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Popular Media The Federal Communications Commission’s (“FCC”) recent order to reclassify broadband internet access as a Title II “telecommunications service” under the Communications Act, will subject the . . .
The Federal Communications Commission’s (“FCC”) recent order to reclassify broadband internet access as a Title II “telecommunications service” under the Communications Act, will subject the industry to extensive public utility style regulation. While “net neutrality” principles drove were the initial justifications for Title II, the FCC’s current rationale has shifted to national security, public safety, and privacy concerns and broader regulatory control. Title II’s comprehensive regulatory framework threatens to commoditize broadband by banning practices like paid prioritization, zero-rating, and usage-based pricing, thereby reducing consumer choice and stifling innovation. Such heavy-handed regulation is unnecessary given the increasing competition in broadband markets from new technologies like 5G and satellite internet. Title II common carrier regulation is an outdated regulatory model ill-suited for modern broadband services and may do more harm than good for consumers.
Net neutrality is the idea that internet service providers (“ISPs”) should treat all data transmitted over the internet the same, and should not discriminate among consumers, entities that provide content, or applications that use the internet. Whether net neutrality should be mandated by rules and regulations — such as the Federal Communications Commission’s (“FCC”) latest net-neutrality regulations — has been a highly controversial topic since the early 2000s. The FCC has imposed net-neutrality rules twice before, in 2010 and 2015, only to see them struck down by courts or repealed, as the commission’s partisan makeup changed. Last month, in a party line vote, the Commission voted to regulate broadband internet under Title II of the Communications Act and impose net-neutrality rules.[1]
For much of the internet’s history, broadband telecommunications have been regulated as an “information service” under Title I of the Communications Act, which is widely considered to be a relatively light-touch regulatory framework. Since the FCC’s 2015 Open Internet Order, the agency has attempted to reclassify broadband as a “telecommunications service” under Title II, subject to the more heavy-handed regulation imposed on public utilities and “common carriers.” Under Title II, broadband companies are required to provide service to all customers equally and may be subject to public-utility-style regulation, including price controls, certificates of convenience and necessity, and quality-of-service requirements.
Because regulation under Title II entails much more than just net neutrality, critics complain that reclassifying broadband providers as common carriers amounts essentially to a federal takeover of a large part of the U.S. economy, used by nearly every American every day. On the other hand, proponents claim that precisely because broadband is so important to the economy, and even to the functioning of society, it must be managed by a government agency that will ensure equal access, maintain privacy and free speech, and protect national security and public safety.
While net neutrality is just a small piece of Title II, Title II is just one cog in massive gearwork of new federal regulations affecting nearly every aspect of access and use of the internet. Under rules adopted by the FCC, broadband deployment, upgrades, pricing, promotions, quality of service, and even marketing and advertising are now subject to FCC monitoring, scrutiny, and enforcement.
In this article, we provide a brief historical overview of net neutrality, including the debates over whether internet service is best classified as a Title I information service or at Title II telecommunications service, and how understanding of the underlying concerns has changed over the past 25 years. We then take a deeper look at what Title II regulation involves, to understand whether it is suitable to address contemporary concerns. We conclude by examining Title II within a broad regulatory framework that is — intentionally or unintentionally — banning or hindering many of the dimensions across which broadband providers compete. Some may argue that the commodification of broadband will nudge broadband toward a more competitive market with standardized (or near-standardized) products. In the process, however, consumers will see dwindling options among service offerings much like Henry Ford’s quip that consumers could get a Model T in any color they like, so long as it’s black.
Columbia Law School Professor Tim Wu is credited with articulating the concept of “net neutrality” as an anti-discrimination framework, “to give users the right to use non-harmful network attachments or applications, and give innovators the corresponding freedom to supply them.”[2] In a letter to the FCC, Wu & Lawrence Lessing drew a comparison to electric utilities which, as common carriers, provide electricity to all paying customers “without preference for certain brands or products.”[3] Indeed, Wu argued that his net neutrality proposal was “similar” to historic common carriage requirements.[4]
In the years since Wu introduced the term, net-neutrality policies have focused on the prohibition of three practices:
In 2004, FCC Chair Michael Powell articulated four “Internet Freedoms,” derived from Wu & Lessig’s work.[8] These were subsequently incorporated into the FCC’s 2005 “Internet Policy Statement.”[9]
By this point, the question of Title I versus Title II classification had become a central fracture point in discussions of net neutrality. On its face, Title I offers the FCC little, if any, substantive regulatory authority — indeed, it was created to differentiate unregulated services ancillary to the core telephone network services that the FCC regulated throughout the 20th century. Conversely, Title II provides the FCC with pervasive regulatory authority over the traditional telephone network, from pricing decisions to decisions over what services to offer and even what furniture to buy for meeting rooms.[10] Starting in the late 1990s, the FCC argued that internet service was best treated under Title I. The 9th Circuit Court of Appeals subsequently determined that internet service was better understood as a Title II service. The FCC disagreed and, in Brand X the Supreme Court held that the FCC’s determination takes precedence over that of the federal courts.
Thus, understanding of how internet services would be classified went from Title I, to Title II, and back to Title I over a period of seven years: The battle for classification had begun. That continued in the 2010 and 2015 Orders (in which the FCC relied on Title I and then Title II, respectively).
In 2010, the agency issued its Preserving the Open Internet Order, prohibiting blocking and unreasonable discrimination as well as mandating providers disclose the network management practices, performance characteristics, and terms and conditions of their broadband services.[11] In separate 2010 and 2014 cases, The DC Circuit Court of Appeals struck down the 2010 Order’s net neutrality requirements.[12] The courts noted that, because broadband providers were regulated under Title I as information services, they were not common carriers and could not be subject to net neutrality’s common carriage rules. A little more than a year after the court’s 2014 decision, in 2015, the FCC adopted the Open Internet Order, that reclassified broadband internet as a Title II common carrier telecommunication service and adopted new net neutrality rules prohibiting blocking, throttling, and paid prioritization.[13] The order also imposed a “general conduct” rule that prohibited broadband providers from “unreasonably interfer[ing] or unreasonably disadvantag[ing]” users from accessing the content or services of their choice.
In 2017, the FCC reversed course and repealed the 2015 Order with its Restoring Internet Freedom Order.[14] The order (again) reclassified broadband as a Title I information service, thereby eliminating net neutrality and general conduct rules. The order also preempted any state or local laws “that would effectively impose rules or requirements that [the FCC] repealed or decided to refrain from imposing,” or that would impose “more stringent requirements for any aspect of broadband service” addressed by the 2017 Order. In 2019, an appeals court upheld much of the order, but vacated the order’s preemption of state and local laws.[15]
Until recently, much of the debate was over whether net neutrality was necessary and how it would affect continued investment by ISPs’ in their networks. Advocates for federal intervention claimed it was necessary for the FCC to preserve or foster the “open internet” by mandating net neutrality. Opponents countered that such intervention was (1) unnecessary because providers were not engaging in widespread practices contrary to net neutrality, and (2) harmful because the prohibitions were so tight that they would stifle investment and innovation in new business models.
Something happened along the way from then to now: No one seems to care much about net neutrality anymore.[16] One reason is because most people are happy with their internet service. Since 2021, more households are connected to the internet, broadband speeds have increased while prices have declined, more households are served by more than a single provider, and new technologies — such as satellite and 5G — have expanded internet access and intermodal competition among providers.[17] Another reason is a shift in perception of who is blocking or throttling content. Much of that ire has turned towards websites, apps, and device providers.[18] Much of the public no longer sees broadband providers as the bogeymen.
The FCC itself seems to have downgraded “net neutrality” as a justification for heavy handed Title II regulation in favor of other reasons. For example, “national security” was mentioned only three times in the 2015 Order, but 181 times in the 2024 Order. The 2015 Order makes no mention of China, Russia, Iran, North Korea, or “data security;” in the 2024 Order China is mentioned 140 times and “data security” 15 times. Cybersecurity got a single mention in the 2015 Order, but 73 in the 2024 Order. This is a pretty clear indication that the FCC intends to do much more with its expansive Title II powers than merely prevent blocking, throttling, and paid prioritization.
Net neutrality is often used as the hook for regulating broadband providers as common carriers. But Title II is an expansive provision in the Communications Act. Among its many provisions, Title II allows federal rate regulation of broadband, as well as Section 214 “certificate of convenience and necessity” regulations requiring providers to obtain the FCC’s approval before constructing new networks, offering new services, discontinuing outdated offerings, or transferring control of licenses. The Commission’s order forbears rate regulation and grants “blanket” Section 214 authority to all current broadband providers, with the exception of five Chinese providers.
The 2024 Order’s “general conduct standard” provides the FCC with unlimited discretion to intervene in innovative business models. The order states the general conduct standard “prohibits unreasonable interference or unreasonable disadvantage to consumers or edge providers” that serves as a “catch-all backstop” to allow the FCC to intervene when it finds that an ISP’s conduct could harm consumers or content providers.
The FCC has a history of invoking the general conduct standard to scrutinize two common practices:
Zero-rating is the practice of excluding certain online content or applications from a subscriber’s allowed data usage. For example, when AT&T owned HBO, it exempted HBO Max content from AT&T users’ data allowance.
Zero-rating can make some popular services more accessible and affordable for lower-income users, who may have limited data plans. Zero-rating also allows ISPs to offer value-added services and to differentiate their offerings, spurring competition and innovation in the broadband market.
In December 2016, the FCC sent letters to both AT&T and Verizon Communications, warning their zero-rating programs could harm competition and consumers.[19] In the last days of the Obama administration, the FCC released a staff review of sponsored data and zero-rating practices in the mobile-broadband market concluding such practices “may harm consumers and competition… by unreasonably discriminating in favor of select downstream providers.”[20] Less than a month later, in the early days of the Trump administration, the FCC retracted the report.[21]
We can expect that under the 2024 Order — identical in most ways to the 2015 Order under which these practices were investigated — the Commission will once again use its powers to scrutinize zero-rating practices with an eye toward prohibiting them. Indeed, the 2024 Order characterizes, “sponsored-data programs as the type of practices that may raise concerns under the general conduct standard” that will be subject to a “case-by-case review.”
Usage-based pricing can be thought of as a “pay-as-you-go” plan in which consumers pay in advance for a certain amount of data per month. If they exceed that amount (what some would call a “cap”), then the consumer has the option to purchase more data. Some consumer groups claim that data caps and usage-based pricing are little more than a “money grab” by providers who derive additional revenue from overage charges or by upgrading users to a tier with a larger data allowance.[22] On the other hand, providers say that usage-based pricing is no different from nearly every other consumer product in which consumers pay for what they use. They argue that, without usage-based pricing, modest users of data would subsidize those who use copious amounts of data.[23]
In June 2023, FCC Chair Jessica Rosenworcel announced that she would ask her fellow commissioners to support a formal notice of inquiry to learn more about how broadband providers use data caps on consumer plans.[24] That same day, the FCC launched a “Data Caps Stories Portal” for “consumers to share how data caps affect them.” The 2024 Order indicates “providers can implement data caps in ways that harm consumers or the open Internet” and the FCC will “evaluate individual data cap practices under the general conduct standard.”
If, however, sponsored-data, zero-rating, data caps, and usage-based pricing practices harm competition or consumers, these concerns can be addressed with a straightforward application of existing antitrust and consumer-protection laws. Antitrust enforcers and courts assess such practices under the rule of reason — an approach that avoids a presumptive condemnation because they only rarely result in actual anticompetitive harm. Under a rule-of-reason approach, the effects of potentially harmful conduct are typically evaluated and weighed against the various aims that competition law seeks to promote. Only following that review is it determined whether particular conduct is harmful and, if so, whether there are procompetitive benefits that outweigh the harm.
Consumer protection is the purview of the Federal Trade Commission. Section 5 of the FTC Act prohibits “unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce.” The FTC has a long history of using its authority, such as recent actions to protect the privacy of consumers’ health records.[25] But, the FTC has no Section 5 authority over “common carriers subject to the Acts to regulate commerce,” which includes, according to the FTC Act, the “Communications Act of 1934 and all Acts amendatory thereof and supplementary thereto.” Thus, by classifying broadband providers as Title II common carriers, the FCC has stripped the FTC of its authority to protect consumers using Section 5.
In its Notice of Proposed Rulemaking, the Commission argued that broadband internet access services are “[n]ot unlike other essential utilities, such as electricity and water” and that high-speed internet “was essential or important to 90 percent of U.S. adults during the COVID-19 pandemic.”[26] The Commission argues that broadband internet is therefore an essential public utility and should be regulated as such.
But many essentials to human survival — shelter, food, clothing — are not subject to common-carrier regulations, because they are provided by multiple suppliers in competitive markets. Utilities are considered distinct because they tend to have such significant economies of scale that (1) a single monopoly provider can provide the goods or services at a lower cost than multiple competing firms, and/or (2) market demand is insufficient to support more than a single supplier.[27] Water, sewer, electricity distribution, and natural gas are typically considered “natural” monopolies under this definition.[28] In many cases, not only are these industries treated as monopolies, but their monopoly status is codified by laws forbidding competition. At one time, local and long-distance telephone services were considered — and treated as — natural monopolies, as was cable television.[29]
Over time, innovations have eroded the “natural” monopolies in telephone and cable.[30] In 2000, 94 percent of U.S. households had a landline telephone, and only 42 percent had a mobile phone.[31] By 2018, those numbers flipped.[32] In 2015, 73 percent of households subscribed to cable or satellite-television services.[33] Today, fewer than half of U.S. households subscribe.[34] Much of that transition is due to the enormous improvements in broadband speed, reliability, and affordability. Similarly, entry and intermodal competition from 5G, fixed wireless, and satellite has meant that more than 94 percent of the country can now access highspeed broadband from three or more providers, thereby eroding the already tenuous claims that broadband-internet service is akin to a utility.
Much of the FCC’s motivation in its recent regulatory push — Title II, digital discrimination, and broadband “nutrition labels” — seems to be driven by a misplaced notion of perfect competition, as described in introductory economics textbooks. Under perfect competition, prices paid by consumers equal the marginal cost of production, that cost is the minimum average cost, and firms earn zero economic profits. Perfect competition is too perfect. While perfection can be sought, it can never be achieved in the real world because the real world is a messy place.
Perhaps the messiest assumption of perfect competition is that each firm produces undifferentiated commodity products.[35] Broadband internet service is not a commodity. Providers use different technologies (e.g. fiber, 5G, copper wire) with different performance characteristics (e.g. speed and latency). Providers offer different service agreements. Some have early termination fees, while others don’t; some have “all-you-can-eat” data usage, while other have usage-based billing; some may have zero-rating while other don’t. With so much variation in services both across and within providers, some have argued that most consumers are not well-informed — if not confused — about their broadband options.
As a first step to commoditizing broadband, at the direction of the 2021 bipartisan infrastructure bill, the FCC adopted its broadband “nutrition label” rules.[36] Providers must display a nutrition label for each plan it offers. Consumers can then use the labels as an “apples to apples” comparison across plans and providers. Despite the cost to produce the labels, the uncertainty whether consumers will find the labels useful, and whether the full force of the federal government is necessary to display the labels, it’s difficult to argue that consumers are worse off by having easy-to-use information readily available.
With the FCC’s recent digital discrimination rules, the agency took another step toward commoditizing broadband. The infrastructure act required the Commission to adopt final rules “preventing digital discrimination of access based on income level, race, ethnicity, color, religion, or national origin.”[37] The FCC could have issued a narrow rule to outlaw intentional discrimination by broadband providers in deployment decisions, in a way that would treat a person or group of persons less favorably than others because of a listed protected trait. This rule would be workable, leaving the FCC to focus its attention on cases where broadband providers fail to invest in deploying networks due to animus against those groups.
Instead, the FCC’s final order creates an expansive regulatory scheme that gives it essentially unlimited discretion over anything that would affect the adoption of broadband. It did this by adopting a differential impact standard that applies not only to broadband providers, but to anyone that could “otherwise affect consumer access to broadband internet access service.”[38] The order spans nearly every aspect of broadband deployment, including, but not limited to network infrastructure deployment, network reliability, network upgrades, and network maintenance. In addition, the order covers a wide range of policies and practices that while not directly related to deployment, affect the profitability of deployment investments, such as pricing, discounts, credit checks, marketing or advertising, service suspension, and account termination. Most troubling, the order considers price among the “comparable terms and conditions” subject to its digital discrimination rules.[39] Taken together, with these rules, the FCC gave itself nearly unlimited authority over broadband providers, and even a great deal of authority over other entities that can affect broadband access, including other federal agencies, state and local governments, nonprofit organizations, and apartment owners.
Because the infrastructure act included income level as a protected trait, the FCC opened a Pandora’s Box in which nearly any organization’s policies and practices can be scrutinized as discriminatory.[40] For example many providers offer plans explicitly targeted at low-income consumers, such as Xfinity’s Internet Essentials program.[41] These programs are at risk of scrutiny under the digital discrimination rules. Moreover, the rules will likely stifle new deployment or upgrades out of fear of alleged disparate effects. If they don’t upgrade everyone, they could be accused of discrimination. At the extreme, providers will be faced with the choice to upgrade everyone or upgrade no one. Because they cannot afford to upgrade everyone, then they will upgrade no one.
While unintentional, the digital discrimination rules are another step toward commoditization. Providers must offer comparable speeds, capacities, latency, and other quality of service metrics in a given area, for comparable terms and conditions, including price, thereby erasing many of the dimensions across which providers compete.
Lastly under Title II and its net neutrality provisions, the FCC is erasing more competitive dimensions. Banning paid prioritization forces all data to be treated equally, even if customers or services would benefit from differentiated offerings. Without flexibility in how services are delivered and priced, companies lose incentives to develop better networks and new innovations for specific use cases like high-bandwidth video streaming or remote medical services. A ban on data throttling removes essential network-management tools that could prevent congestion and improve overall customer experience. If — as expected — the FCC moves to ban zero-rating and usage-based billing, consumers will have even fewer choices among broadband internet services. In the extreme, providers will simply be providing “dumb pipes” with standardized service. While such efforts may mimic perfect competition’s commodity condition, it’s not clear that consumers will benefit from one-size-fits-all broadband.
As we have recounted above, discussion about net neutrality concerns grew out of the era in which telecommunications services were provided by regulated, natural, monopoly carriers. In that era, there was legitimate need for pervasive regulation of these carriers. But these discussions also started concurrent with changing competitive dynamics in these markets. This historical context centered net neutrality in debates over the ongoing basis for the FCC’s own authority: Whether the regulatory structure of Title II, long central to the FCC’s mission, is still fit to task in contemporary markets. Looking at the comprehensive regulatory framework contemplated by Title II, the answer is clear: Regulation is driving internet services toward increasingly commodity services, reducing consumer choice in the process. Much like the Model T, Title II may have been necessary in the past, but it is now an artifact of a bygone era and should be allowed to slip into history.
[1] Declaratory Ruling, Order, Report and Order, and Order on Reconsideration, In the Matter of Safeguarding and Securing the Open Internet; Restoring Internet Freedom, WC Docket No. 23-320, WC Docket No. 17-108 (Apr. 25, 2024) [hereinafter “2024 Order”].
[2] Tim Wu, Network Neutrality, Broadband Discrimination, 2 J. Telecomm. & High Tech. L. 141, 142 (2003) [emphasis in original].
[3] Tim Wu & Lawrence Lessig, Ex Parte Submission, Appropriate Regulatory Treatment for Broadband Access to the Internet Over Cable Facilities, CS Docket No. 02-52 (Aug. 22, 2003), available at https://web.archive.org/web/20041204012743/http://faculty.virginia.edu/timwu/wu_lessig_fcc.pdf (“When consumers buy a new toaster made by General Electric they need not worry that it won’t work because the utility company makes a competing product.”).
[4] Wu, supra note 2 at 150.
[5] Lawrence Lessig, Voice-Over-IP’s Unlikely Hero, Wired (May 1, 2005), https://www.wired.com/2005/05/voice-over-ips-unlikely-hero.
[6] Declan McCullagh, FCC Formally Rules Comcast’s Throttling of Bittorrent Was Illegal, CNet (Aug. 20, 2008), https://www.cnet.com/tech/tech-industry/fcc-formally-rules-comcasts-throttling-of-bittorrent-was-illegal.
[7] Chao Liu & Cooper Quintin, Internet Service Providers Plan to Subvert Net Neutrality. Don’t Let Them, Elec. Frontier Found. (Apr. 19, 2024), https://www.eff.org/deeplinks/2024/04/internet-service-providers-plan-subvert-net-neutrality-dont-let-them.
[8] Michael Powell, Preserving Internet Freedom: Guiding Principles for the Industry, 3 J. Telecomm. & High Tech. L. 5 (2004).
[9] Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, 20 FCC Rcd. 14,986, 14,987-88 (2005).
[10] 47 CFR § 32.2000.
[11] Report and Order, In the Matter of Preserving the Open Internet; Broadband Industry Practices, GN Docket No. 09-191, WC Docket No. 07-52 (Dec. 21, 2010) [hereinafter “2010 Order”].
[12] For a more thorough summary, see Chris D. Linebaugh, Cong. Research Serv. LSB10693, ACA Connects v. Bonta: Ninth Circuit Upholds California’s Net Neutrality Law in Preemption Challenge (Feb. 2, 2022), available at https://crsreports.congress.gov/product/pdf/LSB/LSB10693.
[13] Report and Order on Remand, Declaratory Ruling, and Order, In the Matter of Protecting and Promoting the Open Internet, GN Docket No. 14-28 (Mar. 15, 2015) [hereinafter “2015 Order”].
[14] Declaratory Ruling, Report and Order, and Order, In the Matter of Restoring Internet Freedom, WC Docket No. 17-108 (Dec. 14, 2017) [hereinafter “2017 Order”].
[15] Mozilla Corp. v. FCC, 940 F.3d 1 (D.C. Cir., 2019)
[16] See, e.g. FCC reinstates net neutrality policies after 6 years, NPR Weekend Edition Saturday (May 4, 2024), available at https://www.npr.org/2024/05/04/1249166941/fcc-reinstates-net-neutrality-policies-after-6-years (noting that “Net neutrality was once the biggest controversy about the internet . . . .” and concluding “I think that net neutrality may be one of the most overhyped regulations on both sides.”).
[17] Eric Fruits, Ben Sperry, & Kristian Stout, ICLE Comments to FCC on Title II NPRM, Int’l Ctr. for L & Econ. (Dec. 14, 2023), https://laweconcenter.org/wp-content/uploads/2023/12/ICLE-Comments-on-2023-FCC-Title-II-NPRM.pdf\.
[18] See, for example, Oral Dissent of Brendan Carr, In the Matter of Safeguarding and Securing the Open Internet; Restoring Internet Freedom, WC Docket No. 23-320, WC Docket No. 17-108 (Apr. 25, 2024), https://youtu.be/W0CFV9DNSLU?si=dmS4MAnSvnEu-P-J (“After 2017 it wasn’t the ISPs that abuse their positions in the internet ecosystem. It was not the ISPs that blocked links to the New York Post’s Hunter Biden laptop story. Twitter did that. It wasn’t the ISPs that just one day after lobbying this FCC on this order, blocked all posts from a newspaper and removed the links to the outlet after it published a critical article. Facebook did that. It wasn’t the ISPs that earlier this month blocked links to a California-based news organization from showing up in search results to protest a state law. Google did that. It wasn’t the ISPs that blocked Beeper Mini, an app that allowed interoperability between iOS and messaging. Apple did that. Since 2017, we have learned that the real abusers of gatekeeper power were not ISPs operating at the physical layer, but big tech companies at the applications layer.”).
[19] Thomas Gryta, FCC Raises Fresh Concerns Over “Zero-Rating” by AT&T, Verizon, Wall St. J. (Dec. 2, 2016), https://www.wsj.com/articles/fcc-raises-fresh-concerns-over-zero-rating-by-at-t-verizon-1480695463.
[20] Policy Review of Mobile Broadband Operators’ Sponsored Data Offerings for Zero-Rated Content and Services (Jan. 11, 2017), https://transition.fcc.gov/Daily_Releases/Daily_Business/2017/db0111/DOC-342987A1.pdf.
[21] Order, In the Matter of Wireless Telecommunications Bureau Report: Policy Review of Mobile Broadband Operators’ Sponsored Data Offerings for Zero Rated Content and Services (Feb. 3, 2017), https://docs.fcc.gov/public/attachments/DA-17-127A1.pdf.
[22] Jon Brodkin, Comcast Disabled Throttling System, Proving Data Cap Is Just a Money Grab, Ars Technica (Jun. 13, 2018), https://arstechnica.com/tech-policy/2018/06/comcast-says-it-doesnt-throttle-heaviest-internet-users-anymore.
[23] Brian C. Albrecht & Jonathan W. Williams, Net Neutrality Is an Idea That Should Have Stayed Dead, Boston Globe (May 6, 2024), https://www.bostonglobe.com/2024/05/06/opinion/net-neutrality-data-caps. See also, Eric Fruits, The Curious Case of the Missing Data Caps Investigation, Truth on the Market (Feb. 5, 2024), https://truthonthemarket.com/2024/02/05/the-curious-case-of-the-missing-data-caps-investigation.
[24] Chairwoman Rosenworcel Proposes to Investigate How Data Caps Affect Consumers and Competition (Jun. 15, 2023), https://docs.fcc.gov/public/attachments/DOC-394416A1.pdf.
[25] Elisa Jillson, Protecting the Privacy of Health Information: A Baker’s Dozen Takeaways from FTC Cases (Jul. 25, 2023), https://www.ftc.gov/business-guidance/blog/2023/07/protecting-privacy-health-information-bakers-dozen-takeaways-ftc-cases.
[26] Notice of Proposed Rulemaking, In the Matter of Safeguarding and Securing the Open Internet, WC Docket No. 23-320 (Sep. 28, 2023), available at https://docs.fcc.gov/public/attachments/DOC-397309A1.pdf.
[27] See Paul Krugman & Robin Wells, Economics 389 (4th ed. 2015) (“So the natural monopolist has increasing returns to scale over the entire range of output for which any firm would want to remain in the industry—the range of output at which the firm would at least break even in the long run. The source of this condition is large fixed costs: when large fixed costs are required to operate, a given quantity of output is produced at lower average total cost by one large firm than by two or more smaller firms.”).
[28] Id. (“The most visible natural monopolies in the modern economy are local utilities—water, gas, and sometimes electricity. As we’ll see, natural monopolies pose a special challenge to public policy.”).
[29] See Richard H. K. Vietor, Contrived Competition 167 (1994) (“[I]n the early part of the twentieth century, American Telephone and Telegraph (AT&T) set itself the goal of providing universal telephone services through an end-to-end national monopoly. … By [the 1960s], however, the distortions of regulatory cross-subsidy had diverged too far from the economics of technological change.”); see also Thomas W. Hazlett, Cable TV Franchises as Barriers to Video Competition, 2 Va. J.L. & Tech. 1, 1 (2007) (“Traditionally, municipal cable TV franchises were advanced as consumer protection to counter “natural monopoly” video providers. … Now, marketplace changes render even this weak traditional case moot. … [V]ideo rivalry has proven viable, with inter-modal competition from satellite TV and local exchange carriers (LECs) offering “triple play” services.”).
[30] See id. at 59-73.
[31] Share of United States Households Using Specific Technologies, Our World in Data (n.d.), https://ourworldindata.org/grapher/technology-adoption-by-households-in-the-united-states.
[32] Id. (showing household usage of landlines and mobile phones in 2018 at 42.7 and 95 percent, respectively).
[33] Edward Carlson, Cutting the Cord: NTIA Data Show Shift to Streaming Video as Consumers Drop Pay-TV, NTIA (2019), https://www.ntia.gov/blog/2019/cutting-cord-ntia-data-show-shift-streaming-video-consumers-drop-pay-tv.
[34] Karl Bode, A New Low: Just 46% of U.S. Households Subscribe to Traditional Cable TV, TechDirt (Sep. 18, 2023), https://www.techdirt.com/2023/09/18/a-new-low-just-46-of-u-s-households-subscribe-to-traditional-cable-tv. See also, Shira Ovide, Cable TV Is the New Landline, N.Y. Times (Jan. 6, 2022), https://www.nytimes.com/2022/01/06/technology/cable-tv.html.
[35] Krugman & Wells, supra note 28 at 360 (“A perfectly competitive industry must produce a standardized product.”), 359 (“a standardized product, which is a product that consumers regard as the same good even when it comes from different producers, sometimes known as a commodity”) [emphasis in original].
