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One Day After FCC’s Net Neutrality Repeal, Focus Turns to Reactions and Responses

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WASHINGTON, December 15, 2017 – The Federal Communications Commission’s Thursday vote to repeal the “open internet” rules classifying broadband services as common carriers represents the most significant regulatory shift in the internet in more than a decade. Critics in Congress, at the agency, and even on late-night TV wasted no time in blasting it.

These repealed network neutrality regulations prohibited broadband internet providers from speeding up or slowing down certain websites’ internet traffic based on financial or business relationships. Now, internet providers will be free to throttle, block and prioritize traffic, so long as they provide notice to consumers that they are doing so.

The most recent iteration of those regulations were put in place by the FCC under President Obama in February 2015. It was based on Title II of the Communication Act, which regulates common carriers like telephone companies.

Such common carriage rules require telephone providers to treat all traffic the same in the same way. For example, Ma Bell was prohibited from prioritizing voice calls over fax calls, or prioritizing the calls of customers who buy telephone handsets from the phone company over those who didn’t.

Broadband reverts to being an information service ‘regulated’ under Title I

Under the rules that the FCC will implement after Thursday’s vote, broadband internet access service will revert to being “regulated” under Title I. That section of the law governs “ancillary services,” and for decades the FCC has classified “information services” under this lesser regulatory standard.

These information services are not subject to the same kinds of requirements as are common carriers.

Thursday’s result was only the latest chapter in a public policy battle that has raged since the waning years of the George W. Bush Administration.

At the time, the FCC under then-Chairman Kevin Martin ruled that Comcast had discriminated against peer-to-peer file-sharing applications by blocking traffic using the BitTorrent application.

The agency had held that Comcast’s actions departed from standard industry practice and did not fall under the category of “reasonable network management.” That was, then, part of the standard under which the FCC would allow a broadband provider to manage traffic.

Chairman Julius Genachowski, the first chairman selected by Obama, said that the FCC would be a “smart cop on the beat.” Genachowski proposed network neutrality rules that would enforceable under Title I – the less-regulatory standard – of the law. But those rules were also struck down by the D.C. Circuit Court.

In part, that led Genachowski’s successor Tom Wheeler to take the stricter step of reclassifying broadband under Title II.

Taking enforcement authority for internet violations out of the hands of the FCC

Not only does the FCC’s action Thursday undo that reclassification, it goes further by declaring that the FCC will not attempt to regulate broadband providers at all. Additionally, enforcement of what little that remains of the “net neutrality” rules are passed to the Federal Trade Commission.

The FTC can only take enforcement actions after a violation of consumer protection rules has occurred. Further, under a recent decision by the 9th Circuit Court of Appeals, the FTC may not even have the authority to regulate broadband providers at all.

The Department of Justice Antitrust Division could also initiate litigation. But that can take years to achieve a result.

While Pai characterized Thursday’s vote as a return to the “light-touch” regulation that existed before 2015, it goes further. It abdicates the authority and responsibility that Martin – a Republican considered an ardent foe of network neutrality – acknowledged that the FCC possessed.

Sharply critical reactions from Democrats in Congress

In addition to strong comments by Congressional Democrats like Rep. Anna Eshoo, D-California, and Sen. Ed Markey, D-Massachusetts, progressives and other advocates of net neutrality rules through their lot behind arguments that the FCC cannot simply abandon it authority to enforce consumer-focused standards for an internet.

During a conference call with media last week, former FCC general counsel Jonathan Sallet predicted that the courts would not allow the FCC to pick and choose which parts of the law to enforce.

“The draft order seems to say that the FCC is no longer interested in exercising its responsibilities as an expert agency,” said Sallet. “I do not believe a court of appeals will uphold this order.”

On Thursday, Markey and Eshoo added that in addition to leading efforts to draft an amicus brief for litigation in support of the rules, Markey said he will introduce a resolution under the Congressional Review Act that would overturn the FCC’s decision.

Senator Patrick Leahy, D-Vermont – who conducted a Judiciary Committee field hearing in Vermont on the subject of network neutrality — also condemned Thursday’s vote in a statement.

“Today the FCC took a wrecking ball to the pillars of freedom and openness upon which the Internet was built.  Without the protection of net neutrality rules, powerful telecommunication companies can decide which content gets preferential treatment and which gets throttled or even blocked,” he said.

Leahy added that the decision will hurt consumers, small businesses, and startups by stifling innovation and competition, and pledged to keep fighting until the protections are restored.

Late-night comedians weigh in with their studied analyses

Even late-night television hosts whose employers have interests in the debate got in on attacking the FCC’s decision, with Stephen Colbert of CBS (which runs its’ own video streaming service), Seth Meyers of NBC (which is owned by Comcast), and Jimmy Kimmel of ABC (which is owned by Disney, which is starting its own video streaming services which could be blocked under the new rules) condemning the vote, which Kimmel called “absolutely despicable.”

“So now, we have to hope Congress agrees to vote on and reverse it,” Kimmel said. “So, thank you, President Trump – thanks to you and this (explitive deleted) [Pai] you appointed to run the FCC — big corporations are about to take control of the internet.”

