Voice of Washington Volume III: Net Neutrality Two-Step

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    Congress and FCC Locked in Net Neutrality Two-Step

    Both the Federal Communications Commission (FCC) and the United States Congress are working feverishly toward finalizing their net neutrality policy proposals. But while there is plenty of movement on the issue, there is less forward progress than either side would prefer. “I think what we’re seeing is a little bit of a minuet—or a dance step—between the democratically-controlled FCC and the republican-controlled Congress,” explained DC-based telecommunications lawyer Larry Freedman in this month’s Voice of Washington update.

    While the FCC is gunning for an aggressive regulatory policy—one that would reclassify the Internet as a common carrier, essentially making it a public utility subject to government regulation—Congress is leaning toward a less regulated approach. In Freedman’s words, the draft legislation that currently exists “would, to a large degree, pin the FCC’s ears back a bit.”

    That scares many net neutrality advocates, who fear that even if the FCC is able to apply the common carrier designation—known as Title II—to Internet services, the impending congressional legislation would make enforcement of the FCC order nearly impossible. Furthermore, the draft legislation contains a lot of vague language—which could give way to loopholes that would permit the very problems the FCC is trying to eliminate.

    The FCC, for its part, isn’t committed to total regulation, either—mostly because the commissioners know full well that even with President Obama’s support, a full application of Title II policy to the Internet simply wouldn’t fly. So, in an attempt to satisfy the anti-regulation camp, the FCC likely will use the concept of forbearance—which allows officials to pick and choose which pieces of Title II classification they’d like to apply to the Internet, specifically—as part of its proposed policy. “The idea was, by sweeping broadband under Title II, the FCC could get its regulatory hooks into it, and by forbearing they can then assuage those people who think that’s too aggressive and say, ‘Well, we’re gaining the legal justifications to regulate but avoiding the claim of overregulation,’” Freedman said.

    Of course, nailing down the details of the proposed forbearance could prove tedious—especially considering that two of the five FCC commissioners are Republicans who remain opposed to any type of common carrier regulation of the Internet. In fact, Commissioner Michael O’Rielly has said the FCC should “step back” and wait until Congress acts before he and the rest of the commissioners hash out the details of their proposal.

    Still, lawmakers and others close to the issue expect the FCC to vote in favor of some type of net neutrality order during a meeting scheduled for February 26. So, for congressional leaders hoping to beat the FCC to the punch, the race is on—and according to Freedman, their “split personality” strategy for passing this legislation has basically left them running in place. “On the one hand, they would like to see a sneak preview of what the FCC has in mind earlier so that they, in Congress, can react to it,” he said. “On the other hand, they would prefer for the FCC to wait and give Congress the chance to legislate first.”

    Whatever happens on February 26, one thing is for sure: litigation will almost certainly follow any changes to the law as it stands—not only because those changes will have an economic impact on many of the heavy-hitters in the telecommunications industry, but also because the issue has become so visibly politicized. In Freedman’s words, net neutrality has evolved into “a sexy telecommunications issue that public interest groups and stakeholders and folks in the political realm have sunk their teeth into, and now [they] won’t let go.”

    Bottom line: The net neutrality battle is far from over, which means we can expect plenty more updates in the weeks and months to come.

    Municipal Broadband Could Help Bring Internet to All

    Here on the Telco Americana blog, we talk a lot about creative solutions to the lack of broadband availability in rural areas. Among them: municipal broadband. As Freedman explained in this month’s update, municipal broadband is “the concept that a locality—a city, county, municipal jurisdiction—would themselves go into the broadband business and provision these types of services that historically were used to seeing [private] providers deploy.” In short, the government—rather than a private company—maintains and sells Internet services.

    At this point, municipal broadband really only exists to fill in the gaps in underserved areas, which on the surface, doesn’t seem like much of a problem. However, many people—particularly, those with private interests in the telecommunications market—worry that municipal broadband could eventually run other providers out of business. Small, rural operators are especially wary of this trend, as they fear that “if the government gets involved, [then] the government is competing with private interests, but it’s not on a level playing field,” Freedman said. Specifically, the government has distinct advantages when it comes to things like right of way, facilities, and financing.