[36] Order, In the Matter of Empowering Broadband Consumers Through Transparency, CG Docket No. 22-2 (Jul. 18, 2023), available at https://docs.fcc.gov/public/attachments/DA-23-617A1.pdf.
[37] Pub. L. No. 117-58, § 60506(b)(1), 135 Stat. 429, 1246.
[38] See 47 CFR §16.2 (definition of “Covered entity” and “Covered elements of service”).
[39] Report and Order and Further Notice of Proposed Rulemaking, In the Matter of Implementing the Infrastructure Investment and Jobs Act: Prevention and Elimination of Digital Discrimination, GN Docket No. 22-69 (Oct. 25, 2023), available at https://docs.fcc.gov/public/attachments/DOC-397997A1.pdf (“Indeed, pricing is often the most important term that consumers consider when purchasing goods and services… this is no less true with respect to broadband internet access ser-vices.”).
[40] Eric Fruits, Everyone Discriminates Under the FCC’s Proposed New Rules, Truth on the Market (Oct. 30, 2023), https://truthonthemarket.com/2023/10/30/everyone-discriminates-under-the-fccs-proposed-new-rules.
[41] Internet Essentials, (2024), https://www.xfinity.com/learn/internet-service/internet-essentials.
ICLE White Paper I. Introduction In mid-2021, the International Center for Law & Economics (ICLE) published a white paper on the state of broadband competition in the United . . .
In mid-2021, the International Center for Law & Economics (ICLE) published a white paper on the state of broadband competition in the United States,[1] which concluded that:
Rather than repeat the analysis conducted in the 2021 report, in this report, we investigate the extent to which broadband competition has evolved over the past three years. We find that it has been a rapid evolution:
When the 2021 ICLE white paper was published, the worst of the COVID-19 pandemic appeared to be over, but the virus’ Delta variant was surging.[3] With pandemic precautions keeping people at home to work, go to school, visit health-care providers, or be entertained, broadband access and use was seen by many as a necessity, rather than a luxury. At the time, Congress considered whether to devote significant federal resources toward promoting broadband access in underserved communities. Toward this end, in November 2021, Congress passed the Infrastructure Investment and Jobs Act (IIJA), which includes three key provisions to foster greater broadband access:[4]
These three policies were intended to intertwine in order to foster greater broadband competition. ACP subsidies are intended to boost consumer demand for broadband and generate revenue to support providers’ profitable deployment of broadband investments.[5] BEAD investments are intended to reduce the costs of broadband deployment.[6] The law’s digital-discrimination provisions were intended to prevent discrimination by broadband providers that serves to deny or limit consumers’ access to broadband internet.[7]
Alas, today, we find that each of these provisions faces headwinds. With Congress failing to extend appropriations beyond a May 31 deadline, the ACP has run out of funding.[8] States attempting to implement the BEAD program have complained of tight timelines, restrictive rules, limited coordination, and administrative burdens that may undermine effectiveness.[9] Providers and local jurisdictions report that BEAD’s Buy America rules are particularly onerous.[10] Smaller internet service providers say BEAD’s financial requirements exclude them from projects they would otherwise be able to complete successfully.[11] Complying with Buy America rules regarding attaching equipment to utility poles and railroad crossings also threatens deployment timelines.[12] And, in November 2023, the FCC approved rules to apply a disparate-impact approach toward the IIJA’s digital-discrimination mandate, which could raise constitutional issues over the major questions doctrine.[13]
In addition to these programs, the FCC appears dead set to regulate more stringently much of the broadband-internet industry. First, the agency’s sweeping digital-discrimination rules cover nearly every aspect of the deployment and delivery of internet services and nearly every entity associated—even tangentially—with deployment and delivery.[14] Next, the agency approved Title II common-carrier regulation with its recently adopted Safeguarding and Securing the Open Internet Order.[15],[16]
The current state of broadband competition policy appears to be one of confusion. Some policies foster competition, while others hinder it. Programs such as the ACP and BEAD could do much to encourage competition by simultaneously generating demand for broadband and helping to build out supply. At the same time, these programs—especially BEAD—attempt to micromanage competition with stifling conditions and de facto rate regulation. Similarly, the FCC’s digital-discrimination rules explicitly subject broadband pricing to ex post scrutiny and enforcement. The FCC’s reclassification of broadband internet-access services under Title II of the Communications Act raises the specter of common-carrier rate regulation that will hang over the industry unless either vacated by the courts, or a future administration once again reverses course.
Put simply, broadband competition in the United States is currently robust, innovative, and successful. But this state of vibrant competition is at risk from recent and forthcoming regulations. Without a course correction, we are likely to see slowing or shrinking broadband investment, reduced innovation, and the exit of small and rural providers.
By all relevant measures, U.S. broadband competition is vibrant and has increased dramatically since the COVID-19 pandemic. Since 2021, more households are connected to the internet, broadband speeds have increased, prices have fallen, more households are served by more than a single provider, and new technologies like satellite and 5G have expanded internet access and intermodal competition among providers.
By any reasonable measure today’s U.S. broadband market is an incredible success. Nearly the entire country has access to at-home internet, a vast majority has access to high-speed internet, and much of the country has access to these speeds from three or more providers. Nevertheless, criticisms of the current state of broadband deployment claim that too few Americans have affordable access to adequate broadband speed and capacity and that this, in turn, is the result of insufficient competition among broadband providers.[17] For example, in her speech announcing the FCC’s most recent process to regulate internet services under Title II, Chair Rosenworcel claimed that 80% of the country faces a monopoly or duopoly for download speeds of 100 Mbps or greater.[18] These claims are belied by widespread broadband adoption and competitive markets.
SOURCE: U.S. Census Bureau, American Community Survey
The U.S. Census Bureau’s American Community Survey reports that 97.6% of households have access to at-home internet and 92.6% use the internet at home (Figure 1).[19] While a large majority with at-home internet get it through a broadband subscription, a substantial minority access the internet from their mobile wireless providers. A small number (2.3%) claim they can access the internet at home without paying for a subscription. This likely includes multi-family units, as well as student and senior housing in which broadband access is included in the rent. Among the 7.4% who do not use an at-home internet connection, two-thirds indicate that internet access is available, but they have chosen not to adopt it.[20]
In 2021, approximately 97 percent of 3- to 18-year-olds had home internet access, according to the National Center for Education Statistics. This represents a five-percentage-point increase since 2016.[21]
Until March 2024, the FCC defined high-speed broadband as internet service that offered speeds of at least 25/3 Mbps.[22] The IIJA defines a location as “unserved” if it has no internet connection available or only has a connection offering speeds of less than 25/3 Mbps.[23] A location is considered “underserved” if the only options available offer speeds of less than 100/20 Mbps.[24]
As shown in Figure 2, smaller households with relatively simple needs can generally access the internet productively with download speeds of less than 100 Mbps, or even 25 Mbps. The third iteration of the National Broadband Map, released in November 2023, indicated:[25]
SOURCE: Allconnect, ‘Everything You Need to Know;’ FCC, ‘Fixed Broadband Deployment’
SOURCE: HighSpeedInternet.com, ‘What Type of Internet Do You Have?’
The FCC reports that more than 90% of U.S. households have access to speeds of 100 Mbps or greater, and nearly 90% have access to 1 Gbps or greater (Table 1).[26] Fewer than 4% of U.S. households lack access to at least 30 Mbps download speeds via fixed broadband.
SOURCE: FCC, ‘International Broadband Data Report’[27]
Some note that, while high-speed connections are available across nearly the entire country, in many cases, only a single provider offers such speeds. This, such critics assert, suggests insufficient competition among providers of high-speed internet. For example, regarding 100 Mbps service, FCC Chair Rosenworcel claimed that “only half of us can get it from more than a single provider. Only one-fifth of the country has more than two choices at this speed.”[28]
This provides a misleading sense of the rate of high-speed broadband deployment and the scope of availability. The most recent information from the FCC on broadband deployment across the United States suggests that 90% of the population in 2021 was served by one or more providers offering 250/25 Mbps or higher speeds (Table 2).[29] That is more than double the population share five years earlier, when only 44% of the population had access to such speeds.[30] In 2019, the FCC did not report the share of population with access to 1,000/100 Mbps speeds or greater. By 2021, 28% of the population had access to gigabit download speeds.[31]
Moreover, Table 2 shows that, in 2021, more than 85% of the population was covered by two or more fixed-broadband providers offering 25/3 Mbps or greater speeds, and more than 60% of the country was covered by three or more providers providing such speeds. Moreover, if satellite and 5G providers are included, close to 100% of the country is served by two or more high-speed providers.
SOURCE: FCC, ‘Fixed Broadband Deployment’
At the same time, the evidence indicates that broadband competition has increased over time, as measured by the number of competing high-speed providers (Figure 4).[32]
SOURCE: FCC, ‘2022 Communications Marketplace Report’
Additionally, intermodal competition among providers is only improving. Starlink satellite service has been made available to all locations in the United States.[33] Starlink’s reported speeds are between 25/5 Mbps and 220/25 Mbps.[34] And Project Kuiper has successfully launched its first test satellites,[35] with commercial service expected to begin in the second half of 2024.[36]
After accounting for speed and data usage, the United States has some of the lowest broadband prices in the world. Even so, critics of the current state of U.S. broadband competition claim that U.S. prices are among the highest in the developed world because, they claim, the U.S. market is not as competitive as other jurisdictions. For example, the Community Tech Network asks rhetorically, “[s]o why does the internet cost so much more in the U.S. than in other countries? One possible answer is the lack of competition.”[37] Their article included a graphic in which U.S. internet service is described as “expensive and slow” while Australia is categorized as “fast and cheap.” Yet none of these claims hold up under scrutiny, such as adjusting for consumption and download speeds.
It’s true the United States has the third-highest average monthly broadband costs among OECD countries, according to Cable.co.uk (Figure 5). Australia, however, has the seventh-highest.[38] On a cost-per-megabit basis, Australia has the second-highest costs in the OECD, while the United States is in the bottom third of the distribution (Figure 6).[39] Speedtest’s Global Index of median speeds reports that the United States has the second-fastest median speed, and Australia the third-slowest median speed, among OECD countries (Figure 7).[40]
SOURCE: Cable.co.uk, ‘Global Broadband Pricing League Table 2023’
SOURCE: Speedtest, Global Index
Cross-country comparisons of broadband pricing are especially fraught, due to country-by-country variations in factors that drive the costs of delivering broadband and the prices paid by consumers.[41] Deployment costs are driven largely by population density and terrain, as well as each country’s unique regulatory and tax policies.[42] Consumer choices often drive the prices paid by subscribers. These include choices regarding the mix of fixed broadband and mobile, speed preferences, and data consumption.[43]
For example, Figure 8 demonstrates a clear relationship between the average monthly cost for broadband and the monthly cost per megabit; a higher monthly cost tends to be associated with a higher cost per megabit. But there are outliers. The United States is well below the trendline, but Canada is well above it. While the average monthly cost in the two countries is similar, the information provided by Cable.co.uk suggests that U.S. consumers use 9-10 times more megabits per month than Canadian consumers. In addition, as shown in Figure 7, the median U.S. download speed is about 35% faster than the median in Canada.
SOURCE: Cable.co.uk, ‘Global Broadband Pricing League Table 2023’; Speedtest, Global Index
A broadband-pricing index published annually by USTelecom reports that inflation-adjusted broadband prices for the most popular speed tiers fell by 54.7% from 2015 to 2023, or 5.6% annually.[44] Prices for the highest speed tiers fell by 55.8% over the same period. The Producer Price Index for residential internet-access services fell by 11.2% from 2015 through July 2023.[45] The median fixed-broadband connection in the United States delivers more than 207 Mbps download service, an 80% increase over pre-pandemic median speeds (Figure 10).[46]
SOURCE: Speedtest, Global Index (July of each year)
Evidence from large surveys suggests that price is not a dominant factor driving adoption for the currently unconnected. For example, among the 7% of households who do not use the internet at home, more than half of Current Population Survey respondents indicated that they “don’t need it or [are] not interested.”[47] About one-third of respondents indicated that price is a factor, with responses such as “can’t afford it” or “not worth the cost.”[48]
Of course, cost and interest are not mutually exclusive factors.[49] A common response to CPS surveys among those who do not subscribe to internet service is that it is “not worth the cost.” This is an unhelpful response to guide policymakers because it doesn’t answer whether the cost is “too high,” the value is “too low,” or a combination of both. Another common response is “not interested.” This, too, is unhelpful, as it does not identify the price at which a potential consumer might become interested, if such a price exists. For example, surveys suggest that some nonadopters may become interested in subscribing to internet services or find it worth the cost at a price of zero.
In addition, as shown in Figure 1, about a quarter of households without a broadband or smartphone subscription claim that they can access the internet at home without paying for a subscription.
Jamie Greig & Hannah Nelson note that low-income households are more likely to use smartphones than computers for internet access.[52] According to Pew Research, 19% of adults who do not have at-home broadband report that their smartphone does everything they need to do online.[53] Colin Rhinesmith et al. summarize the response of a Detroit focus group participant: “[I]f he had to choose between home access and mobile access, the latter is more desirable as it allows him to be reachable and flexible for job interviews and the like”[54]
When the FCC issued the Open Internet Order (OIO) in 2015 to reclassify broadband internet-access service under Title II, opponents claimed the policy would diminish broadband investment. Similarly, when the FCC repealed the reclassification in 2018, opponents claimed the repeal would diminish broadband investment. While U.S. broadband capital expenditures have been relatively stable for the past two decades, there was a noticeable drop in the wake of the 2015 OIO (Figure 11).[55]
SOURCE: USTelecom
Recent peer-reviewed econometric research from economist Wolfgang Briglauer and his coauthors—indicates that net-neutrality rules do, in fact, slow broadband investment, as measured by the number of fiber connections deployed.[56] The study analyzed 2000-2021 data across OECD countries. Thus, it includes both 2015’s imposition of Title II regulations in the United States and the 2017 repeal. It found that introducing net-neutrality rules was associated with a 22-25% decrease in fiber investments.
Briglauer’s study isolated the effects of net neutrality from other factors that might have affected investment, such as general economic conditions. It focused on new fiber connections as representing growth in network capacity, rather than short-term fluctuations in spending. Even controlling for other variables, net neutrality had an independent negative relationship with fiber deployments.
ICLE’s 2021 white paper argued that broadband markets are dynamic and characterized by ongoing innovation in technologies and business models. Investment and innovation do not solely come from new entrants, as incumbents often are important sources of innovation while they try to stay competitive and avoid disruption. In this way, providers compete through new product introductions and disruption, not just on price. Because of these dynamics, mergers and increased concentration can sometimes be associated with increased investment, in that they may allow firms to achieve greater economies of scale and scope.[57] In addition, firms make long-term investments to upgrade networks and deploy new technologies even amid just a few competitors.[58]
Since ICLE’s white paper, Kenneth Flamm & Pablo Varas published research examining the relationship between the change in a territory’s number of providers and changes in service-plan quality (e.g., upload and download speeds).[59] They examine Census blocks that were served by only two “legacy” broadband providers in 2014, which they define as cable and digital subscriber line (DSL) providers. Their study tracked entry and exit of providers in these blocks through 2018, and evaluated the change in maximum download speeds available in those blocks over time. They find that blocks with no entry or exit (what they call “unchanged duopoly”) experienced an increase of 750 Mbps in maximum download speeds (Figure 12). Blocks that transitioned from duopoly to monopoly experienced a relatively modest 430 Mbps increase, while blocks that transitioned from two to three providers experienced an 810 Mbps increase. Blocks that transitioned from three to four providers experienced an 854 Mbps increase.
They also noted that internet providers may be highly motivated to introduce new, higher-quality speed tiers as technology improves. These results comport with research summarized in the 2021 ICLE white paper, which found the most significant incremental benefits in broadband quality came from adding a second service provider (relative to monopoly), with some marginal benefit from adding a third provider, and a much smaller benefit from adding a fourth.
SOURCE: Flamm & Varas (2022)
Another recent study is Andrew Kearns’ analysis of the Seattle market.[60] In contrast to Flamm & Varas, Kearns concluded that competition among broadband providers might weaken the incentive to increase quality, which he measured as a provider upgrading a Census block to fiber. He argued that improvements in quality often require significant investment, and the returns on this investment may be uncertain in a competitive market. Thus, in a competitive market, providers may prioritize attracting customers with lower prices and a wider range of product options, rather than investing in improvements to the quality of their service. Even so, Kearns concluded that increased competition offers substantial benefits to consumers related to increased product choice and lower prices.
The latest published research supports ICLE’s earlier observation that whether adding or removing a competitor is associated with more or less investment depends greatly on various factors, including the market’s initial conditions.[61] Thus, a case can be made that competition (as judged by counting the number of competitors in a market) may be, in and of itself, of only lesser importance relative to other factors that guide investment decisions, such as population density, terrain, and demand, as well as the local regulatory and tax environment.[62]
Broadband internet has become a service that many Americans—and U.S. policymakers—consider essential. But new and forthcoming regulations imposed in an effort to promote equal access to broadband may actually risk dampening innovation and investment in this critical sector. In this section, we discuss the Affordable Connectivity Program and Broadband Equity, Access, and Deployment subsidy programs, which could foster broadband competition by stimulating both demand and supply. Even so, administration of both of these programs have erected significant hurdles that may damage their effectiveness if not remedied by Congress or the regulatory agencies.
We also discuss other programs that are likely to reduce broadband competition by diminishing the incentives to invest and innovate. Though motivated by a desire to prevent discriminatory access, rigid rules to correct “disparate impact” in broadband-deployment decisions fail to account for the dynamic efficiencies of differentiated service models calibrated to consumer demand. At the same time, attempts to impose common-carrier obligations on broadband providers ignore the truly competitive nature of modern broadband markets, which are thriving under light-touch regulation.
Going forward, policymakers should resist the temptation to micromanage a sector as dynamic as U.S. broadband internet. Instead, they should focus their attention on interventions to address genuinely unfair or anticompetitive conduct, while trusting that innovation and investment will be maximized when companies retain the flexibility to respond to consumer demand, while constrained by economic and technical realities.
The ACP is a federal subsidy program that provides eligible low-income households with monthly broadband-service discounts of up to $30, or up to $75 for households on tribal lands.[63] It also provides a one-time $100 discount for the purchase of a computer or tablet. ICLE has argued that well-designed subsidies targeted to underserved consumers can be an effective way to increase broadband deployment and adoption.[64] Subsidies help make providing service in high-cost, low-density areas more financially viable for providers. They also make broadband more affordable for lower-income consumers, stimulating demand.[65]
Proponents of the ACP identify two main goals for the program:
Through the ACP, the federal government absorbs part of the cost of providing broadband service to these households, making them more financially attractive customers for broadband providers. The program also creates an incentive for providers to expand their networks to reach eligible households, as they can now potentially recover more revenue from serving those users.[67] For example, if ACP subsidies stimulate consumer demand, providers may find it profitable to deploy broadband to areas that would not otherwise generate a sufficient return on investment to justify deployment. In some cases, a new provider might be able to offer services to a market currently served by a single incumbent firm.
To date, however, the ACP and its predecessors do not appear to have been as successful in increasing at-home internet adoption by unconnected households as was hoped when such programs were created. Due to what appears to be inelastic demand, ACP has faced difficulties in stimulating sufficient interest among the 5% of unconnected households who could access the internet, but fail to take up service.[68] These households may not be aware of the program or may lack digital literacy; may be able to access the internet without a subscription; or may have no interest in subscribing to an internet service at any price.
On the other hand, the ACP’s subsidies appear to have successfully enabled already-subscribed households to maintain at-home internet service through the COVID-19 pandemic, thereby proving effective in enabling economically vulnerable inframarginal consumers to remain connected. More than 23 million U.S. households (about 17%) were enrolled in the ACP before the program lapsed at the end of May 2024.[69] It is currently unknown how many of these households will unsubscribe now that ACP subsidies are unavailable. In turn, it’s also unknown how providers will respond should large number of households unsubscribe from their internet services.
In March 2024, the FCC announced that April 2024 would be the program’s last fully funded month, with partial subsidies through May 2024.[70] Without ACP subsidies, one expects some households will unsubscribe from internet service, and the decreased demand may even lead to consolidation in some markets through exits or mergers. Moreover, Congress’ failure to renew the ACP risks other long-term policy responses that could waste already-invested funds.
In the face of another economic downturn, the inframarginal households that unadopt internet service will likely spur future rounds of congressional appropriations to bring these households back online. This turmoil, meanwhile, stands to erode providers’ investment incentives, due to lack of demand. This threatens to create a vicious cycle that requires periodic reinvestment from Congress just to stand these programs back up. Over the long term, it would almost certainly be more efficient to extend and focus the ACP program to ensure that truly needy households receive the subsidy (including those that would otherwise unadopt), rather than construing the program as strictly focused on convincing the last 5% of households with inelastic demand to adopt.
In 2023, the NTIA awarded more than $42 billion in grants to state governments under the Broadband Equity, Access, and Deployment (BEAD) program,[71] whose primary purpose is to expand high-speed internet access in areas that currently lack it.[72] Congress focused the BEAD program on connecting “unserved” and “underserved” territories. The law requires that those areas lacking connections with speeds of at least 100/20 Mbps must be helped first before addressing other priorities, such as upgrades, adoption programs, and middle-mile infrastructure.[73] Funding is distributed directly to states, which are required to develop plans tailored to connect their unserved and underserved locations.[74]
But much of that congressional intent got muddled in the NTIA’s implementation of BEAD funding. The NTIA’s notice of funding opportunity (“NOFO”) introduced conflicting priorities beyond connecting the unserved. These additional priorities include “middle-class affordability” requirements, the provision of “low cost” plans, and a ban on data caps.[75] The NOFO also gave clear preference to fiber networks over wireless and satellite providers, and to governmental and municipal providers over private companies.[76]
The NTIA’s NOFO prompted each participating U.S. state or territory to include a “middle-class affordability plan to ensure that all consumers have access to affordable high-speed internet” (emphasis in original).[77] The notice provided several examples of how this could be achieved, including:
Despite the IIJA’s explicit prohibition of price regulation, the NTIA’s approval process appears to envision exactly this. The first example provided above is clear rate regulation. It specifies a price (“low-cost”); a quantity (“all middle-class households”); and imposes a quality mandate (“high-speed”). Toward these ends, the notice provides an example of a “low-cost” plan that would be acceptable to NTIA:
A policy bulletin published by the Phoenix Center for Advanced Legal & Economic Public Policy Studies notes that the NTIA did not conclude that broadband was unaffordable for middle-class households.[79] George Ford, the bulletin’s author, collected data on broadband adoption by income level. The data indicate that, in general, internet-adoption rates increase with higher income levels (Figure 12). Higher-income households have higher adoption rates (97.3%) than middle-income households (92.9%), which in turn have higher adoption rates than lower-income households (78.1%).
SOURCE: Adapted from Ford (2022), Table 2 and Figure 2.
For each of the 50 states and the District of Columbia, the Phoenix bulletin finds that middle-income internet-adoption rates are, to a statistically significant degree, higher than lower-income adoption. Thus, the Phoenix bulletin concludes that broadband currently is “affordable” to middle-class households and that “no direct intervention is required” to ensure affordability to the middle class.[80]
John Mayo, Greg Rosston, & Scott Wallsten point out that BEAD’s key purpose of providing high-speed internet access to locations that lack it (presumably because it’s too expensive to deploy to these areas without investment subsidies) conflicts with NTIA’s focus on affordability:
A substantial portion of the unserved and underserved areas of the country that are the likely targets of the BEAD program, however, are rural, low-population density areas where deployment costs will be high. These high deployment costs may seem to indicate that even “cost-based” rates—normally seen as an attractive competitive benchmark—may be high, violating the IIJA’s “affordability” standard.[81]
The only effective way to simultaneously reduce broadband prices, increase access, and improve quality is to increase supply. But the NTIA’s attempts at rate regulation work at cross-purposes with BEAD’s objective to increase supply. Therefore, attempts to use BEAD funding to impose price controls may act to reduce broadband competition, rather than preserve or increase it.
The potential harm to competition is worsened by NTIA’s preference for government or municipal providers over private providers, which we discuss in more detail in Section III.G. The NTIA’s funding notice required states to ensure the participation of “non-traditional broadband providers,” such as municipalities and cooperatives. Municipal broadband networks might make sense in some rare cases where private providers are unable to deploy, but such systems have generally mired taxpayers in expensive projects that failed to deliver on promises.
In addition to these challenges, BEAD applications must come with a letter of credit issued by a qualified bank for 25% of the grant amount.[82] This is a guarantee to the grant administrator (e.g., a state broadband office) that there is liquid cash in an account that it can claw back should the applicant not deliver on their grant requirements. To receive a letter of credit, applicants will be required by the issuing bank to provide collateral—which could be cash or cash equivalents equal to the full value of the letter of credit. The letter-of-credit requirement is separate and in addition to BEAD’s match requirement, which demands that applicants contribute a minimum 25% of the total build cost. The letter-of-credit and matching requirements may hinder competition by favoring large and well-capitalized providers over smaller internet-service providers (ISPs) that may be better positioned to serve rural areas.
In November 2023, NTIA released a waiver for the letter-of-credit requirement because of industry concerns about how the rule may prevent smaller ISPs from participating in the BEAD program.[83] The “programmatic waiver” describes several alternatives to the letter of credit. For example, subgrantees can obtain the letter of credit from a credit union instead of a bank. The expectation is that credit unions would offer lower interest rates for loans and lower fees. Alternatively, applicants can provide a performance bond “equal to 100% of the BEAD subaward amount.” In addition, the NTIA is allowing states and territories to reduce the percentage requirement of the performance bond or letter of credit over time, as service providers meet certain project milestones.
Congress set an ambitious goal with BEAD: To expand high-speed internet access in areas that currently lack it. The $42 billion appropriated for the program could have been used to deploy broadband to underserved areas and to foster broadband implementation. However, NTIA’s implementation of the program appears designed to dampen private investment and stifle competition among broadband, wireless, and satellite providers.
One of the most problematic new regulations to hit the broadband sector is the FCC’s digital-discrimination rules. While well-intentioned, these rules are virtually certain to curtail broadband investment and adoption. In late 2023, the FCC adopted final rules facilitating equal access to broadband internet under Section 60506 of the IIJA.[84] The statutory text directs the FCC to prevent discrimination in broadband access based on income level, race, ethnicity, color, religion, or national origin, while also directing the commission to consider issues of technical and economic feasibility.
The rules prohibit digital discrimination of access, which is defined as policies or practices that differentially affect or are intended to differentially affect consumers’ access to broadband internet-access service based on their income level, race, ethnicity, color, religion or national origin, unless justified by genuine issues of technical or economic feasibility.[85] The are two key provisions that will disrupt broadband competition, namely:
The rules apply to entities that provide, facilitate, and/or affect consumer access to broadband internet-access service. This includes typical broadband providers, as well as entities that “affect consumer access to broadband internet access service.”[86] Under this broad definition, local governments, nonprofits, and even apartment-building owners all may be subject to the FCC’s digital-discrimination rules.
The rules also revise the commission’s informal consumer-complaint process to accept complaints of digital discrimination of access, and to authorize the commission to initiate investigations and impose penalties and remedies for violations of the rules.[87]
The FCC also proposed additional rules that would require providers to submit annual reports on their major deployment, upgrade, and maintenance projects, and to establish and maintain internal compliance programs to assess whether their policies and practices advance or impede equal access to broadband internet-access service within their service areas.[88] In essence, these proposed rules would require providers to prepare their own disparate-impact analysis every year.
Because of the expansive definition of covered entities and services subject to the digital-discrimination rules, providers will face legal uncertainty and litigation risks.[89] The most obvious of these involve the likelihood of complaints or investigations based on allegations of disparate impact, which may be difficult to disprove. Comments to the FCC from the U.S. Chamber of Commerce highlight these concerns:[90]
These policies would render it impossible for businesses and the marketplace to make rational investment decisions. The scope of the services that the Draft covers is so broad that it does not provide meaningful guidance for how to comply. And because the Draft fails to grant sufficient guidance, it does not give fair notice of how to avoid liability. Consequently, investment in broadband innovation would disappear and consumers would have to pay higher costs for less efficient services.
