Author’s Note: I submitted this essay in February, 2017 as part of my graduate coursework in public administration. It covers policy developments related to the FCC’s 2015 Open Internet Order from late 2015 to the recent changes in FCC leadership under the new presidential administration.
INTRODUCTION: Happy Anniversary
I. USTA v. FCC: The Resolution
- A Not-So-New Decision
- Will the Fight Go On?
II. ENFORCING PRIVACY AND SECURITY UNDER TITLE II
- TerraCom & YourTel
- Cox Communications
III. INNOVATIVE OR NOT? CRTIQUES OF THE ORDER
- Priority Versus Speed
- Priority, Pricing, and Packages
- Presidential Influence
IV. THE FUTURE OF BROADBAND EXPANSION
- A New Chairman
- Municipal Broadband
CONCLUSION: Happy Trails
- Broadband Will Expand—but on Whose Terms?
- The Influence of Political Appointees
“Today’s Internet reality is that there are a multitude of individually owned pieces of a very large puzzle that are all interconnected. Individually, no ISPs’ single piece of that network puzzle has significant value, but connected to a myriad of other individually owned networks, the value and potential is staggering. It is equivalent to the idea of a single cell and its relative insignificant value compared to the billions of cells that make up the human body and the potential value of the human being as a whole.”
—David Missirian, University of Toledo Law Review, 2016.
Introduction: Happy Anniversary
In December, 2015, I covered the history and meaning of the FCC’s 2015 Open Internet Order. February 26, 2017 is the nation’s two-year anniversary with this policy, and it arrives at time where a shift in federal power heralds a new era and a potentially new policy direction.
In my previous analysis, I examined the arguments made by Alamo Broadband and others in documents presented to the court in on-going proceedings in USTA v. FCC. Since then, the Court of Appeals issued its decision in 2016. The court settled the matter in agreement with the FCC’s position on the Order. This decision is unlikely to be reviewed by the Supreme Court, so I will summarize its implications in Part I.
The FCC exercised its newfound Title II authority to issue three enforcement orders related to privacy and security, generally in the form of monetary fines and procedural requirements. Though most everyone agrees on the importance of data security and privacy, the net neutrality aspects of the Order continue to draw criticism. Critics argue that net neutrality stifles innovation, and they present less neutral policies in other nations as a critique of the Order. But the most pointed criticism of the Order, and of the USTA decision, came from within the FCC itself—from former Commissioner Pai, now appointed FCC Chairman by President Trump in the wake of Tom Wheeler’s resignation.
This power shift, given the FCC’s tendency toward strongly partisan votes, could threaten Wheeler’s vision of broadband expansion at higher speeds into all areas of the nation. Wheeler spoke in favor of municipal broadband, challenging the recent court decisions on the matter.
Exploring these developments in the legal, administrative, and political dimensions of the Order’s first two years will shed light on the future of the Order, current critiques of net neutrality, and the Order’s current relation to the more general policy goal of broadband expansion.
I. USTA v. FCC: The Resolution.
USTA v. FCC (2016) was not decided until more than a year into the new Title II policy regime. The arguments presented by the corporate plaintiffs were covered in detail in my first analysis, and I predicted the Court of Appeals for the District of Columbia Circuit would decide for itself what the Supreme Court had already solved in Brand X; namely, that the FCC had the authority to classify broadband under Title II and was reasonably interpreting the language of its guiding legislation.
1. A Not-So-New Decision. The heart of USTA v. FCC was an objection to the FCC’s ban on paid prioritization. Arguments from c0-plaintiff Alamo Broadband appealed to a First Amendment interpretation of the broadband provider’s role. Determining not to provide access to Internet content the ISP finds objectionable would, in this view, constitute an exercise of the ISP’s free speech. The court found no merit in free speech arguments (Fung, 2016). And understandably so. Censoring content is the opposite of free speech.
An analysis in Houston Law Review argued in favor of a split interpretation of First Amendment protection. As neutral transmitters of data, ISPs are not really speaking. But Stephanie Kan proposes that when ISPs function as “edge providers”, then courts should consider them as having free speech rights within the boundaries of the content they create and exercise editorial control over (Kan, 2016). Kan’s “split” interpretation of free speech in ISP cases shows sensitivity to the significant difference in two functions: one, providing access to all content; two, content creation.
