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FCC Chairman Ajit Pai Launches His Biggest Battle: Eliminating Net Neutrality Regulations

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WASHINGTON, November 21, 2017 – In a move that could further infuriate an already-energized coalition of technology industry power players, consumer advocates, and progressive interest groups, Federal Communications Commission Chairman Ajit Pai on Tuesday unveiled plans to undo the net neutrality rules that put in place in some form or another since the early years of the Obama administration.

“Under my proposal, the federal government will stop micromanaging the internet,” Pai said in a statement.

“Instead, the FCC would simply require internet service providers to be transparent about their practices so that consumers can buy the service plan that’s best for them and entrepreneurs and other small businesses can have the technical information they need to innovate.”

Pai’s general proposal has faced widespread opposition since it was announced this year. After the FCC published a Notice of Proposed Rulemaking seeking comments on whether to undo rules reclassifying broadband under Title II of the Telecommunications Act of 1996, roughly 21 million comments were submitted via the FCC’s Electronic Comment Filing System.

That’s more than any other agency proceeding, and the vast majority were of those of retaining the strong net neutrality provisions put in place by former FCC Chairman Tom Wheeler in February 2015.

Those Wheeler net neutrality rules – which are still technically in force – require broadband internet access providers to live by common carrier requirements to which telephone companies have long been subject.

One way of looking at this is that the phone company cannot charge users different rates for a fax call versus a voice call. Nor can it degrade call quality for fax owners.

In a likewise manner, an internet provider cannot, under the rules, slow down a customer’s bandwidth because they are watching Netflix instead of Hulu, or charge extra to for businesses to enable their website to show up more quickly when customers access them using an internet connection.

What Pai’s net neutrality deregulation might mean for the internet

Those groundrules could change if Pai – a former Verizon Communications lawyer named chairman by President Donald Trump in January after having served as a commissioner at the agency since 2012 — gets his way.

Pai proposes to return broadband internet access service to its’ original classification as a lightly-regulated information service under Title I of the Telecommunications Act. Further, his proposal would repeal the “policy statement” about net neutrality originally put in place under George W. Bush Administration FCC Chairman Kevin Martin.

Although the Martin rules didn’t have the force of law or regulation, they paved the way for future FCC regulations that prohibited internet providers from throttling content or offering paid prioritization for some data, save for an exception carved out for “reasonable network management.”

Under Pai’s new rules, internet providers would be free to prioritize traffic for a fee, or to prioritize traffic of affiliated companies. The limitation is that the internet providers disclose such a practice.

Internet providers were once penalized for violating such a practice during Bush administration. In 2008, the Martin FCC fined Comcast for throttling traffic outside of the “reasonable network management” exception to the agency’s “policy statement.”

Now, if approved by the FCC, Pai’s FCC would completely deregulate network neutrality rules. And the onus for enforcing its disclosure requirements would land at the Federal Trade Commission. It could punish internet providers for throttling traffic in violation of its stated practices.

Under the Pai proposal, state regulators would also be barred from stepping into the deregulatory breach

States looking to step into the regulatory void and protect consumers might also find themselves disappointed under Pai’s proposal. The FCC’s new rules would specifically pre-empt state law or regulation imposing a common carrier requirement on internet providers.

Even regulations governing internet providers that operate entirely within one state would be subject to this preemption, senior FCC officials said, because the internet the provider is connected to is a nationwide network.

Despite the public outcry and tsunami of public comments, FCC officials downplayed its significance during a press conference call reviewing the proposal.

Despite the record number of citizen comments through the FCC’s filing system, agency officials said that most people’s comments were irrelevant to the FCC’s decision-making process because they only contained opinions – not facts, legal arguments or economic analyses.

A regulatory policy that the FCC says is based upon economic analysis

Economic analyses were at the heart of Pai’s proposal, officials said. They cited cost-benefit analyses showing investment in broadband networks falling since the adoption of network neutrality rules.

But when asked for specific examples, officials told reporters that the analyses would be available as part of the draft rules, which were to be released on Wednesday.

The FCC’s desire to take into account the economic impact of network neutrality regulations doesn’t appear to include the views of Silicon Valley, the heartbeat of the information technology sector.

The tech industry is almost unitedly opposed to Pai’s plans: They strongly supported the adoption of the Obama-era regulations.

In July, the Internet Association, which represents Amazon, Facebook, Google, Twitter, and other large technology companies, filed comments warning that allowing paid prioritization would harm tech giants and also stunt the rising generation of startups.

The new rules would put them “at the mercy of ISPs who would face minimal constraints on their ability to charge [the industry] for prioritized access,” the Internet Association said.

Initial legislative reactions to the Pai proposal are beginning to come forward

In a statement, Rep. Zoe Lofgren, D-California, decried the new rules, which appear to favor large broadband providers over technology companies or consumer voices – at least as expressed in the FCC’s comments.