The digital-discrimination rules also may discourage innovation and differentiation in broadband service offerings, as providers could avoid service offerings that may be perceived as discriminatory or having a differential impact on certain consumers or communities. Providers could also be reluctant to invest in new technologies or platforms that, while improving broadband service quality or availability, might also create disparities in service characteristics among consumers or areas. As FCC Commissioner Brendan Carr has noted:[91]
Another telling last minute addition is a new advisory opinion process. This is the very definition of swapping out permissionless innovation for a mother-may-I pre-approval process. What’s more? The FCC undermines whatever value that type of process could provide because, to the extent the FCC does—at some point in the future—authorize your conduct, the Order says that the agency reserves the right to rescind an advisory opinion at any time and on a moment’s notice. At that time, the covered provider “must promptly discontinue” the practice or policy. That does not provide the confidence necessary to invest and innovate.
Private, public, and nonprofit entities may even face allegations of intentional discrimination for policies and practices designed to increase internet adoption and use by protected groups. In particular, programs intended to increase broadband adoption among low-income and price-sensitive consumers could run afoul of the digital-discrimination rules. George Ford provides an example of such a program:[92]
For example, Cox Communications offers 100 Mbps broadband service for $49.99 per month, but ACP eligible households can get the same service for $30 per month. Higher-income households may not avail themselves of the discounted price.
In Tennessee, Hamilton County Schools’ EdConnect program offers free high-speed internet access to eligible students, where eligibility is based on income level—i.e., students who receive free or reduced-cost lunch, attend any school where every student receives free or reduced-cost lunch, or whose family participates in the Supplemental Nutrition Assistance Program (SNAP) or other economic-assistance programs.[93] Both the school district and the nonprofit that runs the program would also be covered entities. The fact that the price (free) is available only to those of a certain income level is explicit, intentional discrimination.
The FCC’s digital-discrimination rules will almost surely increase the regulatory burden and compliance costs for providers. Small and rural providers may be disproportionately burdened, as these providers tend to have more limited resources and face technical and economic challenges in deploying and maintaining broadband networks in unserved and underserved areas. The FCC’s proposal that broadband providers submit an annual report on their substantial broadband projects could likewise give larger providers an advantage, as they are more likely to have the resources to comply with this requirement. For example, the Wireless Internet Service Providers Association commented to the FCC:[94]
Annual reporting and record retention rules and the requirement to adopt and certify to the existence and compliance with an internal digital discrimination compliance plan would impose significant burdens on broadband providers, especially smaller providers that may not track investment data and lack the resources to develop a compliance program with ongoing obligations. The burdens are overly egregious given that smaller providers do not have any record of engaging in digital discrimination.
Further complicating the evaluation of digital-discrimination claims based on income is that, not only is income a key factor influencing whether a given consumer will adopt broadband, but it is also highly correlated with race, ethnicity, national origin, age, education level, and home-computer ownership and usage. The FCC’s digital-discrimination rules fail to recognize this “income conundrum” and will invite costly and time-consuming litigation based on allegations of digital discrimination either where it does not exist or where it is excused by economic-feasibility considerations. Moreover, by specifying pricing as an area subject to digital-discrimination scrutiny, the FCC’s rules allow for ex-post regulation of rates, prompting Commissioner Carr to characterize the agency’s digital-discrimination rules and Title II rules as “fraternal twins.”[95]
In 2015, the FCC issued the Open Internet Order (OIO), which reclassified broadband internet-access service as a telecommunications service subject to Title II of the Communications Act. Proponents of the OIO contend that the Title II classification was necessary to ensure net neutrality—that is, that internet service providers (ISP) would treat all internet traffic equally. In 2018, the Title II classification was repealed by the FCC’s Restoring Internet Freedom Order (RIFO).
One month after ICLE’s white paper was published in 2021, President Joe Biden issued an executive order that “encouraged” the FCC to “[r]estore Net Neutrality rules undone by the prior administration.” Last year, Anna Gomez was confirmed as an FCC commissioner, providing the commission a 3-2 Democratic majority. One day after her confirmation, FCC Chair Rosenworcel announced the agency’s proposal to reimpose Title II regulation on internet services. Soon thereafter, the FCC issued its “Notice of Proposed Rulemaking for the Safeguarding and Securing the Open Internet Order,” which would again reclassify broadband under Title II.[96] On April 25, 2024, the commission approved the order on a 3-2 party-line vote.[97]
While the FCC provides several reasons for reclassifying broadband, most of the justifications are built on the same underlying premise: That broadband is an essential public utility and should be regulated as such. Of course, many other essentials—shelter, food, clothing—are provided by various suppliers in competitive markets. Utilities are considered distinct because they tend to have significant economies of scale such that:
Under this definition, water, sewer, electricity, and natural gas constitute examples typically cited as “natural” monopolies.[99] In some cases, not only are these industries treated as regulated monopolies, but their monopoly status is solidified by laws forbidding competition.
At one time, local and long-distance telephone services were similarly treated as natural monopolies, as was cable television.[100] Various innovations eroded the “natural” monopolies in telephone and cable service over time.[101] As of the year 2000, 94% of U.S. households had a landline telephone, while only 42% had a mobile phone.[102] By 2018, those numbers flipped. In 2015, 73% of households subscribed to cable or satellite television service.[103] Today, fewer than half of U.S. households subscribe.[104] Much of that transition has been due to the enormous improvements in broadband speed, reliability, and affordability discussed in Section II. Similarly, innovations in 5G, fixed wireless, and satellite are eroding the already-tenuous claims that broadband internet service is akin to a utility.
The FCC’s latest reclassification of broadband under Title II prohibits blocking, throttling, or engaging in paid or affiliated prioritization arrangements.[105] In addition, it imposes “a general conduct standard that would prohibit unreasonable interference or unreasonable disadvantage to consumers or edge providers.” Under the OIO, the FCC invoked the general conduct standard to scrutinize providers’ “zero rating” programs.[106] Although Title II regulation explicitly allows for rate regulation of covered entities, the 2024 order forebears rate regulation.[107]
Critics of Title II regulation have argued that some of the conduct prohibited under the FCC’s proposal may be pro-competitive practices that benefit consumers. For example, Hyun Ji Lee & Brian Whitacre found that low-income consumers were willing to pay for an extra GB of data each month, but were not willing to pay extra for a higher speed.[108] This data-speed tradeoff suggests those consumers would benefit from a plan that offered a larger data allowance, but throttled speeds if the allowance is exceeded. In 2014 comments to the FCC, ICLE and TechFreedom described a pro-competitive benefit of paid prioritization:[109]
Prioritization at least requires content providers to respond to incentives—to take congestion into account instead of using up a common resource without regard to cost. It also allows the gaming company to buy better service, which isn’t an option at all with neutrality, under which it just has to suffer congestion. The truth is that, if the game developer can’t afford to pay for clear access, then it may have a bad business model if it is built on an expectation that it will have unfettered, free access to a scarce, contestable resource.
Aside from the likely pro-competitive effects of the conduct the FCC seeks to prohibit, in the face of robust competition, consumers can readily switch away from providers who charge anticompetitive prices or impose harmful terms and conditions. In its 2019 Mozilla decision, the U.S. Circuit Court of Appeals for the D.C. Circuit concluded:[110]
[M]any customers can access edge provider’s content from multiple sources (i.e., fixed and mobile). In this way, there is no terminating monopoly. Additionally, the Commission argued that even if a terminating monopoly exists for some edge providers the commenters did not offer sufficient evidence in the record to demonstrate that the resulting prices will be inefficient. Given these reasons, we reject Petitioners’ claim that the Commission’s conclusion on terminating monopolies is without explanation.
In addition, the court noted:[111]
More importantly, the Commission contends that low churn rates do not per se indicate market power. Instead, they could be a function of competitive actions taken by broadband providers to attract and retain customers. And such action to convince customers to switch providers, the Commission argues, is indicia of material competition for new customers.
Regardless of the FCC’s intent in imposing Title II regulation, the effect will be a stifling of innovation in the delivery and pricing of broadband-internet service. In tandem with the agency’s digital-discrimination rules, the proposed “net neutrality” rules attempt to transition broadband to a commodity service with little differentiation between providers. In so doing, the FCC is eliminating, piece-by-piece, the dimensions among which broadband providers compete, resulting in both higher prices for consumers and lower returns for providers. Rather than a “virtuous cycle” of growth and innovation, the U.S. broadband market may instead experience a “doom loop” of stagnant internet adoption, depressed investment in deployment, and diminished broadband competition.
Rate regulation—any mechanism whereby government intervenes in the pricing process—has long been a contentious issue in the realm of broadband services.[112] Historically, the FCC has been deeply involved in rate regulation, tasked with ensuring fair rates, reliable service, and universal access to telecommunications since 1934.[113] As the telecommunications landscape has evolved, however, so too has the FCC’s approach, increasingly moving toward deregulatory approaches. That is, until recently.[114] Unfortunately, there are multiple ways that rates can be regulated, and—despite public disavowals—policymakers already appear to be implementing some forms of rate regulation on broadband providers.
Explicit rate regulation manifests primarily in two forms: price ceilings and floors.[115] Price ceilings limit the maximum price that can be charged, a common example being rent control. Price floors, on the other hand, set a minimum price, akin to minimum wage laws. Each of these forms impacts the broadband sector differently, potentially altering market dynamics and influencing consumer access and provider revenues.[116]
Policymakers can also resort to less-obvious means of regulating prices—de-facto rate regulation—such as rent stabilization or inflation-linked wage increases, which control the rate of price changes rather than the prices themselves.[117] Moreover, as discussed further infra, price controls are sometimes introduced laterally as requirements to participate in various federal programs, with the effect remaining that government agents assume broad control over prices. Still other regulations may not explicitly regulate rates, but act in much the same way as direct rate regulation, as explained by Jonathan Nuechterlein and Howard Shelanski:[118]
Finally, but no less important, the line between “price” and “non-price” regulation is thin, and regulatory obligations can amount to rate regulation even when regulators do not perceive themselves as setting rates at either the retail or wholesale level.
The FCC’s 2015 OIO, while explicitly eschewing rate regulation, indirectly influenced pricing strategies in the broadband market.[119] By imposing common-carriage obligations, the OIO impacted how ISPs invested and priced their services. In this respect, the FCC’s 2024 rules are identical to the 2015 rules. But this time, Title II regulation will work hand-in-hand with the agency’s digital-discrimination rules. While the proposed common-carrier rules explicitly eschew ex-ante rate regulation through forbearance, the digital-discrimination rules explicitly subject pricing policies and practices to ex-post discrimination scrutiny.
In some ways, the FCC may be imposing among the worst of possible rate-regulation regimes. Under an ex-ante approach to rate regulation, providers have—at a minimum—a framework to form their expectations about whether and how rates will be regulated. As discussed in Section III.C, however, under the ex-post approach that the FCC has adopted in its digital-discrimination rules, providers and any other “covered entity” lack any meaningful framework regarding how the agency may regulate rates or how to avoid liability.
Specifically, the FCC’s Digital Discrimination Order states:
The Commission need not prescribe prices for broadband internet access service, as some commenters have cautioned against, in order to determine whether prices are “comparable” within the meaning of the equal access definition. The record reflects support for the Commission ensuring pricing consistency as between different groups of consumers. We also find that the Commission is well situated to analyze comparability in pricing, as we must already do so in other contexts.[120]
While assessing the comparability of prices is not explicit rate regulation, a policy that holds entities liable for those disparities, such that an ISP must adjust its prices until it matches the FCC definitions of “comparable” and “consistency,” is tantamount to setting that rate.[121]
In addition to the FCC digital-discrimination and Title II rules, recent developments in broadband policy have introduced other forms of de-facto rate regulation. The BEAD program itself mandates a “low-cost” option be made available to recipients of the Affordable Connectivity Program by providers that receive a BEAD grant.[122] The NTIA’s NOFO for the BEAD program further mandates that participating states include an affordability plan that ensures access to affordable high-speed internet for all middle-class consumers.[123] This initiative might require providers to offer low-cost plans or to provide consumer subsidies. Similarly, the U.S. Department of Agriculture’s (USDA) ReConnect Loan and Grant Program awards funding preferences to applicants that adhere to net-neutrality rules and offer “affordable” options.[124] New York’s Affordable Broadband Act is another example of broadband rules that mandate ISPs provide low-cost internet-access plans to qualifying low-income households.[125]
Rate regulation, de facto or otherwise, has a major effect on providers’ ability to enter new markets and to improve service in those markets in which they already operate. Rate regulations lead to market distortions. By capping prices below the market rate, such regulations can increase demand without a corresponding increase in supply, potentially leading to shortages and discouraging providers from making output-improving investments.[126] For broadband providers, this can translate into reduced investment in network expansion and quality improvement, particularly in less profitable or more challenging areas. Moreover, binding rate regulations can lower the returns on investment, thereby discouraging deployments and slowing overall broadband expansion. Quality and service also may suffer under rate regulation. A regulated provider, constrained by price ceilings, cannot fully reap the benefits of service-quality improvements, leading to a reduced incentive to enhance that service quality.[127]
The importance of pole attachments cannot be overstated in the context of expanding broadband connectivity, even if utility-pole issues often fly under the radar. This is particularly true due to their implications for competition in the relevant local broadband markets. Access to physical infrastructure is critical, and where providers cannot readily access this physical infrastructure, it can delay deployment or make it more costly.
The FCC has recognized the crucial role of pole attachments in a pending proceeding that seeks to address inefficiencies in access to pole attachments that lead to cost overruns and delays in deployment.[128] In December 2023, in an effort to expedite broadband deployment, the commission adopted several important pole-attachment reform measures.[129] These included introducing a streamlined process to resolve utility-pole attachment disputes, which could be pivotal to hasten broadband rollouts, especially in underserved areas.[130] The FCC also mandated that utilities provide comprehensive pole-inspection information to broadband attachers, which is expected to facilitate more informed planning and to reduce delays.[131] The commission has also refined its procedural rules to foster quicker resolutions through mediation and expedited adjudication via the Accelerated Docket.[132]
The FCC is on the right track: ensuring timely access to pole infrastructure is crucial to ensure that broadband markets remain competitive, and that the substantial investments in broadband infrastructure directed by programs like BEAD yield the intended benefits.
The goal of pole-attachment rules should be to equitably assess costs in ways that avoid inefficient rent extraction and ensure the smooth deployment of broadband infrastructure.[133] The FCC’s current rules, however, can impose on a requesting attacher the entire cost of pole replacement, which is economically suboptimal.[134] There is therefore a need to revisit the current formula to ensure that the incremental costs and benefits are appropriately allocated to each relevant party. In its recent order, the FCC expanded the definition of what constitutes as a “red tagged” pole in need of replacement.[135] The extent to which this works in practice will, however, depend on how the FCC processes applications under its new “red tag” policy.
One critical concern is the emergence of hold-up and hold-out problems.[136] Section 224 of the Communications Act authorizes the FCC to ensure that the costs of pole attachments are just and reasonable.[137] This provision, however, also allows pole owners to deny access when there is insufficient capacity, creating a potential imbalance in bargaining power.[138] This imbalance is exacerbated by the pole owners’ superior knowledge of their cost structures and their ability to impose “take it or leave it” offers on prospective attachers.[139] Consequently, attachers might be, at the margin, discouraged from deploying in areas with capacity-constrained poles. Further, the “last attacher pays” model can inadvertently create a disincentive for pole owners to replace or upgrade poles until a new attacher is obligated to bear the full cost. This scenario may lead to delays in broadband deployment, especially in areas where the cost of deployment is already high. The recent FCC order aims to address these concerns by clarifying cost-causation principles and ensuring more equitable cost sharing for pole replacements and modifications.[140] But there again remains interpretive room within the framework the commission has established. Thus, it remains to be seen how effectively the new rules will mitigate the problem.
Any reconsideration of pole-attachment rules also must account for the fact that the pole market is highly regulated.[141] The actual cost for pole replacements in a free market, without regulatory intervention, would likely be some middle ground between the total replacement cost and the new rental price charged to attachers. The FCC must judiciously leverage its ability to set reasonable rental rates to approach the ideal price that would otherwise be discovered through market mechanisms.
Toward this end, the upfront “make-ready” charges for pole replacement should be limited to a pole owner’s incremental cost.[142] This approach acknowledges that early replacements simply shift the timing of the expense, rather than adding additional costs. The formula could incorporate the depreciated value of the pole being replaced and allocate the costs associated with increased capacity across all beneficiaries, including new attachers as well as the pole owner, who may realize additional revenue from the increased capacity.
Beyond disputes over privately owned poles, a lacuna in the FCC’s authority over poles owned by certain public entities threatens to erect large roadblocks to deployment. This is particularly the case for poles owned by the Tennessee Valley Authority (TVA).[143] Such common TVA practices as refusing reasonable and nondiscriminatory pole-attachment agreements risk significantly slowing the deployment of broadband, especially in the rural areas the TVA services.[144]
The source of this problem is a provision of Section 224 of the Communications Act that exempts municipal and electric-cooperative (coop) pole owners from FCC oversight.[145] This exemption allows the TVA to set its own rates for pole attachments, which are notably higher than FCC rates, and often sidestep access requirements typically mandated by states and the FCC.[146]
Municipally owned electricity distributors constitute what economists call state-owned enterprises. As such, they face significantly different restraints than privately owned enterprises.[147] Private businesses must pass the profit-and-loss test on the market, while state-owned enterprises are not similarly constrained. Municipally owned electricity distributors are usually monopolies, either because private competitors are not allowed to compete, or because they receive government benefits not available to potential private competitors. As a result, they may pursue other goals in the “public interest,” such as providing their products and services at below-market prices.[148] This includes the ability to leverage their electricity monopolies to enter into broadband provision. The problem is that these municipally owned electricity distributors also have strong incentives to refuse to deal with private competitors in the broadband market who need access to the electric poles they own.[149]
Rural electric cooperatives (RECs), particularly those distributing electricity from the TVA, also hold a privileged position that allows them to act in potentially anticompetitive ways toward broadband providers seeking pole attachments. Unlike municipally owned electricity distributors, RECs need to earn sufficient revenues to remain operational. They are also, however, much more like state-owned enterprises in the governmental benefits they receive, including the immense difficulty of normal oversight from the market for corporate control.[150] This similarly incentivizes them to act anticompetitively, particularly as many enter or plan to enter the broadband market.[151]
These circumstances often lead RECs to refuse to deal with private broadband providers, thereby stifling competition and deployment in rural areas.[152] Furthermore, RECs often face little oversight from rate regulators regarding pole attachments, leading to significantly higher costs for broadband companies seeking to attach to poles owned by co-ops and municipalities outside FCC jurisdiction.[153]
This regulatory loophole not only leads to higher costs for broadband providers, but also raises concerns about the application of antitrust laws to these entities. Sen. Mike Lee (R-Utah) has argued that the U.S. Justice Department (DOJ) should examine the antitrust implications of these practices, emphasizing that these government-owned entities should be subject to antitrust laws when acting as market participants.[154] And FCC Commissioner Brendan Carr has noted ongoing concerns about delays and costs associated with attaching to poles owned by municipal and cooperative utilities.[155] Addressing this loophole is crucial to bridge the digital divide and ensure that the IIJA’s goals are met effectively.
As previously noted, despite persistent interest in some quarters to promote municipal broadband,[156] there are many challenges that contribute to such projects’ poor record. In particular, the financial prospects of municipal networks are typically dim, as many such projects generate negative cash flow and are unsustainable without substantial improvements in operations.[157] Only a small subset of municipalities—usually those with existing municipal-power utilities—might be well-positioned to venture into municipal broadband, due to potential cross-subsidization opportunities.[158] Even among those municipal-broadband projects that have been deemed successful, however, the repayment of project costs is daunting, often requiring substantial subsidies and cross-subsidization.[159] The prospects for municipal broadband have not improved since ICLE’s 2021 white paper.
In a study by Christopher Yoo et al., the authors examine the financial performance of every municipal fiber project operating in the United States from 2010 through 2019 that provided annual financial reports for its fiber operations.[160] Each of the 15 projects was located in an urban area, as defined by the U.S. Census Bureau. In addition, each project was built in areas already served by one or more private broadband providers—none were designed to serve previously unserved areas. In every case, the municipality issued revenue bonds to fund construction and initially expected the projects to repay their construction and operating costs from project revenues, rather than from taxes or interfund transfers. In some cases, the cities anticipated the projects would generate surpluses that would, in turn, allow the cities to lower taxes.
In contrast to these expectations, every project either needed infusions of cash from outside sources or debt relief through refinancing. Three projects defaulted on their debt, two of which were liquidated at significant losses.
Yoo et al. employed two measures of financial performance:
Based on ANCF, only two of the 15 projects have broken even or are expected to break even by the time their initial debt matures. Based on NPV, more than half of the projects were not on track to break even—even assuming a theoretical best-case performance in terms of capital expenditures and debt service.
Municipalities that are unable to cover their broadband projects’ costs of debt and operations must make up the shortfall from general tax revenues or default on their debt. Making up a shortfall from tax revenues means the city must enact some combination of tax increases or service cuts. A default will result in a downgrade in the municipality’s bond rating, which will increase the costs of financing all of the city’s operations, not just the broadband project. These additional costs must ultimately be paid the municipality’s taxpayers.
In a separate analysis, George Ford notes that many municipal-broadband projects are located in cities that operate their own electric utilities.[161] Such an arrangement allows the broadband network’s debt and other expenses to be placed on the electric utility’s books, thereby improving the apparent financial condition of the broadband network. As electricity rates are based on cost of service, Ford argues that a shift of broadband costs to the electric utility would be expected to increase electricity rates.
To evaluate this hypothesis, he compares municipal electricity rates among four Tennessee cities that own and operate municipal broadband. Two cities financed the projects with general-obligation bonds funded by tax revenues and other sources of the municipality’s income. The other two cities used electric-utility profits to cover the broadband project’s financial losses. One of these cities is Chattanooga, which received $111 million in subsidies and in which the city’s electric utility assumed $162 million of debt to construct the broadband network and made $50 million of loans to the broadband division.
Ford’s statistical analysis calculates broadband projects are associated with a 5.4% increase in electricity rates in cities with utility-funded projects, relative to cities that issued general-obligation bonds. It should be emphasized that the higher rates are imposed on all electricity ratepayers, not just those who subscribe to the city’s broadband. These higher electricity rates are used to cross-subsidize municipal-broadband subscribers. For example, Ford reports that, in Chattanooga, the average monthly revenue per broadband subscriber was $147 in 2015. In addition, the average subscriber was associated with a monthly subsidy of $30. Thus, cross-subsidies from electricity ratepayers account for about 17% of the average monthly broadband-subscriber cost.
The conclusions from ICLE’s 2021 white paper remain valid today. Proposals to offer municipal broadband as a means to increase broadband adoption—either by attempting to increase supply, or to suppress prices—put the cart before the horse. That’s because private supply and demand conditions are usually sufficient to guarantee creation of adequate broadband networks throughout most of the country.
Some uneconomic locations (i.e., the unserved areas) may require interventions to ensure broadband access. In some cases, municipal broadband may be an effective option to subsidize hard-to-reach consumers. Municipal broadband should not, however, be considered the best or only option. Indeed, the evidence demonstrates that municipal broadband might best be considered a solution of last resort, used only when no private provider finds it economically viable to serve a particular area.
By most measures, U.S. broadband competition is vibrant and has increased dramatically since the COVID-19 pandemic. Since 2021, more households are connected to the internet; broadband speeds have increased, while prices have declined; more households are served by more than a single provider, and new technologies like satellite and 5G have expanded internet access and intermodal competition among providers.
Broadband competition policy currently appears to be in a state of confusion: Some policies foster competition, while others hinder it. Programs such as the ACP and BEAD could do much to encourage competition by simultaneously increasing the demand for broadband and facilitating the buildout of supply. At the same time, some facets of these programs’ implementation act to stifle competition with onerous rules, reporting requirements, and—in some cases—de-facto rate regulation.
In addition, the FCC’s digital-discrimination rules explicitly subject broadband pricing and other dimensions of competition to ex-post scrutiny and enforcement. In reclassifying broadband internet-access services under Title II of the Communications Act, the FCC has rendered nearly every aspect of broadband deployment and delivery subject to its regulation or scrutiny.
Put simply, today, U.S. broadband competition is robust, innovative, and successful. At the same time, new and forthcoming regulations threaten broadband competition by eliminating or proscribing the policies and practices by which providers compete. As a result, the United States is at risk of slowing or shrinking broadband investment—thereby reducing innovation and harming the very consumers that policymakers claim they seek to help.
[1] Geoffrey A. Manne, Kristian Stout, & Ben Sperry, A Dynamic Analysis of Broadband Competition: What Concentration Numbers Fail to Capture, Int’l Ctr. for L. & Econ. (Jun. 2021), available at https://laweconcenter.org/wp-content/uploads/2021/06/A-Dynamic-Analysis-of-Broadband-Competition.pdf.
[2] See id. at 2-3; 35-37.
[3] CDC Museum COVID-19 Timeline, Ctr. for Disease Control and Prevention (Mar. 15, 2023), https://www.cdc.gov/museum/timeline/covid19.html.
[4] H.R. 3684, 117th Cong. (2021).
[5] Eric Fruits & Kristian Stout, Finding Marginal Improvements for the ‘Good Enough’ Affordable Connectivity Program, Int’l Ctr. for L. & Econ. (Sep. 15, 2023), available at https://laweconcenter.org/wp-content/uploads/2023/09/ACP-Subsidies-Paper.pdf.
[6] Eric Fruits & Geoffrey A. Manne, Quack Attack: De Facto Rate Regulation in Telecommunications, Int’l Ctr. for L. & Econ. (Mar. 30, 2023), available at https://laweconcenter.org/wp-content/uploads/2023/03/De-Facto-Rate-Reg-Final-1.pdf.
[7] Eric Fruits & Kristian Stout, The Income Conundrum: Intent and Effects Analysis of Digital Discrimination, Int’l Ctr. for L. & Econ. (Nov. 14, 2022), available at https://laweconcenter.org/wp-content/uploads/2022/11/The-Income-Conundrum-Intent-and-Effects-Analysis-of-Digital-Discrimination.pdf.
[8] Wireline Competition Bureau Announces the Final Month of the Affordable Connectivity Program, WC Docket No. 21-450 (Mar. 4, 2024), available at https://docs.fcc.gov/public/attachments/DA-24-195A1.pdf; see also Brian Fung, FCC Ends Affordable Internet Program Due to Lack of Funds, CNN (May 31, 2024), https://www.cnn.com/2024/05/31/tech/fcc-affordable-connectivity-program-acp-close/index.html.
[9] Anthony Hennen, More Money, More Problems for National Broadband Expansion, The Center Square (Aug. 15, 2023), https://www.thecentersquare.com/pennsylvania/article_3124e98c-3bb3-11ee-ad87-7361f3872110.html.
[10] Lindsay McKenzie, BEAD Waiver Information Coming This Summer, NTIA Says, StateScoop (Aug. 17, 2023), https://statescoop.com/bead-broadband-waiver-summer-2023-ntia.
[11] BEAD Letter of Credit Concerns, $4.3M in ACP Outreach Grants, FCC Waives Rules for Hawaii Wildfires, Broadband Breakfast (Aug. 21, 2023), https://broadbandbreakfast.com/2023/08/bead-letter-of-credit-concerns-4-3m-in-acp-outreach-grants-fcc-waives-rules-for-hawaii-wildfires.
[12] Eric Fruits, Red Tape and Headaches Plague BEAD Rollout, Truth on the Market (Aug. 17, 2023), https://truthonthemarket.com/2023/08/17/red-tape-and-headaches-plague-bead-rollout.
[13] Fruits & Stout, supra note 6; see also Eric Fruits, Kristian Stout, & Ben Sperry, ICLE Reply Comments on Prevention and Elimination of Digital Discrimination, Notice of Proposed Rulemaking, In the Matter of Implementing the Infrastructure, Investment, and Jobs Act: Prevention and Elimination of Digital Discrimination, No. 22-69, at Part III, Int’l Ctr. for L. & Econ. (Apr. 20, 2023), https://laweconcenter.org/resources/icle-reply-comments-on-prevention-and-elimination-of-digital-discrimination.
