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Broadband and Title II: It’s starting to feel like 1995

Federal Communications Commission chairman earlier today decided to take us back to 1995 and announced that he will issue new net neutrality rules that would bring wireline and wireless broadband providers under Title II regulation.  According to The Financial Times, investor fears were subdued when Mr. Wheeler assured the public that there would be no rate regulation on the part of the FCC.  Okay.  But that doesn’t mean that there will not be new rates implemented by broadband providers.  Mr. Wheeler in his opinion piece did not rule that possibility out.

Additional rates on the part of broadband providers wouldn’t be a bad thing either for investors, the operators, or consumers.  For investors and operators they can be assured that additional compliance costs under a new Title II regime are being recovered if operators charge additional fees.  For example, electric utilities charge different rates for different classes of ratepayer.  The typical ratepayer classes include residential, commercial, and industrial, with larger ratepayers paying a lower per unit rate because of the greater volume they consume and the decreasing marginal costs involved in generating electricity for larger consumers.  Residential consumers may pay less in total because they consume a smaller gross amounts of electricity but pay a larger per unit cost for their electricity.

Broadband providers may decide to dust off their regulatory playbooks from the period before the 1996 rewrite of the Communications Act and start charging tiered rates or even per minute rates for certain low-use packages.  Since broadband operators and content providers would be banned from entering paid prioritization agreements, what better way to manage congestion than to design packages where consumers in effect determine the speeds at which they get data based on the dollar value of the data.  It may also give wannabe broadband providers like Google and Facebook an excuse to charge for some of their services.

Yes, it’s starting to feel like 1995.

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