It was not free speech but a more procedural matter that decided USTA: the FCC’s authority to classify broadband under Title II. Brand X had established the Supreme Court’s view of this question, and the Court of Appeals reaffirmed it with similar reasoning. This court used the reasoning from Chevron, but the legal questions asked were the same: is the 1996 Act vague about how broadband should be classified, and does the FCC have the authority to make a definite classification? Yes, and yes.
This decision should end the questioning of the FCC’s authority to classify broadband. The agency has successfully established an interpretation of its defining congressional statute which the judiciary will agree with. Given that lengthy, costly litigation has for too long drawn agency resources away from its true policy goals, this solid scheme of regulatory authority will simplify things. This is why “the FCC opted for a reclassification that offered a stronger legal foundation for its regulatory authority” (WSGR, 2015).
USTA answers the question of whether or not this regulatory regime includes wireless broadband. “These two changes—reclassification under Title II and the regulation of mobile broadband—are the main focus of industry’s legal challenge and were the subject of significant questioning at the recent hearing in the court of appeals” (ibid). The court determined Title II classification applied to wireless, and it found no reason to object to the FCC’s inclusion of both wireless and wired service (Fung, 2016). Though the FCC had at one time “excluded mobile services from many of its net neutrality rules” in the early days of that marketplace, recent technological advances and “widespread use” prompted the FCC to apply its regulations to both fixed and mobile broadband (WSGR, 2015).
Chairman Wheeler acknowledged the “decade of debate and legal battles” leading up to this affirmation of the FCC’s authority. But not everyone felt the matter was completely settled.
2. Will the Fight Go On? Because this was an opinion issued by a three-judge panel, not all the court’s judges, the plaintiffs could request all the judges hear the case, or possibly ask for a review from the Supreme Court (Brodkin, 2016). AT&T general counsel claimed to have “always expected this issue to be decided by the Supreme Court” (Qtd. in Kang, 14 Jun., 2016). But it sounds like so much saber-rattling. Why would the Supreme Court waste its time hearing this case when it already stated its position in Brand X?
The durability of this decision does not come without its dissenters and detractors at the court, at the ISPs, and within the FCC. Dissenting judge Stephen Williams voiced concern about discouraging competition in the broadband industry (ibid). The National Cable and Telecommunications Association called upon Congress to settle the matter by drafting new legislation (ibid). The NCTA may be right; better legislation would have prevented much litigation, but that is exactly the long-standing problem the new regulatory scheme evolved from and has now solved.
Commissioner Ajit Pai, now Chairman, opposed the Title II regime to begin with. In the wake of USTA, he voiced his support for the plaintiffs, saying, “these regulations are unlawful, and I hope that the parties challenging them will continue the legal fight” (Qtd. in ibid). What’s more likely is that federal courts have sufficient agreement about the FCC’s scope of authority, and the 2016 decision will serve as precedent for other courts. But even if the matter is iron-clad on the judicial front, Chairman Pai’s ongoing and open objections to the Title II regime could undo these two years of support from the judiciary.
II. Enforcing Privacy and Security Under Title II.
Not all the developments in the FCC’s new regulatory scheme had to do with paid prioritization or clarifying that broadband means all broadband, wired or not. The FCC also used its Title II authority to enforce matters of security and privacy, which often get less media attention. These enforcement actions garner less dissent than net neutrality, possibly because no matter where you stand on net neutrality, you probably want your private data secure. It’s something everyone can agree on, and examining this aspect of Title II enforcement puts the Order in a less controversial light.
1. TerraCom & YourTel. A $3.5M action against TerraCom & YourTel was the “agency’s first data security action against a telecom provider” (WSGR, 2015). The enforcement order identifies the violation clearly: “The Companies’ vendor stored the proprietary information of more than 300,000 customers in clear, readable text on servers that were accessible over the Internet, and the data was not password protected or encrypted” (FCC, Order DA 15-776).
The FCC did more than fine these companies. It defined administrative procedures the companies needed to implement, from “designating a senior corporate manager who is a certified privacy professional” to filing regular compliance reports with the FCC (ibid). The FCC clearly sees in such a deplorable lack of data security a sign that these companies need to be told how to run a secure operation, and that they will be monitored until they get it right.
