Recognizing the convoluted nature of the subject, I did my best to lay out what “net neutrality” is and what is at stake with the current FCC rule-making process in my recent post: Say Goodbye to “Net Neutrality” – New FCC Proposal Will Permit Discrimination of Web Content.
Well the FCC voted on its proposal yesterday and it passed with a 3-2 vote. More on that later, first I want to share an article I recently read on The Verge, which is extremely important to understand before you form an opinion on what should be done.
The first buzzword you need to familiarize yourself with is “Title II regulation.”
Title II refers to a key section of the Communications Act, which has to do with the classification of telephone providers as “common carriers,” and subjects them to increased regulation and oversight. When the Communications Act was updated in 1996, it appears that broadband providers would not be deemed “common carriers,” which would allow them to be largely unregulated. Yet, Verizon decided it wanted to be regulated under Title II when building out its broadband network. Why would it do this?
It turns out that building a huge broadband network isn’t cheap, and being more “regulated” actually gave Verizon a tremendous cost advantage. Verge notes that: “Title II designation gives carriers broad power to compel other utilities — power, water, and so on — to give them access to existing infrastructure for a federally controlled price, which makes it simpler and more cost-effective for cables to be run.“
Here’s the really despicable thing. Now that Verizon has used Title II to build out much of its network, it now wants to turn around and play unregulated entity when it comes to pricing services that it built out under the guise of it being a heavily regulated business. You can’t make this stuff up. More from The Verge:
At issue is how (or if) the FCC will protect the internet’s openness, free of special treatment and data “fast lanes” offered to the highest bidders. And while Verizon, Comcast, AT&T, and others have been clamoring to prevent heavy regulation from being considered this week, it turns out that communications providers have actually been working the system for years, using exactly this kind of regulation to their advantage. In fact, strict FCC rules have helped Verizon build a largely unregulated network — a network that’s valued in the tens of billions of dollars.
Today New York’s Public Utility Law Project (PULP) published a report, authored by New Networks, which contains previously unseen documents. It demonstrates how Verizon deliberately moves back and forth between regulatory regimes, classifying its infrastructure either like a heavily regulated telephone network or a deregulated information service depending on its needs. The chicanery has allowed Verizon to raise telephone rates, all the while missing commitments for high-speed internet deployment.
In submitting to regulation, AT&T was designated a “common carrier” — in broad terms, an organization that will deliver something from anyone to anyone else — under a critical section of the Communications Act called Title II. When the Communications Act was updated in 1996, it appeared that broadband internet providers might fall under the same strict rules, but after a series of hearings, the FCC ultimately ruled in 2002 that cable modems were “information services,” a far less restrictive designation. In 2005, it ruled that DSL fell into the same category; today, effectively all internet connections are beyond the reach of Title II.
When Verizon talked about this broadband infrastructure with local regulators, however, it made clear it would lay the fiber for its next-generation network as a “common carrier pursuant to Title II of the Communications Act of 1934.” In other words, Verizon was making a move that, at a glance, seems counterintuitive: it asked for more regulation by building its fiber network under the same tight rules as the old telephone lines.
Why would Verizon — which, like all big telecom companies, is generally averse to government regulation — make a point of repeatedly noting that its fiber network fell under the same strict rules as the telephone system?
There are two reasons. First, Title II designation gives carriers broad power to compel other utilities — power, water, and so on — to give them access to existing infrastructure for a federally controlled price, which makes it simpler and more cost-effective for cables to be run. And that infrastructure adds up: poles, ducts, conduits running beneath roads, the list goes on. Second, Title II gave Verizon a unique opportunity to justify boosting telephone rates in discussions with regulators, arguing that these phone calls would run over the same fiber used by FiOS, Verizon’s home internet service. According to PULP’s report, Verizon raised traditional wired telephone rates in New York some 84 percent between 2006 and 2009, blessed by regulators in return for its “massive investment in fiber optics.”
Of course, telephone service isn’t the real reason Verizon has spent billions on fiber: landlines have long been a dying business, expedited on their trip to the grave by the smartphone revolution of the past decade. Rather, the fiber was laid to carry data — the very data Verizon doesn’t want subject to Title II regulation. It’s for FiOS in the home and for wireless backhaul, the backbone that connects cellular towers (including Verizon Wireless’ own) to the internet.