    For that reason, many states have passed laws that “constrain or condition” the deployment of municipal broadband—by requiring formal review to determine that no private operator is willing to serve a particular area, for example. However, recent calls for the FCC to use its regulatory authority to pre-empt state legislation have brought the issue of municipal broadband to the forefront of controversy. In fact, Chairman Tom Wheeler has publicly indicated his interest in asserting the FCC’s authority over state rules—potentially as part of the February 26 order. Adding even more fuel to the fire is the fact that President Obama seems to be on board with the FCC’s direction on municipal broadband.

    Even if the FCC asserts power over the states, it will be a tough sell in the judiciary, which according to Freedman, is exactly where it will end up. And with previous federal rulings striking down the federal government’s authority to trump state law in this type of situation, the FCC’s vision for municipal broadband could be on shaky ground. Yes, it’s tough to argue against the importance of Internet availability in all corners of the nation, but there’s no easy answer as to how to get there—and the road to universal coverage undoubtedly will be a bumpy one.

    FCC Ushers in IP Transition While Trying to Preserve Competition

    Just as everyone knows how important universal broadband is, everyone knows that fiber technology is the way of the future. The problem—as always—is figuring out a way to change the status quo without negatively impacting any of the stakeholders. That, of course, is a tall order—especially when it comes to replacing outdated copper infrastructure with fiber lines.

    The simple answer would be to allow individual providers to replace their networks as they see fit, in accordance with their own budgets and market demands. The problem, though, is that fiber networks are not subject to the same rules and regulations as copper ones. So, taken to the extreme, a “free-for-all” transition to fiber could kill the market competition that historically has been preserved by federal regulatory structures—particularly, the Telecommunications Act of 1996.

    As Freedman explained, current FCC rules require incumbent providers to unbundle their copper lines and share them with competitors—but that requirement does not apply to fiber lines. “So if the incumbent could retire copper, shift to fiber, and have no other constraints, then basically they could have the effect of killing off competition wherever they operate,” Freedman said, further noting that competition is “good for the country because it spurs innovation, provides for better service, and helps cut costs.”

    Recognizing the benefits of maintaining a competitive market for telecommunications services, Chairman Wheeler and his FCC colleagues have introduced a notice of proposed rulemaking (NPRM) that puts “a strong stake in the ground that we are going to try to accommodate this IP transition, but we are standing firmly for competition,” Freedman said.

    According to Freedman, the recent NPRM has three main components:

    It requires private operators to provide notice that they are going to transition from copper to fiber. That way, any parties who may suffer negative consequences as a result of the transition have the opportunity to voice their concerns.

    It mandates wholesale equivalent facilities. Basically, this means that if retiring copper has the effect of preventing a competitor from deploying services to a customer, then the competitor must have the equivalent right over the fiber network essential to deploying those services—and access to that fiber must come with similar rates, terms, and conditions as those that applied to the copper network. “That was a critical win for the competitive industry, and particularly, for some of the stakeholders,” Freedman said.

    It asks for comments on the concept of copper facility sales. The idea is that if an incumbent no longer wants to spend the money to maintain its copper facilities, then that provider should be able to sell off those facilities to competitors. The FCC hopes to receive comments on whether a voluntary option to sell copper is a good idea, and if so, how those sales should be structured.

    With so many buns in the oven, this spring should prove bountiful in the way of telecommunications policy. Be sure to stay tuned to Telco Americana for monthly updates from inside of the kitchen—er, the nation’s capital.

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One Response to Voice of Washington Volume III: Net Neutrality Two-Step

  1. Ken Pyle February 7, 2015 at 8:31 AM #

    Great article on very complex and timely topics.Spectrum policy should be added to the above list. It seems like it is time for Congress to take a comprehensive look at rewriting 80+ year old communications laws to reflect today’s digital reality.

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