2. Cox Communications. After TerraCom, the FCC “brought its first privacy and data security enforcement action against a cable provider” (WSGR, 2015). Cox Communications entered a “seven-year consent decree” and agreed to “pay $595,000 to settle a case involving a hack that exposed the data of 61 Cox customers (almost $10,000 per customer)” (ibid).
What led to this security breach? According to the enforcement order, someone convinced a Cox customer service representative and a Cox contractor to enter their respective account IDs and passwords into a fake website, which the third party controlled. With those IDs and passwords, the third party could then access customer information within Cox’s data systems (FCC, Order DA 15-1241). The enforcement order explains this is a common form of “social engineering”, and that much of the customer information was then exposed through various social media sites. As with the Terracom action, Cox received some pointed advice on how to run a secure operation.
3. Verizon. The FCC hit Verizon with a fine, requirements to notify customers before gathering any of their data, and instructions to get permission “before sharing consumer data with third party partner” (Kang, 7 Mar., 2016). Verizon had been using “supercookies” to gather customer information to be used for targeted advertising. “Even among customers who had tried to delete regular cookies from their mobile browsers, the supercookies, or hidden code unique to each customer, were undeletable and used as a workaround to continue data collection” such as “a mobile subscriber’s browsing history” which “third-party companies used …to target ads to users” (ibid). The privacy violation was revealed by a Stanford Law School privacy scholar who was subsequently hired by the FCC as a chief technologist (Singer, 2015).
Announcements of this enforcement came at a time when the FCC was proposing new privacy rules, which were approved in October, 2016. “The agency made privacy rules for phones and cable television in the past, but high-speed Internet providers, including AT&T and Verizon Communications, were not held to any privacy restrictions” (Kang, 27 Oct., 2016). Welcome to the world of Title II. It should be noted that jurisdictionally, the FCC ends and the FTC begins at web-based companies. The FCC can regulate telcos and broadband ISPs, but the Federal Trade Commission establishes consumer protection rules for web-based companies (ibid).
The new privacy rules were approved 3-2, which demonstrates how much one vote either way can determine FCC policy. Without Chairman Wheeler, an outspoken proponent of these privacy rules, how different would the FCC’s policies have been these past two years? The answer is radically different, and the recent shift in political power could undermine much of what net neutrality advocates consider advances in protecting and expanding broadband Internet.
III. Innovative Or Not? Critiques of the Order.
1. Priority Versus Speed. A 2016 TechPolicyDaily column pointed out that despite the ban on paid prioritization, different connection speeds form de facto prioritization of data delivery to different customers using different speeds. Bronwyn Howell argued that a truly neutral net would deliver all information at the same speed, and not differentiate speeds between different customers. One Internet, one connection speed. While it is difficult to imagine how an infrastructure currently being constructed and expanded from older underlying infrastructure could ever achieve Howell’s utopian conception, his arguments suggest how we could conceive of a truly neutral net in terms of connection speed and data delivery.
Setting aside current pricing tiers for speeds to residential and commercial customers, variances in connection speeds often affect rural and underserved municipalities. Achieving a neutral net in terms of neutral speed means the bar must be raised at a national level. Hundreds of municipal broadband projects are bringing robust high-speed broadband to their communities by building their own systems, and their ability to do so is a major part of creating a net that is at once neutral and high-performing.
2. Priority, Price, and Packages. Critiques of the net neutrality aspect of the Order point to examples such as MetroPCS who, in 2011, attempted to offer a low-cost plan to wireless subscribers. The package included unlimited web browsing, but “free access to YouTube, courtesy of an arrangement with Google whereby the search giant helped optimize YouTube content for MetroPCS’s capacity-constrained networks” (Watts, 2015, p.. 455). But this preferential treatment to YouTube appeared to FCC regulators to violate the concept of net neutrality (non-preferential treatment of content providers). MetroPCS had financial troubles and was eventually absorbed into T-Mobile.