And as landline telephones lose ground to newer, better, and faster technologies, the folks left on these copper wires disproportionately skew toward low-income populations and the elderly — the demographics least likely to be able to take advantage of broadband. Yet it was their rate increases that were being used to subsidize the investment in Verizon’s fiber network. The PULP report estimates these rate increases have generated $4.4 billion in additional revenue for Verizon in New York alone, money that’s funneled directly from a Title II service to an array of services that currently lie beyond Title II’s reach.
Still, the tactic strikes many as hypocritical. “The network has to be built as a common carrier network, because there is no way to get that infrastructure in place without it,” says Earl Comstock, a lawyer at Eckert Seamans specializing in net neutrality who helped draft the Telecommunications Act of 1996. “Verizon knows it needs to offer just enough basic voice services on its fiber to claim that designation. But it doesn’t live up to those promises when it’s done building it out.”
With broadband internet’s anemic competitive landscape, this lack of regulatory accountability becomes even more troubling. According to a 2012 FCC report, roughly 27 percent of US households had only one choice to get a wired connection of 6Mbps or greater. Uncompetitive markets are the ripest for regulation; the dominant players in those markets, of course, would disagree. And while we wait to see whether the FCC will move to bring the internet under Title II to codify it as the public utility that is has become, Verizon and others are playing a regulatory shell game, spinning in and out of Title II rules at their leisure.
So always bear that in mind when you hear arguments from internet service providers (ISPs) about how devastating regulation is. As usual, it’s all about the money, and when it was profitable to be “regulated” Verizon had no issues playing that role.Moving along to the FCC proposal vote, it is important to bear in mind that this is just the very beginning of the entire process and nothing has been decided yet. In fact, we have now entered into a 120 day public comment period. Specifically, the public will have until July 15 to submit initial comments on the proposal to the commission, and until Sept. 10 to file comments replying to the initial discussions.
To me, the most interesting aspect of the run-up to the proposal vote was a group of hardcore activists who camped outside of the FCC for a week in order to get their points across. I strongly recommend checking out the site OccupytheFCC and suggest signing their petition. When I signed it yesterday, it had over 200,000 signatures.
It appears this group had a meaningful impact and should be congratulated. For instance, the DailyDot reported that:
Wheeler has since amended his proposed rule changes, which will go before a vote Thursday, to be friendlier to net neutrality, though he still faces significant criticism.
“What’s exciting is seeing this mounting public pressure having a huge impact at the FCC,” Evan Greer, campaign manager at Fight For the Future, one of the groups organizing the protest, told the Daily Dot.
“A culture shift has happened here in the last week alone. This is a building almost no one goes to unless they’re an AT&T, Comcast, or Verizon lobbyist. Now it’s filled with flyers for net neutrality, carried in by employees handed them on their way to work,” she said.
But those activists, like most, want the Internet to be classified as a utility, like water and electricity, saying that would both give the FCC more regulatory control and accurately describes the reality of how important the Internet is to people’s everyday lives.
As a reminder, when you hear activists call for the Internet to be classified as a utility, they are essentially talking about Title II regulation discussed earlier.This is an extremely complicated subject, and I don’t have all or any of the answers. That said, from my research I would say that fast and slow lanes for web content based on who pays more or less money is completely and totally unacceptable.
I’m also not sure if regulating the Internet under Title II makes the most sense, but what I can say is that if a company like Verizon built out it’s network under a regulated environment then it should be responsible financially to contribute in a major way financially toward whatever solution makes the most sense to maintain a free and open Internet.
Finally, I want to highlight the following video of protesters being thrown out of the FCC hearing yesterday. It’s short and already has over 125,000 views.
A Liberty Blitzkrieg commenter summarized the scene witnessed above perfectly when replying to a post yesterday by stating:
“The FCC meeting today, this 30 second video says EVERYTHING YOU NEED TO UNDERSTAND.
A room FULL OF LAWYERS. A FEW COPS AND HUMAN BEINGS SPEAKING REALITY TO THEM.
I know the lawyers , I am one, I can pick them out. This is a room full of lawyers.”
No wonder the Republic is in the state it’s in.
In Liberty,
Michael Krieger
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