Last week a coalition, led by Google, wrote a letter to the chairman of the Georgia House Committee on Energy, Utilities, and Telecommunications urging him to not pass HB 282, the Municipal Broadband Investment Act. The bill, if passed, would require that municipal broadband networks serve only areas that are not being served by a private broadband provider. It also requires that the Georgia Public Service Commission (GPSC) make a determination as to whether an area is unserved and to draft rules that specify violations of the Act.

Seeing Google and the National Association of Telecommunications Officers and Advisors (NATOA) is scary enough. These two have nothing on common other than they represent content providers who would rather not directly pay to have their content distributed over the Internet. Both have been pro net neutrality, NATOA more so, because they don’t want to see their content throttled.

Scarier yet is the lack of support for the assertions made in their letter to the committee chairman. Most glaring is their arguments about how the bill would hinder economic growth in Georgia. What’s hindering economic growth in Georgia isn’t the lack of broadband, although the job creation resulting from construction and deployment of broadband infrastructure wouldn’t hurt. What is really hurting growth in Georgia is the lack of a more diversified economic base compounded by a loss of manufacturing jobs. Also, Georgia is trying to get from under a foreclosure crisis exacerbated by high unemployment.

Even if broadband deployment were the panacea for our economic ills, HB 282 would direct deployment where its most needed; in the areas that are unserved and could probably get a boost from the type of industry where a broadband connection is key.

Google and NATOA should spend less time playing carpetbagger and get to know the state before making unwarranted assertions about economic growth. That phrase has been bandied about to the point where it’s staring to lose value.

If Google and NATOA are so concerned about expanding broadband, they should support legislation that calls for an universal service assessment on cost causers like Amazon, Facebook, and Google, requiring that they pay a percentage of income made from advertisements and/or online retail. That would go long way toward getting the unserved online, whether they reside in an area serviced by multiple broadband providers or none.

The Federal Communications Commission pushes its universal service program the way a drug dealer pushes cocaine. To keep carriers in check, it has devised a system that some carriers believe they have to depend on, while the FCC sells them on the need to keep doing lines because it will give the carrier the confidence it needs to go out and serve unserved areas of the country. It’s time for carriers to break the dependency and free themselves from this regulatory crossfire. The carriers are not the bad guys when it comes to broadband adoption and I would go further and argue that they should not be responsible for financing its expansion. That responsibility should lie with online content producers, including companies that publish news, movies, and blogs.

Content providers, not broadband providers, are the primary beneficiaries of broadband adoption by the remaining 100 million households the FCC targeted in its national broadband plan. If a land developer wants to ensure people come to its development, buy houses, and live in the development, the land developer is going to build roads, lay conduits for communications and water, and maybe throw in a school building. Google, Amazon, and Netflix are not doing that with broadband, even though it’s broadband that brings them the eyeballs for their content.

Content providers are not doing that with broadband networks. With the help of the FCC, they have dumped the negative externality of adoption costs unto broadband providers. Net neutrality is famously their prime mechanism for doing so; by requiring that traffic from all content providers be given first class treatment on a broadband provider’s network. The other instrument, universal service via the moniker Connect America Fund, while reimbursing broadband providers for the cost of deploying facilities where their business models dare not tread, really takes final payment of this subsidy out of the wallets of the end using consumer.

The Connect America Fund had about $185 million left on the table for broadband providers to apply for and use to help with the cost of getting broadband to Farmer Smith and Dr. Jones so that they can deliver services to an increasingly demanding broadband consumer. These funds are also meant to help people access the Internet at high-speed so that they can take advantage of news,information, goods, and services provided by larger e-commerce entities including Amazon, Ebay, Walmart, and Google.

If these companies, who need the Internet like humans need air, want to reach their potential customers that bad, why don’t they invest the cash sitting on their books to subsidize broadband adoption? For example, Google, with four dollars of current assets with one dollar of current liabilities, has enough cash on hand to kick in and incentivize broadband adoption. And let’s not forget Facebook, with 1.1 billion subscribers, some of whom are connecting via wired and wireline broadband, has ten dollars in current assets for every dollar of current liability has enough liquidity and cash to kick in some direct funding for broadband adoption.

Carriers are just middlemen, unless they are endowed with content properties like Comcast. Being in the middle makes you a target for regulation, including the onerous requirements of a universal broadband service fund, but equity calls for the incidence of broadband adoption initiatives to fall on the entities with the most to gain, and those entities are the content providers and e-commerce companies selling goods and services.