Critics also raise concerns about the FCC’s public comment process

Kimmel noted that many of the public comments filed with the FCC that were in favor the repeal turned out to have been filed under the names of dead people.

Wheeler and others had previously noted that problems with the public comment process, which attracted more comments than any other rulemaking in the FCC’s history.

That could factor into litigation seeking to overturn the new rules by allowing network neutrality advocates to claim that the FCC did not properly follow the Administrative Procedure Act.

Internet service providers pleased with the decision

While consumer groups and most technology companies were vehemently against repealing the 2015 rules, perhaps the only groups excited about the FCC’s vote were those associated with large broadband providers.

Michael Powell, President and CEO of NCTA – The Internet Association, praised the FCC’s decision in a statement released to reporters.

“Today’s FCC action rightly restores the light-touch approach to government regulation of the internet that has fostered the development of a vibrant, open and innovative platform,” Powell said. “For decades, America’s internet service providers have delivered an open internet – allowing consumers to enjoy the lawful internet content and applications of their choosing.”

Powell said that Internet providers have repeatedly pledged to continue to adhere to the now-repealed rules, but did not explain why his association’s members lobbied so aggressively for the rules’ repeal if they still want to follow them.

The two Democratic FCC commissioners minced no words

Democrats on the FCC railed against Pai and the Republican majority in angry statements delivered before the vote.

“I dissent from this rash decision to roll back net neutrality rules,” Commissioner Jessica Rosenworcel, a Democrat said.

“I dissent. I dissent from this fiercely spun, legally lightweight, consumer-harming, corporate-enabling Destroying Internet Freedom Order,” said Rosenworcel’s senior Democratic colleague.

(Photo of Sen. Patrick Leahy, among the critics of the FCC’s Thursday decision on net neutrality.)

Broadband's Impact

Dianne Crocker: Recession Fears Have Real Estate Market Forecasters Hitting the Reset Button

Growing fears of recession trigger pullback on previous rosy forecasts.

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The author of this Expert Opinion is Dianne Crocker, Principal Analyst for LightBox

The lyrics to “Same As It Ever Was” by the Talking Heads certainly don’t apply to how 2022 is playing out in the commercial real estate market. Two quarters of negative economic growth has put a damper on market sentiment and triggered fears that the U.S. economy is heading for a recession. By midyear, market analysts were taking a good, hard look at their rosy forecasts from the start of the New Year and redrawing the lines.

Once upon a time…

At the start of 2022, forecasters were bullishly predicting that commercial real estate investment and lending levels would be nearly as good as 2021. This was significant, considering that 2021 set new records for deal-making and lending volume as the debt and equity capital amassed during the pandemic while looking for a home in U.S. commercial real estate.

What a difference a few quarters have made. Virtually, all the predictions that started the New Year were obsolete by mid-summer. The abrupt shift in market conditions is palpable and surprised just about everyone. Now, markets are reaching an inflection point that is in sharp contrast with the strong rebound of last year.

The two I’s: Inflation and interest rates

At the core of the recent upset in market sentiment is the persistence of high inflation, which seems to be ignoring all attempts by the Federal Reserve to raise interest rates and bring prices down. Higher inflation is having a ripple effect throughout the economy, pushing up the costs of construction materials, energy, and consumer goods. Among the notable economic indicators showing stress at mid-year was the GDP, which fell for the second consecutive quarter, and the Consumer Price Index, which jumped 9.1% year-over-year in June – the highest increase in about four decades.

In July, the CPI fell to 8.5%, an encouraging sign that inflation was beginning to stabilize. By the latest August report from LightBox, however, hopes were dashed when the CPI showed little improvement, holding firm at a still high of 8.3%.

The market is responding to a higher cost of capital as lenders tap the brakes. As the cost of capital rises with each interest rate hike and concerns of a recession intensify, many large U.S. financial institutions are pulling back on their loan originations for the rest of 2022 and into 2023. This change in tenor is a significant shift, given that 2021 was a record-breaking year for commercial real estate lending. Many lenders have already shifted to a more defensive underwriting position as they look to mitigate risks.

The Mortgage Bankers Association, which had previously predicted that lending levels in 2022 would break the $1 trillion mark for the first time revised their forecast downward in mid-July. By year-end, the MBA now expects volume to be a significant 18% below 2021 levels—and one-third lower than the bullish forecast made in February. Now, investment activity is cooling as higher borrowing costs drive some buyers from the market.

In the investment world, transactions were down by 29% at midyear due to a thinning buyer pool as higher rates impact access to debt capital. Market volatility is causing investors, lenders, and owners to rethink strategies, reconsider assumptions, and prepare for possible disruption.

Looking ahead to year-end and 2023

The rapid and diverse shifts in the market make for an uncertain forecast and certainly a more cautious investment environment. The battle between inflation and interest rates will continue over the near term. As LightBox’s investor, lender, valuation, and environmental due diligence clients move toward the 4th quarter—typically the busiest quarter of the year–unprecedented volatility is driving them to recalibrate and reforecast given recent market developments.