Using MetroPCS as a case study for the “chilling effect” of net neutrality may be misguided. The provider’s financial troubles existed before the new neutrality discussion of the YouTube deal, and the episode took place four years before the 2015 Open Internet Order. The FCC never took enforcement action against MetroPCS on this matter, having only looked into it at the request of certain corporations. MetroPCS has little to do with the first two years of regulatory practice under the Order.
However, a bit of furor tends to erupt over FCC “policy” even when no action or official order happens. The FCC occasionally issues a report about something it has looked into, and what the implications of a company’s actions may be under current Title II thinking. Often, an outcry against the FCC’s current policy is only a response to a line of thought proposed in a general report, not an actual enforcement action.
In a 2017 op-ed piece for The Hill, former deputy U.S. coordinator for international communications and information policy Scott Cleland criticized an FCC report—not an official action or enforcement, just a report—for being anti-customer and using net neutrality to stifle innovation (Cleland, 2017). The report pointed out that AT&T might have a neutrality violation if it gave its subsidiary DirecTV preferential treatment in a zero-rating plan. The report commented that if DirecTV was zero-rated at nominal cost, it would be preferential treatment if other services incurred a significant per-gigabyte cost (Coldewey, 2017). No action was taken or recommended in this report.
The complexities of common-carrier regulation are always more dry than emotionally loaded words such as net neutrality, which work better as a soundbite than an objective policy description. But Cleland’s critique makes a valid point: regulation in the Order’s first two years has curtailed, in the U.S., several approaches to pricing and service which are flourishing internationally.
One is the “social media plan”, which bundles low-cost broadband with access to a limited number of popular social media sites. The idea is to give Internet access to the sites most commonly used, and make that cost-effective by not providing the entire Internet someone may not want or need on their phone. Similar plans give a preferential treatment to a single online email provider (Lyons, p. 468). “Feature phone access plans” such as Facebook Zero and Google Free Zone offer packages with stripped-down versions of the site features (such as text-only interfaces) that require less data capacity and can be used at no extra charge (ibid, p. 470-2). For those who want to only use a specific service, such as Skype, wireless providers are offering packages with fewer app services and lower costs.
At the heart of the arguments over whether or not such packages can be offered under current Title II regulations are questions of innovation and competition. Is a phone giving preferential access to Facebook or Google services helping or hindering the market and the economy? Supporters of these plans point to their increased use across the globe, and numbers showing they have helped more people in low-income or underserved areas get connected. Detractors point out it’s a biased connection to a limited selection of the Internet’s possibilities, and that the ubiquity of any given social media company on a huge network of phones could give it an overpowering edge on other companies looking to break into the market.
I believe innovation means more than bundling services into packages, and sometimes the difference between innovative pricing plans gets confused with innovation in actual products and technology. Critics who champion innovation need to show more than a clever price plan based on free social media apps, because they have little to say about the Order’s relation to real technological innovations that will get full broadband Internet access to everyone.
3. Presidential Influence. The Michigan Law Review published work which criticizes the amount of influence the President has on the FCC, and the 2015 Open Internet Order is a case study for that critique. Democratic President Obama appointed Tom Wheeler, and openly advocated for the Order, encouraging the public to voice support for it (Watts, 2016, p. 717-8). Chariman Pai, who did not vote in favor of the order, declared the FCC had expanded its Title II Authority to include broadband “for one reason and one reason alone. President Obama told us to” (Qtd. in Watts, p. 719). Will Chairman Pai be as susceptible to the influence of the Republican President who appointed him as Wheeler’s successor?
Presidential appointments, and the Senate’s confirmation process, do allow the executive and the legislature to influence policy by maintaining a party majority among the chairman and commissioners, especially given the agency’s voting history of 3–2 splits along party lines. In theory, the FCC is an independent agency (ibid, p. 717). But in practice, political appointments to the agency’s top leadership positions make the FCC extremely dependent on the president for determining the current policy environment and objectives. The back-and-forth party control from the oval office and capitol hill means that the FCC risks veering in one policy direction and then the other, unable to present a consistent regulatory environment for more than two presidential terms at a time.
Will the 2015 Open Internet Order be sacked in the wake of the current power shift? That question worries millions of Americans.
