PITTSBURGH, August 31, 2017 – Treating broadband Internet service providers (ISPs) as common carriers under Title II of the Communications Act was a classic case of government overreach, unnecessary as a matter of economics, incorrect as a matter of law and harmful to ISPs. It was especially harmful to smaller ISPs, their customers and communities because the overhang of 1930’s utility-style regulation increased smaller ISPs’ costs while decreasing their incentive and ability to invest in broadband Internet infrastructure and offer innovative or beneficial new features and services to consumers, according to the American Cable Association.
ACA’s well-considered views came in reply comments (attached) related to FCC proposals that would restore the light-touch regulation of ISPs that existed for nearly two decades, covering a period characterized by phenomenal growth in network infrastructure investment and in the spread of innovative online services across fixed and mobile platforms.
“The FCC has before it copious record evidence supporting action on its lead proposal to roll-back the application of Title II regulation and restore its light-touch regulatory approach under Title I, and it should proceed immediately to ensure that ISPs, smaller ones especially, have the necessary incentives to invest in critical Internet infrastructure,” ACA President and CEO Matthew M. Polka said.
In the reply comments, ACA stressed that Title II reclassification – a radical step taken in 2015 by the FCC under then-Chairman Thomas Wheeler – harmed smaller ISPs, their customers and communities by imposing compliance burdens and introducing regulatory uncertainty. It also raised the potential for after-the-fact rate regulation, thereby decreasing ISPs’ incentive and ability to invest in broadband plant and roll out new features and services that would have benefitted consumers and brought in additional revenues that would have been re-invested.
During the entire course of the “Net Neutrality” debate, ACA and its members have continued to support an open Internet, with the only question being how to achieve that objective in a manner that encourages Internet investment and innovation by all market participants.
In ACA’s view, the application of Title II regulation to ISPs was a mistake. The agency had reasonable alternatives to Title II reclassification in the 2014-15 time frame, but chose instead to reclassify the service and impose burdensome common carrier regulation that had only the barest relationship, if any, to protecting the open Internet against threats, real or imagined.
As ACA explained, for smaller ISPs the fear of adverse FCC enforcement or consumer complaints was concrete and far from “imaginary,” as some Title II proponents claim. Record evidence in the form of sworn Declarations by member companies submitted by ACA shows how these well-grounded fears prevented ACA members from deploying innovative features and services that would have benefitted both the providers and their customers because the costs of defending actions after-the-fact before a regulator or courts, even if successful, can outweigh any economic benefit tied to the innovative offering.
Smaller ISPs were unwilling to “roll the dice” under these circumstances. ACA members also described how the decision caused them to delay, defer or curtail broadband investments. They cited, as a key driver, the potential threat of after-the-fact rate regulation that would impair an ISP’s ability to recoup its investment through revenues and repay loans.
Direct adverse economic impacts of the Title II decision included cutbacks in the scope of planned network upgrades, delays in embarking upon existing network upgrades and expansions, delays in engaging in full system rebuilds, and decisions to refrain from investing to expand broadband into rural unserved areas.
As prudent businesses, ACA members report continuing to invest in broadband out of competitive necessity and to satisfy customer demand, but they delayed, deferred and invested less in broadband plant and service expansions than they otherwise would have but for the Title II reclassification decision. ACA explained in its reply how nothing in the initial submissions of Title II proponents refutes or even undermines this record evidence of direct economic harm.
In light of the many concerns with Title II regulation, ACA also urged the FCC to take into account the following as it considers the contours of an appropriate regulatory framework for broadband ISPs:
The “gatekeeper” theory cannot justify Title II regulation: ISPs do not have “terminating access monopolies” that cause market failures with respect to Internet edge providers. The economic literature overwhelmingly demonstrates that the vertical gatekeeper theory is inapplicable to broadband Internet access markets.
Title II classification cannot be justified on grounds unrelated to protecting the open Internet: It is well established that in the absence of identified market power as a prerequisite for potentially compelling common carriage, the FCC cannot impose common carrier regulation to achieve policy objectives alone.
The FCC has authority under Section 706 to adopt baseline Net Neutrality rules: The record shows a high level of consensus from ISPs, industry groups and Internet edge providers alike that the FCC has sufficient regulatory authority under Section 706 to adopt baseline protections consisting of no blocking, no throttling, subject to reasonable network management and transparency.
Any remaining legal uncertainty is best addressed by Congress: There is also a high level of consensus that, should the FCC determine ex ante rules are needed but that it lacks adequate authority to adopt them under Section 706 or any other provision of the Communications Act, the answer is for Congress to enact new, bipartisan legislation clarifying the FCC’s authority and establishing a stable and appropriate regulatory framework to ensure an open Internet. In the meantime, it is imperative that the FCC undo its harmful Title II classification decision and restore the information service classification for broadband Internet access service.
About the American Cable Association: Based in Pittsburgh, the American Cable Association is a trade organization representing about 750 smaller and medium-sized, independent cable companies who provide broadband services for nearly 7 million cable subscribers primarily located in rural and smaller suburban markets across America. Through active participation in the regulatory and legislative process in Washington, D.C., ACA’s members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business. For more information, visit https://www.americancable.org/