Federal Communications Commission member Ajit Pai today gave his assessment on where the FCC may go on broadband regulation should the United States Court of Appeals-DC Circuit decide to uphold the FCC’s net neutrality rules issued back in December 2010. Here is an excerpt from his opening remarks before the Phoenix Center :

“On a more serious note, I would like to spend a few minutes this morning previewing the
year ahead in broadband policy. I believe that 2013 will be a watershed year. And the most
important action probably will not occur either at the FCC or on Capitol Hill. Instead, it will
take place in the federal courthouse about a mile away on Constitution Avenue. At some point
next year, the D.C. Circuit likely will decide the fate of the Commission’s 2010 net neutrality
order. Whatever the court’s decision, the consequences are likely to be profound.

Should the D.C. Circuit uphold the FCC’s order, I would expect to see revitalized efforts
to expand the Commission’s regulation of the Internet. In particular, I would not be surprised if
the FCC looked into whether we should stiffen our oversight of the network management
practices of wireless broadband providers and whether we should begin to regulate usage-based
pricing. With a court victory under the Commission’s belt, I believe that the net neutrality order
would be the first step, not the last, on our regulatory path.

I expect that a court victory also would result in more calls to enforce the FCC’s net
neutrality rules. To date, we’ve received few complaints that these rules have been violated, and
we’ve done little with any that have been filed. But if the regulations are upheld, the agency
could well receive more complaints alleging violations and it could spring into action
adjudicating them. Uncertainty over how the FCC would resolve these complaints could persist
for some time.

Now let’s look at the opposite (and perhaps more likely) scenario. What would happen if
the D.C. Circuit decides that the FCC lacked the authority to adopt the net neutrality order? The
big question confronting the Commission would be this: whether to abandon the drive to regulate
network management practices or instead to sidestep the court’s decision by reclassifying
broadband as a Title II service.

For what it’s worth, I have already made my view on this matter clear. Under no
circumstance will I support Title II reclassification. I am convinced that grafting creaky,
burdensome common carrier regulations onto the Internet would dramatically slow broadband
deployment, reduce infrastructure investment, frustrate innovation, hamper job creation, and
diminish economic growth.”

Investors, naturally, should keep their fingers crossed that the court does not uphold net neutrality rules thus giving the FCC authority to apply common carrier treatment to broadband providers. The just and reasonable standard when it comes to pricing and to whom service can be provided a priori would see carrier costs of service increase with pressure from the FCC on pricing. Not only would grass roots advocates scream about justifiable price increases implemented to cover compliance the costs, advocates would press for additional hearings on network management practices.

Based on the court’s rejection in Comcast to treat broadband as a Title II service, I do believe that Verizon should be successful with its opposition before the DC Circuit to the FCC’s net neutrality rules. I would have to conduct a more thorough analysis to draw a definitive conclusion.

Last week the Innovation Technology and Information Foundation released a report comparing the expected policies and platforms of President Barack Obama, Governor Mitt Romney, and the Republican and Democratic parties in a number of areas including broadband, special access, and spectrum. Here is a summation of the findings in the report.

On broadband, specifically a digital infrastructure, President Obama has promoted a robust wireless and wireline broadband infrastructure capable of supporting an enhanced electrical grid, health care, and education. The Romney campaign has not articulated a position on the nation’s digital infrastructure.

The Obama Administration would like to see high-speed wireless capability within reach of 98% of Americans. The Romney campaign has not taken a position on expanding high-speed wireless access, but current FCC members agree with Democrats on the issue of modernizing the Universal Service Fund mechanism to support access to broadband.

In the area of special access, the Democratic majority on the FCC supports suspending deregulation of special access, while Republicans want to see deregulation continued.

Republicans and Democrats agree that the USF should be modernized so that rural and underserved households receive greater access to broadband services.

Republicans are opposed to the FCC’s net neutrality rules that were imposed in December 2010. Democrats, including the President, have been steadfast about removing the rules. While Democrats would like to see net neutrality rules not applied to wireless services, Republicans want the same forbearance for both broadband wireline and wireless services.

Can we really say we see any surprises?

A very pointed piece in CNET.com by Randolph May of the Free State Foundation where he argues that the Federal Communications Commission’s net neutrality rules violate the First Amendment. Under the First Amendment, Congress is restricted from abridging or curtailing the freedom of speech. Mr. May argues that government intervention via net neutrality rules to ensure that a carrier does not refuse to carry traffic of content providers violates the First Amendment rights of the carrier.

I agree with Mr. May that net neutrality does curtail carrier speech. Net neutrality violates a carrier’s liberty to manage its networks in the way it sees fit.

A problem I see, however, is with the term abridging. It means to shorten. It doesn’t mean stop completely. It can be interpreted as “giving as little rope as possible”. I don’t think the FCC should be given even an inch of rope which would lead to their hope for implementing these rules to some unknown onerous extent. Congress should take unequivocal action by legislating these rules away, leaving no doubt as to what government’s role is expected to be in regulating the passage of traffic over broadband networks.