FCC Issues Notice of Inquiry Regarding Broadband Regulation and Industry Offers a Mixed Response

WASHINGTON, June 18, 2010 – Yesterday the Federal Communications Commission met to consider putting out a Notice of Inquiry on how they should regulate broadband. After the recent Comcast decision the FCC’s ability to regulate broadband was put into question. After looking at the various issues FCC’s counsel came to the conclusion that there were 2 possible methods of regulating either as an information service under Title I or as a Telecommunications service under Title II. The chairmen however did not feel that Title I gave the commission enough authority; while Title II put too much regulation on ISPs; to solve this he created his Third Way proposal.

Under the Third Way ISPs would only be subject to a limited number Title II provisions. The NOI explains the Third Way as “ (i) reaffirm that Internet information services should remain generally unregulated; (ii) identify the Internet connectivity service that is offered as part of wired broadband Internet service (and only this connectivity service) as a telecommunications service; and (iii) forbear under section 10 of the Communications Act from applying all provisions of Title II other than the small number that are needed to implement the fundamental universal service, competition and small business opportunity, and consumer protection policies that have received broad support. “

The NOI seeks comment on how the FCC should proceed, whether they should stick to Title I, reclassify as Title II or proceed with the Third Way proposal. Additionally they seek comment to determine how they should proceed with Universal Service under Title I regulation “Can the Commission reform its universal service program to support broadband Internet service by asserting direct authority under section 254, combined with ancillary authority under Title I?”

They also would like comments on how they can provide support for disabled individuals, privacy issues, public safety and how they can address any future harms caused by ISPs.

The NOI was passed with a vote of 3-2; with Commissioners Baker and McDowell dissenting.

Commissioner Copps voiced the strongest support for the reclassification. He felt that using Title I regulation would be too light and the commission would spend years in court trying to support its position. “Down this path would be years and years of dead-end delays, years without the most elemental public interest safeguards for broadband, and years of agency paralysis. It would be death by a thousand cuts.” He then went on to describe how back in 2002 he dissented to the change in reclassification of cable modems to Title I.

In response to those who claim that broadband services should not be regulated, Copps stated: “I, for one, am worried about relying only on the good will of a few powerful companies to achieve this country’s broadband hopes and dreams. We see what price can be paid when critical industries operate with unfettered control and without reasonable and meaningful oversight. Look no further than the banking industry’s role in precipitating the recent financial meltdown or turn on your TV and watch what is taking place right now in the Gulf of Mexico.”

Copps then went on to describe how the rest of the world is lapping the US in broadband speed and availability while the US is stuck arguing these basic issues.

Copps also warned the commission about the PR campaign being waged about the issue, “So beware of all the slick PR you hear, and remember that much of it is coming from lavishly-funded corporate interests whose latest idea of a “triple play” is this: (1) slash the FCC’s broadband authority; (2) gut the National Broadband Plan; and (3) kill the open Internet.”

Commissioner McDowell opposed the NOI claiming that by merely issuing the notice the investment community would stop providing capitol to ISPS due to the high level of uncertainty. He then went on to claim that Title II regulation is unnecessary; and that the Comcast decision does not create any new paradigm. “The Comcast decision certainly does not affect our ability to reallocate spectrum, one of the central pillars of the Plan. Nor does the decision undermine our authority to reform our Universal Service program, the other major component of the Plan. In the unlikely event that a court decided against granting us Chevron deference in the pursuit of directly supporting broadband with Universal Service distributions, the FCC could tie future subsidies to broadband deployment.”

McDowell then went on to state that the FCC does not have the authority to reclassify and that only Congress can reclassify. He then pointed out that “a large bipartisan majority of Congress – consisting of at least 291 Members – has weighed in asking the Commission to discard this idea or at least to wait for Congress to act. In other words, a commanding majority of the directly elected representatives of the American people do not want the FCC to try to regulate broadband Internet access as a monopoly phone service.”