V. The Future of Broadband Expansion.
1. A New Chairman. On December 15, Wheeler issued a brief statement about his resignation. It said nothing about his reasons for leaving, but it did clarify how Wheeler envisions the legacy he leaves behind: “a thriving communications sector, where robust investment and world-leading innovation continue to drive our economy and meaningful improvements in the lives of the American people” (FCC Statement, 2016).
The FCC’s announcement gave his date of his departure as January 20, the date of President Trump’s inauguration. “Following custom for an FCC chairman, Wheeler resigned his seat when the new administration of Donald Trump began on January 20, 2017”, leaving the new President with a new Chairman to appoint (Cone, 2016). The normally five-person FCC panel began the Trump administration with a 2-1 Republican majority. The Senate did not outright deny the appointment of Jessica Rosenworcel, but it delayed her confirmation and went to recess. Rosenworcel’s term ended more than two weeks before the inauguration (McMill, 2016).
Chairman Ajit Pai, always outspoken against net neutrality and the current Title II regime, will “need to be reconfirmed by the Senate before the end of  because his current five-year term as a commissioner expires”, but he requires no confirmation process to get started (Fiegerman, 2017). That leaves two vacancies on the FCC board to bring it to a full five. As only three can be from the same political party, we can most likely expect a split of three Republicans and two Democrats.
2. Subsidies. As the net neutrality movement says farewell to Chairman Wheeler, it must wonder about the fate of other programs Wheeler favored. These programs and policy developments were part of Wheeler’s larger vision for the future, which included net neutrality as only one component in expanding high-speed broadband Internet to everyone in the U.S.
Will the political power shift bring an end to programs such as subsidized broadband for low-income homes, who could benefit from access to job applications, educational sites, and other social services? At the same meeting that set the FCC’s new privacy rules for ISPs, the agency approved a plan for subsidizing broadband Internet access for low-income families (Kang, 31 Mar., 2016). “Those eligible for programs like the Supplemental Nutrition Assistance Program and tribal and veterans’ benefits will be able to apply for the subsidy. The funds can be used for wireless or fixed-wire broadband” (ibid). The FCC’s plan to fund the $2.25B project resembles methods it used on telcos to subsidize universal telephone service: line-item charges on wireless and Internet bills. The vote was approved 3–2, along partisan lines.
3. Municipal Broadband. Not all underserved areas lack the resources to take the broadband expansion into their own hands. Cities have found they can create their own municipal broadband service, effectively serve the entire community, and recoup their costs in about a decade. But the major ISPs have taken these proactive cities to court, and so far, the courts have not sided with the cities. Chairman Wheeler was a proponent of municipal broadband, and it is worth examining as a major component of the policy goal of expanding broadband nationwide.
Chanute, Kansas confronted the problem of broadband expansion without being at the mercy of cable companies or the FCC’s complex subsidy schemes. Rather than wait for costly last-mile infrastructure to come to it, Chanute built its own (Lefler, 2014). The city projected it would take ten short years for their project to pay for itself, and this proactive approach is but one example of a growing wave of cities taking the broadband bull by the horns.
The overwhelming successes of hundreds of municipal broadband projects make it difficult to justify there being “legislative barriers to public-owned networks in 19 states” (Settles, 2014). “Over 400 public-owned networks operate in the United States, according to the Institute of Local Self-Reliance… covering business districts, industrial parks, and medical and university campuses” (ibid).
These projects are largely a success, with cities seeing increased service to outlying residential areas, increased employment, increased access to health care information and video-conference doctor visits, reduced government spending on broadband expenses, profits on the broadband service which are used to eliminate certain taxes, and higher speeds for everyone—all without needing to wait for the larger subsidized companies to get around to building infrastructure for the city (ibid).
On the same day as the voting on the 2015 Open Internet Order, the FCC voted 3–2 in favor of an order “seeking to pre-empt those state laws” which created “barriers to broadband investment” and specifically laws unfavorable to “municipalities” who wanted to build their own broadband networks in “areas of little or no service” (Reuters, 2016).
While municipal broadband fits in with Chairman Wheeler’s vision of expanding broadband access, nineteen states have laws preventing its development, laws “often passed at the behest of private Internet service providers that didn’t want to face competition” (Brodkin, 2015). On the forefront of the ensuing litigation st00d Tennessee and North Carolina, each of which had limits on publicly created Internet service (Fung, 2015). Cities in those states asked the FCC to intervene and allow them to provide municipal broadband despite the state laws.