“Today, FCC Chairman Ajit Pai confirmed his long-term goal to unravel net neutrality protections, demonstrating that he is on the wrong side of history, startups, consumers and the public interest,” said Lofgren, who district includes most of Silicon Valley.

“As millions of Americans voice their support for a free and open internet, Chairman Pai’s proposal hands the internet over to the largest Internet Service Providers who can throttle, assess a toll or block content,” she said.

Lofgren noted that under the current rules, an entire ecosystem of apps and new technologies has developed because of those rules’ protections.

“The net neutrality protections have advanced competition and innovation, created more startups and entrepreneurs, and have been judicially approved. Repealing these protections is an assault on what has made the internet what it is… an open and dynamic platform,” she said.

“This is not the end of a battle but the beginning of a new one that I will engage in to protect the open internet for my constituents and all Americans.”

 

Andrew Feinberg is the White House Correspondent and Managing Editor for Breakfast Media. He rejoined BroadbandBreakfast.com in late 2016 after working as a staff writer at The Hill and as a freelance writer. He worked at BroadbandBreakfast.com from its founding in 2008 to 2010, first as a Reporter and then as Deputy Editor. He also covered the White House for Russia's Sputnik News from the beginning of the Trump Administration until he was let go for refusing to use White House press briefings to promote conspiracy theories, and later documented the experience in a story which set off a chain of events leading to Sputnik being forced to register under the Foreign Agents Registration Act. Andrew's work has appeared in such publications as The Hill, Politico, Communications Daily, Washington Internet Daily, Washington Business Journal, The Sentinel Newspapers, FastCompany.TV, Mashable, and Silicon Angle.

Broadband's Impact

Broadband Breakfast on October 27, 2021 — When ‘Greenfield’ Fiber Meets ‘Brownfield’ Multiple Dwelling Units

What options do owners of, operators in, and tenants within MDUs have for better-quality broadband?

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Our Broadband Breakfast Live Online events take place on Wednesday at 12 Noon ET. You can watch the October 27, 2021, event on this page. You can also PARTICIPATE in the current Broadband Breakfast Live Online event. REGISTER HERE.

Wednesday, October 27, 2021, 12 Noon ET — “When Greenfield Fiber Meets Brownfield Multiple Dwelling Units”

Bringing fiber to the premises is sometimes only half the battle. For example, bringing fiber to an MDU may not mean that every tenant will get better-quality broadband. In the case of multiple dwelling units or multi-tenant housing, it isn’t easy to completely rewire an existing building with fiber-to-the-unit. Further, the Biden Administration and the Federal Communications Commission are pushing real estate owners to eliminate or minimize exclusive MDU broadband contacts. What options do the owners of, operators in, and tenants within MDUs have to enjoy both competitive and better-quality broadband?

Panelists:

  • Sandra Howe, Board of Directors, Minim
  • Pierre Trudeau, President and Chief Technology Officer, Positron Access
  • Other Guests have been invited
  • Drew Clark (moderator), Editor and Publisher of Broadband Breakfast

Drew ClarkEditor and Publisher of Broadband Breakfast, also serves as Of Counsel to The CommLaw Group. He has helped fiber-based and fixed wireless providers negotiate telecom leases and fiber IRUs, litigate to operate in the public right of way, and argue regulatory classifications before federal and state authorities. He has also worked with cities on structuring Public-Private Partnerships for better broadband access for their communities. Drew brings experts and practitioners together to advance the benefits provided by broadband. He is also the President of the Rural Telecommunications Congress.

WATCH HERE, or on YouTubeTwitter and Facebook

As with all Broadband Breakfast Live Online events, the FREE webcasts will take place at 12 Noon ET on Wednesday.

SUBSCRIBE to the Broadband Breakfast YouTube channel. That way, you will be notified when events go live. Watch on YouTubeTwitter and Facebook

See a complete list of upcoming and past Broadband Breakfast Live Online events.

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Education

National Non-Profit to Launch Joint Initiative to Close Broadband Affordability and Homework Gap

EducationSuperHighway is signing up partners and will launch November 4.

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Evan Marwell, founder and CEO of Education Super Highway.

WASHINGTON, October 18, 2021 – National non-profit Education Super Highway is set to launch a campaign next month that will work with internet service providers to identify students without broadband and expand programs that will help connect the unconnected.

On November 4, the No Home Left Offline initiative will launch to close the digital divide for 18 million American households that “have access to the Internet but can’t afford to connect,” according to a Monday press release.

The campaign will publish a detailed report with “crucial data insights into the broadband affordability gap and the opportunities that exist to close it,” use data to identify unconnected households and students, and launch broadband adoption and free apartment Wi-Fi programs in Washington D.C.

The non-profit and ISPs will share information confidentially to identify students without broadband at home and “enable states and school districts to purchase Internet service for families through sponsored service agreements,” the website said.