[14] FCC, Report and Order and Further Notice of Proposed Rulemaking on Implementing the Infrastructure Investment and Jobs Act: Prevention and Elimination of Digital Discrimination, GN Docket No. 18-238, FCC 19-44 (Nov. 20, 2023), available at https://docs.fcc.gov/public/attachments/FCC-23-100A1.pdf [hereinafter “Digital Discrimination Order”]. See also Eric Fruits, Everyone Discriminates Under the FCC’s Proposed New Rules, Truth on the Market (Oct. 30, 2023), https://truthonthemarket.com/2023/10/30/everyone-discriminates-under-the-fccs-proposed-new-rules (reporting that, under the rules, “broadband service” includes every element of a consumer’s broadband-internet experience, including speeds, data caps, pricing, and discounts, and that the rules broadly apply to broadband providers as well as to “entities outside the communications industry” that “provide services that facilitate and affect consumer access to broadband,” which may include municipalities and property owners).
[15] Notice of Proposed Rulemaking, Safeguarding and Securing the Open Internet, WC Docket No. 23-320 (Sep. 28, 2023). [hereinafter “Title II NPRM”]
[16] Declaratory Ruling, Order, Report and Order, and Order on Reconsideration, Safeguarding and Securing the Open Internet, WC Docket No. 23-320, WC Docket No. 17-108 (adopted Apr. 25, 2024), available at https://docs.fcc.gov/public/attachments/DOC-401676A1.pdf [hereinafter “SSOIO” or “2024 Order”].
[17] See, e.g., Karl Bode, Colorado Eyes Killing State Law Prohibiting Community Broadband Networks, TechDirt (Mar. 30, 2023), https://www.techdirt.com/2023/03/30/colorado-eyes-killing-state-law-prohibiting-community-broadband-networks (local broadband monopolies are a “widespread market failure that’s left Americans paying an arm and a leg for what’s often spotty, substandard broadband access.”).
[18] FCC Chair Rosenworcel on Reinstating Net Neutrality Rules, C-Span (Sep. 25, 2023), https://www.c-span.org/video/?530731-1/fcc-chair-rosenworcel-reinstating-net-neutrality-rules (“Only one-fifth of the country has more than two choices at [100 Mbps download] speed. So, if your broadband provider mucks up your traffic, messes around with your ability to go where you want and do what you want online, you can’t just pick up and take your business to another provider. That provider may be the only game in town.”).
[19] U.S. Census Bureau, 2021 American Community Survey 1-Year Estimates, Table Id. S2801 (2021); U.S. Census Bureau, ACS 1-Year Estimates Public Use Microdata Sample 2021, Access to the Internet (ACCESSINET) (2021).
[20] In contrast, a 2021 NTIA survey reports that 14.4% of households do not use the internet at home, with three-quarters of these households indicating they have “no need/interest” and one quarter indicating it is “too expensive.” See, Michelle Cao & Rafi Goldberg, Switched Off: Why Are One in Five U.S. Households Not Online?, National Telecommunications and Information Administration (2022), https://ntia.gov/blog/2022/switched-why-are-one-five-us-households-not-online.
[21] National Center for Education Statistics, Children’s Internet Access at Home, Condition of Education, (U.S. Department of Education, Institute of Education Sciences, Aug. 2023), https://nces.ed.gov/programs/coe/indicator/cch.
[22] See FCC, 2015 Broadband Progress Report (2015), https://www.fcc.gov/reports-research/reports/broadband-progressreports/2015-broadband-progress-report (upgrading the standard speed from 4/1 Mbps to 25/3 Mbps). In March 2024, the FCC approved a report increasing the fixed-speed benchmark to 100/20 Mbps and setting an “aspirational goal” of 1 Gbps/500 Mbps. See, FCC, In the Matter of Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, GN Docket No. 22-270 (Mar. 14, 2024), available at https://docs.fcc.gov/public/attachments/DOC-400675A1.pdf. In November 2023, FCC Chair Jessica Rosenworcel proposed reaching a 1 Gbps/500 Mbps benchmark by the year 2030. See Eric Fruits, Gotta Go Fast: Sonic the Hedgehog Meets the FCC, Truth on the Market (Nov. 3, 2023), https://truthonthemarket.com/2023/11/03/gotta-go-fast-sonic-the-hedgehog-meets-the-fcc.
[23] Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, § 60102 (a)(1)(A)(ii), 135 Stat. 429 (Nov. 15, 2021), available at https://www.congress.gov/117/plaws/publ58/PLAW-117publ58.pdf; Jake Varn, What Makes a Community “Unserved” or “Underserved” by Broadband?, Pew Charitable Trusts (May 3, 2023), available at https://www.pewtrusts.org/-/media/assets/2023/06/un–and-underserved-definitions-ta-memo-pdf.pdf.
[24] Id., IIJA.
[25] Mike Conlow, New FCC Broadband Map, Version 3, Mike’s Newsletter (Nov. 20, 2023), https://mikeconlow.substack.com/p/new-fcc-broadband-map-version-3.
[26] FCC, Communications Marketplace Report, GN Docket No 22-203, FCC 22-103, Appendix G (Dec. 20, 2022), https://www.fcc.gov/document/2022-communications-marketplace-report.
[27] Pursuant to the IIJA, the FCC and providers are working to provide new broadband-coverage maps. These numbers will change over time, but FCC Chair Jessica Rosenworcel noted: “Looking ahead, we expect that any changes in the number of locations will overwhelmingly reflect on-the-ground changes such as the construction of new housing.” See Brad Randall, FCC’s Updated Broadband Map Shows Increasing National Connectivity, Broadband Communities (Nov. 27, 2023), https://bbcmag.com/fccs-new-broadband-map-shows-increasing-national-connectivity.
[28] FCC Chair Rosenworcel on Reinstating Net Neutrality Rules, C-Span (Sep. 26, 2023), https://www.c-span.org/video/?530731-1/fcc-chair-rosenworcel-reinstating-net-neutrality-rules.
[29] FCC, Fixed Broadband Deployment (Jun. 2021), https://broadband477map.fcc.gov/#/area-summary?version=jun2021&type=nation&geoid=0&tech=acfw&speed=25_3&vlat=27.480205324799257&vlon=-41.52925368904516&vzoom=5.127403622197149.
[30] FCC, 2019 Broadband Deployment Report, GN Docket No. 18-238, FCC 19-44 at Fig. 4 (May 29, 2019), available at https://docs.fcc.gov/public/attachments/FCC-19-44A1.pdf.
[31] The FCC does not explain the differences between the information summarized in Table 1 and Table 2. The differences likely reflect different methodologies. For example, Table 1 may be at the household level and Table 2 at the population level.
[32] 2022 Communications Marketplace Report, GN Docket No. 22-203 (Dec. 30, 2022) at Fig. II.A.28, available at https://docs.fcc.gov/public/attachments/FCC-22-103A1.pdf.
[33] Dan Heming, Starlink No Longer Has a Waitlist for Standard Service, and 10 MPH Speed Enforcement Update, Mobile Internet Resource Center (Oct. 3, 2023), https://www.rvmobileinternet.com/starlink-no-longer-has-a-waitlist-for-standard-service-and-10-mph-speed-enforcement-update/#:~:text=In%20the%20latest%20update%2C%20the,order%20anywhere%20in%20the%20USA.
[34] Starlink Specifications, Starlink, https://www.starlink.com/legal/documents/DOC-1400-28829-70.
[35] Amazon Shares an Update on How Project Kuiper’s Test Satellites Are Performing, Amazon (Oct. 16, 2023), https://www.aboutamazon.com/news/innovation-at-amazon/amazon-project-kuiper-test-satellites-space-launch-october-2023-update.
[36] Kuiper Service to Start by End of 2024: Amazon, Communications Daily (Oct. 12, 2023), https://communicationsdaily.com/news/2023/10/12/Kuiper-Service-to-Start-by-End-of-2024-Amazon-2310110007.
[37] Why Is the Internet More Expensive in the USA than in Other Countries?, Community Tech Network (Feb. 2, 2023), https://communitytechnetwork.org/blog/why-is-the-internet-more-expensive-in-the-usa-than-in-other-countries.
[38] Dan Howdle, Global Broadband Pricing League Table 2023, Cable.co.uk (2023), https://www.cable.co.uk/broadband/pricing/worldwide-comparison, data available at https://www.cable.co.uk/broadband/worldwide-pricing/2023/broadband_price_comparison_data.xlsx.
[39] This is qualitatively consistent with the FCC’s finding that United States has the seventh-lowest prices per gigabit of data consumption, and that Australia has the 12th-lowest among OECD countries. FCC, 2022 Communications Marketplace Report, Docket No. 22-103, Appendix G (Dec. 30, 2022), available at https://docs.fcc.gov/public/attachments/FCC-19-44A1.pdf.
[40] Median Country Speeds, Speedtest Global Index (Oct. 2023), https://www.speedtest.net/global-index (last visited Dec. 7, 2023).
[41] See Christian Dippon, et al., Adding a Warning Label to Rewheel’s International Price Comparison and Competitiveness Rankings (Nov. 30, 2020), available at https://laweconcenter.org/wp-content/uploads/2020/11/Rewheel_Review_Final.pdf.
[42] Fruits & Stout, supra note 6; see also Giuseppe Colangelo, Regulatory Myopia and the Fair Share of Network Costs: Learning from Net Neutrality’s Mistakes, Int’l Ctr. for L. & Econ. (Comments to European Commission Exploratory Consultation, The Future of the Electronic Communications Sector and Its Infrastructure, May 18, 2023), https://laweconcenter.org/resources/regulatory-myopia-and-the-fair-share-of-network-costs-learning-from-net-neutralitys-mistakes.
[43] Id. at 14.
[44] Arthur Menko Business Planning Inc., 2023 Broadband Pricing Index, USTelecom (Oct. 2023), available at https://ustelecom.org/wp-content/uploads/2023/10/USTelecom-2023-BPI-Report-final.pdf.
[45] U.S. Bureau of Labor Statistics, Producer Price Index by Commodity: Telecommunication, Cable, and Internet User Services: Residential Internet Access Services [WPU374102], retrieved from FRED, Federal Reserve Bank of St. Louis (Aug. 29, 2023), https://fred.stlouisfed.org/series/WPU374102.
[46] United States Median Country Speeds July 2023, Speedtest Global Index (2023), https://www.speedtest.net/global-index/united-states. Prior years retrieved from Internet Archive. See also Camryn Smith, The Average Internet Speed in the U.S. Has Increased by Over 100 Mbps since 2017, Allconnect (Aug. 4, 2023), https://www.allconnect.com/blog/internet-speeds-over-time (average download speed in the United States was 30.7 Mbps in 2017 and 138.9 Mbps in the first half of 2023).
[47] George S. Ford, Confusing Relevance and Price: Interpreting and Improving Surveys on Internet Non-adoption, 45 Telecomm. Pol’y 102084 (2021).
[48] Smaller surveys and focus groups that allow more opportunities for follow-up questions, however, suggest that price may be more important than is suggested by Census Bureau surveys. For example, one study in Detroit, Michigan, used surveys and focus groups to examine internet adoption and use in three low-income urban neighborhoods. Participants who reported lacking at-home internet mentioned lack of interest and high costs at roughly equal rates. See, Colin Rhinesmith, Bianca Reisdorf, & Madison Bishop, The Ability to Pay For Broadband, 5 Comm. Res. Pract. 121 (2019).
[49] Ford, supra note 9.
[50] Michelle Cao & Rafi Goldberg, New Analysis Shows Offline Households Are Willing to Pay $10-a-Month on Average for Home Internet Service, Though Three in Four Say Any Cost Is Too Much, National Telecommunications and Information Administration (Oct. 6, 2022), https://ntia.gov/blog/2022/new-analysis-shows-offline-households-are-willing-pay-10-month-average-home-internet.
[51] Michelle Cao & Rafi Goldberg, Switched Off: Why Are One in Five U.S. Households Not Online?, National Telecommunications and Information Administration (2022), https://ntia.gov/blog/2022/switched-why-are-one-five-us-households-not-online.
[52] Jamie Greig & Hannah Nelson, Federal Funding Challenges Inhibit a Twenty-First Century “New Deal” for Rural Broadband, 37 Choices 1 (2022).
[53] Andrew Perrin, Mobile Technology and Home Broadband 2021, Pew Research Center (Jun. 3, 2021), https://www.pewresearch.org/internet/2021/06/03/mobile-technology-and-home-broadband-2021.
[54] Rhinesmith, et al., supra note 10.
[55] 2022 Broadband Capex Report, USTelecom (Sep. 8, 2023), available at https://ustelecom.org/wp-content/uploads/2023/09/2022-Broadband-Capex-Report-final.pdf.
[56] Wolfgang Briglauer, Carlo Cambini, Klaus Gugler, & Volker Stocker, Net Neutrality and High-Speed Broadband Networks: Evidence from OECD Countries, 55 Eur. J. L. & Econ. 533 (2023).
[57] Eric Fruits, Justin (Gus) Hurwitz, Geoffrey A. Manne, Julian Morris, & Alec Stapp, Static and Dynamic Effects of Mergers: A Review of the Empirical Evidence in the Wireless Telecommunications Industry, (OECD Directorate for Financial and Enterprise Affairs Competition Committee, Global Forum on Competition, DAF/COMP/GF(2019)13, Dec. 6, 2019), available at https://one.oecd.org/document/DAF/COMP/GF(2019)13/en/pdf.
[58] Manne, Stout, & Sperry, supra note 1.
[59] Kenneth Flamm & Pablo Varas, Effects of Market Structure on Broadband Quality in Local U.S. Residential Service Markets, 12 J. Info. Pol’y 234 (2022).
[60] Andrew Kearns, Does Competition From Cable Providers Spur the Deployment of Fiber? (Jul. 27, 2023), https://ssrn.com/abstract=4523529 or http://dx.doi.org/10.2139/ssrn.4523529.
[61] Manne, Stout, & Sperry, supra note 1.
[62] Fruits, et al., supra note 55.
[63] FCC, Affordable Connectivity Program (Oct. 2, 2023), https://www.fcc.gov/acp.
[64] Eric Fruits & Kristian Stout, Finding Marginal Improvements for the ‘Good Enough’ Affordable Connectivity Program (Int’l. Ctr. for L. & Econ. Issue Brief, Sep. 15, 2023), available at https://laweconcenter.org/wp-content/uploads/2023/09/ACP-Subsidies-Paper.pdf.
[65] See Paul Winfree, Bidenomics Goes Online: Increasing the Costs of High-Speed Internet, Econ. Pol’y Innovation Ctr (Jan. 8, 2024), available at https://epicforamerica.org/wp-content/uploads/2024/01/Bidenomics-Goes-Online_01.08.24-1.pdf (Finding ACP subsidies are associated with higher prices for all broadband plans, especially lower-speed plans, but these costs are more than offset by the subsidies for those who receive them. Thus, the ACP provides lower prices net of subsidy to ACP beneficiaries, but higher prices for those who are not.).
[66] Id.
[67] Id.
[68] Fruits & Stout, supra note 4.
[69] Universal Service Administrative Co., ACP Enrollment and Claims Tracker (Feb. 8, 2024), https://www.usac.org/about/affordable-connectivity-program/acp-enrollment-and-claims-tracker. Beginning Feb. 8, 2024, the ACP ceased enrollment.
[70] Wireline Competition Bureau Announces the Final Month of the Affordable Connectivity Program, WC Docket No. 21-450 (Mar. 4, 2024), available at https://docs.fcc.gov/public/attachments/DA-24-195A1.pdf.
[71] Biden-Harris Administration Announces State Allocations for $42.45 Billion High-Speed Internet Grant Program as Part of Investing in America Agenda, Nat’l Telecomms and Info. Admin. (Jun. 26, 2023), https://www.ntia.gov/press-release/2023/biden-harris-administration-announces-state-allocations-4245-billion-high-speed.
[72] Id.
[73] U.S. Dep’t of Com., Internet For All Frequently Asked Questions and Answers Draft Answers Version 2.0 Broadband, Equity, Access, and Deployment (BEAD) Program, Nat’l Telecomms and Info. Admin. (Sep. 2022), available at https://broadbandusa.ntia.doc.gov/sites/default/files/2022-09/BEAD-Frequently-Asked-Questions-%28FAQs%29_Version-2.0.pdf.
[74] Infrastructure Investment and Jobs Act Overview, BroadbandUSA, https://broadbandusa.ntia.doc.gov/resources/grant-programs (last visited Dec. 7, 2023).
[75] U.S. Dep’t of Com., Notice of Funding Opportunity, Broadband Equity, Access, and Deployment Program, NTIA-BEAD-2022, Nat’l Telecomms and Info. Admin. (May 2022), available at https://broadbandusa.ntia.doc.gov/sites/default/files/2022-05/BEAD%20NOFO.pdf. [hereinafter “BEAD NOFO”]
[76] Id. See also, Ted Cruz, Red Light Report, Stop Waste, Fraud, and Abuse in Federal Broadband Funding, U.S. S. Comm. on Com., Science, and Transp. (Sep. 2023), https://www.commerce.senate.gov/services/files/0B6D8C56-7DFD-440F-8BCC-F448579964A3.
[77] U.S. Dep’t of Com., Notice of Funding Opportunity, Broadband Equity, Access, and Deployment Program, NTIA-BEAD-2022, NTIA (May 2022), available at https://broadbandusa.ntia.doc.gov/sites/default/files/2022-05/BEAD%20NOFO.pdf (note that the IIJA itself did not include this requirement, as it was an addition by NTIA as part of the NOFO process; thus, it is unclear the extent to which this represents a valid requirement by NTIA under the BEAD program).
[78] Id. at 67.
[79] George S. Ford, Middle-Class Affordability of Broadband: An Empirical Look at the Threshold Question, Phoenix Ctr. for Adv. Leg. & Econ. Pub. Pol’y Stud., Pol’y Bull. No. 61 (Oct. 2022), available at https://phoenix-center.org/PolicyBulletin/PCPB61Final.pdf.
[80] Id.
[81] John W. Mayo, Gregory L. Rosston & Scott J. Wallsten, From a Silk Purse to a Sow’s Ear? Implementing the Broadband, Equity, Access and Deployment Act, Geo. U. McDonough Sch. of Bus. Ctr. for Bus. & Pub. Pol’y (Aug. 2022), https://georgetown.app.box.com/s/yonks8t7eclccb0fybxdpy3eqmw1l2da?mc_cid=95d011c7c1&mc_eid=dc30181b39.
[82] BEAD Letter of Credit Concerns, $4.3M in ACP Outreach Grants, FCC Waives Rules for Hawaii Wildfires, Broadband Breakfast (Aug. 21, 2023), https://broadbandbreakfast.com/2023/08/bead-letter-of-credit-concerns-4-3m-in-acp-outreach-grants-fcc-waives-rules-for-hawaii-wildfires.
[83] NTIA, Ensuring Robust Participation in the BEAD Program (Nov. 1, 2023), https://www.internetforall.gov/blog/ensuring-robust-participation-bead-program.
[84] FCC, Report and Order and Further Notice of Proposed Rulemaking, GN Docket No. 22-69, FCC 23-100 (Nov. 20, 2023), available at https://docs.fcc.gov/public/attachments/FCC-23-100A1.pdf
[85] Id. at 3.
[86] Id.
[87] Id.
[88] Id.
[89] Fruits, supra note 13.
[90] U.S. Chamber of Commerce, In the Matter of Implementing the Infrastructure Investment and Jobs Act: Prevention and Elimination of Digital Discrimination, GN Docket No. 22-69 (Nov. 6, 2023), https://www.fcc.gov/ecfs/document/110620347626/2 (citations omitted).
[91] FCC, Dissenting Statement of Commissioner Brendan Carr Regarding the Implementing the Infrastructure Investment and Jobs Act: Prevention and Elimination of Digital Discrimination, GN Docket No. 22-69, Report and Order and Further Notice of Proposed Rulemaking, FCC 23-100 (2023), available at https://docs.fcc.gov/public/attachments/FCC-23-100A3.pdf.
[92] George S. Ford, Will Digital Discrimination Policies End Discount Plans for Low-Income Consumers? (Phoenix Ctr. for Advanced Legal & Econ. Pub. Pol’y Stud., Nov. 1, 2023), https://www.fcc.gov/ecfs/document/1103079827403/5.
[93] HCS EdConnect, Welcome to HCS EdConnect (2023), https://www.edconnect.org.
[94] WISPA, In the Matter of Implementing the Infrastructure Investment and Jobs Act: Prevention and Elimination of Digital Discrimination, GN Docket No. 22-69 (Nov. 8, 2023), https://www.fcc.gov/ecfs/document/1108944918538/1.
[95] Testimony of Brendan Carr, Commissioner, Federal Communications Commission, Before the Subcommittee on Communications and Technology of the United States House of Representatives Committee on Energy and Commerce, “Oversight of President Biden’s Broadband Takeover” (Nov. 30, 2023), available at https://d1dth6e84htgma.cloudfront.net/11_30_23_Carr_Testimony_3163ea4363.pdf.
[96] Title II NPRM, supra note 14.
[97] SSOIO, supra note 16.
[98] See, Paul Krugman & Robin Wells, Economics (4th ed. 2015) at 389 (“So the natural monopolist has increasing returns to scale over the entire range of output for which any firm would want to remain in the industry—the range of output at which the firm would at least break even in the long run. The source of this condition is large fixed costs: when large fixed costs are required to operate, a given quantity of output is produced at lower average total cost by one large firm than by two or more smaller firms.”)
[99] Id. (“The most visible natural monopolies in the modern economy are local utilities—water, gas, and sometimes electricity. As we’ll see, natural monopolies pose a special challenge to public policy.”)
[100] Richard H. K. Vietor, Contrived Competition (1994) at 167 (“[I]n the early part of the twentieth century, American Telephone and Telegraph (AT&T) set itself the goal of providing universal telephone services through an end-to-end national monopoly. … By [the 1960s], however, the distortions of regulatory cross-subsidy had diverged too far from the economics of technological change.”). Thomas W. Hazlett, Cable TV Franchises as Barriers to Video Competition, 2 Va. J.L. & Tech. 1 (2007) (“Traditionally, municipal cable TV franchises were advanced as consumer protection to counter “natural monopoly” video providers. … Now, marketplace changes render even this weak traditional case moot. … [V]ideo rivalry has proven viable, with inter-modal competition from satellite TV and local exchange carriers (LECs) offering “triple play” services.”)
[101] Id.
[102] Share of United States Households Using Specific Technologies, Our World in Data (n.d.), https://ourworldindata.org/grapher/technology-adoption-by-households-in-the-united-states.
[103] Edward Carlson, Cutting the Cord: NTIA Data Show Shift to Streaming Video as Consumers Drop Pay-TV, NTIA (2019), https://www.ntia.gov/blog/2019/cutting-cord-ntia-data-show-shift-streaming-video-consumers-drop-pay-tv.
[104] Karl Bode, A New Low: Just 46% Of U.S. Households Subscribe to Traditional Cable TV, TechDirt (Sep. 18, 2023), https://www.techdirt.com/2023/09/18/a-new-low-just-46-of-u-s-households-subscribe-to-traditional-cable-tv. See also, Shira Ovide, Cable TV Is the New Landline, New York Times (Jan. 6, 2022), https://www.nytimes.com/2022/01/06/technology/cable-tv.html.
[105] SSOIO, supra, note 16.
[106] FCC, Wireless Telecommunications Bureau Report: Policy Review of Mobile Broadband Operators’ Sponsored Data Offerings for Zero-Rated Content and Services (Jan. 2017), available at https://transition.fcc.gov/Daily_Releases/Daily_Business/2017/db0111/DOC-342987A1.pdf.
[107] SSOIO, supra, note 16.
[108] Hyun Ji Lee & Brian Whitacre, Estimating Willingness-to-Pay for Broadband Attributes among Low-Income Consumers: Results from Two FCC Lifeline Pilot Projects, 41 Telecomm. Pol’y. 769 (Oct. 2017).
[109] Geoffrey A. Manne, Ben Sperry, Berin Szóka, & Tom Struble, ICLE & TechFreedom Policy Comments (Jul. 14, 2014), available at https://laweconcenter.org/images/articles/icle-tf_nn_policy_comments.pdf.
[110] Mozilla Corp. v. Fed. Commc’ns Comm’n, 940 F.3d 1 (D.C. Cir. 2019) (citations omitted).
[111] Id.
[112] In 2015, when the FCC voted to enact the 2015 Open Internet Order, Chair Tom Wheeler promised to forebear from applying such rate regulation, stating flatly that “we are not trying to regulate rates.” FCC Reauthorization: Oversight of the Commission, Hearing Before the Subcommittee on Communications and Technology, Committee on Energy and Commerce, House of Representatives, 114 Cong. 27 (Mar. 19, 2015) (Statement of Tom Wheeler). Standing as a nominee to the FCC, Gigi Sohn was asked during a 2021 confirmation hearing before the U.S. Senate Commerce Committee if she would support the agency’s regulation of broadband rates. She responded: “No. That was an easy one.” David Shepardson, FCC Nominee Does Not Support U.S. Internet Rate Regulation, Reuters (Dec. 1, 2021), https://www.reuters.com/world/us/fcc-nominee-does-not-support-us-internet-rate-regulation-2021-12-01. In September 2023, in a speech announcing the FCC’s proposal to regulate broadband internet under Title II of the Communications Act, Chair Jessica Rosenworcel was emphatic: “They say this is a stalking horse for rate regulation. Nope. No how, no way.” FCC Chair Rosenworcel on Reinstating Net Neutrality Rules, C-Span (Sep. 26, 2023), https://www.c-span.org/video/?530731-1/fcc-chair-rosenworcel-reinstating-net-neutrality-rules.
[113] Vietor, supra note 89.
[114] Id. See also, Illinois Economic and Fiscal Commission, Telecommunications Deregulation Issues and Impacts: A Special Report (Apr. 2001), available at https://www.ilga.gov/commission/cgfa/archives/telecom_dereg.PDF and Kevin J. Martin, Balancing Deregulation and Consumer Protection, 17 Commlaw Conspectus (2008), available at https://transition.fcc.gov/commissioners/previous/martin/MartinSpeech011609.pdf.
[115] Fruits & Manne, supra note 5, at 1.
[116] Id.
[117] Id. at 7.
[118] Jonathan E. Nuechterlein & Howard Shelanski, Building on What Works: An Analysis of U.S. Broadband Policy, 73 Fed. Comm. L.J. 219 (2021)
[119] Fruits & Manne, supra note 5, at 13.
[120] Digital Discrimination Order, supra note 15 [emphasis added].
[121] Brief of the International Center for Law & Economics and the Information Technology & Innovation Foundation as Amici Curiae in Support of Petitioners and Setting Aside the Commission’s Order, Minnesota Telecom Alliance v. FCC, No. 24-1179 (8th Cir. Apr. 29, 2024) available at https://laweconcenter.org/wp-content/uploads/2024/04/2024-04-29-ICLE-ITIF-Amicus-Brief.pdf.
[122] IIJA 60102 (h)(4)(B).
[123] U.S. Dep’t of Com., supra note 66, at 66. States have begun to follow this lead by prescribing obligations to local providers for quality and price on deployments that have speeds and capabilities far above what BEAD and the FCC consider as the baseline for a “served” household. See, e.g., ConnectLA, BEAD Initial Proposal, vol. 2 (Aug. 2023), available at https://connect.la.gov/media/3gylvrgc/bead-vol-2-final.pdf (prescribing a complex system for preferencing providers that deploy “affordable” fiber and other high-speed service to middle-class homes).
[124] RUS Vol. 87, No. 149, Notice of Availability of the Draft Programmatic Environmental Assessment for the Partnerships for Climate-Smart Commodities Funding Opportunity, Docket No. NRCS–2022–0009 (U.S.D.A., Aug. 4, 2022), https://www.federalregister.gov/documents/2022/08/04/2022-16694/rural-econnectivity-program and RD, Preparing for ReConnect Round 4, (USDA) available at https://www.rd.usda.gov/sites/default/files/Preparing-for-ReConnect-Round-4.pdf.
[125] New York State Telecommunications Association, Inc. v. James, No. 21-1075 (2nd Cir. Apr. 26, 2024), available at https://www.courthousenews.com/wp-content/uploads/2024/04/ny-broadband-law-opinion-second-circuit.pdf. See also, Randolph J. May & Seth L. Cooper, Second Circuit Hears Preemption Challenge to New York’s Broadband Rate Regulation Law, FedSoc Blog (Feb. 7, 2023), https://fedsoc.org/commentary/fedsoc-blog/second-circuit-hears-preemption-challenge-to-new-york-s-broadband-rate-regulation-law.