EPB, the municipal utility serving Chattanooga, TN, petitioned the FCC to allow it to deliver Internet to communities outside of the 600-square mile area they service (Settles, 20 Jul., 2014). Wilson, NC petitioned to provide Internet to local communities, and the FCC determined residents who lived outside the service range of utility companies in Chattanooga and Wilson had no broadband service at all (Gross, 2015).
The states challenged the FCC’s interference, and the legal authority behind it. In August, 2016, “the United States Court of Appeals for the Sixth Circuit upheld restrictive laws in North Carolina and Tennessee that will halt the growth of such networks” (Kang, 26 Aug., 2016). While the court agreed that municipal networks were valuable, it disagreed with the FCC’s legal arguments on its power to pre-empt state laws (ibid). The court ruled the FCC could not block North Carolina and Tennessee “from setting limits on municipal broadband expansion” (Reuters, 2016).
Wheeler openly lamented a decision that “appears to halt the promise of jobs, investment, and opportunity that community broadband has provided” (ibid). Chairman Pai applauded the decision. “Rather than wasting its time on illegal efforts to intrude on the prerogatives of state governments, the FCC should focus on implementing a broadband deployment agenda to eliminate regulatory barriers that discourage those in the private sector from deploying and upgrading next-generation networks” (Qtd. in ibid).
Where private cable companies have powerful lobbies, such as in North Carolina, they can exert powerful influence over whether cities can develop their own broadband projects. While the FCC’s Title II authority gives them some control over broadband companies, these companies can still use other political and legal channels to achieve aims which directly contravene the FCC’s vision for robust, high-speed broadband for everyone.
Conclusion: Happy Trails
1. Broadband Will Expand—but on Whose Terms? An analysis in the University of Toledo Law Review summarized the position of the broadband ISPs as for-profit companies faced with massive infrastructure costs who want the option to generate revenue through “price discrimination and content control” (Missirian, 2016, p. 347). And why not? Shouldn’t the owners of an infrastructure get to do whatever they want with it?
This position, and arguments for a less neutral net, have little to do with longstanding realities of common-carrier policy, and even less to do with centuries of policy development on how the state regulates a natural monopoly. The ISPs now find themselves in a regulatory environment that more closely resembles the early days of the telephone, when AT&T was encouraged to build infrastructure to service the entire nation, but regulated in its ability to price the services.
The ISPs would like to prevent municipal broadband, and why wouldn’t they? If cities take care of their own Internet infrastructure, the ISPs lose entire markets. If cities can generate public profits from serving nearby communities, who needs a private ISP?
In the near future, with the appointment of Chairman Pai, we are unlikely to see the FCC initiate any challenges to the states blocking municipal broadband in favor of cable industry lobbies. But it will be increasingly more painful to the residents of those states when they see their neighbors solving all the broadband problems themselves. Pressure from within the states may obviate the need for FCC involvement. Under Title II, we have the government regulating private companies which provide a service to the government. These private companies have a strong ally in Chairman Pai, but governments in every state will realize that municipalities can cut out the middlemen and be their own ISPs.
A robust network of municipalities with high-speed broadband, both wired and wireless, would be a boon to the public sector. Regulating that network according to a common-carrier philosophy is consistent with the idea of broadband as a public utility. Right now, public entities—cities—in some states remain subject to the expansion schedules of private companies.
2. The Influence of Political Appointees. In a more general sense, the power-shift-in-progress serves as a case study of the political appointee system. The risk of pulling the FCC back and forth on policy determinations with every presidential election is often suffered by agencies staffed by short-term appointees who have short-term goals. Developing consistent long-term policies and seeing them implemented over several presidential administrations may not be possible. This is not a problem only for the FCC, but a system-wide problem in the federal government. I have covered its causes, effects, and possible solutions in my literature review The Problems of Political Appointees in Federal Government.
The future of the 2015 Open Internet Order remains in the hands of new set of commissioners, and a chairman who never liked the Order in the first place. Broadband expansion will continue, but it may come to us in a climate that favors a private sector approach over a public utility approach.
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