conduct a rulemaking proceeding prior to changing the regulatory status of broadband Internet service, and/or stay the effectiveness of any reclassification (or reclassification and forbearance) decision until it can complete the rulemaking proceedings that would be required for implementation of and compliance with its decision.

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2010 08 12 ACA Third Way Reply Comments FINAL as filed.pdf1.04 MB

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