[126] Fruits & Manne, supra note 5, at 16.
[127] Id. at 1.
[128] FCC, Fourth Report and Order, Declaratory Ruling, and Third Further Notice of Proposed Rulemaking Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket No. 17-84 (Dec. 15, 2023), available at https://docs.fcc.gov/public/attachments/FCC-23-109A1.pdf [hereinafter “Poles Order”].
[129] Id.
[130] Id. at ¶ 7.
[131] Id.
[132] Id.
[133] Kristian Stout & Eric Fruits, Reply Comments of the International Center for Law & Economics, In the Matter of Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket No. 17-84 at 4 (submitted Aug. 26, 2022), available at https://laweconcenter.org/wp-content/uploads/2022/08/Pole-Attachments-Reply-Comments-2022-08-27-v2.pdf.
[134] Id.
[135] See Poles Order at ¶ 42.
[136] Id.
[137] Id. at 8.
[138] Id. at 9.
[139] Id.
[140] See Poles Order at ¶ 42.
[141] Id.
[142] Id. at 10.
[143] Ben Sperry, Geoffrey A. Manne, & Kristian Stout, The Role of Antitrust and Pole-Attachment Oversight in TVA Broadband Deployment (Int’l Ctr. for L. & Econ. Issue Brief 2023-09-04, 2023), available at https://laweconcenter.org/wp-content/uploads/2023/08/TVA-Pole-Attachments-Issue-Brief.pdf.
[144] Id. at 2.
[145] Id. at 3.
[146] Id.
[147] Id. at 4.
[148] Id.
[149] Id.
[150] Id. at 6-9.
[151] Id. at 10.
[152] Id.
[153] Id. at 11.
[154] Sen. Michael S. Lee, Letter to DOJ Re: Tennessee Valley Authority (TVA) – Supporting Broadband Deployment (June 22, 2023), in Ben Sperry, Geoffrey A. Manne, & Kristian Stout, The Role of Antitrust and Pole-Attachment Oversight in TVA Broadband Deployment (Int’l. Ctr. for L. & Econ. Issue Brief, Sep. 4, 2023) available at https://laweconcenter.org/wp-content/uploads/2023/08/TVA-Pole-Attachments-Issue-Brief.pdf.
[155] Sperry, Manne, & Stout, supra note 124, at 16.
[156] See, e.g., BEAD NOFO, supra note 71.
[157] Manne, Stout, & Sperry, supra note 1.
[158] Id.
[159] Id.
[160] Christopher S. Yoo, Jesse Lambert & Timothy P. Pfenninger, Municipal Fiber in the United States: A Financial Assessment, 46 Telecomm. Pol. 102292 (Jun. 2022).
[161] George S. Ford, Electricity Rates and the Funding of Municipal Broadband Networks: An Empirical Analysis, 102 Energy Econ. 105475 (2021).
Popular Media Like Jason Voorhees in each new iteration of the “Friday the 13th” franchise, net neutrality is coming back from the dead. With a Democratic majority . . .
Like Jason Voorhees in each new iteration of the “Friday the 13th” franchise, net neutrality is coming back from the dead. With a Democratic majority now in place on the Federal Communications Commission, the commissioners recently voted 3-2 to reinstate net neutrality rules the FCC repealed in 2018. This decision to reclassify how broadband is regulated also sets the stage for even more expansive rules than the ones that existed before.
Read the full piece here.
Scholarship Judicial review of the Open Internet Order adopted by the Federal Communications Commission (“FCC”) in April 2024 has the chance to deviate substantially from the . . .
Judicial review of the Open Internet Order adopted by the Federal Communications Commission (“FCC”) in April 2024 has the chance to deviate substantially from the deferential scrutiny that resulted in upholding all three versions of the net neutrality rules adopted in prior years. With respect to administrative law, the Supreme Court’s pending reconsideration of the Chevron doctrine and its 2022 embrace of the major questions doctrine may open the door to more exacting judicial scrutiny of the FCC’s actions. In addition, Justice Kavanaugh’s elevation to the Supreme Court provides new salience to the First Amendment challenge to the 2015 version of the net neutrality rules that he endorsed in his dissent from the decision not to hear that case en banc. Lastly, the advent of 5G fixed home broadband and satellite home broadband have changed the economic and technological environment in ways that make the rationale for regulation and justifications for restricting ISPs’ editorial discretion more problematic. These key differences lead the reviewing court to take an approach that that differs widely from those in the past.
Read at SSRN.
Popular Media The Federal Communications Commission has voted on yet another round of net neutrality rules. Its vote Thursday reprises the 2015 rules, which resuscitated the 1934 . . .
The Federal Communications Commission has voted on yet another round of net neutrality rules. Its vote Thursday reprises the 2015 rules, which resuscitated the 1934 Communications Act for modern, high-speed broadband networks. The agency decided, by a partisan split of 3-2, to end the “abdication of authority over broadband in 2017” and the ensuing years of “no federal oversight.”
TOTM With yet another net-neutrality order set to take effect (the link is to the draft version circulated before today’s Federal Communications Commission vote; the final version is . . .
With yet another net-neutrality order set to take effect (the link is to the draft version circulated before today’s Federal Communications Commission vote; the final version is expected to be published in a few weeks) and to impose common-carriage requirements on broadband internet-access service (BIAS) providers, it is worth considering how the question of whether online platforms (whether they be social media or internet service providers) have the right to editorial discretion keeps shifting.
TOTM In this “Age of the Administrative State,” federal agencies have incredible latitude to impose policies without much direction or input from Congress. President Barack Obama . . .
In this “Age of the Administrative State,” federal agencies have incredible latitude to impose policies without much direction or input from Congress. President Barack Obama fully pulled off the mask in 2014, when he announced “[w]e are not just going to be waiting for legislation,” declaring “I’ve got a pen, and I’ve got a phone.” Subsequent presidents have similarly discovered that they had pens and phones, too.
TOTM The Federal Communications Commission (FCC) has proposed classifying broadband internet-access service as a common carrier “telecommunications service” under Title II of the Communications Act. One . . .
The Federal Communications Commission (FCC) has proposed classifying broadband internet-access service as a common carrier “telecommunications service” under Title II of the Communications Act. One major consequence of this reclassification would be subjecting broadband providers to Section 214 regulations that govern the provision, acquisition, and discontinuation of communication “lines.”
In the Trojan War, the Greeks conquered Troy by hiding their soldiers inside a giant wooden horse left as a gift to the besieged Trojans. Section 214 hides a potential takeover of the broadband industry inside the putative gift of improving national security.
Regulatory Comments I. Introduction We thank the Federal Communications Commission (“FCC” or “the Commission”) for the opportunity to offer reply comments to this notice of proposed rulemaking . . .
We thank the Federal Communications Commission (“FCC” or “the Commission”) for the opportunity to offer reply comments to this notice of proposed rulemaking (“NPRM”) as the Commission seeks, yet again, to reclassify broadband-internet-access services under Title II of the Communications Act of 1934.[1]
As our previous comments, these reply comments, and the comments of others in this proceeding repeatedly point out, the idea of an “open internet” is not incompatible with business-model experimentation, which could include various experiments in pricing and network management. This is particularly apparent, given the lengthy history of broadband deployment reaching ever more consumers at ever lower cost per megabit, even in the absence of Title II regulation.
As repeatedly noted in this docket, U.S. broadband providers were able to support large increases in network load during the COVID-19 pandemic, and have been pressing forward to provide hard-to-reach potential customers with service tailored to their needs, whether through cable, fiber, satellite, fixed-wireless, or mobile connections, all without a Title II regime.
By contrast, applying Title II to broadband providers risks ossifying the existing set of technical and business-model parameters and undermining the internet’s fundamental dynamism. The ability to adapt to new applications and users has long driven the internet’s success. Declaring the current network architecture complete and frozen under Title II is at odds with this reality. In essence, openness requires embracing ongoing change, not freezing the status quo.
As noted extensively by multiple commentators in this proceeding, the rationale for applying Title II is rooted in the precautionary principle. This weak basis does not warrant preemptively imposing blanket prohibitions. A better approach would be to employ an error-cost framework that minimizes the total risk of either over- or under-inclusive rules, and to eschew proscriptive ex ante mandates.
Technology markets tend to be highly dynamic and to evolve rapidly. Which technology best fits particular deployment and usage needs, particular network designs, and the business relationships among different kinds of providers is determined by context, and by complex interactions between long-term investment and fast-changing exigencies that demand flexibility.
What this means here is that the Commission should not promulgate policies that would presumptively disallow so-called blocking, throttling, and paid prioritization. As detailed below, in most instances, there is no way to prohibit these practices ex ante without the risk of inducing a chilling effect on many pro-consumer business arrangements. Similarly, the General Conduct Standard threatens to foster an open-ended, difficult-to-predict regulatory environment that would chill innovation and harm consumers.
Going forward, the Commission should avoid Title II reclassification and instead hew to the policy that has guided it since the 2018 Order. Where problems occur, ex post enforcement of existing competition and consumer-protection laws provides enforcers with the tools sufficient to guarantee a truly open internet.
The Commission imposed Title II regulations on broadband internet with its 2015 Open Internet Order.[2] Title II regulation was repealed with the 2018 Restoring Internet Freedom Order.[3] Thus, it would be reasonable to see this latest Title II proposal as a do-over of the 2015 Order. Indeed, the Commission describes its proposal as a “return to the basic framework the Commission adopted in 2015.”[4] Attorneys at Davis Wright Tremaine say the proposed rules are “effectively identical” to the Open Internet Order.[5] The American Enterprise Institute’s Daniel Lyons invokes the late Justice Antonin Scalia’s observation of bad policy as a “ghoul in a late night horror movie that repeatedly sits up in its grave and shuffles abroad, after being repeatedly killed and buried.”[6]
In ex parte meetings with FCC commissioners in 2017, ICLE concluded that the 2015 Order was not supported by a “reasoned analysis.”
We stressed that we believe that Congress is the proper place for the enactment of fundamentally new telecommunications policy, and that the Commission should base its regulatory decisions interpreting Congressional directives on carefully considered empirical research and economic modeling. We noted that the 2015 OIO was, first, a change in policy improperly initiated by the Commission rather than by Congress. Moreover, even if some form of open Internet rules were properly adopted by the Commission, the process by which it enacted the 2015 OIO, in particular, demonstrated scant attention to empirical evidence, and even less attention to a large body of empirical and theoretical work by academics. The 2015 OIO, in short, was not supported by reasoned analysis. In particular, the analysis offered in support of the 2015 OIO ignores or dismisses crucial economics literature, sometimes completely mischaracterizing entire fields of study as a result. It also cherry picks from among the comments in the docket, ignoring or dismissing without analysis fundamental issues raised by many commenters. Tim Brennan, chief economist of the FCC during the 2015 OIO’s drafting, aptly noted that “[e]conomics was in the Open Internet Order, but a fair amount of the economics was wrong, unsupported, or irrelevant.”[7]
We stressed that we believe that Congress is the proper place for the enactment of fundamentally new telecommunications policy, and that the Commission should base its regulatory decisions interpreting Congressional directives on carefully considered empirical research and economic modeling. We noted that the 2015 OIO was, first, a change in policy improperly initiated by the Commission rather than by Congress. Moreover, even if some form of open Internet rules were properly adopted by the Commission, the process by which it enacted the 2015 OIO, in particular, demonstrated scant attention to empirical evidence, and even less attention to a large body of empirical and theoretical work by academics. The 2015 OIO, in short, was not supported by reasoned analysis.
In particular, the analysis offered in support of the 2015 OIO ignores or dismisses crucial economics literature, sometimes completely mischaracterizing entire fields of study as a result. It also cherry picks from among the comments in the docket, ignoring or dismissing without analysis fundamental issues raised by many commenters. Tim Brennan, chief economist of the FCC during the 2015 OIO’s drafting, aptly noted that “[e]conomics was in the Open Internet Order, but a fair amount of the economics was wrong, unsupported, or irrelevant.”[7]
With the current Title II NPRM, it appears the Commission is again ignoring or dismissing fundamental issues without conducting sufficient analysis. Moreover, the see-sawing between imposition, repeal, and possible re-imposition of Title II regulations invites scrutiny under the Administrative Procedures Act, especially in light of the 5th U.S. Circuit Court of Appeals’ decision in Wages & White Lion Invs. LLC v. FDA.
The change-in-position doctrine requires careful comparison of the agency’s statements at T0 and T1. An agency cannot shift its understanding of the law between those two times, deny or downplay the shift, and escape vacatur under the APA. As the D.C. Circuit put it in the canonical case: “[A]n agency changing its course must supply a reasoned analysis indicating that prior policies and standards are being deliberately changed, not casually ignored, and if an agency glosses over or swerves from prior precedents without discussion it may cross the line from the tolerably terse to the intolerably mute.”[8]
As the NCTA notes in its comments:
“[A]n agency regulation must be designed to address identified problems.” Accordingly, “[r]ules are not adopted in search of regulatory problems to solve”; rather, “they are adopted to correct problems with existing regulatory requirements that an agency has delegated authority to address.” And because the reclassification of broadband would reverse previous agency decision-making, the Commission is obligated to show not only that it is addressing an actual problem, but that it reasonably believes the new rules “to be better” and has not “ignore[d] its prior factual findings” underpinning the existing rules or the “reliance interests” that have arisen from those rules. That is not possible here.[9]
The NPRM identifies two reasons for re-imposing Title II classification on broadband internet that mirror the reasons in the 2015 Order: (1) ensuring “internet openness” and (2) consumer protection. The NPRM also identifies several new justifications for reimposing Title II:
As we discuss below, these justifications do not stand up to scrutiny.
Beyond the obvious national-comparison data demonstrating that U.S. networks already outperform other countries, there are many problems with relying on internet-usage patterns during and subsequent to the COVID-19 pandemic as justification for imposing Title II regulations on broadband providers.
The NPRM concludes: “While Internet access has long been important to daily life, the COVID-19 pandemic and the rapid shift of work, education, and health care online demonstrated how essential broadband Internet connections are for consumers’ participation in our society and economy.”[15] It further notes: “In the time since the RIF Order, propelled by the COVID-19 pandemic, BIAS has become even more essential to consumers for work, health, education, community, and everyday life,”[16] and that this importance “has persisted post-pandemic.”[17] The Commission “believe[s] the COVID-19 pandemic dramatically changed the importance of the Internet today, and seek[s] comment on our belief.”[18]
In our initial comments on this matter, ICLE reported that, by most measures, U.S. broadband competition is already vibrant, and has improved dramatically since the COVID-19 pandemic.[19] For example, since 2021, more households are connected to the internet; broadband speeds have increased while prices have declined; more households are served by more than a single provider; and new technologies—such as satellite and 5G—have served to expand internet access and intermodal competition among providers.[20]
In these reply comments, we agree with the Commission’s assertion that internet access “has long been important to daily life.” We do, however, disagree in some key respects with the Commission’s conclusion that internet access “has become even more essential,” and we question whether the pandemic has actually “dramatically changed the importance of the Internet today.” At the risk of splitting hairs, the Commission is unclear in how it defines “post-pandemic.” On April 10, 2023, President Biden signed H.J. Res. 7, terminating the national emergency related to the COVID-19 pandemic effective May 11, 2023. Thus, by the administration’s reckoning, the United States is only about nine months into the “post-pandemic” era. It is mind-boggling how the Commission could draw any firm conclusions about post-pandemic internet usage, given the dearth of information regarding internet usage over such a short period.
The NPRM attempts to support the Commission’s conclusion by citing a 2021 Pew Research Center survey “showing that high speed Internet was essential or important to 90 percent of U.S. adults during the COVID-19 pandemic.”[21] While we do not dispute Pew’s research, it seems the Commission has cherry picked from only this single report. Notably, an earlier Pew survey reported in 2017 that 90% of respondents also said high-speed internet access was essential or important.[22] By this measure, it appears the importance of the internet has not changed since 2017, let alone changed dramatically. Moreover, a COVID-era Pew survey reported that 62% of respondents said “the federal government does not have” responsibility to ensure all Americans have a high-speed internet connection at home.[23]
To support its assertion that this heightened internet usage “has persisted post-pandemic,” the Commission cites research from OpenVault, reporting that the share of subscribers using 533 GB or more of bandwidth per-month increased from 10% to almost 50% between 2017 and 2022.[24] The report cited in the NPRM, however, concludes that one factor driving the acceleration of data usage is the trend among many usage-based billing operators to provide unlimited data to their gigabit subscribers.[25] It’s more than a little ironic that providers have rolled out a policy that encourages increased data usage, only to see the FCC invoke the increased usage as a justification for regulating the policies that increased that usage. Such reasoning suggests that the Commission’s overworked “virtuous cycle” concept is nothing more than a shibboleth to be invoked only to buttress the Commission’s proposals.[26]
There are other areas in which the Commission seems to misunderstand the available data and how it affects its conclusions. Table 1 provides average U.S. broadband data usage reported by OpenVault for the third quarter of the years 2018 through 2023.[27] While it is true that internet usage increased by 40% in the first year of the pandemic, the increase in subsequent years (11-14%) was smaller than the average pre-pandemic increase of 20%. The average annual increase over the six years in Table 1 is 19%. It is simply too soon to tell whether COVID-19 caused a permanent shift in the rate of increase of internet usage.
To further support its assertion, the Commission reports that usage per-subscriber smartphone monthly data rose by 12% between 2020 and 2021.[28] But these years were directly in the middle of the pandemic, rendering this information useless for assessing post-pandemic mobile data usage. Information from CTIA indicates that, from 2016, wireless data traffic increased an average of 28% annually, from 13.7 trillion MB to 37.1 trillion MB.[29] By contrast, from 2019 to 2022, traffic increased by an average of only 19% a year, to 73.7 trillion MB. It appears that, rather than COVID-19 being associated with mobile data use increasing at a faster rate, the pandemic was actually associated with usage increasing at a slower rate.
Thus, not only did the performance of U.S. broadband providers during the pandemic demonstrate that Title II regulations were unnecessary, but the data that the Commission cites in this proceeding on this point completely undermine its case.
The Commission invokes “tens of billions of dollars” of congressional appropriations on internet deployment and access as a reason to impose utility-style regulation on the industry.[30] The NPRM identifies the following bills that appropriated such funds:[31]
As we note in our comments, the legislative process would have been a perfect time for Congress to legislate net neutrality or Title II regulation, as it debated four bills that proposed spending tens of billions of dollars to encourage internet adoption and broadband buildout for the next decade or so.[32] But no such provisions were included in any of these bills, as noted in comments from the Advanced Communications Law & Policy Institute:
The Congressional record for each of these bills appears to be devoid of discussion about the inadequacy of the prevailing regulatory framework or a need to reclassify broadband. In addition, it does not appear that any bills or amendments were proposed that sought to impose common carrier regulation on broadband ISPs. An amendment that was included in the final IIJA prohibited the NTIA from engaging in rate regulation as part of BEAD. Rate regulation is not permitted under the Title I regulatory framework but would be theoretically possible under Title II. This provides additional evidence that Congress was cognizant of the regulatory environment in which it was legislating.[33]
The fact that Congress had numerous opportunities in recent years to mandate Title II regulations suggests the Commission’s proposal is likely at odds with congressional intent and that the FCC should refrain from such excessive regulatory intervention. At the very least, the pattern of congressional spending in no way supports the presumption that Title II reimposition is important, given federal outlays.
The Commission asserts that Title II reclassification “will strengthen the Commission’s ability to secure communications networks and critical infrastructure against national security threats.”[34] The NPRM concludes, “developments in recent years have highlighted national security and public safety concerns … ranging from the security risks posed by malicious cyber actors targeting network equipment and infrastructure to the loss of communications capability in emergencies through service outages.”[35] The Commission “believe[s] that blocking, throttling, paid prioritization, and other potential conduct have the potential to impair public safety communications in a variety of circumstances and therefore harm the public.”[36]
Comments from the Free State Foundation point out the obvious: The Commission has not identified any specific national-security threats and has not articulated any way in which Title II regulations would address these threats.
Unsurprisingly, the Notice fails to articulate any specific threats of harm to national security and public safety that Title II regulation would alleviate. And the Notice provides no basis for concluding that such regulation will improve broadband cybersecurity. If security and safety truly are vulnerable, why has the Commission kept that from public knowledge until the rollout of its regulatory proposal.[37]
Comments from the CPAC Center for Regulatory Freedom suggest that the Commission’s assertions regarding national-security threats are likely based on the Annual Threat Assessment of the U.S. intelligence community.[38] The latest Threat Assessment identifies potential cyber threats from China, Russia, Iran, North Korea, and transnational criminal organization (TCOs).[39] The 2017 Threat Assessment, however, identified the same sources of potential threats, with TCOs divided into terrorists and criminals.[40] Broadly speaking, the United States faces cyber threats from the same sources today that it did when Title II was repealed with the RIF Order.
The “developments” identified by the Commission are not new. The 2017 Threat Assessment reported that: “Russian actors have conducted damaging and disruptive cyber attacks, including on critical infrastructure networks.”[41] The assessment also reported an Iranian intrusion into the industrial control system of a U.S. dam and criminals’ deployment of ransomware targeting the medical sector.[42] The Commission offers no evidence that these threats have changed sufficiently since the 2018 Order to justify a change in national-security posture with respect to regulating broadband internet under Title II.
The Free State Foundation criticizes the Commission’s national-security and public-safety justifications as mere speculation:
But now the Notice suddenly makes national security and public safety into primary claimed justifications for reimposing public utility regulation on broadband Internet services. Over a dozen paragraphs in the draft notice address speculated future vulnerabilities in network management operations, functionalities, and equipment.[43]
Not only are the Commission’s asserted network vulnerabilities speculative, but so are the conclusions regarding Title II regulation’s ability to address them. The NPRM “tentatively” concludes reclassification would “enhance” the FCC’s ability and efforts to safeguard national security, protect national defense, protect public safety, and protect the nation’s communications networks from entities that pose threats to national security and law enforcement.[44] Yet, it is mute on exactly how imposing Title II obligations on broadband providers would grant or enhance its powers to combat cyber-crime.
Indeed, as noted by CTIA, it is likely that many data services used in public safety would not be subject to Title II regulations:
Public Safety: The 2020 RIF Remand Order demonstrated that public safety entities often use enterprise-level quality-of-service dedicated public safety data services rather than BIAS. Title II regulation of BIAS therefore would not reach many of the data services relied on by public safety. In contrast, as the 2020 RIF Remand Order showed, the Title I framework for BIAS benefits virtually all services that advance public safety—including consumer access to information and to first responders over BIAS connectivity—as a result of the additional network investment that is better driven by Title I.[45]
FirstNet is one such service that would not be subject to Title II regulation.
FirstNet is public safety’s dedicated, nationwide communications platform. It is the only nationwide, high-speed broadband communications platform dedicated to and purpose-built for America’s first responders and the extended emergency response community. Today, FirstNet covers all 50 states, the District of Columbia, and the five U.S. territories. As of September 30, 2023, 27,000 public safety agencies and direct-support organizations use FirstNet, representing more than 5.3 million connections on the network. FirstNet is designed for all first responders in the country—including law enforcement, EMS personnel, firefighters, 9-1-1 communicators, and emergency managers. It enables subscribers to maintain always-on priority access; FirstNet users never compete with commercial traffic for bandwidth, and the network does not throttle them anywhere in the country in any circumstances. FirstNet is built and operated in a public-private partnership between AT&T and the First Responder Network Authority—an independent agency within the federal government. Following an open and competitive RFP process, the federal government selected AT&T to build, operate, and evolve FirstNet for 25 years. Custom FirstNet State Plans were developed for the country’s 56 jurisdictions, which ultimately all chose to opt in.[46]
FirstNet is public safety’s dedicated, nationwide communications platform. It is the only nationwide, high-speed broadband communications platform dedicated to and purpose-built for America’s first responders and the extended emergency response community. Today, FirstNet covers all 50 states, the District of Columbia, and the five U.S. territories. As of September 30, 2023, 27,000 public safety agencies and direct-support organizations use FirstNet, representing more than 5.3 million connections on the network. FirstNet is designed for all first responders in the country—including law enforcement, EMS personnel, firefighters, 9-1-1 communicators, and emergency managers. It enables subscribers to maintain always-on priority access; FirstNet users never compete with commercial traffic for bandwidth, and the network does not throttle them anywhere in the country in any circumstances.
FirstNet is built and operated in a public-private partnership between AT&T and the First Responder Network Authority—an independent agency within the federal government. Following an open and competitive RFP process, the federal government selected AT&T to build, operate, and evolve FirstNet for 25 years. Custom FirstNet State Plans were developed for the country’s 56 jurisdictions, which ultimately all chose to opt in.[46]
TechFreedom also notes that Title II does not apply to data services marketed to government users.[47] The group’s comments dispel the myth that, if only the FCC had Title II authority, the legendary and nearly apocryphal Santa Clara fire-department saga could have been avoided.
For this rationale, FCC Chair Jessica Rosenworcel relies heavily on a single incident. In 2018, the Republican-led FCC returned broadband to Title I, the lighter regulatory approach. Months later, “when firefighters in Santa Clara, California, were responding to wildfires they discovered the wireless connectivity on one of their command vehicles was being throttled,” Rosenworcel claims. “With Title II classification, the FCC would have the authority to intervene,” she said separately. She is mistaken. Title II doesn’t apply to data plans marketed to government users; both the 2015 Order and the NPRM define BIAS as a “mass-market retail service” offered “directly to the public.” Even if Title II had applied, the FCC’s rules wouldn’t have addressed the unique confusion that occurred in Santa Clara, which involved the fire department buying a plan that was obviously inadequate for its needs, Verizon recommending a better plan, and the department refusing. But that isn’t really the point. The point is that the FCC needed to shift its speculation about the possible impacts of blocking, throttling, or discrimination to something that seemed more tangible than abstractions like “openness.” Invoking the Santa Clara kerfuffle may make the stakes seem higher, but it won’t change how courts apply the major question doctrine.[48]
For this rationale, FCC Chair Jessica Rosenworcel relies heavily on a single incident. In 2018, the Republican-led FCC returned broadband to Title I, the lighter regulatory approach. Months later, “when firefighters in Santa Clara, California, were responding to wildfires they discovered the wireless connectivity on one of their command vehicles was being throttled,” Rosenworcel claims. “With Title II classification, the FCC would have the authority to intervene,” she said separately.
She is mistaken. Title II doesn’t apply to data plans marketed to government users; both the 2015 Order and the NPRM define BIAS as a “mass-market retail service” offered “directly to the public.” Even if Title II had applied, the FCC’s rules wouldn’t have addressed the unique confusion that occurred in Santa Clara, which involved the fire department buying a plan that was obviously inadequate for its needs, Verizon recommending a better plan, and the department refusing. But that isn’t really the point. The point is that the FCC needed to shift its speculation about the possible impacts of blocking, throttling, or discrimination to something that seemed more tangible than abstractions like “openness.” Invoking the Santa Clara kerfuffle may make the stakes seem higher, but it won’t change how courts apply the major question doctrine.[48]
It beggars belief that the Commission would impose regulations with vast economic and political significance based on speculative threats and only tentative inklings about whether and how Title II could “enhance” the FCC’s ability and efforts to address those threats. In short, before asserting public safety as a basis for imposing Title II, the Commission needs to produce evidence demonstrating both the existence of such a problem (beyond the weak anecdote of the Santa Clara incident), as well as evidence demonstrating that the vast majority of services necessary for public safety would even be subject to Title II.