Continued softness in transaction volume is likely to continue as rates and valuations establish a new equilibrium. If property prices begin to level out, there will be more pressure on buyers to consider how to improve a property to get their return on investment. The next chapter of the commercial real estate market will be defined by how long inflation sticks around, how high interest rates go, and whether the economy slips into a recession (and how deeply). The greatest areas of opportunity will be found in asset classes like office and retail that are evolving away from traditional uses and morphing to meet the needs of today’s market. Until barometers stabilize, it’s important to rethink assumptions, watch developments, and recalibrate as necessary.

Dianne Crocker is the Principal Analyst for LightBox, delivering strategic analytics, best practices in risk management, market intelligence reports, educational seminars, and customized research for stakeholders in commercial real estate deals. She is a highly respected expert on commercial real estate market trends. 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 reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Digital Inclusion

White House Presses Outreach Initiatives for Affordable Connectivity Program

White House officials urged schools and other local institutions to engage in text-message and social media campaigns for the ACP.

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Photo of President Joe Biden, obtained from Wikimedia.

WASHINGTON, September 15, 2022 – The White House on Monday urged schools and other local institutions to engage in text-message and social media campaigns, PSAs, and other community-outreach initiatives to promote enrollment in the Federal Communications Commission’s Affordable Connectivity Program among of families with school-age children.

The Affordable Connectivity Program subsidizes internet service bill for low-income households. Monthly discounts of up to $30 are available for non-tribal enrollees, $75 for applicants on qualifying tribal lands. In addition, the ACP offers enrollees a one-time discount $100 on qualifying device purchases.

To boost ACP enrollment, speakers encouraged schools to reach out directly to families. Bharat Ramanurti, deputy director of the National Economic Council, said text-message campaigns drive up enrollment in government programs. A Massachusetts text-message campaign doubled ACP enrollment rates in subsequent days, said Ramanurti.

Also highlighted was the administration’s “ACP Consumer Outreach Kit,” which provides partners with resources, including fliers, posters, audio PSAs, social-media templates.

In fact, many of these tactics have proved effective in increasing ACP enrollment among telehealth patients. In addition, Microsoft and Communications Workers of America recently announced a circuit of ACP sign-up drives in that will tour several states including Michigan, New York, and North Carolina.

Political considerations as November nears…

As students go back to school and midterm elections loom, new ACP sign-ups could benefit the enrollees as well as the Democrats’ political chances.

Public officials and private experts alike recognize the value of community involvement in extending broadband connectivity and digital literacy nationwide. Marshaling community institutions – like schools – to maximize broadband access could help Biden and other Democrats overcome inflation-driven electoral headwinds in the November midterms. The White House obtained commitments from 20 providers to offer high-speed internet plans for $30 per month or less to ACP-eligible households – this means no out-of-pocket costs for recipients of ACP discounts. Free broadband coverage could bring the administration – and all Democrat candidates, by extension – back into the good graces of low-income families.

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Digital Inclusion

Federal Government Must Collect More Granular Data on Minorities to Aid in Initiatives

Discussion on the “data gap” comes as the nation tries to connect the unserved and underserved.

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Screenshot of Denice Ross, the White House's chief data scientist

WASHINGTON, August 31, 2022 – In order to serve the needs of all Americans, the federal government must gather and act on more granular data on underrepresented minority groups that have been historically overlooked in the data-gathering process, said Denice Ross, the White House’s chief data scientist.

Ross argued at an online event hosted by the Center for Data Innovation on Tuesday that many minority groups – including African Americans, Native Americans, the disabled, and the LGBT community – are disadvantaged by the “data divide,” a term which refers to disparities in the amount and quality of available data on various groups.

Ross was citing a report issued earlier this year by the Equitable Data Working Group, a task force created by President Joe Biden earlier this year, which said policymakers are often unable to perceive or ameliorate problems facing minority communities if data on those communities are unavailable or insufficiently disaggregated. Disaggregated data, the report says, is “data that can be broken down and analyzed by race, ethnicity, gender, disability, income, veteran status, age, or other key demographic variables.”

The report recommends a federal data collection strategy that safeguards privacy and facilitates analysis of “the interconnectedness of identities and experiences,” or how individuals’ various minority-group identities compound the societal disadvantages they face. The report also advocates the creation of “incentives and pathways” promoting minority representation in the data collection process.

The recommendations come as the broadband industry and federal agencies try to improve knowledge of where there are unserved and underserved areas for broadband connectivity and to take action to improve digital literacy. The Illinois Broadband Lab and other state broadband offices, for example, implement a community-up approach to data gathering. Direct community involvement provides data insights that help states deliver coverage to in-need communities, officials say. 

In the panel discussion that followed Ross’s opening remarks, experts and academics agreed that community outreach is a necessary step in closing the data divide. Dominique Harrison, director of bank Citi Ventures’ Racial Equity Design and Data Initiative, said that some in the African American community view data collection with skepticism.  

Christopher Wood, executive director of LGBT Tech, argued that the passage of a federal privacy standard is a critical step toward establishing trust in government data collection. The most recent attempt to pass a national privacy regime, the American Data Privacy and Protection Act, was approved by the House Committee on Energy and Commerce last month.

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