Commissioner Clyburn supported the NOI with a brief statement which defended the authority of the FCC. She then refuted the claims made by Commissioner McDowell by saying: notable telecommunications analysts at firms such as Bank of America Merrill Lynch, UBS, and Goldman Sachs have each asserted that the public reaction by industry to the Chairman’s proposal is overblown. In fact, they believe the current landscape presents a tremendous buying opportunity. As one well-regarded analyst stated: [T]he FCC’s “Third Way” reclassification largely keeps the status quo intact, with key points being: 1) no rate regulation, 2) no unbundling, to require Cable to share its networks, 3) the forbearance is difficult to overturn, 4) no inconsistent state regulation, [(5)] provides no competitive advantage to DBS or Telco vs. Cable and [(6)] Wireless has a similar “Third Way” reclassification, which has not negatively impacted the business model.”

Clyburn then echoed Copps statement regarding the PR campaign being waged, stating that investors are more fearful of the PR than the actions taken by the FCC.

Commissioner Baker’s statement of dissent reiterated the points she made last week while addressing the Broadband Policy Summit. She felt that the Comcast decision did change the way the FCC could regulate broadband and reiterated the comments made by McDowell that the NOI will create too much uncertainty which will decrease overall investment.

Baker then went on to oppose the Third way by saying “I reject the effort to re-brand a Title II classification with forbearance as a middle ground, it is not. There will be time to address all of the legal and factual infirmities of a Title II approach for broadband, and its adverse impact on capital markets, consumer welfare, and international regulatory norms.”

The chairmen made the final statement of support for the NOI reiterating many of the points he has made before and brought up the fact that the chairs of the Senate and House committees which oversee telecommunications, Senators Rockefeller, Kerry, and Representative Waxman, and Boucher have all publically supported the actions being taken by the FCC.

He then went on to say that he supported the possible updating of the communications act, “I fully support this Congressional effort. A limited update of the Communications Act could lock in an effective broadband framework to promote investment and innovation, foster competition, and empower consumers. I commit all available FCC resources to assisting Congress in its consideration of how to improve and clarify our communications laws.”

The response to this NOI is mixed, the National Cable & Telecommunications Association, which represents the cable industry, opposed the regulation by saying “As we revisit this question with the start of today’s inquiry, we see little benefit to changing course and great danger in attempting to shoehorn modern broadband services into a Depression-era regulatory regime without serious collateral effects to investment, employment, and innovation.”

The Small Business & Entrepreneurship Council criticized the proposal by stating “”Today’s vote opens the door to a future where government dictates the price and operational models on broadband providers. Such regulation will severely limit small business choices, raise prices, deter broadband deployment and hurt our innovative capacity.”

The commission did receive support from the Center for Democracy and Technology, “It is also crucial for the FCC to recognize limits to its authority,” said CDT Senior Policy Counsel David Sohn. “The agency needs to expressly refute and disprove the common rhetorical claim that its efforts here amount to an attempt to ‘regulate the Internet,'” Sohn said. “The ‘Third Way’ option outlined today can offer a sound path forward from both a policy and a legal perspective.”

Public Knowledge also supported the actions, with Gigi Sohn saying ““The Commission’s simple, uncomplicated action today of makes certain that the expert agency in telecommunications has the authority to carry out its mission. The Commission has been attacked unmercifully by multi-billion dollar companies using threats, intimidation and fabrications, among other distasteful tactics. They have used captive or unwitting legislators, in the face if common sense, to further their corporate goals at the expense of millions of Americans.”

The President of the CTIA Wireless Association released the following statement “We are disappointed that the Commission continues to consider the application of monopoly-era rules for the U.S. mobile broadband ecosystem. Despite the fact the FCC has heard from more than half of the elected officials in Congress that this approach is wrong, the Commission has chosen to ignore this diverse and bi-partisan group of Senators and Representatives from around the country. Instead, the Commission’s action is a dangerous solution in search of a non-existent problem.”

Dish Network offered a statement of support “DISH Network applauds the Commission’s decision to release a Notice of Inquiry on the ‘Third Way’ legal approach. We strongly support Chairman Genachowski’s leadership in moving this critical process forward,” said Charlie Ergen, Chairman, President and CEO of DISH Network. “A sound legal framework is absolutely necessary to preserve a free and open Internet and encourage innovation and investment.”

Unsurprisingly Tom Tauke, Verizon executive vice president for public affairs, policy and communications opposed the NOI and released the following statement. “Reclassifying high-speed broadband Internet service as a telecom service is a terrible idea. The negative consequences for online users and the Internet ecosystem would be severe and have ramifications for decades. It is difficult to understand why the FCC continues to consider this option.”