The NPRM reports that, following the 2018 Order, “[a] number of states quickly stepped in to fill that void, adopting their own unique regulatory approaches” toward broadband internet.[49] The Commission claims “establishing a uniform, national regulatory approach” is “critical” to “ensure that the Internet is open and fair.”[50] Toward that end, the FCC now indicates it intends to pre-empt these state laws with Title II regulation and “seek[s] comment on how best to exercise [its] preemption authority.”[51] Crucially, the NPRM asks whether the proposed Title II regulations should be treated as a “floor” or a “ceiling” with respect to state or local regulations.[52]
While we believe that Title II regulation is unnecessary, unwarranted, and likely harmful to both providers and consumers, we agree with NCTA’s conclusion that, if the Commission imposes Title II regulations, those rules should be imposed and enforced uniformly nationwide as both a “floor” and a “ceiling”:
At the same time, the NPRM appropriately recognizes that broadband is an inherently interstate service, and it is critical that the states be preempted from adopting separate requirements addressing ISPs’ provision of broadband. The Commission has long recognized, on a bipartisan basis, that broadband is a jurisdictionally interstate service regardless of its regulatory classification—and the Commission can and should confirm that determination. Consistent with the initial draft of the NPRM, and contrary to any suggestion in the released version, the federal framework should not serve as a “floor” on top of which states may layer additional requirements or prohibitions. Rather, it should serve as both a floor and a ceiling. A uniform national approach is particularly vital today, as states have shown a growing desire to adopt measures that conflict with federal broadband regulation precisely because they disagree with and wish to undermine federal policy choices.[53]
If the Commission imposes Title II regulation as only a “floor,” rather than both a “floor” and a “ceiling,” then the rules will do little to eliminate the “patchwork” of state regulations about which the Commission has “expressed concern.”[54] Indeed, it is likely that the “patchwork” would become even more “patchy.” It is also likely a two-tier system of regulation would arise, much as with motor-vehicle emissions, where Environmental Protection Agency rules govern emissions for some states, but 18 other states follow California’s more stringent standards.[55] The result is a patchwork of state laws with a mishmash of emissions standards. This would be unacceptable, as the Second Circuit ruled in American Booksellers Foundation:
[A]t the same time that the internet’s geographic reach increases Vermont’s interest in regulating out-of-state conduct, it makes state regulation impracticable. We think it likely that the internet will soon be seen as falling within the class of subjects that are protected from State regulation because they “imperatively demand[] a single uniform rule.”[56]
We continue to oppose the imposition of Title II on broadband providers. With that said, whatever regulatory course the Commission charts, it is crucial that it fully preempt state law so as to avoid creating a thicket of contradictory, economically inefficient requirements that will generate unnecessary red tape on broadband providers and ultimately lead to slower deployment.
Before discussing the NPRM’s particulars, it is important to note that regulatory humility is crucial when dealing with industries and firms that develop and deploy highly innovative technologies.[57] It remains a daunting challenge to forecast the economics of technological innovation on the economy and society. The potential for unforeseen and unintended consequences—particularly in hindering the development of new ways to serve underserved consumers—is considerable. Such regulatory actions could have profound and far-reaching effects. In particular, it can serve to eliminate many of the dimensions across which providers compete. The result would be to remove much of the product differentiation among competitors and turn broadband service into something more like a commodity service.
The Commission’s proposed Title II regulation of broadband internet seeks to prohibit blocking, throttling, or engaging in paid or affiliated prioritization arrangements, and would impose a “general conduct standard” that it claims would prohibit “interference or unreasonable disadvantage to consumers or edge providers.”[58] But the Commission has not identified any actual harms from these practices or any actual benefits that would flow from banning or limiting them, or from placing deployment under a broad discretionary standard. Indeed, the NPRM identifies only four concrete examples of alleged blocking or throttling.[59]
The first two examples are now more than 15 years old and provide no useful information regarding current or future conduct by broadband-internet-service providers. The third example is of questionable reliability. The fourth example is of a policy that was never fully implemented and was, indeed, rectified because of the pressures of market demand.
The Commission seems to be missing, ignoring, or dismissing a key fact: The powers it seeks under Title II are unnecessary and unwarranted, and—in many cases—it already has the power to deter harmful conduct. For example, Scalia Law Clinic finds “no credible evidence of internet service providers engaging in blocking, throttling, or anticompetitive paid prioritization.”[68]
TechFreedom notes:
The FCC could still police surreptitious blocking, throttling, or discrimination among content, services, and apps—but then, the Federal Trade Commission can already do that; it just hasn’t needed to.[69]
ITIF’s comments explain how the 2018 Order’s transparency requirements have stifled incentives to engage in undisclosed blocking, throttling, or paid prioritization, to the point that the largest providers have publicly indicated they don’t—and won’t—engage in such practices:
Harmful violations of basic net neutrality principles are exceedingly rare, and there is no evidence of them since the 2018 reapplication of the Title I regime the FCC now looks to unwind. Much of the heavy lifting of the bright line requirements is already functionally in practice. Many major ISPs have publicly foresworn blocking, throttling, or paid prioritization. The RIF’s transparency requirements ensure that these practices cannot happen in secret. Therefore, to the extent a flat ban might deter the few harmful attempts that might get through, its benefits would likely be counterbalanced by the broader chilling effects of Title II.[70]
As much as the Commission would like to expand its reach across other agencies, CTIA notes that the Federal Trade Commission (FTC) has been “active” in monitoring providers’ practices:
In any event, BIAS providers have made meaningful commitments to their customers, in keeping with the transparency rule, not to block or throttle or engage in paid prioritization, which the Federal Trade Commission (“FTC”) can enforce under many circumstances. And the FTC has been active in scrutinizing broadband provider practices following adoption of the 2018 RIF Order.[71]
As we note in our comments, the U.S. broadband industry is both competitive and dynamic. This vigorous competition forces providers to align their interests with those of their customers, both consumers and edge providers, as noted by CTIA:
Despite the Notice’s suggestion, regulation in a handful of states has not affected what these thousands of BIAS providers do, because it remains in their interest to offer customers service that does not block, throttle, or engage in paid prioritization. In addition, the Notice does not identify a list of harms arising since the 2018 RIF Order, and even Internet openness allegations against BIAS providers are, for all practical purposes, non-existent.[72]
More broadly, a survey of the research summarized by Roslyn Layton and Mark Jamison concludes that, with the exception of some bans on blocking, “net neutrality” regulations would do more harm than good to both consumers and providers:
But in general, the literature finds that regulations would hinder investment and harm consumers, but not under all conditions. The exception is for traffic blocking, where there is broad agreement that consumers are worse off with blocking. The literature supported the conclusion that paid prioritisation would lead to lower retail prices for broadband access and provide financial resources for network expansion. Jamison concludes that because the scenarios that give different answers are each feasible and may exist at different times, it seems that policy should favour applying competition and consumer protection laws, which can be adapted to individual cases, rather than ex ante regulations, which necessarily apply broadly[73]
And as CTIA notes:
The practical benefit of rules banning blocking, throttling, and paid prioritization would be negligible, as no such behavior exists, but the costs of reclassification to Title II would be substantial, as the switch to Title II regulation raises the specter of further regulation at the Commission’s whim, generating regulatory uncertainty that harms the Commission’s stated goals.[74]
In summary, the Commission has only speculated about whether blocking, throttling, or paid or affiliated prioritization currently exists, or would exist in the future without Title II regulation. It further speculates with respect to potential harms, and ignores or dismisses the benefits from these practices. In reality, there is no evidence to suggest that there is systematic abuse along these lines.
Tim Wu, widely credited with coining the term “net neutrality,” has argued that even a “zero-pricing rule” should permit prioritization:
As a result, we do not feel as though a zero-pricing rule should prohibit this particular implementation, as here content providers are not forced to pay a termination fee to access users.[76]
Moreover, it is important to note that not all innovation comes from small, startup edge providers. As economists Peter Klein and Nicolai Foss have pointed out:
The problem with an exclusive emphasis on start-ups is that a great deal of creation, discovery, and judgment takes place in mature, large, and stable companies. Entrepreneurship is manifest in many forms and had many important antecedents and consequences, and we miss many of those if we look only at start-up companies.[77]
Adopting a regulatory schema that prioritizes startup innovation (although, as noted, it likely doesn’t even do that) at the expense of network innovation—in part, because network operators aren’t small startups—may materially detract from consumer welfare and the overall rate of innovation.
In effect, net neutrality claims that the only proper price to charge content providers for access to ISPs and their subscribers is zero. As an economic matter, that is possible. But it most certainly needn’t be so.
At the most basic level, it is simply not demonstrably the case that content markets themselves are best served by being directly favored, to the exclusion of infrastructure. The two markets are symbiotic, in that gains for one inevitably produce gains for the other (i.e., increasing quality/availability of applications/content drives up demand for broadband, which provides more funding for networking infrastructure, and increased bandwidth enabled by superior networking infrastructure allows for even more diverse and innovative applications/content offerings to utilize that infrastructure). Absent an assessment of actual and/or likely competitive effects, it is impossible to say ex ante that consumer welfare in general—and with regard to content, in particular—is best served by policies intended to encourage innovation and investment in one over the other.
To the extent that new entrants might threaten ISPs’ affiliated content or services, the Commission’s proposal is on somewhat more solid economic ground. But such a risk justifies, at most, only a limited rule that creates a rebuttable presumption of commercial unreasonableness. Even then, the logic behind such a rule tracks precisely the well-established antitrust law and economics of vertical foreclosure, which neither justifies a presumption (even a rebuttable one), nor the imposition of a targeted regulation beyond the antitrust laws themselves.[78]
The use of paid prioritization as a means for ISPs to recover infrastructure costs raises the fundamental empirical question that has largely remained unaddressed: whether the benefits of mandated “openness” outweigh the forsaken benefits to consumers, infrastructure investment, and competition from prohibiting discrimination.
A related question was considered by Tim Wu, who acknowledged that there were inherent tradeoffs in mandating neutrality. Among other things, prohibiting content prioritization (thus precluding user subsidies) raises consumer prices:
Of course, for a given price level, subsidizing content comes at the expense of not subsidizing users, and subsidizing users could also lead to greater consumer adoption of broadband. It is an open question whether, in subsidizing content, the welfare gains from the invention of the next killer app or the addition of new content offset the price reductions consumers might otherwise enjoy or the benefit of expanding service to new users.[79]
Policy advocates that support net neutrality routinely misunderstand this dynamic, and instead seem to presume that discrimination by ISPs can only harm networks. As Public Knowledge has claimed, for instance:
If Verizon – or any ISP – can go to a website and demand extra money just to reach Verizon subscribers, the fundamental fairness of competing on the internet would be disrupted. It would immediately make Verizon the gatekeeper to what would and would not succeed online. ISPs, not users, not the market, would decide which websites and services succeed. * * * Remember that a “two-sided market” is one in which, in addition to charging subscribers to access the internet, ISPs get to charge edge providers on the internet to access subscribers as well.[80]
If Verizon – or any ISP – can go to a website and demand extra money just to reach Verizon subscribers, the fundamental fairness of competing on the internet would be disrupted. It would immediately make Verizon the gatekeeper to what would and would not succeed online. ISPs, not users, not the market, would decide which websites and services succeed.
* * *
Remember that a “two-sided market” is one in which, in addition to charging subscribers to access the internet, ISPs get to charge edge providers on the internet to access subscribers as well.[80]
And elsewhere:
Comcast’s market power affords it advantages vis-à-vis recipients of Internet video content as well as creators of Internet video content. For example, Comcast will be able to distribute NBC content through its Xfinity online offering without having to pay itself license fees. This two-sided market advantage results from Comcast’s position as a gatekeeper: it provides access to customers for content creators and it provides access to content for customers. Control over both directions of this transaction allows Comcast the opportunity for anticompetitive behavior against either content creators or consumers, or both simultaneously.[81]
Comcast’s market power affords it advantages vis-à-vis recipients of Internet video content as well as creators of Internet video content. For example, Comcast will be able to distribute NBC content through its Xfinity online offering without having to pay itself license fees.
This two-sided market advantage results from Comcast’s position as a gatekeeper: it provides access to customers for content creators and it provides access to content for customers. Control over both directions of this transaction allows Comcast the opportunity for anticompetitive behavior against either content creators or consumers, or both simultaneously.[81]
These comments fundamentally misunderstand the economics of two-sided markets: Rather than facilitating anticompetitive conduct or enabling greater exploitation of both sides of the market, two-sided markets facilitate efficient but otherwise-difficult economic exchange, and nearly all such markets incorporate subsidies from one side of the market to the other—not excessive profiteering by the platform.[82] The “two-sidedness” of markets does not inherently confer increased ability to earn monopoly profits. In fact, the literature suggests that the availability of subsidization reduces monopoly power and increases welfare. In the broadband context, as one study notes:
Imposing rules that prevent voluntarily negotiated multisided prices will never achieve optimal market results, and…can only lead to a reduction in consumer welfare.[83]
Business models frequently coexist where different parties pay for the same or similar services. Some periodicals are paid for by readers and offer little or no advertising; others charge a subscription and offer paid ads; and still others are offered for free, funded entirely by ads. All of these models work. None is necessarily “better” than another. Indeed, each model may be better than the others under each model’s idiosyncratic product and market conditions. There is no reason the same wouldn’t be true for broadband and content.
What’s more, the literature directly contradicts the assumption that net neutrality improves consumer welfare or encourages infrastructure investment. In fact, the opposite appears to be true, and non-neutrality actually generally benefits both consumers and content providers:
Our main result is that a switch from the net neutrality regime to the discriminatory regime would be beneficial in terms of investments, innovation and total welfare. First, when ISPs offer differentiated traffic lanes, investment in broadband capacity increases. This is because the discriminatory regime allows ISPs to extract additional revenues from CPs [Content Providers] through the priority fees. Second, innovation in services also increases: some highly congestion-sensitive CPs that were left out of the market under net neutrality enter when a priority lane is proposed. Overall, discrimination always increases total welfare….[84]
Another paper finds the same result, except in a small subset of cases:
Our results suggest that investment incentives of ISPs, which are important drivers for innovation and deployment of new technologies, play a key role in the net neutrality debate. In the non-neutral regime, because it is easier to extract surplus through appropriate CP pricing, our model predicts that ISPs’ investment levels are higher; this coincides with the predictions made by the defendants of the non-neutral regime. On the other hand, because of platforms’ monopoly power over access, CP participation can be reduced in the non-neutral regime; this coincides with the predictions made by the defendants of the neutral regime. We find that in the walled-garden model, the first effect is dominant and social welfare is always larger in the non-neutral model. While this still holds for many instances of the priority-lane model, the neutral regime is welfare superior relative to the non-neutral regime when CP heterogeneity is large.[85]
The economic literature does, however, provide some support for imposing a minimum-quality standard:
We extend our baseline model to account for the possibility that ISPs engage in quality degradation or “sabotage” of CP’s traffic. We find that sabotage never arises endogenously under net neutrality. In contrast, under the discriminatory regime, ISPs may have an incentive to sabotage the non-priority lane to make the priority lane more valuable, and hence, to extract higher revenues from the CPs that opt for priority. Any level of sabotage is detrimental for total welfare, and therefore, a switch to the discriminatory regime would still require some regulation of traffic quality.[86]
Even here, however, the analysis does not consider disclosure-based (transparency) restraints on quality to be degradation, and it is entirely possible that a transparency rule (or simply the risk of public disclosure, even without such a rule) would be sufficient to deter quality degradation.
In the end, the literature to date supports, at most, a minimum-quality requirement and perhaps only a transparency requirement; it does not support mandated nondiscrimination rules.
The Commission “does not dispute” that there may be benefits associated with paid prioritization.[87] Yet it “tentatively” concludes that the “potential” harms “outweigh any speculative benefits.”[88] To be blunt, the Commission is just guessing, as summarized by TPI:
The argument that paid prioritization was necessarily a net harm to society was always an unproven hypothesis. The test still has not been conducted, making it impossible to draw the conclusion that it would necessarily be bad.[89]
Indeed, both the economics of nonlinear pricing, and the evidence already added to the record, demonstrate that the Commission should not ban paid prioritization.
First, as we have previously noted before the Commission, simply banning paid prioritization does not remove the need to ration broadband in a resource-constrained environment:
Scarcity on the Internet (as everywhere else) is a fact of life — whether it arises from network architecture, search costs, switching costs, or the fundamental limits of physics, time and attention. The need for some sort of rationing (which implies prioritization) is thus also a fact of life. If rationing isn’t performed by the price mechanism, it will be performed by something else. For startups, innovators, and new entrants, while they may balk at paying for priority, the relevant question, as always, is “compared to what?” There is good reason to think that a neutral Internet will substantially favor incumbents and larger competitors, imposing greater costs than would paying for prioritization. Far from detracting from the Internet’s value, including its value to the small, innovative edge providers so many net neutrality proponents are concerned about, prioritization almost certainly increases it.[90]
Essentially, banning “paid prioritization” does nothing to actually remove the need for prioritization. Instead, it merely moves the locus of decision-making out of the scope of a market made of arm’s-length transactions, and puts it into the hands of a few individuals at the Commission.
Broadband-internet access is a valuable service that requires ongoing investments and maintenance. Determining who pays for broadband access is a complex economic issue. In multi-sided markets like broadband, rigid one-size-fits-all pricing models are often inadequate. Instead, experimentation and flexibility are needed to find optimal and sustainable cost allocations between consumers and industry. Multiple business models can reasonably coexist, with costs shared in various ways.[91] Overall, broadband pricing should balance economic sustainability, consumer affordability, and the public interest.
Pricing models across industries demonstrate that there is no single best approach. For example, as with periodicals (discussed above), some websites rely entirely on subscription fees, others use a mix of subscriptions and advertising, and some are given away for free and supported solely by ads. All of these models can work, and all may appeal to different consumer segments. Similarly, for emerging data and content services that intend to attract new users, pricing flexibility and experimentation are needed. There is no one-size-fits-all model inherently superior in reaching consumers or promoting consumer welfare. The optimal strategy depends on market dynamics and consumer demand, which are uncertain and evolving in new markets. Rigid pricing mandates risk stifling innovation and growth.
Moreover, the assumption that paid prioritization inherently favors incumbents over new entrants is flawed. In many cases, new entrants are at a disadvantage with respect to incumbents. Incumbents may have any number of many advantages, including brand loyalty, mature business processes, economies of scale, etc. But prioritization can reduce the scope and scale of some of these advantages:
[P]remium service stimulates innovation on the edges of the network because lower-value content sites are better able to compete with higher-value sites with the availability of the premium service. The greater diversity of content and the greater value created by sites that purchase the premium service benefit advertisers because consumers visit content sites more frequently. Consumers also benefit from lower network access prices.[92]
Thus, there must be some evidence presented that paid prioritization benefits incumbents at the expense of new entrants before this claim can be taken seriously. There may be some cases where this is so, but it’s absolutely not a warranted presumption, and should be demonstrated as a realistic harm before it is categorically forbidden.
As noted, non-neutrality offers the prospect that a startup might be able to buy priority access to overcome the inherent disadvantage of newness, and to better compete with an established company. Neutrality, on the other hand, renders that competitive advantage unavailable; the baseline relative advantages and disadvantages remain—all of which helps incumbents, not startups. With a neutral internet, the incumbent competitor’s in-built advantages can’t be dissipated by a startup buying a favorable leg-up in speed. The Netflixes of the world will continue to dominate.
Of course, the claim is that incumbents will use their huge resources to gain even more advantage with prioritized access. Implicit in this claim must be the assumption that the advantage a startup could gained from buying priority offers less potential return than the costs imposed by the inherent disadvantages of reputation, brand awareness, customer base, etc. But that’s not plausible for all startups. Investors devote capital there is a likelihood of a good return. If paying for priority would help overcome inherent disadvantages, there would be financial support for that strategy.
Also implicit is the claim that the benefits to incumbents (over and above their natural advantages) from paying for priority—in terms of hamstringing new entrants—will outweigh the cost. This, too, is unlikely to be true, in general. Incumbents already have advantages. While they might sometimes want to pay for more, it is precisely in those cases where it would be worthwhile that a new entrant would benefit most from the strategy—ensuring, again, that investment funds will be available.
Finally, implicit in these arguments is the presumption that content deserves to be subsidized, while networks need neither subsidy nor the flexibility to adopt business models that increase returns or help to operate their networks optimally. But broadband providers, equipment makers, and the like have spent trillions of dollars to build internet infrastructure. The “neutrality for startups” argument holds that content providers shouldn’t be the ones to pay for it, but it maintains this without evidence that mandating subsidies to content providers (in the form of zero-price internet access) will actually lead to optimal results.[93]
While paid prioritization does carry risks, the impacts on competition are nuanced. Claims that it necessarily harms new entrants and benefits only incumbents oversimplify a complex issue. The real impacts likely depend on the specifics of how prioritization is implemented in a given market.
The notion that businesses’ internet-access costs should be zero reflects flawed thinking. Access is never truly zero-cost—all businesses have costs. Early-stage startups, in particular, need capital to cover expenses as they grow. Singling out broadband access as uniquely important for price parity is questionable. One could make equivalent arguments for controlling other business costs like rent, advertising, personnel, etc. Businesses rationally factor the costs of key resources into their planning and investments. Some enjoy cost advantages in certain areas, and disadvantages in others. Whether “equal” pricing is mandated across businesses is often irrelevant to long-term investment decisions. While fair-access policies have merits, the costs of resources like internet access are just one factor among many that businesses must weigh.
This is not an argument unique to broadband service pricing. “Paid prioritization” is a pricing technique that occurs in many other areas, and frequently is useful for solving rationing problems. And where it is banned, this yields downstream effects that we would similarly expect to occur in the broadband market. As the Nobel Laureate economist Ronald Coase pointed out, banning paid prioritization for radio airplay (i.e., payola) actually benefits large record labels at the expense of smaller artists.[94] Simply banning payola, however, did nothing to rectify the underlying problem: airtime on radio was scarce and radio stations had to resort to other ways to ration it. As with insider trading, [95] the de facto practice necessarily is reconstituted elsewhere. The dollars previously spent on payola simply end up somewhere else, such as in advertising.[96] On the radio, this meant more ads taking up airtime, creating more scarcity and less music of any kind. While the specific mix of actual songs played may be different, there is no reason to believe it is in any way “better” or even more diverse without payola, and every reason to believe that there will simply be less of it.
Retail-store slotting contracts provide another helpful analogy:
Retailer supply of shelf space can therefore be thought of as creating incremental or “promotional” sales that would not occur without the promotion. The promotional shelf space provided by retailers induces these incremental sales by increasing the willingness of “marginal consumers” to pay for a product that they would not purchase absent the promotion. The generation of these promotional sales may occur by more prominently displaying a known brand, for example, in eye-level shelf space or a special display, or by providing shelf space for an unknown or new product.[97]
As with prioritization on the internet, an intuitive fear about such arrangements is that they will be used by established content providers to hamstring their rivals:
The primary competitive concern with slotting arrangements is the claim that they may be used by manufacturers to foreclose or otherwise disadvantage rivals, raising the costs of entry and consequently increasing prices. It is now well established in both economics and antitrust law that the possibility of this type of anticompetitive effect depends on whether a dominant manufacturer can control a suf?cient amount of distribution so that rivals are effectively prevented from reaching minimum ef?cient scale.[98]
The problem with this argument is that:
[S]lotting fees are a payment that must be borne by all manufacturers. Competition for shelf space that leads to slotting may raise the cost of obtaining retail distribution, but it does so for everyone…. However, competition between incumbents and entrants for retail distribution generally occurs on a level playing field in the sense that all manufacturers can openly compete for shelf space and it is the manufacturer willing to pay the most for a particular space that obtains it.[99]
While not a violation of antitrust law, the NPRM’s approach would ban this practice without evidence of harm. So long as there are minimum-service guarantees in place, however, there is no reason to believe that the practice would actually harm startups or consumers. Moreover, these sorts of arrangements are usually tailored to the firms in question, with larger firms that demand more service also drawing higher prices for that service. Thus, in practice, the opportunity to pay for prioritization is relatively less attractive to large firms.
A blanket ban on paid prioritization risks locking in inefficient and suboptimal pricing models. It would restrict the very experimentation and innovation in business models that could help expand internet access. Rather than a one-size-fits-all ban, tailored oversight and monitoring of prioritization practices through the existing transparency rules would better balance the complex tradeoffs involved.
In the NPRM, the Commission notes that “In adopting a ban on paid prioritization in 2015, the Commission sought to prevent the bifurcation of the Internet into a ‘fast’ lane for those with the means and will to pay and a “slow” lane for everyone else.”[100] It then tentatively concludes that this concern remains valid today. But this framing makes as little sense now as it did in 2015.
The concept of “fast lanes” is a gross oversimplification, even apart from paid-prioritization schemes. In most cases, prioritization involves applying network-management strategies to guarantee certain content meets minimum-performance levels appropriate for its data type. For example, this could include prioritizing video-conferencing data for lower latency, or streaming video for better throughput. Technically, this creates a “fast lane,” but it is highly misleading to refer to it as such.
The costs and benefits of prioritization are nuanced and context-dependent. Whether prioritization is beneficial or harmful depends heavily on the presence of congestion. Prioritization matters most when congestion exists, since it inherently involves improving service for some content at the expense of other content.[101] While prioritization schemes risk worsening service for non-prioritized content, they also can improve quality for higher-value applications. Congestion levels, minimum standards, and other factors combined to determine the impact. Overly simplistic “fast lane” rhetoric should be avoided in favor of careful analysis of the tradeoffs, given technical and market conditions. What works as a better default is to provide minimum-performance guarantees for internet service.
A minimum-performance guarantee means that prioritized services cannot degrade non-prioritized content below a certain level. It also limits the extent to which prioritized content can receive better service, given the bandwidth needed to satisfy the minimum guarantees. As a result, ISPs that offer prioritization may actually increase total network capacity to deliver meaningful priority benefits without violating minimums. [102]
Even without expanded capacity, prioritization with minimum guarantees does not necessarily create starkly differentiated service levels. During congestion, “slower” service becomes a reality for non-prioritized content. But simultaneously, the meaningfulness of “faster” service decreases in proportion to congestion levels. The practical difference between prioritized and non-prioritized traffic is less than is often assumed, and varies based on fluctuating traffic volumes. With appropriate safeguards, the fears of dramatic disparities created by “fast lanes” are overblown. For latency-insensitive content, even degraded “slow lanes” would have minimal effect. Thus, even if prioritization were to become widespread, its value and price would likely decrease. More content providers could thereby afford priority, further lessening any differentiation. With marginal speed differences and cheap priority access, dramatic impacts are unlikely.
We see the same dynamic even within edge providers’ operations with respect to what are glibly deemed “slow” and “fast” lanes on the open internet. For example, it was discovered in 2015 that Netflix had been throttling its own transmission rate in certain situations, likely in order to optimize customers’ viewing experience.[103] But under the framing presented in this NPRM, the incentive for this sort of self-disciplining behavior—which optimally rations scarce network resources—would disappear.
As we discuss below, the Commission asserts that “minimal” compliance costs are associated with a ban on blocking and a “minimal” compliance “burden” is associated with a ban on throttling. The Commission has no principled means to make this determination.
