FCC must exempt smaller ISPs from Title II tsunami

Broadband Internet providers represented by the American Cable Association support an open Internet.  The Federal Communications Commission got it right in 2002 by classifying cable modem service as the information service and relying on a light-touch regulatory regime to nurture investment in broadband networks as the basis for stimulating the growth of the Internet economy.  Now, in an abrupt about-face, the FCC is on the cusp of adopting a heavy-handed, bureaucratic approach to protecting an open Internet. FCC adoption of Title II common carrier regulation would be a costly and significant reversal, imposing unwarranted and unnecessary burdens on ACA’s 800-plus small and medium-sized providers. 

The FCC must not go forward with this proposal unchanged.  Far from preserving the status quo, the FCC’s plan will trigger consequences beyond its control, risking serious harm to ACA members’ ability to fund and deploy broadband without supplying any concrete benefits.  If the FCC reclassifies this service for the purpose of regulating it under Title II, it must forbear from applying Title II regulations to small and medium-sized Internet Servicer Providers (ISPs).

{mosads}Facts and reason justify FCC forbearance.  Smaller ISPs have no incentive to harm the openness of the Internet.  Nearly all face competition from one wireline ISP or more and compete to attract and serve customers who would depart if their ISPs engaged in any business practices that interfered with their Internet experience. In compliance with the FCC’s 2005 Open Internet Principles, ACA members do not block, throttle, discriminate among types of Internet traffic, nor do they charge Internet edge providers for priority delivery.

Smaller ISPs lack the market power to harm edge providers and consumers.  These ISPs cannot compel payment for unblocking, non-discriminatory treatment or paid prioritization services because on an individual level, each serves too few Internet subscribers to matter to globally powerful edge providers such as Netflix, Amazon or Hulu.  Simply put, smaller ISPs lack any leverage in the market to create problems for popular edge providers that proponents of an Open Internet suggest are possible.

In reality, smaller ISPs have plenty to fear from non-neutral behavior on the part of edge providers that provide content, develop applications and offer services. Many ACA members have been victimized by large Internet video distributors that block selectively their Internet subscribers’ access to the video content they otherwise make freely available online.

The reach and rigidity of Title II regulation are real and can’t be overstated as threats.  Sections 201 and 202 of Title II require that common carriers hold themselves out to serve upon reasonable request, and that their rates, terms, conditions of service and practices in connection with service be just and reasonable and not unjustly or unreasonably discriminatory.

These two provisions are the source of the FCC’s authority to regulate rates, require that service be extended, require carriers to resell their services, unbundle and offer them to third-party providers.  Section 208 permits aggrieved parties to file complaints about any of these things, and the service provider must defend against such complaints before the FCC, which can be extremely burdensome and costly, even if the adjudication demonstrates the provider did no wrong.

The FCC has used these provisions to impose service unbundling and resale obligations. Because the current FCC cannot bind the actions of a future FCC determined to institute rate regulation, the possibility of future tariffing and unbundling mandates creates deep and lasting regulatory uncertainty.

Title II regulation also would result in significant new compliance and reporting obligations – potentially at the state as well as the federal level – leading to direct and substantial out-of-pocket costs to hire compliance staff and engage outside consultants and attorneys.  It could potentially lead to an increase in fees cable broadband providers pay for pole attachments and add new costs associated with complying with enhanced transparency requirements.

It is simply asking too much of ACA members — half of which serve 1,000 subscribers or fewer and employ 10 or fewer workers – to have to comply with Title II regulation to solve a non-problem.

ACA is speaking out because it cannot stand idly by while the FCC is planning to unleash a tsunami of regulations that will inundate small and medium-sized ISPs that are demonstrably not the source of any actual or threatened breaches of the principle of Net Neutrality.

Polka is president and CEO of the American Cable Association.