The initiative will run on five principles: identify student need, have ISPs create sponsored service offerings for school districts or other entities, set eligibility standards, minimize the amount of information necessary to sign up families, and protect privacy.

The non-profit said 82 percent of Washington D.C.’s total unconnected households – a total of just over 100,000 people – have access to the internet but can’t afford to connect.

“This ‘broadband affordability gap’ keeps 47 million Americans offline, is present in every state, and disproportionately impacts low-income, Black, and Latinx communities,” the release said. “Without high-speed Internet access at home, families in Washington DC can’t send their children to school, work remotely, or access healthcare, job training, the social safety net, or critical government services.”

Over 120 regional and national carriers have signed up for the initiative.

The initiative is another in a national effort to close the “homework gap.” The Federal Communications Commission is connected schools, libraries and students using money from the Emergency Connectivity Fund, which is subsidizing devices and connections. It has received $5 billion in requested funds in just round one.

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Broadband's Impact

Steve Lacoff: A New Standard for the ‘Cloudification’ of Communications Services

The cloudification of communications services makes it easy to include voice, data, SMS, and video within any existing service.

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The author of this Expert Opinion is Steve Lacoff, general manager of Avalara for communications

The line of demarcation between what has traditionally been considered a telecommunications service was once very clear. It was tangible – there were wires, end points, towers, switches, facilities. Essentially, there was infrastructure required to relay voice or data from point A to point B.

Today that line is fuzzy, if not invisible. The legacy infrastructure remains, but an industry of cloud-based services that don’t require the physical connections has exploded. Voice, data, SMS, and video conferencing can now be conveniently delivered OTT. Enabled by simple API integrations, businesses can embed just one of these services or a complete communications platform-as-a-service (CPaaS) into an app, service, or product.

Cloudification is a game changer

This “cloudification” of communications services makes it easy to include voice, data, SMS, and video within any existing application, product, or service. These are essential components for many business models.

Consider these services we have come to rely on in our daily lives: food or grocery delivery, ride services, and business and personal communications. These require multiple methods of communication with shoppers, drivers, co-workers, watch party groups, and external business partners.

The exciting news is there is no end in sight. Use cases will continue to evolve and growth will continue to skyrocket. The scale cloud delivery accommodates is massive. These untethered, easy to embed communications services are a critical differentiator for both business-to-business and business-to-consumer buyers, and the lifeblood of the businesses providing both the end user subscriptions and the APIs.

In fact, one industry juggernaut saw H1 YoY video application service demand grow nearly 600% in 2020.

Not surprisingly, as business demand for these services increases smaller CPaaS players continue to enter the market to quickly snag market share. According to a recent IDC study, “the global market revenue for CPaaS reached $5.9bn in 2020, up from $4.26bn in 2019, and is expected to reach $17.71bn by 2024.”

Merger and acquisition activity is aligned with this hockey stick growth forecast. Large telcos, SaaS providers, and even other CPaaS providers are all on the hunt. Whether they want to add additional features to punch up their products or eliminate the competition in a very tight, nuanced market, the end game is clear – as the market expands, the players will ultimately contract leaving only the most competitive offerings.

Don’t let communications tax take you by surprise

One of the least understood risks when adding cloud-based voice, data, SMS, or video conferencing to an existing product or service is new eligibility for and exposure to the complex world of communications taxation. Making mistakes can get costly very quickly.

Here are some of the key pitfalls to keep an eye on:

  • Expanded nexus: Understanding communications tax nexus is different – and exceptionally more complicated – than sales tax. There are approximately 60,000 federal, state, local, and special taxing jurisdictions, each with uniquely complex rules that tend to change at their own pace. Rules are very different for each service.
  • More complex calculations: The more communications services you provide via API, the more complicated communications taxes will be. Each feature can be taxed at different rates in each individual jurisdiction, or the whole bundle can be taxed at one rate. It’s critical to monitor monthly to avoid audit issues.
  • Maintaining overall compliance: Just as tax rates and rules need to be maintained, so must tax and regulatory filing forms in each jurisdiction. Some of these are very long and require significant detail.  They must be filed in a timely, accurate cadence to avoid additional audit risk.

Bottom line: Don’t assume, be prepared! As these communications services become more pervasive a larger swath of technology providers will find themselves liable for communications tax. The more your business falls behind, the more it can cost you.

It pays to be proactive and prepared. Tax and legal advisory experts can help determine your level of risk, and tax and compliance software providers can help you keep up with changing rules and regulations. Don’t underestimate the ongoing value of networking with peers who are either struggling to answer the same questions or have already overcome the hurdles you’re facing today.

Steve Lacoff is General Manager of Avalara for Communications. With a focus on data, VoIP, and video streaming, Steve has spent 15 years in various product and marketing leadership roles in communications and technology industries, including Disney’s streaming services and Comcast technology solutions. Steve now drives business strategy on today’s changing industry landscape and associated tax impacts. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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