CEI’s comments point out the obvious: Paid prioritization is ubiquitous, even in the federal government, with TSA PreCheck and USPS Priority Mail,[104] as well as paid priority (i.e., “expedited service”) for passports.[105] The Federal Highway Administration not only condones paid prioritization of roadways (e.g., high-occupancy toll lanes, or “HOT lanes”), it encourages them, concluding that:
HOT lanes provide a reliable, uncongested, time saving alternative for travelers wanting to bypass congested lanes and they can improve the use of capacity on previously underutilized HOV lanes. A HOT lane may also draw enough traffic off the congested lanes to reduce congestion on the regular lanes.[106]
In our comments on this matter, we note that the Commission fails to distinguish between instances where so-called “paid prioritization” has pro-consumer benefits and where it may constitute an anticompetitive harm.[107] For example, Netflix’s collocation of data centers within different networks to expedite service and reduce overall network load are unequivocally pro-consumer.[108] In addition, AT&T’s Sponsored Data program and T-Mobile’s Binge On offerings provide more choices, potentially lower prices, and introduce competitive threats to other providers in the market.[109]
Under the Commission’s proposed Title II regulations, these innovations would be illegal. As a result, as ITIF points out, firms and potential entrants would have reduced incentives to experiment with and roll out new and innovative services to a wide range of consumers, especially lower-income consumers:
In the case of paid prioritization there would be significant harm to presuming conduct unlawful. The 2017 RIF order found that banning all paid prioritization chilled general innovation and network experimentation. These harms disproportionately fall on potential new entrants who are most likely to want to differentiate their service, perhaps by “zero-rating” popular services, but who are also least able to afford the cost of lawyers and consultations. It might also preclude practices that could have increased equity. For example, an agreement between an ISP and a content provider to guarantee a certain service quality for an application across varying network speeds would likely benefit subscribers to lower speeds most of all. ISPs have an incentive to provide the type of service consumers value, but insofar as limited competition in some areas of the country might prevent consumers from switching providers if they are unhappy with their ISP’s practices, the Commission should have expected those risks to have been greatest when competition was lowest. Since competition is increasing over time as more technologies emerge, the fact that ISPs have so far not required bright-line prohibitions to keep them from engaging in specifically harmful behaviors suggests that they are no more likely to in the future.[110]
We agree with several commenters who conclude that the proposed ban on paid prioritization may be at odds with the Commission’s desire to “preserve” and “advance” public safety. For example, the Free State Foundation says:
[T]he Notice does not even appear to directly permit any form of traffic prioritization for serving public safety purposes. And to the extent that such an omission is inadvertent, it might suggest the Commission has not adequately carried out its duty to consider the negative effects that a ban on paid prioritization can have on “promoting safety of life and property through the use of wire and radio communications.”[111]
NCTA points out that public safety during emergencies is one of the key instances in which prioritization is clearly beneficial:
If anything, retaining a light-touch regulatory regime for broadband would benefit public safety users by allowing ISPs to prioritize such critical traffic in times of emergency without fear of becoming subject to enforcement action for being “non-neutral.”[112]
A recurring theme throughout this rulemaking process is that the U.S. broadband industry is both competitive and dynamic. This vigorous competition forces providers to align their interests with those of their customers, as noted by CEI:
A bright line prohibition is also unneeded because the market will impose rationality on prioritization practices. If an ISP engaging in paid prioritization provides an inferior consumer experience, its customers are empowered to take their business elsewhere because most consumers have multiple options in ISPs. This is exactly how the market functions throughout the economy.[113]
The broadband market’s competitiveness and dynamism are demonstrated by two seemingly contradictory, but completely consistent statement from WISPA. First, it notes that anticompetitive paid prioritization can harm smaller providers:
WISPA is concerned that preferential traffic management techniques that are anti-competitive can be used to disadvantage providers that are unable to secure access to certain content or lack the leverage to obtain commercial terms afforded to broadband access providers with regional and national scope.[114]
At the same time, WISPA reports that there is no evidence of such anticompetitive conduct, and that if such conduct were found, it could be addressed under existing regulations:
These open internet principles can be preserved by maintaining the current light-touch regulatory approach. There is no market failure or evidence of blocking, throttling, paid prioritization or bad conduct from smaller providers that justifies saddling them with monopoly- based common carrier regulations.[115]
Comments in this proceeding reinforce our conclusions that, in nearly every case, paid prioritization benefits ISPs, consumers, and edge providers. To date, there has been no evidence of the anticompetitive use of paid prioritization or any harms to consumers or edge providers from the limited instances of above-board paid or affiliated prioritization arrangements. Thus, the Commission’s proposal to ban such arrangements is based on mere speculation, rather than “reasoned analysis.”
The Commission proposes a “bright-line rule” prohibiting providers from “blocking lawful content, applications, services, or non-harmful devices.”[116] The Commission “tentatively” concludes that providers “continue to have the incentive and ability to engage in practices that threaten Internet openness.”[117] But, just two paragraphs later in the NPRM, the Commission reports:
As far back as the Commission’s Internet Policy Statement in 2005, major providers have broadly accepted a no-blocking principle. Even after the repeal of the no-blocking rule, many providers continue to advertise a commitment to open Internet principles on their websites, which include commitments not to block traffic except in certain circumstances.[118]
At a conceptual level, issues like blocking and throttling could raise valid legal concerns when they are not done for valid network-management reasons. To date, however, there hasn’t even been a potential harm raised that would, if proven, not be remediable under existing antitrust law. Thus, arrogating more power to itself will do little to enhance the FCC’s ability to deter this conduct. the Providers’ behavior is already scrutinized under the Commission’s transparency rules, and any anticompetitive behavior can be pursued by antitrust enforcers.
But in practice, as the Commission notes, the providers have all committed to refrain from blocking and throttling unrelated to reasonable network management. This is akin to the old joke about clapping to keep away elephants.[119] We not aware of any comment in this matter that offers reliable evidence that any provider currently blocks lawful content, applications, services, or non-harmful devices. As noted above, the NPRM does not identify any examples of blocking in the last 15 years since the Madison River and Comcast peer-to-peer matters, and most providers have adopted explicit no-blocking policies.[120] The Commission concludes “this principle is so widely accepted, including by ISPs, we anticipate compliance costs will be minimal.”[121]
In comments on the 2015 Order, ICLE and TechFreedom noted that (1) many internet users are tech-savvy, (2) blocking is easily detectable by even those users who are not tech-savvy, and (3) blocking is widely unpopular. Therefore, providers likely have more disincentives to block content than incentives to do so:
There are already millions of tech-savvy Americans on the web, and the tools necessary to detect a blocking or serious degradation of service are widely available, so there is every reason to suspect that any future instances of such blocking will also be detected. If they are truly nefarious (i.e., the ISP is blocking a legal service/application that its customers are trying to access), then public outcry by the affected subscribers should likely be sufficient to convince the ISP to change its practices, rather than bear the brunt of public backlash, in hopes of pleasing its customers (and its investors).[122]
Even so, the Commission nonetheless also asserts that Title II regulation is necessary to ban a practice in which no one engages. Such assertions venture far away from “reasoned analysis” territory and deep into “arbitrary and capricious” territory.
The Commission proposes to prohibit providers from “throttling lawful content, applications, services, and non-harmful devices.”[123] This is because the FCC “believe[s] that incentives for ISPs to degrade competitors’ content, applications, or devices remain”[124] even though the Commission also “believes” providers “have had a strong incentive to follow their voluntary commitments to maintain service consistent with certain conduct rules established in the 2015 Open Internet Order” during and after the COVID-19 pandemic.[125] TechFreedom concludes, “There is no real debate over these principles; everyone has agreed that blocking and throttling is such a bad idea that the marketplace has rejected it.”[126] Moreover, the Commission reports that the incidence and likelihood of provider throttling is so low that there will be “a minimal compliance burden” associated with the proposed ban:
Even after the repeal of the no-throttling rule, ISPs continue to advertise on their websites that they do not throttle traffic except in limited circumstances. As a result, we anticipate that prohibiting throttling of lawful Internet traffic will impose a minimal compliance burden on ISPs.[127]
Consistent with ICLE’s comments in this matter, 5G Americas reports that the change in the competitive broadband landscape, along with existing transparency rules, render blocking and throttling prohibitions unnecessary:
Blocking and throttling prohibitions are not needed, because internet business models require delivering the lawful content consumers want, at the speeds they expect. There have been no instances of mobile broadband providers engaging in discriminatory conduct since the 2017 RIF Order. This is because the internet ecosystem is dramatically different from when Title II regulation was first discussed in the early 2000’s. Today it is widely understood that content providers have more market power than ISPs. Reimposition of the 2015 rules is a proposal in search of a problem that doesn’t exist in the vastly differentiated marketplace of today. In addition, the existing transparency rule is sufficient to protect against unlikely discriminatory conduct, making the general conduct rule, as well as the blocking and throttling prohibitions, unnecessary. It is notable that the Notice of Proposed Rulemaking makes no attempt to argue that since the 2017 RIF Order broadband providers have engaged in anticompetitive or non-transparent conduct that would justify regulating the entire industry as common carriers subject to ex ante oversight.[128]
Blocking and throttling prohibitions are not needed, because internet business models require delivering the lawful content consumers want, at the speeds they expect. There have been no instances of mobile broadband providers engaging in discriminatory conduct since the 2017 RIF Order. This is because the internet ecosystem is dramatically different from when Title II regulation was first discussed in the early 2000’s. Today it is widely understood that content providers have more market power than ISPs. Reimposition of the 2015 rules is a proposal in search of a problem that doesn’t exist in the vastly differentiated marketplace of today.
In addition, the existing transparency rule is sufficient to protect against unlikely discriminatory conduct, making the general conduct rule, as well as the blocking and throttling prohibitions, unnecessary. It is notable that the Notice of Proposed Rulemaking makes no attempt to argue that since the 2017 RIF Order broadband providers have engaged in anticompetitive or non-transparent conduct that would justify regulating the entire industry as common carriers subject to ex ante oversight.[128]
The NPRM cites a study published in 2019, using data mostly from 2018, that “suggested that ISPs regularly throttle video content.”[129] We urge the Commission to be skeptical of relying on this study. As we report above, several commenters report that it has been “debunked.”[130] Moreover, we note in our comments that, to the extent the study found throttling, the authors concluded it was “not to the extent in which consumers would likely notice.”[131] In other words, the study does not reliably demonstrate “regular” throttling of content and any throttling detected was de minimis. CTIA’s comments provide a detailed summary of the study’s shortfalls:
The Notice also asserts that a study “suggested that ISPs regularly throttle video content,” but the Commission makes no findings and the Notice does not recognize the thorough rebuttal debunking the claims in the paper. The Li et al. Study purported to show throttling of video sites by wireless providers, but as CTIA noted at the time, the study used simulated traffic between artificial network end points and failed to account for basic network engineering, consumer preference, or how mobile content is distributed. Consumers, for example, have the ability to alter video resolution settings or sign up for steaming service plans that offer varying levels of resolution. Additionally, many video applications take actions themselves to automatically adjust to a network’s available bandwidth to improve the user experience. What the study identified, if found in a real-world setting, would be either reasonable network management, consumer choice, or data management practices used by content providers. allegation was therefore without merit and does not show harm to Internet openness.[132]
As with its proposed ban on blocking, the Commission asserts that Title II regulation is necessary to ban throttling—a practice in which no one engages. Such assertions venture far from “reasoned analysis” territory and deep into “arbitrary and capricious” territory.
In this NPRM, the Commission seeks to revive the General Conduct Standard (also known as the Internet Conduct Standard) that was removed in the 2018 Order.[134] The General Conduct Standard is a catch-all rule that would allow the Commission to intervene when it finds that an ISP’s conduct generally threatened end users or content providers under some principle of net neutrality.[135] As “guidance,” the Commission proposes a non-exhaustive list of factors that could possibly (but not necessarily) be used to prove a violation.[136] The factors comprise an uncertain mashup of competition law, consumer-protection law, and First Amendment law and include 1) the effect on end-user control; 2) competitive effects; 3) effect on consumer protection; 4) effect on innovation, investment, or broadband deployment; 5) effects on free expression; 6) whether the conduct is application-agnostic; and 7) whether the conduct conforms to standard industry practices.[137]
The U.S Circuit Court of Appeals for the D.C. Circuit rejected US Telecom’s arguments that the 2015 General Conduct Rule should be invalidated.[138] Notwithstanding that decision, the Commission should be wary in moving forward with this provision. While the court may have found the General Conduct Standard was not vague in all its applications, the Court did not consider that, under State Farm, the Commission’s choice to implement such a far-reaching, ambiguous standard lacked a rational connection with FCC’s proffered facts.[139]
In the 2015 Order, the FCC claimed it had not created a novel, case-by-case standard, but rather that it was taking an approach similar to the “no unreasonable discrimination rule,” which was accompanied by four factors (end-user control, use-agnostic discrimination, standard practices, and transparency).[140] While the “no unreasonable discrimination rule” was grounded in Section 706 of the Telecommunications Act of 1996, basing the General Conduct Standard in Sections 201 and 202 of the Communications Act (in addition to Section 706) enabled an unprecedented expansion of FCC authority over the internet’s physical infrastructure.[141] Then-Commissioner Ajit Pai noted at the time:
The FCC’s newfound control extends to the design of the Internet itself, from the last mile through the backbone. Section 201(a) of the Communications Act gives the FCC authority to order “physical connections” and “through routes,” meaning the FCC can decide where the Internet should be built and how it should be interconnected. And with the broad Internet conduct standard, decisions about network architecture and design will no longer be in the hands of engineers but bureaucrats and lawyers. So if one Internet service provider wants to follow in the footsteps of Google Fiber and enter the market incrementally, the FCC may say no. If another wants to upgrade the bandwidth of its routers at the cost of some latency, the FCC may block it. Every decision to invest in ports for interconnection may be second-guessed; every use of priority coding to enable latency-sensitive applications like Voice over LTE may be reviewed with a microscope. How will this all be resolved? No one knows. 81-year-old laws like this don’t self-execute, and even in 317 pages, there’s not enough room for the FCC to describe how it would decide whether this or that broadband business practice is just and reasonable. So businesses will have to decide for themselves—with newly-necessary counsel from high-priced attorneys and accountants—whether to take a risk.”[142]
In the 2015 Order, the FCC relied on its 2010 findings, without advancing new evidence from the intervening five years of internet innovation to justify taking vastly greater authority over the physical infrastructure of the internet than it had in the 2010 Order.[143] In this NPRM, the Commission again advances no new evidence to justify such a massive takeover. The Commission contemplates using Sections 201 and 202 as the basis for the General Conduct Standard.[144] But when it previously invoked those sections and added more factors to the General Conduct Standard than were in the “no unreasonable discrimination rule,” it merely addressed the reason the rule was overturned by the D.C. Circuit in Verizon, rather than articulate a dire need to grab power.[145] Thus, the Commission again fails to articulate its need.
Vastly expanding the FCC’s authority to implement a vague list of non-exhaustive factors is a terrible way to determine rules of conduct for firms that necessarily invest billions of dollars in infrastructure over the course of decades. Even on the relatively shorter timescale required to offer innovative new service packages to consumers, a tremendous volume of negotiations are required among the broadband networks, rights holders, and any other third parties. The only practical way to comply with the General Conduct Standard would be to involve the FCC in business decisions at every level. For providers, such a “standard” cannot help but chill innovation and ultimately harm consumers through higher prices, reduced quality, and limited choice.
In addition, unlike the General Conduct Standard, which applies to both fixed and mobile broadband providers, the “no unreasonable discrimination rule” adopted in the 2010 Order only applied to fixed broadband providers.[146] The D.C. Circuit in US Telecom did not consider the FCC’s failure to create a rational connection between the facts the Commission found and its choice to establish a conduct standard for mobile in the 2015 Order. First, the FCC’s reliance on the 2015 Broadband Progress Report to demonstrate that the “virtuous cycle” was in peril did not consider mobile broadband. Second, the FCC attempted to sidestep the need to perform competitive analysis for imposing the standard on mobile by stating, “even if the mobile market is sufficiently competitive, competition alone is not sufficient to deter mobile providers from taking actions that would limit Internet openness.”[147] Instead, the FCC stated that the General Conduct Standard could apply to mobile based on a handful of “incidents.”[148] Closer inspection of the examples cited, however, critically undermine the foundation of the FCC’s argument.
One such example stated that “AT&T blocked Apple’s FaceTime iPhone and iPad applications over AT&T’s mobile data network in 2012.”[149] Already operating on Wi-Fi, Apple made FaceTime available over mobile operators’ networks starting with iOS 6, which launched in September 2012 and was designed to handle more data than previous iOS versions.[150] Sprint and Verizon announced that they would make the service available to mobile data subscribers of all data plans.[151] AT&T maintained that it was taking a more cautious approach and only made FaceTime available on shared data plans, because it could not sufficiently model how much subscribers would use the app and thus its network impact.[152]
If FaceTime use were to exceed modelled expectations, AT&T claimed that its network data usage may have adversely impacted voice quality.[153] In November 2012—two months after the release of a cellular version of FaceTime and without threat of FCC action—AT&T announced its network would support FaceTime on all tiered data plans with an LTE device, and would continue to monitor its network to expand the availability of FaceTime to customers on other billing plans.[154] An additional plausible explanation for AT&T’s actions is that it made FaceTime available over its mobile network four months after competitors Sprint and Verizon also announced they would make FaceTime available over on all data plans. On balance, in a year in which AT&T doubled its nationwide 4G LTE coverage, this example hardly seems the nefarious “they’ve done it before and will do it again” rationale trotted out in this and the handful of other examples cited by the FCC as justification for including mobile broadband under the Internet Conduct Standard.[155]
Theoretically, such a case-by-case standard should focus on the market’s ability to mitigate any alleged harms through competition. The General Conduct Standard is instead a novel, catch-all standard established without input from Congress.[156] It contains no insight as to which factor is most important, how the FCC will resolve the inevitable conflicts among factors, or even if the factors are dependent on one another or disjunctive.
This General Conduct Standard, in short, provides no meaningful guidance for firms or consumers, and leaves regulation up to the Commission’s whim.
The NPRM is virtually silent on the topic of data caps, asserting only that individuals with disabilities “increasingly rely” on internet-based communications that are “particularly sensitive to data caps,”[157] and asking whether the Commission should require more detailed disclosures regarding the “requirements, restrictions, or standards for enforcement of data caps.”[158]
But this near silence in the NPRM appears to belie the Commission’s deep interest in regulating data caps. In June 2023, Chair Rosenworcel announced she would ask her fellow commissioners to support a formal notice of inquiry to learn more about how broadband providers use data caps on consumer plans.[159] The same day, the FCC launched a “Data Caps Stories Portal” for “consumers to share how data caps affect them.”[160] It would not be a stretch to surmise that the Commission intends to regulate data caps under the “general conduct” rules in its proposed Title II reclassification.
The NPRM is similarly silent on the issue of usage-based pricing and zero rating, with only a passing reference in a footnote[161] and a request for comments regarding whether “any zero rating or sponsored data practices that raise particular concerns under the proposed general conduct standard.”[162] Nevertheless, since the 2015 Order, at least some members of the Commission appear to have maintained keen interest in scrutinizing providers’ zero-rating offerings, with an eye toward regulating them. For example, in the last days of the Obama administration, the Commission released a report of a staff review of sponsored data and zero-rating practices in the mobile-broadband market.[163] In a letter to Sen. Edward Markey (D-Mass.), the Commission summarized its conclusions:
While reiterating that zero-rating per se does not raise concerns, it finds that two of the programs reviewed, AT&T’s “Sponsored Data” program and Verizon’s “FreeBee Data 360” program. present significant risks to consumers and competition. In particular, these sponsored data offerings may harm consumers and competition by unreasonably discriminating in favor of downstream providers owned or affiliated with the network providers. The Commission has long been concerned about the ability and incentives of network owners to thwart their downstream competitors’ ability to serve consumers.
In the early days of the Trump administration, the Commission announced it would end its inquiry into zero rating.[164] Chair Rosenworcel has added her view that: “A lot about zero net rating is about data caps.”[165] She also had expressed her concerns with zero rating:
But over the long haul, what that does is it constrains where you can go and what you can do online. Because you’ll get a fast lane to go to all of those sites that your broadband provider has set up a deal with, and you’ll get consigned to a bumpy road if you want to see anything else. And that erodes net neutrality over time.[166]
AT&T, probably more familiar than most with the Commission simultaneously declaring that it abjure rate regulation only to shoehorn such regulation into catch-all General Conduct rules, notes in comments to this proceeding:
For example, the proposed conduct rule raises the investment-killing specter of rate regulation, despite the Commission’s empty assurances to the contrary. ISPs have seen this movie before. The Commission similarly forswore rate regulation in 2015, yet it followed up a year later with threats to punish ISPs under the conduct rule for the rate structure of their sponsored data programs, which offered consumers the economic equivalent of bundled discounts and thus provided more broadband for less. Indeed, even while denying plans for rate regulation, the NPRM itself vows to scrutinize the structure of broadband pricing plans for evidence of “prohibit[ed] unjust and unreasonable charges.” Long-term revenues are difficult enough to project even in the absence of such unpredictable regulatory prohibitions. But the prospect of creeping rate regulation would further imperil the business case for investment by threatening to upend assumptions about future revenue streams.[167]
The Commission appears to be playing coy. It gives the impression that it has little interest in regulating data caps or zero rating, yet it also has a long and ongoing history of making moves to regulate such practices. In the remainder of this section, we explain that, in most cases, nonlinear pricing models like zero rating are pro-competitive and benefit ISPs, consumers, and edge providers alike.
Forbidding usage-based pricing for internet service can actually frustrate consumer demand for data and content. With so-called “neutral” pricing, consumers have little ability or incentive to prioritize their own internet use based on preferences, beyond simply consuming or not consuming the service altogether. This creates deadweight loss, as users forgo benefits from services they cannot afford under an all-or-nothing full-access model. It also encourages inefficient network-usage patterns since consumers cannot signal their priorities. Additionally, restricting pricing models limits innovation in offerings that could leverage more nuanced pricing approaches. The rigid one-size-fits-all nature of “neutral” pricing can negatively impact consumer welfare and network efficiency.
With undifferentiated pricing, the cost to users is the same for high-value, low-bandwidth data (e.g., telehealth) as it is for low-value, high-bandwidth data (e.g., photo hosting), so long as the user’s total bandwidth allotment is not exceeded. Undifferentiated pricing can lead consumers to overconsume lower-value data like photo sharing while under-consuming higher-value uses like telehealth. Content developers respond by overinvesting in the former and underinvesting in the latter. The end result is a net reduction in the overall value of both available and consumed content, along with network underinvestment.
The notion that consumers and competition benefit when users lack incentives to consider their own usage runs counter to basic economic principles. Evidence does not support the proposition that preventing consumers and providers from prioritizing high-value uses leads to optimal outcomes. More flexibility in pricing and service tiers could better align investment and usage with true value.
The goal of broadband policy should be to optimize internet use in a way that maximizes value for consumers, while offering incentivizes for innovation and investment. This requires usage-based pricing and prioritization models tailored to address congestion issues efficiently. Since consumer preferences are diverse, a flexible approach is needed, rather than one-size-fits-all mandates. ISPs should have room to experiment with options that encourage users to prioritize data based on their individual needs and willingness to pay. Effective policy aims for an internet that maximizes benefits and incentives for all through flexible, value-driven models.
Evidence does not support claims that restricting providers from accounting for externalities improves outcomes. In fact, usage-based pricing and congestion pricing could, in many cases, encourage expansion of network capacity.[168] It is possible that, under some conditions, differential pricing could provide incentives for artificial network scarcity.[169] If that is the concern, however, economic analysis should clearly establish when such risks exist before regulating. Additionally, regulation should be narrowly targeted to address only proven harms, while avoiding constraints on beneficial incentives for investment, usage, and innovation.
Importantly, limiting ISP pricing flexibility may hinder faster network construction and ultimately reduce consumer welfare. In a 2013 paper, former DOJ Chief Economist and current FTC Chief Economist Aviv Nevo (and co-authors) explained:
Our results suggest that usage-based pricing is an effective means to remove low-value traffic from the Internet, while improving overall welfare. Consumers adopt higher speeds, on average, which lowers waiting costs. Yet overall usage falls slightly. The effect on subscriber welfare depends on the alternative considered. If we hold the set of plans, and their prices, constant, then usage-based pricing is a transfer of surplus from consumers to ISPs. However, if we let the ISP set price to maximize revenues, then consumers are better off.[170]
The authors further note that overall (and ISP) welfare could be increased further with $100/month flat-rate pricing on a Gigabit network. But as the authors note, “[f]rom the ISP’s perspective, the capital costs of such investment would be recovered in approximately 150…months. Similarly, this estimate is a lower bound on the actual time required.”[171]
While such cost recovery is feasible, it assumes no significant changes in technology, regulation, or demand that would alter the calculation; relatively high population density; and, most importantly, the ability to charge relatively high rates, leading to decreased penetration. And the authors further note that the optimal fixed fee for Gigabit was almost $200/month. While:
This revenue-maximizing price is in the middle of the range of prices currently offered for Gigabit service in the US…, due to restrictions on rates from local municipalities, an ISP may have a difficult time charging this rate.[172]
The bottom line is that regulatory restrictions on pricing generally serve to reduce welfare and incentives for broadband investment. The FCC should avoid adopting such restrictions, particularly without the evidence or economic analysis sufficient to justify them.
Data caps lay at the heart of zero rating and usage-based pricing. Thus, it is unsurprising that the Commission has taken the first steps to inquire about consumers’ experiences with data caps, especially given its demonstrated antagonism toward zero rating. But without data caps, zero rating certain applications is irrelevant because, effectively, every application is zero rated. Similarly, without data caps, usage-based billing is meaningless from the consumer’s standpoint, as data would be “too cheap to meter.”
Practically speaking, data caps are one of many ways in which providers can use pricing and data allowances to manage network congestion. Even so, it appears that consumer demand is guiding providers away from data caps. According to Statista, 45% of mobile consumers say they have unlimited data plans.[173] It should be axiomatic that consumers who subscribe to unlimited data plans prefer those plans over the alternatives.[174] Perhaps that’s why OpenVault reports a “trend” among many operators to provide unlimited data to their gigabit subscribers.[175] If this continues, data caps and, in turn, zero rating and usage-based billing may soon be practices of the past, much like long-distance telephone charges.[176] EFF’s comments in this matter echo this observation:
Given abundant capacity, throttling, paid prioritization, and data caps become all the more unreasonable. This is already apparent in broadband plans, both wireline and mobile, where increasingly there are very high to no data caps. As more fiber is laid, data caps should disappear altogether. Certainly, the need to manage the volume of traffic as a matter of “reasonable network management” will be even less plausible than it is today as time goes on.[177]
Until the day that data caps “disappear altogether,” however, providers will likely continue offering plans with zero rating or usage-based pricing. Because we still live in a world of limited capacity and periodic congestion, zero-rating policies provide a benefit to many consumers, as reported in our comments in this matter.[178] Free State Foundation’s comments support our conclusion:
The regulatory uncertainty caused by the Title II Order’s general conduct standard and the Wheeler FCC’s investigation of free data plans effectively halted new offerings for unlimited data plans. But the Pai FCC’ rescission of the Wheeler FCC’s report and the RIF Order’s repeal of the Title II Order provided a market climate hospitable to innovative “free data plans.”156 And there is no evidence in the Notice of anyone being harmed by the offering of such plans. Accordingly, the Commission should not risk the elimination of “free data plans” by reimposing public utility regulation and the vague “general conduct” standard. The existing policy of market freedom should be retained to the benefit of consumers. Or at the most, the Commission should analyze future complaints involving innovations like “free data” plans under a commercially reasonable standard such as the one addressed later in these comments.[179]
Layton & Jamison further highlight the benefits of zero rating in encouraging U.S. veterans to connect with U.S. Department of Veterans Affairs health-care providers:
The US Department of Veteran’s Affairs (VA) video app which is called VA Video Connect and is offered in partnership with US broadband providers, allows veterans and caregivers to meet with VA healthcare providers via a computer, tablet, or mobile device without data charges. The VA reported that more than 120,000 veterans accessed the app (Wicklund, 2020), which was important because VA hospitals were under high stress during the pandemic and could not maintain their prior level of routine care. The VA also reported that the app increased the VA’s ability to reach roughly 2.6 million veterans from remote locations with limited transportation or hesitancy over in-person, medical visits. Politico reported, “Officials at the Department of Veterans Affairs are privately sounding the alarm that California’s new net neutrality law could cut off veterans nationwide from a key telehealth app.”[180]
The Commission’s antagonism toward data caps and zero rating has always been somewhat misguided. Past and future investments in broadband capacity, however, have and will render efforts to regulate, reign in, or eliminate such practices increasingly unnecessary, unwarranted, and quixotic.
[1] Notice of Proposed Rulemaking, Safeguarding and Securing the Open Internet, WC Docket No. 23-320 (Sep. 28, 2023) [hereinafter “NPRM”] at ¶1.
[2] Report and Order on Remand, Declaratory Ruling, and Order, In the Matter of Protecting and Promoting the Open Internet, GN Docket No. 14-28 (Mar. 15, 2015) [hereinafter “2015 Order”].
[3] Report and Order on Remand, Declaratory Ruling, and Order, In the Matter of Restoring Internet Freedom, WC Docket No. 17-108 (Jan. 4, 2018) [hereinafter “2018 Order”]
[4] NPRM at ¶114.
[5] Maria Browne, David Gossett, K. C. Halm, Nancy Libin, Christopher Savage, & John Seiver, Here We Go Again—FCC Proposes to Revive Net Neutrality Rules, JD Supra (Oct. 2, 2023), https://www.jdsupra.com/legalnews/here-we-go-again-fcc-proposes-to-revive-5527239.
[6] Daniel Lyons, Why Resurrect Net Neutrality?, AEIdeas (Oct. 4, 2023), https://www.aei.org/technology-and-innovation/why-resurrect-net-neutrality.
[7] ICLE, Notice of Ex Parte Meetings, Restoring Internet Freedom, WC Docket No. 17-108 (Nov. 6, 2017), available at https://laweconcenter.org/images/articles/icle_fcc_rif_ex_parte.pdf. See also, ICLE, Policy Comments, WC Docket No. 17-108 (July 17, 2017), available at https://laweconcenter.org/wp-content/uploads/2017/09/icle-comments_policy_rif_nprm-final.pdf.
