FCC Chairman Ajit Pai's Proposal to Overturn Net Neutrality, Annotated
FCC Chairman Ajit Pai's Proposal to Overturn Net Neutrality, Annotated
Chris Kanaracus is managing editor of Constellation Insights. Insights delivers exclusive, daily analysis of breaking news across Constellation’s eight business research themes to Constellation Executive Network members. Prior to joining Constellation, Kanaracus spent seven years covering the enterprise software industry for IDG News Service, where he frequently broke exclusive stories with a focus on end-customer issues. Kanaracus has also held various managerial and reporting roles at newspapers in New England since 1998. Twitter: @chriskanaracus , Title: Big IdeasConstellation Insights Insights delivers exclusive, daily analysis of breaking news across Constellation’s eight business research themes to Constellation Executive Network members. ...
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Federal Communications Commission Chairman Ajit Pai has unveiled how he intends to roll back so-called "net neutrality" regulations passed in 2015. While Pai has the benefit of a Republican-majority FCC board, he could still be in for a fight as advocates and the public push back.
Net neutrality forbids ISPs from blocking or slowing down Internet traffic that points to legal content, and from favoring traffic based on payments or other considerations. Critics like Pai say the rules, which placed ISPs into the "common carrier" category under Title II of the Communications Act, go too fair and are anticompetitive.
Consumer advocacy groups and Internet companies such as Netflix and Facebook have been the most prominent net neutrality advocates, with ISPs seeking further control taking the other position. But in today's environment, with trends such as the IoT (Internet of Things), the app economy and general move toward cloud computing, makes the way Internet traffic is regulated in the U.S. a core concern for enterprises.
Hence, the details of Pai's proposals are worth a close look. Here are some of the key highlights from a speech he gave this week in Washington outlining his plan, accompanied by my annotations and context.
Pai: "Whether I am in Red America, Purple America, or Blue America, whether I am above the Arctic Circle or in the bayous of Louisiana, people tell me that they want fast, affordable, and reliable Internet access. They say that they want the benefits that come from competition. And they tell me that they want to access the content and use the applications, services, and devices of their choice."
- The FCC received an unprecedented 3.7 million comments from the public regarding net neutrality before the rules were passed. The Sunlight Foundation, a nonprofit that advocates for open government, performed an analysis using 800,000 of those comments and found that only 1 percent were in opposition to net neutrality. However, other polls have shown that only a scarce majority of Americans understand well enough what net neutrality is.
Pai: "[Under] the Telecommunications Act of 1996 ... America’s Internet economy produced the world’s most successful online companies: Google, Facebook, and Netflix, just to name a few. ... And under this framework, consumers benefited from unparalleled innovation. But two years ago, the federal government’s approach suddenly changed. The FCC, on a partyline vote, decided to impose a set of heavy-handed regulations upon the Internet. It decided to slap an old regulatory framework called “Title II”—originally designed in the 1930s for the Ma Bell telephone monopoly—upon thousands of Internet service providers, big and small. It decided to put the federal government at the center of the Internet. Why? Unfortunately, the answer has nothing to do with the law or the facts. Nothing about the Internet was broken in 2015. Nothing about the law had changed. And there wasn’t a rash of Internet service providers blocking customers from accessing the content, applications, or services of their choice.
- Net neutrality proponent Free Press this week published a list of incidents it says violated the spirit of net neutrality, both before the rules were passed in 2015 and afterward.
Pai: So what happened after the Commission adopted Title II? Sure enough, infrastructure investment declined. Among our nation’s 12 largest Internet service providers, domestic broadband capital expenditures decreased by 5.6% percent, or $3.6 billion, between 2014 and 2016, the first two years of the Title II era. This decline is extremely unusual. It is the first time that such investment has declined outside of a recession in the Internet era. And the impact hasn’t been limited to big ISPs. Smaller, competitive providers have also been hit. ... Our nation’s smallest providers simply do not have the means or the margins to withstand the Title II regulatory onslaught. And remember—these are the kinds of small companies who are critical to meeting consumers’ hope for a more competitive broadband marketplace and closing the digital divide.
- Opinions vary on Title II/net neutrality's impact on ISP infrastructure investment. The Internet Association, a lobbying group which represents companies such as Google and Facebook, noted that major ISPs Comcast, Verizon and AT&T have made aggressive investments in fiber during the past couple of years. Free Press, meanwhile, put out a flyer listing capital expenditures from about two dozen publicly traded ISPs. About three-fourths had expanded their investments from 2015 to 2016. Comcast's capital expenditures grew 26.6 percent during that period, while Cincinatti Bell's rose 50.3 percent.
Pai: When businesses cut back on capital expenditures, the areas that provide the most marginal returns on investment are the first to go. And in the case of broadband, that means low-income rural and urban neighborhoods. As a result, Title II has kept countless consumers from getting better Internet access or getting access, period. It is widening the digital divide in our country and accentuating the practice of digital redlining—of fencing off lower-income neighborhoods on the map and saying, “It’s not worth the time and money to deploy there.”
- ISPs have accepted billions in subsidies over the years in the name of supporting rural broadband, but modern fiber networks remain largely nonexistent in less populated areas. Moreover, ISPs are loathe to continue servicing their aging and increasingly obsolete copper networks, which support DSL, the main option for broadband in the U.S. countryside, and have taken steps to phase out the service without an acceptable broadband option being in place.
Pai: Now, some have called on the FCC to reverse Title II immediately, through what is known as a Declaratory Ruling. But I don’t believe that is the right path forward. This decision should be made through an open and transparent process in which every American can share his or her views. So what are the basic elements of this Notice of Proposed Rulemaking? First, we are proposing to return the classification of broadband service from a Title II telecommunications service to a Title I information service—that is, light-touch regulation drawn from the Clinton Administration.
- The next major step in the debate comes May 18, when the FCC votes on a Notice of Proposed Rulemaking regarding Pai's proposal. If it passes—which is practically guaranteed—then a public comment period will open. Net neutrality has simmered in the U.S. for going on 20 years and has always been politically charged. It will be no different, and perhaps more controversial than ever before, as the year unfolds.
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