Later today I will participate in a Congressional Black Congress Foundation panel discussion on telecommunications and media. I’ll be sharing my thoughts and insights on how a Title II classification of broadband access could impact information service providers in general and minority-owned information services providers in particular.
It should be no surprise, if you are one of the three or four people who follow this blog, that I see no social policy benefits in treating broadband access as a Title II common carrier. Title II does not encourage broadband deployment or investment. It does not even promote the neutral and open platform necessary for encouraging the development and deployment of the software applications that have provided us with familiar services like e-mail and video streaming.
The main reason that Title II is ineffective in a 21st century broadband world is that Title II was intended to regulate services and pricing for telecommunications services provided in an analog, point-to-point, switched circuit world with an emphasis on regulating prices and charges for services. While the early days of the Internet were driven by a philosophy of openness intended to encourage application development and deployment necessary for exchanging information, Title II was intended to facilitate the universal access of American households to a legacy switched-circuit telephone infrastructure.
Title II says nothing about digital networks much less net neutrality. Title II says nothing about democratizing access to or app development on the Internet. In fact, the entire Communications Act of 1934 doesn’t speak to net neutrality. Section 1302 (section 706 under the Telecommunications Act that amended the Communications Act) boils down to encouraging the deployment of advanced services, where advanced services have been determined to mean broadband.
Title II has become the backdoor approach used by net neutrality proponents to get to regulation of broadband services and the Internet as opposed to the old fashioned method of proposing legislation to Congress that would expressly authorize net neutrality as a policy tool and provide the Federal Communications Commission with the authority to create net neutrality rules.
But what proponents of net neutrality rarely discuss are the negative impacts Title II would have on information and content entrepreneurs. Take for example section 203 of the Communications Act. This section discusses schedule and charges assessed by common carriers. To analyze what a Title II eco-system would look like for broadband operators, replace the term “common carriers” with the term “broadband operators.”
So, according to this section broadband operators would have to keep on file with the FCC a schedule of their rates and charges, whether for traffic sent solely on their networks or traffic exchanged with other broadband operators. At first blush this may seem like just a mere compliance or administrative inconvenience. What this requirement would do, however, is introduce more uncertainty for information and content entrepreneurs.
For the broadband operators it may mean calling out of retirement a few of their tariff experts. (Don’t call me. I hated drafting the damned things.) The real inconvenience will fall on entrepreneurs. For example, if the broadband operator has to change rates or charges to accommodate changes in his relationship with video distributors like Netflix, price changes, pursuant to section 203(b) of the Act, would take place after 120 days notice of the price change.
Would a broadband operator want to put off collecting additional revenues while waiting for the FCC to approve a rate change?
Can an information provider afford to have a broadband operator say no to its additional traffic because the broadband operator has not instituted the appropriate price points to compensate for additional traffic?
Another source of uncertainty for information and content entrepreneurs may come from section 204(a)(1) of the Act. This section allows the FCC to hold hearings to challenge the lawfulness of new charges. These challenges may come from the FCC or from a consumer. Along with the challenge would be a suspension of the rate for up to five months.
Broadband operators may be walking on eggshells when a content or data entrepreneur wants to run a service that calls for a change in rate only to be turned down because the operator doesn’t want the headache of a future refund headache down the road.
Information and content entrepreneurs should also be concerned about section 211(a) which would require a broadband operator file with the FCC other contracts that the operator has with other broadband operators. Why should this concern information and data entrepreneurs? Because if the terms and conditions of these contracts includes third-party, information and content entrepreneur information, it may expose these entrepreneurs to competitive risks.
Title II puts entrepreneurs at risk as collateral damage in attempts to regulate hypothetical broadband operator bad behavior. Investors in online start ups should consider the impact of Title II on their investments.