[8] Wages & White Lion Invs., L.L.C. v. Food & Drug Admin., No. 21-60766, 21-60800 (5th Cir. 2024) (en banc) (quoting Greater Bos. Television Corp. v. FCC, 444 F.2d 841, 852 (D.C. Cir. 1970) (footnote omitted); accord Encino Motorcars, LLC v. Navarro, 579 U.S. 211, 222 (2016) (“When an agency changes its existing position, it … must at least display awareness that it is changing position and show that there are good reasons for the new policy.” (quotation and citation omitted)).
[9] Comments of NCTA, WC Docket No. 23-320 (Dec. 14, 2023) at 49.
[10] NPRM at ¶1 (“[T]he COVID-19 pandemic … demonstrated how essential broadband Internet connections are for consumers’ participation in our society and economy.”).
[11] Id. (“Congress responded by investing tens of billions of dollars into building out broadband Internet networks and making access more affordable and equitable, culminating in the generational investment of $65 billion in the Infrastructure Investment and Jobs Act.”).
[12] NPRM at ¶3 (“[R]eclassification will strengthen the Commission’s ability to secure communications networks and critical infrastructure against national security threats.”).
[13] Id. (“[T]his authority will allow the Commission to protect consumers, including by issuing straightforward, clear rules to prevent Internet service providers from engaging in practices harmful to consumers, competition, and public safety, and by establishing a uniform, national regulatory approach rather than disparate requirements that vary state-by-state.”).
[14] Id.
[15] NPRM at ¶1.
[16] NPRM at ¶16.
[17] NPRM at ¶17.
[18] Id.
[19] Comments of ICLE, WC Docket No. 23-320 (Dec. 14, 2023) at 4, 9-18.
[20] Id.
[21] NPRM at ¶17 (citing Colleen McClain et al., The Internet and the Pandemic: 1. How the internet and technology shaped Americans’ personal experiences amid COVID-19, Pew Research Center (Sep. 1, 2021), https://www.pewresearch.org/internet/2021/09/01/how-the-internet-andtechnology-shaped-americans-personal-experiences-amid-covid-19.
[22] Monica Anderson & John B. Horrigan, Americans Have Mixed Views on Policies Encouraging Broadband Adoption, Pew Research Center (Apr. 10, 2017), https://www.pewresearch.org/short-reads/2017/04/10/americans-have-mixed-views-on-policies-encouraging-broadband-adoption (“[R]oughly nine-in-ten Americans describe high-speed internet service as either essential (49%) or important but not essential (41%)”).
[23] Emily A. Vogels, Andrew Perrin, Lee Rainie, & Monica Anderson, 53% of Americans Say the Internet Has Been Essential During the COVID-19 Outbreak, Pew Research Center (Apr. 30, 2020), https://www.pewresearch.org/internet/2020/04/30/53-of-americans-say-the-internet-has-been-essential-during-the-covid-19-outbreak.
[24] NPRM at ¶17.
[25] OpenVault, Broadband Insights Report (OVBI) 4Q22 (Feb. 8, 2023), https://openvault.com/wp-content/uploads/2023/02/OVBI_4Q22_Report.pdf.
[26] See, NPRM at ¶131 (describing the “virtuous cycle” as one in which “market signals on both sides of ISPs’ platforms encourage consumer demand, content creation, and innovation, with each respectively increasing the other, providing ISPs incentives to invest in their networks.”)
[27] OpenVault, Broadband Industry Report (OVBI) 3Q 2019, (Nov. 11, 2019), https://telecompetitor.com/clients/openvault/Q3/Openvault_Q319_Final.pdf; OpenVault, Broadband Insights Report (OVBI) 3Q21, (Nov. 15, 2021), https://openvault.com/wp-content/uploads/2021/11/OVBI_3Q21_Report.pdf; OpenVault, Broadband Insights Report (OVBI) 3Q23, (Nov. 3, 2023), https://openvault.com/wp-content/uploads/2023/11/OVBI_3Q23_Report_FINAL.pdf.
[28] NPRM at ¶17.
[29] CTIA, 2023 Annual Survey Highlights (Nov. 2, 2023), available at https://api.ctia.org/wp-content/uploads/2023/11/2023-Annual-Survey-Highlights.pdf.
[30] NPRM at ¶1.
[31] NPRM at n. 59.
[32] ICLE Comments, supra n. 19, at 3.
[33] Comments of the Advanced Communications Law & Policy Institute, WC Docket No. 23-320 (Dec. 14, 2023) at 12. See also, Comments of CTIA, WC Docket No. 23-320 (Dec. 14, 2023) at 43 (“In the Notice, the Commission ignores that Congress has recently acted to address the ‘availability and affordability of BIAS’ via the IIJA, which focused on BIAS in detail and, throughout that lengthy discussion, chose not to apply Title II.”). See also, Comments of NCTA, supra n. 9, at 83 (“The $1 trillion Infrastructure Investment and Jobs Act (‘IIJA’) that President Biden signed into law in November 2021, for example, allocates $65 billion to support broadband deployment, adoption, and digital equity across the country, without regard to broadband’s regulatory classification.”) and id. 84 (“As with legislation relating to national security and other issues, the fact that Congress took comprehensive action on broadband affordability and adoption without requiring or authorizing regulation of broadband as a Title II service speaks volumes.”).
[34] NPRM at ¶3.
[35] NPRM at ¶25.
[36] NPRM at ¶119.
[37] Comments of the Free State Foundation, WC Docket No. 23-320 (Dec. 14, 2023) at 22.
[38] Comments of CPAC Center for Regulatory Freedom, WC Docket No. 23-320 (Dec. 14, 2023) at 9.
[39] Office of the Director of National Intelligence, Annual Threat Assessment of the U.S. Intelligence Community (Feb. 6, 2023), available at https://www.odni.gov/files/odni/documents/assessments/ata-2023-unclassified-report.pdf.
[40] Daniel R. Coats, Statement for the Record, Worldwide Threat Assessment of the US Intelligence Community, Senate Armed Services Committee (May 23, 2017) at 1-2, available at https://www.dni.gov/files/documents/newsroom/testimonies/sasc%202017%20ata%20sfr%20-%20final.pdf.
[41] Id.
[42] Id.
[43] Comments of the Free State Foundation, supra n. 36, at 22.
[44] NPRM at ¶¶21, 26, 27.
[45] Comments of CTIA, supra n. 32, at 36.
[46] Comments of AT&T, WC Docket No. 23-320 (Dec. 14, 2023) at 20-21.
[47] Comments of TechFreedom, WC Docket No. 23-320 (Dec. 14, 2023) at 46 (“The Communications Act specifies that ‘public safety services’ are those which are ‘not made commercially available to the public by the provider.’ Accordingly, the 2015 Order explicitly ‘excluded [such services] from the definition of mobile [BIAS].’ Likewise, the Act defines a ‘telecommunications service’ (the thing Title II covers) as ‘the offering of telecommunications for a fee directly to the public.’ Accordingly, the 2015 Order applied Title II only to ‘broadband Internet access service’ (BIAS), defined as a ‘mass-market retail service’ offered ‘directly to the public.’”)
[48] Id. at 44-45. See also, Comments of Technology Policy Institute, WC Docket No. 23-320 (Dec. 14, 2023) at 39 (“But this example highlights the need for public safety to have prioritized access to networks, which demonstrates potential benefits of prioritization.”). See also, Comments of AT&T at 20-21 (“FirstNet users never compete with commercial traffic for bandwidth, and the network does not throttle them anywhere in the country in any circumstances.”)
[49] NPRM at ¶21.
[50] NPRM at ¶21.
[51] NPRM at ¶21.
[52] NPRM at ¶96.
[53] Comments of NCTA, supra n. 9, at 10.
[54] NPRM at ¶24.
[55] Section 177 of the Clean Air Act (42 U.S.C. §7507) is a provision that allows states to adopt and enforce California’s motor vehicle emission standards, which are often more stringent than federal standards. This section was implemented due to California’s unique authority to set emission standards, as it had vehicle regulations that preceded the federal Clean Air Act. See also, California Air Resources Board, Section 177 States Regulation Dashboard (2024), https://ww2.arb.ca.gov/our-work/programs/advanced-clean-cars-program/states-have-adopted-californias-vehicle-regulations.
[56] Am. Booksellers Found. v. Dean, 342 F.3d 96, 104 (2003), citing Cooley v. Bd. of Wardens, 53 U.S. 299, 319 (1852).
[57] See, e.g., Geoffrey A. Manne & Joshua D. Wright, Innovation and the Limits of Antitrust, 6 J. Competition L. & Econ. 153 (2010).
[58] FACT SHEET: FCC Chairwoman Rosenworcel Proposes to Restore Net Neutrality Rules, Fed. Commc’n Comm’n. (Sep. 26, 2023), available at https://docs.fcc.gov/public/attachments/DOC-397235A1.pdf.
[59] In public comments, Commissioners have invoked a fifth example regarding 2018 allegations of Verizon throttling the Santa Clara Fire Department’s wireless broadband service during a wildfire emergency. However, it’s unlikely the service would have been subject to Title II regulation and, even if it was, whether such regulation would have addressed the allegations in this particular example. See, for example, Comments of TechFreedom, supra n. 46, at 44-45. It is perhaps for these reasons that this example was not included in the NPRM, except obliquely in a footnote. See NPRM at n. 56.
[60] NPRM at n. 7.
[61] Declan McCullagh, Telco Agrees to Stop Blocking VoIP Calls, CNET (Mar. 5, 2005), https://www.cnet.com/home/internet/telco-agrees-to-stop-blocking-voip-calls.
[62] NPRM at n. 7.
[63] Comments of TechFreedom, supra n. 46, at 27.
[64] NPRM at ¶128.
[65] See, Comments of CTIA, supra n. 32, at 11 (“[T]he Commission makes no findings and the Notice does not recognize the thorough rebuttal debunking the claims in the paper.”). See also, Comments of the U.S. Chamber of Commerce, WC Docket No. 23-320 (Dec. 14, 2023) at 5 (“[T]he Commission cites a single 2019 study regarding alleged throttling practices by wireless ISPs in the U.S. and elsewhere—the methodology, veracity, and import of which has been contested by providers and others.”)
[66] Comments of ICLE, supra n. 19, at 29.
[67] NPRM at n. 484. See also, Comments of CTIA at 10-11.
[68] Comments of the Scalia Law Clinic, WC Docket No. 23-320 (Dec. 14, 2023) at 6. Critics of the net neutrally repeal advanced a parade of horribles, speculating that internet providers would engage in various undesirable practices, including throttling, anticompetitive paid-prioritization, and blocking. Yet none of this has come to pass. To date, there is no credible evidence of internet service providers engaging in blocking, throttling, or anticompetitive paid prioritization. That is unsurprising given the competitive environment. See RIF, 83 Fed. Reg. 7900 (“[N]o Internet paid prioritization agreements have yet been launched in the United States, rendering any concerns about such practices purely theoretical.”), id. at 7901 (“[T]here is scant evidence that end users, under different legal frameworks, have been prevented by blocking or throttling from accessing the content of their choosing.”); USTelecom Reply Comments, supra, at 7-8 (“[The 2018 Order’s critics] raise alarm regarding the potential for harmful blocking, throttling, or paid prioritization, but the record lacks any evidence that ISPs have employed these practices since the RIF Order took effect.”); Charter Communications, Inc., Comments on Restoring Internet Freedom, at 3 (Apr. 20, 2020) (“For the nineteen years before the Commission’s Title II Order, there were only isolated incidents of purported ISP blocking or discrimination, and there is no evidence that ISPs have engaged in such practices since the adoption of the RIF Order in 2017.”).
[69] Comments of TechFreedom, supra n. 46, at 28.
[70] Comments of the Information Technology & Innovation Foundation (ITIF), WC Docket No. 23-320 (Dec. 14, 2023) at 7. See also, Comments of CTIA, supra n. 32, at 19 (“The Notice does not identify a single BIAS provider that has disclosed it engages in blocking or throttling or paid prioritization, or a single instance where a BIAS provider has failed to make such a disclosure in violation of existing law. This more than demonstrates that market forces and transparency are sufficient to prevent harm to openness, and there is no basis to re- impose the Internet conduct rules.”). See also, Comments of NCTA, supra n. 9, at 53 (“[A]s the Commission is well aware, providers’ commitments are enshrined in their disclosures under the Commission’s Transparency Rule, which the Commission can independently enforce—holding providers to their obligations to clearly and publicly disclose on their websites the terms and conditions of their broadband offerings, including any practices regarding blocking, throttling, and paid prioritization.”)
[71] Comments of CTIA, supra n. 32, at 18-19.
[72] Id. at 12.
[73] Roslyn Layton & Mark Jamison, Net Neutrality in the USA During COVID-19, in Beyond the Pandemic? Exploring the Impact of COVID-19 on Telecommunications and the Internet (Jason Whalley, Volker Stocker & William Lehr eds., 2023).
[74] Comments of CTIA at 97.
[75] Many of our findings and conclusion submitted during the 2018 Order’s rulemaking process remain true today and much of this section builds on those comments. ICLE, Policy Comments, supra n. 7.
[76] Id. at 73-74.
[77]Ángel Martin Oro, Interview: Nicolai J. Foss and Peter G. Klein on “Organizing Entrepreneurial Judgment,” Sintetia (Jul. 7, 2014), http://www.sintetia.com/interview-nicolai-j-foss-and-peter-g-klein-on-organizing-entrepreneurial-judgment. See also Nicolai J. Foss & Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (2014).
[78] See Thomas W. Hazlett & Joshua D. Wright, The Law and Economics of Network Neutrality, 45 Ind. L. Rev. 767 (2012).
[79] See, e.g., Robin S. Lee & Tim Wu, Subsidizing Creativity Through Network Design: Zero-Pricing and Net Neutrality, 23 J. Econ. Perspectives 61, 67 (2009).
[80] Michael Weinberg, But For These Rules…., Public Knowledge (Sep. 10, 2013), https://www.publicknowledge.org/news-blog/blogs/these-rules.
[81] Public Knowledge, Petition to Deny, In the Matter of Applications of Comcast Corporation, General Electric Company and NBC Universal, Inc. for Consent to Assign Licenses or Transfer Control of Licensees, MB Docket No. 10-56, available at https://www.publicknowledge.org/files/docs/PK-nbc-comcast-20100621.pdf.
[82] See generally Jean-Charles Rochet & Jean Tirole, Platform Competition in Two-Sided Markets, 1 J. Eur. Econ. Assoc. 990 (2003).
[83] Larry F. Darby & Joseph P. Fuhr, Jr., Consumer Welfare, Capital Formation and Net Neutrality: Paying for Next Generation Broadband Networks, 16 Media L. & Pol’y 122, 123 (2007).
[84] Marc Bourreau, Frago Kourandi & Tommaso Valletti, Net Neutrality with Competing Internet Platforms, 63 J. Indus. Econ. 1 (2015).
[85] Paul Njoroge et al., Investment in Two-Sided Markets and the Net Neutrality Debate, 12 Rev. Network Econ. 355, 361 (2013). Some previous papers have found the opposite result in some instances. All of these models exclude important aspects of the more updated literature, however. See Id. 362-65, for a literature review. One, in particular, finds a welfare increase from neutrality, although not with monopoly platforms, interestingly. But this paper does not incorporate infrastructure investment incentives in its models. See Nicholas Economides & Joacim Tåg, Network Neutrality on the Internet: A Two-sided Market Analysis, 24 Info. Econ. & Pol’y 91 (2012).
[86] Marc Borreau, et al., supra n. 85 at 33-34.
[87] NPRM at ¶160.
[89] Comments of the Technology Policy Institute, supra n. 47, at 15.
[90] ICLE Policy Comments, supra n. 7, at 50.
[91] See, e.g., Daniel A. Lyons, Innovations in Mobile Broadband Pricing, 92 Denv. U. L. Rev. 453 (2015).
[92] Mark A. Jamison & Janice Hauge, Dumbing Down the Net: A Further Look at the Net Neutrality Debate, Internet Policy And Economics: Challenges And Perspectives 57-71 (William H. Lehr & Lorenzo Maria Pupillo, eds., 2009).
[93] See, e.g., Lee & Wu, supra n. 77, at 67.
[94] See Ronald H. Coase, Payola in Radio and Television Broadcasting, 22 J.L. & Econ. 269 (1979), available at http://old.ccer.edu.cn/download/7874-3.pdf.
[95] See Stephen M. Bainbridge, Manne on Insider Trading (UCLA School of Law, Law-Econ Research Paper No. 08-04), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1096259.
[96] See Gabriel Rossman, Climbing the Charts: What Radio Airplay Tells Us about the Diffusion of Innovation (2012).
[97] Joshua D. Wright, Slotting Contracts and Consumer Welfare, 74 Antitrust L. J. 439, 448 (2007). See also Benjamin Klein & Joshua D. Wright, The Economics of Slotting Contracts, 50 J. L. & Econ. 421 (2007).
[98] Klein & Wright, supra note 5 at 422.
[99] Id. at 423-24.
[100] NPRM at ¶158.
[101] See, e.g., Jan Krämer & Lukas Wiewiorra, Network Neutrality and Congestion Sensitive Content Providers: Implications for Service Innovation, Broadband Investment and Regulation, (MPRA Paper No. 27003, Oct. 2010), available at http://mpra.ub.uni-muenchen.de/27003/1/MPRA_paper_27003.pdf. See also Drew Fitzgerald, How the Web’s Fast Lanes Would Work Without Net Neutrality, Wall St. J. (May 16, 2014), http://online.wsj.com/news/articles/SB10001424052702304908304579565880257774274.
[102] See Mark A. Jamison & Janice A. Hauge, Getting What You Pay For: Analyzing The Net Neutrality Debate (TPRC 2007) at 14-15, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1081690. (“When the non-degradation condition holds, a network provider will increase network capacity when providing premium transmission service.”).
[103] Steven Musil, Netflix: We’re the Ones Throttling Videos Speeds on AT&T and Verizon, CNET (Mar. 24, 2016), https://www.cnet.com/news/netflix-admits-throttling-video-speeds-on-at-t-verizon.
[104] Comments of the Competitive Enterprise Institute, WC Docket No. 23-320 (Dec. 14, 2023) at 15.
[105] U.S. Department of State, Passport Fees (Aug. 1, 2023), https://travel.state.gov/content/travel/en/passports/how-apply/fees.html.
[106] Federal Highway Administration, High-Occupancy Toll Lanes (Partial Facility Pricing) (Feb. 11, 2022), https://ops.fhwa.dot.gov/congestionpricing/strategies/involving_tolls/hot_lanes.htm.
[107] Comments of ICLE, supra n. 19, at 7.
[108] Id.
[109] Id. at 23.
[110] Comments of ITIF, supra n. 69, at 7-8.
[111] Comments of the Free State Foundation, supra n. 36, at 29. See also, Comments of the Scalia Law Clinic, supra n. 67, at 7 (“Prioritization can be helpful in the public safety context and allows for providers to make ‘tradeoffs’ that can help increase speed and accessibility for all.”)
[112] Comments of NCTA, supra n. 9, at 72.
[113] Comments of the Competitive Enterprise Institute, supra n. 102, at 15.
[114] Comments of the Wireless Internet Service Providers Association (WISPA), WC Docket No. 23-320 (Dec. 14, 2023) at 39.
[115] Id. at 7.
[116] NPRM at ¶150.
[117] Id.
[118] NPRM at ¶152.
[119] Patrick, Chasing Away Elephants, Fairytalenight.com (Apr. 16, 2020), https://www.fairytalenight.com/2020/04/16/chasing-away-elephants (“A man is walking down the street, clapping his hands together every ten seconds. Asked by another man, why he is performing this peculiar behavior, he responds: ‘I’m clapping to scare away the elephants.’ Visibly puzzled, the second man notes that there are no elephants there, where upon the clapping man replies: ‘See, it works!’”)
[120] There is, however, a pro-competitive explanation for Comcast’s alleged conduct. Comments of TechFreedom, supra n. 46, at 27 (Explaining that intensive file-sharing traffic was causing such severe latency and jitter that it made VoIP telephony unusable. Comcast wanted to launch its VoIP offering with dedicated network capacity but feared accusations of making it impossible for rival VoIP services to compete. Throttling BitTorrent was pro-competitive in that it allowed Comcast and its competitors to offer VoIP services.) In addition, in the wake of the Comcast matter, Micro Transport Protocol, or μTP, was developed reduce congestion related to peer-to-peer file sharing. See, Drake Baer, How BitTorrent Rewrote the Rules of the Internet, Fast Company (Mar. 5, 2014), https://www.fastcompany.com/3026852/how-bittorrent-rewrote-the-rules-of-the-internet.
[121] NPRM at ¶152.
[122] ICLE & TechFreedom, Policy Comments, GN Docket No. 14-28 (Jul. 17, 2014) at 15-16, https://laweconcenter.org/resources/icle-techfreedom-policy-comments.
[123] NPRM at ¶153.
[124] NPRM at ¶156.
[125] NPRM at ¶156.
[126] Comments of TechFreedom, supra n. 46, at 2.
[127] Id.
[128] Comments of 5G America, WC Docket No. 23-320 (Dec. 14, 2023) at 8.
[129] NPRM at ¶128.
[130] See, Comments of CTIA, supra n. 32, at 11 (“[T]he Commission makes no findings and the Notice does not recognize the thorough rebuttal debunking the claims in the paper.”). See also, Comments of the U.S. Chamber of Commerce, supra n. 64, at 5 (“[T]he Commission cites a single 2019 study regarding alleged throttling practices by wireless ISPs in the U.S. and elsewhere—the methodology, veracity, and import of which has been contested by providers and others.”).
[131] Comments of ICLE, supra n. 19, at 29.
[132] Comments of CTIA, supra n. 32, at 10-11.
[133] Many of our findings and conclusion submitted during the 2018 Order’s rulemaking process remain true today and much of this section builds on those comments. ICLE, Policy Comments, supra n. 7
[134] NPRM at ¶166.
[135] NPRM at ¶165
[136] NPRM at ¶165.
[137] Id.
[138] United States Telecom Ass’n v. Fed. Commc’ns Comm’n, 825 F.3d 674, 736 (D.C. Cir. 2016).
[139] Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 52 (1983).
[140] 2015 Order at ¶138.
[141] Report and Order, In the Matter of Preserving the Open Internet Broadband Industry Practices, GN Docket No. 09-191, ¶68 (Dec. 23, 2010), [hereinafter “2010 Order”]; 2015 Order, supra n. 2, at ¶137.
[142] Dissenting Statement of Commissioner Ajit Pai, In the Matter of Protecting & Promoting the Open Internet, GN Docket No. 14-28, 30 F.C.C. Rcd. 5601, 5921 (2015).
[143] 2015 Order at ¶137-38.
[144] NPRM at ¶167.
[145] Cellco Partnership v. Fed. Commc’ns Comm’n, 700 F.3d 534, 548 (D.C. Cir, 2012); Verizon v. F.C.C., 740 F.3d 623, 657 (D.C. Cir. 2014).
[146] 2010 Order at ¶68.
[147] 2015 Order at ¶148.
[149] 2015 Order at n. 123. See also, Comments of the Electronic Frontier Foundation, WC Docket No. 23-320 (Dec. 14, 2023) at 7.
[150] Jordan Crook, Apple Introduces iOS 6, Coming This Fall, TechCrunch (Jun. 11, 2012), https://techcrunch.com/2012/06/11/apple-announces-ios-6-wwdc.
[151] 9to5Mac, Sprint Says It Will Not Charge For FaceTime Over Network, Verizon Calls iOS 6 Pricing Conversations ‘Premature’, 9to5Mac (Jul. 18, 2012), https://9to5mac.com/2012/07/18/sprint-says-it-will-not-charge-for-facetime-over-cellular-verizon-calls-talk-premature; Jon Brodkin, Verizon Will Enable iPhone’s FaceTime On All Data Plans, Unlike AT&T, ArsTechnica (Sep. 13, 2012), https://arstechnica.com/apple/2012/09/verizon-will-enable-iphones-facetime-on-all-data-plans-unlike-att.
[152] Jim Cicconi, A Few Thoughts On FaceTime, AT&T Public Policy (Nov. 8, 2012), https://www.attpublicpolicy.com/broadband/a-few-thoughts-on-facetime.
[153] Id.; At the time, a FaceTime call consumed on average 2-4 times more bandwidth than a similar call carried out via Skype. FCC, Open Internet Advisory Committee – 2013 Annual Report, at 3.
[154] Jim Cicconi, A Few Thoughts On FaceTime, AT&T Public Policy (Nov. 8, 2012), https://www.attpublicpolicy.com/broadband/a-few-thoughts-on-facetime.
[155] Press Release, AT&T, AT&T 4G LTE Coverage Double In 2012 (Nov. 16, 2012), https://www.att.com/gen/press-room?pid=23553&cdvn=news&newsarticleid=35717.
[156] And note, such a vast arrogation of power surely will factor into a “major questions analysis.” See, Comments of ICLE, surpra n. 19, at nn. 153-185, and accompanying text.
[157] NPRM at ¶120.
[158] NPRM at ¶175.
[159] FCC, Chairwoman Rosenworcel Proposes to Investigate How Data Caps Affect Consumers and Competition (Jun. 15, 2023), available at https://docs.fcc.gov/public/attachments/DOC-394416A1.pdf.
[160] FCC, FCC Launches Data Cap Stories Portal (Jun. 21, 2023), https://www.fcc.gov/consumer-governmental-affairs/fcc-launches-data-cap-stories-portal.
[161] NPRM at ¶534.
[162] NPRM at ¶166.
[163] FCC, Policy Review of Mobile Broadband Operators’ Sponsored Data Offerings for Zero-Rated Content and Services (Jan. 11, 2017), available at https://docs.fcc.gov/public/attachments/DOC-342987A1.pdf.
[164] FCC, Statement of Commissioner Michael O’Rielly on Conclusion of Zero Rating Inquiries (Feb. 3, 2017), available at https://docs.fcc.gov/public/attachments/DOC-343340A1.pdf.
[165] Full Transcript: FCC Commissioner Jessica Rosenworcel Answers Net Neutrality Questions on Too Embarrassed to Ask, Vox (Dec. 20, 2017), https://www.vox.com/2017/12/20/16797164/transcript-fcc-commissioner-jessica-rosenworcel-net-neutrality-questions-too-embarrassed-to-ask.
[166] Id.
[167] Comments of AT&T, supra n. 45 at 5-6.
[168] See generally, Robert D. Willig, Pareto Superior Nonlinear Outlay Schedules, 11 Bell J. Econ. 56 (1978).
[169] See Nicholas Economides, Why Imposing New Tolls on Third-Party Content and Applications Threatens Innovation and Will Not Improve Broadband Providers’ Investment (NYU Center for Law, Economics & Organization Working Paper No. 10-32, Jul. 2010), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1627347.
[170] Aviv Nevo, John L Turner, & Jonathan W. Williams, Usage-Based Pricing and Demand for Residential Broadband 38 (Working Paper, Sep. 12, 2013), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2330426.
[171] Id. at 37.
[172] Id. at 38.
[173] Most Common Mobile Data Plans in the U.S. as of September 2023, Statista (Nov. 2023), https://www.statista.com/forecasts/997206/most-common-mobile-data-plans-in-the-us (Response to the question, “How large is your monthly data volume according to your main smartphone contract/prepaid service?”).
[174] Comments of CTIA, supra n. 32, at 102-103 (“[U]sage-based pricing and zero-rating are quintessential examples of offers that facilitate choice. Usage-based pricing plans involve customers paying a fixed monthly fee for a fixed amount of data per month, so that consumers do not need to choose between “all you can eat” or nothing. Zero-rating involves certain traffic that does not count towards any usage-based pricing limit, meaning consumers get the benefits of more choice of price points and extra data”).
[175] OpenVault (2023), supra, n. 26.
[176] See, Comments of AT&T, supra, n. 45 at 26-27 (describing zero-rating as the “equivalent of toll-free calling”).
[177] Comments of Electronic Frontier Foundation, supra n. 146 at 14-15.
[178] ICLE comments, supra n. 19 at 30-32 (summarizing and FCC report concluding data caps provide revenues to fund broadband buildout, provide incentives to develop more efficient ways of delivering data-intensive services, and enable business-model experimentation).
[179] Comments of the Free State Foundation, supra n. 36 at 55-56.
[180] Layton & Jamison, supra n. 72, at 199.
